<PAGE> 1
File Nos. 333-25473
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. 16 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [X]
Amendment No. 17
(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
Christine A. Nixon, Esq.
Anchor National Life Insurance Company
1 SunAmerica Center
Los Angeles, California 90067-6022
(Name and Address of Agent for Service)
<TABLE>
<CAPTION>
Title
of Securities
Being Registered
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<S> <C>
Flexible Payment
Deferred Annuity
Contracts
</TABLE>
It is proposed that this filing will become effective:
-- immediately upon filing pursuant to paragraph (b) of Rule 485
X on December 29, 2000 pursuant to paragraph (b) of Rule 485
60 days after filing pursuant to paragraph (a) of Rule 485
on ___________, 2000 pursuant to paragraph (a) of Rule 485
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VARIABLE SEPARATE ACCOUNT
Cross Reference Sheet
PART A - PROSPECTUS
<TABLE>
<CAPTION>
Item Number in Form N-4 Caption
----------------------- -------
<S> <C> <C>
1. Cover Page............................. Cover Page
2. Definitions............................ Definitions
3. Synopsis............................... Profile; Fee Tables;
Portfolio Expenses;
Examples
4. Condensed Financial Information........ Appendix A -
Condensed Financial
Information
5. General Description of Registrant,
Depositor and Portfolio Companies...... Polaris II/PolarisAmerica
Variable Annuity; Other
Information
6. Deductions............................. Expenses
7. General Description of
Variable Annuity Contracts............. Polaris II/The PolarisAmerica
Variable Annuity; Purchasing a
Polaris II/PolarisAmerica
Variable Annuity Contract;
Investment Options
8. Annuity Period......................... Income Options
9. Death Benefit.......................... Death Benefit
10. Purchases and Contract Value........... Purchasing a Polaris II/
PolarisAmerica Variable
Annuity Contract
11. Redemptions............................ Access To Your Money
12. Taxes.................................. Taxes
13. Legal Proceedings...................... Other Information - Legal
Proceedings
14. Table of Contents of Statement
of Additional Information.............. Table of Contents of
Statement of Additional
Information
</TABLE>
<PAGE> 3
PART B - STATEMENT OF ADDITIONAL INFORMATION
Certain information required in part B of the Registration Statement has
been included within the Prospectus forming part of this Registration Statement;
the following cross-references suffixed with a "P" are made by reference to the
captions in the Prospectus.
<TABLE>
<CAPTION>
Item Number in Form N-4 Caption
----------------------- -------
<S> <C> <C>
15. Cover Page............................. Cover Page
16. Table of Contents...................... Table of Contents
17. General Information and History........ The Polaris II/PolarisAmerica
Variable Annuity (P); Separate
Account; General Account;
Investment Options (P);
Other Information
18. Services............................... Other Information (P)
19. Purchase of Securities Being Offered... Purchasing a Polaris II/
PolarisAmerica Variable
Annuity Contract (P)
20. Underwriters........................... Distribution of Contracts
21. Calculation of Performance Data........ Performance Data
22. Annuity Payments....................... Income Options (P);
Income Payments;
Annuity Unit Values
23. Financial Statements................... Depositor: Other
Information - Financial
Statements; Registrant:
Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE> 4
[POLARIS II PROFILE LOGO]
THIS PROFILE IS A SUMMARY OF SOME OF THE MORE IMPORTANT POINTS THAT YOU SHOULD
KNOW AND CONSIDER BEFORE PURCHASING THE POLARIS(II) VARIABLE ANNUITY. THIS
VARIABLE ANNUITY PROVIDES AN OPTIONAL BONUS FEATURE CALLED "PRINCIPAL REWARDS."
IF YOU ELECT THIS FEATURE, IN EXCHANGE FOR ANY BONUS CREDITED TO YOUR CONTRACT,
YOUR SURRENDER CHARGE SCHEDULE WILL BE LONGER AND GREATER THAN IF YOU CHOSE NOT
TO ELECT THIS FEATURE. THESE WITHDRAWAL CHARGES MAY OFFSET THE VALUE OF THE
BONUS, IF YOU MAKE AN EARLY WITHDRAWAL. THE ANNUITY IS MORE FULLY DESCRIBED IN
THE PROSPECTUS. PLEASE READ THE PROSPECTUS CAREFULLY.
December 29, 2000
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1. THE POLARIS(II) VARIABLE ANNUITY
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The Polaris(II) Variable Annuity is a contract between you and Anchor National
Life Insurance Company ("Anchor National"). It is designed to help you invest on
a tax-deferred basis and meet long-term financial goals, such as retirement
funding. Tax deferral means all your money, including the amount you would
otherwise pay in current income taxes, remains in your contract to generate more
earnings. Your money could grow faster than it would in a comparable taxable
investment.
Polaris(II) offers a diverse selection of money managers, investment options and
other programs. You may divide your money among any or all 32 variable
portfolios and 5 fixed account options. Additionally, if you do not elect to
participate in the Principal Rewards Program, you may also allocate money to the
2 dollar cost averaging ("DCA") fixed account options. To the extent you invest
in the variable portfolios, your investment is not guaranteed. The value of your
Polaris(II) contract can fluctuate up and down, based on the performance of the
underlying investments you select and you may experience a loss.
The variable portfolios offer professionally managed investment choices with
goals ranging from capital preservation to aggressive growth. Your choices for
the various investment options are found on the next page.
The contract also offers 5 fixed account options and, if you do not elect to
participate in the Principal Rewards Program, 2 DCA fixed account options for
different time periods. Each may have a different interest rate. Interest rates
are guaranteed by Anchor National.
Like most annuities, the contract has an accumulation phase and an income phase.
During the accumulation phase, you invest money in your contract. Your earnings
are based on the investment performance of the variable portfolios to which your
money is allocated and/or the interest rate(s) earned on the fixed account
option(s) in which you invest. You may withdraw money from your contract during
the accumulation phase. However, as with other tax-deferred investments, you
will pay taxes on earnings and untaxed contributions when you withdraw them. A
federal tax penalty may apply if you make withdrawals before age 59 1/2.
During the income phase, you may receive income payments from your annuity. Your
income payments may be fixed in dollar amount, vary with investment performance
or a combination of both, depending on where your money is allocated. Among
other factors, the amount of money you are able to accumulate in your contract
during the accumulation phase will affect the amount of your income payments
during the income phase.
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2. INCOME OPTIONS
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You can select from one of five income options:
(1) payments for your lifetime;
(2) payments for your lifetime and your survivor's lifetime;
(3) payments for your lifetime and your survivor's lifetime, but for not less
than 10 or 20 years;
(4) payments for your lifetime, but for not less than 10 or 20 years; and
(5) payments for a specified period of 5 to 30 years.
You will also need to decide when your income payments begin and if you want
your income payments to fluctuate with investment performance or remain
constant. Once you begin receiving income payments, you cannot change your
income option.
If your contract is part of a non-qualified retirement plan (one that is
established with after-tax dollars), payments during the income phase are
considered partly a return of your original investment. The "original
investment" part of each payment is not taxable as income. For contracts which
are part of a qualified retirement plan using before-tax dollars, the entire
income payment is taxable as income.
In addition to the above income options, you may elect to take income payments
under the income protector feature, subject to the provisions thereof.
<PAGE> 5
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3. PURCHASING A POLARIS(II) VARIABLE
ANNUITY CONTRACT
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You can buy a contract through your financial advisor, who can also help you
complete the proper forms. For non-qualified contracts, the minimum initial
purchase payment is $5,000 and subsequent amounts of $500 or more may be added
to your contract at any time during the accumulation phase. For qualified
contracts, the minimum initial purchase payment is $2,000 and subsequent amounts
of $250 or more may be added to your contract at any time during the
accumulation phase.
You may elect to participate in the Principal Rewards Program when you apply for
your contract. Under this program, we add an amount to your contract (an
"upfront payment enhancement") each time you invest a purchase payment.
Additionally, we may also pay an amount to your contract at a future date (a
"deferred payment enhancement"). Payment enhancement amounts are calculated as a
percentage of each purchase payment. The Principal Rewards Program may not be
available to you. Please check with your financial advisor regarding
availability of this program.
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4. INVESTMENT OPTIONS
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You may allocate money to the following variable portfolios of the Anchor Series
Trust ("AST") and/or the SunAmerica Series Trust("SST"):
STOCKS:
MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
- Alliance Growth Portfolio SST
- Global Equities Portfolio SST
- Growth & Income Portfolio SST
MANAGED BY DAVIS SELECTED ADVISERS L.P.
- Davis Venture Value Portfolio SST
- Real Estate Portfolio SST
MANAGED BY FEDERATED INVESTORS L.P.
- Federated Value Portfolio SST
- Telecom Utility Portfolio SST
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
- Goldman Sachs Research Portfolio SST
MANAGED BY MARSICO CAPITAL MANAGEMENT, LLC
- Marsico Growth SST
MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
- MFS Growth & Income Portfolio SST
- MFS Mid-Cap Growth Portfolio SST
MANAGED BY MORGAN STANLEY ASSET MANAGEMENT
- International Diversified Equities Portfolio SST
- Technology Portfolio SST
MANAGED BY PUTNAM INVESTMENT MANAGEMENT INC.
- Emerging Markets Portfolio SST
- International Growth & Income Portfolio SST
- Putnam Growth Portfolio SST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION
- Aggressive Growth Portfolio SST
- Blue Chip Growth Portfolio SST
- "Dogs" of Wall Street Portfolio SST
- Growth Opportunities Portfolio SST
MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP
- Capital Appreciation Portfolio AST
- Growth Portfolio AST
- Natural Resources Portfolio AST
BALANCED:
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
- Asset Allocation Portfolio SST
MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
- MFS Total Return Portfolio SST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION
- SunAmerica Balanced Portfolio SST
BONDS:
MANAGED BY FEDERATED INVESTORS L.P.
- Corporate Bond Portfolio SST
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT INT'L.
- Global Bond Portfolio SST
MANAGED BY MORGAN STANLEY ASSET MANAGEMENT
- Worldwide High Income Portfolio SST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION
- High-Yield Bond Portfolio SST
MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP
- Government & Quality Bond Portfolio AST
CASH:
MANAGED BY BANC OF AMERICA CAPITAL MANAGEMENT, INC.
- Cash Management Portfolio SST
You may also allocate money to the 1-year fixed account option or the 3, 5, 7
and 10-year market value adjustment ("MVA") fixed account options and, under
certain circumstances, the 6-month and 1-year DCA fixed account options.
The interest rates applicable for these fixed account options may differ from
time to time, however, we will never credit less than a 3% annual effective
rate. Once established, the rate will not change during the selected period.
Your contract value will be adjusted up or down for withdrawals or transfers
from the 3, 5, 7 and 10-year fixed account options prior to the end of the
guarantee period.
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5. EXPENSES
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Each year, we deduct a $35 contract maintenance fee ($30 in North Dakota) from
your contract. We also deduct insurance charges which equal 1.52% annually of
the average daily value of your contract allocated to the variable portfolios.
As with other professionally managed investments, there are investment charges
imposed on contracts with money allocated to the variable portfolios. We
estimate these fees to range from .53 to 1.90.
If you elect the optional EstatePlus benefit, we charge a 0.25% fee. The
EstatePlus fee is an annualized charge that we deduct daily from your net asset
value. EstatePlus is not available if you are age 81 or older at the time of
contract issue.
If you take money out of your contract, you may be assessed a withdrawal charge
which is a percentage of purchase
<PAGE> 6
payments. The percentage declines over the time the money is in the contract.
The withdrawal charge schedule also varies dependent upon whether you elect to
participate in the Principal Rewards program when you purchase your contract.
The two withdrawal charge schedules are as follows:
WITHDRAWAL CHARGE WITHOUT THE PRINCIPAL REWARDS PROGRAM (SCHEDULE A)
<TABLE>
<CAPTION>
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YEAR 1 2 3 4 5 6 7 8
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
WITHDRAWAL
CHARGE 7% 6% 5% 4% 3% 2% 1% 0%
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</TABLE>
WITHDRAWAL CHARGE WITH THE PRINCIPAL REWARDS PROGRAM (SCHEDULE B)
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<CAPTION>
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YEAR 1 2 3 4 5 6 7 8 9 10
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WITHDRAWAL
CHARGE 9% 9% 8% 7% 6% 5% 4% 3% 2% 0%
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</TABLE>
These higher potential withdrawal charges may compensate us for the expenses
associated with the Principal Rewards program.
Each year, you are allowed to make 15 transfers without charge. After your first
15 free transfers, a $25 transfer fee ($10 in Pennsylvania and Texas) applies to
each subsequent transfer.
In a limited number of states, you may also be charged for a state premium tax
of up to 3.5% depending upon the state.
The following chart is designed to help you understand the charges in your
contract. The column "Total Annual Charges" shows the total of the 1.52%
insurance charges, the $35 contract maintenance fee and the investment charges
for each variable portfolio. We converted the contract maintenance fee to a
percentage using an assumed contract size of $40,000. The actual impact of this
charge on your contract may differ from this percentage.
The next two columns show two examples of the charges you would pay under the
contract. The examples assume that you invested $1,000 in a contract which earns
5% annually and that you withdraw your money: (1) at the end of year 1, and (2)
at the end of year 10. The premium tax is assumed to be 0% in both examples.
<TABLE>
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EXAMPLES:
TOTAL EXPENSES TOTAL EXPENSES
TOTAL ANNUAL TOTAL ANNUAL AT END OF 1 YEAR AT END OF 10 YEARS
INSURANCE INVESTMENT TOTAL ANNUAL WITHOUT/WITH PRINCIPAL WITHOUT/WITH PRINCIPAL
ANCHOR SERIES TRUST PORTFOLIO CHARGES CHARGES CHARGES REWARDS PROGRAM REWARDS PROGRAM
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<S> <C> <C> <C> <C> <C>
Capital Appreciation(1) 1.61% .74% 2.35% $ 93/$116 $265/$270
Government and Quality Bond 1.61% .66% 2.27% $ 93/$115 $257/$262
Growth 1.61% .73% 2.34% $ 93/$116 $264/$269
Natural Resources 1.61% 1.00% 2.61% $ 96/$118 $291/$296
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SUNAMERICA SERIES TRUST PORTFOLIO
Aggressive Growth 1.61% .75% 2.36% $ 94/$116 $266/$271
Alliance Growth 1.61% .63% 2.24% $ 92/$115 $254/$259
Asset Allocation 1.61% .63% 2.24% $ 92/$115 $254/$259
Blue Chip Growth(2,3) 1.61% .85% 2.46% $ 95/$117 $276/$281
Cash Management(4) 1.61% .53% 2.14% $ 91/$114 $243/$248
Corporate Bond 1.61% .71% 2.32% $ 93/$115 $262/$267
Davis Venture Value 1.61% .74% 2.35% $ 93/$116 $265/$270
"Dogs" of Wall Street(3) 1.61% .67% 2.28% $ 93/$115 $258/$263
Emerging Markets(3) 1.61% 1.90% 3.51% $105/$128 $375/$383
Federated Value 1.61% .77% 2.38% $ 94/$116 $268/$273
Global Bond 1.61% .84% 2.45% $ 94/$117 $275/$280
Global Equities 1.61% .84% 2.45% $ 94/$117 $275/$280
Goldman Sachs Research(2,3) 1.61% 1.35% 2.96% $100/$122 $329/$331
Growth-Income 1.61% .56% 2.17% $ 92/$114 $247/$251
Growth Opportunities(2,3) 1.61% 1.00% 2.61% $ 96/$118 $291/$296
High-Yield Bond 1.61% .67% 2.28% $ 93/$115 $258/$263
International Diversified
Equities 1.61% 1.22% 2.83% $ 98/$121 $312/$318
International Growth and
Income 1.61% 1.21% 2.82% $ 98/$121 $311/$318
Marsico Growth(2) 1.61% 1.00% 2.61% $ 96/$118 $291/$296
MFS Growth and Income 1.61% .75% 2.36% $ 94/$116 $266/$271
MFS Mid-Cap Growth(3) 1.61% 1.15% 2.76% $ 98/$120 $305/$311
MFS Total Return 1.61% .75% 2.36% $ 94/$116 $266/$271
Putnam Growth 1.61% .80% 2.41% $ 94/$116 $271/$276
Real Estate 1.61% .92% 2.53% $ 95/$118 $283/$288
SunAmerica Balanced 1.61% .66% 2.27% $ 93/$115 $257/$262
Technology(2,3) 1.61% 1.55% 3.16% $102/$124 $343/$350
Telecom Utility(5) 1.61% .84% 2.45% $ 94/$117 $275/$280
Worldwide High Income 1.61% 1.12% 2.73% $ 97/$120 $302/$308
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</TABLE>
(1) The Total Annual Investment Charge noted here is restated to reflect an
estimate of the fees for the portfolio for the current fiscal year. This fee
increase became effective August 1, 2000 following approval by the Board of
Directors of the Trust and the shareholders.
(2) This portfolio was not available for sale during fiscal year 2000. The Total
Annual Investment Charges are based on estimated amounts for the current
fiscal year.
(3) For these Portfolios, the adviser, SunAmerica Asset Management Corp., has
voluntarily agreed to waive fees or reimburse expenses, if necessary, to
keep operating expenses at or below an established maximum amount. All
waivers or reimbursements may be terminated at any time. Only certain
portfolios relied on these waivers and/or reimbursements during this fiscal
year, as follows: MFS Mid-Cap Growth (1.17%). Absent recoupment of expenses
by the Adviser, the Total Annual Expenses during the last fiscal year for
"Dogs" of Wall Street would have been .67% and Emerging Markets (1.77%).
For the "Dogs" of Wall Street portfolio for fiscal year ended January 31,
2000, the adviser recouped prior years expenses that were mathematically
insignificant, resulting in the expense ratio before and after recoupment
remaining at 0.67%.
(4) Formerly managed by SunAmerica Asset Management Corp.
(5) Formerly named Utility Portfolio. The name change will not result in any
modifications to the portfolio's principal investment goal or fundamental
investment policies.
<PAGE> 7
If you elect the EstatePlus benefit (0.25%):
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EXAMPLES:
TOTAL EXPENSES TOTAL EXPENSES
AT END OF AT END OF
1 YEAR 10 YEARS
TOTAL ANNUAL WITHOUT/WITH WITHOUT/WITH
TOTAL ANNUAL INVESTMENT TOTAL ANNUAL PRINCIPAL PRINCIPAL
ANCHOR SERIES TRUST PORTFOLIO INSURANCE CHARGES CHARGES CHARGES REWARDS PROGRAM REWARDS PROGRAM
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<S> <C> <C> <C> <C> <C>
Capital Appreciation(1) 1.86% (1.61% + 0.25%) 0.74% 2.60% $ 96/118 $ 290/296
Government and Quality Bond 1.86% (1.61% + 0.25%) 0.66% 2.52% $ 95/117 $ 282/288
Growth 1.86% (1.61% + 0.25%) 0.73% 2.59% $ 96/118 $ 289/295
Natural Resources 1.86% (1.61% + 0.25%) 1.00% 2.86% $ 99/121 $ 315/322
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SUNAMERICA SERIES TRUST PORTFOLIO
Aggressive Growth 1.86% (1.61% + 0.25%) 0.75% 2.61% $ 96/118 $ 291/297
Alliance Growth 1.86% (1.61% + 0.25%) 0.63% 2.49% $ 95/117 $ 279/285
Asset Allocation 1.86% (1.61% + 0.25%) 0.63% 2.49% $ 95/117 $ 279/285
Blue Chip Growth(2,3) 1.86% (1.61% + 0.25%) 0.85% 2.71% $ 97/119 $ 300/307
Cash Management(4) 1.86% (1.61% + 0.25%) 0.53% 2.39% $ 94/116 $ 269/275
Corporate Bond 1.86% (1.61% + 0.25%) 0.71% 2.57% $ 96/118 $ 287/293
Davis Venture Value 1.86% (1.61% + 0.25%) 0.74% 2.60% $ 96/118 $ 290/296
"Dogs" of Wall Street(3) 1.86% (1.61% + 0.25%) 0.67% 2.53% $ 95/118 $ 283/289
Emerging Markets(3) 1.86% (1.61% + 0.25%) 1.90% 3.76% $ 108/130 $ 397/406
Federated Value 1.86% (1.61% + 0.25%) 0.77% 2.63% $ 96/119 $ 293/299
Global Bond 1.86% (1.61% + 0.25%) 0.84% 2.70% $ 97/119 $ 299/306
Global Equities 1.86% (1.61% + 0.25%) 0.84% 2.70% $ 97/119 $ 299/306
Goldman Sachs Research(2,3) 1.86% (1.61% + 0.25%) 1.35% 3.21% $ 102/125 $ 353/356
Growth-Income 1.86% (1.61% + 0.25%) 0.56% 2.42% $ 94/116 $ 272/278
Growth Opportunities(2,3) 1.86% (1.61% + 0.25%) 1.00% 2.86% $ 99/121 $ 315/322
High-Yield Bond 1.86% (1.61% + 0.25%) 0.67% 2.53% $ 95/118 $ 283/289
International Diversified
Equities 1.86% (1.61% + 0.25%) 1.22% 3.08% $ 101/123 $ 336/343
International Growth and
Income 1.86% (1.61% + 0.25%) 1.21% 3.07% $ 101/123 $ 335/343
Marsico Growth(2) 1.86% (1.61% + 0.25%) 1.00% 2.86% $ 99/121 $ 315/322
MFS Growth and Income 1.86% (1.61% + 0.25%) 0.75% 2.61% $ 96/118 $ 291/297
MFS Mid-Cap Growth(3) 1.86% (1.61% + 0.25%) 1.15% 3.01% $ 100/122 $ 329/337
MFS Total Return 1.86% (1.61% + 0.25%) 0.75% 2.61% $ 96/118 $ 291/297
Putnam Growth 1.86% (1.61% + 0.25%) 0.80% 2.66% $ 97/119 $ 296/302
Real Estate 1.86% (1.61% + 0.25%) 0.92% 2.78% $ 98/120 $ 307/314
SunAmerica Balanced 1.86% (1.61% + 0.25%) 0.66% 2.52% $ 95/117 $ 282/288
Technology(2,3) 1.86% (1.61% + 0.25%) 1.55% 3.41% $ 104/127 $ 366/375
Telecom Utility(5) 1.86% (1.61% + 0.25%) 0.84% 2.70% $ 97/119 $ 299/306
Worldwide High Income 1.86% (1.61% + 0.25%) 1.12% 2.98% $ 100/122 $ 326/334
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</TABLE>
(1) The Total Annual Investment Charge noted here is restated to reflect an
estimate of the fees for the portfolio for the current fiscal year. This fee
increase became effective August 1, 2000 following approval by the Board of
Directors of the Trust and the shareholders.
(2) This portfolio was not available for sale during fiscal year 2000. The Total
Annual Investment Charges are based on estimated amounts for the current
fiscal year.
(3) For this portfolio, the adviser, SunAmerica Asset Management Corp., has
voluntarily agreed to waive fees or reimburse expenses, if necessary, to
keep operating expenses at or below established maximum amounts. All waivers
or reimbursements may be terminated at any time. Only certain portfolios
relied on these waivers and/or reimbursements during this fiscal year as
follows: MFS Mid-Cap Growth (1.17%). Absent recoupment of expenses by the
adviser, the Total Annual Expenses during the last fiscal year for the
"Dogs" of Wall Street Portfolio would have been 0.67% and for Emerging
Markets Portfolios 1.77%. For the "Dogs" of Wall Street portfolio for fiscal
year ended January 31, 2000, the adviser recouped prior year expense
reimbursements that were mathematically insignificant, resulting in the
expense ratio before and after the recoupment remaining at 0.67%.
(4) Formerly managed by SunAmerica Asset Management Corp.
(5) Formerly named Utility Portfolio. The name change will not result in any
modifications to the portfolio's principal investment goal or fundamental
investment policies.
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6. TAXES
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Unlike taxable investments where earnings are taxed in the year they are earned,
taxes on amounts earned in a non-qualified contract are deferred until they are
withdrawn. In a qualified contract, all amounts are taxable when they are
withdrawn.
When you begin taking distributions or withdrawals from your contract, earnings
are considered to be taken out first and will be taxed at your ordinary income
rate. You may be subject to a 10% federal tax penalty for distributions or
withdrawals before age 59 1/2.
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7. ACCESS TO YOUR MONEY
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During the first year, you may withdraw free of a withdrawal charge an amount
that is equal to the penalty-free earnings in your contract as of the date you
make the withdrawal or, if you participate in the systematic withdrawal program,
you may withdraw 10% of your total invested amount less any withdrawals made
during the year. The penalty-free earnings amount is calculated by taking the
value of your contract on the day you make the withdrawal and subtracting your
total invested amount. After the first year, your maximum free withdrawal amount
is the greater of: (1) the penalty-free
<PAGE> 8
earnings or (2) 10% of your total invested amount that has been invested for at
least one year, less any withdrawals made during the year. Withdrawals in excess
of these limits will be assessed a withdrawal charge.
If you withdraw your entire contract value and you have purchase payments still
subject to withdrawal charges, we will recoup any withdrawal charges which would
have been due if your prior free withdrawals had not been free. After a purchase
payment has been in the contract for seven years, or nine years if you
participate in the Principal Rewards program, there are no withdrawal charges on
that purchase payment.
A federal tax penalty may apply if you make withdrawals before age 59 1/2.
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8. PERFORMANCE
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When you invest in the Polaris(II) Variable Annuity, your money is actually
invested in the underlying portfolios of the Anchor Series Trust and/or the
SunAmerica Series Trust. The value of your annuity will fluctuate depending upon
the investment performance of the portfolio(s) you choose.
The following chart shows total returns for each portfolio for the time periods
shown. These numbers reflect the insurance charges, the contract maintenance fee
and the investment charges. Neither withdrawal charges nor fees for optional
benefits are reflected in the chart. Past performance is no guarantee of future
results.
<TABLE>
<CAPTION>
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ANCHOR SERIES CALENDAR CALENDAR
TRUST PORTFOLIO YEAR 1999 YEAR 1998
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<S> <C> <C>
Capital Appreciation 65.30% 20.27%
Government and Quality Bond (3.15)% 7.42%
Growth 24.95% 26.93%
Natural Resources 39.28% (18.80)%
-----------------------------------------------------------------
SUNAMERICA SERIES
TRUST PORTFOLIO
Aggressive Growth 81.80% 15.55%
Alliance Growth 31.04% 49.83%
Asset Allocation 7.76% 1.67%
Blue Chip Growth -- --
Cash Management 3.20% 3.51%
Corporate Bond (3.38)% 4.31%
Davis Venture Value 14.33% 11.96%
"Dogs" of Wall Street (8.57)% (1.83)%
Emerging Markets 74.55% (25.62)%
Federated Value 4.53% 16.05%
Global Bond (2.57)% 9.04%
Global Equities 28.87% 20.86%
Goldman Sachs Research -- --
Growth-Income 28.03% 28.74%
Growth Opportunities -- --
High-Yield Bond 4.85% (4.51)%
International Diversified
Equities 22.60% 16.60%
International Growth and
Income 22.29% 9.03%
Marsico Growth -- --
MFS Growth and Income 4.28% 27.22%
MFS Mid-Cap Growth -- --
MFS Total Return 1.25% 17.64%
Putnam Growth 27.69% 32.60%
Real Estate (8.98)% (16.76)%
SunAmerica Balanced 19.49% 22.67%
Technology -- --
Telecom Utility 0.16% 12.21%
Worldwide High Income 17.37% (18.45)%
-----------------------------------------------------------------
</TABLE>
The total returns listed here do not take into account the effect of any
payment enhancement made under the Principal Rewards program.
----------------------------------------------------------------
----------------------------------------------------------------
9. DEATH BENEFIT
----------------------------------------------------------------
----------------------------------------------------------------
If you should die during the accumulation phase, your beneficiary will receive a
death benefit. You must select from the two death benefit options described
below at the time you purchase your contract. Once selected, your death benefit
may not be changed. You should discuss with your financial advisor the options
available to you and which option is best for you.
OPTION 1 - PURCHASE PAYMENT ACCUMULATION OPTION:
The death benefit is the greater of:
(1) the contract value at the time we receive satisfactory proof of death; or
(2) total purchase payments less withdrawals (and any fees or charges applicable
to such withdrawals), compounded at a 4% annual growth rate until the date
of death (3% growth rate if 70 or older at the time of contract issue) plus
any purchase payments less withdrawals recorded after the date of death (and
any fees or charges applicable to such withdrawals); or
(3) the contract value on the seventh contract anniversary, plus any purchase
payments since the seventh anniversary and less any withdrawals (and any
fees or charges applicable to such withdrawals), all compounded at a 4%
annual growth rate until the date of death (3% if 70 or older at the time of
contract issue) plus any purchase payments less withdrawals recorded after
the date of death (and any fees or charges applicable to such withdrawals).
OPTION 2 - MAXIMUM ANNIVERSARY OPTION:
The death benefit is the greater of:
(1) the contract value at the time we receive satisfactory proof of death; or
(2) total purchase payments less any withdrawals (and any fees or charges
applicable to such withdrawals); or
(3) the maximum anniversary value on any contract anniversary prior to your 81st
birthday. The anniversary value equals the contract value on a contract
anniversary plus any purchase payments and less any withdrawals (and any
fees or charges applicable to such withdrawals) since that anniversary.
If you are age 90 or older at the time of death and selected the option 2
(Maximum Anniversary) death benefit, the death benefit will be equal to the
contract value at the time we receive satisfactory proof of death.
In addition, for a fee you may elect the EstatePlus benefit, which can increase
your selected death benefit when payable. This feature is not available if you
are age 81 or older at the time of contract issue.
If you participate in the Principal Rewards program and die prior to a deferred
payment enhancement date, we will not allocate the corresponding deferred
payment enhancement(s) to your contract.
EstatePlus may not be available in your state or through the broker-dealer with
which your financial advisor is affiliated. See your financial advisor for
information on availability.
<PAGE> 9
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10. OTHER INFORMATION
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----------------------------------------------------------------
FREE LOOK: You may cancel your contract within ten days (or longer if required
by your state) by mailing it to our Annuity Service Center. Your contract will
be treated as void on the date we receive it and we will pay you an amount equal
to the value of your contract on the day we receive your request (unless
otherwise required by state law) less the free look payment enhancement
deduction. The amount returned to you may be more or less than the money you
initially invested.
ASSET ALLOCATION REBALANCING PROGRAM: If elected by you, this program seeks to
keep your investment in line with your goals. We will maintain your specified
allocation mix in the variable portfolios and the 1-year fixed account option by
readjusting your money on a calendar quarter, semiannual or annual basis.
SYSTEMATIC WITHDRAWAL PROGRAM: If elected by you, this program allows you to
receive either monthly, quarterly, semiannual or annual checks during the
accumulation phase. Systematic withdrawals may also be electronically
transferred to your bank account. Of course, withdrawals may be taxable and a
10% federal tax penalty may apply if you are under age 59 1/2.
PRINCIPAL ADVANTAGE PROGRAM: If elected by you, this program allows you to
obtain growth potential without any market risk to your principal. We will
guarantee that the portion of your money allocated to the 1, 3, 5, 7 or 10-year
fixed account option will grow to equal your principal investment when it is
allocated in accordance with the program.
DOLLAR COST AVERAGING: If elected by you, this program allows you to invest
gradually in the variable portfolios from any of the variable portfolios or the
1-year fixed account option. You may also invest in the variable portfolios from
the 6-month DCA fixed account option or the 1-year DCA fixed account option if
you do not participate in the Principal Rewards program.
AUTOMATIC PAYMENT PLAN: You can add to your contract directly from your bank
account with as little as $20 per month.
CONFIRMATIONS AND QUARTERLY STATEMENTS: During the accumulation phase, you will
receive confirmation of transactions within your contract. Transactions made
pursuant to contractual or systematic agreements, such as deduction of the
annual maintenance fee and dollar cost averaging, may be confirmed quarterly.
Purchase payments received through the automatic payment plan or a salary
reduction arrangement, may also be confirmed quarterly. For all other
transactions, we send confirmations immediately.
During the accumulation and income phases, you will receive a statement of your
transactions over the past quarter and a summary of your account values.
----------------------------------------------------------------
----------------------------------------------------------------
11. INQUIRIES
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----------------------------------------------------------------
If you have questions about your contract or need to make changes, call your
financial representative or contact us at:
Anchor National Life Insurance Company
Annuity Service Center
P.O. Box 54299
Los Angeles, California 90054-0299
Telephone Number: (800) 445-SUN2
If money accompanies your correspondence, you should direct it to:
Anchor National Life Insurance Company
P.O. Box 100330
Pasadena, California 91189-0001
<PAGE> 10
[POLARIS II LOGO]
PROSPECTUS
DECEMBER 29, 2000
<TABLE>
<S> <C> <C>
Please read this prospectus carefully FLEXIBLE PAYMENT DEFERRED ANNUITY CONTRACTS
before investing and keep it for issued by
future reference. It contains ANCHOR NATIONAL LIFE INSURANCE COMPANY
important information about the in connection with
Polaris(II) Variable Annuity. VARIABLE SEPARATE ACCOUNT
The annuity has 39 investment choices -7 fixed account
To learn more about the annuity options and 32 Variable Portfolios listed below. The 7 fixed
offered by this prospectus, you can account options include specified periods of 1, 3, 5, 7 and
obtain a copy of the Statement of 10 years and DCA accounts for 6-month and 1-year periods.
Additional Information ("SAI") dated The 32 Variable Portfolios are part of the Anchor Series
December 29, 2000. The SAI has been Trust ("AST") or the SunAmerica Series Trust ("SST").
filed with the Securities and
Exchange Commission ("SEC") and is STOCKS:
incorporated by reference into this MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
prospectus. The Table of Contents of - Alliance Growth Portfolio SST
the SAI appears on page 27 of this - Global Equities Portfolio SST
prospectus. For a free copy of the - Growth & Income Portfolio SST
SAI, call us at (800) 445-SUN2 or MANAGED BY DAVIS SELECTED ADVISERS L.P.
write to us at our Annuity Service - Davis Venture Value Portfolio SST
Center, P.O. Box 54299, Los Angeles, - Real Estate Portfolio SST
California 90054-0299. MANAGED BY FEDERATED INVESTORS L.P.
- Federated Value Portfolio SST
In addition, the SEC maintains a - Telecom Utility Portfolio SST
website (http://www.sec.gov) that MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
contains the SAI, materials - Goldman Sachs Research Portfolio SST
incorporated by reference and other MANAGED BY MARSICO CAPITAL MANAGEMENT, LLC
information filed electronically with - Marsico Growth SST
the SEC by Anchor National. MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
- MFS Growth & Income Portfolio SST
ANNUITIES INVOLVE RISKS, INCLUDING - MFS Mid-Cap Growth Portfolio SST
POSSIBLE LOSS OF PRINCIPAL, AND ARE MANAGED BY MORGAN STANLEY ASSET MANAGEMENT
NOT A DEPOSIT OR OBLIGATION OF, OR - International Diversified Equities Portfolio SST
GUARANTEED OR ENDORSED BY, ANY BANK. - Technology Portfolio SST
THEY ARE NOT FEDERALLY INSURED BY THE MANAGED BY PUTNAM INVESTMENT MANAGEMENT INC.
FEDERAL DEPOSIT INSURANCE - Emerging Markets Portfolio SST
CORPORATION, THE FEDERAL RESERVE - International Growth & Income Portfolio SST
BOARD OR ANY OTHER AGENCY. - Putnam Growth Portfolio SST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION
This variable annuity provides an - Aggressive Growth Portfolio SST
optional bonus feature called - Blue Chip Growth Portfolio SST
"Principal Rewards". If you elect - "Dogs" of Wall Street Portfolio SST
this feature, in exchange for bonuses - Growth Opportunities Portfolio SST
credited to your contract, your MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP
surrender charge schedule will be - Capital Appreciation Portfolio AST
longer and greater than if you chose - Growth Portfolio AST
not to elect this feature. These - Natural Resources Portfolio AST
withdrawal charges may offset the
value of any bonus, if you make an BALANCED:
early withdrawal. MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
- Asset Allocation Portfolio SST
MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
- MFS Total Return Portfolio SST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION
- SunAmerica Balanced Portfolio SST
BONDS:
MANAGED BY FEDERATED INVESTORS L.P.
- Corporate Bond Portfolio SST
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL
- Global Bond Portfolio SST
MANAGED BY MORGAN STANLEY ASSET MANAGEMENT
- Worldwide High Income Portfolio SST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION
- High-Yield Bond Portfolio SST
MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP
- Government & Quality Bond Portfolio AST
CASH:
MANAGED BY BANC OF AMERICA CAPITAL MANAGEMENT, INC.
- Cash Management Portfolio SST
</TABLE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE> 11
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
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Anchor National's Annual Report on Form 10-K for the year ended December 31,
1999 and its quarterly report on Form 10-Q for the quarters ended March 31,
2000, June 30, 2000 and September 30, 2000 are incorporated herein by reference.
All documents or reports filed by Anchor National under Section 13(a), 13(c),
14, or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") after the effective date of this prospectus are also incorporated by
reference. Statements contained in this prospectus and subsequently filed
documents which are incorporated by reference or deemed to be incorporated by
reference are deemed to modify or supersede documents incorporated herein by
reference.
Anchor National files its Exchange Act documents and reports, including its
annual and quarterly reports on Form 10-K and Form 10-Q, electronically pursuant
to EDGAR under CIK No. 0000006342.
Anchor National is subject to the informational requirements of the Securities
and Exchange Act of 1934 (as amended). We file reports and other information
with the SEC to meet those requirements. You can inspect and copy this
information at SEC public facilities at the following locations:
WASHINGTON, DISTRICT OF COLUMBIA
450 Fifth Street, N.W., Room 1024
Washington, D.C. 20549
CHICAGO, ILLINOIS
500 West Madison Street
Chicago, IL 60661
NEW YORK, NEW YORK
7 World Trade Center, 13th Fl.
New York, NY 10048
To obtain copies by mail contact the Washington, D.C. location. After you pay
the fees as prescribed by the rules and regulations of the SEC, the required
documents are mailed.
Registration statements under the Securities Act of 1933, as amended, related to
the contracts offered by this prospectus are on file with the SEC. This
prospectus does not contain all of the information contained in the registration
statements and exhibits. For further information regarding the separate account,
Anchor National and its general account, the Variable Portfolios and the
contract, please refer to the registration statements and exhibits.
The SEC also maintains a website (http://www.sec.gov) that contains the SAI,
materials incorporated by reference and other information filed electronically
with the SEC by Anchor National.
Anchor National will provide without charge to each person to whom this
prospectus is delivered, upon written or oral request, a copy of the above
documents incorporated by reference. Requests for these documents should be
directed to Anchor National's Annuity Service Center, as follows:
Anchor National Life Insurance Company
Annuity Service Center
P.O. Box 54299
Los Angeles, California 90054-0299
Telephone Number: (800) 445-SUN2
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SECURITIES AND EXCHANGE COMMISSION POSITION ON INDEMNIFICATION
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Indemnification for liabilities arising under the Securities Act of 1933 (the
"Act") is provided to Anchor National's officers, directors and controlling
persons. The SEC has advised that it believes such indemnification is against
public policy under the Act and unenforceable. If a claim for indemnification
against such liabilities (other than for Anchor National's payment of expenses
incurred or paid by its directors, officers or controlling persons in the
successful defense of any legal action) is asserted by a director, officer or
controlling person of Anchor National in connection with the securities
registered under this prospectus, Anchor National will submit to a court with
jurisdiction to determine whether the indemnification is against public policy
under the Act. Anchor National will be governed by final judgment of the issue.
However, if in the opinion of Anchor National's counsel, this issue has been
determined by controlling precedent, Anchor National will not submit the issue
to a court for determination.
2
<PAGE> 12
<TABLE>
<S> <C> <C>
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------------------------------------------------------------------
TABLE OF CONTENTS
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 2
SECURITIES AND EXCHANGE COMMISSION POSITION ON
INDEMNIFICATION........................................... 2
GLOSSARY.................................................... 3
FEE TABLES.................................................. 4
Owner Transaction Expenses............................ 4
Contract Maintenance Fee.............................. 4
Annual Separate Account Expenses...................... 4
Optional EstatePlus................................... 4
Portfolio Expenses.................................... 4
EXAMPLES.................................................... 5
THE POLARIS(II) VARIABLE ANNUITY............................ 9
PURCHASING A POLARIS(II) VARIABLE ANNUITY................... 10
Allocation of Purchase Payments....................... 10
Principal Rewards Program............................. 10
Accumulation Units.................................... 11
Free Look............................................. 12
INVESTMENT OPTIONS.......................................... 12
Variable Portfolios................................... 12
Anchor Series Trust................................... 12
SunAmerica Series Trust............................... 12
Fixed Account Options................................. 13
Market Value Adjustment ("MVA")....................... 13
Transfers During the Accumulation Phase............... 14
Dollar Cost Averaging................................. 14
Asset Allocation Rebalancing Program.................. 15
Principal Advantage Program........................... 15
Voting Rights......................................... 15
Substitution.......................................... 16
ACCESS TO YOUR MONEY........................................ 16
Systematic Withdrawal Program......................... 17
Nursing Home Waiver................................... 17
Minimum Contract Value................................ 17
DEATH BENEFIT............................................... 17
Purchase Payment Accumulation Option.................. 18
Maximum Anniversary Option............................ 18
EstatePlus............................................ 18
Spousal Continuation.................................. 19
EXPENSES.................................................... 19
Insurance Charges..................................... 19
Withdrawal Charges.................................... 20
Investment Charges.................................... 20
Contract Maintenance Fee.............................. 20
Transfer Fee.......................................... 20
Optional EstatePlus Fee............................... 20
Premium Tax........................................... 20
Income Taxes.......................................... 21
Reduction or Elimination of Charges and Expenses,
and Additional Amounts Credited..................... 21
INCOME OPTIONS.............................................. 21
Annuity Date.......................................... 21
Income Options........................................ 21
Fixed or Variable Income Payments..................... 22
Income Payments....................................... 22
Transfers During the Income Phase..................... 22
Deferment of Payments................................. 22
The Income Protector Feature.......................... 22
TAXES....................................................... 23
Annuity Contracts in General.......................... 23
Tax Treatment of Distributions - Non-Qualified
Contracts............................................. 24
Tax Treatment of Distributions - Qualified
Contracts............................................. 24
Minimum Distributions................................. 24
Diversification....................................... 24
PERFORMANCE................................................. 25
OTHER INFORMATION........................................... 25
Anchor National....................................... 25
The Separate Account.................................. 25
The General Account................................... 25
Distribution of the Contract.......................... 25
Administration........................................ 26
Legal Proceedings..................................... 26
Ownership............................................. 26
Custodian............................................. 26
Independent Accountants............................... 26
Registration Statement................................ 26
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION....
27
APPENDIX A - CONDENSED FINANCIAL INFORMATION................ A-1
APPENDIX B - PRINCIPAL REWARDS PROGRAM EXAMPLES............. B-1
APPENDIX C - MARKET VALUE ADJUSTMENT ("MVA")................ C-1
APPENDIX D - DEATH BENEFITS FOLLOWING SPOUSAL
CONTINUATION.............................................. D-1
APPENDIX E - PREMIUM TAXES.................................. E-1
------------------------------------------------------------------
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GLOSSARY
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------------------------------------------------------------------
We have capitalized some of the technical terms used in this
prospectus. To help you understand these terms, we have defined
them in this glossary.
ACCUMULATION PHASE - The period during which you invest money in
your contract.
ACCUMULATION UNITS - A measurement we use to calculate the value
of the variable portion of your contract during the Accumulation
Phase.
ANNUITANT(S) - The person(s) on whose life (lives) we base income
payments.
ANNUITY DATE - The date on which income payments are to begin, as
selected by you.
ANNUITY UNITS - A measurement we use to calculate the amount of
income payments you receive from the variable portion of your
contract during the Income Phase.
BENEFICIARY - The person designated to receive any benefits under
the contract if you or the Annuitant dies.
COMPANY - Anchor National Life Insurance Company, We, Us, the
insurer which issues this contract.
INCOME PHASE - The period during which we make income payments to
you.
IRS - The Internal Revenue Service.
NON-QUALIFIED (CONTRACT) - A contract purchased with after-tax
dollars. In general, these contracts are not under any pension
plan, specially sponsored program or individual retirement account
("IRA").
PAYMENT ENHANCEMENT(S) - The amount(s) allocated to your contract
by us under the Principal Rewards Program. Payment Enhancements
are calculated as a percentage of your Purchase Payments and are
considered earnings.
PURCHASE PAYMENTS - The money you give us to buy the contract, as
well as any additional money you give us to invest in the contract
after you own it.
QUALIFIED (CONTRACT) - A contract purchased with pretax dollars.
These contracts are generally purchased under a pension plan,
specially sponsored program or IRA.
TRUSTS - Refers to the Anchor Series Trust and the SunAmerica
Series Trust collectively.
VARIABLE PORTFOLIO(S) - The variable investment options available
under the contract. Each Variable Portfolio has its own investment
objective and is invested in the underlying investments of the
Anchor Series Trust or the SunAmerica Series Trust.
</TABLE>
ALL FINANCIAL REPRESENTATIVES OR AGENTS THAT SELL THE CONTRACTS OFFERED BY THIS
PROSPECTUS ARE REQUIRED TO DELIVER A PROSPECTUS.
3
<PAGE> 13
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FEE TABLES
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OWNER TRANSACTION EXPENSES
WITHDRAWAL CHARGE (AS A PERCENTAGE OF EACH PURCHASE PAYMENT)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
YEARS:.................. 1 2 3 4 5 6 7 8 9 10
Schedule A*............. 7% 6% 5% 4% 3% 2% 1% 0% 0% 0%
Schedule B**............ 9% 9% 8% 7% 6% 5% 4% 3% 2% 0%
</TABLE>
* This schedule applies to each Purchase Payment if you are not participating
in the Principal Rewards Program.
** This schedule applies to each Purchase Payment if you are participating in
the Principal Rewards Program.
<TABLE>
<S> <C>
TRANSFER FEE.......... No charge for first 15 transfers each
contract year; thereafter, fee is $25
($10 in Pennsylvania and Texas) per
transfer
</TABLE>
CONTRACT MAINTENANCE FEE*
$35 ($30 in North Dakota)
*waived if contract value is $50,000 or more
ANNUAL SEPARATE ACCOUNT EXPENSES
(AS A PERCENTAGE OF AVERAGE ACCOUNT VALUE)
<TABLE>
<S> <C>
Mortality and Expense Risk Charge........................ 1.37%
Distribution Expense Charge.............................. 0.15%
-----
TOTAL SEPARATE ACCOUNT EXPENSES 1.52%
=====
</TABLE>
OPTIONAL ESTATEPLUS FEE
(ESTATEPLUS, AN ENHANCED DEATH BENEFIT FEATURE, IS OPTIONAL AND IF ELECTED, THE
FEE IS AN ANNUALIZED CHARGE THAT IS DEDUCTED DAILY.)
<TABLE>
<S> <C>
Fee as a percentage of your daily net asset value......... 0.25%
</TABLE>
PORTFOLIO EXPENSES
ANCHOR SERIES TRUST
(AS A PERCENTAGE OF AVERAGE NET ASSETS FOR THE TRUST'S FISCAL YEAR ENDED
DECEMBER 31, 1999)
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEE EXPENSES EXPENSES
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital Appreciation(1) .70% .04% .74%
-----------------------------------------------------------------------------------------------------------
Government and Quality Bond .60% .06% .66%
-----------------------------------------------------------------------------------------------------------
Growth .68% .05% .73%
-----------------------------------------------------------------------------------------------------------
Natural Resources .75% .25% 1.00%
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
</TABLE>
(1) The expenses noted here are restated to reflect an estimate of the fees
for the portfolio for the current fiscal year. This fee increase became
effective on August 1, 2000 following approval by the Board of Directors
of the Trust and shareholders.
SUNAMERICA SERIES TRUST
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER REIMBURSEMENT OR WAIVER OF EXPENSES
FOR THE TRUST'S FISCAL YEAR ENDED JANUARY 31, 2000)
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEE EXPENSES EXPENSES
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aggressive Growth .70% .05% .75%
-----------------------------------------------------------------------------------------------------------
Alliance Growth .60% .03% .63%
-----------------------------------------------------------------------------------------------------------
Asset Allocation .58% .05% .63%
-----------------------------------------------------------------------------------------------------------
Blue Chip Growth(1,2) .70% .15% .85%
-----------------------------------------------------------------------------------------------------------
Cash Management(3) .49% .04% .53%
-----------------------------------------------------------------------------------------------------------
Corporate Bond .62% .09% .71%
-----------------------------------------------------------------------------------------------------------
Davis Venture Value .71% .03% .74%
-----------------------------------------------------------------------------------------------------------
"Dogs" of Wall Street(1) .60% .07% .67%
-----------------------------------------------------------------------------------------------------------
Emerging Markets(1) 1.25% .65% 1.90%
-----------------------------------------------------------------------------------------------------------
Federated Value .71% .06% .77%
-----------------------------------------------------------------------------------------------------------
Global Bond .69% .15% .84%
-----------------------------------------------------------------------------------------------------------
Global Equities .72% .12% .84%
-----------------------------------------------------------------------------------------------------------
Goldman Sachs Research(1,2) 1.20% .15% 1.35%
-----------------------------------------------------------------------------------------------------------
Growth-Income .53% .03% .56%
-----------------------------------------------------------------------------------------------------------
Growth Opportunities(1,2) .75% .25% 1.00%
-----------------------------------------------------------------------------------------------------------
High-Yield Bond .62% .05% .67%
-----------------------------------------------------------------------------------------------------------
International Diversified Equities 1.00% .22% 1.22%
-----------------------------------------------------------------------------------------------------------
International Growth and Income .98% .23% 1.21%
-----------------------------------------------------------------------------------------------------------
Marsico Growth(1,2) .85% .15% 1.00%
-----------------------------------------------------------------------------------------------------------
MFS Growth and Income .70% .05% .75%
-----------------------------------------------------------------------------------------------------------
MFS Mid-Cap Growth(1) .75% .40% 1.15%
-----------------------------------------------------------------------------------------------------------
MFS Total Return .66% .09% .75%
-----------------------------------------------------------------------------------------------------------
Putnam Growth .76% .04% .80%
-----------------------------------------------------------------------------------------------------------
Real Estate .80% .12% .92%
-----------------------------------------------------------------------------------------------------------
SunAmerica Balanced .62% .04% .66%
-----------------------------------------------------------------------------------------------------------
Technology(1,2) 1.20% .35% 1.55%
-----------------------------------------------------------------------------------------------------------
Telecom Utility(4) .75% .09% .84%
-----------------------------------------------------------------------------------------------------------
Worldwide High Income 1.00% .12% 1.12%
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
</TABLE>
(1)For this portfolio, the adviser, SunAmerica Asset Management Corp., has
voluntarily agreed to waive fees or reimburse expenses, if necessary, to
keep operating expenses at or below established maximum amounts. All
waivers or reimbursements may be terminated at any time. Only certain
portfolios relied on these waivers and/or reimbursements during this
fiscal year as follows: MFS Mid-Cap Growth (1.17%). Absent recoupment of
expenses by the adviser, the Total Annual Expenses during the last fiscal
year for the "Dogs" of Wall Street Portfolio would have been 0.67% and for
Emerging Markets Portfolios 1.77%. For the "Dogs" of Wall Street portfolio
for fiscal year ended January 31, 2000, the adviser recouped prior year
expense reimbursements that were mathematically insignificant, resulting
in the expense ratio before and after the recoupment remaining at 0.67%.
(2)This portfolio was not available for sale during fiscal year 2000. The
Total Annual Expenses are based on estimated amounts for the current
fiscal year.
(3)Formerly managed by SunAmerica Asset Management Corp.
(4)Formerly named Utility Portfolio. The name change will not result in any
modifications to the portfolio's principal investment goal or fundamental
investment policies.
THE ABOVE PORTFOLIO EXPENSES WERE PROVIDED BY THE TRUSTS. WE HAVE NOT
INDEPENDENTLY VERIFIED THE ACCURACY OF THE INFORMATION.
4
<PAGE> 14
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EXAMPLES
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You will pay the following expenses on a $1,000 investment in each Variable
Portfolio, assuming a 5% annual return on assets, no participation in the
Principal Rewards program, Portfolio Expenses after waiver, reimbursement or
recoupment, if applicable and:
(a) you surrender the contract at the end of the stated time period.
(b) you elect the optional EstatePlus benefit and you surrender the
contract at the end of the stated period.
(c) you do not surrender the contract.*
(d) you elect the optional EstatePlus benefit and you do not surrender
the contract.
<TABLE>
<CAPTION>
1 3 5 10
PORTFOLIO YEAR YEARS YEARS YEARS
--------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Appreciation (a) $ 93 (a) $122 (a) $154 (a) $265
(b) $ 96 (b) $130 (b) $166 (b) $290
(c) $ 23 (c) $ 72 (c) $124 (c) $265
(d) $ 26 (d) $ 80 (d) $136 (d) $290
--------------------------------------------------------------------------------------------------------
Government and Quality Bond (a) $ 93 (a) $120 (a) $150 (a) $257
(b) $ 95 (b) $127 (b) $162 (b) $282
(c) $ 23 (c) $ 70 (c) $120 (c) $257
(d) $ 25 (d) $ 77 (d) $132 (d) $282
--------------------------------------------------------------------------------------------------------
Growth (a) $ 93 (a) $122 (a) $153 (a) $264
(b) $ 96 (b) $130 (b) $166 (b) $289
(c) $ 23 (c) $ 72 (c) $123 (c) $264
(d) $ 26 (d) $ 80 (d) $136 (d) $289
--------------------------------------------------------------------------------------------------------
Natural Resources (a) $ 96 (a) $130 (a) $167 (a) $291
(b) $ 99 (b) $138 (b) $179 (b) $315
(c) $ 26 (c) $ 80 (c) $137 (c) $291
(d) $ 29 (d) $ 88 (d) $149 (d) $315
--------------------------------------------------------------------------------------------------------
Aggressive Growth (a) $ 94 (a) $123 (a) $154 (a) $266
(b) $ 96 (b) $130 (b) $167 (b) $291
(c) $ 24 (c) $ 73 (c) $124 (c) $266
(d) $ 26 (d) $ 80 (d) $137 (d) $291
--------------------------------------------------------------------------------------------------------
Alliance Growth (a) $ 92 (a) $119 (a) $148 (a) $254
(b) $ 95 (b) $127 (b) $161 (b) $279
(c) $ 22 (c) $ 69 (c) $118 (c) $254
(d) $ 25 (d) $ 77 (d) $131 (d) $279
--------------------------------------------------------------------------------------------------------
Asset Allocation (a) $ 92 (a) $119 (a) $148 (a) $254
(b) $ 95 (b) $127 (b) $161 (b) $279
(c) $ 22 (c) $ 69 (c) $118 (c) $254
(d) $ 25 (d) $ 77 (d) $131 (d) $279
--------------------------------------------------------------------------------------------------------
Blue Chip Growth (a) $ 95 (a) $126 (a) $159 (a) $276
(b) $ 97 (b) $133 (b) $172 (b) $300
(c) $ 25 (c) $ 76 (c) $129 (c) $276
(d) $ 27 (d) $ 83 (d) $142 (d) $300
--------------------------------------------------------------------------------------------------------
Cash Management (a) $ 91 (a) $116 (a) $143 (a) $243
(b) $ 94 (b) $124 (b) $156 (b) $269
(c) $ 21 (c) $ 66 (c) $113 (c) $243
(d) $ 24 (d) $ 74 (d) $126 (d) $269
--------------------------------------------------------------------------------------------------------
Corporate Bond (a) $ 93 (a) $121 (a) $152 (a) $262
(b) $ 96 (b) $129 (b) $165 (b) $287
(c) $ 23 (c) $ 71 (c) $122 (c) $262
(d) $ 26 (d) $ 79 (d) $135 (d) $287
--------------------------------------------------------------------------------------------------------
Davis Venture Value (a) $ 93 (a) $122 (a) $154 (a) $265
(b) $ 96 (b) $130 (b) $166 (b) $290
(c) $ 23 (c) $ 72 (c) $124 (c) $265
(d) $ 26 (d) $ 80 (d) $136 (d) $290
--------------------------------------------------------------------------------------------------------
"Dogs" of Wall Street (a) $ 93 (a) $120 (a) $150 (a) $258
(b) $ 95 (b) $128 (b) $163 (b) $283
(c) $ 23 (c) $ 70 (c) $120 (c) $258
(d) $ 25 (d) $ 78 (d) $133 (d) $283
--------------------------------------------------------------------------------------------------------
Emerging Markets (a) $105 (a) $157 (a) $211 (a) $375
(b) $108 (b) $164 (b) $223 (b) $397
(c) $ 35 (c) $107 (c) $181 (c) $375
(d) $ 38 (d) $114 (d) $193 (d) $397
--------------------------------------------------------------------------------------------------------
Federated Value (a) $ 94 (a) $123 (a) $155 (a) $268
(b) $ 96 (b) $131 (b) $168 (b) $293
(c) $ 24 (c) $ 73 (c) $125 (c) $268
(d) $ 26 (d) $ 81 (d) $138 (d) $293
--------------------------------------------------------------------------------------------------------
Global Bond (a) $ 94 (a) $125 (a) $159 (a) $275
(b) $ 97 (b) $133 (b) $171 (b) $299
(c) $ 24 (c) $ 75 (c) $129 (c) $275
(d) $ 27 (d) $ 83 (d) $141 (d) $299
--------------------------------------------------------------------------------------------------------
Global Equities (a) $ 94 (a) $125 (a) $159 (a) $275
(b) $ 97 (b) $133 (b) $171 (b) $299
(c) $ 24 (c) $ 75 (c) $129 (c) $275
(d) $ 27 (d) $ 83 (d) $141 (d) $299
--------------------------------------------------------------------------------------------------------
* We do not currently charge a surrender charge upon annuitization unless the contract is annuitized
using the Income Protector feature. We assess the applicable surrender charge upon annuitization under
the Income Protector feature assuming a full surrender of your contract.
</TABLE>
5
<PAGE> 15
<TABLE>
<CAPTION>
1 3 5 10
PORTFOLIO YEAR YEARS YEARS YEARS
--------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Goldman Sachs Research (a) $100 (a) $141 (a) $186 (a) $329
(b) $102 (b) $149 (b) $198 (b) $353
(c) $ 30 (c) $ 91 (c) $156 (c) $329
(d) $ 32 (d) $ 99 (d) $168 (d) $353
--------------------------------------------------------------------------------------------------------
Growth-Income (a) $ 92 (a) $117 (a) $145 (a) $247
(b) $ 94 (b) $124 (b) $157 (b) $272
(c) $ 22 (c) $ 67 (c) $115 (c) $247
(d) $ 24 (d) $ 74 (d) $127 (d) $272
--------------------------------------------------------------------------------------------------------
Growth Opportunities (a) $ 96 (a) $130 (a) $167 (a) $291
(b) $ 99 (b) $138 (b) $179 (b) $315
(c) $ 26 (c) $ 80 (c) $137 (c) $291
(d) $ 29 (d) $ 88 (d) $149 (d) $315
--------------------------------------------------------------------------------------------------------
High-Yield Bond (a) $ 93 (a) $120 (a) $150 (a) $258
(b) $ 95 (b) $128 (b) $163 (b) $283
(c) $ 23 (c) $ 70 (c) $120 (c) $258
(d) $ 25 (d) $ 78 (d) $133 (d) $283
--------------------------------------------------------------------------------------------------------
International Diversified Equities (a) $ 98 (a) $137 (a) $178 (a) $312
(b) $101 (b) $144 (b) $190 (b) $336
(c) $ 28 (c) $ 87 (c) $148 (c) $312
(d) $ 31 (d) $ 94 (d) $160 (d) $336
--------------------------------------------------------------------------------------------------------
International Growth and Income (a) $ 98 (a) $136 (a) $177 (a) $311
(b) $101 (b) $144 (b) $190 (b) $335
(c) $ 28 (c) $ 86 (c) $147 (c) $311
(d) $ 31 (d) $ 94 (d) $160 (d) $335
--------------------------------------------------------------------------------------------------------
Marsico Growth (a) $ 96 (a) $130 (a) $167 (a) $291
(b) $ 99 (b) $138 (b) $179 (b) $315
(c) $ 26 (c) $ 80 (c) $137 (c) $291
(d) $ 29 (d) $ 88 (d) $149 (d) $315
--------------------------------------------------------------------------------------------------------
MFS Growth and Income (a) $ 94 (a) $123 (a) $154 (a) $266
(b) $ 96 (b) $130 (b) $167 (b) $291
(c) $ 24 (c) $ 73 (c) $124 (c) $266
(d) $ 26 (d) $ 80 (d) $137 (d) $291
--------------------------------------------------------------------------------------------------------
MFS Mid-Cap Growth (a) $ 98 (a) $135 (a) $174 (a) $305
(b) $100 (b) $142 (b) $186 (b) $329
(c) $ 28 (c) $ 85 (c) $144 (c) $305
(d) $ 30 (d) $ 92 (d) $156 (d) $329
--------------------------------------------------------------------------------------------------------
MFS Total Return (a) $ 94 (a) $123 (a) $154 (a) $266
(b) $ 96 (b) $130 (b) $167 (b) $291
(c) $ 24 (c) $ 73 (c) $124 (c) $266
(d) $ 26 (d) $ 80 (d) $137 (d) $291
--------------------------------------------------------------------------------------------------------
Putnam Growth (a) $ 94 (a) $124 (a) $157 (a) $271
(b) $ 97 (b) $132 (b) $169 (b) $296
(c) $ 24 (c) $ 74 (c) $127 (c) $271
(d) $ 27 (d) $ 82 (d) $139 (d) $296
--------------------------------------------------------------------------------------------------------
Real Estate (a) $ 95 (a) $128 (a) $163 (a) $283
(b) $ 98 (b) $135 (b) $175 (b) $307
(c) $ 25 (c) $ 78 (c) $133 (c) $283
(d) $ 28 (d) $ 85 (d) $145 (d) $307
--------------------------------------------------------------------------------------------------------
SunAmerica Balanced (a) $ 93 (a) $120 (a) $150 (a) $257
(b) $ 95 (b) $127 (b) $162 (b) $282
(c) $ 23 (c) $ 70 (c) $120 (c) $257
(d) $ 25 (d) $ 77 (d) $132 (d) $282
--------------------------------------------------------------------------------------------------------
Technology (a) $102 (a) $146 (a) $194 (a) $343
(b) $104 (b) $154 (b) $206 (b) $366
(c) $ 32 (c) $ 96 (c) $164 (c) $343
(d) $ 34 (d) $104 (d) $176 (d) $366
--------------------------------------------------------------------------------------------------------
Telecom Utility (a) $ 94 (a) $125 (a) $159 (a) $275
(b) $ 97 (b) $133 (b) $171 (b) $299
(c) $ 24 (c) $ 75 (c) $129 (c) $275
(d) $ 27 (d) $ 83 (d) $141 (d) $299
--------------------------------------------------------------------------------------------------------
Worldwide High Income (a) $ 97 (a) $134 (a) $173 (a) $302
(b) $100 (b) $141 (b) $185 (b) $326
(c) $ 27 (c) $ 84 (c) $143 (c) $302
(d) $ 30 (d) $ 91 (d) $155 (d) $326
--------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 16
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EXAMPLES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
You will pay the following expenses on a $1,000 investment in each Variable
Portfolio, assuming a 5% annual return on assets, participation in the Principal
Rewards program, Portfolio Expenses after waiver, reimbursement or recoupment,
if applicable and:
(a) you surrender the contract at the end of the stated time period.
(b) you elect the optional EstatePlus benefit and you surrender the
contract at the end of the stated period.
(c) you do not surrender the contract*
(d) you elect the optional EstatePlus benefit and you do not surrender
the contract.
<TABLE>
<CAPTION>
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Appreciation (a) $116 (a) $155 (a) $187 (a) $270
(b) $118 (b) $163 (b) $200 (b) $296
(c) $ 24 (c) $ 74 (c) $126 (c) $270
(d) $ 26 (d) $ 81 (d) $139 (d) $296
--------------------------------------------------------------------------------------------------------
Government and Quality Bond (a) $115 (a) $153 (a) $183 (a) $262
(b) $117 (b) $161 (b) $196 (b) $288
(c) $ 23 (c) $ 71 (c) $122 (c) $262
(d) $ 26 (d) $ 79 (d) $135 (d) $288
--------------------------------------------------------------------------------------------------------
Growth (a) $116 (a) $155 (a) $187 (a) $269
(b) $118 (b) $163 (b) $200 (b) $295
(c) $ 24 (c) $ 73 (c) $126 (c) $269
(d) $ 26 (d) $ 81 (d) $138 (d) $295
--------------------------------------------------------------------------------------------------------
Natural Resources (a) $118 (a) $163 (a) $201 (a) $296
(b) $121 (b) $171 (b) $213 (b) $322
(c) $ 27 (c) $ 82 (c) $139 (c) $296
(d) $ 29 (d) $ 89 (d) $152 (d) $322
--------------------------------------------------------------------------------------------------------
Aggressive Growth (a) $116 (a) $156 (a) $188 (a) $271
(b) $118 (b) $163 (b) $201 (b) $297
(c) $ 24 (c) $ 74 (c) $127 (c) $271
(d) $ 27 (d) $ 82 (d) $139 (d) $297
--------------------------------------------------------------------------------------------------------
Alliance Growth (a) $115 (a) $152 (a) $182 (a) $259
(b) $117 (b) $160 (b) $195 (b) $285
(c) $ 23 (c) $ 70 (c) $121 (c) $259
(d) $ 25 (d) $ 78 (d) $133 (d) $285
--------------------------------------------------------------------------------------------------------
Asset Allocation (a) $115 (a) $152 (a) $182 (a) $259
(b) $117 (b) $160 (b) $195 (b) $285
(c) $ 23 (c) $ 70 (c) $121 (c) $259
(d) $ 25 (d) $ 78 (d) $133 (d) $285
--------------------------------------------------------------------------------------------------------
Blue Chip Growth (a) $117 (a) $159 (a) $193 (a) $281
(b) $119 (b) $166 (b) $206 (b) $307
(c) $ 25 (c) $ 77 (c) $132 (c) $281
(d) $ 28 (d) $ 85 (d) $145 (d) $307
--------------------------------------------------------------------------------------------------------
Cash Management (a) $114 (a) $149 (a) $177 (a) $248
(b) $116 (b) $157 (b) $189 (b) $275
(c) $ 22 (c) $ 67 (c) $115 (c) $248
(d) $ 24 (d) $ 75 (d) $128 (d) $275
--------------------------------------------------------------------------------------------------------
Corporate Bond (a) $115 (a) $154 (a) $186 (a) $267
(b) $118 (b) $162 (b) $199 (b) $293
(c) $ 24 (c) $ 73 (c) $125 (c) $267
(d) $ 26 (d) $ 80 (d) $137 (d) $293
--------------------------------------------------------------------------------------------------------
Davis Venture Value (a) $116 (a) $155 (a) $187 (a) $270
(b) $118 (b) $163 (b) $200 (b) $296
(c) $ 24 (c) $ 74 (c) $126 (c) $270
(d) $ 26 (d) $ 81 (d) $139 (d) $296
--------------------------------------------------------------------------------------------------------
"Dogs" of Wall Street (a) $115 (a) $153 (a) $184 (a) $263
(b) $118 (b) $161 (b) $197 (b) $289
(c) $ 23 (c) $ 72 (c) $123 (c) $263
(d) $ 26 (d) $ 79 (d) $135 (d) $289
--------------------------------------------------------------------------------------------------------
Emerging Markets (a) $128 (a) $191 (a) $245 (a) $383
(b) $130 (b) $198 (b) $258 (b) $406
(c) $ 36 (c) $109 (c) $184 (c) $383
(d) $ 38 (d) $116 (d) $196 (d) $406
--------------------------------------------------------------------------------------------------------
Federated Value (a) $116 (a) $156 (a) $189 (a) $273
(b) $119 (b) $164 (b) $202 (b) $299
(c) $ 24 (c) $ 75 (c) $128 (c) $273
(d) $ 27 (d) $ 82 (d) $141 (d) $299
--------------------------------------------------------------------------------------------------------
Global Bond (a) $117 (a) $158 (a) $193 (a) $280
(b) $119 (b) $166 (b) $205 (b) $306
(c) $ 25 (c) $ 77 (c) $131 (c) $280
(d) $ 28 (d) $ 84 (d) $144 (d) $306
--------------------------------------------------------------------------------------------------------
Global Equities (a) $117 (a) $158 (a) $193 (a) $280
(b) $119 (b) $166 (b) $205 (b) $306
(c) $ 25 (c) $ 77 (c) $131 (c) $280
(d) $ 28 (d) $ 84 (d) $144 (d) $306
--------------------------------------------------------------------------------------------------------
* We do not currently charge a surrender charge upon annuitization unless the contract is annuitized
using the Income Protector feature. We assess the applicable surrender charge upon annuitization under
the Income Protector feature assuming a full surrender of your contract.
</TABLE>
7
<PAGE> 17
<TABLE>
<CAPTION>
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Goldman Sachs Research (a) $122 (a) $174 (a) $218 (a) $331
(b) $125 (b) $182 (b) $231 (b) $356
(c) $ 30 (c) $ 92 (c) $157 (c) $331
(d) $ 33 (d) $100 (d) $170 (d) $356
--------------------------------------------------------------------------------------------------------
Growth-Income (a) $114 (a) $150 (a) $178 (a) $251
(b) $116 (b) $158 (b) $191 (b) $278
(c) $ 22 (c) $ 68 (c) $117 (c) $251
(d) $ 25 (d) $ 76 (d) $130 (d) $278
--------------------------------------------------------------------------------------------------------
Growth Opportunities (a) $118 (a) $163 (a) $201 (a) $296
(b) $121 (b) $171 (b) $213 (b) $322
(c) $ 27 (c) $ 82 (c) $139 (c) $296
(d) $ 29 (d) $ 89 (d) $152 (d) $322
--------------------------------------------------------------------------------------------------------
High-Yield Bond (a) $115 (a) $153 (a) $184 (a) $263
(b) $118 (b) $161 (b) $197 (b) $289
(c) $ 23 (c) $ 72 (c) $123 (c) $263
(d) $ 26 (d) $ 79 (d) $135 (d) $289
--------------------------------------------------------------------------------------------------------
International Diversified Equities (a) $121 (a) $170 (a) $212 (a) $318
(b) $123 (b) $178 (b) $224 (b) $343
(c) $ 29 (c) $ 88 (c) $151 (c) $313
(d) $ 31 (d) $ 96 (d) $163 (d) $343
--------------------------------------------------------------------------------------------------------
International Growth and Income (a) $121 (a) $170 (a) $211 (a) $318
(b) $123 (b) $177 (b) $224 (b) $343
(c) $ 29 (c) $ 88 (c) $150 (c) $318
(d) $ 31 (d) $ 96 (d) $163 (d) $343
--------------------------------------------------------------------------------------------------------
Marsico Growth (a) $118 (a) $163 (a) $201 (a) $296
(b) $121 (b) $171 (b) $213 (b) $322
(c) $ 27 (c) $ 82 (c) $139 (c) $296
(d) $ 29 (d) $ 89 (d) $152 (d) $322
--------------------------------------------------------------------------------------------------------
MFS Growth and Income (a) $116 (a) $156 (a) $188 (a) $271
(b) $118 (b) $163 (b) $201 (b) $297
(c) $ 24 (c) $ 74 (c) $127 (c) $271
(d) $ 27 (d) $ 82 (d) $139 (d) $297
--------------------------------------------------------------------------------------------------------
MFS Mid-Cap Growth (a) $120 (a) $168 (a) $208 (a) $311
(b) $122 (b) $175 (b) $221 (b) $337
(c) $ 28 (c) $ 86 (c) $147 (c) $311
(d) $ 31 (d) $ 94 (d) $160 (d) $337
--------------------------------------------------------------------------------------------------------
MFS Total Return (a) $116 (a) $156 (a) $188 (a) $271
(b) $118 (b) $163 (b) $201 (b) $297
(c) $ 24 (c) $ 74 (c) $127 (c) $271
(d) $ 27 (d) $ 82 (d) $139 (d) $297
--------------------------------------------------------------------------------------------------------
Putnam Growth (a) $116 (a) $157 (a) $191 (a) $276
(b) $119 (b) $165 (b) $203 (b) $302
(c) $ 25 (c) $ 76 (c) $129 (c) $276
(d) $ 27 (d) $ 83 (d) $142 (d) $302
--------------------------------------------------------------------------------------------------------
Real Estate (a) $118 (a) $161 (a) $197 (a) $288
(b) $120 (b) $168 (b)$209 (b) $314
(c) $ 26 (c) $ 79 (c) $135 (c) $288
(d) $ 28 (d) $ 87 (d) $148 (d) $314
--------------------------------------------------------------------------------------------------------
SunAmerica Balanced (a) $115 (a) $153 (a) $183 (a) $262
(b) $117 (b) $161 (b) $196 (b) $288
(c) $ 23 (c) $ 71 (c) $122 (c) $262
(d) $ 26 (d) $ 79 (d) $135 (d) $288
--------------------------------------------------------------------------------------------------------
Technology (a) $124 (a) $180 (a) $228 (a) $350
(b) $127 (b) $188 (b) $241 (b) $375
(c) $ 32 (c) $ 98 (c) $167 (c) $350
(d) $ 35 (d) $106 (d) $179 (d) $375
--------------------------------------------------------------------------------------------------------
Telecom Utility (a) $117 (a) $158 (a) $193 (a) $280
(b) $119 (b) $166 (b) $205 (b) $306
(c) $ 25 (c) $ 77 (c) $131 (c) $280
(d) $ 28 (d) $ 84 (d) $144 (d) $306
--------------------------------------------------------------------------------------------------------
Worldwide High Income (a) $120 (a) $167 (a) $207 (a) $308
(b) $122 (b) $175 (b) $219 (b) $334
(c) $ 28 (c) $ 85 (c) $146 (c) $308
(d) $ 30 (d) $ 93 (d) $158 (d) $334
--------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 18
EXPLANATION OF FEE TABLES AND EXAMPLES
1. The purpose of the Fee Tables is to show you the various expenses you would
incur directly and indirectly by investing in the contract. The tables
represent both fees at the separate account (contract level) as well as
portfolio company investment management expenses. Additional information on
the portfolio company fees can be found in the Trust prospectuses located
behind this prospectus.
2. For certain Variable Portfolios, the adviser, SunAmerica Asset Management
Corp., has voluntarily agreed to waive fees or reimburse certain expenses,
if necessary, to keep annual operating expenses at or below the lesser of
the maximum allowed by any applicable state expense limitations or the
following percentages of each Variable Portfolio's average net assets: MFS
MidCap Growth (1.15%); Goldman Sachs Research (1.35%); Blue Chip Growth
(.85%); Growth Opportunities (1.00%); Marsico Growth (1.00%); Technology
(1.55%); "Dogs" of Wall Street (.85%); and Emerging Markets (1.90%). The
adviser also may voluntarily waive or reimburse additional amounts to
increase a Variable Portfolio's investment return. All waivers and/or
reimbursements may be terminated at any time. Furthermore, the adviser may
recoup any waivers or reimbursements within two years after such waivers or
reimbursements are granted, provided that the Variable Portfolio is able to
make such payment and remain in compliance with the foregoing expense
limitations.
3. The Examples assume that no transfer fees were imposed. Although premium
taxes may apply in certain states, they are not reflected in the Examples.
4. Examples reflecting participation in the Principal Rewards program reflect
surrender charge Schedule B, and a 2% upfront payment enhancement.
5. THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
THE HISTORICAL ACCUMULATION UNIT VALUES ARE CONTAINED IN APPENDIX A -- CONDENSED
FINANCIAL INFORMATION.
----------------------------------------------------------------
----------------------------------------------------------------
THE POLARIS(II) VARIABLE ANNUITY
----------------------------------------------------------------
----------------------------------------------------------------
An annuity is a contract between you and an insurance company. You are the owner
of the contract. The contract provides three main benefits:
- Tax Deferral: This means that you do not pay taxes on your earnings from
the annuity until you withdraw them.
- Death Benefit: If you die during the Accumulation Phase, the insurance
company pays a death benefit to your Beneficiary.
- Guaranteed Income: If elected, you receive a stream of income for your
lifetime, or another available period you select.
Tax-qualified retirement plans (e.g., IRAs, 401(k) or 403(b) plans) defer
payment of taxes on earnings until withdrawal. If you are considering funding a
tax-qualified retirement plan with an annuity, you should know that an annuity
does not provide any additional tax deferral treatment of earnings beyond the
treatment provided by the tax-qualified retirement plan itself. However,
annuities do provide other features and benefits which may be valuable to you.
You should fully discuss this decision with your financial representative.
This annuity was developed to help you contribute to your retirement savings.
This annuity works in two stages, the Accumulation Phase and the Income Phase.
Your contract is in the Accumulation Phase during the period when you make
payments into the contract. The Income Phase begins when you request us to start
making income payments to you out of the money accumulated in your contract.
The contract is called a "variable" annuity because it allows you to invest in
variable portfolios which, like mutual funds, have different investment
objectives and performance which varies. You can gain or lose money if you
invest in these Variable Portfolios. The amount of money you accumulate in your
contract depends on the performance of the Variable Portfolios in which you
invest. This contract currently offers 32 Variable Portfolios.
The contract also offers several fixed account options for varying time periods.
Fixed account options earn interest at a rate set and guaranteed by Anchor
National. If you allocate money to the fixed account options, the amount of
money that accumulates in the contract depends on the total interest credited to
the particular fixed account option(s) in which you invest.
For more information on investment options available under this contract SEE
INVESTMENT OPTIONS ON PAGE 12.
This annuity is designed to assist in contributing to retirement savings of
investors whose personal circumstances allow for a long-term investment time
horizon. As a function of the Internal Revenue Code ("IRC"), you may be assessed
a 10% federal tax penalty on any withdrawal made prior to your reaching age
59 1/2. Additionally, this contract provides that you will be charged a
withdrawal charge on each purchase payment withdrawn if that purchase payment
has not been invested in this contract for at least 7 years, or 9 years if you
elect to participate in the Principal Rewards Program. Because of these
potential penalties, you should fully discuss all of the benefits and risks of
this contract with your financial representative prior to purchase.
Anchor National Life Insurance Company (Anchor National, The Company, Us, We)
issues the PolarisII Variable Annuity. When you purchase a PolarisII Variable
Annuity, a contract exists between you and Anchor National. The Company is a
stock life insurance company organized under the laws of the
9
<PAGE> 19
state of Arizona. Its principal place of business is 1 SunAmerica Center, Los
Angeles, California 90067. The Company conducts life insurance and annuity
business in the District of Columbia and all states except New York. Anchor
National is an indirect, wholly owned subsidiary of American International
Group, Inc. ("AIG"), a Delaware corporation.
----------------------------------------------------------------
----------------------------------------------------------------
PURCHASING A POLARIS(II) VARIABLE ANNUITY
----------------------------------------------------------------
----------------------------------------------------------------
An initial Purchase Payment is the money you give us to buy a contract. Any
additional money you give us to invest in the contract after purchase is a
subsequent Purchase Payment.
The following chart shows the minimum initial and subsequent Purchase Payments
permitted under your contract. These amounts depend upon whether a contract is
Qualified or Non-qualified for tax purposes. FOR FURTHER EXPLANATION, SEE TAXES
ON PAGE 23.
<TABLE>
<CAPTION>
-----------------------------------------------------------
Minimum
Minimum Initial Subsequent
Purchase Payment Purchase Payment
-----------------------------------------------------------
<S> <C> <C>
Qualified $2,000 $250
-----------------------------------------------------------
Non-Qualified $5,000 $500
-----------------------------------------------------------
</TABLE>
Prior Company approval is required to accept Purchase Payments greater than
$1,500,000. The Company reserves the right to refuse any Purchase Payment
including one which would cause the contract value or total Purchase Payments to
exceed $1,500,000 at the time of the Purchase Payment. Also, the optional
automatic payment plan allows you to make subsequent Purchase Payments of as
little as $20.00.
In general, we will not issue a Qualified contract to anyone who is age 70 1/2
or older, unless it is shown that the minimum distribution required by the IRS
is being made. In addition, we may not issue a contract to anyone age 91 or
older. You may not elect to participate in the Principal Rewards Program or
elect the EstatePlus benefit if you are age 81 or older at the time of contract
issue.
ALLOCATION OF PURCHASE PAYMENTS
We invest your Purchase Payments in the fixed and variable investment options
according to your instructions. If we receive a Purchase Payment without
allocation instructions, we will invest the money according to your last
allocation instructions. SEE INVESTMENT OPTIONS ON PAGE 12.
In order to issue your contract, we must receive your completed application,
Purchase Payment allocation instructions and any other required paperwork at our
principal place of business. We allocate your initial Purchase Payment within
two days of receiving it. If we do not have complete information necessary to
issue your contract, we will contact you. If we do not have the information
necessary to issue your contract within 5 business days we will:
- Send your money back to you, or;
- Ask your permission to keep your money until we get the information
necessary to issue the contract.
PRINCIPAL REWARDS PROGRAM
If you elect to participate in the Principal Rewards program at contract issue,
we contribute an Upfront Payment Enhancement and, if applicable, a Deferred
Payment Enhancement to your contract in conjunction with each Purchase Payment
you invest during the life of your contract. If you elect to participate in this
program, all Purchase Payments are subject to a nine year withdrawal charge
schedule. SEE WITHDRAWAL CHARGES ON PAGE 20. These withdrawal charges may offset
the value of any bonus, if you make an early withdrawal. SEE EXPENSES ON PAGE
19. You may not elect to participate in this program if you are age 81 or older
at the time of contract issue. Amounts we contribute to your contract under this
program are considered earnings and are allocated to your contract as described
below.
Purchase Payments may not be invested in the 6-month or the 1-year Dollar Cost
Averaging fixed accounts if you participate in the Principal Rewards Program.
However, you may use the 1-year fixed account option as a Dollar Cost Averaging
source account.
There may be scenarios in which due to negative market conditions and your
inability to remain invested over the long-term, a contract with the Principal
Rewards program may not perform as well as the contract without the feature.
Enhancement Levels
The Upfront Payment Enhancement Rate, Deferred Payment Enhancement Rate and
Deferred Payment Enhancement Date may be determined based on stated Enhancement
Levels. Each Enhancement Level is a range of dollar amounts which may correspond
to different enhancement rates and dates. Enhancement Levels may change from
time to time, at our sole discretion. The Enhancement Level applicable to your
initial Purchase Payment is determined by the amount of that initial Purchase
Payment. With respect to any subsequent Purchase Payments we determine your
Enhancement Level by adding your contract value on the date we receive each
subsequent Purchase Payment plus the amount of the subsequent Purchase Payment.
Upfront Payment Enhancement
An Upfront Payment Enhancement is an amount we add to your contract on the day
we receive a Purchase Payment. We calculate an Upfront Payment Enhancement
amount as a percentage (the "Upfront Payment Enhancement Rate") of each Purchase
Payment. The Upfront Payment Enhancement Rate will always be at least 2%. We
periodically review and establish the Upfront Payment Enhancement Rate, which
may increase or decrease at any time, but will never be less than 2%. The
applicable Upfront Payment Enhancement Rate is that which is in effect for any
applicable Enhancement Level, when we receive each Purchase Payment under your
contract. The Upfront Payment Enhancement amounts are allocated among the fixed
and variable investment options
10
<PAGE> 20
according to the current allocation instructions in effect when we receive each
Purchase Payment.
Deferred Payment Enhancement
A Deferred Payment Enhancement is an amount we may add to your contract on a
stated future date (the "Deferred Payment Enhancement Date") as a percentage of
Purchase Payments received. We refer to this percentage amount as the Deferred
Payment Enhancement Rate. We periodically review and establish the Deferred
Payment Enhancement Rates and Deferred Payment Enhancement Dates. The Deferred
Payment Enhancement Rate being offered may increase, decrease or be eliminated
by us, at any time. The Deferred Payment Enhancement Date, if applicable, may
change at any time. The applicable Deferred Payment Enhancement Date and
Deferred Payment Enhancement Rate are those which may be in effect for any
applicable Enhancement Level, when we receive each Purchase Payment under your
contract. Any applicable Deferred Payment Enhancement, when credited, is
allocated to the Cash Management Variable Portfolio.
If you withdraw any portion of a Purchase Payment, to which a Deferred Payment
Enhancement applies, prior to the Deferred Payment Enhancement Date, we reduce
the amount of the corresponding Deferred Payment Enhancement in the same
proportion that your withdrawal (and any fees and charges associated with such
withdrawals) reduces that Purchase Payment. For purposes of the Deferred Payment
Enhancement, withdrawals are assumed to be taken from earnings first, then from
Purchase Payments, on a first-in-first-out basis.
APPENDIX B shows how we calculate any applicable Deferred Payment Enhancement
amount.
We will not allocate any applicable Deferred Payment Enhancement to your
contract if any of the following circumstances occurs prior to the Deferred
Payment Enhancement Date:
- You surrender your contract;
- A death benefit is paid on your contract;
- You switch to the Income Phase of your contract; or
- You fully withdraw the corresponding Purchase Payment.
See your financial advisor for information on the current Enhancement Levels and
Payment Enhancements rates.
CURRENT ENHANCEMENT LEVELS
The Enhancement Levels, Upfront Payment Enhancement Rate, Deferred Payment
Enhancement Rate and Deferred Enhancement Date applicable to all Purchase
Payments received after December 1, 2000, are as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
UPFRONT PAYMENT DEFERRED PAYMENT DEFERRED PAYMENT
ENHANCEMENT LEVEL ENHANCEMENT RATE ENHANCEMENT RATE ENHANCEMENT DATE
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
Under $40,000 2% 0% N/A
-----------------------------------------------------------------------------------
$40,000 - $99,999 4% 0% N/A
-----------------------------------------------------------------------------------
Nine years from the
$100,000 - $499,999 4% 1% date we receive each
Purchase Payment.
-----------------------------------------------------------------------------------
Nine years from the
$500,000 - more 5% 1% date we receive each
Purchase Payment.
-----------------------------------------------------------------------------------
</TABLE>
Future Upfront Enhancement Rates may change at any time, but will never be less
than 2%. Future Deferred Payment Enhancement Rates and Dates may change. The
Deferred Payment Enhancement Rate may increase, decrease or stay the same; there
is no minimum Deferred Payment Enhancement Rate. The Date on which you may
receive any applicable Deferred Payment Enhancement may change; it may be less
than nine years or greater than nine years.
90 Day Window
Contracts issued with the Principal Rewards feature after April 3, 2000, may be
eligible for a "Look-Back Adjustment." As of the 90th day after your contract
was issued, we will total your Purchase Payments made over those 90 days,
without considering any investment gain or loss in contract value on those
Purchase Payments. If your total Purchase Payments bring you to an Enhancement
Level which, as of the date we issued your contract, would have provided for a
higher Upfront and/or Deferred Payment Enhancement Rate on each Purchase
Payment, you will get the benefit of the Enhancement Rate(s) that were
applicable to that higher Enhancement Level at the time your contract was
issued. We will add any applicable Upfront Look Back Adjustment to your contract
on the 90th day following the date of contract issue. We will send you a
confirmation indicating any applicable Upfront and/or Deferred Look Back
Adjustment, on or about the 90th day following the date of contract issuance. We
will allocate any applicable Upfront Look Back Adjustment according to your
then-current allocation instructions on file for subsequent Purchase Payments at
the time we make the contribution and if applicable, to the Cash Management
Portfolio, for a Deferred Look Back Adjustment.
APPENDIX B provides an example of the 90 Day Window Provision.
The Principal Rewards Program may not be available in your state or through the
broker-dealer with which your financial advisor is affiliated. Please check with
your financial advisor regarding the availability of this program.
WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE PRINCIPAL REWARDS
PROGRAM (IN ITS ENTIRETY OR ANY COMPONENT) AT ANY TIME.
ACCUMULATION UNITS
When you allocate a Purchase Payment to the Variable Portfolios, we credit your
contract with Accumulation Units of the separate account. We base the number of
Accumulation Units you receive on the unit value of the Variable Portfolio as of
the day we receive your money if we receive it before 1 p.m. Pacific Standard
Time, or on the next business day's unit value if we receive your money after 1
p.m. Pacific Standard Time. The value of an Accumulation Unit goes up and down
based on the performance of the Variable Portfolios.
We calculate the value of an Accumulation Unit each day that the New York Stock
Exchange ("NYSE") is open as follows:
1. We determine the total value of money invested in a particular Variable
Portfolio;
2. We subtract from that amount all applicable contract charges; and
3. We divide this amount by the number of outstanding Accumulation Units.
We determine the number of Accumulation Units credited to your contract by
dividing the Purchase Payment and Payment Enhancement, if applicable, by the
Accumulation Unit value for the specific Variable Portfolio.
EXAMPLE (CONTRACTS WITHOUT PRINCIPAL REWARDS):
We receive a $25,000 Purchase Payment from you on Wednesday. You allocate
the money to the Global Bond Portfolio. We determine that the value of an
Accumulation Unit for the Global Bond Portfolio is $11.10 when the NYSE
closes on Wednesday. We then divide $25,000 by $11.10 and credit your
contract on Wednesday night with 2252.2523 Accumulation Units for the
Global Bond Portfolio.
11
<PAGE> 21
EXAMPLE (CONTRACTS WITH PRINCIPAL REWARDS):
We receive a $25,000 Purchase Payment from you on Wednesday. You allocate
the money to the Global Bond Portfolio. If the Upfront Payment Enhancement
is 2.00% of your Purchase Payment, we would add an Upfront Payment
Enhancement of $500 to your contract. We determine that the value of an
Accumulation Unit for the Global Bond Portfolio is $11.10 when the NYSE
closes on Wednesday. We then divide $25,500 by $11.10 and credit your
contract on Wednesday with 2,297.2973 Accumulation Units for the Global
Bond Portfolio.
Performance of the Variable Portfolios and expenses under your contract affect
Accumulation Unit values. These factors cause the value of your contract to go
up and down.
FREE LOOK
You may cancel your contract within ten days after receiving it (or longer if
required by state law). We call this a "free look." To cancel, you must mail the
contract along with your free look request to our Annuity Service Center at P.O.
Box 54299, Los Angeles, California 90054-0299.
If you decide to cancel your contract during the free look period, we will
refund to you the value of your contract on the day we receive your request
minus the Free Look Payment Enhancement Deduction, if applicable. The Free Look
Payment Enhancement Deduction is equal to the lesser of (1) the value of any
Payment Enhancement(s) on the day we receive your free look request; or (2) the
Payment Enhancement amount(s), if any, which we allocated to your contract.
Thus, you receive any gain and we bear any loss on any Payment Enhancement(s) if
you decide to cancel your contract during the free look period.
Certain states require us to return your Purchase Payments upon a free look
request. Additionally, all contracts issued as an IRA require the full return of
Purchase Payments upon a free look. With respect to those contracts, we reserve
the right to put your money in the Cash Management Portfolio during the free
look period and will allocate your money according to your instructions at the
end of the applicable free look period. Currently, we do not put your money in
the Cash Management Portfolio during the free look period unless you allocate
your money to it. If your contract was issued in a state requiring return of
Purchase Payments or as an IRA and you cancel your contract during the free look
period, we return the greater of (1) your Purchase Payments; or (2) the value of
your contract minus the Free Look Payment Enhancement Deduction, if applicable.
At the end of the free look period, we allocate your money according to your
instructions.
----------------------------------------------------------------
----------------------------------------------------------------
INVESTMENT OPTIONS
----------------------------------------------------------------
----------------------------------------------------------------
VARIABLE PORTFOLIOS
The contract currently offers 32 Variable Portfolios. These Variable Portfolios
invest in shares of the Anchor Series Trust and the SunAmerica Series Trust (the
"Trusts"). Additional Variable Portfolios may be available in the future. The
Variable Portfolios operate similar to a mutual fund but are only available
through the purchase of certain insurance contracts.
SunAmerica Asset Management Corp., an indirect wholly owned subsidiary of AIG,
is the investment adviser to the Trusts. The Trusts serve as the underlying
investment vehicles for other variable annuity contracts issued by Anchor
National, and other affiliated/unaffiliated insurance companies. Neither Anchor
National nor the Trusts believe that offering shares of the Trusts in this
manner disadvantages you. The adviser monitors the Trusts for potential
conflicts.
The Variable Portfolios along with their respective subadvisers are listed
below:
ANCHOR SERIES TRUST
Wellington Management Company, LLP serves as subadviser to the Anchor Series
Trust Portfolios. Anchor Series Trust ("AST") has investment portfolios in
addition to those listed below which are not available for investment under the
contract.
SUNAMERICA SERIES TRUST
Various subadvisers provide investment advice for the SunAmerica Series Trust
Portfolios. SunAmerica Series Trust ("SST") has investment portfolios in
addition to those listed below which are not available for investment under the
contract.
STOCKS:
MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
- Alliance Growth Portfolio SST
- Global Equities Portfolio SST
- Growth & Income Portfolio SST
MANAGED BY DAVIS SELECTED ADVISERS L.P.
- Davis Venture Value Portfolio SST
- Real Estate Portfolio SST
MANAGED BY FEDERATED INVESTORS L.P.
- Federated Value Portfolio SST
- Telecom Utility Portfolio SST
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
- Goldman Sachs Research Portfolio SST
MANAGED BY MARSICO CAPITAL MANAGEMENT, LLC
- Marsico Growth SST
MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
- MFS Growth & Income Portfolio SST
- MFS Mid-Cap Growth Portfolio SST
MANAGED BY MORGAN STANLEY ASSET MANAGEMENT
- International Diversified Equities Portfolio SST
- Technology Portfolio SST
MANAGED BY PUTNAM INVESTMENT MANAGEMENT INC.
- Emerging Markets Portfolio SST
- International Growth & Income Portfolio SST
- Putnam Growth Portfolio SST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION
- Aggressive Growth Portfolio SST
- Blue Chip Growth Portfolio SST
- "Dogs" of Wall Street Portfolio SST
- Growth Opportunities Portfolio SST
MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP
- Capital Appreciation Portfolio AST
- Growth Portfolio AST
- Natural Resources Portfolio AST
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<PAGE> 22
BALANCED:
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
- Asset Allocation Portfolio SST
MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
- MFS Total Return Portfolio SST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION
- SunAmerica Balanced Portfolio SST
BONDS:
MANAGED BY FEDERATED INVESTORS L.P.
- Corporate Bond Portfolio SST
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT INT'L.
- Global Bond Portfolio SST
MANAGED BY MORGAN STANLEY ASSET MANAGEMENT
- Worldwide High Income Portfolio SST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION
- High-Yield Bond Portfolio SST
MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP
- Government & Quality Bond Portfolio AST
CASH:
MANAGED BY BANC OF AMERICA CAPITAL MANAGEMENT, INC.
- Cash Management Portfolio SST
YOU SHOULD READ THE ATTACHED PROSPECTUSES FOR THE TRUSTS CAREFULLY. THESE
PROSPECTUSES CONTAIN DETAILED INFORMATION ABOUT THE VARIABLE PORTFOLIOS,
INCLUDING EACH VARIABLE PORTFOLIO'S INVESTMENT OBJECTIVE AND RISK FACTORS.
FIXED ACCOUNT OPTIONS
The contract also offers seven fixed account options. Anchor National will
guarantee the interest rate earned on money you allocate to any of these fixed
account options. We currently offer fixed account options for periods of one,
three, five, seven and ten years, which we call guarantee periods. If you do not
elect to participate in the Principal Rewards Program, you also have the option
of allocating your money to the 6-month DCA fixed account and/or the 1-year DCA
fixed account (the "DCA fixed accounts") which are available in conjunction with
the Dollar Cost Averaging Program. The 6-month and 1-year DCA fixed account
options are not available to you if you elect to participate in the Principal
Rewards Program. Please see the section on DOLLAR COST AVERAGING ON PAGE 15 for
additional information about, including limitations on, and the availability and
operation of the DCA fixed accounts. The DCA fixed accounts are only available
for new Purchase Payments. Policyholders in Pennsylvania who elect the Principal
Rewards Program cannot use the multi-year MVA fixed accounts.
Each guarantee period may offer a different interest rate but will never be less
than an annual effective rate of 3%. Once established the rates for specified
payments do not change during the guarantee period. The guarantee period is that
period for which we credit the applicable rate (one, three, five, seven or ten
years).
There are three scenarios in which you may put money into the fixed account
options other than the DCA fixed accounts options. In each scenario your money
may be credited a different rate of interest as follows:
- Initial Rate: Rate credited to amounts allocated to the fixed account
when you purchase your contract.
- Current Rate: Rate credited to subsequent amounts allocated to the fixed
account.
- Renewal Rate: Rate credited to money transferred from a fixed account or
a Variable Portfolio into a fixed account and to money remaining in a
fixed account after expiration of a guarantee period.
Each of these rates may differ from one another. Once declared, the applicable
rate is guaranteed until the corresponding guarantee period expires.
When a guarantee period ends, you may leave your money in the same fixed
investment option. You may also reallocate your money to another fixed
investment option (other than the DCA fixed accounts) or to the Variable
Portfolios. If you want to reallocate your money to a different fixed account
option or a Variable Portfolio, you must contact us within 30 days after the end
of the current interest guarantee period and instruct us how to reallocate the
money. We do not contact you. If we do not hear from you, your money will remain
in the same fixed account option, where it will earn interest at the renewal
rate then in effect for the fixed account option.
The DCA fixed accounts also credit a fixed rate of interest. Interest is
credited to amounts allocated to the 6-month or 1-year DCA fixed account while
your investment is systematically transferred to the Variable Portfolios. The
rates applicable to the DCA fixed accounts may differ from each other and/or the
other fixed account options but will never be less than an annual effective rate
of 3%. See DOLLAR COST AVERAGING ON PAGE 14 for more information.
MARKET VALUE ADJUSTMENT ("MVA")
NOTE: THE FOLLOWING DISCUSSION APPLIES TO THE 3, 5, 7 AND 10-YEAR FIXED ACCOUNT
OPTIONS ONLY. THESE OPTIONS ARE NOT AVAILABLE IN ALL STATES. PLEASE CONTACT YOUR
FINANCIAL REPRESENTATIVE FOR MORE INFORMATION.
If you take money out of the multi-year fixed account options before the end of
the guarantee period, we make an adjustment to your contract. We refer to the
adjustment as a market value adjustment (the "MVA"). The MVA reflects any
difference in the interest rate environment between the time you place your
money in the fixed account option and the time when you withdraw or transfer
that money. This adjustment can increase or decrease your contract value. You
have 30 days after the end of each guarantee period to reallocate your funds
without incurring any MVA.
We calculate the MVA by doing a comparison between current rates and the rate
being credited to you in the fixed account option. For the current rate we use a
rate being offered by us for a guarantee period that is equal to the time
remaining in the guarantee period from which you seek withdrawal. If we are not
currently offering a guarantee period for that period of time, we determine an
applicable rate by using a formula to arrive at a number between the interest
rates currently offered for the two closest periods available.
Generally, if interest rates drop between the time you put your money into the
fixed account options and the time you take it out, we credit a positive
adjustment to your contract. Conversely, if interest rates increase during the
same period, we post a negative adjustment to your contract.
Where the MVA is negative, we first deduct the adjustment from any money
remaining in the fixed account option. If
13
<PAGE> 23
there is not enough money in the fixed account option to meet the negative
deduction, we deduct the remainder from your withdrawal. Where the MVA is
positive, we add the adjustment to your withdrawal amount.
The multi-year MVA fixed accounts are not available to Washington state and
Maryland policyholders.
Anchor National does not assess a MVA against withdrawals under the following
circumstances:
- If made within 30 days after the end of a guarantee period;
- If made to pay contract fees and charges;
- To pay a death benefit; and
- Upon annuitization, if occurring on the latest Annuity Date.
APPENDIX C shows how we calculate the MVA.
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase you may transfer funds between the Variable
Portfolios and/or the fixed account options. Funds already in your contract
cannot be transferred into the DCA fixed accounts. You must transfer at least
$100. If less than $100 will remain in any Variable Portfolio after a transfer,
that amount must be transferred as well.
You may request transfers of your account value between the Variable Portfolios
and/or the fixed account options in writing or by telephone. Additionally, you
may access your account and request transfers between Variable Portfolios and/or
the fixed account options through SunAmerica's website
(http://www.sunamerica.com). We currently allow 15 free transfers per contract
per year. We charge $25 ($10 in Pennsylvania and Texas) for each additional
transfer in any contract year. Transfers resulting from your participation in
the DCA program count against your 15 free transfers per contract year. However,
transfers resulting from your participation in the automatic asset rebalancing
program do not count against your 15 free transfers.
We accept transfer requests by telephone unless you tell us not to on your
contract application. Additionally, you may request transfers over the internet
unless you indicate you do not wish your account to be traded over the internet.
When receiving instructions over the telephone or the internet, we follow
appropriate procedures to provide reasonable assurance that the transactions
executed are genuine. Thus, we are not responsible for any claim, loss or
expense from any error resulting from instructions received over the telephone.
If we fail to follow our procedures, we may be liable for any losses due to
unauthorized or fraudulent instructions.
We may limit the number of transfers in any contract year or refuse any transfer
request for you or others invested in the contract if we believe that excessive
trading or a specific transfer request or group transfer requests may have a
detrimental effect on unit values or the share prices of the underlying Variable
Portfolios.
Where permitted by law, we may accept your authorization for a third party to
make transfers for you subject to our rules. We reserve the right to suspend or
cancel such acceptance at any time and will notify you accordingly.
Additionally, we may restrict the investment options available for transfers
during any period in which such third party acts for you. We notify such third
party beforehand regarding any restrictions. However, we will not enforce these
restrictions if we are satisfied that:
- such third party has been appointed by a court of competent jurisdiction
to act on your behalf; or
- such third party is a trustee/fiduciary, for you or appointed by you, to
act on your behalf for all your financial affairs.
We may provide administrative or other support services to independent third
parties you authorize to make transfers on your behalf. We do not currently
charge you extra for providing these support services. This includes, but is not
limited to, transfers between investment options in accordance with market
timing strategies. Such independent third parties may or may not be appointed
with us for the sale of annuities. However, WE DO NOT ENGAGE ANY THIRD PARTIES
TO OFFER INVESTMENT ALLOCATION SERVICES OF ANY TYPE. WE TAKE NO RESPONSIBILITY
FOR THE INVESTMENT ALLOCATION AND TRANSFERS TRANSACTED ON YOUR BEHALF BY SUCH
THIRD PARTIES OR FOR ANY INVESTMENT ALLOCATION RECOMMENDATIONS MADE BY SUCH
PARTIES.
For information regarding transfers during the Income Phase, SEE INCOME OPTIONS
ON PAGE 21.
We reserve the right to modify, suspend, waive or terminate these transfer
provisions at any time.
DOLLAR COST AVERAGING
The Dollar Cost Averaging ("DCA") program allows you to invest gradually in the
Variable Portfolios. Under the program you systematically transfer a set dollar
amount or percentage of portfolio value from one Variable Portfolio or the
1-year fixed account option (source accounts) to any other Variable Portfolio.
Transfers may be monthly or quarterly and count against your 15 free transfers
per contract year. You may change the frequency at any time by notifying us in
writing. The minimum transfer amount under the DCA program is $100, regardless
of the source account.
We also offer the 6-month and 1-year DCA fixed accounts exclusively to
facilitate this program. If you elected to participate in the Principal Rewards
Program, the 6-month and 1-year DCA fixed accounts are not available under your
contract. The DCA fixed accounts only accept new Purchase Payments. You cannot
transfer money already in your contract into these options. If you allocate new
Purchase Payments into a DCA fixed account, we transfer all your money allocated
to that account into the Variable Portfolios over the selected 6-month or 1-year
period. You cannot change the option or the frequency of transfers once
selected.
If allocated to the 6-month DCA fixed account, we transfer your money over a
maximum of 6 monthly transfers. We base the actual number of transfers on the
total amount allocated to the account. For example, if you allocate $500 to the
6-month DCA fixed account, we transfer your money over a period of five months,
so that each payment complies with the $100 per transfer minimum.
14
<PAGE> 24
We determine the amount of the transfers from the 1-year DCA fixed account based
on
- the total amount of money allocated to the account, and
- the frequency of transfers selected.
For example, let's say you allocate $1,000 to the 1-year DCA fixed account. You
select monthly transfers. We completely transfer all of your money to the
selected investment options over a period of ten months.
You may terminate your DCA program at any time. If money remains in the DCA
fixed accounts, we transfer the remaining money to the 1-year fixed account
option, unless we receive different instructions from you. Transfers resulting
from a termination of this program do not count towards your 15 free transfers.
The DCA program is designed to lessen the impact of market fluctuations on your
investment. However, we cannot ensure that you will make a profit. When you
elect the DCA program, you are continuously investing in securities regardless
of fluctuating price levels. You should consider your tolerance for investing
through periods of fluctuating price levels.
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want to gradually move $750 each quarter from the Cash
Management Portfolio to the Aggressive Growth Portfolio over six quarters.
You set up dollar cost averaging and purchase Accumulation Units at the
following values:
<TABLE>
<CAPTION>
---------------------------------------------
ACCUMULATION UNITS
QUARTER UNIT PURCHASED
---------------------------------------------
<S> <C> <C>
1 $ 7.50 100
2 $ 5.00 150
3 $10.00 75
4 $ 7.50 100
5 $ 5.00 150
6 $ 7.50 100
---------------------------------------------
</TABLE>
You paid an average price of only $6.67 per Accumulation Unit over six
quarters, while the average market price actually was $7.08. By investing
an equal amount of money each month, you automatically buy more
Accumulation Units when the market price is low and fewer Accumulation
Units when the market price is high. This example is for illustrative
purposes only.
ASSET ALLOCATION REBALANCING PROGRAM
Earnings in your contract may cause the percentage of your investment in each
investment option to differ from your original allocations. The Automatic Asset
Rebalancing Program addresses this situation. At your election, we periodically
rebalance your investments in the Variable Portfolios to return your allocations
to their original percentages. Asset rebalancing typically involves shifting a
portion of your money out of an investment option with a higher return into an
investment option with a lower return.
At your request, rebalancing occurs on a quarterly, semiannual or annual basis.
Transfers made as a result of rebalancing do not count against your 15 free
transfers for the contract year.
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want your initial Purchase Payment split between two
Variable Portfolios. You want 50% in the Corporate Bond Portfolio and 50%
in the Growth Portfolio. Over the next calendar quarter, the bond market
does very well while the stock market performs poorly. At the end of the
calendar quarter, the Corporate Bond Portfolio now represents 60% of your
holdings because it has increased in value and the Growth Portfolio
represents 40% of your holdings. If you had chosen quarterly rebalancing,
on the last day of that quarter, we would sell some of your units in the
Corporate Bond Portfolio to bring its holdings back to 50% and use the
money to buy more units in the Growth Portfolio to increase those holdings
to 50%.
PRINCIPAL ADVANTAGE PROGRAM
The Principal Advantage Program allows you to invest in one or more Variable
Portfolios without putting your principal at direct risk. The program
accomplishes this by allocating your investment strategically between the fixed
account options and Variable Portfolios. You decide how much you want to invest
and approximately when you want a return of principal. We calculate how much of
your Purchase Payment to allocate to the particular fixed account option to
ensure that it grows to an amount equal to your total principal invested under
this program. We invest the rest of your principal in the Variable Portfolio(s)
of your choice.
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want to allocate a portion of your initial Purchase Payment
of $100,000 to the fixed account option. You want the amount allocated to
the fixed account option to grow to $100,000 in 7 years. If the 7-year
fixed account option is offering a 5% interest rate, we will allocate
$71,069 to the 7-year fixed account option to ensure that this amount will
grow to $100,000 at the end of the 7-year period. The remaining $28,931 may
be allocated among the Variable Portfolios, as determined by you, to
provide opportunity for greater growth.
VOTING RIGHTS
Anchor National is the legal owner of the Trusts' shares. However, when a
Variable Portfolio solicits proxies in conjunction with a vote of shareholders,
we must obtain your instructions on how to vote those shares. We vote all of the
shares we own in proportion to your instructions. This includes any shares we
own on our own behalf. Should we determine that we are no longer required to
comply with these rules, we will vote the shares in our own right.
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<PAGE> 25
SUBSTITUTION
If underlying Trust portfolios become unavailable for investment, we may be
required to substitute shares of another underlying Trust portfolio. We will
seek prior approval of the SEC and give you notice before substituting shares.
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ACCESS TO YOUR MONEY
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You can access money in your contract in two ways:
- by making a partial or total withdrawal, and/or;
- by receiving income payments during the Income Phase. SEE INCOME OPTIONS
ON PAGE 21.
Generally, we deduct a withdrawal charge applicable to any total or partial
withdrawal and a MVA if a partial withdrawal comes from the 3, 5, 7 or 10 year
fixed account options. If you withdraw your entire contract value, we also
deduct premium taxes and a contract maintenance fee. SEE EXPENSES ON PAGE 20.
Your contract provides for a free withdrawal amount each year. A free withdrawal
amount is the portion of your account that we allow you to take out each year
without being charged a surrender penalty. However, upon a future full surrender
of your contract in which there are purchase payments still subject to a
withdrawal charge we will recoup any withdrawal charges which would have been
due if your prior free withdrawal had not been free. Additionally, if you
participate in the Principal Rewards Program you will not receive your Deferred
Payment Enhancement if you fully withdraw a Purchase Payment or your contract
value prior to the corresponding Deferred Payment Enhancement Date. SEE
PRINCIPAL REWARDS PROGRAM ON PAGE 10.
Purchase payments, above and beyond the amount of your free withdrawal amount,
that are withdrawn prior to the end of the seventh or ninth year if you elect to
participate in the Principal Rewards Program will result in your paying a
penalty in the form of a surrender charge. The amount of the charge and how it
applies are discussed more fully below. SEE EXPENSES ON PAGE 20. You should
consider, before purchasing this contract, the effect this charge will have on
your investment if you need to withdraw more money than the free withdrawal
amount. You should fully discuss this decision with your financial
representative.
To determine your free withdrawal amount and your withdrawal charge, we refer to
two special terms. These are penalty free earnings and the total invested
amount.
The penalty-free earnings portion of your contract is simply your account value
less your total invested amount. The total invested amount is the total of all
Purchase Payments you have made into the contract less portions of some prior
withdrawals you made. The portions of prior withdrawals that reduce your total
invested amount are as follows:
- Free withdrawals in any year that were in excess of your penalty-free
earnings and were based on the part of the total invested amount that was
no longer subject to withdrawal charges at the time of the withdrawal,
and
- Any prior withdrawals (including withdrawal charges on those withdrawals)
of the total invested amount on which you already paid a surrender
penalty.
When you make a withdrawal, we assume that it is taken from penalty-free
earnings first, then from the total invested amount on a first-in, first-out
basis. This means that you can also access your Purchase Payments which are no
longer subject to a withdrawal charge before those Purchase Payments which are
still subject to the withdrawal charge.
During the first year after we issue your contract your free withdrawal amount
is the greater of (1) your penalty-free earnings; and (2) if you are
participating in the Systematic Withdrawal program, a total of 10% of your total
invested amount. If you are a Washington resident, you may withdraw during the
first contract year, the greater of (1); (2); or (3) interest earnings from the
amounts allocated to the fixed account options, not previously withdrawn.
After the first contract year, you can take out the greater of the following
amounts each year (1) your penalty-free earnings and any portion of your total
invested amount no longer subject to withdrawal charges; and (2) 10% of the
portion of your total invested amount that has been in your contract for at
least one year. If you are a Washington resident, your maximum free withdrawal
amount, after the first contract year, is the greater of (1); (2); or (3)
interest earnings from amounts allocated to the fixed account options, not
previously withdrawn.
Although we do not assess a withdrawal charge when you take a 10% penalty-free
withdrawal, we will proportionally reduce the amount of any corresponding
Deferred Payment Enhancement.
We calculate charges due on a total withdrawal on the day after we receive your
request and your contract. We return to you your contract value less any
applicable fees and charges.
The withdrawal charge percentage is determined by the age of the Purchase
Payment remaining in the contract at the time of the withdrawal. For the purpose
of calculating the withdrawal charge, any prior Free Withdrawal is not
subtracted from the total Purchase Payments still subject to withdrawal charges.
For example, you make an initial Purchase Payment of $100,000. For purposes of
this example we will assume a 0% growth rate over the life of the contract, no
subsequent Purchase Payments, and no Principal Rewards election. In contract
year 2, you take out your maximum free withdrawal of $10,000. After that free
withdrawal your contract value is $90,000. In contract year 5 you request a full
surrender of your contract. We will apply the following calculation,
A-(B x C)=D, where:
A=Your contract value at the time of your request for surrender ($90,000)
B=The amount of your Purchase Payments still subject to withdrawal charge
($100,000)
C=The withdrawal charge percentage applicable to the age of each Purchase
Payment (3%)[B x C=$3,000]
D=Your full surrender value ($87,000)
Under most circumstances, the partial withdrawal minimum is $1,000. We require
that the value left in any investment option be at least $100, after the
withdrawal. You must send
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<PAGE> 26
a written withdrawal request. Unless you provide us with different instructions,
partial withdrawals will be made pro rata from each Variable Portfolio and the
fixed account option in which your contract is invested.
Under certain Qualified plans, access to the money in your contract may be
restricted. Additionally, withdrawals made prior to age 59 1/2 may result in a
10% IRS penalty tax. SEE TAXES ON PAGE 24.
We may be required to suspend or postpone the payment of a withdrawal for any
period of time when: (1) the NYSE is closed (other than a customary weekend and
holiday closings); (2) trading with the NYSE is restricted; (3) an emergency
exists such that disposal of or determination of the value of shares of the
Variable Portfolios is not reasonably practicable; (4) the SEC, by order, so
permits for the protection of contract owners.
Additionally, we reserve the right to defer payments for a withdrawal from a
fixed account in option. Such deferrals are limited to no longer than six
months.
SYSTEMATIC WITHDRAWAL PROGRAM
During the Accumulation Phase, you may elect to receive periodic income payments
under the systematic withdrawal program. Under the program, you may choose to
take monthly, quarterly, semi-annual or annual payments from your contract.
Electronic transfer of these funds to your bank account is also available. The
minimum amount of each withdrawal is $100. If you are an Oregon resident, the
minimum withdrawal amount is $100 per withdrawal or an amount equal to your free
withdrawal amount, as described on page 10. There must be at least $500
remaining in your contract at all times. Withdrawals may be taxable and a 10%
IRS penalty tax may apply if you are under age 59 1/2. There is no additional
charge for participating in this program, although a withdrawal charge and/or
MVA may apply.
The program is not available to everyone. Please check with our Annuity Service
Center, which can provide the necessary enrollment forms. We reserve the right
to modify, suspend or terminate this program at any time.
NURSING HOME WAIVER
If you are confined to a nursing home for 60 days or longer, we may waive the
withdrawal charge and/or market value adjustment on certain withdrawals prior to
the Annuity Date (not available in Texas). The waiver applies only to
withdrawals made while you are in a nursing home or within 90 days after you
leave the nursing home. Your contract prohibits use of this waiver during the
first 90 days after you purchase your contract. In addition, the confinement
period for which you seek the waiver must begin after you purchase your
contract.
In order to use this waiver, you must submit with your withdrawal request, the
following documents: (1) a doctor's note recommending admittance to a nursing
home; (2) an admittance form which shows the type of facility you entered; and
(3) a bill from the nursing home which shows that you met the 60 day confinement
requirement.
MINIMUM CONTRACT VALUE
Where permitted by state law, we may terminate your contract if both of the
following occur: (1) your contract is less than $500 as a result of withdrawals;
and (2) you have not made any Purchase Payments during the past three years. We
will provide you with sixty days written notice. At the end of the notice
period, we will distribute the contract's remaining value to you.
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DEATH BENEFIT
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If you die during the Accumulation Phase of your contract, we pay a death
benefit to your Beneficiary. At the time you purchase your contract, you must
select one of the two death benefits described below. Once selected, you can not
change your death benefit option. You should discuss the available options with
your financial representative to determine which option is best for you.
We will not pay a Deferred Payment Enhancement on a Purchase Payment if you die
before the corresponding Deferred Payment Enhancement Date. SEE PRINCIPAL
REWARDS PROGRAM ON PAGE 10.
We do not pay the death benefit if you die after you switch to the Income Phase.
However, if you die during the Income Phase, your Beneficiary receives any
remaining guaranteed income payments in accordance with the income option you
selected. SEE INCOME OPTIONS ON PAGE 21.
You name your Beneficiary. You may change the Beneficiary at any time, unless
you previously made an irrevocable Beneficiary designation.
We pay the death benefit when we receive satisfactory proof of death. We
consider the following satisfactory proof of death:
1. a certified copy of the death certificate; or
2. a certified copy of a decree of a court of competent jurisdiction as to
the finding of death; or
3. a written statement by a medical doctor who attended the deceased at the
time of death; or
4. any other proof satisfactory to us.
We may require additional proof before we pay the death benefit.
The death benefit payment must begin immediately upon receipt of all necessary
documents. In any event, the death benefit must be paid within 5 years of the
date of death unless the Beneficiary elects to have it payable in the form of an
income option. If the Beneficiary elects an income option, it must be paid over
the Beneficiary's lifetime or for a period not extending beyond the
Beneficiary's life expectancy. Payments must begin within one year of your
death.
If the Beneficiary is the spouse of a deceased owner, he or she can elect to
continue the Contract. SEE SPOUSAL CONTINUATION ON PAGE 19.
If a Beneficiary does not elect a specific form of pay out within 60 days of our
receipt of proof of death, we pay a lump sum death benefit to the Beneficiary.
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<PAGE> 27
OPTION 1 - PURCHASE PAYMENT ACCUMULATION OPTION
The death benefit is the greater of:
1. the contract value at the time we receive satisfactory proof of death;
or
2. total Purchase Payments less withdrawals (and any fees or charges
applicable to such withdrawals), compounded at a 4% annual growth rate
until the date of death (3% growth rate if age 70 or older at the time
of contract issue) plus any Purchase Payments less withdrawals recorded
after the date of death (and any fees or charges applicable to such
withdrawals); or
3. the contract value on the seventh contract anniversary, plus any
Purchase Payments and less any withdrawals (and any fees or charges
applicable to such withdrawals), since the seventh contract anniversary,
all compounded at a 4% annual growth rate until the date of death (3%
growth rate if age 70 or older at the time of contract issue) plus any
Purchase Payments less withdrawals recorded after the date of death (and
any fees or charges applicable to such withdrawals).
OPTION 2 - MAXIMUM ANNIVERSARY OPTION
The death benefit is the greater of:
1. the contract value at the time we receive satisfactory proof of death;
or
2. total Purchase Payments less any withdrawals (and any fees or charges
applicable to such withdrawals); or
3. the maximum anniversary value on any contract anniversary prior to your
81st birthday. The anniversary value equals the contract value on a
contract anniversary plus any Purchase Payments and less any withdrawals
(and any fees or charges applicable to such withdrawals), since that
contract anniversary.
If you are age 90 or older at the time of death and selected the Option 2 death
benefit, the death benefit will be equal to the contract value at the time we
receive satisfactory proof of death. Accordingly, you do not get the advantage
of option 2 if:
- you are age 81 or older at the time of contract issue, or
- you are age 90 or older at the time of your death.
ESTATEPLUS
EstatePlus is an optional benefit that, if selected, may increase your death
benefit amount.
The term "Net Purchase Payment" is used frequently in explaining the EstatePlus
benefit. We define Net Purchase Payments as Purchase Payments less an adjustment
for each withdrawal.
To calculate the adjustment amount for a withdrawal, you first determine the
percentage by which the contract value is reduced by the withdrawal, on the date
of the withdrawal. This percentage is calculated by dividing the amount of each
withdrawal (including fees and charges applicable to the withdrawal) by the
contract value immediately before taking that withdrawal. The percentage amount
is then multiplied by the amount of Net Purchase Payments immediately before the
withdrawal to get the adjustment amount. This amount is subtracted from the
amount of Net Purchase Payment(s) immediately before the withdrawal.
If you have not taken any withdrawals from your contract, Net Purchase Payments
equals total Purchase Payments into your contract. If Principal Rewards is
elected, any payment enhancements are not considered Purchase Payments.
The EstatePlus benefit may increase the death benefit amount. If you have
earnings in your contract at the time of death, we will add a percentage of
those earnings (the "EstatePlus Percentage"), subject to a maximum dollar amount
(the "Maximum EstatePlus Percentage"), to the death benefit payable. The
EstatePlus benefit, if any, is added to the death benefit payable under the
Purchase Payment Accumulation or Maximum Anniversary options. The contract year
of your death will determine the EstatePlus percentage and the Maximum
EstatePlus percentage.
The table below provides the details if you are age 69 or younger at the time we
issue your contract:
<TABLE>
<CAPTION>
-------------------------------------------------------------
CONTRACT YEAR ESTATEPLUS MAXIMUM
OF DEATH PERCENTAGE ESTATEPLUS PERCENTAGE
-------------------------------------------------------------
<S> <C> <C>
Years 0-4 25% of earnings 40% of Net Purchase
Payments
-------------------------------------------------------------
Years 5-9 40% of earnings 65% of Net Purchase
Payments*
-------------------------------------------------------------
Years 10+ 50% of earnings 75% of Net Purchase
Payments*
-------------------------------------------------------------
</TABLE>
If you are between your 70th and 81st birthdays at the time we issue your
contract the table below shows the available EstatePlus benefit:
<TABLE>
<S> <C> <C>
---------------------------------------------------------------
CONTRACT YEAR ESTATEPLUS MAXIMUM
OF DEATH PERCENTAGE ESTATEPLUS
PERCENTAGE
---------------------------------------------------------------
Years 0-10+ 25% of earnings 40% of Net
Purchase Payments*
---------------------------------------------------------------
</TABLE>
*Purchase Payments received after the 5(th) contract anniversary must remain in
the contract for at least 6 full months to be included as part of Net Purchase
Payments for the purpose of the Maximum EstatePlus calculation.
What is the Contract Year of Death?
Contract Year of Death is the number of full 12 month periods beginning with the
date your contract is issued and ending on the date of death.
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<PAGE> 28
What is the EstatePlus Percentage Amount?
We determine the amount of the EstatePlus benefit, based on a percentage of the
earnings in your contract at the time of your death. For the purpose of this
calculation, earnings equals contract value minus Net Purchase Payments as of
the date of death. If the earnings amount is negative, no EstatePlus amount will
be added.
What is the Maximum EstatePlus Amount?
The EstatePlus benefit is subject to a maximum dollar amount. The maximum
EstatePlus amount is equal to a percentage of your Net Purchase Payments.
You must elect EstatePlus at the time of contract application. Once elected, you
may not terminate or change this election.
We assess a .25% fee for EstatePlus. On a daily basis we deduct this annual
charge from the average daily ending value of the assets you have allocated to
the Variable Portfolios.
EstatePlus is not available if you are age 81 or older at the time we issue your
contract. Furthermore, a Continuing Spouse cannot benefit from EstatePlus if
he/she is age 81 or older on the Continuation Date. SEE SPOUSAL CONTINUATION
BELOW. The EstatePlus benefit is not payable after the latest Annuity Date. You
may pay for the EstatePlus benefit and your beneficiary may never receive the
benefit if you live past the latest Annuity Date. SEE INCOME OPTIONS ON PAGE 21.
EstatePlus may not be available in your state or through the broker-dealer with
which your financial advisor is affiliated. See your financial advisor for
information regarding availability.
WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE ESTATEPLUS BENEFIT (IN
ITS ENTIRETY OR ANY COMPONENT AT ANY TIME) AT ANY TIME.
SPOUSAL CONTINUATION
If you are the original owner of the contract and the Beneficiary is your
spouse, your spouse may elect to continue the contract after your death. The
spouse becomes the new owner ("Continuing Spouse"). Generally, the contract and
its elected features, if any, remain the same. The Continuing Spouse is subject
to the same fees, charges and expenses applicable to the original owner of the
contract. A spousal continuation can only take place upon the death of the
original owner of the contract.
Upon a spouse's continuation of the contract, we will contribute to the contract
value an amount by which the death benefit that would have been paid to the
beneficiary upon the death of the original owner exceeds the contract value
("Continuation Contribution"), if any. We calculate the Continuation
Contribution as of the date of the original owner's death. We will add the
Continuation Contribution as of the date we receive both the Continuing Spouse's
written request to continue the contract and proof of death of the original
owner in a form satisfactory to us ("Continuation Date"). The Continuation
Contribution is not considered a Purchase Payment for the purposes of any other
calculations except as explained in Appendix D. SEE APPENDIX D FOR FURTHER
EXPLANATION OF THE DEATH BENEFIT CALCULATIONS FOLLOWING A SPOUSAL CONTINUATION.
To the extent that the Continuing Spouse invests in the Variable Portfolios or
MVA fixed accounts, they will be subject to investment risk as was the original
owner.
Generally, the Continuing Spouse cannot change any contract provisions as the
new owner. However, on the Continuation Date, the Continuing Spouse may
terminate the original owner's election of EstatePlus. We will terminate
EstatePlus if the Continuing Spouse is age 81 or older on the Continuation Date.
If EstatePlus is terminated or if the Continuing Spouse dies after the latest
Annuity Date, no EstatePlus benefit will be payable. The age of the Continuing
Spouse on the Continuation Date and on the date of the Continuing Spouse's death
will be used in determining any future death benefits under the Contract. SEE
APPENDIX D FOR A DISCUSSION OF THE DEATH BENEFIT CALCULATIONS AFTER A SPOUSAL
CONTINUATION.
WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE SPOUSAL CONTINUATION
PROVISION (IN ITS ENTIRETY OR ANY COMPONENT) AT ANY TIME.
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EXPENSES
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There are charges and expenses associated with your contract. These charges and
expenses reduce your investment return. We will not increase the contract
maintenance fee or the insurance and withdrawal charges under your contract.
However, the investment charges under your contract may increase or decrease.
Some states may require that we charge less than the amounts described below.
INSURANCE CHARGES
The amount of this charge is 1.52% annually, of the value of your contract
invested in the Variable Portfolios. We deduct the charge daily.
The insurance charge compensates us for the mortality and expense risks and the
costs of contract distribution assumed by Anchor National.
If these charges do not cover all of our expenses, we will pay the difference.
Likewise, if these charges exceed our expenses, we will keep the difference.
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<PAGE> 29
WITHDRAWAL CHARGES
The contract provides a free withdrawal amount every year. SEE ACCESS TO YOUR
MONEY ON PAGE 16. If you take money out in excess of the free withdrawal amount,
you may incur a withdrawal charge. You may also incur a withdrawal charge upon a
full surrender.
We apply a withdrawal charge against each Purchase Payment you put into the
contract. After a Purchase Payment has been in the contract for 7 complete
years, or 9 years if you elected to participate in the Principal Rewards
Program, no withdrawal charge applies. The withdrawal charge equals a percentage
of the Purchase Payment you take out of the contract. The withdrawal charge
percentage declines each year a Purchase Payment is in the contract. The two
withdrawal charge schedules are as follows:
WITHDRAWAL CHARGE WITHOUT THE PRINCIPAL REWARDS PROGRAM
(SCHEDULE A)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
YEAR 1 2 3 4 5 6 7 8
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WITHDRAWAL
CHARGE 7% 6% 5% 4% 3% 2% 1% 0%
-----------------------------------------------------------------------------------------
</TABLE>
WITHDRAWAL CHARGE WITH THE PRINCIPAL REWARDS PROGRAM
(SCHEDULE B)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
YEAR 1 2 3 4 5 6 7 8 9 10
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WITHDRAWAL
CHARGE 9% 9% 8% 7% 6% 5% 4% 3% 2% 0%
-----------------------------------------------------------------------------------------------------------
</TABLE>
When calculating the withdrawal charge, we treat withdrawals as coming first
from the Purchase Payments that have been in your contract the longest. However,
for tax purposes, your withdrawals are considered earnings first, then Purchase
Payments.
These higher potential withdrawal charges may compensate us for the expenses
associated with the Principal Rewards Program.
The Principal Rewards feature of this contract is designed to reward long term
investing. We expect that if you remain committed to this investment over the
long term, we will profit as a result of fees charged over the life of your
contract. However, neither the mortality and expense fees, distribution
expenses, contract administration fee nor the investment management fees are
higher on the Principal Rewards version, than the contract without an election
of the bonus feature.
Whenever possible, we deduct the withdrawal charge from the money remaining in
your contract. If you withdraw all of your contract value, we deduct any
applicable withdrawal charges from the amount withdrawn.
We will not assess a withdrawal charge for money withdrawn to pay a death
benefit or to pay contract fees or charges. We will not assess a withdrawal
charge when you switch to the Income Phase, except when you elect to receive
income payments using the Income Protector feature. If you elect to receive
income payments using the Income Protector feature, we assess the entire
withdrawal charge applicable to Purchase Payments remaining in your contract
when calculating your income benefit base. SEE INCOME OPTIONS ON PAGE 21.
Withdrawals made prior to age 59 1/2 may result in tax penalties. SEE TAXES ON
PAGE 23.
INVESTMENT CHARGES
Charges are deducted from your Variable Portfolios for the advisory and other
expenses of the Variable Portfolios. THE FEE TABLES LOCATED AT PAGE 4 illustrate
these charges and expenses. For more detailed information on these investment
charges, refer to the prospectuses for the Trusts, enclosed or attached.
CONTRACT MAINTENANCE FEE
During the Accumulation Phase, we subtract a contract maintenance fee from your
account once per year. This charge compensates us for the cost of contract
administration. We deduct the $35 contract maintenance fee ($30 in North Dakota)
from your account value on your contract anniversary. If you withdraw your
entire contract value, we deduct the fee from that withdrawal.
If your contract value is $50,000 or more on your contract anniversary date, we
will waive the charge. This waiver is subject to change without notice.
TRANSFER FEE
We currently permit 15 free transfers between investment options each contract
year. We charge you $25 for each additional transfer that contract year ($10 in
Pennsylvania and Texas). SEE INVESTMENT OPTIONS ON PAGE 12.
OPTIONAL ESTATEPLUS FEE
Please see page 19 for more information on the EstatePlus fee.
PREMIUM TAX
Certain states charge the Company a tax on the premiums you pay into the
contract. We deduct from your contract these premium tax charges. Currently we
deduct the charge for premium taxes when you take a full withdrawal or begin the
Income Phase of the contract. In the future, we may assess this deduction at the
time you put Purchase Payment(s) into the contract or upon payment of a death
benefit.
APPENDIX E provides more information about premium taxes.
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<PAGE> 30
INCOME TAXES
We do not currently deduct income taxes from your contract. We reserve the right
to do so in the future.
REDUCTION OR ELIMINATION OF CHARGES AND EXPENSES, AND ADDITIONAL AMOUNTS
CREDITED
Sometimes sales of the contracts to groups of similarly situated individuals may
lower our administrative and/or sales expenses. We reserve the right to reduce
or waive certain charges and expenses when this type of sale occurs. In
addition, we may also credit additional interest to policies sold to such
groups. We determine which groups are eligible for such treatment. Some of the
criteria we evaluate to make a determination are: size of the group; amount of
expected Purchase Payments; relationship existing between us and prospective
purchaser; nature of the purchase; length of time a group of contracts is
expected to remain active; purpose of the purchase and whether that purpose
increases the likelihood that our expenses will be reduced; and/or any other
factors that we believe indicate that administrative and/or sales expenses may
be reduced.
Anchor National may make such a determination regarding sales to its employees,
it affiliates' employees and employees of currently contracted broker-dealers;
its registered representatives and immediate family members of all of those
described.
We reserve the right to change or modify any such determination or the treatment
applied to a particular group, at any time.
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INCOME OPTIONS
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ANNUITY DATE
During the Income Phase, we use the money accumulated in your contract to make
regular income payments to you. You may switch to the Income Phase any time
after your 2nd contract anniversary. You select the month and year you want
income payments to begin. The first day of that month is the Annuity Date. You
may change your Annuity Date, so long as you do so at least seven days before
the income payments are scheduled to begin. Once you begin receiving income
payments, you cannot change your income option. Except as indicated under Option
5 below, once you begin receiving income payments, you cannot otherwise access
your money through a withdrawal or surrender.
If you switch to the Income Phase prior to a Deferred Payment Enhancement Date,
we will not allocate the corresponding Deferred Payment Enhancement to your
contract. SEE PRINCIPAL REWARDS PROGRAM ON PAGE 10.
Income payments must begin on or before your 90th birthday or on your tenth
contract anniversary, whichever occurs later. If you do not choose an Annuity
Date, your income payments will automatically begin on this date. Certain states
may require your income payments to start earlier.
If the Annuity Date is past your 85th birthday, your contract could lose its
status as an annuity under Federal tax laws. This may cause you to incur adverse
tax consequences.
In addition, most Qualified contracts require you to take minimum distributions
after you reach age 70 1/2. SEE TAXES ON PAGE 23.
INCOME OPTIONS
Currently, this Contract offers five income options. If you elect to receive
income payments but do not select an option, your income payments will be made
in accordance with option 4 for a period of 10 years. For income payments based
on joint lives, we pay according to option 3 for a period of 10 years.
We base our calculation of income payments on the life of the Annuitant and the
annuity rates set forth in your contract. As the contract owner, you may change
the Annuitant at any time prior to the Annuity Date. You must notify us if the
Annuitant dies before the Annuity Date and designate a new Annuitant.
OPTION 1 - LIFE INCOME ANNUITY
This option provides income payments for the life of the Annuitant. Income
payments stop when the Annuitant dies.
OPTION 2 - JOINT AND SURVIVOR LIFE ANNUITY
This option provides income payments for the life of the Annuitant and for the
life of another designated person. Upon the death of either person, we will
continue to make income payments during the lifetime of the survivor. Income
payments stop when the survivor dies.
OPTION 3 - JOINT AND SURVIVOR LIFE ANNUITY WITH 10 OR 20 YEARS GUARANTEED
This option is similar to option 2 above, with an additional guarantee of
payments for at least 10 years. If the Annuitant and the survivor die before all
of the guaranteed income payments have been made, the remaining payments are
made to the Beneficiary under your contract.
OPTION 4 - LIFE ANNUITY WITH 10 OR 20 YEARS GUARANTEED
This option is similar to option 1 above. In addition, this option provides a
guarantee that income payments will be made for at least 10 or 20 years. You
select the number of years. If the Annuitant dies before all guaranteed income
payments are made, the remaining income payments go to the Beneficiary under
your contract.
OPTION 5 - INCOME FOR A SPECIFIED PERIOD
This option provides income payments for a guaranteed period ranging from 5 to
30 years. If the Annuitant dies before all the guaranteed income payments are
made, the remaining income payments are made to the Beneficiary under your
contract. Additionally, if variable income payments are elected under this
option, you (or the Beneficiary under the contract if the Annuitant dies prior
to all guaranteed income payments being
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<PAGE> 31
made) may redeem any remaining guaranteed variable income payments after the
Annuity Date. The amount available upon such redemption would be the discounted
present value of any remaining guaranteed variable income payments. If provided
for in your contract, any applicable withdrawal charge will be deducted from the
discounted value as if you fully surrendered your contract.
The value of an Annuity Unit, regardless of the option chosen, takes into
account the Mortality and Expense Risk Charge. Since Option 5 does not contain
an element of mortality risk, no benefit is derived from this charge.
Please read the Statement of Additional Information ("SAI") for a more detailed
discussion of the income options.
FIXED OR VARIABLE INCOME PAYMENTS
You can choose income payments that are fixed, variable or both. If at the date
when income payments begin you are invested in the Variable Portfolios only,
your income payments will be variable. If your money is only in fixed accounts
at that time, your income payments will be fixed in amount. Further, if you are
invested in both fixed and variable investment options when income payments
begin, your payments will be fixed and variable. If income payments are fixed,
Anchor National guarantees the amount of each payment. If the income payments
are variable the amount is not guaranteed.
INCOME PAYMENTS
We make income payments on a monthly, quarterly, semiannual or annual basis. You
instruct us to send you a check or to have the payments directly deposited into
your bank account. If state law allows, we distribute annuities with a contract
value of $5,000 or less in a lump sum. Also, if the selected income option
results in income payments of less than $50 per payment, we may decrease the
frequency of payments, state law allowing.
If you are invested in the Variable Portfolios after the Annuity date, your
income payments vary depending on four things:
- for life options, your age when payments begin, and;
- the value of your contract in the Variable Portfolios on the Annuity
Date, and;
- the 3.5% assumed investment rate used in the annuity table for the
contract, and;
- the performance of the Variable Portfolios in which you are invested
during the time you receive income payments.
If you are invested in both the fixed account options and the Variable
Portfolios after the Annuity Date, the allocation of funds between the fixed and
variable options also impacts the amount of your annuity payments.
TRANSFERS DURING THE INCOME PHASE
During the Income Phase, one transfer per month is permitted between the
Variable Portfolios. No other transfers are allowed during the Income Phase.
DEFERMENT OF PAYMENTS
We may defer making fixed payments for up to six months, or less if required by
law. Interest is credited to you during the deferral period.
THE INCOME PROTECTOR FEATURE
The Income Protector feature is a future "safety net" which offers you the
ability to receive a guaranteed fixed minimum retirement income when you switch
to the Income Phase. With the Income Protector feature you know the level of
minimum income that will be available to you upon annuitization, regardless of
fluctuating market conditions.
The Income Protector is a standard feature of your contract. There is no
additional charge associated with this feature. This feature may not be
available in your state. Check with your financial advisor regarding
availability.
Other options were previously available under the Income Protector feature.
Generally, if you purchased your contract between November 2, 1998 and March 31,
1999 and the Income Protector feature was available in your state at that time,
the other provisions continue to apply to your contract. Please contact our
Annuity Service Center for more information.
We reserve the right to modify, suspend or terminate the Income Protector
feature at any time.
HOW WE DETERMINE THE AMOUNT OF YOUR MINIMUM GUARANTEED INCOME
We base the amount of minimum income available to you if you elect to receive
income payments using the Income Protector feature upon a calculation we call
the income benefit base.
The income benefit base is only a calculation. It does not represent a contract
value, nor does it guarantee performance of the Variable Portfolios in which you
invest.
Your income benefit base increases if you make subsequent Purchase Payments and
decreases if you withdraw money from your contract. The exact income benefit
base calculation is equal to (a) plus (b) minus (c) where:
(a) is equal to, for the first year of calculation, your initial Purchase
Payment, or for each subsequent year of calculation, the income benefit
base on the prior contract anniversary, and;
(b) is equal to the sum of all subsequent Purchase Payments made into the
contract since the last contract anniversary, and;
(c) is equal to all withdrawals and applicable fees and charges since the
last contract anniversary, in an amount proportionate to the amount by
which such withdrawals decreased your contract value.
22
<PAGE> 32
ELECTING TO RECEIVE INCOME PAYMENTS
You may elect to begin the Income Phase of your contract using the Income
Protector feature ONLY within the 30 days after the seventh or later contract
anniversary.
The contract anniversary prior to your election to begin receiving income
payments is your income benefit date. This is the date as of which we calculate
your income benefit base to use in determining your guaranteed minimum fixed
retirement income. Your final income benefit base is equal to (a) minus (b)
where:
(a) is equal to your income benefit base as of your income benefit date,
and;
(b) is equal to any partial withdrawals of contract value and any charges
applicable to those withdrawals and any withdrawal charges otherwise
applicable, calculated as if you fully surrender your contract as the
income benefit date, and any applicable premium taxes.
To arrive at the minimum guaranteed retirement income available to you we apply
to your final income benefit base to the annuity rates stated in your Income
Protector endorsement for the income option you select. You then choose if you
would like to receive that income annually, semi-annually quarterly or monthly
for the time guaranteed under your selected income option. The income options
available when using the income protector feature to receive your retirement
income are:
- Life Annuity with 10 Years Guaranteed, or
- Joint and Survivor Life Annuity with 20 Years Guaranteed
At the time you elect to begin receiving income payments, we will calculate your
income payments using both your income benefit base and your contract value. We
will use the same income option for each calculation, however, the annuity
factors used to calculate your income under the Income Protector feature will be
different. You will receive whichever provides a greater stream of income. If
you elect to receive income payments using the Income Protector feature your
income payments will be fixed in amount. You are not required to use the Income
Protector feature to receive income payments.
NOTE TO QUALIFIED CONTRACT HOLDERS
Qualified contracts generally require that you select an income option which
does not exceed your life expectancy. That restriction, if it applies to you,
may limit your ability to use the Income Protector feature.
You may wish to consult your tax advisor for information concerning your
particular circumstances.
HYPOTHETICAL EXAMPLE OF THE OPERATION OF THE INCOME PROTECTOR FEATURE
This table assumes $100,000 initial investment in a Non-qualified contract with
no withdrawals, additional Purchase Payments or premium taxes.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Minimum annual income if you elect to receive income payments
If at issue on contract anniversary . . .
you are . . . 7 10 15 20
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Male 6,108 6,672 7,716 8,832
age 60*
-------------------------------------------------------------------------------------------------------------
Female 5,388 5,880 6,900 8,112
age 60*
-------------------------------------------------------------------------------------------------------------
Joint** 4,716 5,028 5,544 5,928
Male-60
Female-60
-------------------------------------------------------------------------------------------------------------
</TABLE>
* Life annuity with 10 years guaranteed
** Joint and survivor life annuity with 20 years guaranteed
----------------------------------------------------------------
----------------------------------------------------------------
TAXES
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----------------------------------------------------------------
NOTE: WE PREPARED THE FOLLOWING INFORMATION ON TAXES AS A GENERAL DISCUSSION OF
THE SUBJECT. IT IS NOT TAX ADVICE. WE CAUTION YOU TO SEEK COMPETENT TAX ADVICE
ABOUT YOUR OWN CIRCUMSTANCES. WE DO NOT GUARANTEE THE TAX STATUS OF YOUR
ANNUITY. TAX LAWS CONSTANTLY CHANGE, THEREFORE WE CANNOT GUARANTEE THAT THE
INFORMATION CONTAINED HEREIN IS COMPLETE AND/OR ACCURATE.
ANNUITY CONTRACTS IN GENERAL
The Internal Revenue Code ("IRC") provides for special rules regarding the tax
treatment of annuity contracts. Generally, taxes on the earnings in your annuity
contract are deferred until you take the money out. Qualified retirement
23
<PAGE> 33
investments automatically provide tax deferral regardless of whether the
underlying contract is an annuity. Different rules apply depending on how you
take the money out and whether your contract is Qualified or Non-qualified.
If you do not purchase your contract under a pension plan, a specially sponsored
employer program or an individual retirement account, your contract is referred
to as a Non-qualified contract. A Non-qualified contract receives different tax
treatment than a Qualified contract. In general, your cost basis in a
Non-qualified contract is equal to the Purchase Payments you put into the
contract. You have already been taxed on the cost basis in your contract.
If you purchase your contract under a pension plan, a specially sponsored
employer program or as an individual retirement account, your contract is
referred to as a Qualified contract. Examples of qualified plans are: Individual
Retirement Accounts ("IRAs"), Roth IRAs, Tax-Sheltered Annuities (referred to as
403(b) contracts), H.R. 10 Plans (referred to as Keogh Plans) and pension and
profit sharing plans, including 401(k) plans. Typically you have not paid any
tax on the Purchase Payments used to buy your contract and therefore, you have
no cost basis in your contract.
TAX TREATMENT OF DISTRIBUTIONS -
NON-QUALIFIED CONTRACTS
If you make a withdrawal from a Non-qualified contract, the IRC treats such a
withdrawal as first coming from the earnings and then as coming from your
Purchase Payments. For income payments, any portion of each payment that is
considered a return of your Purchase Payment will not be taxed. Withdrawn
earnings are treated as income to you and are taxable. The IRC provides for a
10% penalty tax on any earnings that are withdrawn other than in conjunction
with the following circumstances: (1) after reaching age 59 1/2; (2) when paid
to your Beneficiary after you die; (3) after you become disabled (as defined in
the IRC); (4) when paid in a series of substantially equal installments made for
your life or for the joint lives of you and you Beneficiary; (5) under an
immediate annuity; or (6) which come from Purchase Payments made prior to August
14, 1982.
TAX TREATMENT OF DISTRIBUTIONS - QUALIFIED CONTRACTS
Generally, you have not paid any taxes on the Purchase Payments used to buy a
Qualified contract. Any amount of money you take out as a withdrawal or as
income payments is taxable income. The IRC further provides for a 10% penalty
tax on any withdrawal or income payment paid to you other than in conjunction
with the following circumstances: (1) after reaching age 59 1/2; (2) when paid
to your Beneficiary after you die; (3) after you become disabled (as defined in
the IRC); (4) in a series of substantially equal installments made for your life
or for the joint lives of you and your Beneficiary; (5) to the extent such
withdrawals do not exceed limitations set by the IRC for amounts paid during the
taxable year for medical care; (6) to fund higher education expenses (as defined
in IRC); (7) to fund certain first-time home purchase expenses; and, except in
the case of an IRA; (8) when you separate from service after attaining age 55;
and (9) when paid to an alternate payee pursuant to a qualified domestic
relations order.
The IRC limits the withdrawal of Purchase Payments from certain Tax-Sheltered
Annuities. Withdrawals can only be made when an owner: (1) reaches age 59 1/2;
(2) leaves his or her job; (3) dies; (4) becomes disabled (as defined in the
IRC); or (5) experiences a hardship (as defined in the IRC). In the case of
hardship, the owner can only withdraw Purchase Payments.
MINIMUM DISTRIBUTIONS
Generally, the IRS requires that you begin taking annual distributions from
qualified annuity contracts by April 1 of the calendar year following the later
of (1) the calendar year in which you attain age 70 1/2 or (2) the calendar year
in which you retire.
We currently waive surrender charges and MVA on withdrawals taken to meet
minimum distribution requirements. Current operational practice is to provide a
free withdrawal of the greater of the contract's maximum penalty free amount or
the required minimum distribution amount for a particular contract (but not
both).
Failure to satisfy the minimum distribution requirements may result in a tax
penalty. You should consult your tax advisor for more information.
You may elect to have the required minimum distribution amount on your contract
calculated and withdrawn each year under the automatic withdrawal option. You
may select either monthly, quarterly, semiannual or annual withdrawals for this
purpose. This service is provided as a courtesy and we do not guarantee the
accuracy of our calculations. Accordingly, we recommend you consult your tax
advisor concerning your required minimum distribution. You may terminate your
election for automated minimum distribution at any time by sending a written
request to our Annuity Service Center. We reserve the right to change or
discontinue this service at any time.
DIVERSIFICATION
The IRC imposes certain diversification requirements on the underlying
investments for a variable annuity. We believe that each underlying Variable
Portfolios' management monitors the Variable Portfolios so as to comply with
these requirements. To be treated as a variable annuity for tax purposes, the
underlying investments must meet these requirements.
The diversification regulations do not provide guidance as to the circumstances
under which you, because of the degree of control you exercise over the
underlying investments, and not Anchor National, would be considered the owner
of the shares of the Variable Portfolios. It is unknown to what extent
24
<PAGE> 34
owners are permitted to select investments, to make transfers among Variable
Portfolios or the number and type of Variable Portfolios owners may select from.
If any guidance is provided which is considered a new position, then the
guidance would generally be applied prospectively. However, if such guidance is
considered not to be a new position, it may be applied retroactively. This would
mean you, as the owner of the contract, could be treated as the owner of the
underlying Variable Portfolios. Due to the uncertainty in this area, we reserve
the right to modify the contract in an attempt to maintain favorable tax
treatment.
----------------------------------------------------------------
----------------------------------------------------------------
PERFORMANCE
----------------------------------------------------------------
----------------------------------------------------------------
We advertise the Cash Management Portfolio's yield and effective yield. In
addition, the other Variable Portfolios advertise total return, gross yield and
yield-to-maturity. These figures represent past performance of the Variable
Portfolios. These performance numbers do not indicate future results.
When we advertise performance for periods prior to the date the contracts were
first issued, we derive the figures from the performance of the corresponding
portfolios for the Trusts, if available. We modify these numbers to reflect
charges and expenses as if the contract was in existence during the period
stated in the advertisement. Figures calculated in this manner do not represent
actual historic performance of the particular Variable Portfolio.
Consult the SAI for more detailed information regarding the calculation of
performance data. The performance of each Variable Portfolio may also be
measured against unmanaged market indices. The indices we use include but are
not limited to the Dow Jones Industrial Average, the Standard & Poor's 500, the
Russell 1000 Growth Index, the Morgan Stanley Capital International Europe,
Australia and Far East Index ("EAFE") and the Morgan Stanley Capital
International World Index. We may compare the Variable Portfolios' performance
to that of other variable annuities with similar objectives and policies as
reported by independent ranking agencies such as Morningstar, Inc., Lipper
Analytical Services, Inc. or Variable Annuity Research & Data Service ("VARDS").
Anchor National may also advertise the rating and other information assigned to
it by independent industry ratings organizations. Some of those organizations
are A.M. Best Company ("A.M. Best"), Moody's Investor's Service ("Moody's"),
Standard & Poor's Insurance Rating Services ("S&P"), and Duff & Phelps. A.M.
Best's and Moody's ratings reflect their current opinion of our financial
strength and performance in comparison to others in the life and health
insurance industry. S&P's and Duff & Phelps' ratings measure the ability of an
insurance company to meet its obligations under insurance policies it issues.
These two ratings do not measure the insurer's ability to meet non-policy
obligations. Ratings in general do not relate to the performance of the Variable
Portfolios.
----------------------------------------------------------------
----------------------------------------------------------------
OTHER INFORMATION
----------------------------------------------------------------
----------------------------------------------------------------
ANCHOR NATIONAL
Anchor National is a stock life insurance company originally organized under the
laws of the state of California in April 1965. On January 1, 1996, Anchor
National redomesticated under the laws of the state of Arizona.
Anchor National and its affiliates, SunAmerica Life Insurance Company, First
SunAmerica Life Insurance Company, SunAmerica Trust Company, SunAmerica Asset
Management Corp., and the SunAmerica Financial Network, Inc. (comprising
six-wholly owned broker-dealers), specialize in retirement savings and
investment products and services. Business focuses include fixed and variable
annuities, mutual funds, broker-dealer services and trust administration
services.
THE SEPARATE ACCOUNT
Anchor National established Variable Separate Account ("separate account"),
under Arizona law on January 1, 1996 when it assumed the separate account,
originally established under California law on June 25, 1981. The separate
account is registered with the SEC as a unit investment trust under the
Investment Company Act of 1940, as amended.
Anchor National owns the assets in the separate account. However, the assets in
the separate account are not chargeable with liabilities arising out of any
other business conducted by Anchor National. Income gains and losses (realized
and unrealized) resulting from assets in the separate account are credited to or
charged against the separate account without regard to other income gains or
losses of Anchor National.
THE GENERAL ACCOUNT
Money allocated to the fixed account options goes into Anchor National's general
account. The general account consists of all of Anchor National's assets other
than assets attributable to a separate account. All of the assets in the general
account are chargeable with the claims of any Anchor National contract holders
as well as all of its creditors. The general account funds are invested as
permitted under state insurance laws.
DISTRIBUTION OF THE CONTRACT
Registered representatives of broker-dealers sell the contract. We pay
commissions to these representatives for the sale of the contracts. We do not
expect the total commissions to exceed 7% of your Purchase Payments. Contracts
sold with the Principal Rewards program may result in our paying
25
<PAGE> 35
lower commission. We may also pay a bonus to representatives for contracts which
stay active for a particular period of time, in addition to standard
commissions. We do not deduct commissions paid to registered representatives
directly from your Purchase Payments.
From time to time, we may pay or allow additional promotional incentives in the
form of cash or other compensation. We reserve the right to offer these
additional incentives only to certain broker-dealers that sell or are expected
to sell, certain minimum amounts of the contract, or other contracts offered by
us. Promotional incentives may change at any time.
SunAmerica Capital Services, Inc., 733 Third Avenue, 4th Floor, New York, New
York 10017 distributes the contracts. SunAmerica Capital Services, an affiliate
of Anchor National, is registered as a broker-dealer under the Exchange Act of
1934 and is a member of the National Association of Securities Dealers, Inc. No
underwriting fees are paid in connection with the distribution of the contracts.
ADMINISTRATION
We are responsible for the administrative servicing of your contract. Please
contact our Annuity Service Center
at 1-800-445-SUN2, if you have any comment, question or service request.
We send out transaction confirmations and quarterly statements. During the
accumulation phase, you will receive confirmation of transactions within your
contract. Transactions made pursuant to contractual or systematic agreements,
such as deduction of the annual maintenance fee and dollar cost averaging, may
be confirmed quarterly. Purchase payments received through the automatic payment
plan or a salary reduction arrangement, may also be confirmed quarterly. For all
other transactions, we send confirmations immediately. It is your responsibility
to review these documents carefully and notify us of any inaccuracies
immediately. We investigate all inquiries. To the extent that we believe we made
an error, we retroactively adjust your contract, provided you notify us within
30 days of receiving the transaction confirmation or quarterly statement. Any
other adjustments we deem warranted are made as of the time we receive notice of
the error.
LEGAL PROCEEDINGS
There are no pending legal proceedings affecting the separate account. Anchor
National and its subsidiaries engage in various kinds of routine litigation. In
management's opinion, these matters are not of material importance to their
respective total assets nor are they material with respect to the separate
account.
OWNERSHIP
The PolarisII Variable Annuity is a Flexible Payment Group Deferred Annuity
contract. We issue a group contract to a contract holder for the benefit of the
participants in the group. As a participant in the group, you will receive a
certificate which evidences your ownership. As used in this prospectus, the term
contract refers to your certificate. In some states, a Flexible Payment
Individual Modified Guaranteed and Variable Deferred Annuity contract is
available instead. Such a contract is identical to the contract described in
this prospectus, with the exception that we issue it directly to the owner.
CUSTODIAN
State Street Bank and Trust Company, 255 Franklin Street, Boston, Massachusetts
02110, serves as the custodian of the assets of the separate account. Anchor
National pays State Street Bank for services provided, based on a schedule of
fees.
INDEPENDENT ACCOUNTANTS
The audited consolidated financial statements of Anchor National as of December
31, 1999, December 31, 1998 and September 30, 1998 and for the year ended
December 31, 1999, for the three months ended December 31, 1998 and for each of
the two fiscal years in the period ended September 30, 1998 and the audited
financial statements of Variable Separate Account (Portion Relating to the
Polaris II Variable Annuity) for the one month ended December 31, 1999 and the
fiscal year ended November 30, 1999 are incorporated by reference in this
prospectus in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
REGISTRATION STATEMENT
A registration statement has been filed with the SEC under the Securities Act of
1933 relating to the contract. This prospectus does not contain all the
information in the registration statement as permitted by SEC regulations. The
omitted information can be obtained from the SEC's principal office in
Washington, D.C., upon payment of a prescribed fee.
26
<PAGE> 36
----------------------------------------------------------------
----------------------------------------------------------------
TABLE OF CONTENTS OF
STATEMENT OF ADDITIONAL INFORMATION
----------------------------------------------------------------
----------------------------------------------------------------
Additional information concerning the operations of the separate account is
contained in a Statement of Additional Information ("SAI"), which is available
without charge upon written request addressed to us at our Annuity Service
Center, P.O. Box 54299, Los Angeles, California 90054-0299 or by calling (800)
445-SUN2. The contents of the SAI are tabulated below.
<TABLE>
<S> <C>
Separate Account.............................. 3
General Account............................... 3
Performance Data.............................. 4
Income Payments............................... 10
Annuity Unit Values........................... 11
Taxes......................................... 14
Distribution of Contracts..................... 17
Financial Statements.......................... 18
</TABLE>
27
<PAGE> 37
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
APPENDIX A - CONDENSED FINANCIAL INFORMATION
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION TO FISCAL YEAR FISCAL YEAR 11/30/99-
PORTFOLIOS 11/30/97 11/30/98 11/30/99 12/31/99
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Appreciation (Inception Date - 6/3/97)
Beginning AUV....................................... $ 18.52 $ 21.26 $ 23.72 $ 36.39
Ending AUV.......................................... $ 21.26 $ 23.72 $ 36.39 $ 43.17
Ending Number of AUs................................ 1,392,262 7,356,862 13,201,318 13,721,175
--------------------------------------------------------------------------------------------------------------------
Government and Quality Bond (Inception Date - 6/11/97)
Beginning AUV....................................... $ 11.99 $ 12.65 $ 13.66 $ 13.37
Ending AUV.......................................... $ 12.65 $ 13.66 $ 13.37 $ 13.28
Ending Number of AUs................................ 395,258 5,697,571 11,644,751 11,975,781
--------------------------------------------------------------------------------------------------------------------
Growth (Inception Date - 6/3/97)
Beginning AUV....................................... $ 17.93 $ 20.31 $ 24.41 $ 29.74
Ending AUV.......................................... $ 20.31 $ 24.41 $ 29.74 $ 32.61
Ending Number of AUs................................ 789,274 3,678,108 6,788,755 7,022,979
--------------------------------------------------------------------------------------------------------------------
Natural Resources (Inception Date - 6/4/97)
Beginning AUV....................................... $ 12.39 $ 11.14 $ 9.30 $ 11.40
Ending AUV.......................................... $ 11.14 $ 9.30 $ 11.40 $ 12.50
Ending Number of AUs................................ 195,946 641,479 1,180,750 1,166,052
--------------------------------------------------------------------------------------------------------------------
Aggressive Growth (Inception Date - 6/9/97)
Beginning AUV....................................... $ 10.03 $ 11.51 $ 11.86 $ 19.02
Ending AUV.......................................... $ 11.51 $ 11.86 $ 19.02 $ 24.30
Ending Number of AUs................................ 821,105 2,794,187 6,626,618 7,344,520
--------------------------------------------------------------------------------------------------------------------
Alliance Growth (Inception Date - 6/2/97)
Beginning AUV....................................... $ 21.81 $ 24.51 $ 32.81 $ 44.31
Ending AUV.......................................... $ 24.51 $ 32.81 $ 44.31 $ 48.56
Ending Number of AUs................................ 2,092,044 12,001,651 24,844,446 25,720,432
--------------------------------------------------------------------------------------------------------------------
Asset Allocation (Inception Date - 6/3/97)
Beginning AUV....................................... $ 16.59 $ 17.98 $ 18.22 $ 19.10
Ending AUV.......................................... $ 17.98 $ 18.22 $ 19.10 $ 19.81
Ending Number of AUs................................ 1,498,681 8,996,522 11,800,263 11,832,744
--------------------------------------------------------------------------------------------------------------------
Blue Chip Growth+ (Inception Date - )
Beginning AUV....................................... -- -- -- --
Ending AUV.......................................... -- -- -- --
Ending Number of AUs................................ -- -- -- --
--------------------------------------------------------------------------------------------------------------------
Cash Management (Inception Date - 6/5/97)
Beginning AUV....................................... $ 11.24 $ 11.43 $ 11.83 $ 12.20
Ending AUV.......................................... $ 11.43 $ 11.83 $ 12.20 $ 12.25
Ending Number of AUs................................ 1,514,290 5,488,046 13,454,926 14,181,154
--------------------------------------------------------------------------------------------------------------------
Corporate Bond (Inception Date - 6/9/97)
Beginning AUV....................................... $ 11.83 $ 12.54 $ 13.15 $ 12.78
Ending AUV.......................................... $ 12.54 $ 13.15 $ 12.78 $ 12.76
Ending Number of AUs................................ 328,300 3,633,064 7,121,685 7,196,448
--------------------------------------------------------------------------------------------------------------------
Davis Venture Value (Inception Date - 6/2/97)
Beginning AUV....................................... $ 18.63 $ 21.30 $ 23.36 $ 26.57
Ending AUV.......................................... $ 21.30 $ 23.36 $ 26.57 $ 27.88
Ending Number of AUs................................ 4,281,879 20,734,371 32,218,454 32,960,877
--------------------------------------------------------------------------------------------------------------------
"Dogs of Wall Street" (Inception Date - 4/1/98)
Beginning AUV....................................... $ -- $ 10.00 $ 9.71 $ 9.12
Ending AUV.......................................... $ -- $ 9.71 $ 9.12 $ 8.99
Ending Number of AUs................................ -- 4,324,225 8,879,703 8,952,838
--------------------------------------------------------------------------------------------------------------------
Emerging Markets (Inception Date - 6/5/97)
Beginning AUV....................................... $ 10.14 $ 7.97 $ 6.14 $ 8.99
Ending AUV.......................................... $ 7.97 $ 6.14 $ 8.99 $ 10.77
Ending Number of AUs................................ 663,212 2,574,316 4,857,715 5,310,973
--------------------------------------------------------------------------------------------------------------------
Federated Value (Inception Date - 6/4/97)
Beginning AUV....................................... $ 12.14 $ 13.62 $ 15.86 $ 16.43
Ending AUV.......................................... $ 13.62 $ 15.86 $ 16.43 $ 16.89
Ending Number of AUs................................ 736,333 3,783,248 6,616,993 6,700,126
--------------------------------------------------------------------------------------------------------------------
Global Bond (Inception Date - 6/11/97)
Beginning AUV....................................... $ 12.41 $ 13.08 $ 14.40 $ 14.11
Ending AUV.......................................... $ 13.08 $ 14.40 $ 14.11 $ 14.09
Ending Number of AUs................................ 183,563 1,342,157 2,692,066 2,749,995
--------------------------------------------------------------------------------------------------------------------
Global Equities (Inception Date - 6/3/97)
Beginning AUV....................................... $ 16.54 $ 16.90 $ 19.21 $ 24.20
Ending AUV.......................................... $ 16.90 $ 19.21 $ 24.20 $ 26.57
Ending Number of AUs................................ 600,294 2,566,912 4,915,631 5,366,080
--------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Not available for sale until July 5, 2000.
++ Not available for sale until December 2000.
AUV - Accumulation Unit Value
AU - Accumulation Units
A-1
<PAGE> 38
<TABLE>
<CAPTION>
INCEPTION TO FISCAL YEAR FISCAL YEAR 11/30/99-
PORTFOLIOS 11/30/97 11/30/98 11/30/99 12/31/99
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Goldman Sachs Research+ (Inception Date - )
Beginning AUV....................................... -- -- -- --
Ending AUV.......................................... -- -- -- --
Ending Number of AUs................................ -- -- -- --
--------------------------------------------------------------------------------------------------------------------
Growth-Income (Inception Date - 6/3/97)
Beginning AUV....................................... $ 18.84 $ 21.41 $ 25.71 $ 33.11
Ending AUV.......................................... $ 21.41 $ 25.71 $ 33.11 $ 35.91
Ending Number of AUs................................ 1,949,292 9,786,202 19,070,913 19,671,134
--------------------------------------------------------------------------------------------------------------------
Growth Opportunities+ (Inception Date - )
Beginning AUV....................................... -- -- -- --
Ending AUV.......................................... -- -- -- --
Ending Number of AUs................................ -- -- -- --
--------------------------------------------------------------------------------------------------------------------
High-Yield Bond (Inception Date - 6/9/97)
Beginning AUV....................................... $ 13.63 $ 14.66 $ 14.25 $ 14.71
Ending AUV.......................................... $ 14.66 $ 14.25 $ 14.71 $ 14.87
Ending Number of AUs................................ 758,856 5,006,115 7,918,425 8,096,738
--------------------------------------------------------------------------------------------------------------------
International Diversified Equities (Inception Date - 6/4/97)
Beginning AUV....................................... $ 12.04 $ 11.62 $ 13.53 $ 15.49
Ending AUV.......................................... $ 11.62 $ 13.53 $ 15.49 $ 16.92
Ending Number of AUs................................ 1,040,812 4,519,545 6,989,492 7,176,791
--------------------------------------------------------------------------------------------------------------------
International Growth and Income (Inception Date - 6/4/97)
Beginning AUV....................................... $ 9.97 $ 10.33 $ 11.16 $ 13.40
Ending AUV.......................................... $ 10.33 $ 11.16 $ 13.40 $ 14.07
Ending Number of AUs................................ 1,310,126 6,738,263 11,676,801 12,288,580
--------------------------------------------------------------------------------------------------------------------
Marsico Growth++ (Inception Date - n/a)
Beginning AUV....................................... -- -- -- --
Ending AUV.......................................... -- -- --
Ending Number of AUs................................ -- -- -- --
--------------------------------------------------------------------------------------------------------------------
MFS Growth and Income (Inception Date - 6/4/97)
Beginning AUV....................................... $ 15.82 $ 17.63 $ 20.46 $ 22.55
Ending AUV.......................................... $ 17.63 $ 20.46 $ 22.55 $ 23.67
Ending Number of AUs................................ 191,101 694,076 4,109,201 4,397,413
--------------------------------------------------------------------------------------------------------------------
MFS Mid-Cap Growth (Inception Date - 4/5/99)
Beginning AUV....................................... -- -- -- $ 14.23
Ending AUV.......................................... -- -- $ 14.23 $ 16.31
Ending Number of AUs................................ -- -- 2,204,857 2,713,848
--------------------------------------------------------------------------------------------------------------------
MFS Total Return (Inception Date - 6/10/97)
Beginning AUV....................................... $ 14.44 $ 15.45 $ 17.28 $ 18.50
Ending AUV.......................................... $ 15.45 $ 17.28 $ 18.50 $ 18.60
Ending Number of AUs................................ 218,391 1,492,175 4,740,884 5,054,346
--------------------------------------------------------------------------------------------------------------------
Putnam Growth (Inception Date - 6/3/97)
Beginning AUV....................................... $ 15.80 $ 18.47 $ 22.29 $ 28.36
Ending AUV.......................................... $ 18.47 $ 22.29 $ 28.36 $ 31.67
Ending Number of AUs................................ 831,178 4,949,624 11,111,497 11,459,476
--------------------------------------------------------------------------------------------------------------------
Real Estate (Inception Date - 6/4/97)
Beginning AUV....................................... $ 9.98 $ 11.44 $ 9.80 $ 8.50
Ending AUV.......................................... $ 11.44 $ 9.80 $ 8.50 $ 8.91
Ending Number of AUs................................ 887,321 3,336,767 3,959,755 3,993,765
--------------------------------------------------------------------------------------------------------------------
SunAmerica Balanced (Inception Date - 6/5/97)
Beginning AUV....................................... $ 11.84 $ 13.22 $ 15.60 $ 18.23
Ending AUV.......................................... $ 13.22 $ 15.60 $ 18.23 $ 19.69
Ending Number of AUs................................ 363,136 3,543,245 11,283,979 11,995,695
--------------------------------------------------------------------------------------------------------------------
Technology+ (Inception Date - )
Beginning AUV....................................... -- -- -- --
Ending AUV.......................................... -- -- -- --
Ending Number of AUs................................ -- -- -- --
--------------------------------------------------------------------------------------------------------------------
Telecom Utility (Inception Date - 6/6/97)
Beginning AUV....................................... $ 11.41 $ 12.74 $ 14.56 $ 15.16
Ending AUV.......................................... $ 12.74 $ 14.56 $ 15.16 $ 15.11
Ending Number of AUs................................ 177,618 1,807,529 4,083,169 4,232,249
--------------------------------------------------------------------------------------------------------------------
Worldwide High Income (Inception Date - 6/5/97)
Beginning AUV....................................... $ 15.57 $ 15.98 $ 13.57 $ 15.23
Ending AUV.......................................... $ 15.98 $ 13.57 $ 15.23 $ 15.70
Ending Number of AUs................................ 596,308 2,430,509 2,853,924 2,824,430
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Not available for sale until July 5, 2000.
++ Not available for sale until December 2000.
AUV - Accumulation Unit Value
AU - Accumulation Units
A-2
<PAGE> 39
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
APPENDIX B - PRINCIPAL REWARDS PROGRAM EXAMPLES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
I. DEFERRED PAYMENT ENHANCEMENT
If you elect to participate in the Principal Rewards Program at contract issue,
we contribute at least 2% of each Purchase Payment to your contract for each
Purchase Payment we receive as an Upfront Payment Enhancement. Any applicable
Deferred Payment Enhancement is allocated to your contract on the corresponding
Deferred Payment Enhancement Date and, if declared by the Company, is a
percentage of your remaining Purchase Payment on the Deferred Payment
Enhancement Date. Deferred Purchase Payment Enhancements are reduced
proportionately by partial withdrawals of that Purchase Payment prior to the
Deferred Payment Enhancement Date.
The examples that follow assume an initial Purchase Payment of $125,000 and that
the Deferred Payment Enhancement is 1%.
For purposes of the example, the Deferred Payment Enhancement Date is the 9th
anniversary of the Purchase Payment.
EXAMPLE 1 - NO WITHDRAWALS ARE MADE
The Upfront Payment Enhancement allocated to your contract is $2,500 (2% of
$125,000).
On your 9th contract anniversary, the Deferred Payment Enhancement Date, your
Deferred Payment Enhancement of $1,250 (1% of your remaining Purchase Payment or
$125,000) will be allocated to your contract.
EXAMPLE 2 - WITHDRAWAL MADE PRIOR TO DEFERRED PAYMENT ENHANCEMENT DATE
As in Example 1, your Upfront Payment Enhancement is $2,500.
This example also assumes the following:
1. Your contract value on your 5th contract anniversary is $190,000.
2. You request a withdrawal of $75,000 on your 5th contract anniversary.
3. No subsequent Purchase Payments have been made.
4. No prior withdrawals have been taken.
5. Funds are not allocated to any of the MVA Fixed Accounts.
On your 5th contract anniversary, your penalty-free earnings in the contract are
$65,000 ($190,000 contract value less your $125,000 investment in the contract).
Therefore, you are withdrawing $10,000 of your initial Purchase Payment. Your
contract value will also be reduced by a $500 withdrawal charge on the $10,000
Purchase Payment (5% of $10,000). Your gross withdrawal is $75,500 of which
$10,500 constitutes part of your Purchase Payment.
The withdrawal of $10,500 of your $125,000 Purchase Payment is a withdrawal of
8.4% of your Purchase Payment. Therefore, only 91.6%, or $114,500, of your
initial Purchase Payment remains in your contract.
On your 9th contract anniversary, the Deferred Payment Enhancement Date,
assuming no other transactions occur affecting the Purchase Payment, we allocate
your Deferred Payment Enhancement of $1,145 (1% of your remaining Purchase
Payment, $114,500) to your contract.
II. 90 DAY WINDOW
The following hypothetical examples assume that the Company is offering Upfront
and Deferred Payment Enhancements in accordance with this chart at the time each
Purchase Payment is received:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
UPFRONT PAYMENT DEFERRED PAYMENT
ENHANCEMENT ENHANCEMENT DEFERRED PAYMENT
ENHANCEMENT LEVEL RATE RATE ENHANCEMENT DATE
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Under $40,000 2% 0% N/A
-----------------------------------------------------------------------------------------------
$40,000 - $99,999 4% 0% N/A
-----------------------------------------------------------------------------------------------
Nine years from the
$100,000 - $499,999 4% 1% date we receive each
Purchase Payment.
-----------------------------------------------------------------------------------------------
Nine years from the
$500,000 - more 4% 2% date we receive each
Purchase Payment.
-----------------------------------------------------------------------------------------------
</TABLE>
Contracts issued with the Principal Rewards feature after April 3, 2000, may be
eligible for a "Look-Back Adjustment." As of the 90th day after your contract
was issued, we will total your Purchase Payments remaining in your contract at
that time, without considering any investment gain or loss in contract value on
those Purchase Payments. If your total Purchase Payments bring you to an
Enhancement Level which, as of the date we issued your contract, would have
provided for a higher Upfront and/or Deferred Payment Enhancement Rate on each
Purchase Payment, you will get the benefit of the Enhancement Rate(s) that were
applicable to that higher Enhancement Level at the time your contract was
issued.
This example assumes the following:
1. Current Enhancement Levels, Rates and Dates (beginning December 1, 2000)
throughout the first 90 days.
B-1
<PAGE> 40
2. No withdrawal in the first 90 days.
3. Initial Purchase Payment of $35,000 on December 1, 2000.
4. Subsequent Purchase Payment of $40,000 on January 15, 2001.
5. Subsequent Purchase Payment of $25,000 on January 30, 2001.
6. Subsequent Purchase Payment of $7,500 on February 12, 2001.
ENHANCEMENT AT THE TIME PURCHASE PAYMENTS ARE RECEIVED
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
DEFERRED
PURCHASE UPFRONT DEFERRED PAYMENT
DATE OF PAYMENT PAYMENT PAYMENT ENHANCEMENT
PURCHASE PAYMENT AMOUNT ENHANCEMENT ENHANCEMENT DATE
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 1, 2000 $35,000 2% 0% N/A
--------------------------------------------------------------------------------------------
January 15, 2001 $40,000 4% 0% N/A
--------------------------------------------------------------------------------------------
January 30, 2001 $25,000 4% 1% January 30, 2010
--------------------------------------------------------------------------------------------
February 12, 2001 $ 7,500 4% 1% February 12, 2010
--------------------------------------------------------------------------------------------
</TABLE>
ENHANCEMENT ADJUSTMENTS ON THE 90TH DAY FOLLOWING CONTRACT ISSUE
The sum of all Purchase Payments made in the first 90 days of the contract
equals $107,500. According to the Enhancement Levels in effect at the time this
contract was issued, a $107,500 Purchase Payment would have received a 4%
Upfront Payment Enhancement and a 1% Deferred Payment Enhancement. Under the 90
Day Window provision all Purchase Payments made within those first 90 days would
receive the benefit of the parameters in place at the time the contract was
issued, as if all of the Purchase Payments were received on the date of issue.
Thus, the first two Purchase Payments would be adjusted on the 90th day
following contract issue, as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
DEFERRED
PURCHASE UPFRONT DEFERRED PAYMENT
DATE OF PAYMENT PAYMENT PAYMENT ENHANCEMENT
PURCHASE PAYMENT AMOUNT ENHANCEMENT ENHANCEMENT DATE
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 1, 2000 $35,000 4% 1% December 1, 2009
--------------------------------------------------------------------------------------------
January 15, 2001 $40,000 4% 1% January 15, 2010
--------------------------------------------------------------------------------------------
January 30, 2001 $25,000 4% 1% January 30, 2010
--------------------------------------------------------------------------------------------
February 12, 2001 $ 7,500 4% 1% February 12, 2010
--------------------------------------------------------------------------------------------
</TABLE>
B-2
<PAGE> 41
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
APPENDIX C - MARKET VALUE ADJUSTMENT ("MVA")
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
The MVA reflects the impact that changing interest rates have on the value of
money invested at a fixed interest rate. The longer the period of time remaining
in the term you initially agreed to leave your money in the fixed account
option, the greater the impact of changing interest rates. The impact of the MVA
can be either positive or negative, and is computed by multiplying the amount
withdrawn, transferred or switched to the Income Phase by the following factor:
N/12
[(1+I/(1+J+0.005)] - 1
The MVA formula may differ in certain states
where:
I is the interest rate you are earning on the money invested in the
fixed account option;
J is the interest rate then currently available for the period of time
equal to the number of years remaining in the term you initially agreed
to leave your money in the fixed account option; and
N is the number of full months remaining in the term you initially
agreed to leave your money in the fixed account option.
EXAMPLES OF THE MVA
The examples below assume the following:
(1) You made an initial Purchase Payment of $10,000 and allocated it to the
10-year fixed account option at a rate of 5%;
(2) You make a partial withdrawal of $4,000 when 1 year (12 months) remains
in the 10-year term you initially agreed to leave your money in the
fixed account option (N=12); and
(3) You have not made any other transfers, additional Purchase Payments, or
withdrawals.
No withdrawal charges are reflected because your Purchase Payment has been in
the contract for nine full years. If a withdrawal charge applies, it is deducted
before the MVA. The MVA is assessed on the amount withdrawn less any withdrawal
charges.
POSITIVE ADJUSTMENT
Assume that on the date of withdrawal, the interest rate in effect for a new
Purchase Payments in the 1-year fixed account option is 4%.
N/12
The MVA factor is = [(1+I/(1+J+0.005) - 1
12/12
= [(1.05)/(1.04+0.005)] - 1
1
= (1.004785) - 1
= 1.004785 - 1
= + 0.004785
The requested withdrawal amount is multiplied by the MVA factor to determine the
MVA:
$4,000 x (+0.004785) = +$19.14
$19.14 represents the MVA that would be added to your withdrawal.
NEGATIVE ADJUSTMENT
Assume that on the date of withdrawal, the interest rate in effect for new
Purchase Payments in the 1-year fixed account option is 6%.
N/12
The MVA factor is = [(1+I)/(1+J+0.005)] - 1
12/12
= [(1.05)/(1.06+0.005)] - 1
1
= (0.985915) - 1
= 0.985915 - 1
= - 0.014085
The requested withdrawal amount is multiplied by the MVA factor to determine the
MVA:
$4,000 X (-0.014085) = -$56.34
$56.34 represents the MVA that will be deducted from the money remaining in the
10-year fixed account option.
C-1
<PAGE> 42
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
APPENDIX D - DEATH BENEFITS FOLLOWING SPOUSAL CONTINUATION
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Capitalized terms used in this Appendix have the same meaning as they have in
prospectus.
The following details the death benefit options and EstatePlus benefit upon the
Continuing Spouse's death:
A. DEATH BENEFIT PAYABLE UPON CONTINUING SPOUSE'S DEATH:
1.Purchase Payment Accumulation Option -- the death benefit is the greater
of:
a.The contract value on the date we receive satisfactory proof of the
Continuing Spouse's death; or
b.Purchase Payments minus withdrawals (and fees and charges applicable
to those withdrawals) made from the original contract issue date
including the Continuation Contribution, compounded to the date of
death at a 4% annual growth rate, (3% growth rate if age 70 or older
at the time of contract issue) plus any Purchase Payments minus
withdrawals recorded after the date of death (and any fees and
charges applicable to those withdrawals).
c.The contract value on the seventh contract anniversary following the
original issue date of the contract, plus any Purchase Payments and
less any withdrawals (and any fees or charges applicable to such
withdrawals), since the seventh contract anniversary, all compounded
at a 4% annual growth rate until the date of death (3% growth rate
if age 70 or older at the time of contract issue) plus any Purchase
Payments less withdrawals recorded after the date of death (and any
fees or charges applicable to such withdrawals).
2.Maximum Anniversary Option -- if the Continuing Spouse is below age 90 at
the time of death, the death benefit is greater of:
a.The contract value at the time we receive satisfactory proof of the
Continuing Spouse's death; or
b.Purchase Payments since the Continuation Date minus withdrawals and
any fees and charges applicable to those withdrawals; or
c.The maximum anniversary value on any contract anniversary occurring
after the Continuation Date prior to the Continuing Spouse's 81st
birthday. The anniversary value equals the contract value on a
contract anniversary plus any Purchase Payments minus withdrawals
and fees and charges applicable to withdrawals recorded since that
contract anniversary. Contract anniversary is defined as any
anniversary following the full 12 month period after the original
contract issue date.
If the Continuing Spouse is age 90 or older at the time of death, under the
Maximum Anniversary death benefit, their beneficiary will receive contract value
only.
B. THE ESTATEPLUS BENEFIT PAYABLE UPON CONTINUING SPOUSE'S DEATH:
The EstatePlus benefit may increase the death benefit amount. The EstatePlus
benefit is only available if the original owner elected EstatePlus and it has
not been terminated. If the Continuing Spouse had earnings in the contract at
the time of his/her death, we will add a percentage of those earnings (the
"EstatePlus Percentage"), subject to a maximum dollar amount (the "Maximum
EstatePlus Percentage"), to the death benefit payable, based on the number of
years the Continuing Spouse has held the contract since the Continuation Date.
The EstatePlus benefit, if any, is added to the death benefit payable under the
Purchase Payment Accumulation or the Maximum Anniversary option.
The term "Continuation Net Purchase Payment" is used frequently to describe the
EstatePlus benefit payable to the beneficiary of the Continuing Spouse. We
define Continuation Net Purchase Payment as Net Purchase Payments made as of the
Continuation Date. For the purpose of calculating Continuation Net Purchase
Payments, the amount that equals the contract value on the Continuation Date,
including the Continuation Contribution is considered a Purchase Payment. If the
Continuing Spouse makes no additional Purchase Payments or withdrawal,
Continuation Net Purchase Payments equals the contract value on the Continuation
Date, including the Continuation Contribution.
The following table provides the details, if the Continuing Spouse is age 69 or
younger on the Continuation Date:
<TABLE>
<CAPTION>
-------------------------------------------------------------
CONTRACT YEAR ESTATEPLUS MAXIMUM
OF DEATH PERCENTAGE ESTATEPLUS PERCENTAGE
-------------------------------------------------------------
<S> <C> <C>
Years 0-4 25% of earnings 40% of Continuation
Net Purchase Payments
-------------------------------------------------------------
Years 5-9 40% of earnings 65% of Continuation
Net Purchase
Payments*
-------------------------------------------------------------
Years 10+ 50% of earnings 75% of Continuation
Net Purchase
Payments*
-------------------------------------------------------------
</TABLE>
D-1
<PAGE> 43
If the Continuing Spouse is between their 70th and 81st birthdays on the
Continuation Date, the table below shows the available EstatePlus benefit:
<TABLE>
<CAPTION>
-------------------------------------------------------------
CONTRACT YEAR ESTATEPLUS MAXIMUM
OF DEATH PERCENTAGE ESTATEPLUS PERCENTAGE
-------------------------------------------------------------
<S> <C> <C>
Years 0-10+ 25% of earnings 40% of Continuation
Net Purchase
Payments*
-------------------------------------------------------------
</TABLE>
*Purchase Payments received after the 5(th) year following the Continuation Date
must remain in the contract for at least six months to be included as part of
Continuation Net Purchase Payments for purpose of the Maximum EstatePlus
calculation.
What is the Contract Year of Death?
Contract Year of Death is the number of full 12 month periods starting on the
Continuation Date and ending on the Continuing Spouse's date of death.
What is the EstatePlus amount?
We determine the EstatePlus amount based upon a percentage of earnings in the
contract at the time of the Continuing Spouse's death. For the purpose of this
calculation, earnings are defined as (1) minus (2) where
(1)equals the contract value on the Continuing Spouse's date of death;
(2)equals the Continuation Net Purchase Payment(s).
What is the Maximum EstatePlus amount?
The EstatePlus benefit is subject to a maximum dollar amount. The Maximum
EstatePlus amount is a percentage of the Continuation Net Purchase Payments.
WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE SPOUSAL CONTINUATION
PROVISION (IN ITS ENTIRETY OR ANY COMPONENT) AT ANY TIME.
D-2
<PAGE> 44
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
APPENDIX E - PREMIUM TAXES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Premium taxes vary according to the state and are subject to change without
notice. In many states, there is no tax at all. Listed below are the current
premium tax rates in those states that assess a premium tax. For current
information, you should consult your tax adviser.
<TABLE>
<CAPTION>
QUALIFIED NON-QUALIFIED
STATE CONTRACT CONTRACT
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
<S> <C> <C>
California .50% 2.35%
----------------------------------------------------------------------------------------
Maine 0% 2%
----------------------------------------------------------------------------------------
Nevada 0% 3.5%
----------------------------------------------------------------------------------------
South Dakota 0% 1.25%
----------------------------------------------------------------------------------------
West Virginia 1% 1%
----------------------------------------------------------------------------------------
Wyoming 0% 1%
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
</TABLE>
E-1
<PAGE> 45
--------------------------------------------------------------------------------
Please forward a copy (without charge) of the Polaris(II) Variable Annuity
Statement of Additional Information to:
(Please print or type and fill in all information.)
------------------------------------------------------------------------
Name
------------------------------------------------------------------------
Address
------------------------------------------------------------------------
City/State/Zip
Date: ------------------------------ Signed: ------------------------------
Return to: Anchor National Life Insurance Company, Annuity Service Center,
P.O. Box 52499, Los Angeles, California 90054-0299
--------------------------------------------------------------------------------
<PAGE> 46
[POLARISAMERICA LOGO]
THIS PROFILE IS A SUMMARY OF SOME OF THE MORE IMPORTANT POINTS THAT YOU SHOULD
KNOW AND CONSIDER BEFORE PURCHASING THE POLARISAMERICA VARIABLE ANNUITY. THE
ANNUITY IS MORE FULLY DESCRIBED IN THE PROSPECTUS. PLEASE READ THE PROSPECTUS
CAREFULLY.
December 29, 2000
----------------------------------------------------------------
----------------------------------------------------------------
1. THE POLARISAMERICA VARIABLE ANNUITY
----------------------------------------------------------------
----------------------------------------------------------------
The PolarisAmerica Variable Annuity is a contract between you and Anchor
National Life Insurance Company ("Anchor National"). It is designed to help you
invest on a tax-deferred basis and meet long-term financial goals, such as
retirement funding. Tax deferral means all your money, including the amount you
would otherwise pay in current income taxes, remains in your contract to
generate more earnings. Your money could grow faster than it would in a
comparable taxable investment.
PolarisAmerica offers a diverse selection of money managers, investment options
and other programs. You may divide your money among any or all 18 variable
portfolios and 7 fixed account options. To the extent you invest in the variable
portfolios, your investment is not guaranteed. The value of your PolarisAmerica
contract can fluctuate up and down, based on the performance of the underlying
investments you select and you may experience a loss.
The variable portfolios offer professionally managed investment choices with
goals ranging from capital preservation to aggressive growth. Your choices for
the various investment options are found on the next page.
The contract also offers 5 fixed account options and 2 Dollar Cost Averaging
("DCA") fixed account options for different time periods. Each may have a
different interest rate. Interest rates are guaranteed by Anchor National.
Like most annuities, the contract has an accumulation phase and an income phase.
During the accumulation phase, you invest money in your contract. Your earnings
are based on the investment performance of the variable portfolios to which your
money is allocated and/or the interest rate(s) earned on the fixed account
option(s) in which you invest. You may withdraw money from your contract during
the accumulation phase. However, as with other tax-deferred investments, you
will pay taxes on earnings and untaxed contributions when you withdraw them. A
federal tax penalty may apply if you make withdrawals before age 59 1/2.
During the income phase, you may receive income payments from your annuity. Your
income payments may be fixed in dollar amount, vary with investment performance
or a combination of both, depending on where your money is allocated. Among
other factors, the amount of money you are able to accumulate in your contract
during the accumulation phase will affect the amount of your income payments
during the income phase.
----------------------------------------------------------------
----------------------------------------------------------------
2. INCOME OPTIONS
----------------------------------------------------------------
----------------------------------------------------------------
You can select from one of five income options:
(1) payments for your lifetime;
(2) payments for your lifetime and your survivor's lifetime;
(3) payments for your lifetime and your survivor's lifetime, but for not less
than 10 or 20 years;
(4) payments for your lifetime, but for not less than 10 or 20 years; and
(5) payments for a specified period of 5 to 30 years.
You will also need to decide when your income payments begin and if you want
your income payments to fluctuate with investment performance or remain
constant. Once you begin receiving income payments, you cannot change your
income option.
If your contract is part of a non-qualified retirement plan (one that is
established with after-tax dollars), payments during the income phase are
considered partly a return of your original investment. The "original
investment" part of each payment is not taxable as income. For contracts which
are part of a qualified retirement plan using before-tax dollars, the entire
income payment is taxable as income.
In addition to the above income options, you may elect to take income payments
under the income protector feature, subject to the provisions thereof.
<PAGE> 47
----------------------------------------------------------------
----------------------------------------------------------------
3. PURCHASING A POLARISAMERICA
VARIABLE ANNUITY CONTRACT
----------------------------------------------------------------
----------------------------------------------------------------
You can buy a contract through your financial representative, who can also help
you complete the proper forms. For non-qualified contracts, the minimum initial
purchase payment is $5,000 and subsequent amounts of $500 or more may be added
to your contract at any time during the accumulation phase. For qualified
contracts, the minimum initial purchase payment is $2,000 and subsequent amounts
of $250 or more may be added to your contract at any time during the
accumulation phase.
----------------------------------------------------------------
----------------------------------------------------------------
4. INVESTMENT OPTIONS
----------------------------------------------------------------
----------------------------------------------------------------
You may allocate money to the following variable portfolios of the Anchor Series
Trust ("AST"), the SunAmerica Series Trust ("SST") and/or the Nations Annuity
Trust ("NAT"):
STOCKS:
MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
- Global Equities Portfolio SST
- Growth-Income Portfolio SST
MANAGED BY BANC OF AMERICA CAPITAL MANAGEMENT, INC.
- Nations Aggressive Growth Portfolio NAT
- Nations Managed Index Portfolio NAT
- Nations Value Portfolio NAT
MANAGED BY BRANDES INVESTMENT PARTNERS, L.P.
- Nations International Value Portfolio NAT
MANAGED BY MARSICO CAPITAL MANAGEMENT, LLC
- Nations Marsico Focused Equities Portfolio NAT
- Nations Marsico Growth & Income Portfolio NAT
MANAGED BY PUTNAM INVESTMENT MANAGEMENT, INC.
- Emerging Markets Portfolio SST
- International Growth & Income Portfolio SST
- Putnam Growth Portfolio SST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP.
- Aggressive Growth Portfolio SST
- Blue Chip Growth Portfolio SST
BALANCED:
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP.
- SunAmerica Balanced Portfolio SST
BONDS:
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
- Global Bond Portfolio SST
MANAGED BY MACKAY SHIELDS LLC
- Nations High Yield Bond Portfolio NAT
MANAGED BY WELLINGTON MANAGEMENT COMPANY, LLP
- Government & Quality Bond Portfolio AST
CASH:
MANAGED BY BANC OF AMERICA CAPITAL MANAGEMENT, INC.
- Cash Management Portfolio SST
You may also allocate money to the 1-year fixed account option or the 3, 5, 7
and 10-year market value adjustment ("MVA") fixed account options and, under
certain circumstances, the 6-month and 1-year DCA fixed account options.
The interest rates applicable for these fixed account options may differ from
time to time, however, we will never credit less than a 3% annual effective
rate. Once established, the rate will not change during the selected period.
Your contract value will be adjusted up or down for withdrawals or transfers
from the 3, 5, 7 and 10-year fixed account options prior to the end of the
guarantee period.
----------------------------------------------------------------
----------------------------------------------------------------
5. EXPENSES
----------------------------------------------------------------
----------------------------------------------------------------
Each year, we deduct a $35 contract maintenance fee ($30 in North Dakota) from
your contract. We also deduct insurance charges which equal 1.52% annually of
the average daily value of your contract allocated to the variable portfolios.
As with other professionally managed investments, there are investment charges
imposed on contracts with money allocated to the variable portfolios. We
estimate these fees to range from .53 to 1.90.
If you take money out of your contract, you may be assessed a withdrawal charge
which is a percentage of purchase payments. The percentage declines over the
time the money is in the contract.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
YEAR 1 2 3 4 5 6 7 8
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WITHDRAWAL
CHARGE 7% 6% 5% 4% 3% 2% 1% 0%
-----------------------------------------------------------------------------------------
</TABLE>
If you elect the EstatePlus benefit, we charge a 0.25% fee. The EstatePlus fee
is an annualized charge that we deduct daily from your net asset value.
EstatePlus is not available if you are age 81 or older at the time of contract
issue.
Each year, you are allowed to make 15 transfers without charge. After your first
15 free transfers, a $25 transfer fee ($10 in Pennsylvania and Texas) applies to
each subsequent transfer.
In a limited number of states, you may also be charged for a state premium tax
of up to 3.5% depending upon the state.
The following chart is designed to help you understand the charges in your
contract. The column "Total Annual Charges" shows the total of the 1.52%
insurance charges, the $35 contract maintenance fee and the investment charges
for each variable portfolio. We converted the contract maintenance fee to a
percentage using an assumed contract size of $40,000. The actual impact of this
charge on your contract may differ from this percentage.
<PAGE> 48
The next two columns show two examples of the charges you would pay under the
contract. The examples assume that you invested $1,000 in a contract which earns
5% annually and that you withdraw your money: (1) at the end of year 1, and (2)
at the end of year 10. The premium tax is assumed to be 0% in both examples.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
EXAMPLES:
TOTAL ANNUAL TOTAL ANNUAL TOTAL EXPENSES TOTAL EXPENSES
INSURANCE INVESTMENT TOTAL ANNUAL AT END OF AT END OF
CHARGES CHARGES CHARGES 1 YEAR 10 YEARS
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ANCHOR SERIES TRUST
Government and Quality Bond 1.61% .66% 2.27% $ 93 $257
-------------------------------------------------------------------------------------------------------------------
SUNAMERICA SERIES TRUST
Emerging Markets(1) 1.61% 1.90% 3.51% $105 $375
Global Equities 1.61% .84% 2.45% $ 94 $275
International Growth and
Income 1.61% 1.21% 2.82% $ 98 $311
Aggressive Growth 1.61% .75% 2.36% $ 94 $266
Blue Chip Growth(1,2) 1.61% .85% 2.46% $ 95 $276
Putnam Growth 1.61% .80% 2.41% $ 94 $271
Growth-Income 1.61% .56% 2.17% $ 92 $247
SunAmerica Balanced 1.61% .66% 2.27% $ 93 $257
Global Bond 1.61% .84% 2.45% $ 94 $275
Cash Management(3) 1.61% .53% 2.14% $ 91 $243
-------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
EXAMPLES:
TOTAL ANNUAL TOTAL ANNUAL TOTAL EXPENSES TOTAL EXPENSES
INSURANCE INVESTMENT TOTAL ANNUAL AT END OF AT END OF
CHARGES CHARGES CHARGES 1 YEAR 10 YEARS
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NATIONS ANNUITY TRUST
Nations Aggressive Growth(4) 1.61% 1.00% 2.61% $ 96 $291
Nations Managed Index(4) 1.61% .75% 2.36% $ 94 $266
Nations Value(4) 1.61% 1.00% 2.61% $ 96 $291
Nations International
Value(4,) (5) 1.61% 1.25% 2.86% $ 99 $315
Nations Marsico Focused
Equities(4) 1.61% 1.10% 2.71% $ 97 $300
Nations Marsico Growth &
Income(4) 1.61% 1.10% 2.71% $ 97 $300
Nations High Yield
Bond(4,) (5) 1.61% 1.00% 2.61% $ 96 $291
</TABLE>
---------------
(1) For this Portfolio, the adviser, SunAmerica Asset Management Corp., has
voluntarily agreed to waive fees or reimburse expenses, if necessary, to
keep operating expenses at or below an established maximum amount. All
waivers or reimbursements may be terminated at any time. For more detailed
information, see Fee Tables and Examples in the prospectus. Neither of these
portfolios relied on these waivers or reimbursement during this fiscal year.
Absent recoupment of expenses by adviser, the Total Annual Expenses during
the last fiscal year for the Emerging Markets portfolio would have been
1.77%.
(2) This portfolio was not available for sale during the fiscal year 2000. The
Total Annual Investment Charges are based on estimated amounts for the
current fiscal year.
(3)Formerly managed by SunAmerica Asset Management Corp.
(4) For these Portfolios, the investment adviser, Banc of America Advisors, Inc.
and other service providers have agreed to waive a portion of their fees
and/or reimburse expenses, including in some cases the 12b-1 distribution
and shareholder servicing fees of .25%, until April 30, 2001 to keep
operating expenses at or below an established maximum amount. All waivers or
reimbursements may be terminated at any time after that date. For more
detailed information, see Fee Tables and Examples in the prospectus.
(5) Total Annual Investment Charges include expense estimates for the current
fiscal year.
<PAGE> 49
If you elect the EstatePlus benefit (0.25%):
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
EXAMPLES:
TOTAL ANNUAL TOTAL EXPENSES TOTAL EXPENSES
TOTAL ANNUAL INVESTMENT TOTAL ANNUAL AT END OF AT END OF
INSURANCE CHARGES CHARGES CHARGES 1 YEAR 10 YEARS
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ANCHOR SERIES TRUST
Government and Quality
Bond 1.86% (1.61% + 0.25%) 0.66% 2.52% $ 95 $282
-------------------------------------------------------------------------------------------------------------------
SUNAMERICA SERIES TRUST
Emerging Markets(1) 1.86% (1.61% + 0.25%) 1.90% 3.76% $108 $397
Global Equities 1.86% (1.61% + 0.25%) 0.84% 2.70% $ 97 $299
International Growth
and Income 1.86% (1.61% + 0.25%) 1.21% 3.07% $101 $335
Aggressive Growth 1.86% (1.61% + 0.25%) 0.75% 2.61% $ 96 $291
Blue Chip Growth(1,2) 1.86% (1.61% + 0.25%) 0.85% 2.71% $ 97 $300
Putnam Growth 1.86% (1.61% + 0.25%) 0.80% 2.66% $ 97 $296
Growth-Income 1.86% (1.61% + 0.25%) 0.56% 2.42% $ 94 $272
SunAmerica Balanced 1.86% (1.61% + 0.25%) 0.66% 2.52% $ 95 $282
Global Bond 1.86% (1.61% + 0.25%) 0.84% 2.70% $ 97 $299
Cash Management(3) 1.86% (1.61% + 0.25%) 0.53% 2.39% $ 94 $269
-------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
EXAMPLES:
TOTAL ANNUAL TOTAL ANNUAL TOTAL EXPENSES TOTAL EXPENSES
INSURANCE INVESTMENT TOTAL ANNUAL AT END OF AT END OF
CHARGES CHARGES CHARGES 1 YEAR 10 YEARS
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NATIONS ANNUITY TRUST
Nations Aggressive
Growth(4) 1.86% (1.61% + 0.25%) 1.00% 2.86% $ 99 $315
Nations Managed
Index(4) 1.86% (1.61% + 0.25%) 0.75% 2.61% $ 96 $291
Nations Value(4) 1.86% (1.61% + 0.25%) 1.00% 2.86% $ 99 $315
Nations International
Value(4,) (5) 1.86% (1.61% + 0.25%) 1.25% 3.11% $101 $339
Nations Marsico Focused
Equities(4) 1.86% (1.61% + 0.25%) 1.10% 2.96% $100 $324
Nations Marsico Growth
& Income(4) 1.86% (1.61% + 0.25%) 1.10% 2.96% $100 $324
Nations High Yield
Bond(4,) (5) 1.86% (1.61% + 0.25%) 1.00% 2.86% $ 99 $315
</TABLE>
---------------
(1) For this Portfolio, the adviser, SunAmerica Asset Management Corp., has
voluntarily agreed to waive fees or reimburse expenses, if necessary, to
keep operating expenses at or below an established maximum amount. All
waivers or reimbursements may be terminated at any time. For more detailed
information, see Fee Tables and Examples in the prospectus. Neither of these
portfolios relied on these waivers or reimbursements during the fiscal year.
Absent recoupment of expenses by the adviser, the Total Annual Expenses
during the last fiscal year for the Emerging Markets portfolio would have
been 1.77% during this fiscal year.
(2) This portfolio was not available for sale for the fiscal year 2000. The
Total Annual Investment Charges are based on estimated amounts for the
current fiscal year.
(3)Formerly managed by SunAmerica Asset Management Corp.
(4) For these Portfolios, the investment adviser, Banc of America Advisors, Inc.
and other service providers have agreed to waive a portion of their fees
and/or reimburse expenses, including in some cases the 12b-1 distribution
and shareholder servicing fees of .25%, until April 30, 2001 to keep
operating expenses at or below an established maximum amount. All waivers or
reimbursements may be terminated at any time after that date. For more
detailed information, see Fee Tables and Examples in the prospectus.
(5) Total Annual Investment Charges include expense estimates for the current
fiscal year.
<PAGE> 50
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6. TAXES
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Unlike taxable investments where earnings are taxed in the year they are earned,
taxes on amounts earned in a non-qualified contract are deferred until they are
withdrawn. In a qualified contract, all amounts are taxable when they are
withdrawn.
When you begin taking distributions or withdrawals from your contract, earnings
are considered to be taken out first and will be taxed at your ordinary income
rate. You may be subject to a 10% federal tax penalty for distributions or
withdrawals before age 59 1/2.
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7. ACCESS TO YOUR MONEY
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During the first year, you may withdraw free of a withdrawal charge an amount
that is equal to the penalty-free earnings in your contract as of the date you
make the withdrawal or, if you participate in the systematic withdrawal program,
you may withdraw 10% of your total invested amount less any withdrawals made
during the year. The penalty-free earnings amount is calculated by taking the
value of your contract on the day you make the withdrawal and subtracting your
total invested amount. After the first year, your maximum free withdrawal amount
is the greater of: (1) the penalty-free earnings or (2) 10% of your total
invested amount that has been invested for at least one year, less any
withdrawals made during the year. Withdrawals in excess of these limits will be
assessed a withdrawal charge.
If you withdraw your entire contract value, any previous free withdrawal would
be subject to a withdrawal charge applicable at the time of the full withdrawal.
After a purchase payment has been in the contract for seven years, there are no
withdrawal charges on that purchase payment.
A federal tax penalty may apply if you make withdrawals before age 59 1/2.
----------------------------------------------------------------
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8. PERFORMANCE
----------------------------------------------------------------
----------------------------------------------------------------
When you invest in the PolarisAmerica Variable Annuity, your money is actually
invested in the underlying portfolios of the Anchor Series Trust, the SunAmerica
Series Trust and/or the Nations Annuity Trust. The value of your annuity will
fluctuate depending upon the investment performance of the portfolio(s) you
choose.
The following chart shows total returns for each portfolio for the time periods
shown. These numbers reflect the insurance charges, the contract maintenance fee
and the investment charges. Withdrawal charges are not reflected in the chart.
Past performance is no guarantee of future results.
<TABLE>
<CAPTION>
--------------------------------------------------------------------
CALENDAR CALENDAR
TRUST YEAR 1999 YEAR 1998
--------------------------------------------------------------------
<S> <C> <C> <C>
STOCKS:
Global Equities Portfolio SST 28.87% 20.86%
Growth-Income Portfolio SST 28.03% 28.74%
Nations Aggressive Growth
Portfolio NAT -- --
Nations Managed Index
Portfolio NAT -- --
Nations Value Portfolio NAT -- --
Nations International Value
Portfolio NAT -- --
Nations Marsico Focused
Equities Portfolio NAT -- --
Nations Marsico Growth &
Income Portfolio NAT -- --
Emerging Markets Portfolio SST 74.55% (25.62)%
International Growth and
Income Portfolio SST 22.29% 9.03%
Putnam Growth Portfolio SST 27.69% 32.60%
Aggressive Growth Portfolio SST 81.80% 15.55%
Blue Chip Growth Portfolio SST -- --
--------------------------------------------------------------------
BALANCED:
SunAmerica Balanced
Portfolio SST 19.49% 22.67%
--------------------------------------------------------------------
BONDS:
Global Bond Portfolio SST (2.57)% 9.04%
Nations High Yield Bond
Portfolio NAT -- --
Government and Quality Bond
Portfolio AST (3.15)% 7.42%
--------------------------------------------------------------------
CASH:
Cash Management Portfolio SST 3.20% 3.51%
--------------------------------------------------------------------
</TABLE>
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9. DEATH BENEFIT
----------------------------------------------------------------
----------------------------------------------------------------
If you should die during the accumulation phase, your beneficiary will receive a
death benefit. You must select from the two death benefit options described
below at the time you purchase your contract. Once selected, your death benefit
may not be changed. You should discuss with your financial representative the
options available to you and which option is best for you.
OPTION 1 - PURCHASE PAYMENT ACCUMULATION OPTION:
The death benefit is the greater of:
(1) the contract value at the time we receive satisfactory proof of death; or
(2) total purchase payments less withdrawals (and any fees or charges applicable
to such withdrawals), compounded at a 4% annual growth rate until the date
of death (3% growth rate if 70 or older at the time of contract issue) plus
any purchase payments less withdrawals recorded
<PAGE> 51
after the date of death (and any fees or charges applicable to such
withdrawals); or
(3) the contract value on the seventh contract anniversary, plus any purchase
payments since the seventh anniversary and less any withdrawals (and any
fees or charges applicable to such withdrawals), all compounded at a 4%
annual growth rate until the date of death (3% if 70 or older at the time of
contract issue) plus any purchase payments less withdrawals recorded after
the date of death (and any fees or charges applicable to such withdrawals).
OPTION 2 - MAXIMUM ANNIVERSARY OPTION:
The death benefit is the greater of:
(1) the contract value at the time we receive satisfactory proof of death; or
(2) total purchase payments less any withdrawals (and any fees or charges
applicable to such withdrawals); or
(3) the maximum anniversary value on any contract anniversary prior to your 81st
birthday. The anniversary value equals the contract value on a contract
anniversary plus any purchase payments and less any withdrawals (and any
fees or charges applicable to such withdrawals) since that anniversary.
If you are age 90 or older at the time of death and selected the option 2
(Maximum Anniversary) death benefit, the death benefit will be equal to the
contract value at the time we receive satisfactory proof of death.
In addition, for a fee, you may elect the EstatePlus benefit, which can increase
your selected death benefit when payable. This benefit is not available if you
are age 81 or older at the time of contract issue. Further, this benefit will
terminate on the latest annuity date.
The EstatePlus benefit may not be available in your state or through the
broker-dealer with which your financial advisor is affiliated. See your
financial advisor for information regarding availability.
----------------------------------------------------------------
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10. OTHER INFORMATION
----------------------------------------------------------------
----------------------------------------------------------------
FREE LOOK: You may cancel your contract within ten days (or longer if required
by your state) by mailing it to our Annuity Service Center. Your contract will
be treated as void on the date we receive it and we will pay you an amount equal
to the value of your contract on the day we receive your request (unless
otherwise required by state law). The amount returned to you may be more or less
than the money you initially invested.
ASSET ALLOCATION REBALANCING PROGRAM: If elected by you, this program seeks to
keep your investment in line with your goals. We will maintain your specified
allocation mix in the variable portfolios and the 1-year fixed account option by
readjusting your money on a calendar quarter, semiannual or annual basis.
SYSTEMATIC WITHDRAWAL PROGRAM: If elected by you, this program allows you to
receive either monthly, quarterly, semiannual or annual checks during the
accumulation phase. Systematic withdrawals may also be electronically
transferred to your bank account. Of course, withdrawals may be taxable and a
10% federal tax penalty may apply if you are under age 59 1/2.
PRINCIPAL ADVANTAGE PROGRAM: If elected by you, this program allows you to
obtain growth potential without any market risk to your principal. We will
guarantee that the portion of your money allocated to the 1, 3, 5, 7 or 10-year
fixed account option will grow to equal your principal investment when it is
allocated in accordance with the program.
DOLLAR COST AVERAGING: If elected by you, this program allows you to invest
gradually in the variable portfolios from any of the variable portfolios or the
1-year fixed account option. You may also invest in the variable portfolios from
the 6-month or 1-year DCA fixed account options.
AUTOMATIC PAYMENT PLAN: You can add to your contract directly from your bank
account with as little as $20 per month.
CONFIRMATIONS AND QUARTERLY STATEMENTS: During the accumulation phase, you will
receive confirmation of transactions within your contract. Transactions made
pursuant to contractual or systematic agreements, such as deduction of the
annual maintenance fee and dollar cost averaging, may be confirmed quarterly.
Purchase payments received through the automatic payment plan or a salary
reduction arrangement, may also be confirmed quarterly. For all other
transactions, we send confirmations immediately.
During the accumulation and income phases, you will receive a statement of your
transactions over the past quarter and a summary of your account values.
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11. INQUIRIES
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If you have questions about your contract or need to make changes, call your
financial representative or contact us at:
Anchor National Life Insurance Company
Annuity Service Center
P.O. Box 54299
Los Angeles, California 90054-0299
Telephone Number: (800) 445-SUN2
If money accompanies your correspondence, you should direct it to:
Anchor National Life Insurance Company
P.O. Box 100330
Pasadena, California 91189-0001
<PAGE> 52
[POLARISAMERICA LOGO]
PROSPECTUS
DECEMBER 29, 2000
<TABLE>
<S> <C> <C>
Please read this prospectus carefully FLEXIBLE PAYMENT DEFERRED ANNUITY CONTRACTS
before investing and keep it for issued by
future reference. It contains ANCHOR NATIONAL LIFE INSURANCE COMPANY
important information about the in connection with
PolarisAmerica Variable Annuity. VARIABLE SEPARATE ACCOUNT
The annuity has 25 investment choices -7 fixed account
To learn more about the annuity options and 18 Variable Portfolios listed below. The 7 fixed
offered by this prospectus, you can account options include specified periods of 1, 3, 5, 7 and
obtain a copy of the Statement of 10 years and DCA accounts for 6-month and 1-year periods.
Additional Information ("SAI") dated The 18 Variable Portfolios are part of the Anchor Series
December 29, 2000. The SAI has been Trust ("AST"), the SunAmerica Series Trust ("SST") or the
filed with the Securities and Nations Annuity Trust ("NAT").
Exchange Commission ("SEC") and is STOCKS:
incorporated by reference into this MANAGED BY ALLIANCE CAPITAL MANAGEMENT, L.P.
prospectus. The Table of Contents of - Global Equities Portfolio SST
the SAI appears on page 23 of this - Growth-Income Portfolio SST
prospectus. For a free copy of the MANAGED BY BANC OF AMERICA CAPITAL MANAGEMENT, INC.
SAI, call us at (800) 445-SUN2 or - Nations Aggressive Growth Portfolio NAT
write to us at our Annuity Service - Nations Managed Index Portfolio NAT
Center, P.O. Box 54299, Los Angeles, - Nations Value Portfolio NAT
California 90054-0299. MANAGED BY BRANDES INVESTMENT PARTNERS, L.P.
- Nations International Value Portfolio NAT
In addition, the SEC maintains a MANAGED BY MARSICO CAPITAL MANAGEMENT, LLC
website (http://www.sec.gov) that - Nations Marsico Focused Equities Portfolio NAT
contains the SAI, materials - Nations Marsico Growth & Income Portfolio NAT
incorporated by reference and other MANAGED BY PUTNAM INVESTMENT MANAGEMENT, INC.
information filed electronically with - Emerging Markets Portfolio SST
the SEC by Anchor National. - International Growth & Income Portfolio SST
- Putnam Growth Portfolio SST
ANNUITIES INVOLVE RISKS, INCLUDING MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP.
POSSIBLE LOSS OF PRINCIPAL, AND ARE - Aggressive Growth Portfolio SST
NOT A DEPOSIT OR OBLIGATION OF, OR - Blue Chip Growth Portfolio SST
GUARANTEED OR ENDORSED BY, ANY BANK.
THEY ARE NOT FEDERALLY INSURED BY THE BALANCED:
FEDERAL DEPOSIT INSURANCE MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP.
CORPORATION, THE FEDERAL RESERVE - SunAmerica Balanced Portfolio SST
BOARD OR ANY OTHER AGENCY.
BONDS:
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
- Global Bond Portfolio SST
MANAGED BY MACKAY SHIELDS LLC
- Nations High Yield Bond Portfolio NAT
MANAGED BY WELLINGTON MANAGEMENT COMPANY, LLP
- Government & Quality Bond Portfolio AST
CASH:
MANAGED BY BANC OF AMERICA CAPITAL MANAGEMENT, INC.
- Cash Management Portfolio SST
</TABLE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE> 53
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
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Anchor National's Annual Report on Form 10-K for the year ended December 31,
1999 and its quarterly report on Form 10-Q for the quarters ended March 31,
2000, June 30, 2000 and September 30, 2000 are incorporated herein by reference.
All documents or reports filed by Anchor National under Section 13(a), 13(c),
14, or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") after the effective date of this prospectus are also incorporated by
reference. Statements contained in this prospectus and subsequently filed
documents which are incorporated by reference or deemed to be incorporated by
reference are deemed to modify or supersede documents incorporated herein by
reference.
Anchor National files its Exchange Act documents and reports, including its
annual and quarterly reports on Form 10-K and Form 10-Q, electronically pursuant
to EDGAR under CIK No. 0000006342.
Anchor National is subject to the informational requirements of the Securities
and Exchange Act of 1934 (as amended). We file reports and other information
with the SEC to meet those requirements. You can inspect and copy this
information at SEC public facilities at the following locations:
WASHINGTON, DISTRICT OF COLUMBIA
450 Fifth Street, N.W., Room 1024
Washington, D.C. 20549
CHICAGO, ILLINOIS
500 West Madison Street
Chicago, IL 60661
NEW YORK, NEW YORK
7 World Trade Center, 13th Fl.
New York, NY 10048
To obtain copies by mail contact the Washington, D.C. location. After you pay
the fees as prescribed by the rules and regulations of the SEC, the required
documents are mailed.
Registration statements under the Securities Act of 1933, as amended, related to
the contracts offered by this prospectus are on file with the SEC. This
prospectus does not contain all of the information contained in the registration
statements and exhibits. For further information regarding the separate account,
Anchor National and its general account, the Variable Portfolios and the
contract, please refer to the registration statements and exhibits.
The SEC also maintains a website (http://www.sec.gov) that contains the SAI,
materials incorporated by reference and other information filed electronically
with the SEC by Anchor National.
Anchor National will provide without charge to each person to whom this
prospectus is delivered, upon written or oral request, a copy of the above
documents incorporated by reference. Requests for these documents should be
directed to Anchor National's Annuity Service Center, as follows:
Anchor National Life Insurance Company
Annuity Service Center
P.O. Box 54299
Los Angeles, California 90054-0299
Telephone Number: (800) 445-SUN2
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SECURITIES AND EXCHANGE COMMISSION POSITION ON INDEMNIFICATION
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Indemnification for liabilities arising under the Securities Act of 1933 (the
"Act") is provided to Anchor National's officers, directors and controlling
persons. The SEC has advised that it believes such indemnification is against
public policy under the Act and unenforceable. If a claim for indemnification
against such liabilities (other than for Anchor National's payment of expenses
incurred or paid by its directors, officers or controlling persons in the
successful defense of any legal action) is asserted by a director, officer or
controlling person of Anchor National in connection with the securities
registered under this prospectus, Anchor National will submit to a court with
jurisdiction to determine whether the indemnification is against public policy
under the Act. Anchor National will be governed by final judgment of the issue.
However, if in the opinion of Anchor National's counsel, this issue has been
determined by controlling precedent, Anchor National will not submit the issue
to a court for determination.
2
<PAGE> 54
<TABLE>
<S> <C> <C>
------------------------------------------------------------------
------------------------------------------------------------------
TABLE OF CONTENTS
------------------------------------------------------------------
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 2
SECURITIES AND EXCHANGE COMMISSION POSITION ON
INDEMNIFICATION........................................... 2
GLOSSARY.................................................... 3
FEE TABLES.................................................. 4
Owner Transaction Expenses............................ 4
Contract Maintenance Fee.............................. 4
Annual Separate Account Expenses...................... 4
Optional EstatePlus Fee............................... 4
Portfolio Expenses.................................... 4
EXAMPLES.................................................... 5
THE POLARISAMERICA VARIABLE ANNUITY......................... 7
PURCHASING A POLARISAMERICA VARIABLE ANNUITY................ 8
Allocation of Purchase Payments....................... 8
Accumulation Units.................................... 8
Free Look............................................. 9
INVESTMENT OPTIONS.......................................... 9
Variable Portfolios................................... 9
Anchor Series Trust................................... 9
SunAmerica Series Trust............................... 9
Nations Annuity Trust................................. 9
Fixed Account Options................................. 9
Market Value Adjustment ("MVA")....................... 10
Transfers During the Accumulation Phase............... 10
Dollar Cost Averaging................................. 11
Asset Allocation Rebalancing Program.................. 11
Principal Advantage Program........................... 12
Voting Rights......................................... 12
Substitution.......................................... 12
ACCESS TO YOUR MONEY........................................ 12
Systematic Withdrawal Program......................... 13
Nursing Home Waiver................................... 13
Minimum Contract Value................................ 13
DEATH BENEFIT............................................... 14
Purchase Payment Accumulation Option.................. 14
Maximum Anniversary Option............................ 14
EstatePlus............................................ 14
Spousal Continuation.................................. 15
EXPENSES.................................................... 16
Insurance Charges..................................... 16
Withdrawal Charges.................................... 16
Investment Charges.................................... 16
Contract Maintenance Fee.............................. 16
Transfer Fee.......................................... 17
EstatePlus Fee........................................ 17
Premium Tax........................................... 17
Income Taxes.......................................... 17
Reduction or Elimination of Charges and Expenses,
and Additional Amounts Credited....................... 17
INCOME OPTIONS.............................................. 17
Annuity Date.......................................... 17
Income Options........................................ 17
Fixed or Variable Income Payments..................... 18
Income Payments....................................... 18
Transfers During the Income Phase..................... 18
Deferment of Payments................................. 18
The Income Protector Feature.......................... 18
TAXES....................................................... 20
Annuity Contracts in General.......................... 20
Tax Treatment of Distributions - Non-Qualified
Contracts............................................. 20
Tax Treatment of Distributions - Qualified
Contracts............................................. 20
Minimum Distributions................................. 20
Diversification....................................... 21
PERFORMANCE................................................. 21
OTHER INFORMATION........................................... 21
Anchor National....................................... 21
The Separate Account.................................. 21
The General Account................................... 21
Distribution of the Contract.......................... 22
Administration........................................ 22
Legal Proceedings..................................... 22
Ownership............................................. 22
Custodian............................................. 22
Independent Accountants............................... 22
Registration Statement................................ 22
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION....
23
APPENDIX A -- CONDENSED FINANCIAL INFORMATION............... A-1
APPENDIX B -- MARKET VALUE ADJUSTMENT ("MVA")............... B-1
APPENDIX C -- DEATH BENEFITS FOLLOWING SPOUSAL
CONTINUATION................................... C-1
APPENDIX D -- PREMIUM TAXES................................. D-1
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GLOSSARY
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------------------------------------------------------------------
We have capitalized some of the technical terms used in this
prospectus. To help you understand these terms, we have defined
them in this glossary.
ACCUMULATION PHASE - The period during which you invest money in
your contract.
ACCUMULATION UNITS - A measurement we use to calculate the value
of the variable portion of your contract during the Accumulation
Phase.
ANNUITANT(S) - The person(s) on whose life (lives) we base income
payments.
ANNUITY DATE - The date on which income payments are to begin, as
selected by you.
ANNUITY UNITS - A measurement we use to calculate the amount of
income payments you receive from the variable portion of your
contract during the Income Phase.
BENEFICIARY - The person designated to receive any benefits under
the contract if you or the Annuitant dies.
COMPANY - Anchor National Life Insurance Company, We, Us, the
insurer which issues this contract.
INCOME PHASE - The period during which we make income payments to
you.
IRS - The Internal Revenue Service.
NON-QUALIFIED (CONTRACT) - A contract purchased with after-tax
dollars. In general, these contracts are not under any pension
plan, specially sponsored program or individual retirement account
("IRA").
PURCHASE PAYMENTS - The money you give us to buy the contract, as
well as any additional money you give us to invest in the contract
after you own it.
QUALIFIED (CONTRACT) - A contract purchased with pretax dollars.
These contracts are generally purchased under a pension plan,
specially sponsored program or IRA.
TRUSTS - Refers to the Anchor Series Trust, the SunAmerica Series
Trust and the Nations Annuity Trust collectively.
VARIABLE PORTFOLIO(S) - The variable investment options available
under the contract. Each Variable Portfolio has its own investment
objective and is invested in the underlying investments of the
Anchor Series Trust, SunAmerica Series Trust or the Nations
Annuity Trust.
</TABLE>
ALL FINANCIAL REPRESENTATIVES OR AGENTS THAT SELL THE CONTRACTS OFFERED BY THIS
PROSPECTUS ARE REQUIRED TO DELIVER A PROSPECTUS.
3
<PAGE> 55
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FEE TABLES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
OWNER TRANSACTION EXPENSES
WITHDRAWAL CHARGE (AS A PERCENTAGE OF EACH PURCHASE PAYMENT)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
YEARS:.......................... 1 2 3 4 5 6 7 8
........................ 7% 6% 5% 4% 3% 2% 1% 0%
</TABLE>
<TABLE>
<S> <C>
TRANSFER FEE.......... No charge for first 15 transfers each
contract year; thereafter, fee is $25
($10 in Pennsylvania and Texas) per
transfer
</TABLE>
CONTRACT MAINTENANCE FEE*
$35 ($30 in North Dakota)
*Waived if contract value is $50,000 or more
ANNUAL SEPARATE ACCOUNT EXPENSES
(AS A PERCENTAGE OF AVERAGE ACCOUNT VALUE)
<TABLE>
<S> <C>
Mortality and Expense Risk Charge................ 1.37%
Distribution Expense Charge...................... 0.15%
-----
TOTAL SEPARATE ACCOUNT EXPENSES 1.52%
=====
</TABLE>
OPTIONAL ESTATEPLUS FEE
(ESTATEPLUS IS AN OPTIONAL ENHANCED DEATH
BENEFIT AND, IF ELECTED, THE FEE IS DEDUCTED DAILY
FROM YOUR CONTRACT VALUE)
<TABLE>
<S> <C>
Fee as a percentage of your daily net asset
value.......................................... 0.25%
-----
</TABLE>
PORTFOLIO EXPENSES
ANCHOR SERIES TRUST
(AS A PERCENTAGE OF AVERAGE NET ASSETS FOR THE TRUST'S FISCAL YEAR ENDED
DECEMBER 31, 1999)
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEE EXPENSES EXPENSES
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Government and Quality Bond .60% .06% .66%
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
</TABLE>
SUNAMERICA SERIES TRUST
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER REIMBURSEMENT OR WAIVER OF EXPENSES
FOR THE TRUST'S FISCAL YEAR ENDED JANUARY 31, 2000)
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEE EXPENSES EXPENSES
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Emerging Markets(1) 1.25% .65% 1.90%
-------------------------------------------------------------------------------------
Global Equities .72% .12% .84%
-------------------------------------------------------------------------------------
International Growth and Income .98% .23% 1.21%
-------------------------------------------------------------------------------------
Aggressive Growth .70% .05% .75%
-------------------------------------------------------------------------------------
Blue Chip Growth(1,2) .70% .15% .85%
-------------------------------------------------------------------------------------
Putnam Growth .76% .04% .80%
-------------------------------------------------------------------------------------
Growth-Income .53% .03% .56%
-------------------------------------------------------------------------------------
SunAmerica Balanced .62% .04% .66%
-------------------------------------------------------------------------------------
Global Bond .69% .15% .84%
-------------------------------------------------------------------------------------
Cash Management(3) .49% .04% .53%
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
</TABLE>
(1)For this portfolio, the adviser, SunAmerica Asset Management Corp., has
voluntarily agreed to waive fees or reimburse expenses, if necessary, to keep
operating expenses at or below established maximum amounts. All waivers or
reimbursements may be terminated at any time. Neither of these portfolios
relied upon these waivers or reimbursements during this fiscal year. Absent
recoupment of expenses by the adviser, the Total Annual Expenses during the
last fiscal year for the: Emerging Markets portfolio would have been (1.77%).
(2) This portfolio was not available for sale during the fiscal year 2000. The
Total Annual Investment Charges are based on estimated amounts for the
current fiscal year.
(3) Formerly managed by SunAmerica Asset Management Corp.
NATIONS ANNUITY TRUST
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER REIMBURSEMENT OR WAIVER OF EXPENSES
FOR THE TRUST'S FISCAL YEAR ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
12B-1 DISTRIBUTION AND
MANAGEMENT SHAREHOLDER OTHER TOTAL ANNUAL
PORTFOLIO FEE SERVICING FEES* EXPENSES EXPENSES
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nations Aggressive Growth .09% 0 .91% 1.00%
-----------------------------------------------------------------------------------------------------------------
Nations Managed Index .08% .25% .42% .75%
-----------------------------------------------------------------------------------------------------------------
Nations Value .22% 0 .78% 1.00%
-----------------------------------------------------------------------------------------------------------------
Nations International Value(4) .72% 0 .53% 1.25%
-----------------------------------------------------------------------------------------------------------------
Nations Marsico Focused Equities .72% 0 .38% 1.10%
-----------------------------------------------------------------------------------------------------------------
Nations Marsico Growth & Income .69% 0 .41% 1.10%
-----------------------------------------------------------------------------------------------------------------
Nations High Yield Bond(4) .51% 0 .49% 1.00%
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
</TABLE>
* Each Nations Annuity Portfolio is subject to fees up to 0.25% of its average
daily net assets pursuant to a 12b-1 distribution and shareholder servicing
plan. Currently, all 12b-1 distribution and shareholder servicing fees are
being waived by each Nations Portfolio, excluding Nations Managed Index.
Expenses you would incur absent these and other waivers are discussed in
footnote 4 to this Fee Table on page 7.
(4) Other expenses are based on estimates for the current fiscal year.
THE ABOVE PORTFOLIO EXPENSES WERE PROVIDED BY THE TRUSTS. WE HAVE NOT
INDEPENDENTLY VERIFIED THE ACCURACY OF THE INFORMATION.
4
<PAGE> 56
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EXAMPLES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
You will pay the following expenses on a $1,000 investment in each Variable
Portfolio, assuming a 5% annual return on assets, Portfolio Expenses after
waiver, reimbursement or recoupment, if applicable and:
(a) you surrender the contract at the end of the stated time period.
(b) you elect the optional EstatePlus benefit and you surrender the
contract at the end of the stated period.
(c) you do not surrender the contract.*
(d) you elect optional EstatePlus benefit and you do not surrender the
contract.
<TABLE>
<CAPTION>
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Government and Quality Bond (a) $ 93 (a) $120 (a) $150 (a) $257
(b) $ 95 (b) $127 (b) $162 (b) $282
(c) $ 23 (c) $ 70 (c) $120 (c) $257
(d) $ 25 (d) $ 77 (d) $132 (d) $282
-----------------------------------------------------------------------------------------------------------
Emerging Markets (a) $105 (a) $157 (a) $211 (a) $375
(b) $108 (b) $164 (b) $223 (b) $397
(c) $ 35 (c) $107 (c) $181 (c) $375
(d) $ 38 (d) $114 (d) $193 (d) $397
-----------------------------------------------------------------------------------------------------------
Global Equities (a) $ 94 (a) $125 (a) $159 (a) $275
(b) $ 97 (b) $133 (b) $171 (b) $299
(c) $ 24 (c) $ 75 (c) $129 (c) $275
(d) $ 27 (d) $ 83 (d) $141 (d) $299
-----------------------------------------------------------------------------------------------------------
International Growth and Income (a) $ 98 (a) $136 (a) $177 (a) $311
(b) $101 (b) $144 (b) $190 (b) $335
(c) $ 28 (c) $ 86 (c) $147 (c) $311
(d) $ 31 (d) $ 94 (d) $160 (d) $335
-----------------------------------------------------------------------------------------------------------
Aggressive Growth (a) $ 94 (a) $123 (a) $154 (a) $266
(b) $116 (b) $130 (b) $167 (b) $291
(c) $ 24 (c) $ 73 (c) $124 (c) $266
(d) $ 26 (d) $ 80 (d) $137 (d) $291
-----------------------------------------------------------------------------------------------------------
Blue Chip Growth(1) (a) $ 95 (a) $126 (a) $159 (a) $276
(b) $ 97 (b) $133 (b) $172 (b) $300
(c) $ 25 (c) $ 76 (c) $129 (c) $276
(d) $ 27 (d) $ 83 (d) $142 (d) $300
-----------------------------------------------------------------------------------------------------------
Putnam Growth (a) $ 94 (a) $124 (a) $157 (a) $271
(b) $ 97 (b) $132 (b) $169 (b) $296
(c) $ 24 (c) $ 74 (c) $127 (c) $271
(d) $ 27 (d) $ 82 (d) $139 (d) $296
-----------------------------------------------------------------------------------------------------------
Growth-Income (a) $ 92 (a) $117 (a) $145 (a) $247
(b) $ 94 (b) $124 (b) $157 (b) $272
(c) $ 22 (c) $ 67 (c) $115 (c) $247
(d) $ 24 (d) $ 74 (d) $127 (d) $272
-----------------------------------------------------------------------------------------------------------
SunAmerica Balanced (a) $ 93 (a) $120 (a) $150 (a) $257
(b) $ 95 (b) $127 (b) $162 (b) $282
(c) $ 23 (c) $ 70 (c) $120 (c) $257
(d) $ 25 (d) $ 77 (d) $132 (d) $282
-----------------------------------------------------------------------------------------------------------
Global Bond (a) $ 94 (a) $125 (a) $159 (a) $275
(b) $ 97 (b) $133 (b) $171 (b) $299
(c) $ 24 (c) $ 75 (c) $129 (c) $275
(d) $ 27 (d) $ 83 (d) $141 (d) $299
-----------------------------------------------------------------------------------------------------------
Cash Management (a) $ 91 (a) $116 (a) $143 (a) $243
(b) $ 94 (b) $124 (b) $156 (b) $269
(c) $ 21 (c) $ 66 (c) $113 (c) $243
(d) $ 24 (d) $ 74 (d) $126 (d) $269
-----------------------------------------------------------------------------------------------------------
Nations Aggressive Growth(2) (a) $ 96 (a) $130 (a) $167 (a) $291
(b) $ 99 (b) $138 (b) $179 (b) $315
(c) $ 26 (c) $ 80 (c) $137 (c) $291
(d) $ 29 (d) $ 88 (d) $149 (d) $315
-----------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 57
<TABLE>
<CAPTION>
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nations Managed Index(2) (a) $ 94 (a) $123 (a) $154 (a) $266
(b) $116 (b) $130 (b) $167 (b) $291
(c) $ 24 (c) $ 73 (c) $124 (c) $266
(d) $ 26 (d) $ 80 (d) $137 (d) $291
-----------------------------------------------------------------------------------------------------------
Nations Value(2) (a) $ 96 (a) $130 (a) $167 (a) $291
(b) $119 (b) $138 (b) $179 (b) $315
(c) $ 26 (c) $ 80 (c) $137 (c) $291
(d) $ 29 (d) $ 88 (d) $149 (d) $315
-----------------------------------------------------------------------------------------------------------
Nations International Value(2) (a) $ 99 (a) $138 (a) $179 (a) $315
(b) $121 (b) $145 (b) $191 (b) $339
(c) $ 29 (c) $ 88 (c) $149 (c) $315
(d) $ 31 (d) $ 95 (d) $161 (d) $339
-----------------------------------------------------------------------------------------------------------
Nations Marsico Focused Equities(2) (a) $ 97 (a) $133 (a) $172 (a) $300
(b) $120 (b) $141 (b) $184 (b) $324
(c) $ 27 (c) $ 83 (c) $142 (c) $300
(d) $ 30 (d) $ 91 (d) $154 (d) $324
-----------------------------------------------------------------------------------------------------------
Nations Marsico Growth & Income(2) (a) $ 97 (a) $133 (a) $172 (a) $300
(b) $120 (b) $141 (b) $184 (b) $324
(c) $ 27 (c) $ 83 (c) $142 (c) $300
(d) $ 30 (d) $ 91 (d) $154 (d) $324
-----------------------------------------------------------------------------------------------------------
Nations High Yield Bond(2) (a) $ 96 (a) $130 (a) $167 (a) $291
(b) $119 (b) $138 (b) $179 (b) $315
(c) $ 26 (c) $ 80 (c) $137 (c) $291
(d) $ 29 (d) $ 88 (d) $149 (d) $315
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
</TABLE>
* We do not currently charge a surrender charge upon annuitization unless the
contract is annuitized using the Income Protector feature. We assess the
applicable surrender charge upon annuitization under the Income Protector
feature assuming a full surrender of your contract.
---------------
(1)
This portfolio was not available for sale during fiscal year 2000. The Total
Annual Investment Charges are based on estimated amounts for the current
fiscal year.
(2)
Other expenses are based on estimates for the current fiscal year
6
<PAGE> 58
EXPLANATION OF FEE TABLES AND EXAMPLES
1. The purpose of the Fee Tables is to show you the various expenses you would
incur directly and indirectly by investing in the contract. The tables
represent both fees at the separate account (contract) level, as well as
portfolio company investment management fees. Additional information on the
portfolio company fees can be found in the Trust prospectus located behind
this prospectus.
2. For certain SunAmerica Series Trust Variable Portfolios, the adviser,
SunAmerica Asset Management Corp., has voluntarily agreed to waive fees or
reimburse certain expenses, if necessary, to keep annual operating expenses
at or below the lesser of the maximum allowed by any applicable state
expense limitations or the following percentages of each Variable
Portfolio's average net assets: Blue Chip Growth (.85%); and Emerging
Markets (1.90%). The adviser also may voluntarily waive or reimburse
additional amounts to increase a Variable Portfolio's investment return. All
waivers and/or reimbursements may be terminated at any time. Furthermore,
the adviser may recoup any waivers or reimbursements within two years after
such waivers or reimbursements are granted, provided that the Variable
Portfolio is able to make such payment and remains in compliance with the
foregoing expense limitations.
3. Each Nations Annuity Trust Portfolio is subject to fees up to 0.25% of its
average daily net assets pursuant to a 12b-1 distribution and shareholder
servicing plan. The 12b-1 distribution and shareholder servicing plan
provides that a Portfolio may pay banks, broker/dealers, insurance
companies, or other financial institutions that have entered into sales
support agreements with Stephens Inc., the distributor of the Portfolio, or
shareholder servicing agreement with the Portfolio for certain expenses that
are incurred in connection with sales support and shareholder services.
Currently, all 12b-1 distribution and shareholder servicing fees are being
waived by each Nations Portfolio, excluding Nations Managed Index.
4. The investment adviser and other service providers to these Nations Annuity
Trust Portfolios have agreed to waive a portion of their fees and/or
reimburse expenses, including in some cases the 12b-1 distribution and
shareholder servicing plan fees of .25%, until April 30, 2001 in order to
maintain total Portfolio operating expenses at the levels shown. There is no
assurance that these waivers and/or reimbursements will continue after this
date. Absent these waivers and/or reimbursements total Portfolio operating
expenses would be: Nations Aggressive Growth (1.81%); Nations Managed Index
(1.07%); Nations Value (1.68%); Nations International Value (1.68%); Nations
Marsico Focused Equities (1.38%); Nations Marsico Growth & Income (1.41%);
and Nations High Yield Bond (1.29%).
5. The Examples assume that no transfer fees were imposed. Although premium
taxes may apply in certain states, they are not reflected in the Examples.
6. THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
THE HISTORICAL ACCUMULATION UNIT VALUES ARE CONTAINED IN APPENDIX A -- CONDENSED
FINANCIAL INFORMATION.
----------------------------------------------------------------
----------------------------------------------------------------
THE POLARISAMERICA VARIABLE ANNUITY
----------------------------------------------------------------
----------------------------------------------------------------
An annuity is a contract between you and an insurance company. You are the owner
of the contract. The contract provides three main benefits:
- Tax Deferral: This means that you do not pay taxes on your earnings from
the annuity until you withdraw them.
- Death Benefit: If you die during the Accumulation Phase, the insurance
company pays a death benefit to your Beneficiary.
- Guaranteed Income: If elected, you receive a stream of income for your
lifetime, or another available period you select.
Tax-qualified retirement plans (e.g., IRAs, 401(k) or 403(b) plans) defer
payment of taxes on earnings until withdrawal. If you are considering funding a
tax-qualified retirement plan with an annuity, you should know that an annuity
does not provide any additional tax deferral treatment of earnings beyond the
treatment provided by the tax-qualified retirement plan itself. However,
annuities do provide other features and benefits which may be valuable to you.
You should fully discuss this decision with your financial representative.
This annuity was developed to help you contribute to your retirement savings.
This annuity works in two stages, the Accumulation Phase and the Income Phase.
Your contract is in the Accumulation Phase during the period when you make
payments into the contract. The Income Phase begins when you request us to start
making income payments to you out of the money accumulated in your contract.
The contract is called a "variable" annuity because it allows you to invest in
Variable Portfolios which like mutual funds, have different investment
objectives and performance which varies. You can gain or lose money if you
invest in these Variable Portfolios. The amount of money you accumulate in your
contract depends on the performance of the Variable Portfolios in which you
invest. This contract currently offers 18 Variable Portfolios.
The contract also offers several fixed account options for varying time periods.
Fixed account options earn interest at a rate set and guaranteed by Anchor
National. If you allocate
7
<PAGE> 59
money to the fixed account options, the amount of money that accumulates in the
contract depends on the total interest credited to the particular fixed account
option(s) in which you invest.
For more information on investment options available under this contract SEE
INVESTMENT OPTIONS ON PAGE 9.
This annuity is designed to assist in contributing to retirement savings of
investors whose personal circumstances allow for a long-term investment time
horizon. As a function of the Internal Revenue Code ("IRC"), you may be assessed
a 10% federal tax penalty on any withdrawal made prior to your reaching age
59 1/2. Additionally, this contract provides that you will be charged a
withdrawal charge on each purchase payment withdrawn if that purchase payment
has not been invested in this contract for at least 7 years. Because of these
potential penalties, you should fully discuss all of the benefits and risks of
this contract with your financial representative prior to purchase.
Anchor National Life Insurance Company (Anchor National, The Company, Us, We)
issues the PolarisAmerica Variable Annuity. When you purchase a PolarisAmerica
Variable Annuity, a contract exists between you and Anchor National. The Company
is a stock life insurance company organized under the laws of the state of
Arizona. Its principal place of business is 1 SunAmerica Center, Los Angeles,
California 90067. The Company conducts life insurance and annuity business in
the District of Columbia and all states except New York. Anchor National is an
indirect, wholly owned subsidiary of American International Group, Inc. ("AIG"),
a Delaware corporation.
----------------------------------------------------------------
----------------------------------------------------------------
PURCHASING A POLARISAMERICA VARIABLE ANNUITY
----------------------------------------------------------------
----------------------------------------------------------------
An initial Purchase Payment is the money you give us to buy a contract. Any
additional money you give us to invest in the contract after purchase is a
subsequent Purchase Payment.
The following chart shows the minimum initial and subsequent Purchase Payments
permitted under your contract. These amounts depend upon whether a contract is
Qualified or Non-qualified for tax purposes. FOR FURTHER EXPLANATION, SEE TAXES
ON PAGE 20.
<TABLE>
<CAPTION>
-----------------------------------------------------------
Minimum
Minimum Initial Subsequent
Purchase Payment Purchase Payment
-----------------------------------------------------------
<S> <C> <C>
Qualified $2,000 $250
-----------------------------------------------------------
Non-Qualified $5,000 $500
-----------------------------------------------------------
</TABLE>
Prior Company approval is required to accept Purchase Payments greater than
$1,500,000. The Company reserves the right to refuse any Purchase Payment
including one which would cause the contract value or total Purchase Payments to
exceed $1,500,000 at the time of the Purchase Payment. Also, the optional
automatic payment plan allows you to make subsequent Purchase Payments of as
little as $20.00.
In general, we will not issue a Qualified contract to anyone who is age 70 1/2
or older, unless it is shown that the minimum distribution required by the IRS
is being made. In addition, we may not issue a contract to anyone age 91 or
older. You may not elect EstatePlus if you are age 81 or older at the time of
contract issue.
ALLOCATION OF PURCHASE PAYMENTS
We invest your Purchase Payments in the fixed and variable investment options
according to your instructions. If we receive a Purchase Payment without
allocation instructions, we will invest the money according to your last
allocation instructions. SEE INVESTMENT OPTIONS ON PAGE 9.
In order to issue your contract, we must receive your completed application,
Purchase Payment allocation instructions and any other required paperwork at our
principal place of business. We allocate your initial Purchase Payment within
two days of receiving it. If we do not have complete information necessary to
issue your contract, we will contact you. If we do not have the information
necessary to issue your contract within 5 business days we will:
- Send your money back to you, or;
- Ask your permission to keep your money until we get the information
necessary to issue the contract.
ACCUMULATION UNITS
When you allocate a Purchase Payment to the Variable Portfolios, we credit your
contract with Accumulation Units of the separate account. We base the number of
Accumulation Units you receive on the unit value of the Variable Portfolio as of
the day we receive your money if we receive it before 1 p.m. Pacific Standard
Time, or on the next business day's unit value if we receive your money after 1
p.m. Pacific Standard Time. The value of an Accumulation Unit goes up and down
based on the performance of the Variable Portfolios.
We calculate the value of an Accumulation Unit each day that the New York Stock
Exchange ("NYSE") is open as follows:
1. We determine the total value of money invested in a particular Variable
Portfolio;
2. We subtract from that amount all applicable contract charges; and
3. We divide this amount by the number of outstanding Accumulation Units.
We determine the number of Accumulation Units credited to your contract by
dividing the Purchase Payment and Payment Enhancement, if applicable, by the
Accumulation Unit value for the specific Variable Portfolio.
8
<PAGE> 60
EXAMPLE:
We receive a $25,000 Purchase Payment from you on Wednesday. You allocate
the money to the Global Bond Portfolio. We determine that the value of an
Accumulation Unit for the Global Bond Portfolio is $11.10 when the NYSE
closes on Wednesday. We then divide $25,000 by $11.10 and credit your
contract on Wednesday night with 2252.2523 Accumulation Units for the
Global Bond Portfolio.
Performance of the Variable Portfolios and expenses under your contract affect
Accumulation Unit values. These factors cause the value of your contract to go
up and down.
FREE LOOK
You may cancel your contract within ten days after receiving it (or longer if
required by state law). We call this a "free look." To cancel, you must mail the
contract along with your free look request to our Annuity Service Center at P.O.
Box 54299, Los Angeles, California 90054-0299.
If you decide to cancel your contract during the free look period, we will
refund to you the value of your contract on the day we receive your request.
Certain states require us to return your Purchase Payments upon a free look
request. Additionally, all contracts issued as an IRA require the full return of
Purchase Payments upon a free look. With respect to those contracts, we reserve
the right to put your money in the Cash Management Portfolio during the free
look period and will allocate your money according to your instructions at the
end of the applicable free look period. Currently, we do not put your money in
the Cash Management Portfolio during the free look period unless you allocate
your money to it. If your contract was issued in a state requiring return of
Purchase Payments or as an IRA and you cancel your contract during the free look
period, we return the greater of (1) your Purchase Payments; or (2) the value of
your contract.
----------------------------------------------------------------
----------------------------------------------------------------
INVESTMENT OPTIONS
----------------------------------------------------------------
----------------------------------------------------------------
VARIABLE PORTFOLIOS
The contract currently offers 18 Variable Portfolios. These Variable Portfolios
invest in shares of the Anchor Series Trust, the SunAmerica Series Trust and the
Nations Annuity Trust (the "Trusts"). Additional Variable Portfolios may be
available in the future. The Variable Portfolios operate similar to a mutual
fund but are only available through the purchase of certain insurance contracts.
SunAmerica Asset Management Corp., an indirect wholly owned subsidiary of AIG,
is the investment adviser to the Anchor Series Trust and the SunAmerica Series
Trust. Banc of America Advisors, Inc. (BAAI), a wholly-owned subsidiary of Bank
of America, which is owned by Bank of America Corporation, is the investment
adviser to the Nations Annuity Trust. The Trusts serve as the underlying
investment vehicles for other variable annuity contracts issued by Anchor
National, and/or other affiliated/unaffiliated insurance companies. Neither
Anchor National nor the Trusts believe that offering shares of the Trusts in
this manner disadvantages you. The adviser monitors the Trusts for potential
conflicts.
ANCHOR SERIES TRUST ("AST")
Wellington Management Company, LLP serves as subadviser to the Anchor Series
Trust Portfolio. Anchor Series Trust has investment portfolios in addition to
the one listed below, which are not available for investment under the contract.
SUNAMERICA SERIES TRUST ("SST")
Various subadvisers provide investment advice for the SunAmerica Series Trust
Portfolios. SunAmerica Series Trust has investment portfolios in addition to the
ten listed below, which are not available for investment under the contract.
NATIONS ANNUITY TRUST ("NAT")
Various subadvisers provide investment advice for the Nations Annuity Trust
Portfolios. Nations Annuity Trust has investment portfolios in addition to the
seven listed below, which are not available for investment under the contract.
The Variable Portfolios along with their respective subadvisers are listed
below:
STOCKS:
MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
- Global Equities Portfolio SST
- Growth Income Portfolio SST
MANAGED BY BANC OF AMERICA CAPITAL MANAGEMENT, INC.
- Nations Aggressive Growth Portfolio NAT
- Nations Managed Index Portfolio NAT
- Nations Value Portfolio NAT
MANAGED BY BRANDES INVESTMENT PARTNERS, L.P.
- Nations International Value Portfolio NAT
MANAGED BY MARSICO CAPITAL MANAGEMENT, LLC
- Nations Marsico Focused Equities Portfolio NAT
- Nations Marsico Growth & Income Portfolio NAT
MANAGED BY PUTNAM INVESTMENT MANAGEMENT, INC.
- Emerging Markets Portfolio SST
- International Growth & Income Portfolio SST
- Putnam Growth Portfolio SST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP.
- Aggressive Growth Portfolio SST
- Blue Chip Growth Portfolio SST
BALANCED:
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP.
- SunAmerica Balanced Portfolio SST
BONDS:
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
- Global Bond Portfolio SST
MANAGED BY MACKAY SHIELDS LLC
- Nations High Yield Bond Portfolio NAT
MANAGED BY WELLINGTON MANAGEMENT COMPANY, LLP
- Government & Quality Bond Portfolio AST
CASH:
MANAGED BY BANC OF AMERICA CAPITAL MANAGEMENT, INC.
- Cash Management Portfolio SST
YOU SHOULD READ THE ATTACHED PROSPECTUSES FOR THE TRUSTS CAREFULLY. THESE
PROSPECTUSES CONTAIN DETAILED INFORMATION ABOUT THE VARIABLE PORTFOLIOS,
INCLUDING EACH VARIABLE PORTFOLIO'S INVESTMENT OBJECTIVE AND RISK FACTORS.
FIXED ACCOUNT OPTIONS
The contract also offers seven fixed account options. Anchor National will
guarantee the interest rate earned on money you
9
<PAGE> 61
allocate to any of these fixed account options. We currently offer fixed account
options for periods of one, three, five, seven and ten years, which we call
guarantee periods. Additionally, we guarantee an interest rate for money
allocated to the 6-month DCA fixed account and/or the 1-year DCA fixed account
(the "DCA fixed accounts") which are available in conjunction with the Dollar
Cost Averaging Program. Please see the section on DOLLAR COST AVERAGING ON PAGE
11 for additional information about, including limitations on, and the
availability and operation of the DCA fixed accounts. The DCA fixed accounts are
only available for new Purchase Payments.
Each guarantee period may offer a different interest rate but will never be less
than an annual effective rate of 3%. Once established the rates for specified
payments do not change during the guarantee period. The guarantee period is that
period for which we credit the applicable rate (one, three, five, seven or ten
years).
There are three scenarios in which you may put money into the fixed account
options other than the DCA fixed account options. In each scenario your money
may be credited a different rate of interest as follows:
- Initial Rate: Rate credited to amounts allocated to the fixed account
when you purchase your contract.
- Current Rate: Rate credited to subsequent amounts allocated to the fixed
account.
- Renewal Rate: Rate credited to money transferred from a fixed account or
a Variable Portfolio into a fixed account and to money remaining in a
fixed account after expiration of a guarantee period.
Each of these rates may differ from one another. Once declared, the applicable
rate is guaranteed until the corresponding guarantee period expires.
When a guarantee period ends, you may leave your money in the same fixed
investment option. You may also reallocate your money to another fixed
investment option (other than the DCA fixed accounts) or to the Variable
Portfolios. If you want to reallocate your money to a different fixed account
option or a Variable Portfolio, you must contact us within 30 days after the end
of the current interest guarantee period and instruct us how to reallocate the
money. We do not contact you. If we do not hear from you, your money will remain
in the same fixed account option, where it will earn interest at the renewal
rate then in effect for the fixed account option.
The DCA fixed accounts also credit a fixed rate of interest. Interest is
credited to amounts allocated to the 6-month or 1-year DCA fixed account while
your investment is systematically transferred to the Variable Portfolios. The
rates applicable to the DCA fixed accounts may differ from each other and/or the
other fixed account options but will never be less than an annual effective rate
of 3%. See DOLLAR COST AVERAGING ON PAGE 11 for more information.
MARKET VALUE ADJUSTMENT ("MVA")
NOTE: THE FOLLOWING DISCUSSION APPLIES TO THE 3, 5, 7 AND 10-YEAR FIXED ACCOUNT
OPTIONS ONLY. THESE OPTIONS ARE NOT AVAILABLE IN ALL STATES. PLEASE CONTACT YOUR
FINANCIAL REPRESENTATIVE FOR MORE INFORMATION.
If you take money out of the multi-year fixed account options before the end of
the guarantee period, we make an adjustment to your contract. We refer to the
adjustment as a market value adjustment (the "MVA"). The MVA reflects any
difference in the interest rate environment between the time you place your
money in the fixed account option and the time when you withdraw or transfer
that money. This adjustment can increase or decrease your contract value. You
have 30 days after the end of each guarantee period to reallocate your funds
without incurring any MVA.
We calculate the MVA by doing a comparison between current rates and the rate
being credited to you in the fixed account option. For the current rate we use a
rate being offered by us for a guarantee period that is equal to the time
remaining in the guarantee period from which you seek withdrawal. If we are not
currently offering a guarantee period for that period of time, we determine an
applicable rate by using a formula to arrive at a number between the interest
rates currently offered for the two closest periods available.
Generally, if interest rates drop between the time you put your money into the
fixed account options and the time you take it out, we credit a positive
adjustment to your contract. Conversely, if interest rates increase during the
same period, we post a negative adjustment to your contract.
Where the MVA is negative, we first deduct the adjustment from any money
remaining in the fixed account option. If there is not enough money in the fixed
account option to meet the negative deduction, we deduct the remainder from your
withdrawal. Where the MVA is positive, we add the adjustment to your withdrawal
amount.
The multi-year MVA fixed accounts are not available to Washington state and
Maryland policyholders. In Oregon the 7 and 10 year fixed accounts are not
available.
Anchor National does not assess a MVA against withdrawals under the following
circumstances:
- If made within 30 days after the end of a guarantee period;
- If made to pay contract fees and charges;
- To pay a death benefit; and
- Upon annuitization, if occurring on the latest Annuity Date.
APPENDIX B shows how we calculate the MVA.
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase you may transfer funds between the Variable
Portfolios and/or the fixed account options. Funds already in your contract
cannot be transferred into the DCA fixed accounts. You must transfer at least
$100. If less than $100 will remain in any Variable Portfolio after a transfer,
that amount must be transferred as well.
You may request transfers of your account value between the Variable Portfolios
and/or the fixed account options in writing or by telephone. Additionally, you
may access your account and request transfers between Variable Portfolios and/or
the fixed account options through SunAmerica's website
(http://www.sunamerica.com). We currently allow 15 free transfers per contract
per year. We charge $25 ($10 in Pennsylvania and Texas) for each additional
transfer in any contract year. Transfers resulting from your participation in
the DCA program count against your 15 free transfers per
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<PAGE> 62
contract year. However, transfers resulting from your participation in the
automatic asset rebalancing program do not count against your 15 free transfers.
We accept transfer requests by telephone unless you tell us not to on your
contract application. Additionally, you may request transfers over the internet
unless you indicate you do not wish your account to be traded over the internet.
When receiving instructions over the telephone or the internet, we follow
appropriate procedures to provide reasonable assurance that the transactions
executed are genuine. Thus, we are not responsible for any claim, loss or
expense from any error resulting from instructions received over the telephone.
If we fail to follow our procedures, we may be liable for any losses due to
unauthorized or fraudulent instructions.
We may limit the number of transfers in any contract year or refuse any transfer
request for you or others invested in the contract if we believe that excessive
trading or a specific transfer request or group transfer requests may have a
detrimental effect on unit values or the share prices of the underlying Variable
Portfolios.
For information regarding transfers during the Income Phase, SEE INCOME OPTIONS
ON PAGE 17.
We reserve the right to modify, suspend, waive or terminate these transfer
provisions at any time.
DOLLAR COST AVERAGING
The Dollar Cost Averaging ("DCA") program allows you to invest gradually in the
Variable Portfolios. Under the program you systematically transfer a set dollar
amount or percentage of portfolio value from one Variable Portfolio or the
1-year fixed account option (source accounts) to any other Variable Portfolio.
Transfers may be monthly or quarterly and count against your 15 free transfers
per contract year. You may change the frequency at any time by notifying us in
writing. The minimum transfer amount under the DCA program is $100, regardless
of the source account.
We also offer the 6-month and 1-year DCA fixed accounts exclusively to
facilitate this program. The DCA fixed accounts only accept new Purchase
Payments. You cannot transfer money already in your contract into these options.
If you allocate new Purchase Payments into a DCA fixed account, we transfer all
your money allocated to that account into the Variable Portfolios over the
selected 6-month or 1-year period. You cannot change the option or the frequency
of transfers once selected.
If allocated to the 6-month DCA fixed account, we transfer your money over a
maximum of 6 monthly transfers. We base the actual number of transfers on the
total amount allocated to the account. For example, if you allocate $500 to the
6-month DCA fixed account, we transfer your money over a period of five months,
so that each payment complies with the $100 per transfer minimum.
We determine the amount of the transfers from the 1-year DCA fixed account based
on
- the total amount of money allocated to the account, and
- the frequency of transfers selected.
For example, let's say you allocate $1,000 to the 1-year DCA fixed account. You
select monthly transfers. We completely transfer all of your money to the
selected investment options over a period of ten months.
You may terminate your DCA program at any time. If money remains in the DCA
fixed accounts, we transfer the remaining money to the 1-year fixed account
option, unless we receive different instructions from you. Transfers resulting
from a termination of this program do not count towards your 15 free transfers.
The DCA program is designed to lessen the impact of market fluctuations on your
investment. However, we cannot ensure that you will make a profit. When you
elect the DCA program, you are continuously investing in securities regardless
of fluctuating price levels. You should consider your tolerance for investing
through periods of fluctuating price levels.
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want to gradually move $750 each quarter from the Cash
Management Portfolio to the Aggressive Growth Portfolio over six quarters.
You set up dollar cost averaging and purchase Accumulation Units at the
following values:
<TABLE>
<CAPTION>
---------------------------------------------
ACCUMULATION UNITS
QUARTER UNIT PURCHASED
---------------------------------------------
<S> <C> <C>
1 $ 7.50 100
2 $ 5.00 150
3 $10.00 75
4 $ 7.50 100
5 $ 5.00 150
6 $ 7.50 100
---------------------------------------------
</TABLE>
You paid an average price of only $6.67 per Accumulation Unit over six
quarters, while the average market price actually was $7.08. By investing
an equal amount of money each month, you automatically buy more
Accumulation Units when the market price is low and fewer Accumulation
Units when the market price is high. This example is for illustrative
purposes only.
ASSET ALLOCATION REBALANCING PROGRAM
Earnings in your contract may cause the percentage of your investment in each
investment option to differ from your original allocations. The Automatic Asset
Rebalancing Program addresses this situation. At your election, we periodically
rebalance your investments in the Variable Portfolios to return your allocations
to their original percentages. Asset rebalancing typically involves shifting a
portion of your money out of an investment option with a higher return into an
investment option with a lower return.
At your request, rebalancing occurs on a quarterly, semiannual or annual basis.
Transfers made as a result of rebalancing do not count against your 15 free
transfers for the contract year.
We reserve the right to modify, suspend or terminate this program at any time.
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<PAGE> 63
EXAMPLE:
Assume that you want your initial Purchase Payment split between two
Variable Portfolios. You want 50% in the Government and Quality Bond
Portfolio and 50% in the Putnam Growth Portfolio. Over the next calendar
quarter, the bond market does very well while the stock market performs
poorly. At the end of the calendar quarter, the Government and Quality Bond
Portfolio now represents 60% of your holdings because it has increased in
value and the Putnam Growth Portfolio represents 40% of your holdings. If
you had chosen quarterly rebalancing, on the last day of that quarter, we
would sell some of your units in the Government and Quality Bond Portfolio
to bring its holdings back to 50% and use the money to buy more units in
the Putnam Growth Portfolio to increase those holdings to 50%.
PRINCIPAL ADVANTAGE PROGRAM
The Principal Advantage Program allows you to invest in one or more Variable
Portfolios without putting your principal at direct risk. The program
accomplishes this by allocating your investment strategically between the fixed
account options and Variable Portfolios. You decide how much you want to invest
and approximately when you want a return of principal. We calculate how much of
your Purchase Payment to allocate to the particular fixed account option to
ensure that it grows to an amount equal to your total principal invested under
this program. We invest the rest of your principal in the Variable Portfolio(s)
of your choice.
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want to allocate a portion of your initial Purchase Payment
of $100,000 to the fixed account option. You want the amount allocated to
the fixed account option to grow to $100,000 in 7 years. If the 7-year
fixed account option is offering a 5% interest rate, we will allocate
$71,069 to the 7-year fixed account option to ensure that this amount will
grow to $100,000 at the end of the 7-year period. The remaining $28,931 may
be allocated among the Variable Portfolios, as determined by you, to
provide opportunity for greater growth.
VOTING RIGHTS
Anchor National is the legal owner of the Trusts' shares. However, when a
Variable Portfolio solicits proxies in conjunction with a vote of shareholders,
we must obtain your instructions on how to vote those shares. We vote all of the
shares we own in proportion to your instructions. This includes any shares we
own on our own behalf. Should we determine that we are no longer required to
comply with these rules, we will vote the shares in our own right.
SUBSTITUTION
If underlying Trust portfolios become unavailable for investment, we may be
required to substitute shares of another underlying Trust portfolio. We will
seek prior approval of the SEC and give you notice before substituting shares.
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ACCESS TO YOUR MONEY
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You can access money in your contract in two ways:
- by making a partial or total withdrawal, and/or;
- by receiving income payments during the Income Phase. SEE INCOME OPTIONS
ON PAGE 17.
Generally, we deduct a withdrawal charge applicable to any total or partial
withdrawal and a MVA if a partial withdrawal comes from the 3, 5, 7 or 10 year
fixed account options. If you withdraw your entire contract value, we also
deduct applicable premium taxes and a contract maintenance fee. SEE EXPENSES ON
PAGE 16.
Your contract provides for a free withdrawal amount each year. A free withdrawal
amount is the portion of your account that we allow you to take out each year
without being charged a surrender penalty. However, upon a future full surrender
at which time there are purchase payments still subject to surrender charges, we
will calculate the withdrawal charges as if your prior free withdrawals had not
been taken. We will use the withdrawal charge percentage applicable at the time
of the full surrender.
Purchase payments withdrawn, above and beyond the amount of your free withdrawal
amount, which have been invested for less than 7 years will result in your
paying a penalty in the form of a withdrawal charge. The amount of the charge
and how it applies are discussed more fully below. SEE EXPENSES ON PAGE 16. You
should consider, before purchasing this contract, the effect this charge will
have on your investment if you need to withdraw more money than the free
withdrawal amount. You should fully discuss this decision with your financial
representative.
To determine your free withdrawal amount and the amount if any, on which we
assess a withdrawal charge, we refer to two special terms. These are Penalty
Free Earnings and the Total Invested Amount.
The Penalty-Free Earnings portion of your contract is simply your account value
less your Total Invested Amount. The Total Invested Amount is the total of all
Purchase Payments you have made into the contract less portions of some prior
withdrawals you made. The portions of prior withdrawals that reduce your Total
Invested Amount are as follows:
- Withdrawals in excess of Penalty Free Earnings, that are free because the
Purchase Payment withdrawn has been invested for seven years or longer,
and
- Withdrawals on which you have previously paid a Withdrawal Charge, plus
the amount of the Withdrawal Charge.
When you make a withdrawal, we assume that it is taken from Penalty-Free
Earnings first, then from the Total Invested Amount on a first-in, first-out
basis. This means that you can also access your Purchase Payments which are no
longer subject to a withdrawal charge before those Purchase Payments which are
still subject to the withdrawal charge.
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<PAGE> 64
During your first contract year your free withdrawal amount is the greater of
(1) your penalty-free earnings; and (2) if you are participating in the
Systematic Withdrawal program, a total of 10% of your Total Invested Amount. If
you are a Washington resident, you may withdraw during the first contract year,
the greater of (1); (2); or (3) interest earnings from the amounts allocated to
the fixed account options, not previously withdrawn.
After the first contract year, you can take out the greater of the following
amounts each year (1) your penalty-free earnings and any portion of your Total
Invested Amount no longer subject to withdrawal charges; and (2) 10% of the
portion of your Total Invested Amount that has been in your contract for at
least one year. If you are a Washington resident, your maximum free withdrawal
amount, after the first contract year, is the greater of (1); (2); or (3)
interest earnings from amounts allocated to the fixed account options, not
previously withdrawn.
We calculate charges due on a total withdrawal on the day after we receive your
request and your contract. We return to you your contract value less any
applicable fees and charges.
The withdrawal charge percentage applicable is determined by the age of the
Purchase Payment being withdrawn. For purposes of calculating the withdrawal
charge in the event of a full surrender, the charge is calculated based on the
remaining Total Invested Amount still subject to a withdrawal charge. However,
any prior Free Withdrawal is not subtracted from the Total Invested Amount
remaining and is still subject to withdrawal charges.
For example, you make an initial Purchase Payment of $100,000. For purposes of
this example we will assume a 0% growth rate over the life of the contract, and
no subsequent Purchase Payments. In contract year 2, you take out your maximum
free withdrawal of $10,000. After that free withdrawal your contract value is
$90,000. In contract year 5 you request a full surrender of your contract. We
will apply the following calculation,
A-(B x C)=D, where:
A=Your contract value at the time of your request for surrender ($90,000)
B=The amount of your Total Invested Amount ($100,000)
C=The withdrawal charge percentage applicable to the age of each Purchase
Payment at the time of the full surrender (3%)[B x C=$3,000]
D=Your full surrender value ($87,000)
Under most circumstances, the partial withdrawal minimum is $1,000. We require
that the value left in any investment option be at least $100, after the
withdrawal. You must send a written withdrawal request. Unless you provide us
with different instructions, partial withdrawals will be made pro rata from each
Variable Portfolio and the fixed account option in which your contract is
invested.
Under certain Qualified plans, access to the money in your contract may be
restricted. Additionally, withdrawals made prior to age 59 1/2 may result in a
10% IRS penalty tax. SEE TAXES ON PAGE 20.
We may be required to suspend or postpone the payment of a withdrawal for any
period of time when: (1) the NYSE is closed (other than a customary weekend and
holiday closings); (2) trading with the NYSE is restricted; (3) an emergency
exists such that disposal of or determination of the value of shares of the
Variable Portfolios is not reasonably practicable; (4) the SEC, by order, so
permits for the protection of contract owners.
Additionally, we reserve the right to defer payments for a withdrawal from a
fixed account option. Such deferrals are limited to no longer than six months.
SYSTEMATIC WITHDRAWAL PROGRAM
During the Accumulation Phase, you may elect to receive periodic income payments
under the systematic withdrawal program. Under the program, you may choose to
take monthly, quarterly, semi-annual or annual payments from your contract.
Electronic transfer of these funds to your bank account is also available. The
minimum amount of each withdrawal is $100. If you are an Oregon resident, the
minimum withdrawal amount is $250 per withdrawal or an amount equal to your free
withdrawal amount, as described on page 10. There must be at least $500
remaining in your contract at all times. Withdrawals may be taxable and a 10%
IRS penalty tax may apply if you are under age 59 1/2. There is no additional
charge for participating in this program, although a withdrawal charge and/or
MVA may apply.
The program is not available to everyone. Please check with our Annuity Service
Center, which can provide the necessary enrollment forms. We reserve the right
to modify, suspend or terminate this program at any time.
A 10% federal tax penalty may apply if your make withdrawals before age 59 1/2.
NURSING HOME WAIVER
If you are confined to a nursing home for 60 days or longer, we may waive the
withdrawal charge and/or market value adjustment on certain withdrawals prior to
the Annuity Date (not available in Texas). The waiver applies only to
withdrawals made while you are in a nursing home or within 90 days after you
leave the nursing home. Your contract prohibits use of this waiver during the
first 90 days after you purchase your contract. In addition, the confinement
period for which you seek the waiver must begin after you purchase your
contract.
In order to use this waiver, you must submit with your withdrawal request the
following documents: (1) a doctor's note recommending admittance to a nursing
home; (2) an admittance form which shows the type of facility you entered; and
(3) a bill from the nursing home which shows that you met the 60 day confinement
requirement.
MINIMUM CONTRACT VALUE
Where permitted by state law, we may terminate your contract if both of the
following occur: (1) your contract is less than $500 as a result of withdrawals;
and (2) you have not made any Purchase Payments during the past three years. We
will provide you with sixty days written notice. At the end of the notice
period, we will distribute the contract's remaining value to you.
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<PAGE> 65
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DEATH BENEFIT
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If you die during the Accumulation Phase of your contract, we pay a death
benefit to your Beneficiary. At the time you purchase your contract, you must
select one of the two death benefits described below. Once selected, you can not
change your death benefit option. You should discuss the available options with
your financial representative to determine which option is best for you.
We do not pay the death benefit if you die after you switch to the Income Phase.
However, if you die during the Income Phase, your Beneficiary receives any
remaining guaranteed income payments in accordance with the income option you
selected. SEE INCOME OPTIONS ON PAGE 17.
You name your Beneficiary. You may change the Beneficiary at any time, unless
you previously made an irrevocable Beneficiary designation.
We pay the death benefit when we receive satisfactory proof of death. We
consider the following satisfactory proof of death:
1. a certified copy of the death certificate; or
2. a certified copy of a decree of a court of competent jurisdiction as to
the finding of death; or
3. a written statement by a medical doctor who attended the deceased at the
time of death; or
4. any other proof satisfactory to us.
We may require additional proof before we pay the death benefit.
The death benefit payment must begin immediately upon receipt of all necessary
documents. In any event, the death benefit must be paid within 5 years of the
date of death unless the Beneficiary elects to have it payable in the form of an
income option. If the Beneficiary elects an income option, it must be paid over
the Beneficiary's lifetime or for a period not extending beyond the
Beneficiary's life expectancy. Payments must begin within one year of your
death.
If the Beneficiary is the spouse of a deceased owner, he or she can elect to
continue the Contract at the then current value. If the Beneficiary/spouse
continues the contract, we do not pay a death benefit to him or her.
If a Beneficiary does not elect a specific form of pay out within 60 days of our
receipt of proof of death, we pay a lump sum death benefit to the Beneficiary.
OPTION 1 - PURCHASE PAYMENT ACCUMULATION OPTION
The death benefit is the greater of:
1. the contract value at the time we receive satisfactory proof of death;
or
2. total Purchase Payments less withdrawals (and any fees or charges
applicable to such withdrawals), compounded at a 4% annual growth rate
until the date of death (3% growth rate if age 70 or older at the time
of contract issue) plus any Purchase Payments less withdrawals recorded
after the date of death (and any fees or charges applicable to such
withdrawals); or
3. the contract value on the seventh contract anniversary, plus any
Purchase Payments and less any withdrawals (and any fees or charges
applicable to such withdrawals), since the seventh contract anniversary,
all compounded at a 4% annual growth rate until the date of death (3%
growth rate if age 70 or older at the time of contract issue) plus any
Purchase Payments less withdrawals recorded after the date of death (and
any fees or charges applicable to such withdrawals).
OPTION 2 - MAXIMUM ANNIVERSARY OPTION
The death benefit is the greater of:
1. the contract value at the time we receive satisfactory proof of death;
or
2. total Purchase Payments less any withdrawals (and any fees or charges
applicable to such withdrawals); or
3. the maximum anniversary value on any contract anniversary prior to your
81st birthday. The anniversary value equals the value of your contract
on a contract anniversary plus any Purchase Payments and less any
withdrawals (and any fees or charges applicable to such withdrawals),
since that contract anniversary.
If you are age 90 or older at the time of death and selected the Option 2 death
benefit, the death benefit will be equal to the contract value at the time we
receive satisfactory proof of death. Accordingly, you do not get the advantage
of option 2 if:
- you are age 81 or older at the time of contract issue, or
- you are age 90 or older at the time of your death.
ESTATEPLUS
EstatePlus is an optional benefit that, if selected, may increase your death
benefit amount.
The term "Net Purchase Payment" is used frequently in explaining the EstatePlus
benefit. We define Net Purchase Payments as Purchase Payments less an adjustment
for each withdrawal.
To calculate the adjustment amount for a withdrawal, you first determine the
percentage by which the contract value is reduced by the withdrawal, on the date
of the withdrawal. This percentage is calculated by dividing the amount of each
withdrawal (including fees and charges applicable to the withdrawal) by the
contract value immediately before taking that withdrawal. The percentage amount
is then multiplied by the amount of Net Purchase Payments immediately before the
withdrawal to get the adjustment amount. This amount is subtracted from the
amount of Net Purchase Payment(s) immediately before the withdrawal.
If you have not taken any withdrawals from your contract, Net Purchase Payments
equals total Purchase Payments into your contract.
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<PAGE> 66
The EstatePlus benefit may increase the death benefit amount. If you have
earnings in your contract at the time of death, we will add a percentage of
those earnings (the "EstatePlus Percentage"), subject to a maximum dollar amount
(the "Maximum EstatePlus Percentage"), to the death benefit payable. The
EstatePlus benefit, if any, is added to the death benefit payable under the
Purchase Payment Accumulation or Maximum Anniversary options. The contract year
of your death will determine the EstatePlus percentage and the Maximum
EstatePlus percentage.
The table below provides the details, if you are age 69 or younger at the time
we issue your contract:
<TABLE>
<CAPTION>
-------------------------------------------------------------
CONTRACT YEAR ESTATEPLUS MAXIMUM
OF DEATH PERCENTAGE ESTATEPLUS PERCENTAGE
-------------------------------------------------------------
<S> <C> <C>
Years 0-4 25% of earnings 40% of Net Purchase
Payments
-------------------------------------------------------------
Years 5-9 40% of earnings 65% of Net Purchase
Payments*
-------------------------------------------------------------
Years 10+ 50% of earnings 75% of Net Purchase
Payments*
-------------------------------------------------------------
</TABLE>
*Purchase Payments received after the 5(th) contract anniversary must remain in
the contract for at least 6 full months to be included as part of Net Purchase
Payments for the purpose of the Maximum EstatePlus calculation.
If you are between your 70th and 81st birthdays at the time we issue your
contract, the table below shows the available EstatePlus benefit:
<TABLE>
<S> <C> <C>
---------------------------------------------------------------
CONTRACT YEAR ESTATEPLUS MAXIMUM
OF DEATH PERCENTAGE ESTATEPLUS
PERCENTAGE
---------------------------------------------------------------
Years 0-10+ 25% of earnings 40% of Net
Purchase Payments*
---------------------------------------------------------------
</TABLE>
*Purchase Payments received after the 5(th) contract anniversary must remain in
the contract for at least 6 full months to be included as part of Net Purchase
Payments for the purpose of the Maximum EstatePlus calculation.
What is the Contract Year of Death?
Contract Year of Death is the number of full 12 month periods beginning with the
date your contract is issued and ending on the date of death.
What is the EstatePlus Percentage Amount?
We determine the amount of the EstatePlus benefit, based on a percentage of the
earnings in your contract at the time of your death. For the purpose of this
calculation, earnings equals contract value minus Net Purchase Payments as of
the date of death. If the earnings amount is negative, no EstatePlus amount will
be added.
What is the Maximum EstatePlus Amount?
The EstatePlus benefit is subject to a maximum dollar amount. The maximum
EstatePlus amount is equal to a percentage of your Net Purchase Payments.
You must elect EstatePlus at the time of contract application. Once elected, you
may not terminate or change this election.
We assess a .25% fee for EstatePlus. On a daily basis we deduct this annual
charge from the average daily ending value of the assets you have allocated to
the Variable Portfolios.
EstatePlus is not available if you are age 81 or older at the time we issue your
contract. Furthermore, a Continuing Spouse cannot benefit from EstatePlus if
he/she is age 81 or older on the Continuation Date. SEE SPOUSAL CONTINUATION
BELOW. The EstatePlus benefit is not available after the latest Annuity Date.
You may pay for the EstatePlus benefit and your beneficiary may never receive
the benefit if you live past the latest Annuity Date. SEE INCOME OPTIONS ON PAGE
17.
EstatePlus may not be available in your state or through the broker-dealer with
which your financial advisor is affiliated. See your financial advisor for
information regarding availability.
WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE ESTATEPLUS BENEFIT (IN
ITS ENTIRETY OR ANY COMPONENT AT ANY TIME) AT ANY TIME.
SPOUSAL CONTINUATION
If you are the original owner of the contract and the Beneficiary is your
spouse, your spouse may elect to continue the contract after your death. The
spouse becomes the new owner ("Continuing Spouse"). Generally, the contract and
its elected features, if any, remain the same. The Continuing Spouse is subject
to the same fees, charges and expenses applicable to the original owner of the
contract. A spousal continuation can only take place upon the death of the
original owner of the contract.
Upon a spouse's continuation of the contract, we will contribute to the contract
value an amount by which the death benefit that would have been paid to the
beneficiary upon the death of the original owner exceeds the contract value
("Continuation Contribution"), if any. We calculate the Continuation
Contribution as of the date of the original owner's death. We will add the
Continuation Contribution as of the date we receive both the Continuing Spouse's
written request to continue the contract and proof of death of the original
owner in a form satisfactory to us ("Continuation Date"). The Continuation
Contribution is not considered a Purchase Payment for the purposes of any other
calculations, except as explained in Appendix C. SEE APPENDIX C FOR
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<PAGE> 67
FURTHER EXPLANATION OF THE DEATH BENEFIT CALCULATIONS FOLLOWING A SPOUSAL
CONTINUATION.
To the extent that the Continuing Spouse invests in the Variable Portfolios or
MVA fixed accounts they will be subject to investment risk as was the original
owner.
Generally, the Continuing Spouse cannot change any contract provisions as the
new owner. However, on the Continuation Date, the Continuing Spouse may
terminate the original owner's election of EstatePlus. We will terminate
EstatePlus if the Continuing Spouse is age 81 or older on the Continuation Date.
If EstatePlus is discontinued or if the Continuing Spouse dies after the latest
Annuity Date, no EstatePlus benefit will be payable. The age of the Continuing
Spouse on the Continuation Date and on the date of the Continuing Spouse's death
will be used in determining any future death benefits under the Contract. SEE
APPENDIX C FOR A DISCUSSION OF THE DEATH BENEFIT CALCULATIONS AFTER A SPOUSAL
CONTINUATION.
WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE SPOUSAL CONTINUATION
PROVISION (IN ITS ENTIRETY OR ANY COMPONENT) AT ANY TIME.
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EXPENSES
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There are charges and expenses associated with your contract. These charges and
expenses reduce your investment return. We will not increase the contract
maintenance fee or the insurance and withdrawal charges under your contract.
However, the investment charges under your contract may increase or decrease.
Some states may require that we charge less than the amounts described below.
INSURANCE CHARGES
The amount of this charge is 1.52% annually, of the value of your contract
invested in the Variable Portfolios. We deduct the charge daily.
The insurance charge compensates us for the mortality and expense risks and the
costs of contract distribution assumed by Anchor National.
If these charges do not cover all of our expenses, we will pay the difference.
Likewise, if these charges exceed our expenses, we will keep the difference.
WITHDRAWAL CHARGES
The contract provides a free withdrawal amount every year. SEE ACCESS TO YOUR
MONEY ON PAGE 12. If you take money out in excess of the free withdrawal amount,
you may incur a withdrawal charge. You may also, incur a withdrawal charge upon
a full surrender.
We apply a withdrawal charge against each Purchase Payment you put into the
contract. After a Purchase Payment has been in the contract for 7 complete years
no withdrawal charge applies. The withdrawal charge equals a percentage of the
Purchase Payment you take out of the contract. The withdrawal charge percentage
declines each year a Purchase Payment is in the contract.
<TABLE>
<CAPTION>
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YEAR 1 2 3 4 5 6 7 8
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WITHDRAWAL
CHARGE 7% 6% 5% 4% 3% 2% 1% 0%
-----------------------------------------------------------------------------------------
</TABLE>
When calculating the withdrawal charge, we treat withdrawals as coming first
from the Purchase Payments that have been in your contract the longest. However,
for tax purposes, your withdrawals are considered earnings first, then Purchase
Payments.
Whenever possible, we deduct the withdrawal charge from the money remaining in
your contract. If you withdraw all of your contract value, we deduct any
applicable withdrawal charges from the amount withdrawn.
We will not assess a withdrawal charge for money withdrawn to pay a death
benefit or to pay contract fees or charges. We will not assess a withdrawal
charge when you switch to the Income Phase, except when you elect to receive
income payments using the Income Protector feature. If you elect to receive
income payments using the Income Protector feature, we assess the entire
withdrawal charge applicable to Purchase Payments remaining in your contract
when calculating your income benefit base. SEE INCOME OPTIONS ON PAGE 17.
Withdrawals made prior to age 59 1/2 may result in tax penalties. SEE TAXES ON
PAGE 20.
INVESTMENT CHARGES
Charges are deducted from your Variable Portfolios for the advisory and other
expenses of the Variable Portfolios. THE FEE TABLES LOCATED ON PAGE 4 illustrate
these charges and expenses. The shares of each Nations Portfolio are subject to
fees imposed under the distribution and shareholder servicing plan adopted by
the Nations Annuity Trust pursuant to Rule 12b-1 under the Investment Company
Act of 1940. Currently, the 12b-1 fees (0.25%) are being waived by each
Portfolio, excluding Nations Managed Index. For more detailed information on
these investment charges, refer to the prospectuses for the Trusts, enclosed or
attached.
CONTRACT MAINTENANCE FEE
During the Accumulation Phase, we subtract a contract maintenance fee from your
account once per year. This charge compensates us for the cost of contract
administration. We deduct the $35 contract maintenance fee ($30 in North Dakota)
from your account value on your contract anniversary. If you withdraw your
entire contract value, we deduct the fee from that withdrawal.
If your contract value is $50,000 or more on your contract anniversary date, we
will waive the charge. This waiver is subject to change without notice.
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<PAGE> 68
TRANSFER FEE
We currently permit 15 free transfers between investment options each contract
year. We charge you $25 for each additional transfer that contract year ($10 in
Pennsylvania and Texas). SEE INVESTMENT OPTIONS ON PAGE 9.
ESTATEPLUS FEE
Please see page 15 for more information on the EstatePlus fee.
PREMIUM TAX
Certain states charge the Company a tax on the premiums you pay into the
contract. We deduct from your contract these premium tax charges. Currently we
deduct the charge for premium taxes when you take a full withdrawal or begin the
Income Phase of the contract. In the future, we may assess this deduction at the
time you put Purchase Payment(s) into the contract or upon payment of a death
benefit.
APPENDIX D provides more information about premium taxes.
INCOME TAXES
We do not currently deduct income taxes from your contract. We reserve the right
to do so in the future.
REDUCTION OR ELIMINATION OF CHARGES AND EXPENSES, AND ADDITIONAL AMOUNTS
CREDITED
Sometimes sales of the contracts to groups of similarly situated individuals may
lower our administrative and/or sales expenses. We reserve the right to reduce
or waive certain charges and expenses when this type of sale occurs. In
addition, we may also credit additional interest to policies sold to such
groups. We determine which groups are eligible for such treatment. Some of the
criteria we evaluate to make a determination are: size of the group; amount of
expected Purchase Payments; relationship existing between us and prospective
purchaser; nature of the purchase; length of time a group of contracts is
expected to remain active; purpose of the purchase and whether that purpose
increases the likelihood that our expenses will be reduced; and/or any other
factors that we believe indicate that administrative and/or sales expenses may
be reduced.
Anchor National may make such a determination regarding sales to its employees,
its affiliates' employees and employees of currently contracted broker-dealers;
its registered representatives and immediate family members of all of those
described.
We reserve the right to change or modify any such determination or the treatment
applied to a particular group, at any time.
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INCOME OPTIONS
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ANNUITY DATE
During the Income Phase, we use the money accumulated in your contract to make
regular income payments to you. You may switch to the Income Phase any time
after your 2nd contract anniversary. You select the month and year you want
income payments to begin. The first day of that month is the Annuity Date. You
may change your Annuity Date, so long as you do so at least seven days before
the income payments are scheduled to begin. Once you begin receiving income
payments, you cannot change your income option. Except as indicated under Option
5 below, once you begin receiving income payments, you cannot otherwise access
your money through a withdrawal or surrender.
Income payments must begin on or before your 90th birthday or on your tenth
contract anniversary, whichever occurs later (latest Annuity Date). If you do
not choose an Annuity Date, your income payments will automatically begin on
this date. Certain states may require your income payments to start earlier.
If the Annuity Date is past your 85th birthday, your contract could lose its
status as an annuity under Federal tax laws. This may cause you to incur adverse
tax consequences.
In addition, most Qualified contracts require you to take minimum distributions
after you reach age 70 1/2. SEE TAXES ON PAGE 20.
INCOME OPTIONS
Currently, this Contract offers five income options. If you elect to receive
income payments but do not select an option, your income payments will be made
in accordance with option 4 for a period of 10 years. For income payments based
on joint lives, we pay according to option 3 for a period of 10 years.
We base our calculation of income payments on the life of the Annuitant and the
annuity rates set forth in your contract. As the contract owner, you may change
the Annuitant at any time prior to the Annuity Date. You must notify us if the
Annuitant dies before the Annuity Date and designate a new Annuitant.
OPTION 1 - LIFE INCOME ANNUITY
This option provides income payments for the life of the Annuitant. Income
payments stop when the Annuitant dies.
OPTION 2 - JOINT AND SURVIVOR LIFE ANNUITY
This option provides income payments for the life of the Annuitant and for the
life of another designated person. Upon the death of either person, we will
continue to make income payments during the lifetime of the survivor. Income
payments stop when the survivor dies.
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<PAGE> 69
OPTION 3 - JOINT AND SURVIVOR LIFE ANNUITY WITH 10 OR 20 YEARS GUARANTEED
This option is similar to option 2 above, with an additional guarantee of
payments for at least 10 years. If the Annuitant and the survivor die before all
of the guaranteed income payments have been made, the remaining payments are
made to the Beneficiary under your contract.
OPTION 4 - LIFE ANNUITY WITH 10 OR 20 YEARS GUARANTEED
This option is similar to option 1 above. In addition, this option provides a
guarantee that income payments will be made for at least 10 or 20 years. You
select the number of years. If the Annuitant dies before all guaranteed income
payments are made, the remaining income payments go to the Beneficiary under
your contract.
OPTION 5 - INCOME FOR A SPECIFIED PERIOD
This option provides income payments for a guaranteed period ranging from 5 to
30 years. If the Annuitant dies before all the guaranteed income payments are
made, the remaining income payments are made to the Beneficiary under your
contract. Additionally, if variable income payments are elected under this
option, you (or the Beneficiary under the contract if the Annuitant dies prior
to all guaranteed income payments being made) may redeem any remaining
guaranteed variable income payments after the Annuity Date. The amount available
upon such redemption would be the discounted present value of any remaining
guaranteed variable income payments. If provided for in your contract, any
applicable withdrawal charge will be deducted from the discounted value as if
you fully surrendered your contract.
The value of an Annuity Unit, regardless of the option chosen, takes into
account the Mortality and Expense Risk Charge. Since Option 5 does not contain
an element of mortality risk, no benefit is derived from this charge.
Please read the Statement of Additional Information ("SAI") for a more detailed
discussion of the income options.
FIXED OR VARIABLE INCOME PAYMENTS
You can choose income payments that are fixed, variable or both. If at the date
when income payments begin you are invested in the Variable Portfolios only,
your income payments will be variable. If your money is only in fixed accounts
at that time, your income payments will be fixed in amount. Further, if you are
invested in both fixed and variable investment options when income payments
begin, your payments will be fixed and variable. If income payments are fixed,
Anchor National guarantees the amount of each payment. If the income payments
are variable the amount is not guaranteed.
INCOME PAYMENTS
We make income payments on a monthly, quarterly, semiannual or annual basis. You
instruct us to send you a check or to have the payments directly deposited into
your bank account. If state law allows, we distribute annuities with a contract
value of $5,000 or less in a lump sum. Also, if the selected income option
results in income payments of less than $50 per payment, we may decrease the
frequency of payments, state law allowing.
If you are invested in the Variable Portfolios after the Annuity Date, your
income payments vary depending on four things:
- for life options, your age when payments begin, and;
- the value of your contract in the Variable Portfolios on the Annuity
Date, and;
- the 3.5% assumed investment rate used in the annuity table for the
contract, and;
- the performance of the Variable Portfolios in which you are invested
during the time you receive income payments.
If you are invested in both the fixed account options and the Variable
Portfolios after the Annuity Date, the allocation of funds between the fixed and
variable options also impacts the amount of your annuity payments.
TRANSFERS DURING THE INCOME PHASE
During the Income Phase, one transfer per month is permitted between the
Variable Portfolios. No other transfers are allowed during the Income Phase.
DEFERMENT OF PAYMENTS
We may defer making fixed payments for up to six months, or less if required by
law. Interest is credited to you during the deferral period.
THE INCOME PROTECTOR FEATURE
The Income Protector feature is a future "safety net" which offers you the
ability to receive a guaranteed fixed minimum retirement income when you switch
to the Income Phase. With the Income Protector feature you know the level of
minimum income that will be available to you upon annuitization, regardless of
fluctuating market conditions.
The Income Protector is a standard feature of your contract. There is no
additional charge associated with this feature. This feature may not be
available in your state. Check with your financial advisor regarding
availability.
We reserve the right to modify, suspend or terminate the Income Protector
feature at any time.
HOW WE DETERMINE THE AMOUNT OF YOUR MINIMUM GUARANTEED INCOME
We base the amount of minimum income available to you if you elect to receive
income payments using the Income Protector feature upon a calculation we call
the income benefit base.
The income benefit base is only a calculation. It does not represent a contract
value, nor does it guarantee performance of the Variable Portfolios in which you
invest.
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<PAGE> 70
Your income benefit base increases if you make subsequent Purchase Payments and
decreases if you withdraw money from your contract. The exact income benefit
base calculation is equal to (a) plus (b) minus (c) where:
(a) is equal to, for the first year of calculation, your initial Purchase
Payment, or for each subsequent year of calculation, the income benefit
base on the prior contract anniversary, and;
(b) is equal to the sum of all subsequent Purchase Payments made into the
contract since the last contract anniversary, and;
(c) is equal to all withdrawals and applicable fees and charges since the
last contract anniversary, in an amount proportionate to the amount by
which such withdrawals decreased your contract value.
ELECTING TO RECEIVE INCOME PAYMENTS
You may elect to begin the Income Phase of your contract using the Income
Protector feature ONLY within the 30 days after the seventh or later contract
anniversary.
The contract anniversary prior to your election to begin receiving income
payments is your income benefit date. This is the date as of which we calculate
your income benefit base to use in determining your guaranteed minimum fixed
retirement income. Your final income benefit base is equal to (a) minus (b)
where:
(a) is equal to your income benefit base as of your income benefit date,
and;
(b) is equal to any partial withdrawals of contract value and any charges
applicable to those withdrawals and any withdrawal charges otherwise
applicable, calculated as if you fully surrender your contract as the
income benefit date, and any applicable premium taxes.
To arrive at the minimum guaranteed retirement income available to you we apply
your final income benefit base to the annuity rates stated in your Income
Protector endorsement for the income option you select. You then choose if you
would like to receive that income annually, semi-annually, quarterly or monthly
for the time guaranteed under your selected income option. The income options
available when using the Income Protector feature to receive your retirement
income are:
- Life Annuity with 10 Years Guaranteed, or
- Joint and Survivor Life Annuity with 20 Years Guaranteed
At the time you elect to begin receiving income payments, we will calculate your
income payments using both your income benefit base and your contract value. We
will use the same income option for each calculation, however, the annuity
factors used to calculate your income under the Income Protector feature will be
different. You will receive whichever provides a greater stream of income. If
you elect to receive income payments using the Income Protector feature your
income payments will be fixed in amount. You are not required to use the Income
Protector feature to receive income payments.
NOTE TO QUALIFIED CONTRACT HOLDERS
Qualified contracts generally require that you select an income option which
does not exceed your life expectancy. That restriction, if it applies to you,
may limit your ability to use the Income Protector feature.
You may wish to consult your tax advisor for information concerning your
particular circumstances.
HYPOTHETICAL EXAMPLE OF THE OPERATION OF THE INCOME PROTECTOR FEATURE
This table assumes $100,000 initial investment in a Non-qualified contract with
no withdrawals, additional Purchase Payments or premium taxes.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Minimum annual income if you elect to receive income payments
If at issue on contract anniversary . . .
you are . . . 7 10 15 20
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Male 6,108 6,672 7,716 8,832
age 60*
-------------------------------------------------------------------------------------------------------------
Female 5,388 5,880 6,900 8,112
age 60*
-------------------------------------------------------------------------------------------------------------
Joint** 4,716 5,028 5,544 5,928
Male-60
Female-60
-------------------------------------------------------------------------------------------------------------
</TABLE>
* Life annuity with 10 years guaranteed
** Joint and survivor life annuity with 20 years guaranteed
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<PAGE> 71
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TAXES
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NOTE: WE PREPARED THE FOLLOWING INFORMATION ON TAXES AS A GENERAL DISCUSSION OF
THE SUBJECT. IT IS NOT TAX ADVICE. WE CAUTION YOU TO SEEK COMPETENT TAX ADVICE
ABOUT YOUR OWN CIRCUMSTANCES. WE DO NOT GUARANTEE THE TAX STATUS OF YOUR
ANNUITY. TAX LAWS CONSTANTLY CHANGE, THEREFORE WE CANNOT GUARANTEE THAT THE
INFORMATION CONTAINED HEREIN IS COMPLETE AND/OR ACCURATE.
ANNUITY CONTRACTS IN GENERAL
The Internal Revenue Code ("IRC") provides for special rules regarding the tax
treatment of annuity contracts. Generally, taxes on the earnings in your annuity
contract are deferred until you take the money out. Qualified retirement
investments automatically provide tax deferral regardless of whether the
underlying contract is an annuity. Different rules apply depending on how you
take the money out and whether your contract is Qualified or Non-qualified.
If you do not purchase your contract under a pension plan, a specially sponsored
employer program or an individual retirement account, your contract is referred
to as a Non-qualified contract. A Non-qualified contract receives different tax
treatment than a Qualified contract. In general, your cost basis in a
Non-qualified contract is equal to the Purchase Payments you put into the
contract. You have already been taxed on the cost basis in your contract.
If you purchase your contract under a pension plan, a specially sponsored
employer program or as an individual retirement account, your contract is
referred to as a Qualified contract. Examples of qualified plans are: Individual
Retirement Accounts ("IRAs"), Roth IRAs, Tax-Sheltered Annuities (referred to as
403(b) contracts), H.R. 10 Plans (referred to as Keogh Plans) and pension and
profit sharing plans, including 401(k) plans. Typically you have not paid any
tax on the Purchase Payments used to buy your contract and therefore, you have
no cost basis in your contract.
TAX TREATMENT OF DISTRIBUTIONS -
NON-QUALIFIED CONTRACTS
If you make a withdrawal from a Non-qualified contract, the IRC treats such a
withdrawal as first coming from the earnings and then as coming from your
Purchase Payments. For income payments, any portion of each payment that is
considered a return of your Purchase Payment will not be taxed. Withdrawn
earnings are treated as income to you and are taxable. The IRC provides for a
10% penalty tax on any earnings that are withdrawn other than in conjunction
with the following circumstances: (1) after reaching age 59 1/2; (2) when paid
to your Beneficiary after you die; (3) after you become disabled (as defined in
the IRC); (4) when paid in a series of substantially equal installments made for
your life or for the joint lives of you and you Beneficiary; (5) under an
immediate annuity; or (6) which come from Purchase Payments made prior to August
14, 1982.
TAX TREATMENT OF DISTRIBUTIONS - QUALIFIED CONTRACTS
Generally, you have not paid any taxes on the Purchase Payments used to buy a
Qualified contract. Any amount of money you take out as a withdrawal or as
income payments is taxable income. The IRC further provides for a 10% penalty
tax on any withdrawal or income payment paid to you other than in conjunction
with the following circumstances: (1) after reaching age 59 1/2; (2) when paid
to your Beneficiary after you die; (3) after you become disabled (as defined in
the IRC); (4) in a series of substantially equal installments made for your life
or for the joint lives of you and your Beneficiary; (5) to the extent such
withdrawals do not exceed limitations set by the IRC for amounts paid during the
taxable year for medical care; (6) to fund higher education expenses (as defined
in IRC); (7) to fund certain first-time home purchase expenses; and, except in
the case of an IRA; (8) when you separate from service after attaining age 55;
and (9) when paid to an alternate payee pursuant to a qualified domestic
relations order.
The IRC limits the withdrawal of Purchase Payments from certain Tax-Sheltered
Annuities. Withdrawals can only be made when an owner: (1) reaches age 59 1/2;
(2) leaves his or her job; (3) dies; (4) becomes disabled (as defined in the
IRC); or (5) experiences a hardship (as defined in the IRC). In the case of
hardship, the owner can only withdraw Purchase Payments.
MINIMUM DISTRIBUTIONS
Generally, the IRS requires that you begin taking annual distributions from
qualified annuity contracts by April 1 of the calendar year following the later
of (1) the calendar year in which you attain age 70 1/2 or (2) the calendar year
in which you retire.
We currently waive surrender charges and MVA on withdrawals taken to meet
minimum distribution requirements. Current operational practice is to provide a
free withdrawal of the greater of the contract's maximum penalty free amount or
the required minimum distribution amount for a particular contract (but not
both). You may elect to have the required minimum distribution amount on your
contract calculated and withdrawn each year under the automatic withdrawal
option. You may select either monthly, quarterly, semiannual or annual
withdrawals for this purpose. This service is provided as a courtesy and we do
not guarantee the accuracy of our calculations. Accordingly, we recommend you
consult your tax advisor concerning your required minimum distribution. You may
terminate your election for automated minimum distribution at any time by
sending a written request to our Annuity Service Center. We reserve the right to
change or discontinue this service at any time.
Failure to satisfy the minimum distribution requirements may result in a tax
penalty. You should consult your tax advisor for more information.
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<PAGE> 72
DIVERSIFICATION
The IRC imposes certain diversification requirements on the underlying
investments for a variable annuity. We believe that each underlying Variable
Portfolios' management monitors the Variable Portfolios so as to comply with
these requirements. To be treated as a variable annuity for tax purposes, the
underlying investments must meet these requirements.
The diversification regulations do not provide guidance as to the circumstances
under which you, because of the degree of control you exercise over the
underlying investments, and not Anchor National, would be considered the owner
of the shares of the Variable Portfolios. It is unknown to what extent owners
are permitted to select investments, to make transfers among Variable Portfolios
or the number and type of Variable Portfolios owners may select from. If any
guidance is provided which is considered a new position, then the guidance would
generally be applied prospectively. However, if such guidance is considered not
to be a new position, it may be applied retroactively. This would mean you, as
the owner of the contract, could be treated as the owner of the underlying
Variable Portfolios. Due to the uncertainty in this area, we reserve the right
to modify the contract in an attempt to maintain favorable tax treatment.
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PERFORMANCE
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We advertise the Cash Management Portfolio's yield and effective yield. In
addition, the other Variable Portfolios advertise total return, gross yield and
yield-to-maturity. These figures represent past performance of the Variable
Portfolios. These performance numbers do not indicate future results.
When we advertise performance for periods prior to the Separate Account
inception date, we derive the figures from the performance of the corresponding
portfolios for the Trusts, if available. We modify these numbers to reflect
charges and expenses as if the contract was in existence during the period
stated in the advertisement. Figures calculated in this manner do not represent
actual historic performance of the particular Variable Portfolio.
Consult the SAI for more detailed information regarding the calculation of
performance data. The performance of each Variable Portfolio may also be
measured against unmanaged market indices. The indices we use include but are
not limited to the Dow Jones Industrial Average, the Standard & Poor's 500, the
Russell 1000 Growth Index, the Morgan Stanley Capital International Europe,
Australia and Far East Index ("EAFE") and the Morgan Stanley Capital
International World Index. We may compare the Variable Portfolios' performance
to that of other variable annuities with similar objectives and policies as
reported by independent ranking agencies such as Morningstar, Inc., Lipper
Analytical Services, Inc. or Variable Annuity Research & Data Service ("VARDS").
Anchor National may also advertise the rating and other information assigned to
it by independent industry ratings organizations. Some of those organizations
are A.M. Best Company ("A.M. Best"), Moody's Investor's Service ("Moody's") and
Standard & Poor's Insurance Rating Services ("S&P"). A.M. Best's and Moody's
ratings reflect their current opinion of our financial strength and performance
in comparison to others in the life and health insurance industry. S&P's ratings
measure the ability of an insurance company to meet its obligations under
insurance policies it issues. These ratings do not measure the insurer's ability
to meet non-policy obligations. Ratings in general do not relate to the
performance of the Variable Portfolios.
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OTHER INFORMATION
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ANCHOR NATIONAL
Anchor National is a stock life insurance company originally organized under the
laws of the state of California in April 1965. On January 1, 1996, Anchor
National redomesticated under the laws of the state of Arizona.
Anchor National and its affiliates, SunAmerica Life Insurance Company, First
SunAmerica Life Insurance Company, SunAmerica Trust Company, SunAmerica Asset
Management Corp., and the SunAmerica Financial Network, Inc. (comprising six
wholly-owned broker-dealers), specialize in retirement savings and investment
products and services. Business focuses include fixed and variable annuities,
mutual funds, broker-dealer services and trust administration services.
THE SEPARATE ACCOUNT
Anchor National established Variable Separate Account ("separate account"),
under Arizona law on January 1, 1996 when it assumed the separate account,
originally established under California law on June 25, 1981. The separate
account is registered with the SEC as a unit investment trust under the
Investment Company Act of 1940, as amended.
Anchor National owns the assets in the separate account. However, the assets in
the separate account are not chargeable with liabilities arising out of any
other business conducted by Anchor National. Income gains and losses (realized
and unrealized) resulting from assets in the separate account are credited to or
charged against the separate account without regard to other income gains or
losses of Anchor National.
THE GENERAL ACCOUNT
Money allocated to the fixed account options goes into Anchor National's general
account. The general account consists of
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<PAGE> 73
all of Anchor National's assets other than assets attributable to a separate
account. All of the assets in the general account are chargeable with the claims
of any Anchor National contract holders as well as all of its creditors. The
general account funds are invested as permitted under state insurance laws.
DISTRIBUTION OF THE CONTRACT
Registered representatives of broker-dealers sell the contract. We pay
commissions to these representatives for the sale of the contracts. We do not
expect the total commissions to exceed 7% of your Purchase Payments. We may also
pay a bonus to representatives for contracts which stay active for a particular
period of time, in addition to standard commissions. We do not deduct
commissions paid to registered representatives directly from your Purchase
Payments.
From time to time, we may pay or allow additional promotional incentives in the
form of cash or other compensation. We reserve the right to offer these
additional incentives only to certain broker-dealers that sell or are expected
to sell, certain minimum amounts of the contract, or other contracts offered by
us. Promotional incentives may change at any time.
SunAmerica Capital Services, Inc., 733 Third Avenue, 4th Floor, New York, New
York 10017 distributes the contracts. SunAmerica Capital Services, an affiliate
of Anchor National, is registered as a broker-dealer under the Exchange Act of
1934 and is a member of the National Association of Securities Dealers, Inc. No
underwriting fees are paid in connection with the distribution of the contracts.
ADMINISTRATION
We are responsible for the administrative servicing of your contract. Please
contact our Annuity Service Center
at 1-800-445-SUN2, if you have any comment, question or service request.
We send out transaction confirmations and quarterly statements. During the
accumulation phase, you will receive confirmation of transactions within your
contract. Transactions made pursuant to contractual or systematic agreements,
such as deduction of the annual maintenance fee and dollar cost averaging, may
be confirmed quarterly. Purchase Payments received through the automatic payment
plan or a salary reduction arrangement, may also be confirmed quarterly. For all
other transactions, we send confirmations immediately. It is your responsibility
to review these documents carefully and notify us of any inaccuracies
immediately. We investigate all inquiries. To the extent that we believe we made
an error, we retroactively adjust your contract, provided you notify us within
30 days of receiving the transaction confirmation or quarterly statement. Any
other adjustments we deem warranted are made as of the time we receive notice of
the error.
LEGAL PROCEEDINGS
There are no pending legal proceedings affecting the separate account. Anchor
National and its subsidiaries engage in various kinds of routine litigation. In
management's opinion, these matters are not of material importance to their
respective total assets nor are they material with respect to the separate
account.
OWNERSHIP
The PolarisAmerica Variable Annuity is a Flexible Payment Group Deferred Annuity
contract. We issue a group contract to a contract holder for the benefit of the
participants in the group. As a participant in the group, you will receive a
certificate which evidences your ownership. As used in this prospectus, the term
contract refers to your certificate. In some states, a Flexible Payment
Individual Modified Guaranteed and Variable Deferred Annuity contract is
available instead. Such a contract is identical to the contract described in
this prospectus, with the exception that we issue it directly to the owner.
CUSTODIAN
State Street Bank and Trust Company, 255 Franklin Street, Boston, Massachusetts
02110, serves as the custodian of the assets of the separate account. Anchor
National pays State Street Bank for services provided, based on a schedule of
fees.
INDEPENDENT ACCOUNTANTS
The audited consolidated financial statements of Anchor National as of December
31, 1999, December 31, 1998 and September 30, 1998 and for the year ended
December 31, 1999, for the three months ended December 31, 1998 and for each of
the two fiscal years in the period ended September 30, 1998 are incorporated by
reference in this prospectus in reliance on the report of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting. Sales of these contracts recently began and therefore,
no audited financial statements for Variable Separate Account (portion related
to the PolarisAmerica Variable Annuity) are contained herein.
REGISTRATION STATEMENT
A registration statement has been filed with the SEC under the Securities Act of
1933 relating to the contract. This prospectus does not contain all the
information in the registration statement as permitted by SEC regulations. The
omitted information can be obtained from the SEC's principal office in
Washington, D.C., upon payment of a prescribed fee.
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TABLE OF CONTENTS OF
STATEMENT OF ADDITIONAL INFORMATION
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----------------------------------------------------------------
Additional information concerning the operations of the separate account is
contained in a Statement of Additional Information ("SAI"), which is available
without charge upon written request addressed to us at our Annuity Service
Center, P.O. Box 54299, Los Angeles, California 90054-0299 or by calling (800)
445-SUN2. The contents of the SAI are tabulated below.
<TABLE>
<S> <C>
Separate Account.............................. 3
General Account............................... 3
Performance Data.............................. 4
Income Payments............................... 8
Annuity Unit Values........................... 9
Taxes......................................... 12
Distribution of Contracts..................... 16
Financial Statements.......................... 16
</TABLE>
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APPENDIX A - CONDENSED FINANCIAL INFORMATION
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<TABLE>
<CAPTION>
INCEPTION TO FISCAL YEAR FISCAL YEAR 11/30/99-
PORTFOLIOS 11/30/97 11/30/98 11/30/99 12/31/99
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--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Government and Quality Bond (Inception Date - 6/11/97)
Beginning AUV................................ $ 11.99 $ 12.65 $ 13.66 $ 13.37
Ending AUV................................... $ 12.65 $ 13.66 $ 13.37 $ 13.28
Ending Number of AUs......................... 395,258 5,697,571 11,644,751 11,975,781
--------------------------------------------------------------------------------------------------------------
Emerging Markets (Inception Date - 6/5/97)
Beginning AUV................................ $ 10.14 $ 7.97 $ 6.14 $ 8.99
Ending AUV................................... $ 7.97 $ 6.14 $ 8.99 $ 10.77
Ending Number of AUs......................... 663,212 2,574,316 4,857,715 5,310,973
--------------------------------------------------------------------------------------------------------------
Global Equities (Inception Date - 6/3/97)
Beginning AUV................................ $ 16.54 $ 16.90 $ 19.21 $ 24.20
Ending AUV................................... $ 16.90 $ 19.21 $ 24.20 $ 26.57
Ending Number of AUs......................... 600,294 2,566,912 4,915,631 5,366,080
--------------------------------------------------------------------------------------------------------------
International Growth and Income (Inception Date - 6/4/97)
Beginning AUV................................ $ 9.97 $ 10.33 $ 11.16 $ 13.40
Ending AUV................................... $ 10.33 $ 11.16 $ 13.40 $ 14.07
Ending Number of AUs......................... 1,310,126 6,738,263 11,676,801 12,288,580
--------------------------------------------------------------------------------------------------------------
Aggressive Growth (Inception Date - 6/9/97)
Beginning AUV................................ $ 10.03 $ 11.51 $ 11.86 $ 19.02
Ending AUV................................... $ 11.51 $ 11.86 $ 19.02 $ 24.30
Ending Number of AUs......................... 821,105 2,794,187 6,626,618 7,344,520
--------------------------------------------------------------------------------------------------------------
Blue Chip Growth+ (Inception Date - 7/5/00)
Beginning AUV................................ $ -- $ -- $ -- $ --
Ending AUV................................... $ -- $ -- $ -- $ --
Ending Number of AUs......................... -- -- -- --
--------------------------------------------------------------------------------------------------------------
Putnam Growth (Inception Date - 6/3/97)
Beginning AUV................................ $ 15.80 $ 18.47 $ 22.29 $ 28.36
Ending AUV................................... $ 18.47 $ 22.29 $ 28.36 $ 31.67
Ending Number of AUs......................... 831,178 4,949,624 11,111,497 11,459,476
--------------------------------------------------------------------------------------------------------------
Growth-Income (Inception Date - 6/3/97)
Beginning AUV................................ $ 18.84 $ 21.41 $ 25.71 $ 33.11
Ending AUV................................... $ 21.41 $ 25.71 $ 33.11 $ 35.91
Ending Number of AUs......................... 1,949,292 9,786,202 19,070,913 19,671,134
--------------------------------------------------------------------------------------------------------------
SunAmerica Balanced (Inception Date - 6/5/97)
Beginning AUV................................ $ 11.84 $ 13.22 $ 15.60 $ 18.23
Ending AUV................................... $ 13.22 $ 15.60 $ 18.23 $ 19.69
Ending Number of AUs......................... 363,136 3,543,245 11,283,979 11,995,695
--------------------------------------------------------------------------------------------------------------
Global Bond (Inception Date - 6/11/97)
Beginning AUV................................ $ 12.41 $ 13.08 $ 14.40 $ 14.11
Ending AUV................................... $ 13.08 $ 14.40 $ 14.11 $ 14.09
Ending Number of AUs......................... 183,563 1,342,157 2,692,066 2,749,995
--------------------------------------------------------------------------------------------------------------
Cash Management (Inception Date - 6/5/97)
Beginning AUV................................ $ 11.24 $ 11.43 $ 11.83 $ 12.20
Ending AUV................................... $ 11.43 $ 11.83 $ 12.20 $ 12.25
Ending Number of AUs......................... 1,514,290 5,488,046 13,454,926 14,181,154
--------------------------------------------------------------------------------------------------------------
Nations Aggressive Growth* (Inception
Date - )
Beginning AUV................................ $ -- $ -- $ -- $ --
Ending AUV................................... $ -- $ -- $ -- $ --
Ending Number of AUs......................... -- -- -- --
--------------------------------------------------------------------------------------------------------------
Nations Managed Index* (Inception Date - )
Beginning AUV................................ $ -- $ -- $ -- $ --
Ending AUV................................... $ -- $ -- $ -- $ --
Ending Number of AUs......................... -- -- -- --
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
+ Not available for sale until July 5,
2000.
* Not available for sale until October
23, 2000.
AUV - Accumulation Unit Value
AU - Accumulation Units
</TABLE>
A-1
<PAGE> 76
<TABLE>
<CAPTION>
INCEPTION TO FISCAL YEAR FISCAL YEAR 11/30/99-
PORTFOLIOS 11/30/97 11/30/98 11/30/99 12/31/99
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nations Value* (Inception Date - )
Beginning AUV................................. $ -- $ -- $ -- $ --
Ending AUV.................................... $ -- $ -- $ -- $ --
Ending Number of AUs.......................... -- -- -- --
--------------------------------------------------------------------------------------------------------------
Nations International Value* (Inception
Date - )
Beginning AUV................................ $ -- $ -- $ -- $ --
Ending AUV................................... $ -- $ -- $ -- $ --
Ending Number of AUs......................... -- -- -- --
--------------------------------------------------------------------------------------------------------------
Nations Marsico Focused Equities* (Inception
Date - )
Beginning AUV................................ $ -- $ -- $ -- $ --
Ending AUV................................... $ -- $ -- $ -- $ --
Ending Number of AUs......................... -- -- -- --
--------------------------------------------------------------------------------------------------------------
Nations Marsico Growth & Income* (Inception Date -
Beginning AUV................................ $ -- $ -- $ -- $ --
Ending AUV................................... $ -- $ -- $ -- $ --
Ending Number of AUs......................... -- -- -- --
--------------------------------------------------------------------------------------------------------------
Nations High Yield Bond* (Inception
Date - )
Beginning AUV................................ $ -- $ -- $ -- $ --
Ending AUV................................... $ -- $ -- $ -- $ --
Ending Number of AUs......................... -- -- -- --
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
</TABLE>
* Not available for sale until October 23, 2000.
AUV - Accumulation Unit Value
AU - Accumulation Units
A-2
<PAGE> 77
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
APPENDIX B - MARKET VALUE ADJUSTMENT ("MVA")
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
The MVA reflects the impact that changing interest rates have on the value of
money invested at a fixed interest rate. The longer the period of time remaining
in the term you initially agreed to leave your money in the fixed account
option, the greater the impact of changing interest rates. The impact of the MVA
can be either positive or negative, and is computed by multiplying the amount
withdrawn, transferred or switched to the Income Phase by the following factor:
N/12
[(1+I/(1+J+0.005)] - 1
The MVA formula may differ in certain states
where:
I is the interest rate you are earning on the money invested in the
fixed account option;
J is the interest rate then currently available for the period of time
equal to the number of years remaining in the term you initially agreed
to leave your money in the fixed account option; and
N is the number of full months remaining in the term you initially
agreed to leave your money in the fixed account option.
EXAMPLES OF THE MVA
The examples below assume the following:
(1) You made an initial Purchase Payment of $10,000 and allocated it to the
10-year fixed account option at a rate of 5%;
(2) You make a partial withdrawal of $4,000 when 1 year (12 months) remains
in the 10-year term you initially agreed to leave your money in the
fixed account option (N=12); and
(3) You have not made any other transfers, additional Purchase Payments, or
withdrawals.
No withdrawal charges are reflected because your Purchase Payment has been in
the contract for nine full years. If a withdrawal charge applies, it is deducted
before the MVA. The MVA is assessed on the amount withdrawn less any withdrawal
charges.
POSITIVE ADJUSTMENT
Assume that on the date of withdrawal, the interest rate in effect for a new
Purchase Payments in the 1-year fixed account option is 4%.
N/12
The MVA factor is = [(1+I/(1+J+0.005)] - 1
12/12
= [(1.05)/(1.04+0.005)] - 1
1
= (1.004785) - 1
= 1.004785 - 1
= + 0.004785
The requested withdrawal amount is multiplied by the MVA factor to determine the
MVA:
$4,000 x (+0.004785) = +$19.14
$19.14 represents the MVA that would be added to your withdrawal.
NEGATIVE ADJUSTMENT
Assume that on the date of withdrawal, the interest rate in effect for new
Purchase Payments in the 1-year fixed account option is 6%.
N/12
The MVA factor is = [(1+I)/(1+J+0.005)] - 1
12/12
= [(1.05)/(1.06+0.005)] - 1
1
= (0.985915) - 1
= 0.985915 - 1
= - 0.014085
The requested withdrawal amount is multiplied by the MVA factor to determine the
MVA:
$4,000 X (-0.014085) = -$56.34
$56.34 represents the MVA that will be deducted from the money remaining in the
10-year fixed account option.
B-1
<PAGE> 78
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
APPENDIX C - DEATH BENEFITS FOLLOWING SPOUSAL CONTINUATION
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Capitalized terms used in this Appendix have the same meaning as they have in
the prospectus.
The following details the death benefit options and EstatePlus benefit upon the
Continuing Spouse's death:
A. DEATH BENEFIT PAYABLE UPON CONTINUING SPOUSE'S DEATH:
1.Purchase Payment Accumulation Option -- the death benefit is the greater
of:
a.The contract value on the date we receive satisfactory proof of the
Continuing Spouse's death; or
b.Purchase Payments minus withdrawals (and fees and charges applicable
to those withdrawals) made from the original contract issue date
including the Continuation Contribution, compounded to the date of
death at a 4% annual growth rate, (3% growth rate if age 70 or older
at the time of contract issue) plus any Purchase Payments minus
withdrawals recorded after the date of death (and any fees and
charges applicable to those withdrawals); or
c.The contract value on the seventh contract anniversary following the
original issue date, plus any Purchase Payments and less any
withdrawals (and any fees or charges applicable to such withdrawals)
since the seventh contract anniversary, all compounded at a 4%
annual growth rate until the date of death (3% growth rate if age 70
or older at the time of contract issue) plus any Purchase Payments
less withdrawals recorded after the date of death (and any fees or
charges applicable to such withdrawals).
2.Maximum Anniversary Option -- if the Continuing Spouse is below age 90 at
the time of death, the death benefit is greater of:
a.The contract value at the time we receive satisfactory proof of the
Continuing Spouse's death; or
b.Purchase Payments since the Continuation Date minus withdrawals and
any fees and charges applicable to those withdrawals; or
c.The maximum anniversary value on any contract anniversary occurring
after the Continuation Date prior to the Continuing Spouse's 81st
birthday. The anniversary value equals the contract value on a
contract anniversary plus any Purchase Payments minus withdrawals
and fees and charges applicable to withdrawals recorded since that
contract anniversary. Contract anniversary is defined as any
anniversary following the full 12 month period after the original
contract issue date.
If the Continuing Spouse is age 90 or older at the time of death, under the
Maximum Anniversary death benefit, their beneficiary will receive contract value
only.
B. ESTATEPLUS BENEFIT PAYABLE UPON CONTINUING SPOUSE'S DEATH:
The EstatePlus benefit may increase the death benefit amount. The EstatePlus
benefit is only available if the original owner elected EstatePlus and it has
not been discontinued or terminated. If the Continuing Spouse had earnings in
the contract at the time of his/her death, we will add a percentage of those
earnings (the "EstatePlus Percentage"), subject to a maximum dollar amount (the
"Maximum EstatePlus Percentage"), to the death benefit payable, based on the
number of years the Continuing Spouse has held the contract since the
Continuation Date. The EstatePlus benefit, if any, is added to the death benefit
payable under the Purchase Payment Accumulation or the Maximum Anniversary
option.
The term "Continuation Net Purchase Payment" is used frequently to describe the
EstatePlus benefit payable to the beneficiary of the Continuing Spouse.
We define Continuation Net Purchase Payment as Net Purchase Payments made as of
the Continuation Date. For the purpose of calculating Continuation Net Purchase
Payments, the amount that equals the contract value on the Continuation Date,
including the Continuation Contribution is considered a Purchase Payment. If the
Continuing Spouse makes no additional Purchase Payments or withdrawal,
Continuation Net Purchase Payments equals the contract value on the Continuation
Date, including the Continuation Contribution.
The following table provides the details if the Continuing Spouse is age 69 or
younger on the Continuation Date:
<TABLE>
<CAPTION>
-------------------------------------------------------------
CONTRACT YEAR ESTATEPLUS MAXIMUM
OF DEATH PERCENTAGE ESTATEPLUS PERCENTAGE
-------------------------------------------------------------
<S> <C> <C>
Years 0-4 25% of earnings 40% of Continuation
Net Purchase Payments
-------------------------------------------------------------
Years 5-9 40% of earnings 65% of Continuation
Net Purchase
Payments*
-------------------------------------------------------------
Years 10+ 50% of earnings 75% of Continuation
Net Purchase
Payments*
-------------------------------------------------------------
</TABLE>
If the Continuing Spouse was between their 70th and 81st birthdays on the
Continuation Date, the table below shows the available EstatePlus benefit:
<TABLE>
<CAPTION>
-------------------------------------------------------------
CONTRACT YEAR ESTATEPLUS MAXIMUM
OF DEATH PERCENTAGE ESTATEPLUS PERCENTAGE
-------------------------------------------------------------
<S> <C> <C>
Years 0-10+ 25% of earnings 40% of Continuation
Net Purchase
Payments*
-------------------------------------------------------------
</TABLE>
*Purchase Payments received after the 5(th) year following the Continuation Date
must remain in the contract for at least six months to be included as part of
Continuation Net Purchase Payments for purpose of the Maximum EstatePlus
calculation.
C-1
<PAGE> 79
What is the Contract Year of Death?
Contract Year of Death is the number of full 12 month periods starting on the
Continuation Date and ending on the Continuing Spouse's date of death.
What is the EstatePlus amount?
We determine the EstatePlus amount based upon a percentage of earnings in the
contract at the time of the Continuing Spouse's death. For the purpose of this
calculation, earnings are defined as (1) minus (2) where
(1)equals the contract value on the Continuing Spouse's date of death;
(2)equals the Continuation Net Purchase Payment(s).
What is the Maximum EstatePlus amount?
The EstatePlus benefit is subject to a maximum dollar amount. The Maximum
EstatePlus amount is a percentage of the Continuation Net Purchase Payments.
WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE SPOUSAL CONTINUATION
PROVISION (IN ITS ENTIRETY OR ANY COMPONENT) AT ANY TIME.
C-2
<PAGE> 80
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
APPENDIX D - PREMIUM TAXES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Premium taxes vary according to the state and are subject to change without
notice. In many states, there is no tax at all. Listed below are the current
premium tax rates in those states that assess a premium tax. For current
information, you should consult your tax adviser.
<TABLE>
<CAPTION>
QUALIFIED NON-QUALIFIED
STATE CONTRACT CONTRACT
========================================================================================
<S> <C> <C>
California .50% 2.35%
----------------------------------------------------------------------------------------
Maine 0% 2%
----------------------------------------------------------------------------------------
Nevada 0% 3.5%
----------------------------------------------------------------------------------------
South Dakota 0% 1.25%
----------------------------------------------------------------------------------------
West Virginia 1% 1%
----------------------------------------------------------------------------------------
Wyoming 0% 1%
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
</TABLE>
D-1
<PAGE> 81
--------------------------------------------------------------------------------
Please forward a copy (without charge) of the PolarisAmerica Variable Annuity
Statement of Additional Information to:
(Please print or type and fill in all information.)
------------------------------------------------------------------------
Name
------------------------------------------------------------------------
Address
------------------------------------------------------------------------
City/State/Zip
Date: ------------------------------ Signed: -------------------------
Return to: Anchor National Life Insurance Company, Annuity Service Center,
P.O. Box 52499, Los Angeles, California 90054-0299
--------------------------------------------------------------------------------
<PAGE> 82
STATEMENT OF ADDITIONAL INFORMATION
FLEXIBLE PAYMENT DEFERRED ANNUITY CONTRACTS
ISSUED BY
ANCHOR NATIONAL LIFE INSURANCE COMPANY
IN CONNECTION WITH
VARIABLE SEPARATE ACCOUNT
(Portion relating to the PolarisII/PolarisAmerica
Variable Annuity)
This Statement of Additional Information is not a prospectus; it should be read
with the prospectus, dated December 29, 2000, relating to the annuity contracts
described above. A copy of the prospectus may be obtained without charge by
calling (800) 445-SUN2 or writing us at:
ANCHOR NATIONAL LIFE INSURANCE COMPANY
ANNUITY SERVICE CENTER
P.O. BOX 54299
LOS ANGELES, CALIFORNIA 90054-0299
December 29, 2000
<PAGE> 83
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Separate Account 3
General Account 3
Performance Data 4
Income Payments 8
Annuity Unit Values 9
Taxes 12
Distribution of Contracts 16
Financial Statements 16
</TABLE>
2
<PAGE> 84
SEPARATE ACCOUNT
Variable Separate Account was originally established by Anchor National
Life Insurance Company (the "Company") on June 25, 1981, pursuant to the
provisions of California law, as a segregated asset account of the Company. The
separate account meets the definition of a "separate account" under the federal
securities laws and is registered with the Securities and Exchange Commission
(the "SEC") as a unit investment trust under the Investment Company Act of 1940.
This registration does not involve supervision of the management of the separate
account or the Company by the SEC.
The assets of the separate account are the property of the Company.
However, the assets of the separate account, equal to its reserves and other
contract liabilities, are not chargeable with liabilities arising out of any
other business the Company may conduct. Income, gains, and losses, whether or
not realized, from assets allocated to the separate account are credited to or
charged against the separate account without regard to other income, gains, or
losses of the Company.
The separate account is divided into Variable Portfolios, with the
assets of each Variable Portfolio invested in the shares of one of the
underlying funds. The Company does not guarantee the investment performance of
the separate account, its Variable Portfolios or the underlying funds. Values
allocated to the separate account and the amount of variable Income Payments
will vary with the values of shares of the underlying funds, and are also
reduced by contract charges.
The basic objective of a variable annuity contract is to provide
variable Income Payments which will be to some degree responsive to changes in
the economic environment, including inflationary forces and changes in rates of
return available from various types of investments. The contract is designed to
seek to accomplish this objective by providing that variable Income Payments
will reflect the investment performance of the separate account with respect to
amounts allocated to it both before and after the Annuity Date. Since the
separate account is always fully invested in shares of the underlying funds, its
investment performance reflects the investment performance of those entities.
The values of such shares held by the separate account fluctuate and are subject
to the risks of changing economic conditions as well as the risk inherent in the
ability of the underlying funds' managements to make necessary changes in their
funds to anticipate changes in economic conditions. Therefore, the owner bears
the entire investment risk that the basic objectives of the contract may not be
realized, and that the adverse effects of inflation may not be lessened. There
can be no assurance that the aggregate amount of variable Income Payments will
equal or exceed the Purchase Payments made with respect to a particular account
for the reasons described above, or because of the premature death of an
Annuitant.
Another important feature of the contract related to its basic objective
is the Company's promise that the dollar amount of variable Income Payments made
during the lifetime of the Annuitant will not be adversely affected by the
actual mortality experience of the Company or by the actual expenses incurred by
the Company in excess of expense deductions provided for in the contract
(although the Company does not guarantee the amounts of the variable Income
Payments).
GENERAL ACCOUNT
The general account is made up of all of the general assets of the
Company other than those
3
<PAGE> 85
allocated to the separate account or any other segregated asset account of the
Company. A Purchase Payment may be allocated to the 1, 3, 5, 7 or 10 year fixed
account options and the DCA accounts for 6-month and 1-year periods available in
connection with the general account, as elected by the owner at the time of
purchasing a contract or when making a subsequent Purchase Payment. Assets
supporting amounts allocated to fixed account options become part of the
Company's general account assets and are available to fund the claims of all
classes of customers of the Company, as well as of its creditors. Accordingly,
all of the Company's assets held in the general account will be available to
fund the Company's obligations under the contracts as well as such other claims.
The Company will invest the assets of the general account in the manner
chosen by the Company and allowed by applicable state laws regarding the nature
and quality of investments that may be made by life insurance companies and the
percentage of their assets that may be committed to any particular type of
investment. In general, these laws permit investments, within specified limits
and subject to certain qualifications, in federal, state and municipal
obligations, corporate bonds, preferred and common stocks, real estate
mortgages, real estate and certain other investments.
PERFORMANCE DATA
From time to time the separate account may advertise the Cash Management
Portfolio's "yield" and "effective yield." Both yield figures are based on
historical earnings and are not intended to indicate future performance. The
"yield" of the Cash Management Portfolio refers to the net income generated for
a contract funded by an investment in the Cash Management Portfolio (which
invests in shares of the Cash Management Portfolio of SunAmerica Series Trust)
over a seven-day period (which period will be stated in the advertisement). This
income is then "annualized." That is, the amount of income generated by the
investment during that week is assumed to be generated each week over a 52-week
period and is shown as a percentage of the investment. The "effective yield" is
calculated similarly but, when annualized, the income earned by an investment in
the Cash Management Portfolio is assumed to be reinvested at the end of each
seven day period. The "effective yield" will be slightly higher than the "yield"
because of the compounding effect of this assumed reinvestment. Neither the
yield nor the effective yield takes into consideration the effect of any capital
changes that might have occurred during the seven day period, nor do they
reflect the impact of premium taxes or any withdrawal charges. The impact of
other recurring charges (including the mortality and expense risk charge,
distribution expense charge and contract maintenance fee) on both yield figures
is, however, reflected in them to the same extent it would affect the yield (or
effective yield) for a contract of average size.
In addition, the separate account may advertise "total return" data for
its other Variable Portfolios. Like the yield figures described above, total
return figures are based on historical data and are not intended to indicate
future performance. The "total return" is a computed rate of return that, when
compounded annually over a stated period of time and applied to a hypothetical
initial investment in a Variable Portfolio made at the beginning of the period,
will produce the same contract value at the end of the period that the
hypothetical investment would have produced over the same period (assuming a
complete redemption of the contract at the end of the period). Recurring
contract charges are reflected in the total return figures in the same manner as
they are reflected in the yield data for contracts funded through the Cash
Management Portfolio.
For periods starting prior to the date the Variable Portfolios first
became available through the Separate Account, the total return data for the
Variable Portfolios of the Separate Account will be derived from the performance
of the
4
<PAGE> 86
corresponding underlying funds of Anchor Series Trust, SunAmerica Series Trust
and Nations Annuity Trust modified to reflect the charges and expenses as if the
Separate Account Variable Portfolio had been in existence since the inception
date of each respective Anchor Series Trust, SunAmerica Series Trust and Nations
Annuity Trust underlying fund. In some cases a particular Variable Portfolio may
have been available in another contract funded through this separate account. If
the Variable Portfolio was incepted in this separate account prior to the
offering of this contract, we report standardized contract performance adjusted
for the fees and charges on this contract. Performance figures similarly
adjusted but based on underlying SunAmerica Series Trust, Anchor Series Trust
and Nations Annuity Trust performance (outside of this separate account) should
not be construed to be actual historical performance of the relevant separate
account Variable Portfolio. Rather, they are intended to indicate the historical
performance of the corresponding underlying funds of Anchor Series Trust,
SunAmerica Series Trust and Nations Annuity Trust, adjusted to provide direct
comparability to the performance of the Variable Portfolios after the date the
contracts were first offered to the public (which will reflect the effect of
fees and charges imposed under the contracts). Anchor Series Trust, SunAmerica
Series Trust and Nations Annuity Trust have served since their inception as
underlying investment media for separate accounts of other insurance companies
in connection with variable contracts not having the same fee and charge
schedules as those imposed under the contracts.
Performance data for the various Variable Portfolios are computed in the
manner described below.
CASH MANAGEMENT PORTFOLIO
The annualized current yield and the effective yield for the Cash
Management Portfolio for the 7 day period ending December 31, 1999 were 4.57%
and 4.68%, respectively.
Current yield is computed by first determining the Base Period
Return attributable to a hypothetical contract having a balance of one
Accumulation Unit at the beginning of a 7 day period using the formula:
For contracts without the Principal Rewards Program
Base Period Return = (EV-SV-CMF)/(SV)
For contracts with the Principal Rewards Program:
Base Period Return = (EV-SV-CMF+E)/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 $35 annual contract
maintenance fee, prorated for 7 days
E = Enhancement Rate Payment, prorated for 7 days
5
<PAGE> 87
The change in the value of an Accumulation Unit during the 7 day period
reflects the income received, minus any expenses accrued, during such 7 day
period. The Contract Maintenance Fee (CMF) is first allocated among the Variable
Portfolios and the general account so that each Variable Portfolio's allocated
portion of the charge is proportional to the percentage of the number of
contract owners' accounts that have money allocated to that Variable Portfolio.
The portion of the charge allocable to the Cash Management Portfolio is further
reduced, for purposes of the yield computation, by multiplying it by the ratio
that the value of the hypothetical contract bears to the value of an account of
average size for contracts funded by the Cash Management Portfolio. Finally, the
result is multiplied by the fraction 7/365 to arrive at the portion attributable
to the 7 day period.
The current yield is then obtained by annualizing the Base Period
Return:
Current Yield = (Base Period Return) x (365/7)
The Cash Management Portfolio also quotes an "effective yield" that
differs from the current yield given above in that it takes into account the
effect of dividend reinvestment in the underlying fund. The effective yield,
like the current yield, is derived from the Base Period Return over a 7 day
period. However, the effective yield accounts for dividend reinvestment by
compounding the current yield according to the formula:
Effective Yield = [(Base Period Return + 1)365/7 - 1]
The yield quoted should not be considered a representation of the yield
of the Cash Management Portfolio in the future since the yield is not fixed.
Actual yields will depend on the type, quality and maturities of the investments
held by the underlying fund and changes in interest rates on such investments.
Yield information may be useful in reviewing the performance of the Cash
Management Portfolio and for providing a basis for comparison with other
investment alternatives. However, the Cash Management Portfolio's yield
fluctuates, unlike bank deposits or other investments that typically pay a fixed
yield for a stated period of time.
OTHER VARIABLE PORTFOLIOS
The Variable Portfolios of the separate account other than the Cash
Management Portfolio compute their performance data as "total return."
The total returns since each Variable Portfolio's inception date, for
a 1-year period and, if applicable, for a 5-year period, are shown on the
following two pages, both with and without an assumed complete redemption at the
end of the stated period. Total returns for contracts without the Principal
Rewards Program are on page 8 and total returns for contracts with the Principal
Rewards Program are on page 9.
Standardized performance for the Variable Portfolios available in this
contract reflect total returns using the method of computation discussed below:
- Using the seven year surrender charge schedule available on contracts
issued without the Principal Rewards Program. No enhancement is reflected
under the calculation, as the Payment Enhancement is not available unless
the Principal Rewards Program is elected; AND
- Using the nine year surrender charge schedule available on contracts issued
with the Principal Rewards Program, including the minimum Upfront Payment
Enhancement of 2% of Purchase Payments and calculating the value after
redemption only based on the initial $1,000 Purchase Payment.
We may, from time to time, advertise other variations of performance
along with the standardized performance as described above. We may, in sales
literature, show performance only applicable to one surrender charge schedule to
a contract holder who has already purchased the contract with or without the
Principal Rewards Program. However, we will not report performance for the
contract featuring the Principal Rewards program, unless net of withdrawal
charges.
These rates of return do not reflect election of the EstatePlus feature. The
rates of return would be lower if the feature were included in the calculations.
Total return figures are based on historical data and are not intended to
indicate future performance.
6
<PAGE> 88
POLARIS II
STANDARDIZED PERFORMANCE
CONTRACTS WITHOUT THE PRINCIPAL REWARDS PROGRAM:
TOTAL ANNUAL RETURN (IN PERCENT) FOR
PERIOD ENDING DECEMBER 31, 1999
(WITH/WITHOUT REDEMPTION)
<TABLE>
<CAPTION>
SEPARATE ACCOUNT 1 YEAR 5 YEAR SINCE INCEPTION
INCEPTION ------------------------ ------------------ -------------------
VARIABLE PORTFOLIO DATE WITH WITHOUT WITH WITHOUT WITH WITHOUT
------------------ ---------------- ---- ------- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Capital Appreciation 2/12/93 58.30 65.30 31.80 32.00 23.57 23.62
Government & Quality Bond 2/22/93 -10.15 -3.15 5.48 5.96 4.05 4.17
Growth 2/19/93 17.95 24.95 25.28 25.52 18.67 18.72
Natural Resources 10/31/94 31.28 39.28 5.20 5.69 3.94 4.26
------------------------------------------------------------------------------------------------------------------------------
Aggressive Growth 6/3/96 74.80 81.80 N/A N/A 27.53 28.12
Alliance Growth 2/9/93 24.04 31.04 35.37 35.55 25.68 25.71
Asset Allocation 7/1/93 0.76 7.76 13.50 13.85 10.94 11.03
Blue Chip Growth+ N/A N/A N/A N/A N/A N/A N/A
Corporate Bond 7/1/93 -10.38 -3.38 5.09 5.58 3.62 3.74
Davis Venture Value 10/31/94 7.33 14.33 22.74 23.00 21.73 21.90
"Dogs" of Wall Street 4/1/98 -15.57 -8.57 N/A N/A -9.63 -5.99
Emerging Markets 6/2/97 67.55 74.55 N/A N/A 0.92 2.80
Federated Value 6/3/96 -2.47 4.53 N/A N/A 14.96 15.73
Global Bond 7/1/93 -9.57 -2.57 7.04 7.49 5.21 5.32
Global Equities 2/9/93 21.87 28.87 18.10 18.40 15.10 15.16
Goldman Sachs Research+ N/A N/A N/A N/A N/A N/A N/A
Growth-Income 2/9/93 21.03 28.03 28.28 28.50 20.28 20.33
Growth Opportunities+ N/A N/A N/A N/A N/A N/A N/A
High-Yield Bond 2/9/93 -10.38 -3.38 6.97 7.42 5.76 5.86
International Diversified Equities 10/31/94 15.60 22.60 11.44 11.82 10.36 10.62
International Growth and Income 6/2/97 15.29 22.29 N/A N/A 12.53 14.12
Marsico Growth++ N/A N/A N/A N/A N/A N/A N/A
MFS Growth and Income 2/9/93 -2/72 4.28 18.75 19.05 13.17 13.24
MFS Mid-Cap Growth 4/1/99 N/A N/A N/A N/A 56.03 63.03
MFS Total Return* 10/31/94 -5.75 1.25 12.89 13.26 12.45 12.68
Putnam Growth 2/9/93 20.69 27.69 26.08 26.32 18.08 18.13
Real Estate 6/2/97 -15.98 -8.98 N/A N/A -6.60 -4.48
SunAmerica Balanced 6/3/96 12.49 19.49 N/A N/A 20.12 20.82
Technology+ N/A N/A N/A N/A N/A N/A N/A
Telecom Utility 6/3/96 -6.84 0.16 N/A N/A 11.34 12.18
Worldwide High Income 10/31/94 10.37 17.37 9.45 9.86 8.75 9.03
</TABLE>
+ Not available for sale until July 5, 2000.
++ Not available for sale until December 29, 2000.
POLARIS II
HYPOTHETICAL ADJUSTED HISTORICAL PERFORMANCE
CONTRACTS WITHOUT THE PRINCIPAL REWARDS PROGRAM:
TOTAL ANNUAL RETURN (IN PERCENT) FOR
PERIOD ENDING DECEMBER 31, 1999
<TABLE>
<CAPTION>
UNDERLYING FUND
INCEPTION SINCE
PORTFOLIO DATE 10 YEAR INCEPTION
--------- --------------- ------- ---------
<S> <C> <C> <C>
Capital Appreciation 3/23/87 21.70 18.29
Government and Quality Bond 8/13/84 5.84 7.39
Growth 8/13/84 15.68 14.87
Natural Resources 1/1/88 4.28 5.77
</TABLE>
7
<PAGE> 89
Total return figures are based on historical data and are not intended to
indicate future performance.
POLARIS II
STANDARDIZED PERFORMANCE
CONTRACTS WITH THE PRINCIPAL REWARDS PROGRAM:
TOTAL ANNUAL RETURN (IN PERCENT) FOR
PERIOD ENDING DECEMBER 31, 1999
(RETURN WITH/WITHOUT REDEMPTION)
<TABLE>
<CAPTION>
SEPARATE ACCOUNT 1 YEAR 5 YEAR SINCE INCEPTION
INCEPTION ------------------ ------------------- -----------------
VARIABLE PORTFOLIO DATE WITH WITHOUT WITH WITHOUT WITH WITHOUT
------------------ -------- ------ ------- ------ -------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Capital Appreciation 2/12/93 59.61 68.61 32.13 32.53 23.81 23.97
Government & Quality Bond 2/22/93 -10.21 -1.21 5.43 6.38 4.01 4.47
Growth 2/19/93 18.46 27.46 25.54 26.02 18.85 19.06
Natural Resources 10/31/94 33.06 42.06 5.15 6.11 3.85 4.67
------------------------------------------------------------------------------------------------------------------------
Aggressive Growth 6/3/96 76.43 85.43 N/A N/A 27.80 28.83
Alliance Growth 2/9/93 24.66 33.66 35.73 36.08 25.93 26.08
Asset Allocation 7/1/93 0.92 9.92 13.60 14.31 11.03 11.37
Blue Chip Growth+ N/A N/A N/A N/A N/A N/A N/A
Corporate Bond 7/1/93 -10.45 -1.45 5.03 6.00 3.56 4.06
Davis Venture Value 10/31/94 7.61 16.61 22.97 23.49 21.95 22.37
"Dogs" of Wall Street 4/1/98 -15.71 -6.71 N/A N/A -10.37 -4.91
Emerging Markets 6/2/97 69.04 78.04 N/A N/A 0.59 3.59
Federated Value 6/3/96 -2.38 6.62 N/A N/A 15.03 16.37
Global Bond 7/1/93 -9.62 -0.62 7.02 7.92 5.19 5.65
Global Equities 2/9/93 22.45 31.45 18.27 18.87 15.24 15.49
Goldman Sachs Research+ N/A N/A N/A N/A N/A N/A N/A
Growth-Income 2/9/93 21.59 30.59 28.57 29.01 20.48 20.68
Growth Opportunities+ N/A N/A N/A N/A N/A N/A N/A
High-Yield Bond 2/9/93 -2.05 6.95 6.95 7.85 5.76 6.17
International Diversified Equities 10/31/94 16.05 25.05 11.50 12.27 10.41 11.05
International Growth and Income 6/2/97 15.73 24.73 N/A N/A 12.47 15.00
Marsico Growth++ N/A N/A N/A N/A N/A N/A N/A
MFS Growth and Income 2/9/93 -2.63 6.37 18.93 19.53 13.30 13.57
MFS Mid-Cap Growth 4/1/99 N/A N/A N/A N/A 57.29 66.29
MFS Total Return 10/31/94 -5.72 3.28 12.98 13.71 12.53 13.12
Putnam Growth 2/9/93 21.24 30.24 26.35 26.82 18.26 18.48
Real Estate 6/2/97 -16.14 -7.14 N/A N/A -7.13 -3.74
SunAmerica Balanced 6/3/96 12.88 21.88 N/A N/A 20.29 21.49
Technology+ N/A N/A N/A N/A N/A N/A N/A
Telecom Utility 6/3/96 -6.84 2.16 N/A N/A 11.34 12.80
Worldwide High Income 10/31/94 10.72 19.72 9.48 10.30 8.77 9.45
</TABLE>
+ Not available for sale until July 5, 2000.
++ Not available for sale until December 29, 2000.
POLARIS II
HYPOTHETICAL ADJUSTED HISTORICAL PERFORMANCE
CONTRACTS WITH THE PRINCIPAL REWARDS PROGRAM:
TOTAL ANNUAL RETURNS (IN PERCENT) FOR
PERIOD ENDING DECEMBER 31, 1999
<TABLE>
<CAPTION>
UNDERLYING FUND
VARIABLE PORTFOLIO INCEPTION DATE 10 YEAR SINCE FUND INCEPTION
------------------ --------------- ------- --------------------
<S> <C> <C> <C>
Capital Appreciation Portfolio 3/23/87 21.94 18.48
Government and Quality Bond Portfolio 8/13/84 6.05 7.53
Growth Portfolio 8/13/84 15.91 15.02
Natural Resource Portfolio 1/1/88 4.50 5.95
</TABLE>
8
<PAGE> 90
POLARISAMERICA
STANDARDIZED PERFORMANCE
TOTAL ANNUAL RETURN (IN PERCENT) FOR
PERIOD ENDING DECEMBER 31, 1999
(WITH/WITHOUT REDEMPTION)
<TABLE>
<CAPTION>
SEPARATE ACCOUNT 1 YEAR 5 YEAR SINCE INCEPTION
INCEPTION ----------------------- ------------------ ---------------------
VARIABLE PORTFOLIO DATE WITH WITHOUT WITH WITHOUT WITH WITHOUT
------------------ ------------- -------- ------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Government & Quality Bond 2/22/93 -10.15 -3.15 5.48 5.96 4.05 4.17
----------------------------------------------------------------------------------------------------------------------------
Emerging Markets 6/2/97 67.55 74.55 N/A N/A 0.92 2.80
Global Equities 2/9/93 21.87 28.87 18.10 18.40 15.10 15.16
International Growth and Income 6/2/97 15.29 22.29 N/A N/A 12.53 14.12
Aggressive Growth 6/3/96 74.80 81.80 N/A N/A 27.53 28.12
Blue Chip Growth+ 7/10/00 N/A N/A N/A N/A N/A N/A
Putnam Growth 2/9/93 20.69 27.69 26.08 26.32 18.08 18.13
Growth-Income 2/9/93 21.03 28.03 28.28 28.50 20.28 20.33
SunAmerica Balanced 6/3/96 12.49 19.49 N/A N/A 20.12 20.82
Global Bond 7/1/93 -9.57 -2.57 7.04 7.49 5.21 5.32
Nations Aggressive Growth* N/A N/A N/A N/A N/A N/A N/A
Nations Managed Index* N/A N/A N/A N/A N/A N/A N/A
Nations Value* N/A N/A N/A N/A N/A N/A N/A
Nations International Value* N/A N/A N/A N/A N/A N/A N/A
Nations Marsico Focused Equities* N/A N/A N/A N/A N/A N/A N/A
Nations Marsico Growth & Income* N/A N/A N/A N/A N/A N/A N/A
Nations High Yield Bond* N/A N/A N/A N/A N/A N/A N/A
</TABLE>
+ Not available for sale until July 5, 2000.
* Not available for sale until October 9, 2000.
POLARISAMERICA
HYPOTHETICAL ADJUSTED HISTORICAL PERFORMANCE
TOTAL ANNUAL RETURN (IN PERCENT) FOR
PERIOD ENDING DECEMBER 31, 1999
<TABLE>
<CAPTION>
UNDERLYING FUND
INCEPTION SINCE FUND
PORTFOLIO DATE 1 YEAR 10 YEAR INCEPTION
--------- --------- -------- -------- ---------
<S> <C> <C> <C> <C>
Government and Quality Bond 8/13/84 -3.15 5.84 7.39
Nations Aggressive Growth 3/27/98 8.14 N/A 7.59
Nations Managed Index 3/27/98 16.66 N/A 15.27
Nations Value 3/27/98 0.89 N/A 2.35
Nations International Value 7/3/00 N/A N/A N/A
Nations Marsico Focused Equities 3/27/98 51.67 N/A 46.22
Nations Marsico Growth & Income 3/27/98 53.49 N/A 41.72
Nations High Yield Bond 7/3/00 N/A N/A N/A
</TABLE>
9
<PAGE> 91
Total return for a Variable Portfolio represents a single computed
annual rate of return that, when compounded annually over a specified time
period (one, five, and ten years, or since inception) and applied to a
hypothetical initial investment in a contract funded by that Variable Portfolio
made at the beginning of the period, will produce the same contract value at the
end of the period that the hypothetical investment would have produced over the
same period. The total rate of return (T) is computed so that it satisfies the
formula:
For contracts without the Principal Rewards program:
n
P(1+T) = ERV
For contracts with the Principal Rewards Program
n
[P(1+E)](1+T) = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1, 5, or 10 year period as of
the end of the period (or fractional portion thereof).
E = Payment Enhancement Rate
The total return figures reflect the effect of recurring charges, as
discussed herein. Recurring charges are taken into account in a manner similar
to that used for the yield computations for the Cash Management Portfolio,
described above. As with the Cash Management Portfolio yield figures, total
return figures are derived from historical data and are not intended to be a
projection of future performance.
INCOME PAYMENTS
INITIAL MONTHLY INCOME PAYMENTS
The initial Income Payment is determined by applying separately that
portion of the contract value allocated to the fixed account options and the
Variable Portfolio(s), less any premium tax, and then applying it to the annuity
table specified in the contract for fixed and variable Income Payments. Those
tables are based on a set amount per $1,000 of proceeds applied. The appropriate
rate must be determined by the sex (except where, as in the case of certain
Qualified contracts and other employer-sponsored retirement plans, such
classification is not permitted) and age of the Annuitant and designated second
person, if any, and the annuity option selected.
The dollars applied are then divided by 1,000 and the result multiplied
by the appropriate annuity factor appearing in the table to compute the amount
of the first monthly Income Payment. In the case of a variable annuity, that
amount is divided by the value of an Annuity Unit as of the Annuity Date to
establish the number of Annuity Units representing each variable Income Payment.
The number of
10
<PAGE> 92
Annuity Units determined for the first variable Income Payment remains constant
for the second and subsequent monthly variable Income Payments, assuming that no
reallocation of contract values is made.
SUBSEQUENT MONTHLY PAYMENTS
For fixed Income Payments, the amount of the second and each subsequent
monthly Income Payment is the same as that determined above for the first
monthly payment.
For variable Income Payments, the amount of the second and each
subsequent monthly Income Payment is determined by multiplying the number of
Annuity Units, as determined in connection with the determination of the initial
monthly payment, above, by the Annuity Unit value as of the day preceding the
date on which each Income Payment is due.
INCOME PAYMENTS UNDER THE INCOME PROTECTOR FEATURE
If contract holders elect to begin Income Payments using the Income
Protector feature, the income benefit base is determined as described in the
prospectus. The initial Income Payment is determined by applying the income
benefit base to the annuity table specifically designated for use in conjunction
with the Income Protector feature, either in the contract or in the endorsement
to the contract. Those tables are based on a set amount per $1,000 of income
benefit base applied. The appropriate rate must be determined by the sex (except
where, as in the case of certain Qualified contracts and other
employer-sponsored retirement plans, such classification is not permitted) and
age of the Annuitant and designated second person, if any, and the Income Option
selected.
The income benefit base is applied then divided by 1,000 and the result
multiplied by the appropriate annuity factor appearing in the table to compute
the amount of the first monthly Income Payment. The amount of the second and
each subsequent income payment is the same as that determined above for the
first monthly payment.
ANNUITY UNIT VALUES
The value of an Annuity Unit is determined independently for each
Variable Portfolio.
The annuity tables contained in the contract are based on a 3.5% per
annum assumed investment rate. If the actual net investment rate experienced by
a Variable Portfolio exceeds 3.5%, variable Income Payments derived from
allocations to that Variable Portfolio will increase over time. Conversely, if
the actual rate is less than 3.5%, variable Income Payments will decrease over
time. If the net investment rate equals 3.5%, the variable Income Payments will
remain constant. If a higher assumed investment rate had been used, the initial
monthly payment would be higher, but the actual net investment rate would also
have to be higher in order for Income Payments to increase (or not to decrease).
The payee receives the value of a fixed number of Annuity Units each
month. The value of a fixed number of Annuity Units will reflect the investment
performance of the Variable Portfolios elected, and the amount of each Income
Payment will vary accordingly.
For each Variable Portfolio, the value of an Annuity Unit is determined
by multiplying the Annuity Unit value for the preceding month by the Net
Investment Factor for the month for which the
11
<PAGE> 93
Annuity Unit value is being calculated. The result is then multiplied by a
second factor which offsets the effect of the assumed net investment rate of
3.5% per annum which is assumed in the annuity tables contained in the contract.
NET INVESTMENT FACTOR
The Net Investment Factor ("NIF") is an index applied to measure the net
investment performance of a Variable Portfolio from one day to the next. The NIF
may be greater or less than or equal to one; therefore, the value of an Annuity
Unit may increase, decrease or remain the same.
The NIF for any Variable Portfolio for a certain month is determined by
dividing (a) by (b) where:
(a) is the Accumulation Unit value of the Variable Portfolio
determined as of the end of that month, and
(b) is the Accumulation Unit value of the Variable Portfolio
determined as of the end of the preceding month.
The NIF for a Variable Portfolio for a given month is a measure of the
net investment performance of the Variable Portfolio from the end of the prior
month to the end of the given month. A NIF of 1.000 results in no change; a NIF
greater than 1.000 results in an increase; and a NIF less than 1.000 results in
a decrease. The NIF is increased (or decreased) in accordance with the increases
(or decreases, respectively) in the value of a share of the underlying fund in
which the Variable Portfolio invests; it is also reduced by separate account
asset charges.
ILLUSTRATIVE EXAMPLE
Assume that one share of a given Variable Portfolio had an Accumulation
Unit value of $11.46 as of the close of the New York Stock Exchange ("NYSE") on
the last business day in September; that its Accumulation Unit value had been
$11.44 at the close of the NYSE on the last business day at the end of the
previous month. The NIF for the month of September is:
NIF = ($11.46/$11.44)
= 1.00174825
The change in Annuity Unit value for a Variable Portfolio from one month
to the next is determined in part by multiplying the Annuity Unit value at the
prior month end by the NIF for that Variable Portfolio for the new month. In
addition, however, the result of that computation must also be multiplied by an
additional factor that takes into account, and neutralizes, the assumed
investment rate of 3.5 percent per annum upon which the Income Payment tables
are based. For example, if the net investment rate for a Variable Portfolio
(reflected in the NIF) were equal to the assumed investment rate, the variable
Income Payments should remain constant (i.e., the Annuity Unit value should not
change). The monthly factor that neutralizes the assumed investment rate of 3.5
percent per annum is:
(1/12)
1/[(1.035) ] = 0.99713732
In the example given above, if the Annuity Unit value for the Variable
Portfolio was $10.103523
12
<PAGE> 94
on the last business day in August, the Annuity Unit value on the last business
day in September would have been:
$10.103523 x 1.00174825 x 0.99713732 = $10.092213
To determine the initial payment, the initial annuity payment for
variable annuitization is calculated based on our mortality expectations and an
assumed interest rate (AIR) of 3.5%. Thus the initial variable annuity payment
is the same as the initial payment for a fixed interest payout annuity
calculated at an effective rate of 3.5%.
The NIF measures the performance of the funds that are basis for the
amount of future annuity payments. This performance is compared to the AIR, and
if the growth in the NIF is the same as the AIR rate the payment remains the
same as the prior month. If the rate of growth of the NIF is different than the
AIR, then the payment is changed proportionately to the ratio (1+NIF) / (1+AIR),
calculated on a monthly basis. If the NIF is greater than the AIR, then this
proportion is less that one and payments are decreased.
VARIABLE INCOME PAYMENTS
ILLUSTRATIVE EXAMPLE
Assume that a male owner, P, owns a contract in connection with which P
has allocated all of his contract value to a single Variable Portfolio. P is
also the sole Annuitant and, at age 60, has elected to annuitize his contract
under Option 4, a Life Annuity With 120 Monthly Payments Guaranteed. As of the
last valuation preceding the Annuity Date, P's Account was credited with
7543.2456 Accumulation Units each having a value of $15.432655, (i.e., P's
account value is equal to 7543.2456 x $15.432655 = $116,412.31). Assume also
that the Annuity Unit value for the Variable Portfolio on that same date is
$13.256932, and that the Annuity Unit value on the day immediately prior to the
second Income Payment date is $13.327695.
P's first variable Income Payment is determined from the annuity factor
tables in P's contract, using the information assumed above. From these tables,
which supply monthly annuity factors for each $1,000 of applied contract value,
P's first variable Income Payment is determined by multiplying the factor of
$4.92 (Option 4 tables, male Annuitant age 60 at the Annuity Date) by the result
of dividing P's account value by $1,000:
First Payment = $4.92 x ($116,412.31/$1,000) = $572.75
The number of P's Annuity Units (which will be fixed; i.e., it will not
change unless he transfers his Account to another Account) is also determined at
this time and is equal to the amount of the first variable Income Payment
divided by the value of an Annuity Unit on the day immediately prior to
annuitization:
Annuity Units = $572.75/$13.256932 = 43.203812
P's second variable Income Payment is determined by multiplying the
number of Annuity Units by the Annuity Unit value as of the day immediately
prior to the second payment due date:
13
<PAGE> 95
Second Payment = 43.203812 x $13.327695 = $575.81
The third and subsequent variable Income Payments are computed in a
manner similar to the second variable Income Payment.
Note that the amount of the first variable Income Payment depends on the
contract value in the relevant Variable Portfolio on the Annuity Date and thus
reflects the investment performance of the Variable Portfolio net of fees and
charges during the Accumulation Phase. The amount of that payment determines the
number of Annuity Units, which will remain constant during the Annuity Phase
(assuming no transfers from the Variable Portfolio). The net investment
performance of the Variable Portfolio during the Annuity Phase is reflected in
continuing changes during this phase in the Annuity Unit value, which determines
the amounts of the second and subsequent variable Income Payments.
TAXES
GENERAL
Section 72 of the Internal Revenue Code of 1986, as amended (the "Code")
governs taxation of annuities in general. An owner is not taxed on increases in
the value of a contract until distribution occurs, either in the form of a
non-annuity distribution or as Income Payments under the annuity option elected.
For a lump sum payment received as a total surrender (total redemption), the
recipient is taxed on the portion of the payment that exceeds the cost basis of
the contract. For a payment received as a withdrawal (partial redemption),
federal tax liability is determined on a last-in, first-out basis, meaning
taxable income is withdrawn before the cost basis of the contract is withdrawn.
For contracts issued in connection with Nonqualified 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.
14
<PAGE> 96
An "eligible rollover distribution" is the estimated taxable portion of
any amount received by a covered employee from a plan qualified under Section
401(a) or 403(a) of the Code, or from a tax-sheltered annuity qualified under
Section 403(b) of the Code (other than (1) Income 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."
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
15
<PAGE> 97
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.
PARTIAL 1035 EXCHANGES
Section 1035 of the Code provides that an annuity contract may be
exchanged in a tax-free transaction for another annuity contract. Historically,
it was presumed that only the exchange of an entire contract, as opposed to a
partial exchange, would be accorded tax-free status. In 1998 in Conway vs.
Commissioner, the Tax Court held that the direct transfer of a portion of an
annuity contract into another annuity contract qualified as a non-taxable
exchange. On November 22, 1999, the Internal Revenue Service filed an Action on
Decision which indicated that it acquiesced in the Tax Court decision in
Conway. However, in its acquiesence with the decision of the Tax Court, the
Internal Revenue Service stated that it will challenge transactions where
taxpayers enter into a series of partial exchanges and annuitizations as part
of a design to avoid application of the 10% premature distribution penalty or
other limitations imposed on annuity contracts under Section 72 of the Code. In
the absence of further guidance from the Internal Revenue Service it is unclear
what specific types of partial exchange designs and transactions will be
challenged by the Internal Revenue Service. Due to the uncertainty in this area
owners should seek their own tax advice.
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 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
16
<PAGE> 98
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.
(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.
17
<PAGE> 99
(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.
FINANCIAL STATEMENTS
The audited consolidated financial statements of the Company as of
December 31, 1999, December 31, 1998 and September 30, 1998 and for the year
ended December 31, 1999, for the three months ended December 31, 1998 and for
each of the two fiscal years in the period ended September 30, 1998 are
presented herein to this Statement of Additional Information. The consolidated
financial statements of the Company should be considered only as bearing on the
ability of the Company to meet its obligation under the contracts for amounts
allocated to the 1, 3, 5, 7 or 10 year fixed account options and the DCA
accounts for 6-month and 1-year periods.
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 Polaris II 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. Sale of the PolarisAmerica contracts only recently began
until October 2000. Therefore, financial statements for Variable Separate
Account (portion relating to the PolarisAmerica Variable Annuity) are not yet
available.
PricewaterhouseCoopers LLP, 21650 Oxnard Street, Suite 1900, Woodland
Hills, California 91367, serves as the independent accountants for the Company.
The financial statements referred to above have been so included in reliance on
the report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
PricewaterhouseCoopers LLP will also serve as independent accountants for the
separate account.
18
<PAGE> 100
Report of Independent Accountants
To the Board of Directors and Shareholder of
Anchor National Life Insurance Company:
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income and comprehensive income and of cash flows
present fairly, in all material respects, the financial position of Anchor
National Life Insurance Company and its subsidiaries (the "Company") at December
31, 1999, December 31, 1998, and September 30, 1998, and the results of their
operations and their cash flows for the year ended December 31, 1999, for the
three months ended December 31, 1998 and for each of the two fiscal years in the
period ended September 30, 1998, in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with 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 provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Los Angeles, California
January 31, 2000
19
<PAGE> 101
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31, December 31, September 30,
1999 1998 1998
--------------- --------------- ---------------
<S> <C> <C> <C>
ASSETS
Investments:
Cash and short-term investments $ 475,162,000 $ 3,303,454,000 $ 333,735,000
Bonds, notes and redeemable
preferred stocks available for sale,
at fair value (amortized cost:
December 1999, $4,155,728,000;
December 1998, $4,252,740,000;
September 1998, $1,934,863,000) 3,953,169,000 4,248,840,000 1,954,754,000
Mortgage loans 674,679,000 388,780,000 391,448,000
Policy loans 260,066,000 320,688,000 11,197,000
Separate account seed money 141,499,000 --- ---
Common stocks available for sale,
at fair value (cost: December 1999,
$0; December 1998, $1,409,000;
September 1998, $115,000) --- 1,419,000 169,000
Partnerships 4,009,000 4,577,000 4,403,000
Real estate 24,000,000 24,000,000 24,000,000
Other invested assets 19,385,000 15,185,000 15,036,000
--------------- --------------- ---------------
Total investments 5,551,969,000 8,306,943,000 2,734,742,000
Variable annuity assets held in separate
accounts 19,949,145,000 13,767,213,000 11,133,569,000
Accrued investment income 60,584,000 73,441,000 26,408,000
Deferred acquisition costs 1,089,979,000 866,053,000 539,850,000
Receivable from brokers for sales of
securities 54,760,000 22,826,000 23,904,000
Income taxes currently receivable --- --- 5,869,000
Deferred income taxes 53,445,000 --- ---
Other assets 114,612,000 109,857,000 85,926,000
--------------- --------------- ---------------
TOTAL ASSETS $26,874,494,000 $23,146,333,000 $14,550,268,000
=============== =============== ===============
</TABLE>
See accompanying notes
20
<PAGE> 102
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEET (Continued)
<TABLE>
<CAPTION>
December 31, December 31, September 30,
1999 1998 1998
---------------- ---------------- ----------------
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDER'S EQUITY
Reserves, payables and accrued liabilities:
Reserves for fixed annuity contracts $ 3,254,895,000 $ 5,500,157,000 $ 2,189,272,000
Reserves for universal life insurance
contracts 1,978,332,000 2,339,194,000 ---
Reserves for guaranteed investment
contracts 305,570,000 306,461,000 282,267,000
Payable to brokers for purchases of
securities 139,000 --- 50,957,000
Income taxes currently payable 23,490,000 11,123,000 ---
Modified coinsurance deposit liability 140,757,000 --- ---
Other liabilities 249,224,000 160,020,000 106,594,000
---------------- ---------------- ----------------
Total reserves, payables
and accrued liabilities 5,952,407,000 8,316,955,000 2,629,090,000
---------------- ---------------- ----------------
Variable annuity liabilities related to
separate accounts 19,949,145,000 13,767,213,000 11,133,569,000
---------------- ---------------- ----------------
Subordinated notes payable to affiliates 37,816,000 209,367,000 39,182,000
---------------- ---------------- ----------------
Deferred income taxes --- 105,772,000 95,758,000
---------------- ---------------- ----------------
Shareholder's equity:
Common Stock 3,511,000 3,511,000 3,511,000
Additional paid-in capital 493,010,000 378,674,000 308,674,000
Retained earnings 551,158,000 366,460,000 332,069,000
Accumulated other comprehensive
income (loss) (112,553,000) (1,619,000) 8,415,000
---------------- ---------------- ----------------
Total shareholder's equity 935,126,000 747,026,000 652,669,000
---------------- ---------------- ----------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 26,874,494,000 $ 23,146,333,000 $ 14,550,268,000
================ ================ ================
</TABLE>
See accompanying notes
21
<PAGE> 103
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
Years Ended September 30,
Year Ended Three Months Ended --------------------------------
December 31, 1999 December 31, 1998 1998 1997
----------------- ------------------- ------------ ---------------
<S> <C> <C> <C> <C>
Investment income $ 521,953,000 $ 54,278,000 $ 221,966,000 $ 210,759,000
------------- ------------- ------------- -------------
Interest expense on:
Fixed annuity contracts (231,929,000) (22,828,000) (112,695,000) (109,217,000)
Universal life insurance
contracts (102,486,000) --- --- ---
Guaranteed investment
contracts (19,649,000) (3,980,000) (17,787,000) (22,650,000)
Senior indebtedness (199,000) (34,000) (1,498,000) (2,549,000)
Subordinated notes payable
to affiliates (3,474,000) (853,000) (3,114,000) (3,142,000)
------------- ------------- ------------- -------------
Total interest expense (357,737,000) (27,695,000) (135,094,000) (137,558,000)
------------- ------------- ------------- -------------
NET INVESTMENT INCOME 164,216,000 26,583,000 86,872,000 73,201,000
------------- ------------- ------------- -------------
NET REALIZED INVESTMENT
GAINS (LOSSES) (19,620,000) 271,000 19,482,000 (17,394,000)
------------- ------------- ------------- -------------
Fee income:
Variable annuity fees 306,417,000 58,806,000 200,867,000 139,492,000
Net retained commissions 51,039,000 11,479,000 48,561,000 39,143,000
Asset management fees 43,510,000 8,068,000 29,592,000 25,764,000
Universal life insurance
fees 23,290,000 --- --- ---
Surrender charges 17,137,000 3,239,000 7,404,000 5,529,000
Other fees 13,999,000 1,738,000 3,938,000 3,218,000
------------- ------------- ------------- -------------
TOTAL FEE INCOME 455,392,000 83,330,000 290,362,000 213,146,000
------------- ------------- ------------- -------------
GENERAL AND ADMINISTRATIVE
EXPENSES (154,665,000) (21,993,000) (96,102,000) (98,802,000)
------------- ------------- ------------- -------------
AMORTIZATION OF DEFERRED
ACQUISITION COSTS (116,840,000) (27,070,000) (72,713,000) (66,879,000)
------------- ------------- ------------- -------------
ANNUAL COMMISSIONS (40,760,000) (6,624,000) (18,209,000) (8,977,000)
------------- ------------- ------------- -------------
PRETAX INCOME 287,723,000 54,497,000 209,692,000 94,295,000
Income tax expense (103,025,000) (20,106,000) (71,051,000) (31,169,000)
------------- ------------- ------------- -------------
NET INCOME 184,698,000 34,391,000 138,641,000 63,126,000
------------- ------------- ------------- -------------
Other comprehensive income
(loss), net of tax:
Net unrealized gains (losses)
on debt and equity securities
available for sale:
Net unrealized gains
(losses) identified in
the current period (118,669,000) (10,249,000) (4,027,000) 16,605,000
Less reclassification
adjustment for net
realized (gains) losses
included in net income 7,735,000 215,000 (5,963,000) 7,321,000
------------- ------------- ------------- -------------
OTHER COMPREHENSIVE INCOME
(LOSS) (110,934,000) (10,034,000) (9,990,000) 23,926,000
------------- ------------- ------------- -------------
COMPREHENSIVE INCOME $ 73,764,000 $ 24,357,000 $ 128,651,000 $ 87,052,000
============= ============= ============= =============
</TABLE>
See accompanying notes
22
<PAGE> 104
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION> Year Ended September 30,
Year Ended Three Months Ended -------------------------------------
December 31, 1999 December 31, 1998 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 184,698,000 $ 34,391,000 $ 138,641,000 $ 63,126,000
Adjustments to reconcile net
income to net cash provided
by operating activities:
Interest credited to:
Fixed annuity contracts 231,929,000 22,828,000 112,695,000 109,217,000
Universal life insurance
contracts 102,486,000 --- --- ---
Guaranteed investment
contracts 19,649,000 3,980,000 17,787,000 22,650,000
Net realized investment
losses (gains) 19,620,000 (271,000) (19,482,000) 17,394,000
Amortization (accretion) of
net premiums (discounts)
on investments (18,343,000) (1,199,000) 447,000 (18,576,000)
Universal life insurance
fees (23,290,000) --- --- ---
Amortization of goodwill 776,000 356,000 1,422,000 1,187,000
Provision for deferred
income taxes (100,013,000) 15,945,000 34,087,000 (16,024,000)
Change in:
Accrued investment income 9,155,000 (1,512,000) (4,649,000) (2,084,000)
Deferred acquisition costs (208,228,000) (34,328,000) (160,926,000) (113,145,000)
Other assets (5,661,000) (21,070,000) (19,374,000) (14,598,000)
Income taxes currently
payable 12,367,000 16,992,000 (38,134,000) 10,779,000
Other liabilities 49,504,000 5,617,000 (2,248,000) 14,187,000
Other, net 15,087,000 5,510,000 (5,599,000) 418,000
--------------- --------------- --------------- ---------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 289,736,000 47,239,000 54,667,000 74,531,000
--------------- --------------- --------------- ---------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of:
Bonds, notes and redeemable
preferred stocks (4,130,682,000) (392,515,000) (1,970,502,000) (2,566,211,000)
Mortgage loans (331,398,000) (4,962,000) (131,386,000) (266,771,000)
Other investments, excluding
short-term investments (227,268,000) (1,992,000) --- (75,556,000)
Sales of:
Bonds, notes and redeemable
preferred stocks 2,660,931,000 265,039,000 1,602,079,000 2,299,063,000
Other investments, excluding
short-term investments 65,395,000 142,000 42,458,000 6,421,000
Redemptions and maturities of:
Bonds, notes and redeemable
preferred stocks 1,274,764,000 37,290,000 424,393,000 376,847,000
Mortgage loans 46,760,000 7,699,000 80,515,000 25,920,000
Other investments, excluding
short-term investments 33,503,000 853,000 67,213,000 23,940,000
Cash and short-term investments
acquired in coinsurance
transaction with MBL Life
Assurance Corporation --- 3,083,211,000 --- ---
Short-term investments
transferred to First
SunAmerica Life Insurance
Company in assumption
reinsurance transaction with
MBL Life Assurance Corporation (371,634,000) --- --- ---
--------------- --------------- --------------- ---------------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES (979,629,000) 2,994,765,000 114,770,000 (176,347,000)
--------------- --------------- --------------- ---------------
</TABLE>
23
<PAGE> 105
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
<TABLE>
<CAPTION> Year Ended September 30,
Year Ended Three Months Ended -------------------------------------
December 31, 1999 December 31, 1998 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES:
Premium receipts on:
Fixed annuity contracts $ 2,016,851,000 $ 351,616,000 $ 1,512,994,000 $ 1,097,937,000
Universal life insurance
contracts 78,864,000 --- --- ---
Guaranteed investment
contracts --- --- 5,619,000 55,000,000
Net exchanges from the fixed
accounts of variable annuity
contracts (1,821,324,000) (448,762,000) (1,303,790,000) (620,367,000)
Withdrawal payments on:
Fixed annuity contracts (2,232,374,000) (41,554,000) (191,690,000) (242,589,000)
Universal life insurance
contracts (81,634,000) --- --- ---
Guaranteed investment
contracts (19,742,000) (3,797,000) (36,313,000) (198,062,000)
Claims and annuity payments on:
Fixed annuity contracts (46,578,000) (9,333,000) (40,589,000) (35,731,000)
Universal life insurance
contracts (158,043,000) --- --- ---
Net receipts from (repayments
of) other short-term
financings (129,512,000) 9,545,000 (10,944,000) 34,239,000
Net receipt/(payment) related
to a modified coinsurance
transaction 140,757,000 (170,436,000) 166,631,000 ---
Receipts from issuance of
subordinated note payable
to affiliate --- 170,436,000 --- ---
Net of capital contributions
and return of capital 114,336,000 70,000,000 --- 28,411,000
Dividends paid --- --- (51,200,000) (25,500,000)
--------------- --------------- --------------- ---------------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES (2,138,399,000) (72,285,000) 50,718,000 93,338,000
--------------- --------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH
AND SHORT-TERM INVESTMENTS (2,828,292,000) 2,969,719,000 220,155,000 (8,478,000)
CASH AND SHORT-TERM INVESTMENTS
AT BEGINNING OF PERIOD 3,303,454,000 333,735,000 113,580,000 122,058,000
--------------- --------------- --------------- ---------------
CASH AND SHORT-TERM INVESTMENTS
AT END OF PERIOD $ 475,162,000 $ 3,303,454,000 $ 333,735,000 $ 113,580,000
=============== =============== =============== ===============
SUPPLEMENTAL CASH FLOW
INFORMATION:
Interest paid on indebtedness $ 3,787,000 $ 1,169,000 $ 3,912,000 $ 7,032,000
=============== =============== =============== ===============
Net income taxes paid
(refunded) $ 190,126,000 $ (12,302,000) $ 74,932,000 $ 36,420,000
=============== =============== =============== ===============
</TABLE>
See accompanying notes
24
<PAGE> 106
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
Anchor National Life Insurance Company, including its wholly owned
subsidiaries, (the "Company") is an Arizona-domiciled life insurance
company which conducts its business through three segments: annuity
operations, asset management operations and broker-dealer operations.
Annuity operations include the sale and administration of deposit-type
insurance contracts, including fixed and variable annuities, universal
life contracts and guaranteed investment contracts. Asset management
operations, which include the distribution and management of mutual
funds, are conducted by SunAmerica Asset Management Corp. Broker-dealer
operations include the sale of securities and financial services
products, and are conducted by Royal Alliance Associates, Inc.
The Company is an indirect wholly owned subsidiary of American
International Group, Inc. ("AIG"), an international insurance and
financial services holding 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 date 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. ("SunAmerica").
The operations of the Company are influenced by many factors, including
general economic conditions, monetary and fiscal policies of the federal
government, and policies of state and other regulatory authorities. The
level of sales of the Company's financial products is influenced by many
factors, including general market rates of interest, the strength,
weakness and volatility of equity markets, and terms and conditions of
competing financial products. The Company is exposed to the typical
risks normally associated with a portfolio of fixed-income securities,
namely interest rate, option, liquidity and credit risk. The Company
controls its exposure to these risks by, among other things, closely
monitoring and matching the duration of its assets and liabilities,
monitoring and limiting prepayment and extension risk in its portfolio,
maintaining a large percentage of its portfolio in highly liquid
securities, and engaging in a disciplined process of underwriting,
reviewing and monitoring credit risk. The Company also is exposed to
market risk, as market volatility may result in reduced fee income in
the case of assets managed in mutual funds and held in separate
accounts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION: The accompanying consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles and include the accounts of the Company and all of
its wholly owned subsidiaries. All significant intercompany accounts and
transactions are eliminated in consolidation. Certain items have been
reclassified to conform to the current period's presentation.
25
<PAGE> 107
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Under generally accepted accounting principles, premiums collected on
the non-traditional life and annuity insurance products, such as those
sold by the Company, are not reflected as revenues in the Company's
statement of earnings, as they are recorded directly to policyholders
liabilities upon receipt.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and
assumptions that affect the amounts reported in the financial statements
and the accompanying notes. Actual results could differ from those
estimates.
INVESTED ASSETS: Cash and short-term investments primarily include cash,
commercial paper, money market investments, repurchase agreements and
short-term bank participations. All such investments are carried at cost
plus accrued interest, which approximates fair value, have maturities of
three months or less and are considered cash equivalents for purposes of
reporting cash flows.
Bonds, notes and redeemable preferred stocks available for sale and
common stocks are carried at aggregate fair value and changes in
unrealized gains or losses, net of tax, are credited or charged directly
to shareholder's equity. Bonds, notes and redeemable preferred stocks
are reduced to estimated net realizable value when necessary for
declines in value considered to be other than temporary. Estimates of
net realizable value are subjective and actual realization will be
dependent upon future events.
Mortgage loans are carried at amortized unpaid balances, net of
provisions for estimated losses. Policy loans are carried at unpaid
balances. Separate account seed money consists of seed money for mutual
funds used as investment vehicles for the Company's variable annuity
separate accounts and is valued at market. Limited partnerships are
accounted for by the cost method of accounting. Real estate is carried
at cost, reduced by impairment provisions. Other invested assets include
collateralized bond obligations.
Realized gains and losses on the sale of investments are recognized in
operations at the date of sale and are determined by using the specific
cost identification method. Premiums and discounts on investments are
amortized to investment income by using the interest method over the
contractual lives of the investments.
INTEREST RATE SWAP AGREEMENTS: The net differential to be paid or
received on interest rate swap agreements ("Swap Agreements") entered
into to reduce the impact of changes in interest rates is recognized
over the lives of the agreements, and such differential is classified as
Investment Income or Interest Expense in the income statement.
Initially, Swap Agreements are designated as hedges and, therefore, are
not marked to market. However, when a hedged asset/liability is sold or
repaid before the related Swap Agreement matures, the Swap Agreement is
marked to market and any gain/loss is classified with any gain/loss
realized on the disposition of the hedged asset/liability. Subsequently,
the Swap Agreement is marked to market and the resulting change in fair
value is included in Investment Income in the income
26
<PAGE> 108
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
statement. When a Swap Agreement that is designated as a hedge is
terminated before its contractual maturity, any resulting gain/loss is
credited/charged to the carrying value of the asset/liability that it
hedged and is treated as a premium/discount for the remaining life of
the asset/liability.
DEFERRED ACQUISITION COSTS: Policy acquisition costs are deferred and
amortized, with interest, in relation to the incidence of estimated
gross profits to be realized over the estimated lives of the annuity
contracts. Estimated gross profits are composed of net interest income,
net realized investment gains and losses, variable annuity fees,
universal life insurance fees, surrender charges and direct
administrative expenses. Costs incurred to sell mutual funds are also
deferred and amortized over the estimated lives of the funds obtained.
Deferred acquisition costs ("DAC") consist of commissions and other
costs that vary with, and are primarily related to, the production or
acquisition of new business.
As debt and equity securities available for sale are carried at
aggregate fair value, an adjustment is made to DAC equal to the change
in amortization that would have been recorded if such securities had
been sold at their stated aggregate fair value and the proceeds
reinvested at current yields. The change in this adjustment, net of tax,
is included with the change in accumulated other comprehensive
income/(loss) that is credited or charged directly to shareholder's
equity. DAC has been increased by $29,400,000 at December 31, 1999,
increased by $1,400,000 at December 31, 1998, and decreased by
$7,000,000 at September 30, 1998 for this adjustment.
VARIABLE ANNUITY ASSETS AND LIABILITIES: The assets and liabilities
resulting from the receipt of variable annuity premiums are segregated
in separate accounts. The Company receives administrative fees for
managing the funds and other fees for assuming mortality and certain
expense risks. Such fees are included in Variable Annuity Fees in the
income statement.
GOODWILL: Goodwill, amounting to $22,206,000 at December 31, 1999, is
amortized by using the straight-line method over periods averaging 25
years and is included in Other Assets in the balance sheet. Goodwill is
evaluated for impairment when events or changes in economic conditions
indicate that the carrying amount may not be recoverable.
CONTRACTHOLDER RESERVES: Contractholder reserves for fixed annuity
contracts, universal life insurance contracts and guaranteed investment
contracts are accounted for as investment-type contracts in accordance
with Statement of Financial Accounting Standards No. 97, "Accounting and
Reporting by Insurance Enterprises for Certain Long-Duration Contracts
and for Realized Gains and Losses from the Sale of Investments," and are
recorded at accumulated value (premiums received, plus accrued interest,
less withdrawals and assessed fees).
MODIFIED COINSURANCE DEPOSIT LIABILITY: Cash received as part of the
modified coinsurance transaction described in Note 8 is recorded as a
deposit liability.
27
<PAGE> 109
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
FEE INCOME: Variable annuity fees, asset management fees, universal life
insurance fees and surrender charges are recorded in income as earned.
Net retained commissions are recognized as income on a trade date basis.
INCOME TAXES: The Company files as a "life insurance company" under the
provisions of the Internal Revenue Code of 1986. Its federal income tax
return is consolidated with those of its direct parent, SunAmerica Life
Insurance Company (the "Parent"), and its affiliate, First SunAmerica
Life Insurance Company. Income taxes have been calculated as if the
Company filed a separate return. Deferred income tax assets and
liabilities are recognized based on the difference between financial
statement carrying amounts and income tax bases of assets and
liabilities using enacted income tax rates and laws.
RECENTLY ISSUED ACCOUNTING STANDARDS: In June 1998, the FASB issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133
addresses the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, and hedging
activities. SFAS 133 was postponed by SFAS 137, and now will be
effective for the Company as of January 1, 2001. Therefore, it is not
included in the accompanying financial statements. The Company has not
completed its analysis of the effect of SFAS 133, but management
believes that it will not have a material impact on the Company's
results of operations, financial condition or liquidity.
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information," was adopted for the
year ended December 31, 1999 and is included in Note 14 of the
accompanying financial statements.
3. FISCAL YEAR CHANGE
Effective December 31, 1998, the Company changed its fiscal year end
from September 30 to December 31. Accordingly, the consolidated
financial statements include the results of operations and cash flows
for the three-month transition period ended December 31, 1998. Such
results are not necessarily indicative of operations for a full year.
The consolidated financial statements as of and for the three months
ended December 31, 1998 were originally filed as the Company's unaudited
Transition Report on Form 10-Q.
Results for the comparable prior year period are summarized below.
<TABLE>
<CAPTION>
Three Months Ended
December 31, 1997
<S> <C>
Investment income 59,855,000
Net investment income 26,482,000
Net realized investment gains 20,935,000
Total fee income 63,984,000
Pretax income 67,654,000
Net income 44,348,000
==========
</TABLE>
28
<PAGE> 110
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. ACQUISITION
On December 31, 1998, the Company acquired the individual life business
and the individual and group annuity business of MBL Life Assurance
Corporation ("MBL Life") ("the Acquisition"), via a 100% coinsurance
transaction, for a cash purchase price of $128,420,000. As part of this
transaction, the Company acquired assets having an aggregate fair value
of $5,718,227,000, composed primarily of invested assets totaling
$5,715,010,000. Liabilities assumed in this acquisition totaled
$5,831,266,000, including $3,460,503,000 of fixed annuity reserves,
$2,308,742,000 of universal life reserves and $24,011,000 of guaranteed
investment contract reserves. The excess of the purchase price over the
fair value of net assets received amounted to $104,509,000 at December
31, 1999, after adjustment for the transfer of the New York business to
First SunAmerica Life Insurance Company (see below), and is included in
Deferred Acquisition Costs in the accompanying consolidated balance
sheet. The income statement for the year ended December 31, 1999
includes the impact of the Acquisition. On a pro forma basis, assuming
the Acquisition had been consummated on October 1, 1996, the beginning
of the prior-year periods discussed within, investment income would have
been $517,606,000 and net income would have been $158,887,000 for the
year ended September 30, 1998. For the year ended September 30, 1997,
investment income would have been $506,399,000 and net income would have
been $83,372,000.
Included in the block of business acquired from MBL Life were policies
whose owners are residents of New York State ("the New York Business").
On July 1, 1999, the New York Business was acquired by the Company's New
York affiliate, First SunAmerica Life Insurance Company ("FSA"), via an
assumption reinsurance agreement, and the remainder of the business
converted to assumption reinsurance in the Company, which superseded the
coinsurance agreement. As part of this transfer, invested assets equal
to $678,272,000, life reserves equal to $282,247,000, group pension
reserves equal to $406,118,000, and other net assets of $10,093,000 were
transferred to FSA.
The $128,420,000 purchase price was allocated between the Company and
FSA based on the estimated future gross profits of the two blocks of
business. The portion allocated to FSA was $10,000,000.
As part of the Acquisition, the Company received $242,473,000 from MBL
to pay policy enhancements guaranteed by the MBL Life rehabilitation
agreement to policyholders meeting certain requirements. A primary
requirement was that annuity policyholders must have converted their MBL
Life policy to a policy type currently offered by the Company or one of
its affiliates by December 31, 1999. The enhancements are to be credited
in four installments on January 1, 2000, June 30, 2001, June 30, 2002
and June 30, 2003, to eligible policies still active on each of those
dates. On December 31, 1999, the enhancement reserve for such payments
totaled $223,032,000, which includes interest accredited at 6.75% on the
original reserve. Of this amount, $69,836,000 was credited to
policyholders in February 2000 for the January 1, 2000 installment.
29
<PAGE> 111
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. INVESTMENTS
The amortized cost and estimated fair value of bonds, notes and
redeemable preferred stocks available for sale by major category follow:
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
-------------- --------------
<S> <C> <C>
AT DECEMBER 31, 1999:
Securities of the United States
Government $ 24,688,000 $ 22,884,000
Mortgage-backed securities 1,505,729,000 1,412,134,000
Securities of public utilities 114,933,000 107,596,000
Corporate bonds and notes 1,676,006,000 1,596,469,000
Redeemable preferred stocks 4,375,000 4,547,000
Other debt securities 829,997,000 809,539,000
-------------- --------------
Total $4,155,728,000 $3,953,169,000
============== ==============
AT DECEMBER 31, 1998:
Securities of the United States
Government $ 6,033,000 $ 6,272,000
Mortgage-backed securities 546,790,000 553,990,000
Securities of public utilities 208,074,000 205,119,000
Corporate bonds and notes 2,624,330,000 2,616,073,000
Redeemable preferred stocks 6,125,000 7,507,000
Other debt securities 861,388,000 859,879,000
-------------- --------------
Total $4,252,740,000 $4,248,840,000
============== ==============
AT SEPTEMBER 30, 1998:
Securities of the United States
Government $ 84,377,000 $ 88,239,000
Mortgage-backed securities 569,613,000 584,007,000
Securities of public utilities 108,431,000 106,065,000
Corporate bonds and notes 883,890,000 884,209,000
Redeemable preferred stocks 6,125,000 6,888,000
Other debt securities 282,427,000 285,346,000
-------------- --------------
Total $1,934,863,000 $1,954,754,000
============== ==============
</TABLE>
30
<PAGE> 112
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. INVESTMENTS (Continued)
The amortized cost and estimated fair value of bonds, notes and
redeemable preferred stocks available for sale by contractual maturity,
as of December 31, 1999, follow:
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
-------------- --------------
<S> <C> <C>
Due in one year or less $ 199,679,000 $ 199,198,000
Due after one year through
five years 552,071,000 530,289,000
Due after five years through
ten years 1,243,298,000 1,187,044,000
Due after ten years 654,951,000 624,504,000
Mortgage-backed securities 1,505,729,000 1,412,134,000
-------------- --------------
Total $4,155,728,000 $3,953,169,000
============== ==============
</TABLE>
Actual maturities of bonds, notes and redeemable preferred stocks will
differ from those shown above due to prepayments and redemptions.
31
<PAGE> 113
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. INVESTMENTS (Continued)
Gross unrealized gains and losses on bonds, notes and redeemable
preferred stocks available for sale by major category follow:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized
Gains Losses
------------- -------------
<S> <C> <C>
AT DECEMBER 31, 1999:
Securities of the United States
Government $ 47,000 $ (1,852,000)
Mortgage-backed securities 3,238,000 (96,832,000)
Securities of public utilities 13,000 (7,350,000)
Corporate bonds and notes 10,222,000 (89,758,000)
Redeemable preferred stocks 172,000 ---
Other debt securities 4,275,000 (24,734,000)
------------- -------------
Total $ 17,967,000 $(220,526,000)
============= =============
AT DECEMBER 31, 1998:
Securities of the United States
Government $ 239,000 $ ---
Mortgage-backed securities 9,398,000 (2,198,000)
Securities of public utilities 926,000 (3,881,000)
Corporate bonds and notes 22,227,000 (30,484,000)
Redeemable preferred stocks 1,382,000 ---
Other debt securities 2,024,000 (3,533,000)
------------- -------------
Total $ 36,196,000 $ (40,096,000)
============= =============
AT SEPTEMBER 30, 1998:
Securities of the United States
Government $ 3,862,000 $ ---
Mortgage-backed securities 15,103,000 (709,000)
Securities of public utilities 2,420,000 (4,786,000)
Corporate bonds and notes 31,795,000 (31,476,000)
Redeemable preferred stocks 763,000 ---
Other debt securities 5,235,000 (2,316,000)
------------- -------------
Total $ 59,178,000 $ (39,287,000)
============= =============
</TABLE>
There were no gross unrealized gains on equity securities available for
sale at December 31, 1999. Gross unrealized gains on equity securities
available for sale aggregated $10,000 and $54,000 at December 31, 1998
and September 30, 1998, respectively. There were no unrealized losses at
December 31, 1999, December 31, 1998, or September 30, 1998.
32
<PAGE> 114
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. INVESTMENTS (Continued)
Gross realized investment gains and losses on sales of investments are
as follows:
<TABLE>
<CAPTION>
Years Ended September 30,
Year Ended Three Months Ended -------------------------------
December 31, 1999 December 31, 1998 1998 1997
----------------- ------------------ ------------ ------------
<S> <C> <C> <C> <C>
BONDS, NOTES AND
REDEEMABLE PREFERRED
STOCKS:
Realized gains $ 8,333,000 $ 6,669,000 $ 28,086,000 $ 22,179,000
Realized losses (26,113,000) (5,324,000) (4,627,000) (25,310,000)
COMMON STOCKS:
Realized gains 4,239,000 12,000 337,000 4,002,000
Realized losses (11,000) (9,000) --- (312,000)
OTHER INVESTMENTS:
Realized gains --- 573,000 8,824,000 2,450,000
IMPAIRMENT WRITEDOWNS (6,068,000) (1,650,000) (13,138,000) (20,403,000)
------------ ------------ ------------ ------------
Total net realized
investment gains
and losses $(19,620,000) $ 271,000 $ 19,482,000 $(17,394,000)
============ ============ ============ ============
</TABLE>
The sources and related amounts of investment income are as follows:
<TABLE>
<CAPTION>
Years Ended September 30,
Year Ended Three Months Ended ---------------------------------
December 31,1999 December 31, 1998 1998 1997
---------------- ------------------ ------------- -------------
<S> <C> <C> <C> <C>
Short-term investments $ 61,764,000 $ 4,649,000 $ 12,524,000 $ 11,780,000
Bonds, notes and
redeemable preferred
stocks 348,373,000 39,660,000 156,140,000 163,038,000
Mortgage loans 47,480,000 7,904,000 29,996,000 17,632,000
Common stocks 7,000 --- 34,000 16,000
Real estate (525,000) 13,000 (467,000) (296,000)
Cost-method partnerships 6,631,000 352,000 24,311,000 6,725,000
Other invested assets 58,223,000 1,700,000 (572,000) 11,864,000
------------- ------------- ------------- -------------
Total investment
income $ 521,953,000 $ 54,278,000 $ 221,966,000 $ 210,759,000
============= ============= ============= =============
</TABLE>
Expenses incurred to manage the investment portfolio amounted to
$10,014,000 for the year ended December 31, 1999, $500,000 for the three
months ended December 31, 1998, $1,910,000 for the year ended September
30, 1998 and $2,050,000 for the year ended September 30, 1997, and are
included in General and Administrative Expenses in the income statement.
Investment expenses have increased significantly because the size of the
portfolio increased as a result of the Acquisition.
33
<PAGE> 115
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. INVESTMENTS (Continued)
At December 31, 1999, the following investments exceeded 10% of the
Company's consolidated shareholder's equity of $935,126,000:
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
------------ ------------
<S> <C> <C>
Provident Institutional Funds Inc.
Del Treasury Trust Fund 113,000,000 113,000,000
Salomon Smith Barney Repurchase
Agreement 97,000,000 97,000,000
------------ ------------
Total $210,000,000 $210,000,000
============ ============
</TABLE>
At December 31, 1999, mortgage loans were collateralized by properties
located in 29 states, with loans totaling approximately 36% of the
aggregate carrying value of the portfolio secured by properties located
in California and approximately 11% by properties located in New York.
No more than 8% of the portfolio was secured by properties in any other
single state.
At December 31, 1999, bonds, notes and redeemable preferred stocks
included $377,149,000 of bonds and notes not rated investment grade. The
Company had no material concentrations of non-investment-grade assets at
December 31, 1999.
At December 31, 1999, the carrying value of investments in default as to
the payment of principal or interest was $1,529,000, composed of
$870,000 of bonds and $659,000 of mortgage loans. Such nonperforming
investments had an estimated fair value of $872,000.
As a component of its asset and liability management strategy, the
Company utilizes Swap Agreements to match assets more closely to
liabilities. Swap Agreements are agreements to exchange with a
counterparty interest rate payments of differing character (for example,
variable-rate payments exchanged for fixed-rate payments) based on an
underlying principal balance (notional principal) to hedge against
interest rate changes. The Company typically utilizes Swap Agreements to
create a hedge that effectively converts floating-rate assets and
liabilities to fixed-rate instruments. At December 31, 1999, the Company
had one outstanding Swap Agreement with a notional principal amount of
$21,538,000, which matures in December 2024. The net interest paid
amounted to $215,000 for the year ended December 31, 1999, $54,000 for
the three months ended December 31, 1998, $278,000 for the year ended
September 30, 1998, and $125,000 for the year ended September 30, 1997,
and is included in Interest Expense on Guaranteed Investment Contracts
in the income statement.
At December 31, 1999, $7,418,000 of bonds, at amortized cost, were on
deposit with regulatory authorities in accordance with statutory
requirements.
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following estimated fair value disclosures are limited to
34
<PAGE> 116
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
reasonable estimates of the fair value of only the Company's financial
instruments. The disclosures do not address the value of the Company's
recognized and unrecognized nonfinancial assets (including its real
estate investments and other invested assets except for cost-method
partnerships) and liabilities or the value of anticipated future
business. The Company does not plan to sell most of its assets or settle
most of its liabilities at these estimated fair values.
The fair value of a financial instrument is the amount at which the
instrument could be exchanged in a current transaction between willing
parties, other than in a forced or liquidation sale. Selling expenses
and potential taxes are not included. The estimated fair value amounts
were determined using available market information, current pricing
information and various valuation methodologies. If quoted market prices
were not readily available for a financial instrument, management
determined an estimated fair value. Accordingly, the estimates may not
be indicative of the amounts the financial instruments could be
exchanged for in a current or future market transaction.
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable
to estimate that value:
CASH AND SHORT-TERM INVESTMENTS: Carrying value is considered to be a
reasonable estimate of fair value.
BONDS, NOTES AND REDEEMABLE PREFERRED STOCKS: Fair value is based
principally on independent pricing services, broker quotes and other
independent information.
MORTGAGE LOANS: Fair values are primarily determined by discounting
future cash flows to the present at current market rates, using expected
prepayment rates.
SEPARATE ACCOUNT SEED MONEY: Carrying value is the market value of the
underlying securities.
COMMON STOCKS: Fair value is based principally on independent pricing
services, broker quotes and other independent information.
COST-METHOD PARTNERSHIPS: Fair value of limited partnerships accounted
for by using the cost method is based upon the fair value of the net
assets of the partnerships as determined by the general partners.
VARIABLE ANNUITY ASSETS HELD IN SEPARATE ACCOUNTS: Variable annuity
assets are carried at the market value of the underlying securities.
RESERVES FOR FIXED ANNUITY CONTRACTS: Deferred annuity contracts are
assigned a fair value equal to current net surrender value. Annuitized
contracts are valued based on the present value of future cash flows at
current pricing rates.
RESERVES FOR UNIVERSAL LIFE INSURANCE CONTRACTS: Universal life and
35
<PAGE> 117
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
single life premium life contracts are assigned a fair value equal to
current net surrender value.
RESERVES FOR GUARANTEED INVESTMENT CONTRACTS: Fair value is based on the
present value of future cash flows at current pricing rates and is net
of the estimated fair value of a hedging Swap Agreement, determined from
independent broker quotes.
RECEIVABLE FROM/PAYABLE TO BROKERS FOR PURCHASES OF SECURITIES: Such
obligations represent transactions of a short-term nature for which the
carrying value is considered a reasonable estimate of fair value.
MODIFIED COINSURANCE DEPOSIT LIABILITY: Fair value is based on
discounting the liability by the appropriate cost of funds, and
therefore approximates carrying value.
VARIABLE ANNUITY LIABILITIES RELATED TO SEPARATE ACCOUNTS: Fair values
of contracts in the accumulation phase are based on net surrender
values. Fair values of contracts in the payout phase are based on the
present value of future cash flows at assumed investment rates.
SUBORDINATED NOTES PAYABLE TO AFFILIATES: Fair value is estimated based
on the quoted market prices for similar issues.
36
<PAGE> 118
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
The estimated fair values of the Company's financial instruments at
December 31, 1999, December 31, 1998 and September 30, 1998 compared
with their respective carrying values, are as follows:
<TABLE>
<CAPTION>
Carrying Fair
Value Value
--------------- ---------------
<S> <C> <C>
DECEMBER 31, 1999:
ASSETS:
Cash and short-term investments $ 475,162,000 $ 475,162,000
Bonds, notes and redeemable
preferred stocks 3,953,169,000 3,953,169,000
Mortgage loans 674,679,000 673,781,000
Separate account seed money 141,499,000 141,499,000
Common stocks --- ---
Cost-method partnerships 4,009,000 9,114,000
Variable annuity assets held in
separate accounts 19,949,145,000 19,949,145,000
Receivable from brokers for sales
of securities 54,760,000 54,760,000
LIABILITIES:
Reserves for fixed annuity contracts 3,254,895,000 3,053,660,000
Reserves for universal life insurance
contracts 1,978,332,000 1,853,442,000
Reserves for guaranteed investment
contracts 305,570,000 305,570,000
Payable to brokers for purchases
of securities 139,000 139,000
Modified coinsurance deposit
liability 140,757,000 140,757,000
Variable annuity liabilities related
to separate accounts 19,949,145,000 19,367,834,000
Subordinated notes payable to
affiliates 37,816,000 38,643,000
=============== ===============
DECEMBER 31, 1998:
ASSETS:
Cash and short-term investments $ 3,303,454,000 $ 3,303,454,000
Bonds, notes and redeemable
preferred stocks 4,248,840,000 4,248,840,000
Mortgage loans 388,780,000 411,230,000
Separate account seed money --- ---
Common stocks 1,419,000 1,419,000
Cost-method partnerships 4,577,000 12,802,000
Variable annuity assets held in
separate accounts 13,767,213,000 13,767,213,000
Receivable from brokers for sales
of securities 22,826,000 22,826,000
LIABILITIES:
Reserves for fixed annuity contracts 5,500,157,000 5,437,045,000
Reserves for universal life
insurance contracts 2,339,194,000 2,339,061,000
Reserves for guaranteed investment
contracts 306,461,000 306,461,000
Variable annuity liabilities related
to separate accounts 13,767,213,000 13,287,434,000
Subordinated notes payable to
affiliates 209,367,000 211,058,000
=============== ===============
</TABLE>
37
<PAGE> 119
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
<TABLE>
<CAPTION>
Carrying Fair
Value Value
--------------- ---------------
<S> <C> <C>
SEPTEMBER 30, 1998:
ASSETS:
Cash and short-term investments $ 333,735,000 $ 333,735,000
Bonds, notes and redeemable
preferred stocks 1,954,754,000 1,954,754,000
Mortgage loans 391,448,000 415,981,000
Separate account seed money --- ---
Common stocks 169,000 169,000
Cost-method partnerships 4,403,000 12,744,000
Variable annuity assets held in
separate accounts 11,133,569,000 11,133,569,000
Receivable from brokers for sales
of securities 23,904,000 23,904,000
LIABILITIES:
Reserves for fixed annuity contracts 2,189,272,000 2,116,874,000
Reserves for guaranteed investment
contracts 282,267,000 282,267,000
Payable to brokers for purchases
of securities 50,957,000 50,957,000
Variable annuity liabilities related
to separate accounts 11,133,569,000 10,696,607,000
Subordinated notes payable to
affiliates 39,182,000 41,272,000
=============== ===============
</TABLE>
7. SUBORDINATED NOTES PAYABLE TO AFFILIATES
At December 31, 1998, Subordinated Notes Payable to Affiliates included
a surplus note (the "Note") payable to its immediate parent, SunAmerica
Life Insurance Company (the "Parent"), for $170,436,000. On June 30,
1999, the Parent cancelled the Note and forgave the interest earned.
Funds received were reclassified to Additional Paid-in Capital in the
accompanying consolidated balance sheet.
Subordinated notes and accrued interest payable to affiliates totaled
$37,816,000 at interest rates ranging from 8% to 9% at December 31,
1999, and require principal payments of $5,400,000 in 2000, $10,000,000
in 2001 and $22,060,000 in 2002.
8. REINSURANCE
The business which was assumed from MBL Life is subject to existing
reinsurance ceded agreements. At December 31, 1998, the maximum
retention on any single life was $2,000,000, and a total credit of
$5,057,000 was taken against the life insurance reserves, representing
predominantly yearly renewable term reinsurance. In order to limit even
further the exposure to loss on any single insured and to recover an
additional portion of the benefits paid over such limits, the Company
entered into a reinsurance treaty effective January 1, 1999 under which
the Company retains no more than $100,000 of risk on any
38
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ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. REINSURANCE (Continued)
one insured life. At December 31, 1999, a total reserve credit of
$3,560,000 was taken against the life insurance reserves. With respect
to these coinsurance agreements, the Company could become liable for all
obligations of the reinsured policies if the reinsurers were to become
unable to meet the obligations assumed under the respective reinsurance
agreements. The Company monitors its credit exposure with respect to
these agreements. However, due to the high credit ratings of the
reinsurers, such risks are considered to be minimal.
On August 1, 1999, the Company entered into a modified coinsurance
transaction, approved by the Arizona Department of Insurance, which
involved the ceding of approximately $6,000,000,000 of variable
annuities to ANLIC Insurance Company (Hawaii), a non-affiliated stock
life insurer. The transaction is accounted for as reinsurance for
statutory reporting purposes. As part of the transaction, the Company
received cash in the amount of $150,000,000 and recorded a corresponding
deposit liability. As payments are made to the reinsurer, the deposit
liability is relieved. The cost of this program, $3,621,000 in 1999, is
classified as General and Administrative Expenses in the income
statement.
On August 11, 1998, the Company entered into a similar modified
coinsurance transaction, approved by the Arizona Department of
Insurance, which involved the ceding of approximately $6,000,000,000 of
variable annuities to ANLIC Insurance Company (Cayman), a Cayman Islands
stock life insurance company, effective December 31, 1997. As a part of
this transaction, the Company received cash amounting to approximately
$188,700,000, and recorded a corresponding reduction of DAC related to
the coinsured annuities. As payments were made to the reinsurer, the
reduction of DAC was relieved. Certain expenses related to this
transaction were charged directly to DAC amortization in the income
statement. The net effect of this transaction in the income statement
was not material.
On December 31, 1998, the Company recaptured this business. As part of
this recapture, the Company paid cash of $170,436,000 and recorded an
increase in DAC of $167,202,000 with the balance of $3,234,000 being
recorded as DAC amortization in the income statement.
9. CONTINGENT LIABILITIES
The Company has entered into four agreements in which it has provided
liquidity support for certain short-term securities of municipalities
and non-profit organizations by agreeing to purchase such securities in
the event there is no other buyer in the short-term marketplace. In
return the Company receives a fee. The maximum liability under these
guarantees is $359,400,000. The Company's Parent currently shares in the
liabilities and fees of two of these agreements. The Parent's share in
these liabilities will increase by $150,000,000 subsequent to December
31, 1999, and the Company's share will decrease to $209,400,000.
Management does not anticipate any material future losses with respect
to these liquidity support facilities.
39
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ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. CONTINGENT LIABILITIES (Continued)
The Company is involved in various kinds of litigation common to its
businesses. These cases are in various stages of development and, based
on reports of counsel, management believes that provisions made for
potential losses relating to such litigation are adequate and any
further liabilities and costs will not have a material adverse impact
upon the Company's financial position, results of operations or cash
flows.
The Company's current financial strength and counterparty credit ratings
from Standard & Poor's are based in part on a guarantee (the
"Guarantee") of the Company's insurance policy obligations by American
Home Assurance Company ("American Home"), a subsidiary of AIG, and a
member of an AIG intercompany pool, and the belief that the Company is
viewed as a strategically important member of AIG. The Guarantee is
unconditional and irrevocable, and policyholders have the right to
enforce the Guarantee directly against American Home.
The Company's current financial strength rating from Moody's is based in
part on a support agreement between the Company and AIG (the "Support
Agreement"), pursuant to which AIG has agreed that AIG will cause the
Company to maintain a policyholder's surplus of not less than $1 million
or such greater amount as shall be sufficient to enable the Company to
perform its obligations under any policy issued by it. The Support
Agreement also provides that if the Company needs funds not otherwise
available to it to make timely payment of its obligations under policies
issued by it, AIG will provide such funds at the request of the Company.
The Support Agreement is not a direct or indirect guarantee by AIG to
any person of any obligation of the Company. AIG may terminate the
Support Agreement with respect to outstanding obligations of the Company
only under circumstances where the Company attains, without the benefit
of the Support Agreement, a financial strength rating equivalent to that
held by the Company with the benefit of the support agreement.
Policyholders have the right to cause the Company to enforce its rights
against AIG and, if the Company fails or refuses to take timely action
to enforce the Support Agreement or if the Company defaults in any claim
or payment owed to such policyholder when due, have the right to enforce
the Support Agreement directly against AIG.
American Home does not publish financial statements, although it files
statutory annual and quarterly reports with the New York State Insurance
Department, where such reports are available to the public. AIG is a
reporting company under the Securities Exchange Act of 1934, and
publishes annual reports on Form 10-K and quarterly reports on Form
10-Q, which are available from the Securities and Exchange Commission.
40
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ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. SHAREHOLDER'S EQUITY
The Company is authorized to issue 4,000 shares of its $1,000 par value
Common Stock. At December 31, 1999, December 31, 1998 and September 30,
1998, 3,511 shares were outstanding.
Changes in shareholder's equity are as follows:
<TABLE>
<CAPTION>
Years Ended September 30,
Year Ended Three Months Ended ---------------------------------
December 31, 1999 December 31, 1998 1998 1997
----------------- ------------------ ------------- -------------
<S> <C> <C> <C> <C>
ADDITIONAL PAID-IN
CAPITAL:
Beginning balances $ 378,674,000 $ 308,674,000 $ 308,674,000 $ 280,263,000
Reclassification of
Note by the Parent 170,436,000 --- --- ---
Return of capital (170,500,000) --- --- ---
Capital contributions
received 114,250,000 70,000,000 --- 28,411,000
Contribution of
partnership
investment 150,000 --- --- ---
------------- ------------- ------------- -------------
Ending balances $ 493,010,000 $ 378,674,000 $ 308,674,000 $ 308,674,000
============= ============= ============= =============
RETAINED EARNINGS:
Beginning balances $ 366,460,000 $ 332,069,000 $ 244,628,000 $ 207,002,000
Net income 184,698,000 34,391,000 138,641,000 63,126,000
Dividends paid --- --- (51,200,000) (25,500,000)
------------- ------------- ------------- -------------
Ending balances $ 551,158,000 $ 366,460,000 $ 332,069,000 $ 244,628,000
============= ============= ============= =============
ACCUMULATED OTHER
COMPREHENSIVE INCOME
(LOSS):
Beginning balances $ (1,619,000) $ 8,415,000 $ 18,405,000 $ (5,521,000)
Change in net
unrealized gains
(losses) on debt
securities
available for sale (198,659,000) (23,791,000) (23,818,000) 57,463,000
Change in net
unrealized gains
(losses) on equity
securities
available for sale (10,000) (44,000) (950,000) (55,000)
Change in adjustment
to deferred
acquisition costs 28,000,000 8,400,000 9,400,000 (20,600,000)
Tax effects of net
changes $ 59,735,000 5,401,000 5,378,000 (12,882,000)
------------- ------------- ------------- -------------
Ending balances $(112,553,000) $ (1,619,000) $ 8,415,000 $ 18,405,000
============= ============= ============= =============
</TABLE>
41
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ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. SHAREHOLDER'S EQUITY (Continued)
Dividends that the Company may pay to its shareholder in any year
without prior approval of the Arizona Department of Insurance are
limited by statute. The maximum amount of dividends which can be paid to
shareholders of insurance companies domiciled in the state of Arizona
without obtaining the prior approval of the Insurance Commissioner is
limited to the lesser of either 10% of the preceding year's statutory
surplus or the preceding year's statutory net gain from operations less
equity in undistributed income or loss of subsidiaries included in net
investment income if, after paying the dividend, the Company's capital
and surplus would be adequate in the opinion of the Arizona Department
of Insurance. No dividends were paid in the year ended December 31, 1999
or the three months ended December 31, 1998. Dividends in the amounts of
$51,200,000 and $25,500,000 were paid on June 4, 1998 and April 1, 1997,
respectively. Dividends of $69,000,000 were paid on March 1, 2000.
Under statutory accounting principles utilized in filings with insurance
regulatory authorities, the Company's net income for the year ended
December 31, 1999 was $261,539,000. The statutory net loss for the year
ended December 31, 1998 was $98,766,000. The statutory net income for
the year ended December 31, 1997 totaled $74,407,000. The Company's
statutory capital and surplus totaled $694,621,000 at December 31, 1999,
$443,394,000 at December 31, 1998 and $537,542,000 at September 30,
1998.
On June 30, 1999, the Parent cancelled the Company's surplus note
payable of $170,436,000 and funds received were reclassified to
Additional Paid-in Capital in the accompanying consolidated balance
sheet. On September 9, 1999, the Company paid $170,500,000 to its Parent
as a return of capital. On September 14, 1999 and October 25, 1999, the
Parent contributed additional capital to the Company in the amounts of
$54,250,000 and $60,000,000, respectively. Also on December 31, 1999,
the Parent made a $150,000 contribution of partnership investments.
42
<PAGE> 124
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. INCOME TAXES
The components of the provisions for federal income taxes on pretax
income consist of the following:
<TABLE>
<CAPTION>
Net Realized
Investment
Gains (Losses) Operations Total
------------- ------------- -------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999:
Currently payable $ 6,846,000 $ 196,192,000 $ 203,038,000
Deferred (13,713,000) (86,300,000) (100,013,000)
------------- ------------- -------------
Total income tax expense
(benefit) $ (6,867,000) $ 109,892,000 $ 103,025,000
============= ============= =============
THREE MONTHS ENDED DECEMBER 31, 1998:
Currently payable $ 740,000 $ 3,421,000 $ 4,161,000
Deferred (620,000) 16,565,000 15,945,000
------------- ------------- -------------
Total income tax expense $ 120,000 $ 19,986,000 $ 20,106,000
============= ============= =============
YEAR ENDED SEPTEMBER 30, 1998:
Currently payable $ 4,221,000 $ 32,743,000 $ 36,964,000
Deferred (550,000) 34,637,000 34,087,000
------------- ------------- -------------
Total income tax expense $ 3,671,000 $ 67,380,000 $ 71,051,000
============= ============= =============
YEAR ENDED SEPTEMBER 30, 1997:
Currently payable $ (3,635,000) $ 50,828,000 $ 47,193,000
Deferred (2,258,000) (13,766,000) (16,024,000)
------------- ------------- -------------
Total income tax expense
(benefit) $ (5,893,000) $ 37,062,000 $ 31,169,000
============= ============= =============
</TABLE>
43
<PAGE> 125
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. INCOME TAXES (Continued)
Income taxes computed at the United States federal income tax rate of
35% and income taxes provided differ as follows:
<TABLE>
<CAPTION> Years Ended September 30,
Year Ended Three Months Ended ---------------------------------
December 31, 1999 December 31, 1998 1998 1997
---------------- ------------------ ------------- -------------
<S> <C> <C> <C> <C>
Amount computed at
statutory rate $ 100,703,000 $ 19,074,000 $ 73,392,000 $ 33,003,000
Increases (decreases)
resulting from:
Amortization of
differences between
book and tax bases
of net assets
acquired 609,000 146,000 460,000 666,000
State income taxes,
net of federal tax
benefit 7,231,000 1,183,000 5,530,000 1,950,000
Dividends-received
deduction (3,618,000) (345,000) (7,254,000) (4,270,000)
Tax credits (1,346,000) (1,296,000) (318,000)
Other, net (554,000) 48,000 219,000 138,000
------------- ------------- ------------- -------------
Total income tax
expense $ 103,025,000 $ 20,106,000 $ 71,051,000 $ 31,169,000
============= ============= ============= =============
</TABLE>
For United States federal income tax purposes, certain amounts from life
insurance operations are accumulated in a memorandum policyholders'
surplus account and are taxed only when distributed to shareholders or
when such account exceeds prescribed limits. The accumulated
policyholders' surplus was $14,300,000 at December 31, 1999. The Company
does not anticipate any transactions which would cause any part of this
surplus to be taxable.
44
<PAGE> 126
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. INCOME TAXES (Continued)
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
reporting purposes. The significant components of the liability for
Deferred Income Taxes are as follows:
<TABLE>
<CAPTION>
December 31, December 31, September 30,
1999 1998 1998
------------- ------------- -------------
<S> <C> <C> <C>
DEFERRED TAX LIABILITIES:
Investments $ 23,208,000 $ 18,174,000 $ 17,643,000
Deferred acquisition costs 272,697,000 222,943,000 223,392,000
State income taxes 5,203,000 3,143,000 2,873,000
Other liabilities 18,658,000 13,906,000 144,000
Net unrealized gains on debt
and equity securities
available for sale --- --- 4,531,000
------------- ------------- -------------
Total deferred tax liabilities $ 319,766,000 258,166,000 248,583,000
------------- ------------- -------------
DEFERRED TAX ASSETS:
Contractholder reserves (261,781,000) (148,587,000) (149,915,000)
Guaranty fund assessments (2,454,000) (2,935,000) (2,910,000)
Deferred income (48,371,000) --- ---
Other assets --- --- ---
Net unrealized losses on
debt and equity securities
available for sale (60,605,000) (872,000) ---
------------- ------------- -------------
Total deferred tax assets (373,211,000) (152,394,000) (152,825,000)
------------- ------------- -------------
Deferred income taxes $ (53,445,000) $ 105,772,000 $ 95,758,000
============= ============= =============
</TABLE>
12. COMPREHENSIVE INCOME
Effective October 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130") which requires the reporting of comprehensive income in addition
to net income from operations. Comprehensive income is a more inclusive
financial reporting methodology that includes disclosure of certain
financial information that historically has not been recognized in the
calculation of net income. The adoption of SFAS 130 did not have an
impact on the Company's results of operations, financial condition or
liquidity. Comprehensive income amounts for the prior years are
disclosed to conform to the current year's presentation.
45
<PAGE> 127
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. COMPREHENSIVE INCOME (Continued)
The before tax, after tax, and tax benefit (expense) amounts for each
component of the increase or decrease in unrealized losses or gains on
debt and equity securities available for sale for both the current and
prior periods are summarized below:
<TABLE>
<CAPTION>
Tax Benefit
Before Tax (Expense) Net of Tax
------------- ------------- -------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31,
1999:
Net unrealized losses on debt and
equity securities available
for sale identified in the
current period $(217,259,000) $ 76,041,000 $(141,218,000)
Increase in deferred acquisition
cost adjustment identified in
the current period 34,690,000 (12,141,000) 22,549,000
------------- ------------- -------------
Subtotal (182,569,000) 63,900,000 (118,669,000)
------------- ------------- -------------
Reclassification adjustment for:
Net realized losses included
in net income 18,590,000 (6,507,000) 12,083,000
Related change in deferred
acquisition costs (6,690,000) 2,342,000 (4,348,000)
------------- ------------- -------------
Total reclassification
adjustment 11,900,000 (4,165,000) 7,735,000
------------- ------------- -------------
Total other comprehensive
loss $(170,669,000) $ 59,735,000 $(110,934,000)
============= ============= =============
THREE MONTHS ENDED DECEMBER 31,
1998:
Net unrealized losses on debt
and equity securities available
for sale identified in the
current period $ (24,345,000) $ 8,521,000 $ (15,824,000)
Increase in deferred acquisition
cost adjustment identified in
the current period 8,579,000 (3,004,000) 5,575,000
------------- ------------- -------------
Subtotal (15,766,000) 5,517,000 (10,249,000)
------------- ------------- -------------
Reclassification adjustment for:
Net realized losses included
in net income 510,000 (179,000) 331,000
Related change in deferred
acquisition costs (179,000) 63,000 (116,000)
------------- ------------- -------------
Total reclassification
adjustment 331,000 (116,000) 215,000
------------- ------------- -------------
Total other comprehensive loss $ (15,435,000) $ 5,401,000 $ (10,034,000)
============= ============= =============
</TABLE>
46
<PAGE> 128
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. COMPREHENSIVE INCOME (Continued)
<TABLE>
<CAPTION>
Tax Benefit
Before Tax (Expense) Net of Tax
------------ ------------ ------------
<S> <C> <C> <C>
YEAR ENDED SEPTEMBER 30,
1998:
Net unrealized losses on debt and
equity securities available
for sale identified in the
current period $(10,281,000) $ 3,598,000 $ (6,683,000)
Increase in deferred acquisition
cost adjustment identified in
the current period 4,086,000 (1,430,000) 2,656,000
------------ ------------ ------------
Subtotal (6,195,000) 2,168,000 (4,027,000)
------------ ------------ ------------
Reclassification adjustment for:
Net realized losses included
in net income (14,487,000) 5,070,000 (9,417,000)
Related change in deferred
acquisition costs 5,314,000 (1,860,000) 3,454,000
------------ ------------ ------------
Total reclassification
adjustment (9,173,000) 3,210,000 (5,963,000)
------------ ------------ ------------
Total other comprehensive loss $(15,368,000) $ 5,378,000 $ (9,990,000)
============ ============ ============
YEAR ENDED SEPTEMBER 30,
1997:
Net unrealized gains on debt
and equity securities available
for sale identified in the
current period $ 40,575,000 $(14,201,000) $ 26,374,000
Decrease in deferred acquisition
cost adjustment identified in
the current period (15,031,000) 5,262,000 (9,769,000)
------------ ------------ ------------
Subtotal 25,544,000 (8,939,000) 16,605,000
------------ ------------ ------------
Reclassification adjustment for:
Net realized losses included
in net income 16,832,000 (5,891,000) 10,941,000
Related change in deferred
acquisition costs (5,569,000) 1,949,000 (3,620,000)
------------ ------------ ------------
Total reclassification
adjustment 11,263,000 (3,942,000) 7,321,000
------------ ------------ ------------
Total other comprehensive
income $ 36,807,000 $(12,881,000) $ 23,926,000
============ ============ ============
</TABLE>
47
<PAGE> 129
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. RELATED-PARTY MATTERS
The Company pays commissions to five affiliated companies: SunAmerica
Securities, Inc.; Advantage Capital Corp.; Financial Services Corp.;
Sentra Securities Corp.; and Spelman & Co. Inc. Commissions paid to
these broker-dealers totaled $37,435,000 in the year ended December 31,
1999, $6,977,000 in the three months ended December 31, 1998, and
$32,946,000 in the year ended September 30, 1998 and $25,492,000 in the
year ended September 30, 1997. These broker-dealers, when combined with
the Company's wholly owned broker-dealer, represent a significant
portion of the Company's business, amounting to approximately 35.6% of
premiums in the year ended December 31, 1999 and the three months ended
December 31, 1998, 33.6% in the year ended September 30, 1998 and 36.1%
in the year ended September 30, 1997.
The Company purchases administrative, investment management, accounting,
marketing and data processing services from its Parent and SunAmerica,
an indirect parent. Amounts paid for such services totaled $105,059,000
for the year ended December 31, 1999, $21,593,000 for the three months
ended December 31, 1998, $84,975,000 for the year ended September 30,
1998 and $86,116,000 for the year ended September 30, 1997. The
marketing component of such costs during these periods amounted to
$53,385,000, $9,906,000, $39,482,000 and $31,968,000, respectively, and
are deferred and amortized as part of Deferred Acquisition Costs. The
other components of such costs are included in General and
Administrative Expenses in the income statement.
At December 31, 1999 and 1998, the Company held bonds with a fair value
of $50,000 and $84,965,000, respectively, which were issued by its
affiliate, International Lease Finance Corp. The amortized cost of these
bonds is equal to the fair value. At September 30, 1998 and 1997, the
Company held no investments issued by any of its affiliates.
During the year ended December 31, 1999, the Company transferred
short-term investments and bonds to FSA with an aggregate fair value of
$634,596,000 as part of the transfer of the New York Business from the
Acquisition (See Note 4). The Company recorded a net realized loss of
$5,144,000 on the transfer of these assets.
During the year ended December 31, 1999, the Company purchased certain
invested assets from SunAmerica for cash equal to their current market
value of $161,159,000.
For the three months ended December 31, 1998, the Company made no
purchases or sales of invested assets from or to the Parent or its
affiliates.
During the year ended September 30, 1998, the Company sold various
invested assets to SunAmerica for cash equal to their current market
value of $64,431,000. The Company recorded a net gain aggregating
$16,388,000 on such transactions.
During the year ended September 30, 1998, the Company purchased certain
invested assets from SunAmerica, the Parent and CalAmerica Life
Insurance Company ("CalAmerica"), a wholly-owned subsidiary of the
Parent that has since merged into the Parent, for cash equal to their
current market value which aggregated $20,666,000, $10,468,000
48
<PAGE> 130
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. RELATED-PARTY MATTERS (Continued)
and $61,000, respectively.
During the year ended September 30, 1997, the Company sold various
invested assets to the Parent and CalAmerica for cash equal to their
current market value of $15,776,000 and $15,000, respectively. The
Company recorded a net gain aggregating $276,000 on such transactions.
During the year ended September 30, 1997, the Company purchased certain
invested assets from the Parent and CalAmerica for cash equal to their
current market value of $8,717,000 and $284,000, respectively.
14. BUSINESS SEGMENTS
Effective January 1, 1999, the Company adopted Statement of Financial
Accounting Standards No. 131 ("SFAS 131"), "Disclosures about Segments
of an Enterprise and Related Information," which requires the reporting
of certain financial information by business segment. For the purpose of
providing segment information, the Company has three business segments:
annuity operations, asset management operations and broker-dealer
operations. The annuity operations focus primarily on the marketing of
variable annuity products and the administration of the universal life
business acquired from MBL Life in 1998 (See Note 4). The Company's
variable annuity products offer investors a broad spectrum of fund
alternatives, with a choice of investment managers, as well as
guaranteed fixed-rate account options. The Company earns fee income on
investments in the variable options and net investment income on the
fixed-rate options. The asset management operations are conducted by the
Company's registered investment advisor subsidiary, SunAmerica Asset
Management Corp. ("SunAmerica Asset Management"), and its related
distributor. SunAmerica Asset Management earns fee income by
distributing and managing a diversified family of mutual funds, by
managing certain subaccounts within the Company's variable annuity
products and by providing professional management of individual,
corporate and pension plan portfolios. The broker-dealer operations are
conducted by the Company's broker-dealer subsidiary, Royal Alliance
Associates, Inc. ("Royal"), which sells proprietary annuities and mutual
funds, as well as a full range of non-proprietary investment products.
49
<PAGE> 131
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. BUSINESS SEGMENTS (Continued)
Summarized data for the Company's business segments follow:
<TABLE>
<CAPTION>
Asset Broker
Annuity Management Dealer
Operations Operations Operations Total
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999:
Total assets $ 26,649,310,000 $ 150,966,000 $ 74,218,000 $ 26,874,494,000
Expenditures for long-
lived assets --- 2,563,000 2,728,000 5,291,000
Investment in subsidiaries --- --- --- ---
Revenue from external
customers 790,697,000 54,652,000 41,185,000 886,534,000
Intersegment revenue --- 62,998,000 8,193,000 71,191,000
---------------- ---------------- ---------------- ----------------
Total revenue 790,697,000 117,650,000 49,378,000 957,725,000
================ ================ ================ ================
Investment income 511,914,000 9,072,000 967,000 521,953,000
Interest expense (354,263,000) (3,085,000) (389,000) (357,737,000)
Depreciation and
amortization expense (95,408,000) (23,249,000) (3,234,000) (121,891,000)
Income from unusual
transactions --- --- --- ---
Pretax income 199,333,000 67,779,000 20,611,000 287,723,000
Income tax expense (65,445,000) (28,247,000) (9,333,000) (103,025,000)
Income from extraordinary
items --- --- --- ---
Net income $ 133,888,000 $ 39,532,000 $ 11,278,000 $ 184,698,000
================ ================ ================ ================
Significant non-cash
items $ --- $ --- $ --- $ ---
================ ================ ================ ================
</TABLE>
50
<PAGE> 132
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. BUSINESS SEGMENTS (Continued)
<TABLE>
<CAPTION>
Asset Broker-
Annuity Management Dealer
Operations Operations Operations Total
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
THREE MONTHS ENDED
DECEMBER 31, 1998:
Total assets $ 22,982,323,000 $ 104,473,000 $ 59,537,000 $ 23,146,333,000
Expenditures for long-
lived assets --- 328,000 1,005,000 1,333,000
Investment in subsidiaries --- --- --- ---
Revenue from external
customers 103,626,000 11,103,000 9,605,000 124,334,000
Intersegment revenue --- 11,871,000 1,674,000 13,545,000
---------------- ---------------- ---------------- ----------------
Total revenue 103,626,000 22,974,000 11,279,000 137,879,000
================ ================ ================ ================
Investment income 53,149,000 971,000 158,000 54,278,000
Interest expense (26,842,000) (752,000) (101,000) (27,695,000)
Depreciation and
amortization expense (23,236,000) (4,204,000) (561,000) (28,001,000)
Income from unusual
transactions --- --- --- ---
Pretax income 36,961,000 13,092,000 4,444,000 54,497,000
Income tax expense (12,978,000) (5,181,000) (1,947,000) (20,106,000)
Income from extraordinary
items --- --- --- ---
Net income $ 23,983,000 $ 7,911,000 $ 2,497,000 $ 34,391,000
================ ================ ================ ================
Significant non-cash
item $ --- $ --- $ --- $ ---
================ ================ ================ ================
</TABLE>
51
<PAGE> 133
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. BUSINESS SEGMENTS (Continued)
<TABLE>
<CAPTION>
Asset Broker-
Annuity Management Dealer
Operations Operations Operations Total
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
YEAR ENDED SEPTEMBER 30, 1998:
Total assets $ 14,389,922,000 $ 104,476,000 $ 55,870,000 $ 14,550,268,000
Expenditures for long-
lived assets --- 477,000 5,289,000 5,766,000
Investment in subsidiaries --- --- --- ---
Revenue from external
customers 410,011,000 34,396,000 39,729,000 484,136,000
Intersegment revenue --- 40,040,000 7,634,000 47,674,000
---------------- ---------------- ---------------- ----------------
Total revenue 410,011,000 74,436,000 47,363,000 531,810,000
================ ================ ================ ================
Investment income 218,044,000 2,839,000 1,083,000 221,966,000
Interest expense (131,980,000) (2,709,000) (405,000) (135,094,000)
Depreciation and
amortization expense (60,731,000) (14,780,000) (1,770,000) (77,281,000)
Income from unusual
transactions --- --- --- ---
Pretax income 148,084,000 39,207,000 22,401,000 209,692,000
Income tax expense (44,706,000) (15,670,000) (10,675,000) (71,051,000)
Income from extraordinary
items --- --- --- ---
Net income $ 103,378,000 $ 23,537,000 $ 11,726,000 $ 138,641,000
================ ================ ================ ================
Significant non-cash
items $ --- $ --- $ --- $ ---
================ ================ ================ ================
</TABLE>
52
<PAGE> 134
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. BUSINESS SEGMENTS (Continued)
<TABLE>
<CAPTION>
Asset Broker-
Annuity Management Dealer
Operations Operations Operations Total
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
YEAR ENDED SEPTEMBER 30, 1997:
Total assets $ 12,440,311,000 $ 81,518,000 $ 51,400,000 $ 12,573,229,000
Expenditures for long-
lived assets --- 804,000 4,527,000 5,331,000
Investment in subsidiaries --- --- --- ---
Revenue from external
customers 317,061,000 28,655,000 31,678,000 377,394,000
Intersegment revenue --- 22,790,000 6,327,000 29,117,000
---------------- ---------------- ---------------- ----------------
Total revenue 317,061,000 51,445,000 38,005,000 406,511,000
================ ================ ================ ================
Investment income 208,382,000 1,445,000 932,000 210,759,000
Interest expense (134,416,000) (2,737,000) (405,000) (137,558,000)
Depreciation and
amortization expense (55,675,000) (16,357,000) (689,000) (72,721,000)
Income from unusual
transactions --- --- --- ---
Pretax income 58,291,000 19,299,000 16,705,000 94,295,000
Income tax expense (16,318,000) (7,850,000) (7,001,000) (31,169,000)
Income from extraordinary
items --- --- --- ---
Net income $ 41,973,000 $ 11,449,000 $ 9,704,000 $ 63,126,000
================ ================ ================ ================
Significant non-cash
items $ --- $ --- $ --- $ ---
================ ================ ================ ================
</TABLE>
Substantially all of the Company's revenues are derived from the United
States.
The accounting policies of the segments are as described in the summary
of significant accounting policies (Note 2). The Parent makes
expenditures for long-lived assets for the annuity operations segment
and allocates depreciation of such assets to the annuity operations
segment. The annuity operations and asset management operations pay
commissions to Royal for sales of their proprietary products.
Approximately 90% of these commission payments are in turn paid to
registered representatives of Royal, with the remainder of the revenue
reflected in Net Retained Commissions. In addition, premiums from
variable annuity policies sold by the Company are held in trusts that
are owned by the Company, although the assets directly support
policyholder obligations. SunAmerica Asset Management is the Investment
Advisor for all of the subaccounts of these trusts, for which service it
receives fees which are direct expenses of the trusts. Such fees are
reported as Variable Annuity Fees in the consolidated income statement
and are shown as intersegment revenues in the business segments
disclosure above, although there is no corresponding expense on the
books of any segment.
The annuity operations segment's products are marketed through over 800
independent broker-dealers, full-service securities firms and financial
institutions, in addition to the Company's affiliated broker-dealers.
Those independent selling organizations
53
<PAGE> 135
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. BUSINESS SEGMENTS (Continued)
responsible for over 10% of sales represented 12.0% of sales in the year
ended December 31, 1999, 14.7% in the three months ended December 31,
1998, 16.8% in the year ended September 30, 1998, and 18.4% and 10.2% in
the year ended September 30, 1997. Registered representatives sell
products for the Company's asset management operations and sell products
offered by the broker-dealer operations. Revenue from any single
registered representative or group of registered representatives do not
compose a material percentage of total revenues in either the asset
management operations or the broker-dealer operations.
15. SUBSEQUENT EVENTS
On March 1, 2000, the Company paid dividends of $69,000,000 to the
Parent.
54
<PAGE> 136
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE POLARIS II VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND NOVEMBER 30, 1999
55
<PAGE> 137
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 POLARIS II 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 POLARIS II 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
56
<PAGE> 138
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS II Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF NET ASSETS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Government International
Capital Natural and Diversified
Appreciation Growth Resources Quality Bond Equities
Portfolio Portfolio Portfolio Portfolio Portfolio
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in Anchor Series Trust,
at market value $592,391,593 $229,020,717 $ 14,580,032 $158,963,351 $ 0
Investments in SunAmerica Series Trust,
at market value 0 0 0 0 121,451,215
Liabilities 0 0 0 0 0
------------ ------------ ------------ ------------ ------------
Net Assets $592,391,593 $229,020,717 $ 14,580,032 $158,963,351 $121,451,215
============ ============ ============ ============ ============
Accumulation units outstanding 13,721,175 7,022,979 1,166,052 11,975,781 7,176,791
============ ============ ============ ============ ============
Unit value of accumulation units $ 43.17 $ 32.61 $ 12.50 $ 13.28 $ 16.92
============ ============ ============ ============ ============
<CAPTION>
Global Aggressive
Equities Growth
Portfolio Portfolio
------------ ------------
<S> <C> <C>
Assets:
Investments in Anchor Series Trust,
at market value $ 0 $ 0
Investments in SunAmerica Series Trust,
at market value 142,589,923 178,478,524
Liabilities 0 0
------------ ------------
Net Assets $142,589,923 $178,478,524
============ ============
Accumulation units outstanding 5,366,080 7,344,520
============ ============
Unit value of accumulation units $ 26.57 $ 24.30
============ ============
</TABLE>
See accompanying notes to financial statements.
57
<PAGE> 139
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS II Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF NET ASSETS
DECEMBER 31, 1999
(Continued)
<TABLE>
<CAPTION>
Venture Federated Putnam MFS Growth Alliance
Value Value Growth & Income Growth
Portfolio Portfolio Portfolio Portfolio Portfolio
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in Anchor Series Trust,
at market value $ 0 $ 0 $ 0 $ 0 $ 0
Investments in SunAmerica Series Trust,
at market value 918,987,624 113,143,395 362,907,786 104,086,066 1,248,910,215
Liabilities 0 0 0 0 0
-------------- -------------- -------------- -------------- --------------
Net Assets $ 918,987,624 $ 113,143,395 $ 362,907,786 $ 104,086,066 $1,248,910,215
============== ============== ============== ============== ==============
Accumulation units outstanding 32,960,877 6,700,126 11,459,476 4,397,413 25,720,432
============== ============== ============== ============== ==============
Unit value of accumulation units $ 27.88 $ 16.89 $ 31.67 $ 23.67 $ 48.56
============== ============== ============== ============== ==============
<CAPTION>
Growth- Asset
Income Allocation
Portfolio Portfolio
-------------- --------------
<S> <C> <C>
Assets:
Investments in Anchor Series Trust,
at market value $ 0 $ 0
Investments in SunAmerica Series Trust,
at market value 706,346,292 234,426,378
Liabilities 0 0
-------------- --------------
Net Assets $ 706,346,292 $ 234,426,378
============== ==============
Accumulation units outstanding 19,671,134 11,832,744
============== ==============
Unit value of accumulation units $ 35.91 $ 19.81
============== ==============
</TABLE>
See accompanying notes to financial statements.
58
<PAGE> 140
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS II Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF NET ASSETS
DECEMBER 31, 1999
(Continued)
<TABLE>
<CAPTION>
SunAmerica MFS Total Worldwide High-Yield
Balanced Return Utility High Income Bond
Portfolio Portfolio Portfolio Portfolio Portfolio
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in Anchor Series Trust,
at market value $ 0 $ 0 $ 0 $ 0 $ 0
Investments in SunAmerica Series Trust,
at market value 236,217,673 94,022,931 63,933,292 44,331,004 120,425,390
Liabilities 0 0 0 0 0
------------ ------------ ------------ ------------ ------------
Net Assets $236,217,673 $ 94,022,931 $ 63,933,292 $ 44,331,004 $120,425,390
============ ============ ============ ============ ============
Accumulation units outstanding 11,995,695 5,054,346 4,232,249 2,824,430 8,096,738
============ ============ ============ ============ ============
Unit value of accumulation units $ 19.69 $ 18.60 $ 15.11 $ 15.70 $ 14.87
============ ============ ============ ============ ============
<CAPTION>
Global Corporate
Bond Bond
Portfolio Portfolio
------------ ------------
<S> <C> <C>
Assets:
Investments in Anchor Series Trust,
at market value $ 0 $ 0
Investments in SunAmerica Series Trust,
at market value 38,740,607 91,835,814
Liabilities 0 0
------------ ------------
Net Assets $ 38,740,607 $ 91,835,814
============ ============
Accumulation units outstanding 2,749,995 7,196,448
============ ============
Unit value of accumulation units $ 14.09 $ 12.76
============ ============
</TABLE>
See accompanying notes to financial statements.
59
<PAGE> 141
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS II Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF NET ASSETS
DECEMBER 31, 1999
(Continued)
<TABLE>
<CAPTION>
International Emerging Real "Dogs" of MFS Mid-Cap
Growth & Income Markets Estate Wall Street Growth
Portfolio Portfolio Portfolio Portfolio Portfolio
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in Anchor Series Trust,
at market value $ 0 $ 0 $ 0 $ 0 $ 0
Investments in SunAmerica Series Trust,
at market value 172,953,989 57,224,434 35,583,598 80,485,069 44,250,039
Liabilities 0 0 0 0 0
-------------- -------------- -------------- -------------- --------------
Net Assets $ 172,953,989 $ 57,224,434 $ 35,583,598 $ 80,485,069 $ 44,250,039
============== ============== ============== ============== ==============
Accumulation units outstanding 12,288,580 5,310,973 3,993,765 8,952,838 2,713,848
============== ============== ============== ============== ==============
Unit value of accumulation units $ 14.07 $ 10.77 $ 8.91 $ 8.99 $ 16.31
============== ============== ============== ============== ==============
Cash
Management
Portfolio TOTAL
-------------- --------------
<S> <C> <C>
Assets:
Investments in Anchor Series Trust,
at market value $ 0 $ 994,955,693
Investments in SunAmerica Series Trust,
at market value 173,671,128 5,385,002,386
Liabilities 0 0
-------------- --------------
Net Assets $ 173,671,128 $6,379,958,079
============== ==============
Accumulation units outstanding 14,181,154
============== ==============
Unit value of accumulation units $ 12.25
============== ==============
</TABLE>
See accompanying notes to financial statements.
60
<PAGE> 142
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS II Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF NET ASSETS
NOVEMBER 30, 1999
<TABLE>
<CAPTION>
Government International
Capital Natural and Diversified
Appreciation Growth Resources Quality Bond Equities
Portfolio Portfolio Portfolio Portfolio Portfolio
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in Anchor Series Trust,
at market value $480,400,313 $201,874,465 $ 13,461,238 $155,667,206 $ 0
Investments in SunAmerica Series Trust,
at market value 0 0 0 0 108,270,790
Liabilities 0 0 0 0 0
------------ ------------ ------------ ------------ ------------
Net Assets $480,400,313 $201,874,465 $ 13,461,238 $155,667,206 $108,270,790
============ ============ ============ ============ ============
Accumulation units outstanding 13,201,318 6,788,755 1,180,750 11,644,751 6,989,492
============ ============ ============ ============ ============
Unit value of accumulation units $ 36.39 $ 29.74 $ 11.40 $ 13.37 $ 15.49
============ ============ ============ ============ ============
<CAPTION>
Global Aggressive
Equities Growth
Portfolio Portfolio
------------ ------------
<S> <C> <C>
Assets:
Investments in Anchor Series Trust,
at market value $ 0 $ 0
Investments in SunAmerica Series Trust,
at market value 118,942,147 126,037,673
Liabilities 0 0
------------ ------------
Net Assets $118,942,147 $126,037,673
============ ============
Accumulation units outstanding 4,915,631 6,626,618
============ ============
Unit value of accumulation units $ 24.20 $ 19.02
============ ============
</TABLE>
See accompanying notes to financial statements.
61
<PAGE> 143
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS II Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF NET ASSETS
NOVEMBER 30, 1999
(Continued)
<TABLE>
<CAPTION>
Venture Federated Putnam MFS Growth Alliance
Value Value Growth & Income Growth
Portfolio Portfolio Portfolio Portfolio Portfolio
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in Anchor Series Trust,
at market value $ 0 $ 0 $ 0 $ 0 $ 0
Investments in SunAmerica Series Trust,
at market value 855,880,689 108,715,271 315,070,448 92,681,421 1,100,795,861
Liabilities 0 0 0 0 0
-------------- -------------- -------------- -------------- --------------
Net Assets $ 855,880,689 $ 108,715,271 $ 315,070,448 $ 92,681,421 $1,100,795,861
============== ============== ============== ============== ==============
Accumulation units outstanding 32,218,454 6,616,993 11,111,497 4,109,201 24,844,446
============== ============== ============== ============== ==============
Unit value of accumulation units $ 26.57 $ 16.43 $ 28.36 $ 22.55 $ 44.31
============== ============== ============== ============== ==============
<CAPTION>
Growth- Asset
Income Allocation
Portfolio Portfolio
-------------- --------------
<S> <C> <C>
Assets:
Investments in Anchor Series Trust,
at market value $ 0 $ 0
Investments in SunAmerica Series Trust,
at market value 631,444,819 225,363,736
Liabilities 0 0
-------------- --------------
Net Assets $ 631,444,819 $ 225,363,736
============== ==============
Accumulation units outstanding 19,070,913 11,800,263
============== ==============
Unit value of accumulation units $ 33.11 $ 19.10
============== ==============
</TABLE>
See accompanying notes to financial statements.
62
<PAGE> 144
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS II Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF NET ASSETS
NOVEMBER 30, 1999
(Continued)
<TABLE>
<CAPTION>
SunAmerica MFS Total Worldwide High-Yield
Balanced Return Utility High Income Bond
Portfolio Portfolio Portfolio Portfolio Portfolio
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in Anchor Series Trust,
at market value $ 0 $ 0 $ 0 $ 0 $ 0
Investments in SunAmerica Series Trust,
at market value 205,718,611 87,688,865 61,911,394 43,460,618 116,458,898
Liabilities 0 0 0 0 0
------------ ------------ ------------ ------------ ------------
Net Assets $205,718,611 $ 87,688,865 $ 61,911,394 $ 43,460,618 $116,458,898
============ ============ ============ ============ ============
Accumulation units outstanding 11,283,979 4,740,884 4,083,169 2,853,924 7,918,425
============ ============ ============ ============ ============
Unit value of accumulation units $ 18.23 $ 18.50 $ 15.16 $ 15.23 $ 14.71
============ ============ ============ ============ ============
<CAPTION>
Global Corporate
Bond Bond
Portfolio Portfolio
------------ ------------
<S> <C> <C>
Assets:
Investments in Anchor Series Trust,
at market value $ 0 $ 0
Investments in SunAmerica Series Trust,
at market value 37,993,494 91,081,954
Liabilities 0 0
------------ ------------
Net Assets $ 37,993,494 $ 91,081,954
============ ============
Accumulation units outstanding 2,692,066 7,121,685
============ ============
Unit value of accumulation units $ 14.11 $ 12.78
============ ============
</TABLE>
See accompanying notes to financial statements.
63
<PAGE> 145
(Portion Relating to the POLARIS II Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF NET ASSETS
NOVEMBER 30, 1999
(Continued)
<TABLE>
<CAPTION>
International Emerging Real "Dogs" of
Growth & Income Markets Estate Wall Street
Portfolio Portfolio Portfolio Portfolio
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Assets:
Investments in Anchor Series Trust,
at market value $ 0 $ 0 $ 0 $ 0
Investments in SunAmerica Series Trust,
at market value 156,485,672 43,682,791 33,664,724 81,021,429
Liabilities 0 0 0 0
-------------- -------------- -------------- --------------
Net Assets $ 156,485,672 $ 43,682,791 $ 33,664,724 $ 81,021,429
============== ============== ============== ==============
Accumulation units outstanding 11,676,801 4,857,715 3,959,755 8,879,703
============== ============== ============== ==============
Unit value of accumulation units $ 13.40 $ 8.99 $ 8.50 $ 9.12
============== ============== ============== ==============
<CAPTION>
MFS Mid-Cap Cash
Growth Management
Portfolio Portfolio TOTAL
-------------- -------------- --------------
<S> <C> <C> <C>
Assets:
Investments in Anchor Series Trust,
at market value $ 0 $ 0 $ 851,403,222
Investments in SunAmerica Series Trust,
at market value 31,376,575 164,148,572 4,837,896,452
Liabilities 0 0 0
-------------- -------------- --------------
Net Assets $ 31,376,575 $ 164,148,572 $5,689,299,674
============== ============== ==============
Accumulation units outstanding 2,204,857 13,454,926
============== ==============
Unit value of accumulation units $ 14.23 $ 12.20
============== ==============
</TABLE>
See accompanying notes to financial statements.
64
<PAGE> 146
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS II Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Market Value Market
Variable Accounts Shares Per Share Value Cost
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ANCHOR SERIES TRUST:
Capital Appreciation Portfolio 10,388,399 $ 57.02 $ 592,391,593 $ 396,999,082
Growth Portfolio 5,945,645 38.52 229,020,717 188,766,418
Natural Resources Portfolio 898,618 16.22 14,580,032 13,092,521
Government and Quality Bond Portfolio 11,617,069 13.68 158,963,351 166,104,728
-------------- --------------
994,955,693 764,962,749
-------------- --------------
SUNAMERICA SERIES TRUST:
International Diversified Equities Portfolio 7,591,788 16.00 121,451,215 104,777,456
Global Equities Portfolio 6,544,447 21.79 142,589,923 117,236,842
Aggressive Growth Portfolio 7,640,856 23.36 178,478,524 118,137,193
Venture Value Portfolio 34,299,649 26.79 918,987,624 803,600,710
Federated Value Portfolio 6,827,811 16.57 113,143,395 109,433,791
Putnam Growth Portfolio 12,875,350 28.19 362,907,786 279,960,964
MFS Growth & Income Portfolio 7,453,500 13.96 104,086,066 110,919,375
Alliance Growth Portfolio 32,548,685 38.37 1,248,910,215 986,671,590
Growth-Income Portfolio 21,684,971 32.57 706,346,292 556,800,067
Asset Allocation Portfolio 15,637,952 14.99 234,426,378 237,293,930
SunAmerica Balanced Portfolio 12,025,736 19.64 236,217,673 199,209,093
MFS Total Return Portfolio 6,570,615 14.31 94,022,931 98,708,398
Utility Portfolio 4,446,168 14.38 63,933,292 63,325,351
Worldwide High Income Portfolio 4,166,563 10.64 44,331,004 48,246,386
High-Yield Bond Portfolio 11,485,596 10.48 120,425,390 128,943,216
Global Bond Portfolio 3,582,789 10.81 38,740,607 40,879,128
Corporate Bond Portfolio 8,255,944 11.12 91,835,814 95,814,250
International Growth & Income Portfolio 13,413,047 12.89 172,953,989 170,100,803
Emerging Markets Portfolio 5,161,974 11.09 57,224,434 41,900,899
Real Estate Portfolio 4,037,994 8.81 35,583,598 41,800,376
"Dogs" of Wall Street Portfolio 8,986,293 8.96 80,485,069 86,797,993
MFS Mid-Cap Growth Portfolio 2,722,168 16.26 44,250,039 35,773,154
Cash Management Portfolio 15,953,279 10.89 173,671,128 172,352,999
-------------- --------------
5,385,002,386 4,648,683,964
-------------- --------------
$6,379,958,079 $5,413,646,713
============== ==============
</TABLE>
See accompanying notes to financial statements.
65
<PAGE> 147
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS II Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
SCHEDULE OF PORTFOLIO INVESTMENTS
NOVEMBER 30, 1999
<TABLE>
<CAPTION>
Market Value Market
Variable Accounts Shares Per Share Value Cost
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ANCHOR SERIES TRUST:
Capital Appreciation Portfolio 10,007,739 $ 48.00 $ 480,400,313 $ 375,510,172
Growth Portfolio 5,754,774 35.08 201,874,465 181,634,878
Natural Resources Portfolio 911,125 14.77 13,461,238 13,252,590
Government and Quality Bond Portfolio 11,310,388 13.76 155,667,206 161,925,972
--------------- ---------------
851,403,222 732,323,612
--------------- ---------------
SUNAMERICA SERIES TRUST:
International Diversified Equities Portfolio 7,403,429 14.62 108,270,790 100,825,233
Global Equities Portfolio 6,002,852 19.81 118,942,147 105,966,168
Aggressive Growth Portfolio 6,902,939 18.26 126,037,673 102,069,002
Venture Value Portfolio 33,570,345 25.50 855,880,689 784,490,042
Federated Value Portfolio 6,751,821 16.10 108,715,271 108,182,224
Putnam Growth Portfolio 12,500,523 25.20 315,070,448 269,881,355
MFS Growth & Income Portfolio 6,973,994 13.29 92,681,421 104,423,107
Alliance Growth Portfolio 31,480,734 34.97 1,100,795,861 947,389,395
Growth-Income Portfolio 21,050,466 30.00 631,444,819 536,608,087
Asset Allocation Portfolio 15,615,149 14.43 225,363,736 236,994,913
SunAmerica Balanced Portfolio 11,326,874 18.16 205,718,611 185,958,153
MFS Total Return Portfolio 6,171,107 14.21 87,688,865 93,046,797
Utility Portfolio 4,295,096 14.41 61,911,394 61,168,887
Worldwide High Income Portfolio 4,215,525 10.31 43,460,618 48,891,480
High-Yield Bond Portfolio 11,247,102 10.35 116,458,898 126,551,811
Global Bond Portfolio 3,511,864 10.82 37,993,494 40,134,558
Corporate Bond Portfolio 8,180,769 11.13 91,081,954 95,018,220
International Growth & Income Portfolio 11,618,792 13.47 156,485,672 145,775,555
Emerging Markets Portfolio 4,727,547 9.24 43,682,791 37,325,309
Real Estate Portfolio 4,008,769 8.40 33,664,724 41,673,478
"Dogs" of Wall Street Portfolio 8,924,418 9.08 81,021,429 86,376,791
MFS Mid-Cap Growth Portfolio 2,182,799 14.37 31,376,575 27,352,047
Cash Management Portfolio 15,156,138 10.83 164,148,572 163,468,523
--------------- ---------------
4,837,896,452 4,449,571,135
--------------- ---------------
$ 5,689,299,674 $ 5,181,894,747
=============== ===============
</TABLE>
See accompanying notes to financial statements.
66
<PAGE> 148
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS II Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE ONE MONTH ENDED
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Government
Capital Natural and
Appreciation Growth Resources Quality Bond
Portfolio Portfolio Portfolio Portfolio
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Investment income:
Dividends and capital gains distributions $ 0 $ 0 $ 0 $ 0
------------- ------------- ------------- -------------
Total investment income 0 0 0 0
------------- ------------- ------------- -------------
Expenses:
Mortality risk charge (409,848) (164,810) (10,460) (119,714)
Guarantee death benefit charge (54,646) (21,975) (1,395) (15,962)
Expense risk charge (159,385) (64,093) (4,068) (46,555)
Distribution expense charge (68,309) (27,468) (1,743) (19,952)
------------- ------------- ------------- -------------
Total expenses (692,188) (278,346) (17,666) (202,183)
------------- ------------- ------------- -------------
Net investment income (loss) (692,188) (278,346) (17,666) (202,183)
------------- ------------- ------------- -------------
Net realized gains (losses) from securities
transactions:
Proceeds from shares sold 4,902,412 270,792 641,467 624,820
Cost of shares sold (3,511,221) (238,227) (622,807) (650,038)
------------- ------------- ------------- -------------
Net realized gains (losses) from
securities transactions 1,391,191 32,565 18,660 (25,218)
------------- ------------- ------------- -------------
Net unrealized appreciation (depreciation)
of investments:
Beginning of period 104,890,141 20,239,587 208,648 (6,258,766)
End of period 195,392,511 40,254,299 1,487,511 (7,141,377)
------------- ------------- ------------- -------------
Change in net unrealized appreciation/
depreciation of investments 90,502,370 20,014,712 1,278,863 (882,611)
------------- ------------- ------------- -------------
Increase (decrease) in net assets from operations $ 91,201,373 $ 19,768,931 $ 1,279,857 $ (1,110,012)
============= ============= ============= =============
<CAPTION>
International
Diversified Global Aggressive
Equities Equities Growth
Portfolio Portfolio Portfolio
------------- ------------- -------------
<S> <C> <C> <C>
Investment income:
Dividends and capital gains distributions $ 0 $ 0 $ 0
------------- ------------- -------------
Total investment income 0 0 0
------------- ------------- -------------
Expenses:
Mortality risk charge (87,566) (99,920) (118,298)
Guarantee death benefit charge (11,676) (13,323) (15,773)
Expense risk charge (34,054) (38,858) (46,005)
Distribution expense charge (14,594) (16,653) (19,716)
------------- ------------- -------------
Total expenses (147,890) (168,754) (199,792)
------------- ------------- -------------
Net investment income (loss) (147,890) (168,754) (199,792)
------------- ------------- -------------
Net realized gains (losses) from securities
transactions:
Proceeds from shares sold 15,411,048 2,481,382 1,434,689
Cost of shares sold (14,095,954) (2,179,681) (966,785)
------------- ------------- -------------
Net realized gains (losses) from
securities transactions 1,315,094 301,701 467,904
------------- ------------- -------------
Net unrealized appreciation (depreciation)
of investments:
Beginning of period 7,445,557 12,975,979 23,968,671
End of period 16,673,759 25,353,081 60,341,331
------------- ------------- -------------
Change in net unrealized appreciation/
depreciation of investments 9,228,202 12,377,102 36,372,660
------------- ------------- -------------
Increase (decrease) in net assets from operations $ 10,395,406 $ 12,510,049 $ 36,640,772
============= ============= =============
</TABLE>
See accompanying notes to financial statements.
67
<PAGE> 149
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS II Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE ONE MONTH ENDED
DECEMBER 31, 1999
(Continued)
<TABLE>
<CAPTION>
Venture Federated Putnam MFS Growth
Value Value Growth & Income
Portfolio Portfolio Portfolio Portfolio
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Investment income:
Dividends and capital gains distributions $ 0 $ 0 $ 0 $ 0
------------- ------------- ------------- -------------
Total investment income 0 0 0 0
------------- ------------- ------------- -------------
Expenses:
Mortality risk charge (672,293) (83,757) (258,809) (74,558)
Guarantee death benefit charge (89,639) (11,168) (34,508) (9,941)
Expense risk charge (261,447) (32,572) (100,648) (28,995)
Distribution expense charge (112,050) (13,959) (43,134) (12,427)
------------- ------------- ------------- -------------
Total expenses (1,135,429) (141,456) (437,099) (125,921)
------------- ------------- ------------- -------------
Net investment income (loss) (1,135,429) (141,456) (437,099) (125,921)
------------- ------------- ------------- -------------
Net realized gains (losses) from securities
transactions:
Proceeds from shares sold 1,303,007 1,427,402 667,031 121,182
Cost of shares sold (1,164,586) (1,427,585) (519,095) (135,931)
------------- ------------- ------------- -------------
Net realized gains (losses) from
securities transactions 138,421 (183) 147,936 (14,749)
------------- ------------- ------------- -------------
Net unrealized appreciation (depreciation)
of investments:
Beginning of period 71,390,647 533,047 45,189,093 (11,741,686)
End of period 115,386,914 3,709,604 82,946,822 (6,833,309)
------------- ------------- ------------- -------------
Change in net unrealized appreciation/
depreciation of investments 43,996,267 3,176,557 37,757,729 4,908,377
------------- ------------- ------------- -------------
Increase (decrease) in net assets from operations $ 42,999,259 $ 3,034,918 $ 37,468,566 $ 4,767,707
============= ============= ============= =============
<CAPTION>
Alliance Growth- Asset
Growth Income Allocation
Portfolio Portfolio Portfolio
------------- ------------- -------------
<S> <C> <C> <C>
Investment income:
Dividends and capital gains distributions $ 0 $ 0 $ 0
------------- ------------- -------------
Total investment income 0 0 0
------------- ------------- -------------
Expenses:
Mortality risk charge (891,398) (507,511) (175,914)
Guarantee death benefit charge (118,853) (67,668) (23,455)
Expense risk charge (346,655) (197,365) (68,411)
Distribution expense charge (148,567) (84,586) (29,320)
------------- ------------- -------------
Total expenses (1,505,473) (857,130) (297,100)
------------- ------------- -------------
Net investment income (loss) (1,505,473) (857,130) (297,100)
------------- ------------- -------------
Net realized gains (losses) from securities
transactions:
Proceeds from shares sold 904,912 2,272,536 1,440,517
Cost of shares sold (753,574) (1,918,746) (1,486,742)
------------- ------------- -------------
Net realized gains (losses) from
securities transactions 151,338 353,790 (46,225)
------------- ------------- -------------
Net unrealized appreciation (depreciation)
of investments:
Beginning of period 153,406,466 94,836,732 (11,631,177)
End of period 262,238,625 149,546,225 (2,867,552)
------------- ------------- -------------
Change in net unrealized appreciation/
depreciation of investments 108,832,159 54,709,493 8,763,625
------------- ------------- -------------
Increase (decrease) in net assets from operations $ 107,478,024 $ 54,206,153 $ 8,420,300
============= ============= =============
</TABLE>
See accompanying notes to financial statements.
68
<PAGE> 150
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS II Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE ONE MONTH ENDED
DECEMBER 31, 1999
(Continued)
<TABLE>
<CAPTION>
SunAmerica MFS Total Worldwide
Balanced Return Utility High Income
Portfolio Portfolio Portfolio Portfolio
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Investment income:
Dividends and capital gains distributions $ 0 $ 0 $ 0 $ 0
------------ ------------ ------------ ------------
Total investment income 0 0 0 0
------------ ------------ ------------ ------------
Expenses:
Mortality risk charge (169,487) (68,760) (47,567) (33,886)
Guarantee death benefit charge (22,598) (9,168) (6,342) (4,518)
Expense risk charge (65,912) (26,740) (18,498) (13,178)
Distribution expense charge (28,248) (11,460) (7,928) (5,648)
------------ ------------ ------------ ------------
Total expenses (286,245) (116,128) (80,335) (57,230)
------------ ------------ ------------ ------------
Net investment income (loss) (286,245) (116,128) (80,335) (57,230)
------------ ------------ ------------ ------------
Net realized gains (losses) from securities
transactions:
Proceeds from shares sold 0 24,396 76,227 1,350,169
Cost of shares sold 0 (25,876) (76,541) (1,475,519)
------------ ------------ ------------ ------------
Net realized gains (losses) from
securities transactions 0 (1,480) (314) (125,350)
------------ ------------ ------------ ------------
Net unrealized appreciation (depreciation)
of investments:
Beginning of period 19,760,458 (5,357,932) 742,507 (5,430,862)
End of period 37,008,580 (4,685,467) 607,941 (3,915,382)
------------ ------------ ------------ ------------
Change in net unrealized appreciation/
depreciation of investments 17,248,122 672,465 (134,566) 1,515,480
------------ ------------ ------------ ------------
Increase (decrease) in net assets from operations $ 16,961,877 $ 554,857 $ (215,215) $ 1,332,900
============ ============ ============ ============
<CAPTION>
High-Yield Global Corporate
Bond Bond Bond
Portfolio Portfolio Portfolio
------------ ------------ ------------
<S> <C> <C> <C>
Investment income:
Dividends and capital gains distributions $ 0 $ 0 $ 0
------------ ------------ ------------
Total investment income 0 0 0
------------ ------------ ------------
Expenses:
Mortality risk charge (90,653) (29,220) (69,801)
Guarantee death benefit charge (12,087) (3,896) (9,307)
Expense risk charge (35,254) (11,363) (27,145)
Distribution expense charge (15,109) (4,871) (11,633)
------------ ------------ ------------
Total expenses (153,103) (49,350) (117,886)
------------ ------------ ------------
Net investment income (loss) (153,103) (49,350) (117,886)
------------ ------------ ------------
Net realized gains (losses) from securities
transactions:
Proceeds from shares sold 1,311,705 427,478 1,009,070
Cost of shares sold (1,409,741) (450,269) (1,050,927)
------------ ------------ ------------
Net realized gains (losses) from
securities transactions (98,036) (22,791) (41,857)
------------ ------------ ------------
Net unrealized appreciation (depreciation)
of investments:
Beginning of period (10,092,913) (2,141,064) (3,936,266)
End of period (8,517,826) (2,138,521) (3,978,436)
------------ ------------ ------------
Change in net unrealized appreciation/
depreciation of investments 1,575,087 2,543 (42,170)
------------ ------------ ------------
Increase (decrease) in net assets from operations $ 1,323,948 $ (69,598) $ (201,913)
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
69
<PAGE> 151
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS II Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE ONE MONTH ENDED
DECEMBER 31, 1999
(Continued)
<TABLE>
<CAPTION>
International Emerging Real "Dogs" of
Growth & Income Markets Estate Wall Street
Portfolio Portfolio Portfolio Portfolio
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Investment income:
Dividends and capital gains distributions $ 15,397,560 $ 0 $ 0 $ 0
------------- ------------- ------------- -------------
Total investment income 15,397,560 0 0 0
------------- ------------- ------------- -------------
Expenses:
Mortality risk charge (127,322) (38,508) (25,619) (60,367)
Guarantee death benefit charge (16,976) (5,134) (3,416) (8,049)
Expense risk charge (49,514) (14,975) (9,963) (23,476)
Distribution expense charge (21,221) (6,419) (4,270) (10,061)
------------- ------------- ------------- -------------
Total expenses (215,033) (65,036) (43,268) (101,953)
------------- ------------- ------------- -------------
Net investment income (loss) 15,182,527 (65,036) (43,268) (101,953)
------------- ------------- ------------- -------------
Net realized gains (losses) from securities
transactions:
Proceeds from shares sold 7,350,263 827,847 622,303 1,461,955
Cost of shares sold (6,626,647) (619,939) (771,157) (1,583,069)
------------- ------------- ------------- -------------
Net realized gains (losses) from
securities transactions 723,616 207,908 (148,854) (121,114)
------------- ------------- ------------- -------------
Net unrealized appreciation (depreciation)
of investments:
Beginning of period 10,710,117 6,357,482 (8,008,754) (5,355,362)
End of period 2,853,186 15,323,535 (6,216,778) (6,312,924)
------------- ------------- ------------- -------------
Change in net unrealized appreciation/
depreciation of investments (7,856,931) 8,966,053 1,791,976 (957,562)
------------- ------------- ------------- -------------
Increase (decrease) in net assets from operations $ 8,049,212 $ 9,108,925 $ 1,599,854 $ (1,180,629)
============= ============= ============= =============
<CAPTION>
MFS Mid-Cap Cash
Growth Management
Portfolio Portfolio TOTAL
------------- ------------- -------------
<S> <C> <C> <C>
Investment income:
Dividends and capital gains distributions $ 608,658 $ 0 $ 16,006,218
------------- ------------- -------------
Total investment income 608,658 0 16,006,218
------------- ------------- -------------
Expenses:
Mortality risk charge (28,448) (131,187) (4,595,681)
Guarantee death benefit charge (3,793) (17,492) (612,758)
Expense risk charge (11,063) (51,017) (1,787,209)
Distribution expense charge (4,742) (21,865) (765,953)
------------- ------------- -------------
Total expenses (48,046) (221,561) (7,761,601)
------------- ------------- -------------
Net investment income (loss) 560,612 (221,561) 8,244,617
------------- ------------- -------------
Net realized gains (losses) from securities
transactions:
Proceeds from shares sold 658,578 44,276,886 93,300,074
Cost of shares sold (555,935) (44,036,124) (88,352,716)
------------- ------------- -------------
Net realized gains (losses) from
securities transactions 102,643 240,762 4,947,358
------------- ------------- -------------
Net unrealized appreciation (depreciation)
of investments:
Beginning of period 4,024,528 680,049 507,404,927
End of period 8,476,885 1,318,129 966,311,366
------------- ------------- -------------
Change in net unrealized appreciation/
depreciation of investments 4,452,357 638,080 458,906,439
------------- ------------- -------------
Increase (decrease) in net assets from operations $ 5,115,612 $ 657,281 $ 472,098,414
============= ============= =============
</TABLE>
See accompanying notes to financial statements.
70
<PAGE> 152
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS II Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
NOVEMBER 30, 1999
<TABLE>
<CAPTION>
Government
Capital Natural and
Appreciation Growth Resources Quality Bond
Portfolio Portfolio Portfolio Portfolio
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Investment income:
Dividends and capital gains distributions $ 16,419,928 $ 11,247,203 $ 157,138 $ 6,951,976
------------- ------------- ------------- -------------
Total investment income 16,419,928 11,247,203 157,138 6,951,976
------------- ------------- ------------- -------------
Expenses:
Mortality risk charge (2,670,029) (1,285,168) (91,866) (1,068,231)
Guarantee death benefit charge (356,004) (171,356) (12,249) (142,431)
Expense risk charge (1,038,345) (499,788) (35,726) (415,423)
Distribution expense charge (445,004) (214,194) (15,311) (178,038)
------------- ------------- ------------- -------------
Total expenses (4,509,382) (2,170,506) (155,152) (1,804,123)
------------- ------------- ------------- -------------
Net investment income (loss) 11,910,546 9,076,697 1,986 5,147,853
------------- ------------- ------------- -------------
Net realized gains (losses) from securities
transactions:
Proceeds from shares sold 72,858,783 9,362,928 5,258,327 25,219,551
Cost of shares sold (63,752,901) (8,361,173) (5,112,408) (25,646,811)
------------- ------------- ------------- -------------
Net realized gains (losses) from
securities transactions 9,105,882 1,001,755 145,919 (427,260)
------------- ------------- ------------- -------------
Net unrealized appreciation (depreciation)
of investments:
Beginning of period (2,266,766) 4,884,168 (1,144,012) 713,259
End of period 104,890,141 20,239,587 208,648 (6,258,766)
------------- ------------- ------------- -------------
Change in net unrealized appreciation/
depreciation of investments 107,156,907 15,355,419 1,352,660 (6,972,025)
------------- ------------- ------------- -------------
Increase (decrease) in net assets from operations $ 128,173,335 $ 25,433,871 $ 1,500,565 $ (2,251,432)
============= ============= ============= =============
<CAPTION>
International
Diversified Global Aggressive
Equities Equities Growth
Portfolio Portfolio Portfolio
------------- ------------- -------------
<S> <C> <C> <C>
Investment income:
Dividends and capital gains distributions $ 2,069,746 $ 7,234,539 $ 6,274,037
------------- ------------- -------------
Total investment income 2,069,746 7,234,539 6,274,037
------------- ------------- -------------
Expenses:
Mortality risk charge (766,560) (713,085) (594,912)
Guarantee death benefit charge (102,208) (95,078) (79,322)
Expense risk charge (298,107) (277,311) (231,355)
Distribution expense charge (127,759) (118,848) (99,152)
------------- ------------- -------------
Total expenses (1,294,634) (1,204,322) (1,004,741)
------------- ------------- -------------
Net investment income (loss) 775,112 6,030,217 5,269,296
------------- ------------- -------------
Net realized gains (losses) from securities
transactions:
Proceeds from shares sold 253,041,090 9,018,820 12,860,801
Cost of shares sold (246,068,174) (8,448,132) (11,018,748)
------------- ------------- -------------
Net realized gains (losses) from
securities transactions 6,972,916 570,688 1,842,053
------------- ------------- -------------
Net unrealized appreciation (depreciation)
of investments:
Beginning of period 1,677,884 565,631 1,064,455
End of period 7,445,557 12,975,979 23,968,671
------------- ------------- -------------
Change in net unrealized appreciation/
depreciation of investments 5,767,673 12,410,348 22,904,216
------------- ------------- -------------
Increase (decrease) in net assets from operations $ 13,515,701 $ 19,011,253 $ 30,015,565
============= ============= =============
</TABLE>
See accompanying notes to financial statements.
71
<PAGE> 153
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS II Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
NOVEMBER 30, 1999
(Continued)
<TABLE>
<CAPTION>
Venture Federated Putnam MFS Growth
Value Value Growth & Income
Portfolio Portfolio Portfolio Portfolio
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Investment income:
Dividends and capital gains distributions $ 32,411,794 $ 4,583,838 $ 8,064,530 $ 13,764,409
------------- ------------- ------------- -------------
Total investment income 32,411,794 4,583,838 8,064,530 13,764,409
------------- ------------- ------------- -------------
Expenses:
Mortality risk charge (6,213,568) (803,363) (1,919,599) (433,718)
Guarantee death benefit charge (828,476) (107,115) (255,947) (57,829)
Expense risk charge (2,416,388) (312,419) (746,511) (168,668)
Distribution expense charge (1,035,594) (133,893) (319,932) (72,287)
------------- ------------- ------------- -------------
Total expenses (10,494,026) (1,356,790) (3,241,989) (732,502)
------------- ------------- ------------- -------------
Net investment income (loss) 21,917,768 3,227,048 4,822,541 13,031,907
------------- ------------- ------------- -------------
Net realized gains (losses) from securities
transactions:
Proceeds from shares sold 31,057,635 16,095,924 2,558,419 1,364,335
Cost of shares sold (27,956,324) (14,713,789) (2,299,108) (1,313,899)
------------- ------------- ------------- -------------
Net realized gains (losses) from
securities transactions 3,101,311 1,382,135 259,311 50,436
------------- ------------- ------------- -------------
Net unrealized appreciation (depreciation)
of investments:
Beginning of period 20,764,044 4,379,096 4,482,602 316,687
End of period 71,390,647 533,047 45,189,093 (11,741,686)
------------- ------------- ------------- -------------
Change in net unrealized appreciation/
depreciation of investments 50,626,603 (3,846,049) 40,706,491 (12,058,373)
------------- ------------- ------------- -------------
Increase (decrease) in net assets from operations $ 75,645,682 $ 763,134 $ 45,788,343 $ 1,023,970
============= ============= ============= =============
<CAPTION>
Alliance Growth- Asset
Growth Income Allocation
Portfolio Portfolio Portfolio
------------- ------------- -------------
<S> <C> <C> <C>
Investment income:
Dividends and capital gains distributions $ 73,131,535 $ 26,125,481 $ 17,624,884
------------- ------------- -------------
Total investment income 73,131,535 26,125,481 17,624,884
------------- ------------- -------------
Expenses:
Mortality risk charge (6,692,409) (3,956,812) (1,813,385)
Guarantee death benefit charge (892,321) (527,575) (241,785)
Expense risk charge (2,602,603) (1,538,760) (705,205)
Distribution expense charge (1,115,402) (659,468) (302,230)
------------- ------------- -------------
Total expenses (11,302,735) (6,682,615) (3,062,605)
------------- ------------- -------------
Net investment income (loss) 61,828,800 19,442,866 14,562,279
------------- ------------- -------------
Net realized gains (losses) from securities
transactions:
Proceeds from shares sold 43,457,676 21,422,634 5,985,744
Cost of shares sold (36,427,909) (18,313,760) (6,198,674)
------------- ------------- -------------
Net realized gains (losses) from
securities transactions 7,029,767 3,108,874 (212,930)
------------- ------------- -------------
Net unrealized appreciation (depreciation)
of investments:
Beginning of period 38,472,062 20,109,919 (6,467,628)
End of period 153,406,466 94,836,732 (11,631,177)
------------- ------------- -------------
Change in net unrealized appreciation/
depreciation of investments 114,934,404 74,726,813 (5,163,549)
------------- ------------- -------------
Increase (decrease) in net assets from operations $ 183,792,971 $ 97,278,553 $ 9,185,800
============= ============= =============
</TABLE>
See accompanying notes to financial statements.
72
<PAGE> 154
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS II Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
NOVEMBER 30, 1999
(Continued)
<TABLE>
<CAPTION>
SunAmerica MFS Total Worldwide High-Yield
Balanced Return Utility High Income Bond
Portfolio Portfolio Portfolio Portfolio Portfolio
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Investment income:
Dividends and capital gains distributions $ 2,990,284 $ 8,372,761 $ 3,028,472 $ 4,717,470 $ 10,654,356
------------ ------------ ------------ ------------ ------------
Total investment income 2,990,284 8,372,761 3,028,472 4,717,470 10,654,356
------------ ------------ ------------ ------------ ------------
Expenses:
Mortality risk charge (1,155,745) (491,797) (417,066) (341,118) (889,478)
Guarantee death benefit charge (154,099) (65,573) (55,609) (45,482) (118,597)
Expense risk charge (449,456) (191,254) (162,192) (132,657) (345,908)
Distribution expense charge (192,625) (81,966) (69,511) (56,854) (148,247)
------------ ------------ ------------ ------------ ------------
Total expenses (1,951,925) (830,590) (704,378) (576,111) (1,502,230)
------------ ------------ ------------ ------------ ------------
Net investment income (loss) 1,038,359 7,542,171 2,324,094 4,141,359 9,152,126
------------ ------------ ------------ ------------ ------------
Net realized gains (losses) from securities
transactions:
Proceeds from shares sold 1,062 175,910 3,170,945 5,259,484 27,129,016
Cost of shares sold (954) (168,887) (3,049,495) (6,095,281) (27,773,697)
------------ ------------ ------------ ------------ ------------
Net realized gains (losses) from
securities transactions 108 7,023 121,450 (835,797) (644,681)
------------ ------------ ------------ ------------ ------------
Net unrealized appreciation (depreciation)
of investments:
Beginning of period 3,912,921 654,344 1,513,827 (6,648,206) (4,246,455)
End of period 19,760,458 (5,357,932) 742,507 (5,430,862) (10,092,913)
------------ ------------ ------------ ------------ ------------
Change in net unrealized appreciation/
depreciation of investments 15,847,537 (6,012,276) (771,320) 1,217,344 (5,846,458)
------------ ------------ ------------ ------------ ------------
Increase (decrease) in net assets from operations $ 16,886,004 $ 1,536,918 $ 1,674,224 $ 4,522,906 $ 2,660,987
============ ============ ============ ============ ============
<CAPTION>
Global Corporate
Bond Bond
Portfolio Portfolio
------------ ------------
<S> <C> <C>
Investment income:
Dividends and capital gains distributions $ 2,582,165 $ 3,808,676
------------ ------------
Total investment income 2,582,165 3,808,676
------------ ------------
Expenses:
Mortality risk charge (267,662) (659,556)
Guarantee death benefit charge (35,688) (87,941)
Expense risk charge (104,091) (256,494)
Distribution expense charge (44,610) (109,925)
------------ ------------
Total expenses (452,051) (1,113,916)
------------ ------------
Net investment income (loss) 2,130,114 2,694,760
------------ ------------
Net realized gains (losses) from securities
transactions:
Proceeds from shares sold 1,375,121 1,252,158
Cost of shares sold (1,415,145) (1,302,574)
------------ ------------
Net realized gains (losses) from
securities transactions (40,024) (50,416)
------------ ------------
Net unrealized appreciation (depreciation)
of investments:
Beginning of period 603,670 801,699
End of period (2,141,064) (3,936,266)
------------ ------------
Change in net unrealized appreciation/
depreciation of investments (2,744,734) (4,737,965)
------------ ------------
Increase (decrease) in net assets from operations $ (654,644) $ (2,093,621)
============ ============
</TABLE>
See accompanying notes to financial statements.
73
<PAGE> 155
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS II Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
NOVEMBER 30, 1999
(Continued)
<TABLE>
<CAPTION>
International Emerging Real "Dogs" of
Growth & Income Markets Estate Wall Street
Portfolio Portfolio Portfolio Portfolio
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Investment income:
Dividends and capital gains distributions $ 2,309,922 $ 35,323 $ 1,268,769 $ 2,456,301
--------------- --------------- --------------- ---------------
Total investment income 2,309,922 35,323 1,268,769 2,456,301
--------------- --------------- --------------- ---------------
Expenses:
Mortality risk charge (1,043,018) (237,745) (320,216) (630,844)
Guarantee death benefit charge (139,069) (31,699) (42,695) (84,113)
Expense risk charge (405,618) (92,456) (124,528) (245,328)
Distribution expense charge (173,837) (39,625) (53,370) (105,141)
--------------- --------------- --------------- ---------------
Total expenses (1,761,542) (401,525) (540,809) (1,065,426)
--------------- --------------- --------------- ---------------
Net investment income (loss) 548,380 (366,202) 727,960 1,390,875
--------------- --------------- --------------- ---------------
Net realized gains (losses) from securities
transactions:
Proceeds from shares sold 115,952,248 8,808,655 9,034,362 2,142,706
Cost of shares sold (107,156,772) (8,346,538) (9,994,372) (2,109,651)
--------------- --------------- --------------- ---------------
Net realized gains (losses) from
securities transactions 8,795,476 462,117 (960,010) 33,055
--------------- --------------- --------------- ---------------
Net unrealized appreciation (depreciation)
of investments:
Beginning of period 252,067 (3,748,568) (3,138,635) 1,562,918
End of period 10,710,117 6,357,482 (8,008,754) (5,355,362)
--------------- --------------- --------------- ---------------
Change in net unrealized appreciation/
depreciation of investments 10,458,050 10,106,050 (4,870,119) (6,918,280)
--------------- --------------- --------------- ---------------
Increase (decrease) in net assets from operations $ 19,801,906 $ 10,201,965 $ (5,102,169) $ (5,494,350)
=============== =============== =============== ===============
<CAPTION>
MFS Mid-Cap Cash
Growth Management
Portfolio Portfolio TOTAL
--------------- --------------- ---------------
<S> <C> <C> <C>
Investment income:
Dividends and capital gains distributions $ 0 $ 3,864,891 $ 272,150,428
--------------- --------------- ---------------
Total investment income 0 3,864,891 272,150,428
--------------- --------------- ---------------
Expenses:
Mortality risk charge (46,154) (1,179,294) (36,702,398)
Guarantee death benefit charge (6,154) (157,239) (4,893,654)
Expense risk charge (17,949) (458,614) (14,273,154)
Distribution expense charge (7,692) (196,550) (6,117,065)
--------------- --------------- ---------------
Total expenses (77,949) (1,991,697) (61,986,271)
--------------- --------------- ---------------
Net investment income (loss) (77,949) 1,873,194 210,164,157
--------------- --------------- ---------------
Net realized gains (losses) from securities
transactions:
Proceeds from shares sold 4,767,638 635,576,743 1,324,208,715
Cost of shares sold (4,647,745) (633,363,925) (1,281,056,846)
--------------- --------------- ---------------
Net realized gains (losses) from
securities transactions 119,893 2,212,818 43,151,869
--------------- --------------- ---------------
Net unrealized appreciation (depreciation)
of investments:
Beginning of period 0 687,367 79,758,350
End of period 4,024,528 680,049 507,404,927
--------------- --------------- ---------------
Change in net unrealized appreciation/
depreciation of investments 4,024,528 (7,318) 427,646,577
--------------- --------------- ---------------
Increase (decrease) in net assets from operations $ 4,066,472 $ 4,078,694 $ 680,962,603
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
74
<PAGE> 156
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS II Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE ONE MONTH ENDED
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Government
Capital Natural and
Appreciation Growth Resources Quality Bond
Portfolio Portfolio Portfolio Portfolio
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ (692,188) $ (278,346) $ (17,666) $ (202,183)
Net realized gains (losses) from
securities transactions 1,391,191 32,565 18,660 (25,218)
Change in net unrealized appreciation/
depreciation of investments 90,502,370 20,014,712 1,278,863 (882,611)
------------- ------------- ------------- -------------
Increase (decrease) in net assets from operations 91,201,373 19,768,931 1,279,857 (1,110,012)
------------- ------------- ------------- -------------
From capital transactions:
Net proceeds from units sold 8,871,203 3,287,277 202,683 1,797,269
Cost of units redeemed (2,372,698) (974,318) (69,946) (909,068)
Net transfers 14,291,402 5,064,362 (293,800) 3,517,956
------------- ------------- ------------- -------------
Increase (decrease) in net assets
from capital transactions 20,789,907 7,377,321 (161,063) 4,406,157
------------- ------------- ------------- -------------
Increase (decrease) in net assets 111,991,280 27,146,252 1,118,794 3,296,145
Net assets at beginning of period 480,400,313 201,874,465 13,461,238 155,667,206
------------- ------------- ------------- -------------
Net assets at end of period $ 592,391,593 $ 229,020,717 $ 14,580,032 $ 158,963,351
============= ============= ============= =============
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 221,171 104,342 17,270 134,876
Units redeemed (59,620) (31,226) (5,916) (68,064)
Units transferred 358,306 161,108 (26,052) 264,218
------------- ------------- ------------- -------------
Increase (decrease) in units outstanding 519,857 234,224 (14,698) 331,030
Beginning units 13,201,318 6,788,755 1,180,750 11,644,751
------------- ------------- ------------- -------------
Ending units 13,721,175 7,022,979 1,166,052 11,975,781
============= ============= ============= =============
<CAPTION>
International
Diversified Global Aggressive
Equities Equities Growth
Portfolio Portfolio Portfolio
------------- ------------- -------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ (147,890) $ (168,754) $ (199,792)
Net realized gains (losses) from
securities transactions 1,315,094 301,701 467,904
Change in net unrealized appreciation/
depreciation of investments 9,228,202 12,377,102 36,372,660
------------- ------------- -------------
Increase (decrease) in net assets from operations 10,395,406 12,510,049 36,640,772
------------- ------------- -------------
From capital transactions:
Net proceeds from units sold 1,284,655 2,125,576 4,206,604
Cost of units redeemed (407,506) (648,995) (602,988)
Net transfers 1,907,870 9,661,146 12,196,463
------------- ------------- -------------
Increase (decrease) in net assets
from capital transactions 2,785,019 11,137,727 15,800,079
------------- ------------- -------------
Increase (decrease) in net assets 13,180,425 23,647,776 52,440,851
Net assets at beginning of period 108,270,790 118,942,147 126,037,673
------------- ------------- -------------
Net assets at end of period $ 121,451,215 $ 142,589,923 $ 178,478,524
============= ============= =============
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 80,154 84,013 187,480
Units redeemed (25,588) (25,677) (27,443)
Units transferred 132,733 392,113 557,865
------------- ------------- -------------
Increase (decrease) in units outstanding 187,299 450,449 717,902
Beginning units 6,989,492 4,915,631 6,626,618
------------- ------------- -------------
Ending units 7,176,791 5,366,080 7,344,520
============= ============= =============
</TABLE>
See accompanying notes to financial statements.
75
<PAGE> 157
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS II Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE ONE MONTH ENDED
DECEMBER 31, 1999
(Continued)
<TABLE>
<CAPTION>
Venture Federated Putnam MFS Growth
Value Value Growth & Income
Portfolio Portfolio Portfolio Portfolio
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ (1,135,429) $ (141,456) $ (437,099) $ (125,921)
Net realized gains (losses) from
securities transactions 138,421 (183) 147,936 (14,749)
Change in net unrealized appreciation/
depreciation of investments 43,996,267 3,176,557 37,757,729 4,908,377
------------ ------------ ------------ ------------
Increase (decrease) in net assets from operations 42,999,259 3,034,918 37,468,566 4,767,707
------------ ------------ ------------ ------------
From capital transactions:
Net proceeds from units sold 9,115,340 1,124,247 5,653,487 2,990,649
Cost of units redeemed (3,506,341) (547,731) (1,688,270) (439,946)
Net transfers 14,498,677 816,690 6,403,555 4,086,235
------------ ------------ ------------ ------------
Increase (decrease) in net assets
from capital transactions 20,107,676 1,393,206 10,368,772 6,636,938
------------ ------------ ------------ ------------
Increase (decrease) in net assets 63,106,935 4,428,124 47,837,338 11,404,645
Net assets at beginning of period 855,880,689 108,715,271 315,070,448 92,681,421
------------ ------------ ------------ ------------
Net assets at end of period $918,987,624 $113,143,395 $362,907,786 $104,086,066
============ ============ ============ ============
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 336,177 68,312 188,645 130,044
Units redeemed (130,007) (33,344) (56,590) (19,056)
Units transferred 536,253 48,165 215,924 177,224
------------ ------------ ------------ ------------
Increase (decrease) in units outstanding 742,423 83,133 347,979 288,212
Beginning units 32,218,454 6,616,993 11,111,497 4,109,201
------------ ------------ ------------ ------------
Ending units 32,960,877 6,700,126 11,459,476 4,397,413
============ ============ ============ ============
<CAPTION>
Alliance Growth- Asset
Growth Income Allocation
Portfolio Portfolio Portfolio
------------ ------------ ------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ (1,505,473) $ (857,130) $ (297,100)
Net realized gains (losses) from
securities transactions 151,338 353,790 (46,225)
Change in net unrealized appreciation/
depreciation of investments 108,832,159 54,709,493 8,763,625
-------------- ------------ ------------
Increase (decrease) in net assets from operations 107,478,024 54,206,153 8,420,300
-------------- ------------ ------------
From capital transactions:
Net proceeds from units sold 20,739,442 10,905,023 1,068,934
Cost of units redeemed (5,449,511) (2,906,451) (1,038,355)
Net transfers 25,346,399 12,696,748 611,763
-------------- ------------ ------------
Increase (decrease) in net assets
from capital transactions 40,636,330 20,695,320 642,342
-------------- ------------ ------------
Increase (decrease) in net assets 148,114,354 74,901,473 9,062,642
Net assets at beginning of period 1,100,795,861 631,444,819 225,363,736
-------------- ------------ ------------
Net assets at end of period $1,248,910,215 $706,346,292 $234,426,378
============== ============ ============
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 447,481 317,349 54,973
Units redeemed (118,547) (84,811) (53,377)
Units transferred 547,052 367,683 30,885
------------ ------------ ------------
Increase (decrease) in units outstanding 875,986 600,221 32,481
Beginning units 24,844,446 19,070,913 11,800,263
------------ ------------ ------------
Ending units 25,720,432 19,671,134 11,832,744
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
76
<PAGE> 158
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS II Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE ONE MONTH ENDED
DECEMBER 31, 1999
(Continued)
<TABLE>
<CAPTION>
SunAmerica MFS Total Worldwide
Balanced Return Utility High Income
Portfolio Portfolio Portfolio Portfolio
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ (286,245) $ (116,128) $ (80,335) $ (57,230)
Net realized gains (losses) from
securities transactions 0 (1,480) (314) (125,350)
Change in net unrealized appreciation/
depreciation of investments 17,248,122 672,465 (134,566) 1,515,480
------------- ------------ ------------ ------------
Increase (decrease) in net assets
from operations 16,961,877 554,857 (215,215) 1,332,900
------------- ------------ ------------ ------------
From capital transactions:
Net proceeds from units sold 4,616,016 1,643,833 545,836 173,039
Cost of units redeemed (1,274,264) (318,090) (261,218) (288,003)
Net transfers 10,195,433 4,453,466 1,952,495 (347,550)
------------- ------------ ------------ ------------
Increase (decrease) in net assets
from capital transactions 13,537,185 5,779,209 2,237,113 (462,514)
------------- ------------ ------------ ------------
Increase (decrease) in net assets 30,499,062 6,334,066 2,021,898 870,386
Net assets at beginning of period 205,718,611 87,688,865 61,911,394 43,460,618
------------- ------------ ------------ ------------
Net assets at end of period $ 236,217,673 $ 94,022,931 $ 63,933,292 $ 44,331,004
============= ============ ============ ============
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 241,772 89,208 36,355 11,093
Units redeemed (66,782) (17,229) (17,421) (18,533)
Units transferred 536,726 241,483 130,146 (22,054)
------------- ------------ ------------ ------------
Increase (decrease) in units outstanding 711,716 313,462 149,080 (29,494)
Beginning units 11,283,979 4,740,884 4,083,169 2,853,924
------------- ------------ ------------ ------------
Ending units 11,995,695 5,054,346 4,232,249 2,824,430
============= ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
High-Yield Global Corporate
Bond Bond Bond
Portfolio Portfolio Portfolio
------------- ------------ ------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ (153,103) $ (49,350) $ (117,886)
Net realized gains (losses) from
securities transactions (98,036) (22,791) (41,857)
Change in net unrealized appreciation/
depreciation of investments 1,575,087 2,543 (42,170)
------------- ------------ ------------
Increase (decrease) in net assets
from operations 1,323,948 (69,598) (201,913)
------------- ------------ ------------
From capital transactions:
Net proceeds from units sold 1,339,041 406,148 757,699
Cost of units redeemed (564,751) (216,171) (490,413)
Net transfers 1,868,254 626,734 688,487
------------- ------------ ------------
Increase (decrease) in net assets
from capital transactions 2,642,544 816,711 955,773
------------- ------------ ------------
Increase (decrease) in net assets 3,966,492 747,113 753,860
Net assets at beginning of period 116,458,898 37,993,494 91,081,954
------------- ------------ ------------
Net assets at end of period $ 120,425,390 $ 38,740,607 $ 91,835,814
============= ============ ============
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 90,225 28,765 59,237
Units redeemed (38,100) (15,303) (38,325)
Units transferred 126,188 44,467 53,851
------------- ------------ ------------
Increase (decrease) in units outstanding 178,313 57,929 74,763
Beginning units 7,918,425 2,692,066 7,121,685
------------- ------------ ------------
Ending units 8,096,738 2,749,995 7,196,448
============= ============ ============
</TABLE>
See accompanying notes to financial statements.
77
<PAGE> 159
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS II Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE ONE MONTH ENDED
DECEMBER 31, 1999
(Continued)
<TABLE>
<CAPTION>
International Emerging Real "Dogs" of
Growth & Income Markets Estate Wall Street
Portfolio Portfolio Portfolio Portfolio
--------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ 15,182,527 $ (65,036) $ (43,268) $ (101,953)
Net realized gains (losses) from
securities transactions 723,616 207,908 (148,854) (121,114)
Change in net unrealized appreciation/
depreciation of investments (7,856,931) 8,966,053 1,791,976 (957,562)
------------- ------------ ------------ ------------
Increase (decrease) in net assets
from operations 8,049,212 9,108,925 1,599,854 (1,180,629)
------------- ------------ ------------ ------------
From capital transactions:
Net proceeds from units sold 2,535,222 1,171,741 212,637 921,223
Cost of units redeemed (787,781) (198,401) (207,494) (243,158)
Net transfers 6,671,664 3,459,378 313,877 (33,796)
------------- ------------ ------------ ------------
Increase (decrease) in net assets
from capital transactions 8,419,105 4,432,718 319,020 644,269
------------- ------------ ------------ ------------
Increase (decrease) in net assets 16,468,317 13,541,643 1,918,874 (536,360)
Net assets at beginning of period 156,485,672 43,682,791 33,664,724 81,021,429
------------- ------------ ------------ ------------
Net assets at end of period $ 172,953,989 $ 57,224,434 $ 35,583,598 $ 80,485,069
============= ============ ============ ============
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 182,111 116,673 25,382 103,201
Units redeemed (56,680) (20,504) (24,260) (27,005)
Units transferred 486,348 357,089 32,888 (3,061)
------------- ------------ ------------ ------------
Increase (decrease) in units outstanding 611,779 453,258 34,010 73,135
Beginning units 11,676,801 4,857,715 3,959,755 8,879,703
------------- ------------ ------------ ------------
Ending units 12,288,580 5,310,973 3,993,765 8,952,838
============= ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
MFS Mid-Cap Cash
Growth Management
Portfolio Portfolio TOTAL
------------ ------------- ---------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ 560,612 $ (221,561) $ 8,244,617
Net realized gains (losses) from
securities transactions 102,643 240,762 4,947,358
Change in net unrealized appreciation/
depreciation of investments 4,452,357 638,080 458,906,439
------------ ------------- ---------------
Increase (decrease) in net assets
from operations 5,115,612 657,281 472,098,414
------------ ------------- ---------------
From capital transactions:
Net proceeds from units sold 2,897,330 5,851,518 96,443,672
Cost of units redeemed (134,821) (2,686,485) (29,233,174)
Net transfers 4,995,343 5,700,242 151,349,493
------------ ------------- ---------------
Increase (decrease) in net assets
from capital transactions 7,757,852 8,865,275 218,559,991
------------ ------------- ---------------
Increase (decrease) in net assets 12,873,464 9,522,556 690,658,405
Net assets at beginning of period 31,376,575 164,148,572 5,689,299,674
------------ ------------- ---------------
Net assets at end of period $ 44,250,039 $ 173,671,128 $ 6,379,958,079
============ ============= ===============
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 188,935 478,595
Units redeemed (8,997) (219,565)
Units transferred 329,053 467,198
------------ -------------
Increase (decrease) in units outstanding 508,991 726,228
Beginning units 2,204,857 13,454,926
------------ -------------
Ending units 2,713,848 14,181,154
============ =============
</TABLE>
See accompanying notes to financial statements.
78
<PAGE> 160
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS II Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
NOVEMBER 30, 1999
<TABLE>
<CAPTION>
Government
Capital Natural and
Appreciation Growth Resources Quality Bond
Portfolio Portfolio Portfolio Portfolio
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ 11,910,546 $ 9,076,697 $ 1,986 $ 5,147,853
Net realized gains (losses) from
securities transactions 9,105,882 1,001,755 145,919 (427,260)
Change in net unrealized appreciation/
depreciation of investments 107,156,907 15,355,419 1,352,660 (6,972,025)
------------- ------------- ------------ -------------
Increase (decrease) in net assets
from operations 128,173,335 25,433,871 1,500,565 (2,251,432)
------------- ------------- ------------ -------------
From capital transactions:
Net proceeds from units sold 69,305,659 47,146,379 1,816,831 31,284,336
Cost of units redeemed (13,282,552) (6,605,132) (479,685) (5,928,638)
Net transfers 121,677,384 46,109,493 4,655,997 54,720,584
------------- ------------- ------------ -------------
Increase in net assets
from capital transactions 177,700,491 86,650,740 5,993,143 80,076,282
------------- ------------- ------------ -------------
Increase in net assets 305,873,826 112,084,611 7,493,708 77,824,850
Net assets at beginning of period 174,526,487 89,789,854 5,967,530 77,842,356
------------- ------------- ------------ -------------
Net assets at end of period $ 480,400,313 $ 201,874,465 $ 13,461,238 $ 155,667,206
============= ============= ============ =============
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 2,352,138 1,708,542 168,874 2,324,847
Units redeemed (441,210) (236,228) (44,221) (441,118)
Units transferred 3,933,528 1,638,333 414,618 4,063,451
------------- ------------- ------------ -------------
Increase in units outstanding 5,844,456 3,110,647 539,271 5,947,180
Beginning units 7,356,862 3,678,108 641,479 5,697,571
------------- ------------- ------------ -------------
Ending units 13,201,318 6,788,755 1,180,750 11,644,751
============= ============= ============ =============
</TABLE>
<TABLE>
<CAPTION>
International
Diversified Global Aggressive
Equities Equities Growth
Portfolio Portfolio Portfolio
------------- ------------- -------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ 775,112 $ 6,030,217 $ 5,269,296
Net realized gains (losses) from
securities transactions 6,972,916 570,688 1,842,053
Change in net unrealized appreciation/
depreciation of investments 5,767,673 12,410,348 22,904,216
------------- ------------- -------------
Increase (decrease) in net assets
from operations 13,515,701 19,011,253 30,015,565
------------- ------------- -------------
From capital transactions:
Net proceeds from units sold 13,474,668 21,163,425 22,485,712
Cost of units redeemed (3,304,436) (3,174,599) (2,677,820)
Net transfers 23,416,783 32,642,222 43,063,414
------------- ------------- -------------
Increase in net assets
from capital transactions 33,587,015 50,631,048 62,871,306
------------- ------------- -------------
Increase in net assets 47,102,716 69,642,301 92,886,871
Net assets at beginning of period 61,168,074 49,299,846 33,150,802
------------- ------------- -------------
Net assets at end of period $ 108,270,790 $ 118,942,147 $ 126,037,673
============= ============= =============
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 950,384 986,539 1,432,227
Units redeemed (232,642) (146,981) (169,014)
Units transferred 1,752,205 1,509,161 2,569,218
------------- ------------- -------------
Increase in units outstanding 2,469,947 2,348,719 3,832,431
Beginning units 4,519,545 2,566,912 2,794,187
------------- ------------- -------------
Ending units 6,989,492 4,915,631 6,626,618
============= ============= =============
</TABLE>
See accompanying notes to financial statements.
79
<PAGE> 161
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS II Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
NOVEMBER 30, 1999
(Continued)
<TABLE>
<CAPTION>
Venture Federated Putnam MFS Growth
Value Value Growth & Income
Portfolio Portfolio Portfolio Portfolio
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ 21,917,768 $ 3,227,048 $ 4,822,541 $ 13,031,907
Net realized gains (losses) from
securities transactions 3,101,311 1,382,135 259,311 50,436
Change in net unrealized appreciation/
depreciation of investments 50,626,603 (3,846,049) 40,706,491 (12,058,373)
------------- ------------- ------------- ------------
Increase (decrease) in net assets
from operations 75,645,682 763,134 45,788,343 1,023,970
------------- ------------- ------------- ------------
From capital transactions:
Net proceeds from units sold 129,086,971 19,743,459 80,431,272 36,083,764
Cost of units redeemed (27,710,746) (4,490,393) (9,100,608) (1,799,360)
Net transfers 194,467,200 32,691,119 87,608,460 43,170,189
------------- ------------- ------------- ------------
Increase in net assets
from capital transactions 295,843,425 47,944,185 158,939,124 77,454,593
------------- ------------- ------------- ------------
Increase in net assets 371,489,107 48,707,319 204,727,467 78,478,563
Net assets at beginning of period 484,391,582 60,007,952 110,342,981 14,202,858
------------- ------------- ------------- ------------
Net assets at end of period $ 855,880,689 $ 108,715,271 $ 315,070,448 $ 92,681,421
============= ============= ============= ============
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 5,021,122 1,175,234 3,118,051 1,586,052
Units redeemed (1,071,080) (267,288) (349,272) (79,517)
Units transferred 7,534,041 1,925,799 3,393,094 1,908,590
------------- ------------- ------------- ------------
Increase in units outstanding 11,484,083 2,833,745 6,161,873 3,415,125
Beginning units 20,734,371 3,783,248 4,949,624 694,076
------------- ------------- ------------- ------------
Ending units 32,218,454 6,616,993 11,111,497 4,109,201
============= ============= ============= ============
</TABLE>
<TABLE>
<CAPTION>
Alliance Growth- Asset
Growth Income Allocation
Portfolio Portfolio Portfolio
--------------- ------------- -------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ 61,828,800 $ 19,442,866 $ 14,562,279
Net realized gains (losses) from
securities transactions 7,029,767 3,108,874 (212,930)
Change in net unrealized appreciation/
depreciation of investments 114,934,404 74,726,813 (5,163,549)
--------------- ------------- -------------
Increase (decrease) in net assets
from operations 183,792,971 97,278,553 9,185,800
--------------- ------------- -------------
From capital transactions:
Net proceeds from units sold 242,966,166 127,355,200 21,128,082
Cost of units redeemed (31,653,689) (19,305,894) (9,226,462)
Net transfers 311,928,229 174,525,511 40,366,380
--------------- ------------- -------------
Increase in net assets
from capital transactions 523,240,706 282,574,817 52,268,000
--------------- ------------- -------------
Increase in net assets 707,033,677 379,853,370 61,453,800
Net assets at beginning of period 393,762,184 251,591,449 163,909,936
--------------- ------------- -------------
Net assets at end of period $ 1,100,795,861 $ 631,444,819 $ 225,363,736
=============== ============= =============
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 6,019,042 4,193,175 1,131,416
Units redeemed (778,222) (630,061) (492,133)
Units transferred 7,601,975 5,721,597 2,164,458
--------------- ------------- -------------
Increase in units outstanding 12,842,795 9,284,711 2,803,741
Beginning units 12,001,651 9,786,202 8,996,522
--------------- ------------- -------------
Ending units 24,844,446 19,070,913 11,800,263
=============== ============= =============
</TABLE>
See accompanying notes to financial statements.
80
<PAGE> 162
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS II Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
NOVEMBER 30, 1999
(Continued)
<TABLE>
<CAPTION>
SunAmerica MFS Total Worldwide
Balanced Return Utility High Income
Portfolio Portfolio Portfolio Portfolio
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ 1,038,359 $ 7,542,171 $ 2,324,094 $ 4,141,359
Net realized gains (losses) from
securities transactions 108 7,023 121,450 (835,797)
Change in net unrealized appreciation/
depreciation of investments 15,847,537 (6,012,276) (771,320) 1,217,344
------------- ------------ ------------ ------------
Increase (decrease) in net assets
from operations 16,886,004 1,536,918 1,674,224 4,522,906
------------- ------------ ------------ ------------
From capital transactions:
Net proceeds from units sold 53,470,616 21,860,070 12,447,951 3,498,929
Cost of units redeemed (6,596,557) (1,995,038) (2,137,570) (1,781,662)
Net transfers 86,675,865 40,508,079 23,613,148 4,235,172
------------- ------------ ------------ ------------
Increase in net assets
from capital transactions 133,549,924 60,373,111 33,923,529 5,952,439
------------- ------------ ------------ ------------
Increase in net assets 150,435,928 61,910,029 35,597,753 10,475,345
Net assets at beginning of period 55,282,683 25,778,836 26,313,641 32,985,273
------------- ------------ ------------ ------------
Net assets at end of period $ 205,718,611 $ 87,688,865 $ 61,911,394 $ 43,460,618
============= ============ ============ ============
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 3,095,544 1,175,530 836,231 250,251
Units redeemed (378,819) (107,258) (142,331) (125,840)
Units transferred 5,024,009 2,180,437 1,581,740 299,004
------------- ------------ ------------ ------------
Increase in units outstanding 7,740,734 3,248,709 2,275,640 423,415
Beginning units 3,543,245 1,492,175 1,807,529 2,430,509
------------- ------------ ------------ ------------
Ending units 11,283,979 4,740,884 4,083,169 2,853,924
============= ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
High-Yield Global Corporate
Bond Bond Bond
Portfolio Portfolio Portfolio
------------- ------------ ------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ 9,152,126 $ 2,130,114 $ 2,694,760
Net realized gains (losses) from
securities transactions (644,681) (40,024) (50,416)
Change in net unrealized appreciation/
depreciation of investments (5,846,458) (2,744,734) (4,737,965)
------------- ------------ ------------
Increase (decrease) in net assets
from operations 2,660,987 (654,644) (2,093,621)
------------- ------------ ------------
From capital transactions:
Net proceeds from units sold 16,690,714 7,493,791 14,769,015
Cost of units redeemed (5,524,798) (1,603,734) (3,576,701)
Net transfers 31,272,128 13,428,271 34,199,108
------------- ------------ ------------
Increase in net assets
from capital transactions 42,438,044 19,318,328 45,391,422
------------- ------------ ------------
Increase in net assets 45,099,031 18,663,684 43,297,801
Net assets at beginning of period 71,359,867 19,329,810 47,784,153
------------- ------------ ------------
Net assets at end of period $ 116,458,898 $ 37,993,494 $ 91,081,954
============= ============ ============
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 1,141,423 523,697 1,136,617
Units redeemed (377,152) (112,684) (276,352)
Units transferred 2,148,039 938,896 2,628,356
------------- ------------ ------------
Increase in units outstanding 2,912,310 1,349,909 3,488,621
Beginning units 5,006,115 1,342,157 3,633,064
------------- ------------ ------------
Ending units 7,918,425 2,692,066 7,121,685
============= ============ ============
</TABLE>
See accompanying notes to financial statements.
81
<PAGE> 163
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS II Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
NOVEMBER 30, 1999
(Continued)
<TABLE>
<CAPTION>
International Emerging Real "Dogs" of
Growth & Income Markets Estate Wall Street
Portfolio Portfolio Portfolio Portfolio
--------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ 548,380 $ (366,202) $ 727,960 $ 1,390,875
Net realized gains (losses) from
securities transactions 8,795,476 462,117 (960,010) 33,055
Change in net unrealized appreciation/
depreciation of investments 10,458,050 10,106,050 (4,870,119) (6,918,280)
------------- ------------ ------------ ------------
Increase (decrease) in net assets
from operations 19,801,906 10,201,965 (5,102,169) (5,494,350)
------------- ------------ ------------ ------------
From capital transactions:
Net proceeds from units sold 18,281,360 5,379,448 3,966,703 17,268,910
Cost of units redeemed (4,791,103) (948,361) (1,462,048) (2,960,776)
Net transfers 48,024,228 13,253,871 3,570,410 30,220,688
------------- ------------ ------------ ------------
Increase in net assets
from capital transactions 61,514,485 17,684,958 6,075,065 44,528,822
------------- ------------ ------------ ------------
Increase in net assets 81,316,391 27,886,923 972,896 39,034,472
Net assets at beginning of period 75,169,281 15,795,868 32,691,828 41,986,957
------------- ------------ ------------ ------------
Net assets at end of period $ 156,485,672 $ 43,682,791 $ 33,664,724 $ 81,021,429
============= ============ ============ ============
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 1,458,460 719,913 417,566 1,768,746
Units redeemed (378,517) (124,134) (153,462) (302,395)
Units transferred 3,858,595 1,687,620 358,884 3,089,127
------------- ------------ ------------ ------------
Increase in units outstanding 4,938,538 2,283,399 622,988 4,555,478
Beginning units 6,738,263 2,574,316 3,336,767 4,324,225
------------- ------------ ------------ ------------
Ending units 11,676,801 4,857,715 3,959,755 8,879,703
============= ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
MFS Mid-Cap Cash
Growth Management
Portfolio Portfolio TOTAL
------------ ------------- ---------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ (77,949) $ 1,873,194 $ 210,164,157
Net realized gains (losses) from
securities transactions 119,893 2,212,818 43,151,869
Change in net unrealized appreciation/
depreciation of investments 4,024,528 (7,318) 427,646,577
------------ ------------- ---------------
Increase (decrease) in net assets
from operations 4,066,472 4,078,694 680,962,603
------------ ------------- ---------------
From capital transactions:
Net proceeds from units sold 7,415,790 107,614,496 1,153,629,717
Cost of units redeemed (166,957) (22,563,293) (194,848,612)
Net transfers 20,061,270 10,104,667 1,570,209,870
------------ ------------- ---------------
Increase in net assets
from capital transactions 27,310,103 95,155,870 2,528,990,975
------------ ------------- ---------------
Increase in net assets 31,376,575 99,234,564 3,209,953,578
Net assets at beginning of period 0 64,914,008 2,479,346,096
------------ ------------- ---------------
Net assets at end of period $ 31,376,575 $ 164,148,572 $ 5,689,299,674
============ ============= ===============
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 615,608 8,960,738
Units redeemed (13,180) (1,874,567)
Units transferred 1,602,429 880,709
------------ -------------
Increase in units outstanding 2,204,857 7,966,880
Beginning units 0 5,488,046
------------ -------------
Ending units 2,204,857 13,454,926
============ =============
</TABLE>
See accompanying notes to financial statements.
82
<PAGE> 164
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS II Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
Government
Capital Natural and
Appreciation Growth Resources Quality Bond
Portfolio Portfolio Portfolio Portfolio
------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ 9,632,760 $ 3,199,630 $ 68,950 $ 1,474,541
Net realized gains (losses) from
securities transactions (326,913) (201,242) (204,159) 47,241
Change in net unrealized appreciation/
depreciation of investments (1,465,953) 5,142,158 (803,255) 714,247
------------- ------------ ----------- ------------
Increase (decrease) in net assets
from operations 7,839,894 8,140,546 (938,464) 2,236,029
------------- ------------ ----------- ------------
From capital transactions:
Net proceeds from units sold 71,721,210 35,475,742 2,712,488 28,907,989
Cost of units redeemed (2,491,708) (1,447,887) (143,369) (968,073)
Net transfers 67,863,753 31,589,411 2,154,514 42,664,629
------------- ------------ ----------- ------------
Increase in net assets
from capital transactions 137,093,255 65,617,266 4,723,633 70,604,545
------------- ------------ ----------- ------------
Increase in net assets 144,933,149 73,757,812 3,785,169 72,840,574
Net assets at beginning of period 29,593,338 16,032,042 2,182,361 5,001,782
------------- ------------ ----------- ------------
Net assets at end of period $ 174,526,487 $ 89,789,854 $ 5,967,530 $ 77,842,356
============= ============ =========== ============
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 3,101,815 1,578,439 257,386 2,175,939
Units redeemed (108,228) (63,877) (14,128) (72,558)
Units transferred 2,971,013 1,374,272 202,275 3,198,932
------------- ------------ ----------- ------------
Increase in units outstanding 5,964,600 2,888,834 445,533 5,302,313
Beginning units 1,392,262 789,274 195,946 395,258
------------- ------------ ----------- ------------
Ending units 7,356,862 3,678,108 641,479 5,697,571
============= ============ =========== ============
</TABLE>
<TABLE>
<CAPTION>
International
Diversified Global Aggressive
Equities Equities Growth
Portfolio Portfolio Portfolio
------------- ------------ ------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ 511,389 $ 1,324,274 $ (292,123)
Net realized gains (losses) from
securities transactions 1,386,651 (219,761) (191,856)
Change in net unrealized appreciation/
depreciation of investments 2,059,909 904,533 1,478,610
------------ ------------ ------------
Increase (decrease) in net assets
from operations 3,957,949 2,009,046 994,631
------------ ------------ ------------
From capital transactions:
Net proceeds from units sold 21,091,841 19,315,338 13,649,199
Cost of units redeemed (1,004,862) (640,259) (828,570)
Net transfers 25,033,100 18,470,077 9,885,207
------------ ------------ ------------
Increase in net assets
from capital transactions 45,120,079 37,145,156 22,705,836
------------ ------------ ------------
Increase in net assets 49,078,028 39,154,202 23,700,467
Net assets at beginning of period 12,090,046 10,145,644 9,450,335
------------ ------------ ------------
Net assets at end of period $ 61,168,074 $ 49,299,846 $ 33,150,802
============ ============ ============
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 1,598,306 1,033,453 1,177,432
Units redeemed (75,427) (34,289) (72,238)
Units transferred 1,955,854 967,454 867,888
------------ ------------ ------------
Increase in units outstanding 3,478,733 1,966,618 1,973,082
Beginning units 1,040,812 600,294 821,105
------------ ------------ ------------
Ending units 4,519,545 2,566,912 2,794,187
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
83
<PAGE> 165
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS II Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
NOVEMBER 30, 1998
(Continued)
<TABLE>
<CAPTION>
Venture Federated Putnam MFS Growth
Value Value Growth & Income
Portfolio Portfolio Portfolio Portfolio
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ 2,925,516 $ 48,490 $ 4,712,089 $ 841,929
Net realized gains (losses) from
securities transactions (172,736) 28,529 (107,567) (17,215)
Change in net unrealized appreciation/
depreciation of investments 19,867,377 4,160,013 3,964,873 276,080
------------- ------------ ------------- ------------
Increase (decrease) in net assets
from operations 22,620,157 4,237,032 8,569,395 1,100,794
------------- ------------ ------------- ------------
From capital transactions:
Net proceeds from units sold 208,314,099 26,931,209 49,959,863 5,669,893
Cost of units redeemed (7,851,820) (1,132,439) (1,645,834) (278,400)
Net transfers 170,105,124 19,944,991 38,106,584 4,341,304
------------- ------------ ------------- ------------
Increase in net assets
from capital transactions 370,567,403 45,743,761 86,420,613 9,732,797
------------- ------------ ------------- ------------
Increase in net assets 393,187,560 49,980,793 94,990,008 10,833,591
Net assets at beginning of period 91,204,022 10,027,159 15,352,973 3,369,267
------------- ------------ ------------- ------------
Net assets at end of period $ 484,391,582 $ 60,007,952 $ 110,342,981 $ 14,202,858
============= ============ ============= ============
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 9,205,602 1,800,123 2,384,765 294,266
Units redeemed (349,256) (74,877) (78,007) (14,370)
Units transferred 7,596,146 1,321,669 1,811,688 223,079
------------- ------------ ------------- ------------
Increase in units outstanding 16,452,492 3,046,915 4,118,446 502,975
Beginning units 4,281,879 736,333 831,178 191,101
------------- ------------ ------------- ------------
Ending units 20,734,371 3,783,248 4,949,624 694,076
============= ============ ============= ============
</TABLE>
<TABLE>
<CAPTION>
Alliance Growth- Asset
Growth Income Allocation
Portfolio Portfolio Portfolio
------------- ------------- -------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ 8,226,469 $ 2,384,817 $ 5,744,063
Net realized gains (losses) from
securities transactions 40,331 (105,651) (25,672)
Change in net unrealized appreciation/
depreciation of investments 38,915,613 19,497,796 (6,467,553)
------------- ------------- -------------
Increase (decrease) in net assets
from operations 47,182,413 21,776,962 (749,162)
------------- ------------- -------------
From capital transactions:
Net proceeds from units sold 156,292,588 102,300,459 71,072,209
Cost of units redeemed (7,072,575) (4,333,954) (2,843,383)
Net transfers 146,090,948 90,122,898 69,478,908
------------- ------------- -------------
Increase in net assets
from capital transactions 295,310,961 188,089,403 137,707,734
------------- ------------- -------------
Increase in net assets 342,493,374 209,866,365 136,958,572
Net assets at beginning of period 51,268,810 41,725,084 26,951,364
------------- ------------- -------------
Net assets at end of period $ 393,762,184 $ 251,591,449 $ 163,909,936
============= ============= =============
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 5,295,545 4,276,262 3,835,848
Units redeemed (236,519) (178,639) (157,177)
Units transferred 4,850,581 3,739,287 3,819,170
------------- ------------- -------------
Increase in units outstanding 9,909,607 7,836,910 7,497,841
Beginning units 2,092,044 1,949,292 1,498,681
------------- ------------- -------------
Ending units 12,001,651 9,786,202 8,996,522
============= ============= =============
</TABLE>
See accompanying notes to financial statements.
84
<PAGE> 166
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS II Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
NOVEMBER 30, 1998
(Continued)
<TABLE>
<CAPTION>
SunAmerica MFS Total Worldwide
Balanced Return Utility High Income
Portfolio Portfolio Portfolio Portfolio
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ 80,436 $ 752,215 $ 46,948 $ 1,480,150
Net realized gains (losses) from
securities transactions 767 (77,158) 66,229 (344,498)
Change in net unrealized appreciation/
depreciation of investments 3,846,248 624,947 1,363,944 (6,457,714)
------------ ------------ ------------ ------------
Increase (decrease) in net assets
from operations 3,927,451 1,300,004 1,477,121 (5,322,062)
------------ ------------ ------------ ------------
From capital transactions:
Net proceeds from units sold 23,239,334 11,304,259 10,714,120 17,466,056
Cost of units redeemed (821,763) (494,667) (321,498) (766,182)
Net transfers 24,137,415 10,295,638 12,180,126 12,081,287
------------ ------------ ------------ ------------
Increase in net assets
from capital transactions 46,554,986 21,105,230 22,572,748 28,781,161
------------ ------------ ------------ ------------
Increase in net assets 50,482,437 22,405,234 24,049,869 23,459,099
Net assets at beginning of period 4,800,246 3,373,602 2,263,772 9,526,174
------------ ------------ ------------ ------------
Net assets at end of period $ 55,282,683 $ 25,778,836 $ 26,313,641 $ 32,985,273
============ ============ ============ ============
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 1,595,594 684,178 777,520 1,095,112
Units redeemed (55,510) (29,447) (23,068) (52,697)
Units transferred 1,640,025 619,053 875,459 791,786
------------ ------------ ------------ ------------
Increase in units outstanding 3,180,109 1,273,784 1,629,911 1,834,201
Beginning units 363,136 218,391 177,618 596,308
------------ ------------ ------------ ------------
Ending units 3,543,245 1,492,175 1,807,529 2,430,509
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
High-Yield Global Corporate
Bond Bond Bond
Portfolio Portfolio Portfolio
------------ ------------ ------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ 1,151,514 $ 317,911 $ 153,322
Net realized gains (losses) from
securities transactions (213,441) 81,256 4,182
Change in net unrealized appreciation/
depreciation of investments (4,404,786) 557,677 735,861
------------ ------------ ------------
Increase (decrease) in net assets
from operations (3,466,713) 956,844 893,365
------------ ------------ ------------
From capital transactions:
Net proceeds from units sold 42,561,001 7,360,275 22,508,270
Cost of units redeemed (1,599,144) (442,454) (965,054)
Net transfers 22,740,488 9,053,497 21,232,066
------------ ------------ ------------
Increase in net assets
from capital transactions 63,702,345 15,971,318 42,775,282
------------ ------------ ------------
Increase in net assets 60,235,632 16,928,162 43,668,647
Net assets at beginning of period 11,124,235 2,401,648 4,115,506
------------ ------------ ------------
Net assets at end of period $ 71,359,867 $ 19,329,810 $ 47,784,153
============ ============ ============
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 2,810,972 534,729 1,742,472
Units redeemed (107,339) (31,521) (74,403)
Units transferred 1,543,626 655,386 1,636,695
------------ ------------ ------------
Increase in units outstanding 4,247,259 1,158,594 3,304,764
Beginning units 758,856 183,563 328,300
------------ ------------ ------------
Ending units 5,006,115 1,342,157 3,633,064
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
85
<PAGE> 167
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS II Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
NOVEMBER 30, 1998
(Continued)
<TABLE>
<CAPTION>
International Emerging Real
Growth & Income Markets Estate
Portfolio Portfolio Portfolio
--------------- ------------ ------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ (476,937) $ (112,661) $ (150,771)
Net realized gains (losses) from
securities transactions 705,318 (232,481) (52,161)
Change in net unrealized appreciation/
depreciation of investments 429,721 (2,824,133) (3,433,118)
------------ ------------ ------------
Increase (decrease) in net assets
from operations 658,102 (3,169,275) (3,636,050)
------------ ------------ ------------
From capital transactions:
Net proceeds from units sold 28,356,252 7,726,541 16,657,991
Cost of units redeemed (1,031,779) (312,814) (680,765)
Net transfers 33,650,652 6,265,150 10,198,411
------------ ------------ ------------
Increase in net assets
from capital transactions 60,975,125 13,678,877 26,175,637
------------ ------------ ------------
Increase in net assets 61,633,227 10,509,602 22,539,587
Net assets at beginning of period 13,536,054 5,286,266 10,152,241
------------ ------------ ------------
Net assets at end of period $ 75,169,281 $ 15,795,868 $ 32,691,828
============ ============ ============
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 2,490,709 1,042,154 1,513,224
Units redeemed (92,993) (45,374) (64,997)
Units transferred 3,030,421 914,324 1,001,219
------------ ------------ ------------
Increase in units outstanding 5,428,137 1,911,104 2,449,446
Beginning units 1,310,126 663,212 887,321
------------ ------------ ------------
Ending units 6,738,263 2,574,316 3,336,767
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
"Dogs" of Cash
Wall Street Management
Portfolio Portfolio TOTAL
------------ ------------ ---------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ (182,697) $ 630,687 $ 44,492,911
Net realized gains (losses) from
securities transactions (2,505) 175,674 41,162
Change in net unrealized appreciation/
depreciation of investments 1,562,918 593,790 80,839,803
------------ ------------ ---------------
Increase (decrease) in net assets
from operations 1,377,716 1,400,151 125,373,876
------------ ------------ ---------------
From capital transactions:
Net proceeds from units sold 21,886,112 97,871,143 1,121,065,481
Cost of units redeemed (263,684) (3,830,114) (44,213,051)
Net transfers 18,986,813 (47,835,079) 868,837,912
------------ ------------ ---------------
Increase in net assets
from capital transactions 40,609,241 46,205,950 1,945,690,342
------------ ------------ ---------------
Increase in net assets 41,986,957 47,606,101 2,071,064,218
Net assets at beginning of period 0 17,307,907 408,281,878
------------ ------------ ---------------
Net assets at end of period $ 41,986,957 $ 64,914,008 $ 2,479,346,096
============ ============ ===============
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 2,316,059 8,397,502
Units redeemed (28,630) (327,207)
Units transferred 2,036,796 (4,096,539)
------------ ------------
Increase in units outstanding 4,324,225 3,973,756
Beginning units 0 1,514,290
------------ ------------
Ending units 4,324,225 5,488,046
============ ============
</TABLE>
See accompanying notes to financial statements.
86
<PAGE> 168
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE POLARIS II 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 POLARIS II
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 twenty-seven variable portfolios
(the "Variable Accounts"). Each of the Variable Accounts is invested
solely in the shares of either (1) one of the four currently
available investment portfolios of Anchor Series Trust ("Anchor
Trust") or (2) one of the twenty-three currently available investment
portfolios of SunAmerica Series Trust ("SunAmerica Trust"). The
Anchor Trust and the SunAmerica Trust (the "Trusts") are each
diversified, open-end, affiliated investment companies, which retain
investment advisors to assist in the investment activities of the
Trusts. The participant may elect to have payments allocated to any
of seven guaranteed-interest funds of the Company (the "General
Account"), which are not a part of the Separate Account. If no
election is made, the payments will be invested according to the
contracholder's last allocation instructions. The financial
statements include balances allocated by the participant to the
twenty-seven Variable Accounts and do not include balances allocated
to the General Account.
The inception date of the Government Bond and Global Bond Portfolios
was June 11, 1997. The inception date of the MFS Total Return
Portfolio was June 10, 1997. The inception date of the Corporate
Bond, High-Yield Bond, and Aggressive Growth Portfolios was June 9,
1997. The inception date of the Utility Portfolio was June 6, 1997.
The inception date of the Cash Management, Worldwide High Income,
SunAmerica Balanced, and Emerging Markets Portfolios was June 5,
1997. The inception date of the Natural Resources, MFS Growth &
Income, Federated Value, International Diversified Equities,
International Growth & Income, and Real Estate Portfolios was June 4,
1997. The inception date of the Venture Value and Alliance Growth
Portfolios was June 2, 1997. The inception date of the "Dogs" of Wall
Street Portfolio was April 1, 1998. The inception date of the MFS
Mid-Cap Growth
87
<PAGE> 169
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE POLARIS II VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Portfolio was April 5, 1999. The inception date of the remaining
portfolios was June 3, 1997.
The investment objectives and policies of the four portfolios of the
Anchor Trust are summarized below:
The CAPITAL APPRECIATION PORTFOLIO seeks long-term capital
appreciation. This portfolio invests in growth equity securities
which are widely diversified by industry and company using a
wide-ranging and flexible stock picking approach; may be concentrated
and will generally have less investments in large company securities
than the Growth Portfolio.
The GROWTH PORTFOLIO seeks capital appreciation. This portfolio
invests in core equity securities that are widely diversified by
industry and company.
The NATURAL RESOURCES PORTFOLIO seeks a total return in excess of the
U.S. rate of inflation as represented by the Consumer Price Index.
This portfolio invests primarily in equity securities of U.S. or
foreign companies that are expected to provide favorable returns in
periods of rising inflation.
The GOVERNMENT AND QUALITY BOND PORTFOLIO seeks relatively high
current income, liquidity and security of principal. This portfolio
invests in obligations issued, guaranteed or insured by the U.S.
Government, its agencies or instrumentalities and in high quality
corporate fixed securities.
Anchor Trust has portfolios in addition to those identified above;
however, none of these other portfolios is currently available for
investment under the Separate Account.
The investment objectives and policies of the twenty-three portfolios
of the SunAmerica Trust are summarized below:
The INTERNATIONAL DIVERSIFIED EQUITIES PORTFOLIO seeks long-term
capital appreciation. This portfolio invests (in accordance with
country weightings as determined by the Subadviser) in common stocks
of foreign issuers which, in the aggregate, replicate broad country
and sector indices.
The GLOBAL EQUITIES PORTFOLIO seeks long-term growth of capital. This
portfolio invests primarily in common stocks or securities of U.S.
and foreign issuers with common stock
88
<PAGE> 170
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE POLARIS II VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
characteristics which demonstrate the potential for appreciation and
engages in transactions in foreign currencies.
The AGGRESSIVE GROWTH PORTFOLIO seeks capital appreciation. This
portfolio invests primarily in equity securities of high growth
companies including small companies with market capitalizations under
$1 billion.
The VENTURE VALUE PORTFOLIO seeks growth of capital. This portfolio
invests primarily in common stocks of companies with market
capitalizations of at least $5 billion.
The FEDERATED VALUE PORTFOLIO seeks growth of capital and income.
This portfolio invests primarily in the securities of high quality
companies.
The PUTNAM GROWTH PORTFOLIO seeks long-term growth of capital. This
portfolio invests primarily in common stocks or securities with
common stock characteristics that its Subadviser believes have
above-average growth prospects.
The MFS GROWTH AND INCOME PORTFOLIO (PREVIOUSLY KNOWN AS
GROWTH/PHOENIX INVESTMENT COUNSEL PORTFOLIO) seeks reasonable current
income and long-term growth of capital and income. This portfolio
invests primarily in equity securities.
The ALLIANCE GROWTH PORTFOLIO seeks long term growth of capital. This
portfolio invests primarily in common stocks or securities of a
limited number of large, carefully selected, high quality U.S.
companies that are judged likely to achieve superior earnings.
The GROWTH-INCOME PORTFOLIO seeks growth of capital and income. This
portfolio invests primarily in common stocks or securities which
demonstrate the potential for appreciation and/or dividends.
The ASSET ALLOCATION PORTFOLIO seeks high total return (including
income and capital gains) consistent with preservation of capital
over the long term. This portfolio invests in a diversified selection
of common stocks and other securities having common stock
characteristics, bonds and other intermediate and long-term
fixed-income securities and money market instruments (debt securities
maturing in one year or less) in any combination.
The SUNAMERICA BALANCED PORTFOLIO seeks to conserve principal. This
portfolio maintains at all times a balanced portfolio of stocks and
bonds, with at least 25% invested in fixed income securities.
89
<PAGE> 171
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE POLARIS II VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
The MFS TOTAL RETURN PORTFOLIO (PREVIOUSLY KNOWN AS BALANCED/PHOENIX
INVESTMENT COUNSEL PORTFOLIO) seeks reasonable income, long-term
capital growth and conservation of capital. This portfolio invests
primarily in common stocks and fixed-income securities, with an
emphasis on income-producing securities which appear to have some
potential for capital enhancement.
The UTILITY PORTFOLIO seeks high current income and moderate capital
appreciation. This portfolio invests primarily in the equity and debt
securities of utility companies.
The WORLDWIDE HIGH INCOME PORTFOLIO seeks high current income and,
secondarily, capital appreciation. This portfolio invests primarily
in a selection of high-yielding fixed-income securities of issuers
located throughout the world.
The HIGH-YIELD BOND PORTFOLIO seeks a high level of current income
and, secondarily, 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 with a primary focus on "B" rated high-yield bonds.
The GLOBAL BOND PORTFOLIO seeks a high total return, emphasizing
current income and, to a lesser extent, providing opportunities for
capital appreciation. This portfolio invests in high quality
fixed-income securities of U.S. and foreign issuers and engages in
transactions in foreign currencies.
The CORPORATE BOND PORTFOLIO seeks a high total return with only
moderate price risk. This portfolio invests primarily in investment
grade fixed-income securities.
The INTERNATIONAL GROWTH AND INCOME PORTFOLIO seeks growth of capital
with current income as a secondary objective. This portfolio invests
primarily in common stocks traded on markets outside the United
States.
The EMERGING MARKETS PORTFOLIO seeks long-term capital appreciation.
This portfolio invests mainly in the common stocks and other equity
securities of companies that its Subadviser believes have
above-average growth prospects primarily in emerging markets outside
the United States.
The REAL ESTATE PORTFOLIO seeks to achieve total return through a
combination of growth and income. This portfolio invests primarily in
securities of companies principally engaged
90
<PAGE> 172
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE POLARIS II VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
in or related to the real estate industry or which own significant
real estate assets or which primarily invest in real estate financial
instruments.
The "DOGS" OF WALL STREET PORTFOLIO seeks total return (including
capital appreciation and current income) primarily through the annual
selection of thirty high dividend yielding common stocks from the Dow
Jones Industrial Average and the broader market.
The MFS MID-CAP GROWTH PORTFOLIO seeks long-term growth of capital.
This portfolio invests primarily in equity securities of medium-sized
companies, generally with market capitalizations between $1 billion
and $5 billion, that its Subadvisor believes have above-average
growth potential.
The CASH MANAGEMENT PORTFOLIO seeks high current yield while
preserving capital. This portfolio invests in a diversified selection
of money market instruments.
The SunAmerica Trust has portfolios in addition to those identified
above; however, none of these other portfolios is currently available
for investment under the Separate Account.
Purchases and sales of shares of the portfolios of the Trusts are
valued at the net asset values of the shares on the date the shares
are purchased or sold. Dividends and capital gains distributions are
recorded when received. Realized gains and losses on the sale of
investments in the Trusts are recognized at the date of sale and are
determined on an average cost basis.
Accumulation unit values are computed daily based on the total net
assets of the Variable Accounts.
INCOME PROTECTOR FEATURE: The Income Protector Feature is a "safety
net" which offers the ability to receive a guaranteed fixed minimum
retirement income during the Income Phase. The Income Protector is a
standard feature of your contract at no additional charge. Other
options were previously available under the Income Protector feature.
Generally, if the contract was purchased between November 2, 1998 and
March 31, 1999 the other provisions continue to apply to the
contract. The minimum guaranteed income is determined upon
calculation of the "income benefit base." The "income benefit base"
calculation is equal to the contract's value on the election date,
plus all subsequent purchase payments, less all withdrawals and
applicable fees and charges in an amount proportionate to the amount
by which such withdrawals decrease the contract's value.
91
<PAGE> 173
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE POLARIS II VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
PRINCIPAL REWARDS PROGRAM: The Principal Rewards Program adds an
amount to the contract (an "Initial Payment Enhancement") each time a
Purchase Payment is submitted. The Initial Payment Enhancement is
calculated as 2.00% of each Purchase Payment. Additionally, an amount
may be added to the contract at a future date (a "Deferred Payment
Enhancement"). For Purchase Payments received by March 31, 2000, the
Current Deferred Payment Enhancement Percentage is 2.00%. After March
31, 2000, the Current Deferred Payment Enhancement Percentage may be
increased, decreased, or eliminated. Purchase Payments may not be
invested in a 6-month or 1 year Dollar Cost Averaging fixed accounts
if participating in the Principal Rewards Program.
2. CHARGES AND DEDUCTIONS
Charges and deductions are applied against the current value of the
Separate Account and are paid as follows:
WITHDRAWAL CHARGE: The contract value may be withdrawn at any time
during the accumulation period. Purchase payments that are no longer
subject to the withdrawal charge and not previously withdrawn and
earnings in the contract may be withdrawn free of withdrawal charges
at any time. In addition, there is a free withdrawal amount for the
first withdrawal during a contract year after the first contract
year. The free withdrawal amount is the greater of earnings in the
contract or 10% of the purchase payments that have been invested for
at least one year, and not withdrawn, less any withdrawals made
during the year. Should a withdrawal exceed the free withdrawal
amount, a withdrawal charge, in certain circumstances, is imposed and
paid to the Company.
Withdrawal charges vary in amount depending upon the number of years
since the purchase payment being withdrawn was made and also vary
according to participation in the Principal Rewards Program. The
withdrawal charge is deducted from the remaining contract value so
that the actual reduction in contract value as a result of the
withdrawal will be greater than the withdrawal amount requested and
paid. For purposes of determining the withdrawal charge, withdrawals
will be allocated first to investment income, if any (which may
generally be withdrawn free of a withdrawal charge), and then to the
oldest purchase payments first so that all withdrawals are allocated
to purchase payments to which the lowest (if any) withdrawal charge
applies.
92
<PAGE> 174
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE POLARIS II VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
CHARGES AND DEDUCTIONS (continued)
Any amount withdrawn which exceeds a free withdrawal may be subject
to a withdrawal charge in accordance with the withdrawal charge
tables shown below:
<TABLE>
<CAPTION>
WITHOUT PRINCIPAL REWARDS PROGRAM
<S> <C>
Years Since Purchase Applicable Withdrawal
Payment Charge Percentage
--------------------------------------------------------------------------------
First 7%
Second 6%
Third 5%
Fourth 4%
Fifth 3%
Sixth 2%
Seventh 1%
Eighth and beyond 0%
WITH PRINCIPAL REWARDS PROGRAM
Years Since Purchase Applicable Withdrawal
Payment Charge Percentage
--------------------------------------------------------------------------------
First 9%
Second 9%
Third 8%
Fourth 7%
Fifth 6%
Sixth 5%
Seventh 4%
Eighth 3%
Ninth 2%
Tenth and beyond 0%
</TABLE>
CONTRACT MAINTENANCE FEE: An annual contract maintenance fee of $35
($30 in North Dakota) is charged against each contract, which
reimburses the Company for expenses incurred in establishing and
maintaining records relating to a contract. The contract maintenance
fee will be assessed on each anniversary during the accumulation
phase. In the event that a total surrender of contract value is made,
the entire charge will be assessed as of the date of surrender.
93
<PAGE> 175
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE POLARIS II VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
CHARGES AND DEDUCTIONS (continued)
TRANSFER FEE: A transfer fee of $25 ($10 in Pennsylvania and Texas) is
assessed on each transfer of funds in excess of fifteen transactions
within a contract year.
PREMIUM TAXES: Premium taxes or other taxes payable to a state or
other governmental entity will be charged against the contract values.
Some states assess premium taxes at the time purchase payments are
made; others assess premium taxes at the time annuity payments begin.
The Company currently intends to deduct premium taxes at the time of
surrender or upon annuitization; however, it reserves the right to
deduct any premium taxes when incurred or upon the payment of the
death benefit.
MORTALITY RISK, GUARANTEE DEATH BENEFIT AND EXPENSE RISK CHARGE: The
Company deducts mortality risk, guarantee death benefit and expense
risk charges, which total to an annual rate of 1.37% of the net asset
value of each portfolio, computed on a daily basis. The mortality risk
charge (0.90%) 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. The
guarantee death benefit and expense risk charges (0.12% and 0.35%,
respectively) are compensation for providing death benefits, and for
assuming the risk that the current charges will be insufficient in the
future to cover the cost of administering the contract.
DISTRIBUTION EXPENSE CHARGE: The Company deducts a distribution
expense charge at an annual rate of 0.15% of the net asset value of
each portfolio, computed on a daily basis. This charge is for all
expenses associated with the distribution of the contract. These
expenses include preparing the contract, confirmations and statements,
providing sales support and maintaining contract records. If this
charge is not enough to cover the costs of distributing the contract,
the Company will bear the loss.
SEPARATE ACCOUNT INCOME TAXES: The Company currently does not maintain
a provision for taxes, but has reserved the right to establish such a
provision for taxes in the future if it determines, in its sole
discretion, that it will incur a tax as a result of the operation of
the Separate Account.
94
<PAGE> 176
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE POLARIS II VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
3. INVESTMENT IN ANCHOR TRUST AND SUNAMERICA TRUST
The aggregate cost of the 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>
ANCHOR TRUST:
Capital Appreciation Portfolio $ 25,000,131 $ 4,902,412
Growth Portfolio 7,369,767 270,792
Natural Resources Portfolio 462,738 641,467
Government and Quality Bond Portfolio 4,828,794 624,820
SUNAMERICA TRUST:
International Diversified Equities Portfolio 18,048,177 15,411,048
Global Equities Portfolio 13,450,355 2,481,382
Aggressive Growth Portfolio 17,034,976 1,434,689
Venture Value Portfolio 20,275,254 1,303,007
Federated Value Portfolio 2,679,152 1,427,402
Putnam Growth Portfolio 10,598,704 667,031
MFS Growth & Income Portfolio 6,632,199 121,182
Alliance Growth Portfolio 40,035,769 904,912
Growth-Income Portfolio 22,110,726 2,272,536
Asset Allocation Portfolio 1,785,759 1,440,517
SunAmerica Balanced Portfolio 13,250,940 0
MFS Total Return Portfolio 5,687,477 24,396
Utility Portfolio 2,233,005 76,227
Worldwide High Income Portfolio 830,425 1,350,169
High-Yield Bond Portfolio 3,801,146 1,311,705
Global Bond Portfolio 1,194,839 427,478
Corporate Bond Portfolio 1,846,957 1,009,070
International Growth & Income Portfolio 30,951,895 7,350,263
Emerging Markets Portfolio 5,195,529 827,847
Real Estate Portfolio 895,055 622,303
"Dogs" of Wall Street Portfolio 2,004,271 1,461,955
MFS Mid Cap Growth Portfolio 8,977,042 658,578
Cash Management Portfolio 52,920,600 44,276,886
</TABLE>
95
<PAGE> 177
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE POLARIS II VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
INVESTMENT IN ANCHOR TRUST AND SUNAMERICA TRUST (continued)
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>
ANCHOR TRUST:
Capital Appreciation Portfolio $ 262,469,820 $ 72,858,783
Growth Portfolio 105,090,365 9,362,928
Natural Resources Portfolio 11,253,456 5,258,327
Government and Quality Bond Portfolio 110,443,687 25,219,551
SUNAMERICA TRUST:
International Diversified Equities Portfolio 287,403,217 253,041,090
Global Equities Portfolio 65,680,086 9,018,820
Aggressive Growth Portfolio 81,001,402 12,860,801
Venture Value Portfolio 348,818,828 31,057,635
Federated Value Portfolio 67,267,157 16,095,924
Putnam Growth Portfolio 166,320,083 2,558,419
MFS Growth & Income Portfolio 91,850,835 1,364,335
Alliance Growth Portfolio 628,527,182 43,457,676
Growth-Income Portfolio 323,440,317 21,422,634
Asset Allocation Portfolio 72,816,022 5,985,744
SunAmerica Balanced Portfolio 134,589,345 1,062
MFS Total Return Portfolio 68,091,192 175,910
Utility Portfolio 39,418,568 3,170,945
Worldwide High Income Portfolio 15,353,282 5,259,484
High-Yield Bond Portfolio 78,719,186 27,129,016
Global Bond Portfolio 22,823,563 1,375,121
Corporate Bond Portfolio 49,338,340 1,252,158
International Growth & Income Portfolio 178,015,113 115,952,248
Emerging Markets Portfolio 26,127,411 8,808,655
Real Estate Portfolio 15,837,388 9,034,362
"Dogs" of Wall Street Portfolio 48,062,403 2,142,706
MFS Mid-Cap Growth Portfolio 31,999,792 4,767,638
Cash Management Portfolio 732,605,807 635,576,743
</TABLE>
96
<PAGE> 178
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE POLARIS II 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 comparable prior period are summarized below.
<TABLE>
<CAPTION>
One month ended
December 31, 1998
-----------------
<S> <C>
Total investment income $ 1,524,757
------------
Net investment loss (1,871,485)
Net realized gains from securities transactions 1,182,799
Change in net unrealized appreciation/depreciation
of investments 159,575,225
------------
Increase in net assets from operations $158,886,539
============
</TABLE>
97
<PAGE> 179
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
The following financial statements to this Registration Statement are
included in this Registration Statement:
Audited consolidated financial statements of Anchor National Life
Insurance Company as of December 31, 1999, December 31, 1998 and
September 30, 1998 and for the year ended December 31, 1999, for
the three months ended December 31, 1998 and for each of the two
fiscal years in the period ended September 30, 1998.
Audited Financial Statements of Variable Separate Account
(Portion relating to the Polaris II Variable Annuity) for the one
month ended December 31, 1999 and for each of the two fiscal
years in the period ended November 30, 1999.
Audited Financial Statements of Variable Separate Account
(Portion Relating to the PolarisAmerica Variable Annuity) are not
contained herein as sales of these contracts recently began in
October 2000.
<TABLE>
<CAPTION>
(b) Exhibits
----------------
<S> <C> <C>
(1) Resolution Establishing Separate Account.... ***
(2) Form of Custody Agreements.................. ***
(3) (a) Form of Distribution Contract........... ***
(b) Selling Agreement....................... ***
(4) Variable Annuity Contract
(a) Group Annuity Certificate............... ****
(b) Individual Annuity Contract............. ****
(c) (Principal Rewards) Group Annuity
Certificate............................. *****
(d) (Principal Rewards) Individual Annuity
Contract................................ *****
(5) Application for Contract
(a) Participant Enrollment Form............. *****
(b) Annuity Application..................... *****
(6) Depositor - Corporate Documents
(a) Certificate of Incorporation............ ***
(b) By-Laws................................. ***
(7) Reinsurance Contract........................
(8) Form of Fund Participation Agreement
(a) Anchor Series Trust Fund Participation
Agreement............................... ***
(b) SunAmerica Series Trust 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
Owner Control with Anchor National Life
Insurance Company, the Depositor of
Registrant.................................. +
(15) Powers of Attorney.......................... ++
</TABLE>
-------------
* Filed Herewith
** Not Applicable
*** Filed April 18, 1997, as part of the Initial Registration Statement to
this Registration Statement.
**** Filed March 20, 1998 as part of Post-Effective Amendment Numbers 2 and 3
to this Registration Statement.
***** Filed April 1, 1999, as part of Post-Effective Amendment Numbers 7 and 8
to this Registration Statement.
+ Filed April 17, 2000, as part of Post-Effective Amendment Numbers 12 and
13 to this Registration Statement.
++ Filed July 3, 2000, as part of Post-Effective Amendment Numbers 13 and
14 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.
<TABLE>
<CAPTION>
Name Position
<S> <C>
Eli Broad Chairman and Chief Executive Officer
Jay S. Wintrob Director and President
James R. Belardi Director and Senior Vice President
Jana W. Greer Director and Senior Vice President
Marc H. Gamsin Director and Senior Vice President
N. Scott Gillis Director and Senior Vice President
Edwin R. Raquel Senior Vice President and Chief Actuary
P. Daniel Demko, Jr. Vice President
J. Franklin Grey Vice President
Kevin J. Hart Vice President
Maurice S. Hebert Vice President and Controller
Edward P. Nolan Vice President
Gregory M. Outcalt Senior Vice President
Stewart R. Polakov Vice President
Scott H. Richland Vice President
Lawrence M. Goldman Vice President and Assistant Secretary
Christine A. Nixon Vice President and Secretary
Virginia N. Puzon Assistant Secretary
</TABLE>
<PAGE> 180
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 of
Registrant, see Exhibit 14 of Post Effective Amendment Numbers 12 and 13 to the
Registration Statement filed on April 17, 2000 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 30, 2000.
Item 27. Number of Contract Owners
As of August 31, 2000, the number of Contracts funded by the
Variable Separate Account of Anchor National Life Insurance Company
(Portion relating to the Polaris II Variable Annuity) was 129,642, of
which 73,943 were Qualified Contracts and 55,699 were Nonqualified
Contracts
Item 28. Indemnification
None.
Item 29. Principal Underwriter
SunAmerica Capital Services, Inc. serves as distributor to the
Registrant, 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 and Variable Annuity Account Seven.
SunAmerica Capital Services, Inc. also serves as the underwriter to the
SunAmerica Income Funds, SunAmerica Equity Funds, SunAmerica Money Market Funds,
Inc., Style Select Series, Inc. and the SunAmerica Strategic Investment Series,
Inc., all issued by SunAmerica Asset Management Corp.
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> <C>
J. Steven Neamtz Director and President
Robert M. Zakem Director, Executive Vice
President, General Counsel
and Assistant Secretary
Peter A. Harbeck Director
Debbie Potash-Turner Controller
James Nichols Vice President
Virginia N. Puzon Assistant Secretary
</TABLE>
<TABLE>
<CAPTION>
Net
Distribution Compensation
Name of Discounts and on Redemption Brokerage
Distributor Commissions Annuitization Commission Commissions*
------------ -------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
SunAmerica None None None None
Capital
Services, Inc.
</TABLE>
------------------
* Distribution fee is paid by Anchor National Life Insurance Company.
Item 30. Location of Accounts and Records
Anchor National Life Insurance Company, the Depositor for the
Registrant, is located at 1 SunAmerica Center, Los Angeles, California 90067-
6022. SunAmerica Capital Services, Inc., the distributor of the Contracts, is
located at 733 Third Avenue, 4th Floor, New York, New York 10017. Each maintains
those accounts and records required to be maintained by it pursuant
<PAGE> 181
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), 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 represents 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> 182
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the Registrant certifies it meets the requirements of Securities
Act Rule 485 for effectiveness of this Registration Statement and has caused
this Post-Effective Amendment to the Registration Statement to be signed on
its behalf, in the City of Los Angeles, and the State of California, on this
28th day of December, 2000.
VARIABLE SEPARATE ACCOUNT
(Registrant)
By: ANCHOR NATIONAL LIFE INSURANCE COMPANY
(Depositor)
By: /s/ JAY S. WINTROB
----------------------------------------
Jay S. Wintrob
President
By: ANCHOR NATIONAL LIFE INSURANCE COMPANY
(Depositor, on behalf of itself and Registrant)
By: /s/ JAY S. WINTROB
----------------------------------------
Jay S. Wintrob
President
As required by the Securities Act of 1933, this Post-Effective
Amendment to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
ELI BROAD* Chief Executive Officer December 28, 2000
------------------------ and Chairman of the
Eli Broad Board (Principal Executive
Officer)
MARC H. GAMSIN* Senior Vice President and December 28, 2000
------------------------ Director
Marc H. Gamsin
N. SCOTT GILLIS* Senior Vice President December 28, 2000
------------------------ and Director (Principal
N. Scott Gillis Financial Officer)
MAURICE S. HEBERT* Vice President and Controller December 28, 2000
------------------------ (Principal Accounting Officer)
Maurice S. Hebert
JAMES R. BELARDI* Senior Vice President & December 28, 2000
------------------------ Director
James R. Belardi
JANA W. GREER* Senior Vice President & December 28, 2000
------------------------ Director
Jana W. Greer
</TABLE>
<PAGE> 183
<TABLE>
<S> <C> <C>
JAY S. WINTROB* President and Director December 28, 2000
-----------------------------
Jay S. Wintrob
* By: /s/ CHRISTINE A. NIXON Attorney-in-Fact
-----------------------
Christine A. Nixon
Date: December 28, 2000
</TABLE>
