<PAGE> 1
File Nos. 33-32569
811-4296
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. 19 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [X]
Amendment No. 34
(Check appropriate box or boxes)
VARIABLE ANNUITY ACCOUNT ONE
(Exact Name of Registrant)
Anchor National Life Insurance Company
(Name of Depositor)
1 SunAmerica Center
Los Angeles, California 90067-6022
(Address of Depositor's Principal Offices) (Zip Code)
Depositor's Telephone Number, including Area Code
(310) 772-6000
Susan L. Harris, Esq.
Anchor National Life Insurance Company
1 SunAmerica Center
Los Angeles, California 90067-6022
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
-- immediately upon filing pursuant to paragraph (b) of Rule 485
-- on [ ] pursuant to paragraph (b) of Rule 485
-- 60 days after filing pursuant to paragraph (a)(1) of Rule 485
X on January 29, 1999 pursuant to paragraph (a)(1) of Rule 485
<PAGE> 2
VARIABLE SEPARATE ACCOUNT
Cross Reference Sheet
PART A - PROSPECTUS
<TABLE>
<CAPTION>
Item Number in Form N-4 Caption
- ----------------------- -------
<S> <C> <C>
1. Cover Page............................. Cover Page
2. Definitions............................ Definitions
3. Synopsis............................... Summary; Fee Tables;
Examples
4. Condensed Financial Information........ Condensed Financial
Information; Financial
Statements
5. General Description of Registrant,
Depositor and Portfolio Companies...... Description of
Anchor National, the
Separate Account and
the General Account;
Variable Portfolio
Options; Fixed
Account Option
6. Deductions............................. Contract Charges
7. General Description of
Variable Annuity Contracts............. Description of the
Contracts
8. Annuity Period......................... Income Phase
9. Death Benefit.......................... Description of the
Contract
10. Purchases and Contract Value........... Purchases, Withdrawals
and Contract Value;
Distribution of Contracts
11. Redemptions............................ Purchases, Withdrawals
and Contract Value;
Contract Charges
12. Taxes.................................. Taxes
13. Legal Proceedings...................... Legal Proceedings
14. Table of Contents of Statement
of Additional Information.............. Statement of Additional
Information
</TABLE>
<PAGE> 3
PART B - STATEMENT OF ADDITIONAL INFORMATION
Certain information required in part B of the Registration Statement
has been included within the Prospectus forming part of this Registration
Statement; the following cross-references suffixed with a "P" are made by
reference to the captions in the Prospectus.
Item Number in Form N-4 Caption
- ----------------------- -------
15. Cover Page............................. Cover Page
16. Table of Contents...................... Table of Contents
17. General Information and History........ Not Applicable
18. Services............................... Not Applicable
19. Purchase of Securities Being Offered... Variable Portfolio
Options (P)
20. Underwriters........................... Distributors
21. Calculation of Performance Data........ Performance Data
22. Annuity Payments....................... Income Phase (P); Income
Payments
23. Financial Statements................... Financial Statements
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE> 4
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FLEXIBLE PAYMENT VARIABLE ANNUITY
CONTRACTS
- --------------------------------------------------------------------------------
ISSUED BY
ANCHOR NATIONAL LIFE INSURANCE COMPANY
IN CONNECTION WITH
VARIABLE ANNUITY ACCOUNT ONE
<TABLE>
<S> <C>
CORRESPONDENCE ACCOMPANIED ALL OTHER CORRESPONDENCE,
BY PAYMENTS: ANNUITY SERVICE CENTER:
P.O. BOX 100330 P.O. BOX 54299
PASADENA, CALIFORNIA 91189-0001 LOS ANGELES, CALIFORNIA 90054-0299
TELEPHONE NUMBER: (800) 445-SUN2
</TABLE>
The contracts offered by this prospectus provide for accumulation of
contract values and payment of income benefits on a fixed and/or variable basis.
The contracts are available for both Qualified and Non-qualified plans (SEE
TAXES, PAGE 26).
Purchase Payments under the contracts may be allocated among the divisions
of the separate account, and/or to the fixed account option funded through
Anchor National Life Insurance Company's (Anchor National's) general account.
Each of the 11 divisions of the separate account described in this prospectus is
invested solely in the shares of one of the following currently available
Variable Portfolios of Anchor Series Trust:
<TABLE>
<S> <C>
- Foreign Securities Portfolio - Multi-Asset Portfolio
- Capital Appreciation Portfolio - High Yield Portfolio
- Growth Portfolio - Fixed Income Portfolio
- Natural Resources Portfolio - Government and Quality Bond Portfolio
- Growth and Income Portfolio - Money Market Portfolio
- Strategic Multi-Asset Portfolio
</TABLE>
Additional Variable Portfolios may be made available in the future.
The fixed account option pays a fixed rate of interest declared by Anchor
National for a 1-year guarantee period from the date the amount is allocated to
the fixed account. The declared rate will vary from time to time but will not be
less than 4% per annum, and, once established for a particular allocation, will
not change during the course of the guarantee period.
This prospectus concisely sets forth the information a prospective investor
ought to know before investing. PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN
IT FOR YOUR FUTURE REFERENCE. You bear the complete investment risk for all
Purchase Payments allocated to the separate account.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION (THE "SEC"), NOR HAS THE SEC PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE CONTRACTS OFFERED BY THIS PROSPECTUS INVOLVE RISK, INCLUDING LOSS OF
PRINCIPAL, AND ARE NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR ENDORSED BY,
ANY BANK AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
THE CONTRACTS OFFERED BY THIS PROSPECTUS ARE NOT AVAILABLE IN ALL STATES.
A Statement of Additional Information ("SAI") about the variable portion of
your contract has been filed with the SEC, as part of the registration
statement, and is available without charge upon written or oral request to
Anchor National at its Annuity Service Center at the above address and telephone
number. The SAI is incorporated herein by reference. The Table of Contents of
the Statement of the SAI, dated February 1, 1999, appears on page 29 of this
prospectus.
This prospectus is dated February 1, 1999.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
ITEM ----
<S> <C>
DEFINITIONS................................................. 3
SUMMARY..................................................... 4
FEE TABLES.................................................. 7
EXAMPLES.................................................... 8
CONDENSED FINANCIAL INFORMATION -- ACCUMULATION UNIT
VALUES.................................................... 9
PERFORMANCE DATA............................................ 9
DESCRIPTION OF ANCHOR NATIONAL, THE SEPARATE ACCOUNT AND THE
GENERAL ACCOUNT........................................... 10
Anchor National Life Insurance Company................. 10
Reinsurance of Previously Issued Contracts............. 11
Separate Account....................................... 11
General Account........................................ 12
VARIABLE PORTFOLIO OPTIONS.................................. 12
Equity Portfolios...................................... 12
Managed Portfolios..................................... 13
Fixed Income Portfolios................................ 13
Target '98 Portfolio................................... 14
Voting Rights.......................................... 14
Substitution of Securities............................. 14
FIXED ACCOUNT OPTION........................................ 14
Allocations............................................ 14
CONTRACT CHARGES............................................ 15
Insurance Charges...................................... 15
Withdrawal Charges..................................... 15
Investment Charges..................................... 15
Contract Maintenance Fee............................... 15
Transfer Fee........................................... 16
Annuity Charge......................................... 16
Premium Tax............................................ 16
Income Taxes........................................... 16
Reduction or Elimination of Charges and Expenses, and
Additional Amounts Credited........................... 16
Free Withdrawal Amount................................. 17
DESCRIPTION OF THE CONTRACTS................................ 17
Summary................................................ 17
Ownership.............................................. 17
Annuitant.............................................. 17
Modification of the Contract........................... 17
Assignment............................................. 17
Death Benefit.......................................... 18
PURCHASES, WITHDRAWALS AND CONTRACT VALUE................... 18
Purchase Payments...................................... 18
Automatic Dollar Cost Averaging Program................ 19
Allocation of Purchase Payments........................ 20
Accumulation Units..................................... 20
Free Look.............................................. 20
Transfers During the Accumulation Phase................ 21
Distribution of Contracts.............................. 22
Withdrawals............................................ 22
Systematic Withdrawal Program.......................... 22
Texas Optional Retirement Program...................... 23
Minimum Contract Value................................. 23
INCOME PHASE................................................ 23
Annuity Date........................................... 23
Income Options......................................... 23
Transfers During the Income Phase...................... 24
</TABLE>
2
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<TABLE>
<CAPTION>
PAGE
ITEM ----
<S> <C>
Deferment of Payments.................................. 25
ADMINISTRATION.............................................. 25
TAXES....................................................... 26
Annuity Contracts in General........................... 26
Tax Treatment of Distributions -- Non-Qualified
Contracts............................................. 26
Tax Treatment of Distributions -- Qualified
Contracts............................................. 27
Minimum Distributions.................................. 27
Diversification........................................ 27
CUSTODIAN................................................... 28
LEGAL PROCEEDINGS........................................... 28
REGISTRATION STATEMENTS..................................... 28
ADDITIONAL INFORMATION ABOUT THE SEPARATE ACCOUNT........... 29
FINANCIAL STATEMENTS........................................ 29
APPENDIX A -- PREMIUM TAXES................................. A-1
</TABLE>
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DEFINITIONS
- --------------------------------------------------------------------------------
The following terms, as used in this prospectus, have the indicated
meanings:
ACCUMULATION PHASE -- The period during which you invest money in your contract.
ACCUMULATION UNIT -- A unit of measurement which 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 begin, as selected by you.
ANNUITY UNIT(S) -- 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.
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 pre-tax dollars. These
contracts are generally purchased under a pension plan, specially sponsored
program or IRA.
TRUST -- Anchor Series Trust, an open-end management investment company.
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 Trust.
3
<PAGE> 7
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SUMMARY
- --------------------------------------------------------------------------------
This summary sets forth some of the more important points that you should
know and consider before purchasing the ICAP II Variable Annuity. The remainder
of the prospectus discusses the topics in more detail. We urge you to read it
carefully and retain it, and the prospectus for the Trust, for future reference.
WHAT IS AN ANNUITY CONTRACT?
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.
The ICAP II Variable Annuity is a contract between you and Anchor National
(the Company, Us, We). It is designed to help you invest on a tax deferred basis
and meet long-term financial goals, such as retirement funding.
Like most annuities, this 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 you
allocate money to and/or the interest rate earned on the fixed account option.
During the Income Phase, you will receive income payments from your annuity.
Your payments may be fixed in dollar amount, may vary with investment
performance of the Variable Portfolios or be a combination of both. Among other
factors, the amount of money you are able to accumulate in your contract during
the Accumulation Phase will determine the amount of your payments during the
Income Phase.
WHAT IS THE DIFFERENCE BETWEEN A VARIABLE ANNUITY AND A FIXED ANNUITY?
A fixed annuity earns interest at a fixed rate guaranteed by the insurance
company. A variable annuity typically provides a fixed account option but also
provides Variable Portfolios. The Variable Portfolios are similar to a mutual
fund, but are only available through the purchase of an annuity. Most
significantly, you as the contract owner bear the entire investment risk with
respect to any Purchase Payments allocated to the Variable Portfolios of an
annuity. This means that the value of your contract will go up and down,
depending on the performance of the Variable Portfolios.
The ICAP II Variable Annuity is a variable annuity with one fixed account
option and eleven Variable Portfolios.
WHAT ARE THE INVESTMENT OPTIONS AVAILABLE UNDER THE CONTRACT?
You may allocate money to the following Variable Portfolios of the Trust:
<TABLE>
<S> <C>
- Foreign Securities Portfolio - Multi-Asset Portfolio
- Capital Appreciation Portfolio - High Yield Portfolio
- Growth Portfolio - Fixed Income Portfolio
- Natural Resources Portfolio - Government and Quality Bond
- Growth and Income Portfolio Portfolio
- Strategic Multi-Asset Portfolio - Money Market Portfolio
</TABLE>
4
<PAGE> 8
You may also allocate money to the fixed account option for a period of one
year. We call this time period the guarantee period. Anchor National guarantees
the interest rate credited to money in the fixed account option. The interest
rate offered for the guarantee period may differ from time to time, but we will
never credit less than a 4% annual effective rate.
During the Accumulation Phase, you may transfer among the Variable
Portfolios and/or the fixed account option. Fifteen free transfers are permitted
per contract year. After that, we assess a transfer fee.
HOW MAY I ACCESS MY MONEY?
During the Accumulation Phase, you may withdraw money from your contract at
any time. After your first contract year, the first withdrawal you take each
contract year will be free of a withdrawal charge if it does not exceed 10% of
your total Purchase Payments still subject to a withdrawal charge, less prior
withdrawals. You will not get the benefit of a free withdrawal amount upon a
full surrender of your contract.
Withdrawals in excess of these limits may be assessed a withdrawal charge.
Generally, withdrawals may be made from your contract in the amount of $500 or
more. You may request withdrawals in writing or by establishing systematic
withdrawals. Under systematic withdrawals, the minimum withdrawal amount is
$250.
There are no withdrawal charges on that portion of your money invested for
five years or more. Of course, upon a withdrawal you may have to pay income tax.
A 10% IRS penalty tax may also apply if you are under age 59 1/2. Additionally,
we do not assess withdrawal charges upon payment of a death benefit.
CAN I EXAMINE THE CONTRACT?
You may cancel your contract within ten days of your receipt of the
contract (or longer if required by state law) by mailing it to our Annuity
Service Center. Your contract will be treated as void on the date we receive it
and we will refund an amount equal to the contract value (unless otherwise
required by state law). Its value may be more or less than the money you
initially invested.
WHAT ARE THE CHARGES AND DEDUCTIONS UNDER A CONTRACT?
Each year, we deduct a $30 contract maintenance fee from your contract. We
also deduct insurance charges which equal 1.40% annually of the average daily
value of your contract allocated to the Variable Portfolios. The insurance
charges include: mortality and expense risk, 1.25%, and distribution expense,
.15%.
As with other professionally managed investments, there are also investment
charges imposed on contracts with money allocated to the Variable Portfolios,
which are estimated to range from [ ]% to [ ]%.
If you take money out in excess of the free withdrawal amount allowed for
in your contract, you may be assessed a withdrawal charge which is a percentage
of the Purchase Payments you withdraw. The percentage declines with each year
the money is in the contract as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------
YEAR 1 2 3 4 5 6
- ----------------------------------------------------------------------------------
WITHDRAWAL CHARGE 5% 4% 3% 2% 1% 0%
- ----------------------------------------------------------------------------------
</TABLE>
Each year, you are allowed to make 15 transfers without charge. After your
first 15 free transfers, a $25 transfer fee ($10 in Pennsylvania and Texas) will
apply to each subsequent transfer.
In a limited number of states, you may also be assessed a state premium tax
of up to 3.5% depending upon the state.
5
<PAGE> 9
WHAT IS THE DEATH BENEFIT UNDER THE CONTRACT?
If you die during the Accumulation Phase of your contract, your Beneficiary
will receive a death benefit.
The death benefit is the greater of:
1. the value of your contract at the time we receive satisfactory proof of
death; or
2. total Purchase Payments less any withdrawals and partial annuitizations
(and any fees or charges applicable to such distributions), compounded
at a 5% annual growth rate; or
3. after your fifth contract year, your contract value on the last contract
anniversary plus any Purchase Payments and less any withdrawals and
partial annuitizations (and any fees or charges applicable to such
distributions) since that contract anniversary.
WHAT ARE THE AVAILABLE INCOME OPTIONS UNDER THE CONTRACT?
You can select from one of three income options:
(1) payments for your lifetime, but for not less than 10 or 20 years;
(2) payments for your lifetime and your survivor's lifetime;
(3) 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
payment is taxable as income.
6
<PAGE> 10
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FEE TABLES
- --------------------------------------------------------------------------------
OWNER TRANSACTION EXPENSES
WITHDRAWAL CHARGE (AS A PERCENTAGE OF EACH PURCHASE PAYMENT):
<TABLE>
<CAPTION>
YEAR
<S> <C>
One.................................................. 5%
Two.................................................. 4%
Three................................................ 3%
Four................................................. 2%
Five................................................. 1%
Six and later........................................ 0%
ANNUAL CONTRACT MAINTENANCE FEE............................. $30
TRANSFER FEE................................................ $25*
(no transfer fee applies to the first 15 transfers in a
contract year)
</TABLE>
- ---------------
* $10 in Texas and Pennsylvania.
- --------------------------------------------------------------------------------
ANNUAL SEPARATE ACCOUNT EXPENSES
(AS A PERCENTAGE OF DAILY NET ASSET VALUE)
<TABLE>
<S> <C>
MORTALITY RISK CHARGE....................................... 0.90%
EXPENSE RISK CHARGE......................................... 0.35%
DISTRIBUTION EXPENSE CHARGE................................. 0.15%
----
TOTAL EXPENSE CHARGE................................. 1.40%
====
</TABLE>
- ---------------
ANNUAL TRUST EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS FOR THE TRUST'S
FISCAL YEAR ENDED DECEMBER 31, 1998):
(FEE AND EXPENSE INFORMATION TO BE PROVIDED BY AMENDMENT)
<TABLE>
<CAPTION>
TOTAL ANNUAL
MANAGEMENT FEE OTHER EXPENSES EXPENSES
-------------- -------------- ------------
<S> <C> <C> <C>
Foreign Securities............................... % % %
Capital Appreciation............................. % % %
Growth........................................... % % %
Natural Resources................................ % % %
Growth and Income................................ % % %
Strategic Multi-Asset............................ % % %
Multi-Asset...................................... % % %
High Yield....................................... % % %
Target '98*...................................... % % %
Fixed Income..................................... % % %
Government & Quality Bond........................ % % %
Money Market..................................... % % %
</TABLE>
- ---------------
* On January 1, 1998, we stopped accepting Purchase Payments allocations and
transfers into the Target '98 Portfolio. On November 16, 1998, pursuant to our
notice to contract owners, all money in the Target '98 Portfolio was
automatically reallocated to the Money Market Portfolio.
THE ABOVE EXPENSES WERE PROVIDED BY THE TRUST. THE COMPANY HAS NOT VERIFIED THE
ACCURACY OF THE INFORMATION.
7
<PAGE> 11
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EXAMPLES
- --------------------------------------------------------------------------------
You would pay the following expenses on a $1,000 investment in each Variable
Portfolio, assuming 5% annual return on assets, and:
(a) surrender or switch to the Income Phase of the contract at the end
of the applicable time period;
(b) the contract is not surrendered or switched to the Income Phase.
(EXPENSE INFORMATION TO BE PROVIDED BY AMENDMENT)
<TABLE>
<CAPTION>
TIME PERIODS
----------------------------------------
VARIABLE PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------ ------ ------- ------- --------
<S> <C> <C> <C> <C>
Foreign Securities................................ $ $ $ $
$ $ $ $
Capital Appreciation.............................. $ $ $ $
$ $ $ $
Growth............................................ $ $ $ $
$ $ $ $
Natural Resources................................. $ $ $ $
$ $ $ $
Growth and Income................................. $ $ $ $
$ $ $ $
Strategic Multi-Asset............................. $ $ $ $
$ $ $ $
Multi-Asset....................................... $ $ $ $
$ $ $ $
High Yield........................................ $ $ $ $
$ $ $ $
Target '98........................................ $ $ $ $
$ $ $ $
Fixed Income...................................... $ $ $ $
$ $ $ $
Government and Quality Bond....................... $ $ $ $
$ $ $ $
Money Market...................................... $ $ $ $
$ $ $ $
</TABLE>
- ---------------
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 table
reflects expenses of the separate account as well as the Trust. The examples
do not illustrate the tax consequences of surrendering the contract.
2. The examples assume that no transfer fees were imposed. Although premium
taxes may apply in certain states, they are not reflected in the examples.
3. For purposes of the amounts reported in the examples, the contract
maintenance fee is calculated by dividing the total amount of contract
maintenance fees anticipated to be collected during the year by the total net
assets of the separate account's divisions and the related fixed accounts
assets.
4. THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
8
<PAGE> 12
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CONDENSED FINANCIAL INFORMATION
ACCUMULATION UNIT VALUES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------------------------------------------
SEPARATE ACCOUNT DIVISION 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Foreign Securities
Beginning AUV.................. $10.47 $13.32 $11.45 $11.26 $ 9.64 $12.39 $11.83 $13.13
End AUV........................ $13.32 $11.45 $11.26 $ 9.64 $12.39 $11.83 $13.13 $14.43
End # AU's (000)............... 2,978 2,875 2,623 2,878 5,512 5,328 3,704 3,043
Capital Appreciation
Beginning AUV.................. $ 9.80 $12.08 $ 9.97 $15.36 $19.09 $22.79 $21.62 $28.68
End AUV........................ $12.08 $ 9.97 $15.36 $19.09 $22.79 $21.62 $28.68 $35.39
End # AU's (000)............... 2,515 2,553 2,834 4,148 5,413 5,136 4,751 4,348
Growth
Beginning AUV.................. $15.43 $19.79 $18.99 $26.36 $27.40 $29.12 $27.36 $34.08
End AUV........................ $19.79 $18.99 $26.36 $27.40 $29.12 $27.36 $34.08 $42.03
End # AU's (000)............... 7,998 7,465 8,053 9,030 8,345 5,853 5,375 4,556
Natural Resources
Beginning AUV 1/1/88
(inception).................. $11.02 $12.86 $10.77 $11.13 $11.25 $15.11 $15.05 $17.43
End AUV........................ $12.86 $10.77 $11.13 $11.25 $15.11 $15.05 $17.43 $19.61
End # AU's (000)............... 1,004 1,323 810 748 1,142 1,220 997 788
Growth and Income
Beginning AUV.................. $ 9.76 $11.04 $10.50 $13.12 $15.55 $18.70 $16.67 $19.16
End AUV........................ $11.04 $10.50 $13.12 $15.55 $18.70 $16.67 $19.16 $22.69
End # AU's (000)............... 1,446 1,184 1,034 1,424 2,057 1,915 1,521 1,346
Strategic Multi-Asset
Beginning AUV.................. $10.26 $12.13 $11.06 $13.55 $13.88 $15.78 $15.16 $18.35
End AUV........................ $12.13 $11.06 $13.55 $13.88 $15.78 $15.16 $18.35 $20.78
End # AU's (000)............... 7,568 7,487 6,289 5,447 4,546 3,958 3,213 2,579
Multi-Asset
Beginning AUV.................. $10.09 $11.91 $11.93 $14.98 $15.97 $16.90 $16.39 $20.19
End AUV........................ $11.91 $11.93 $14.98 $15.97 $16.90 $16.39 $20.19 $22.67
End # AU's (000)............... 11,945 11,811 10,975 11,719 10,510 8,354 6,930 5,585
High Yield
Beginning AUV.................. $13.00 $12.48 $11.01 $14.44 $16.24 $19.07 $17.96 $21.03
End AUV........................ $12.48 $11.01 $14.44 $16.24 $19.07 $17.96 $21.03 $23.17
End # AU's (000)............... 2,361 1,791 2,247 2,813 4,000 2,489 2,088 1,872
Target '98
Beginning AUV 5/2/88
(inception).................. $10.63 $12.29 $12.89 $15.11 $15.97 $17.52 $16.57 $18.72
End AUV........................ $12.29 $12.89 $15.11 $15.97 $17.52 $16.57 $18.72 $19.15
End # AU's (000)............... 922 941 767 1,132 1,065 1,028 578 464
Fixed Income
Beginning AUV.................. $15.08 $16.78 $17.84 $20.31 $21.34 $22.71 $21.67 $25.46
End AUV........................ $16.78 $17.84 $20.31 $21.34 $22.71 $21.67 $25.46 $25.73
End # AU's (000)............... 2,240 1,851 1,813 1,785 1,657 1,183 1,006 824
Government & Quality Bond
Beginning AUV.................. $14.95 $17.04 $18.15 $21.00 $22.13 $23.63 $22.60 $26.60
End AUV........................ $17.04 $18.15 $21.00 $22.13 $23.63 $22.60 $26.60 $26.99
End # AU's (000)............... 8,752 8,183 8,917 8,626 7,256 6,270 4,038 3,422
Money Market
Beginning AUV.................. $12.78 $13.73 $14.61 $15.23 $15.53 $15.72 $16.10 $16.77
End AUV........................ $13.73 $14.61 $15.23 $15.53 $15.72 $16.10 $16.77 $17.36
End # AU's (000)............... 16,141 11,858 7,594 7,824 5,746 7,324 5,320 4,090
<CAPTION>
FISCAL YEAR ENDED
----------------------------
SEPARATE ACCOUNT DIVISION 12/31/97 12/31/98
------------------------- --------- ----------------
<S> <C> <C>
Foreign Securities (To be
Beginning AUV.................. $14.43 provided
End AUV........................ $14.08 by
End # AU's (000)............... 2,362 Amendment)
Capital Appreciation
Beginning AUV.................. $35.39
End AUV........................ $43.78
End # AU's (000)............... 3,633
Growth
Beginning AUV.................. $42.03
End AUV........................ $54.05
End # AU's (000)............... 3,847
Natural Resources
Beginning AUV 1/1/88
(inception).................. $19.61
End AUV........................ $17.68
End # AU's (000)............... 600
Growth and Income
Beginning AUV.................. $22.69
End AUV........................ $28.81
End # AU's (000)............... 1,439
Strategic Multi-Asset
Beginning AUV.................. $20.78
End AUV........................ $23.43
End # AU's (000)............... 2,123
Multi-Asset
Beginning AUV.................. $22.67
End AUV........................ $27.09
End # AU's (000)............... 4,627
High Yield
Beginning AUV.................. $23.17
End AUV........................ $25.42
End # AU's (000)............... 1,504
Target '98
Beginning AUV 5/2/88
(inception).................. $19.15
End AUV........................ $19.86
End # AU's (000)............... 325
Fixed Income
Beginning AUV.................. $25.73
End AUV........................ $27.76
End # AU's (000)............... 636
Government & Quality Bond
Beginning AUV.................. $26.99
End AUV........................ $29.16
End # AU's (000)............... 2,546
Money Market
Beginning AUV.................. $17.36
End AUV........................ $18.00
End # AU's (000)............... 3,755
</TABLE>
- ------------------------------
AUV -- Accumulation Unit Value.
AU -- Accumulation Units.
- --------------------------------------------------------------------------------
PERFORMANCE DATA
- --------------------------------------------------------------------------------
We advertise the Money Market Portfolio's "yield" and "effective yield."
Both figures are based on historical earnings and are not intended to indicate
future performance. The "yield" of the Money Market Portfolio refers to the net
income generated for a contract funded by an investment in the Money Market
Portfolio over a seven-day period. This income is then "annualized." That is,
the
9
<PAGE> 13
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 Money Market Portfolio is assumed to
be reinvested at the end of each seven-day period. The "effective yield" will be
slightly higher than the "yield" because of the compounding effect of this
assumed reinvestment. Neither the yield nor the effective yield takes into
consideration the effect of any capital changes that might have occurred during
the seven-day period, nor do they reflect the impact of premium taxes or any
withdrawal charges. The impact of other recurring charges on both yield figures
is, however, reflected in them to the same extent it would affect the yield (or
effective yield) for a contract of average size.
In addition, the separate account may advertise "total return" data for its
other 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 Money
Market Portfolio. The effect of applicable withdrawal charges due to the assumed
redemption will be reflected in the return figures, but may be omitted in
additional return figures given for comparison.
The separate account may also advertise an annualized 30-day (or one month)
yield figure for Variable Portfolios other than the Money Market Portfolio.
These yield figures are based upon the actual performance of the Variable
Portfolio over a 30-day (or one month) period ending on a date specified in the
advertisement. Like the total return data described above, the 30-day (or one
month) yield data will reflect the effect of all recurring contract charges (but
will not reflect any withdrawal charges or premium taxes). The yield figure is
derived from net investment gain (or loss) over the period expressed as a
fraction of the investment's value at the end of the period.
More detailed information on the computation of advertised performance data
for the separate account is contained in the SAI.
- --------------------------------------------------------------------------------
DESCRIPTION OF ANCHOR NATIONAL, THE SEPARATE ACCOUNT
AND THE GENERAL ACCOUNT
- --------------------------------------------------------------------------------
ANCHOR NATIONAL LIFE INSURANCE COMPANY
Anchor National 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 90067-6022. We conduct life insurance and annuity
business in the District of Columbia and all states except New York. We are an
indirect wholly-owned subsidiary of SunAmerica Inc., a Maryland corporation.
Anchor National and its affiliates, SunAmerica Life Insurance Company,
First SunAmerica Life Insurance Company, CalAmerica Life Insurance Company,
SunAmerica National Life Insurance Company, SunAmerica Asset Management Corp.,
Imperial Premium Finance, Inc., Resources Trust Company and five broker-dealers,
specialize in retirement savings and investment products and services. Business
focuses include fixed and variable annuities, mutual funds, premium finance,
broker-dealer services and trust administration services. As of September 30,
1998, Anchor National owned $[ ] billion in assets while SunAmerica Inc., the
Company's ultimate parent, together with its subsidiaries, held $[ ] billion of
assets, consisting of $[ ] billion of assets on its balance sheet, $[ ]
billion of assets managed in mutual funds and private accounts, and $[ ]
billion under custody in retirement trust accounts.
10
<PAGE> 14
Anchor National may 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 Anchor National's
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. These ratings do not relate to the performance of the
Variable Portfolios.
REINSURANCE OF PREVIOUSLY ISSUED CONTRACTS
On November 13, 1989, SunAmerica Inc., Anchor National, Integrated
Resources, Inc. ("IRI") and Integrated Resources Life Insurance Company ("IR
Life") entered into an agreement which amended a stock purchase agreement dated
November 1, 1989 (the "Stock Purchase Agreement") between SunAmerica Inc. and
IRI. Under the Stock Purchase Agreement, as amended, Anchor National acquired,
on an assumption reinsurance basis, the variable annuity contracts of IR Life,
including contracts which except, for the issuer, are identical in all material
respects ("reinsured contracts") to the contracts offered by this prospectus.
Thus, Anchor National has all the liabilities and obligations under the
reinsured contracts. All future payments made under the reinsured contracts will
be made directly to or by Anchor National.
If you are a reinsured contract owner, you have the same contract rights
and the same contract values as you did before the reinsurance transaction.
However, Anchor National, instead of IR Life, will fulfill the terms of your
contract. Pursuant to the reinsurance agreement, the separate account originally
held by IR Life with all of its assets was transferred to Anchor National. Thus,
as of the effective date of the reinsurance closing, the assets of the separate
account are only available to satisfy our obligations under the variable annuity
contracts issued by the separate account. The separate account is not chargeable
with liabilities out of any other business that IR Life has conducted, and the
assets of the separate account cannot be reached by IRI or IRI's creditors. (SEE
SEPARATE ACCOUNT BELOW).
The Stock Purchase Agreement, as amended, also provided for the sale of
Integrated Resources Asset Management Corp. ("IRAM") to SunAmerica Inc. This
transaction constituted a change in the control of IRAM. A change in the control
of IRAM constitutes an assignment of the Investment Management Agreement and
series of investment management contracts between IRAM and the Trust, and the
Sub-Advisory Agreement and series of sub-advisory contracts with Wellington
Management Company, LLP. These agreements and contracts terminate automatically
in the event of their assignment. New agreements were approved by the Trust's
Board of Trustees and by shareholders on February 13, 1990. In connection with
the sale of IRAM to SunAmerica Inc., IRAM's name was changed to SunAmerica Asset
Management Corp. ("SAAMCo").
SEPARATE ACCOUNT
The separate account was originally established by IR Life pursuant to Iowa
insurance law on January 21, 1985. In fulfillment of the reinsurance agreement,
the separate account was assumed intact by Anchor National on January 18, 1990
and reestablished under California insurance laws. In connection with the
redomestication of Anchor National, the establishment of the separate account
was ratified by the Company under Arizona insurance laws. The separate account
is registered with 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 Anchor National by the SEC.
On September 24, 1990, Variable Annuity Account One(c) ("separate
account(c)") was merged with and into the separate account. The separate
account(c) was a separate account originally established by The Capitol Life
Insurance Company, a subsidiary of IRI, pursuant to Colorado insurance law on
September 23, 1986, and used to fund variable annuity contracts ("Capitol
contracts") that are in all material respects identical to the contracts. The
Capitol contracts were
11
<PAGE> 15
reinsured to IR Life and, on January 18, 1990, reinsured to us. As a result of
the merger, the reinsured Capitol contracts are now funded through the separate
account. As is the case with the contracts, the reinsured Capitol contracts were
(and continue to be) ultimately funded by the Variable Portfolios of the Trust
and by the general account of Anchor National. The merger did not affect any of
the rights and obligations of the reinsured Capitol contract owners and Anchor
National under the reinsured Capitol contracts or those of contract owners and
Anchor National under the contracts. The merger did not affect those owners'
contract values.
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 of the separate account. However, the assets in the separate account are
not chargeable with liabilities arising our 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.
GENERAL ACCOUNT
Money allocated to the fixed account option 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.
- --------------------------------------------------------------------------------
VARIABLE PORTFOLIO OPTIONS
- --------------------------------------------------------------------------------
The contract currently offers eleven Variable Portfolios. These Variable
Portfolios invest in shares of the Trust. These Variable Portfolios operate
similarly to a mutual fund but are only available through the purchase of this
annuity contract. The Variable Portfolios are:
<TABLE>
<S> <C>
- FOREIGN SECURITIES - MULTI-ASSET
- CAPITAL APPRECIATION - HIGH YIELD
- GROWTH - FIXED INCOME
- NATURAL RESOURCES - GOVERNMENT AND QUALITY BOND
- GROWTH AND INCOME - MONEY MARKET
- STRATEGIC MULTI-ASSET
</TABLE>
The Trust is an open-end diversified management investment company
registered under the Investment Company Act of 1940. While a brief summary of
the investment objectives is set forth below, more comprehensive information,
including a discussion of potential risks, is found in the prospectus for the
Trust, attached or enclosed. SAAMCo, an affiliate of Anchor National, is the
investment manager for the Trust. Wellington Management Company, LLP, which is
not affiliated with Anchor National, serves as sub-adviser for the Trust.
The eleven Variable Portfolios and their investment objectives are:
[TO BE UPDATED CONSISTENT WITH FUND'S PLAIN-ENGLISH UPDATE.]
EQUITY PORTFOLIOS
FOREIGN SECURITIES PORTFOLIO seeks long-term capital appreciation. This
Variable Portfolio will invest primarily in a diversified group of equity
securities issued by foreign companies and primarily denominated in foreign
currencies.
CAPITAL APPRECIATION PORTFOLIO seeks long-term capital appreciation. This
Variable Portfolio invests in growth equity securities which are widely
diversified by industry and company and may
12
<PAGE> 16
engage in transactions involving stock index futures and options thereon as a
hedge against changes in market conditions.
GROWTH PORTFOLIO seeks capital appreciation through investments in growth
equity securities. This Variable Portfolio may engage in transactions involving
stock index futures and options thereon as a hedge against changes in market
conditions.
NATURAL RESOURCES PORTFOLIO seeks a total return in excess of the U.S. rate
of inflation as represented by the Consumer Price Index. This Variable Portfolio
will invest primarily in equity securities of U.S. or foreign companies which
are expected to provide favorable returns in periods of rising inflation.
GROWTH AND INCOME PORTFOLIO seeks high current income and long-term capital
appreciation. This Variable Portfolio will invest primarily in securities that
provide the potential for growth and offer income, such as dividend-paying
stocks and securities convertible into common stock. This Variable Portfolio may
also engage in transactions involving stock index futures and options thereon as
a hedge against changes in market conditions.
MANAGED PORTFOLIOS
STRATEGIC MULTI-ASSET PORTFOLIO seeks high long-term total investment
return. This Variable Portfolio will invest in a diversified group of securities
of the following types: growth equity and aggressive growth equity securities,
including the securities of smaller companies which may be newer and less
seasoned, investment grade and high-yield, high-risk bonds, international
securities and money market instruments. The Variable Portfolio may also engage
in transactions involving stock index futures contracts and options thereon, and
financial futures contracts and options thereon, as a hedge against changes in
market conditions.
MULTI-ASSET PORTFOLIO seeks long-term total investment return consistent
with moderate investment risk. This Variable Portfolio will invest in a
diversified group of securities, including: growth equity securities,
convertible securities, investment grade fixed income securities and money
market securities. The Variable Portfolio also may engage in transactions
involving stock index futures contracts and options thereon, and financial
futures contracts and options thereon, as a hedge against changes in market
conditions.
FIXED INCOME PORTFOLIOS
HIGH YIELD PORTFOLIO seeks high current income. A secondary investment
objective is capital appreciation. This Variable Portfolio will seek its
objectives by investing, except for temporary defensive purposes, at least 65%
of its assets in high-yielding, high-risk, income producing corporate bonds,
which generally carry ratings lower than those assigned to investment grade
bonds by Moody's or Standard & Poor's, or which are unrated. This Variable
Portfolio may also engage in transactions involving financial futures contracts
and options thereon as a hedge against changes in market conditions. High-yield,
high-risk bonds typically are subject to greater risks than are investments in
lower-yielding, higher-rated bonds. See the Trust's prospectus for more
information.
FIXED INCOME PORTFOLIO seeks high level of current income consistent with
preservation of capital. This Variable Portfolio will invest primarily in
investment grade, fixed income securities and may engage in financial futures
contracts and options thereon as a hedge against changes in market conditions.
GOVERNMENT AND QUALITY BOND PORTFOLIO seeks relatively high current income,
liquidity and security of principal. This Variable Portfolio will invest in
obligations issued, guaranteed or insured by the U.S. Government, its agencies
or instrumentalities and in corporate debt securities rated Aa or better by
Moody's or AA or better by Standard & Poor's.
MONEY MARKET PORTFOLIO seeks current income consistent with stability of
principal through investment in a diversified portfolio of money market
instruments maturing in 397 days or less. The
13
<PAGE> 17
Variable Portfolio will maintain a dollar-weighted average portfolio maturity of
not more than 90 days.
There is no assurance that the investment objective of any of the Variable
Portfolios will be met. The contract owners bear the complete investment risk
for Purchase Payments allocated to a division. Contract values will fluctuate in
accordance with the investment performance of the division(s) to which Purchase
Payments are allocated, and in accordance with the imposition of the fees and
charges assessed under the contracts.
Shares of the Trust are and will be issued and redeemed only in connection
with investments in and payments under variable contracts sold by the company
and its affiliate, First SunAmerica Life Insurance Company, as well as two
unaffiliated companies, Presidential Life Insurance Company and Phoenix Mutual
Life Insurance Company. No disadvantage to contract owners is seen to arise from
the fact that the Trust offers its shares in this fashion.
Additional Variable Portfolios may be established by the Trust from time to
time and may be made available to contract owners. However, there is no
assurance that this will occur.
TARGET '98 PORTFOLIO
On January 1, 1998, we stopped accepting Purchase Payment allocations
and/or transfers to the Target '98 Portfolio. In addition, we requested that
contract owners who had money allocated to the Target '98 Portfolio provide
Anchor National with reallocation instructions before November 16, 1998. On
November 16, 1998, we automatically reallocated contract values in the Target
'98 Portfolio to the Money Market Portfolio. The reallocations of contract
values from the Target '98 Portfolio were not considered "transfers" for
purposes of determining applicable transfer fees.
VOTING RIGHTS
Anchor National is the legal owner of the Trust's 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. Should we determine that we
are no longer required to comply with these rules, we will vote the shares in
our own right.
SUBSTITUTION OF SECURITIES
If Variable Portfolios become unavailable for investment, we may be
required to substitute shares of another Variable Portfolios. We will seek prior
approval of the SEC and give you notice before substituting shares.
- --------------------------------------------------------------------------------
FIXED ACCOUNT OPTION
- --------------------------------------------------------------------------------
ALLOCATIONS
The contract also offers a fixed account option for a one year period. We
call this time period the guarantee period. The fixed account option pays
interest at rate set and guaranteed by Anchor National. The interest rate may
differ from time to time and is set at our sole discretion. We will never credit
less than a 4% annual effective rate to the fixed account option. The interest
rate offered for new Purchase Payments may differ from interest rates offered
for subsequent Purchase Payments and money already in the fixed account option.
Once established, the rates for specified payments do not change during the
guarantee period.
When a guarantee period ends, you may leave your money in the fixed
account. You may also reallocate your money to the Variable Portfolios. If you
want to reallocate your money you must
14
<PAGE> 18
contact us within 30 days after the end of the current guarantee period and
instruct us how to reallocate the money. If we do not hear from you, we will
keep your money in the fixed account where it will earn the renewal interest
rate applicable at that time.
- --------------------------------------------------------------------------------
CONTRACT CHARGES
- --------------------------------------------------------------------------------
There are charges and expenses associated with your contract. These charges
and expenses reduce your investment return. We will not increase these charges
under your contract. Some states may require that we charge less than the
amounts described below.
INSURANCE CHARGES
The amount of this charge is 1.40% 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 we assume. If these charges do not cover all
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 CONTRACT
CHARGES, FREE WITHDRAWAL AMOUNT, PAGE 17.) If you take money out in excess of
the free withdrawal amount, you may incur a withdrawal charge.
We apply a withdrawal charge against each Purchase Payment you put into the
contract. After a Purchase Payment has been in the contract for five complete
years, no withdrawal charge applies. The withdrawal charge equals a percentage
of Purchase Payments you take out of the contract which are still subject to the
withdrawal charge and not previously withdrawn. The withdrawal charge percentage
declines each year a Purchase Payment is in the contract, as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
YEAR 1 2 3 4 5 6
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
WITHDRAWAL CHARGE 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, applicable
withdrawal charges are deducted from the amount withdrawn.
We do not assess a withdrawal charge for money withdrawn to pay a death
benefit. Withdrawals made prior to age 59 1/2 may result in a 10% IRS penalty
tax. SEE TAXES, PAGE 26.
INVESTMENT CHARGES
Charges are deducted from the Variable Portfolios for the advisory and
other expenses of the underlying Variable Portfolios. THE FEE TABLES LOCATED AT
PAGE 7 illustrate these charges and expenses. For more detailed information on
these investment charges, refer to the attached prospectus for the Trust.
CONTRACT MAINTENANCE FEE
During the Accumulation Phase, we subtract a $30 contract maintenance fee
from your account once per contract year. This charge compensates us for the
cost of contract administration. If your
15
<PAGE> 19
contract was issued prior to September 1, 1987, we deduct this fee from your
contract on December 31 of each year. In addition, we will waive the fee during
the year in which you fully surrender your contract. If your contract was issued
on or after September 1, 1987, we deduct the fee on your contract anniversary.
If you withdraw your entire contract value, the fee is deducted from that
withdrawal.
TRANSFER FEE
The contract currently provides for 15 free transfers between investment
options each contract year. After that, a charge of $25 applies to each
additional transfer in any one contract year ($10 in Pennsylvania and Texas).
SEE TRANSFERS DURING THE ACCUMULATION PHASE, PAGE 21.
ANNUITY CHARGE
If you elect to have your income payments made under income option 1, Life
Annuity with 10 or 20 Years Guaranteed, or income option 2, Joint and Survivor
Life Annuity, we do not assess an annuity charge. If you elect income option 3,
Income for a Specified Period, and if your Purchase Payments were made in the
contract year in which income payments begin or in any of the four preceding
contract years, we may assess an annuity charge. This annuity charge equals the
withdrawal charge that would apply if your contract was being surrendered. If
income option 3 is elected by your Beneficiary under the death benefit, we will
not assess an annuity charge. Under certain income options, we will assess the
annuity charge against the portion of your contract in the fixed account.
PREMIUM TAX
Certain states charge us 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 or upon your death. In the future, we may assess this
deduction at the time you put Purchase Payment(s) into the contract.
APPENDIX A 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 used 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.
We may make such a determination regarding sales to our employees, our
affiliates' employees and employees of currently contracted broker-dealers, our
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.
16
<PAGE> 20
FREE WITHDRAWAL AMOUNT
Your contract provides for a free withdrawal amount. Purchase Payments that
are no longer subject to a withdrawal charge and not previously withdrawn, plus
earnings, may be withdrawn without penalty.
After the first full contract year, the contract provides for a free
withdrawal amount on your first withdrawal of each contract year. The free
withdrawal amount is equal to 10% of your total Purchase Payments still subject
to a withdrawal charge, less prior withdrawals.
We will waive the withdrawal charge upon payment of a death benefit. Where
legally permitted, the withdrawal charge may be eliminated when a contract is
issued to an officer, director or employee of the Company or its affiliates.
- --------------------------------------------------------------------------------
DESCRIPTION OF THE CONTRACTS
- --------------------------------------------------------------------------------
SUMMARY
This contract works in two stages, the Accumulation Phase and the Income
Phase. Your contract is in the Accumulation Phase while you make payments into
the contract. The Income Phase begins when you request that we begin making
payments to you out of the money accumulated in your contract.
OWNERSHIP
You, as the contract owner, are entitled to the rights and privileges of
the contract. If you die during the Accumulation Phase, your Beneficiary will
become the owner of the contract, unless you elect otherwise. Joint owners have
equal ownership interests in the contract unless we advise otherwise in writing.
Only spouses may be joint owners.
ANNUITANT
The annuitant is the person on whose life we base income payments. You may
change the Annuitant at any time before the Annuity Date. You may also designate
a second person on whose life, together with the annuitant, income payments
depend. If the annuitant dies before the Annuity Date, you must notify us and
select a new annuitant.
MODIFICATION OF THE CONTRACT
Only the Company's President, a Vice President or Secretary may approve a
change or waive a provision of the contract. Any change or waiver must be in
writing. We reserve the right to modify the terms of the contract as necessary
to comply with changes in applicable law.
ASSIGNMENT
Contracts issued pursuant to Non-qualified plans that are not subject to
Title 1 of the Employee Retirement Income Security Act of 1974 ("ERISA") may be
assigned by the owner at any time during the lifetime of the Annuitant prior to
the Annuity Date. We will not be bound by any assignment until written notice is
received by us at our Annuity Service Center. We are not responsible for the
validity, tax or other legal consequences of any assignment. An assignment will
not affect any payments we may make or actions we may take before we receive
notice of the assignment.
If the contract is issued pursuant to a Qualified plan (or a Non-qualified
plan that is subject to Title 1 of ERISA), it may not be assigned, pledged or
otherwise transferred except under such conditions as may be allowed under
applicable law.
17
<PAGE> 21
BECAUSE AN ASSIGNMENT MAY BE A TAXABLE EVENT, YOU SHOULD CONSULT A
COMPETENT TAX ADVISER SHOULD YOU WISH TO ASSIGN YOUR CONTRACT.
DEATH BENEFIT
If you die during the Accumulation Phase of your contract, we pay a death
benefit to your Beneficiary.
The death benefit is equal to the greater of:
1. the value of your contract at the time we receive satisfactory proof of
death; or
2. total Purchase Payments less any withdrawals and partial annuitizations
(and any fees or charges applicable to such distributions), compounded
at a 5% annual growth rate; or
3. after your fifth contract year, your contract value on the last contract
anniversary plus any Purchase Payments and less any withdrawals and
partial annuitizations (and any fees or charges applicable to such
distributions) since that contract anniversary.
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 PHASE, INCOME OPTIONS, PAGE 24.)
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 the date
of your death. 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.
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.
- --------------------------------------------------------------------------------
PURCHASES, WITHDRAWALS AND CONTRACT VALUE
- --------------------------------------------------------------------------------
PURCHASE PAYMENTS
A 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.
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This chart shows the minimum initial and subsequent Purchase Payments
permitted under your contract. These amounts depend upon whether your contract
is Qualified or Non-qualified for tax purposes. SEE TAXES, PAGE 26.
<TABLE>
<S> <C> <C>
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MINIMUM
MINIMUM INITIAL SUBSEQUENT
PURCHASE PAYMENT PURCHASE PAYMENT
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Qualified $100 $100
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Non-Qualified $1,000 $500
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</TABLE>
Prior Company approval is required to accept Purchase Payments greater than
$1,000,000. Also, the optional automatic payment plan allows you to make
subsequent Purchase Payments of as little as $25.00.
We may refuse any Purchase Payment. In general, Anchor National 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 over age 80.
AUTOMATIC DOLLAR COST AVERAGING PROGRAM
The Dollar Cost Averaging ("DCA") program allows you to invest gradually in
the Variable Portfolios. Under the program you systematically transfer certain
amounts of portfolio value from the Money Market Portfolio, Government and
Quality Bond Portfolio or the 1-year fixed account option (source accounts) to
any other Variable Portfolio. Transfers from the Money Market Portfolio or the
Government and Quality Bond Portfolio may be monthly, quarterly, semiannually or
annually. You may change the frequency at any time by notifying us by telephone
or in writing. Funds in the Money Market Portfolio and the Government and
Quality Bond Portfolio may be transferred as a set dollar amount or as a
percentage of portfolio value.
Transfers from the fixed account option must be made on a percentage basis,
and may not exceed 8% of the value of the fixed account in any contract year.
Transfers from the fixed account may only be made quarterly. The minimum
transfer amount under the DCA program is $100, regardless of the source account.
You may not participate in the DCA program and the systematic withdrawal program
at the same time.
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 Money
Market Portfolio to the Growth and Income Portfolio over six quarters. You
set up dollar cost averaging and purchase Accumulation Units at the
following hypothetical values:
<TABLE>
<CAPTION>
- -----------------------------------------------------------
ACCUMULATION UNITS
QUARTER UNIT VALUE 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>
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In this example, 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.
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 invest the money according to your last allocation
instructions. SEE VARIABLE PORTFOLIO OPTIONS, PAGE 12 AND FIXED ACCOUNT OPTION,
PAGE 14.
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 determine the
number of Accumulation Units credited by dividing the Purchase Payment by the
Accumulation Unit value for the specific Variable Portfolio. The value of an
Accumulation Unit will go 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 by the Accumulation Unit value for the specific
Variable Portfolio.
EXAMPLE:
We receive a $25,000 Purchase Payment from you on Wednesday. You allocate
the money to the Multi-Asset Portfolio. The value of an Accumulation Unit
for the Multi-Asset Portfolio is $11.10 when the NYSE closes on Wednesday.
Your Purchase Payment of $25,000 is then divided by $11.10 and we credit
your contract on Wednesday night with 2252.52 Accumulation Units of the
Multi-Asset Portfolio.
Performance of the Variable Portfolios and the charges 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). Anchor National calls this a "free look." To cancel,
you must mail the contract along with your free look request to the Annuity
Service Center at P.O. Box 54299, Los Angeles, California 90054-0299. We will
refund the value of your contract on the day we receive your request. The amount
refunded to you may be more or less than the amount you originally invested.
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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.
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase you may transfer funds between the Variable
Portfolios and/or the fixed account option. You must transfer at least $500. If
less than $500 will remain in any Variable Portfolio after a transfer, that
amount must be transferred as well. Transfers from the fixed account option may
only be made once each contract year and must be requested during the 30-day
period following the end of the applicable 1-year guarantee period.
You may request transfers of your account value between the Variable
Portfolios and/or the fixed account option in writing or by telephone. We
currently allow 15 free transfers per contract per year. A charge of $25 ($10 in
Pennsylvania and Texas) for each additional transfer in any contract year
applies after the first 15 transfers. We may also assess a $25 fee if you move
all your money from a Variable Portfolio to another Variable Portfolio within 30
days of the contract issue date. Transfers resulting from your participation in
the DCA program count against your 15 free transfers per contract year.
We accept transfer requests by telephone unless you specify not to on your
contract application. Additionally, in the future you may be able to execute
transfers or other financial transactions over the internet. When receiving
instructions over the telephone, 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.
Upon implementation of internet account transfers we will have appropriate
procedures in place to provide reasonable assurance that the transactions
executed are genuine. Thus, Anchor National would not be responsible for any
claim, loss or expense from any error resulting from instructions received over
the internet. If we fail to follow any 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; or
- The underlying Variable Portfolios inform us that they need to restrict
the purchase or redemption of the shares because of excessive trading or
because a specific transfer or group of transfers is deemed to have a
detrimental effect on share prices of affected underlying Variable
Portfolios.
Where permitted by law, we may accept your authorization for a third party
to make transfers for you subject to certain 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 will 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 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
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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
PHASE, TRANSFERS DURING THE INCOME PHASE, PAGE 25.
We reserve the right to modify, suspend, waive or terminate these transfer
provisions at any time.
DISTRIBUTION OF CONTRACTS
Registered representatives of broker-dealers sell the contract. Anchor
National pays commissions to these representatives for the sale of the
contracts. We do not expect the total commissions to exceed 5% 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 is 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.
WITHDRAWALS
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 PHASE,
PAGE 23.)
Generally, we deduct a withdrawal charge applicable to any total or partial
withdrawal. If you withdraw your entire contract value, a deduction for premium
taxes and the contract maintenance fee also occurs. (SEE CONTRACT CHARGES,
WITHDRAWAL CHARGE, PAGE 15.)
Under most circumstances, the partial withdrawal minimum is $500. We
require that the value left in any investment option be at least $500 after the
withdrawal. You must send a written withdrawal request. Unless you provide
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 26.)
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 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
the 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, semiannual or annual payments from your
contract. Electronic transfer of these funds to your bank account is available.
The minimum amount of each withdrawal is $250. You may systematically withdraw
up to 10% of your total Purchase Payments each contract year. There must be at
least $500 remaining in each Variable Portfolio after a withdrawal from your
contract at all times. Withdrawals
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may be subject to a withdrawal charge and taxation, 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.
The program is not available to everyone. Please check with our Annuity
Service Center, which can provide the necessary enrollment forms. Anchor
National reserves the right to modify, suspend or terminate this program at any
time.
TEXAS OPTIONAL RETIREMENT PROGRAM
If you participate in the Texas Optional Retirement Program ("ORP") you
must obtain a certificate of termination from your employer before you can
redeem your contract. We impose this requirement on you because the Texas
Attorney General ruled that participants in ORP may redeem their contract only
upon termination of their employment by Texas public institutions of higher
education, or upon retirement death or total disability.
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 value to you.
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INCOME PHASE
- --------------------------------------------------------------------------------
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 the first full month of your contract. You select the month and year in
which 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.
Income payments must begin on or before the Annuitant's 85th birthday. If
you named joint Annuitants on your contract, the income payments may not be
later than the first day of the month following the 85th birthday of the younger
Annuitant. 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, PAGE 26.)
INCOME OPTIONS
Currently, this contract offers three income options. If you elect to
receive income payments but do not select an option, your income payments will
be made monthly and in accordance with option 1 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.
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OPTION 1 -- LIFE ANNUITY WITH 10 OR 20 YEARS GUARANTEED
This option provides income payments for the longer of (1) the life of the
Annuitant or (2) 10 or 20 years, depending on the number of years you select.
Under this option, we guarantee that income payments will be made for at least
10 or 20 years. If the Annuitant dies before all guaranteed income payments are
made, the remaining income payments go to the Beneficiary under your contract.
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 whenever the survivor dies.
OPTION 3 -- 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 of the guaranteed income payments
are made, the remaining income payments will be made to the Beneficiary under
your contract.
Please read the SAI for a more detailed discussion of the income options.
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 the fixed
account at that time, your income payments will be fixed in amount. Further, if
you are invested in both the fixed and variable investment options when 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. You may send us a written request to
convert variable income payments to fixed income payments. However, you may not
convert fixed income payments to variable income payments.
We make income payments on a monthly 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, the frequency of your payments may be
decreased, 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 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 income payments.
TRANSFERS DURING THE INCOME PHASE
During the Income Phase, you may transfer funds to the fixed account and/or
among the Variable Portfolios. Transfers during the Income Phase are subject to
the following limitations:
(1) You may not transfer funds to a Variable Portfolio during the first
year your contract is in the Income Phase. After the first year, you
may only make one transfer per Variable Portfolio during each contract
year.
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(2) When you make a transfer, you must transfer the entire value of a
Variable Portfolio.
(3) Your transfer request must be in writing. We must receive your transfer
request during the 45 days preceding your contract anniversary. Amounts
are transferred at the next Annuity Unit value calculation date.
(4) You may not transfer funds from the fixed account option. However,
amounts may be transferred from the Variable Portfolios to the fixed
account option.
(5) We reserve the right to modify, suspend or terminate this transfer
privilege at any time.
DEFERMENT OF PAYMENTS
We may defer making fixed income payments for up to six months, or less if
required by law. Interest is credited to you during the deferral period.
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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. 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.
We rely significantly on computer systems and applications in our daily
operations. Many of our systems are not presently year 2000 compliant, which
means that because they have historically used only two digits to identify the
year in a date, they will fail to distinguish dates in the "2000s" from dates in
the "1900s." Anchor National's business, financial condition and results of
operations could be materially and adversely affected by the failure of our
systems and applications (and those operated by third parties interfacing with
our systems and applications) to properly operate or manage these dates.
Anchor National has a coordinated plan to repair or replace these
noncompliant systems and to obtain similar assurances from third parties
interfacing with our systems and applications. In fiscal 1997, the Company's
parent recorded a $15.0 million provision for estimated programming costs to
repair noncompliant systems, of which $6.2 million was allocated to us. We are
making expenditures which we expect will ultimately total $5.0 million to
replace certain other noncompliant systems. Total expenditures relating to the
repair of noncompliant systems will be capitalized by the Company's parent as
software costs and will be paid over future periods. Both phases of the project
are progressing according to plan and we expect to substantially complete them
by the end of calendar 1998. We will test both the repaired and replacement
systems during calendar 1999.
In addition, we distributed a year 2000 questionnaire to our significant
suppliers, distributors, financial institutions, lessors and others we do
business with to evaluate their year 2000 compliance plans and state of
readiness and to determine how our systems and applications may be affected by
their failure to solve their own year 2000 issues. To date, however, we have
only received preliminary feedback from such parties and have not independently
confirmed any information received from other parties with respect to the year
2000 issues. Therefore, we cannot assure that such other parties will complete
their year 2000 conversions in a timely fashion or will not suffer a year 2000
business disruption that may adversely affect our financial condition and
results of operations.
Because we expect to complete our year 2000 conversion prior to any
potential disruption to our business, we have not developed a comprehensive year
2000 contingency plan. Anchor National closely
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monitors the progression of its plan for compliance, and if necessary, would
devote additional resources to assure the timely completion of its year 2000
plan. If we determine that our business is at material risk of disruption due to
the year 2000 issue or anticipate that our year 2000 conversion will not be
completed in a timely fashion, we will work to enhance our contingency plans.
The above statements are forward-looking. The costs of our year 2000
conversion, the date which we have set to complete such conversion and the
possible risks associated with the year 2000 issue are based on our current
estimates and are subject to various uncertainties that could cause actual
results to differ materially from our expectations. Such uncertainties include,
among others, our success in identifying systems and applications that are not
year 2000 compliant, the nature and amount of programming required to upgrade or
replace each of the affected systems and applications, the availability of
qualified personnel, consultants and other resources, and the success of the
year 2000 conversion efforts of others.
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TAXES
- --------------------------------------------------------------------------------
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. 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 IRA, 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: 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
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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) when paid 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 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. Failure to satisfy the minimum distribution requirements
may result in a tax penalty. You should consult your tax advisor for more
information.
DIVERSIFICATION
The IRC imposes certain diversification requirements on the underlying
investments for a variable annuity. We believe that the manager of the
underlying Variable Portfolios 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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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.
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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.
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REGISTRATION STATEMENTS
- --------------------------------------------------------------------------------
Anchor National is subject to the informational requirements of the
Securities and Exchange Act of 1934 (as amended). It files 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
registrations statement and its 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 statement and its
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.
28
<PAGE> 32
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION ABOUT THE SEPARATE ACCOUNT
- --------------------------------------------------------------------------------
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.
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
COMPANY..................................................... 1
INDEPENDENT ACCOUNTANTS..................................... 1
DISTRIBUTORS................................................ 1
PERFORMANCE DATA............................................ 2
Money Market Portfolio.................................... 2
Other Variable Portfolios................................. 3
INCOME PAYMENTS............................................. 4
Annuity Unit Value........................................ 4
Amount of Income Payments................................. 4
Subsequent Monthly Income Payments........................ 5
TAXES....................................................... 5
FINANCIAL STATEMENTS........................................ 10
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Financial statements of the separate account appear in the SAI. Financial
information regarding the fixed account is reported in Anchor National's
financial statements, which are also included in the SAI. A copy of the SAI may
be obtained by contacting Anchor National, c/o its Annuity Service Center.
29
<PAGE> 33
APPENDIX A - PREMIUM TAXES
Premium taxes vary according to the state and are subject to change without
notice. In many states, there is no tax at all. Listed below are the current
premium tax rates in those states that assess a premium tax. For current
information, you should consult your tax adviser.
<TABLE>
<CAPTION>
QUALIFIED NON-QUALIFIED
STATE CONTRACT CONTRACT
<S> <C> <C>
========================================================================
California .50% 2.35%
- ------------------------------------------------------------------------
District of Columbia 2.25% 2.25%
- ------------------------------------------------------------------------
Kentucky 2% 2%
- ------------------------------------------------------------------------
Maine 0% 2%
- ------------------------------------------------------------------------
Nevada 0% 3.5%
- ------------------------------------------------------------------------
South Dakota 0% 1.25%
- ------------------------------------------------------------------------
West Virginia 1% 1%
- ------------------------------------------------------------------------
Wyoming 0% 1%
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
</TABLE>
A-1
<PAGE> 34
Please forward a copy (without charge) of the Statement of Additional
Information concerning ICAP II
Variable Annuity Contracts issued by Anchor National Life Insurance Company to:
(Please print or type and fill in all information.)
- ------------------------------------------------------------------------------
Name
- ------------------------------------------------------------------------------
Address
- ------------------------------------------------------------------------------
City/State/Zip
- ------------------------------------------------------------------------------
Date: ________________________ Signed:
Return to: Anchor National Life Insurance Company, Annuity Service Center, P.O.
Box 54299, Los Angeles, California 90054-0299.
<PAGE> 35
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED
VARIABLE ANNUITY CONTRACTS
ISSUED BY
VARIABLE ANNUITY ACCOUNT ONE
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION
SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE INDIVIDUAL FLEXIBLE
PREMIUM DEFERRED VARIABLE ANNUITY CONTRACTS WHICH ARE REFERRED TO HEREIN.
THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE
INVESTOR OUGHT TO KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS DATED
JANUARY 29, 1999, AS IT MAY BE SUPPLEMENTED, CALL OR WRITE THE COMPANY C/O ITS
ADMINISTRATIVE SERVICE CENTER, P.O. BOX 54299, LOS ANGELES, CALIFORNIA
90054-0299, 1-800-445-SUN2.
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED
JANUARY 29, 1999
<PAGE> 36
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Item
Company....................................................................... 1
Independent Accountants....................................................... 1
Distributors.................................................................. 1
Performance Data.............................................................. 2
Money Market Division...................................................... 2
Other Divisions............................................................ 3
Income Payments............................................................... 4
Annuity Unit Value......................................................... 4
Amount of Income Payments.................................................. 4
Subsequent Monthly Income Payments......................................... 5
Taxes......................................................................... 5
Financial Statements.......................................................... 10
</TABLE>
<PAGE> 37
COMPANY
Information regarding the Anchor National Life Insurance Company (the
"Company") and its ownership is contained in the Prospectus.
INDEPENDENT ACCOUNTANTS
The consolidated financial statements of the Company as of September
30, 1998 and 1997 and for each of the three years in the period ended September
30, 1998 are presented in this Statement of Additional Information. The
consolidated financial statements of the Company should be considered only as
bearing on the ability of the Company to meet its obligation under the
Contracts. The financial statements of the Separate Account as of December 31,
1997 and for each of the two years in the period ended December 31, 1997, also
are included in this Statement of Additional Information.
PricewaterhouseCoopers LLP, 400 South Hope Street, Los Angeles,
California 90071, serves as the independent accountants for the Separate Account
and the Company. The financial statements referred to above included in this
Statement of Additional Information have been so included in reliance on the
reports of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
[ THE SEPARATE ACCOUNT AND THE COMPANY FINANCIALS WILL BE PROVIDED BY AMENDMENT)
DISTRIBUTORS
The Contracts are sold by licensed insurance agents, where the
Contracts may be lawfully sold, who are registered representatives of
broker-dealers which are registered under the Securities Exchange Act of 1934
and are members of the National Association of Securities Dealers, Inc.
The offering is on a continuous basis.
Effective January 28, 1994, the Contracts are offered through the
distributors for the Separate Account, SunAmerica Capital Services, Inc., 733
Third Avenue, 4th Floor, New York, New York 10017, which is an indirect wholly
owned subsidiary of SunAmerica Inc. Prior to this time, Anchor National
Financial Services, Inc., SunAmerica Securities, Inc., both located at 2800 N.
Central Avenue, Phoenix, Arizona 85004, and Royal Alliance Associates, Inc.,
located at 733 Third Street, 4th Floor, New York, New York 10017, served as
co-distributors of the Contract. SunAmerica Securities, Inc. and Royal Alliance
Associates, Inc. are each an indirect wholly-owned subsidiary of SunAmerica Inc.
Prior to the closing date of the assumption reinsurance agreement between
Integrated Resources Life Insurance Company and Anchor National Life Insurance
Company discussed in the Prospectus, the principal underwriter of the Contracts
was Integrated Resources Capital Services, Inc.
For the year ended December 31, 1995, the aggregate amount of
underwriting commissions paid to SunAmerica Capital Services, Inc. was
$1,572,943, of which $162,469 was retained by them. For the year ended December
31, 1996, the aggregate amount of underwriting commissions paid to SunAmerica
Capital Services, Inc. was $1,182,796, of which $119,706 was retained by
1
<PAGE> 38
them. For the year end December 31, 1997, the aggregate amount of underwriting
commissions paid by the Company to SunAmerica Capital Services, Inc. was
$970,366, of which $96,878 was retained by them.
PERFORMANCE DATA
Performance data for the various Divisions of the Separate Account are
determined in the manner described below.
Money Market Division
The annualized current yield and the effective yield for the Money
Market Division for the 7 day period ended December 31, 1998 were [ ]% and [ ]%,
respectively.
Current yield is computed by first determining the Base Period Return
attributable to a hypothetical Contract having a balance of one Accumulation
Unit at the beginning of a 7 day period using the formula:
Base Period Return = (EV-SV-CMF)/(SV)
where:
SV = value of one Accumulation Unit at the start of a 7 day period
EV = value of one Accumulation Unit at the end of the 7 day period
CMF = an allocated portion of the $30 annual Contract Maintenance
Fee, prorated for 7 days
The change in the value of an Accumulation Unit during the 7 day period
reflects the income received, minus any expenses incurred, during such 7 day
period. The Contract Maintenance Fee is first allocated among the Divisions and
the General Account so that each Division's allocated portion of the charge is
proportional to the percentage of the number of Contract Owners' accounts that
have money allocated to that Division. The portion of the Fee allocable to the
Money Market Division 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 Money
Market Division. Finally, as is done with the other charges discussed above, the
result is multiplied by the fraction 7/365 to arrive at the portion attributable
to the 7 day period.
The current yield is then obtained by annualizing the Base Period
Return:
Current Yield = (Base Period Return) x (365/7)
The Money Market Division 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 Money Market Division. The effective yield, like
the current yield, is derived from the Base Period Return over a 7 day period.
However, the effective yield accounts for dividend reinvestment by compounding
the current yield according to the formula:
Effective Yield = [(Base Period Return + 1)365/7 - 1].
Net investment income for yield quotation purposes will not include
either realized capital
2
<PAGE> 39
gains and losses or unrealized appreciation and depreciation, whether reinvested
or not. The yield quotations also do not reflect any impact of premium taxes,
transfer fees, or Withdrawal or Annuity Charges.
The yields quoted should not be considered a representation of the
yield of the Money Market Division in the future since the yield is not fixed.
Actual yields will depend not only on the type, quality and maturities of the
investments held by the Money Market Division and changes in interest rates on
such investments, but also on factors such as a Contract Owner's account size
(since the impact of fixed dollar charges will be greater for small accounts
than for larger accounts).
Yield information may be useful in reviewing the performance of the
Money Market Division and for providing a basis for comparison with other
investment alternatives. However, the Money Market Division's yield fluctuates,
unlike bank deposits or other investments that typically pay a fixed yield for a
stated period of time.
Other Divisions
Divisions of the Separate Account other than the Money Market Division
compute their performance data as "total return." The total returns of the
various Divisions over the last 1, 5 and 10 year periods, and since their
inception, are shown below, both with/without an assumed complete redemption at
the end of the period.
TOTAL ANNUAL RETURN (IN PERCENT) FOR PERIOD ENDING ON 12/31/97:
(RETURN WITH/WITHOUT REDEMPTION)
<TABLE>
<CAPTION>
INCEPTION SINCE
DIVISION DATE 1 YEAR 5 YEARS 10 YEARS INCEPTION
- -------------------- --------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Foreign Securities 3/23/87 -7.60/-2.60 7.59/7.72 4.73/4.73 2.98/2.98
Capital Appreciation 3/23/87 18.63/23.63 17.88/17.97 18.17/18.17 14.53/14.53
Growth 8/13/84 23.50/28.50 14.35/14.45 14.46/14.46 13.34/13.34
Natural Resources 1/01/88 -15.14/-10.14 9.12/9.25 ----------- 5.53/5.53
Growth and Income* 3/23/87 21.84/26.84 12.89/13.00 12.62/12.62 10.11/10.11
Strategic Multi-Asset 3/23/87 7.60/12.60 10.79/10.91 9.85/9.85 8.08/8.08
Multi-Asset 3/23/87 14.37/19.37 10.94/11.06 11.16/11.16 9.57/9.57
High Yield 1/01/86 4.58/9.58 9.11/9.24 8.06/8.06 7.92/7.92
Target '98 5/02/88 -1.46/3.54 4.18/4.33 ----------- 7.26/7.26
Fixed Income 8/13/84 2.63/7.63 5.04/5.18 6.69/6.69 7.79/7.79
Gov't & Quality Bond 8/13/84 2.88/7.88 5.41/5.56 7.56/7.56 8.24/8.24
</TABLE>
- ---------------------
Total return figures are based on historical data and are not intended to
indicate future performance.
* Formerly the Convertible Securities Division
These figures show the total return hypothetically experienced by
Contracts funded through the various Divisions of the Account over the time
periods shown.
Total return for a Division represents a computed annual rate of return
that, when compounded annually over the time period shown and applied to a
hypothetical initial investment in a Contract funded by that Division 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
3
<PAGE> 40
the same period. The total rate of return (T) is computed so that it satisfies
the formula:
P(1+T)n = ERV
where:
P = a hypothetical initial payment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1000
payment made at the beginning of the 1, 5, or 10 year
periods at the end of the 1, 5, or 10 year periods
(or fractional portion thereof).
The total return figures given reflect the effects of both
non-recurring and recurring charges, as discussed herein. Recurring charges are
taken into account in a manner similar to that used for the yield computations
for the Money Market Division, described above. The applicable Withdrawal Charge
(if any) is deducted as of the end of the period, to reflect the effect of the
assumed complete redemption in the case of the first of the two figures given in
the table above for each Division and time period. Because the impact of
Contract Maintenance Fees on a particular Contract Owner's account would
generally have differed from that assumed in the computation, due to differences
between most actual allocations and the assumed one, as well as differences due
to varying account sizes, the total return experienced by an actual account over
these same time periods would generally have been different from those given
above. As with the Money Market Division yield figures, total return figures are
derived from historical data and are not intended to be a projection of future
performance.
INCOME PAYMENTS
Annuity Unit Value
The value of an Annuity Unit is determined independently for each
Separate Account Division.
For each Division, the value of an Annuity Unit for any Valuation
Period is determined by multiplying the Annuity Unit value for the immediately
preceding Valuation Period by the net investment factor for the Valuation Period
for which the Annuity Unit value is being calculated and multiplying the result
by an interest factor which offsets the effect of the investment earnings rate
of five percent (5%) per annum that is assumed in the annuity table contained in
the Contract.
The net investment factor for each Division for a Valuation Period is
determined by dividing (a) by (b) and subtracting (c) from the result where: (a)
is the value of an Accumulation Unit from the applicable Division as of the end
of the current Valuation Period; (b) is the value of an Accumulation Unit for
the applicable Division as of the end of the immediately preceding Valuation
Period; and (c) is a factor representing the daily charge for mortality and
expense risks and administration of 1.40% per annum.
Amount of Income Payments
The initial income payment is determined by applying the Contract
Value, less any
4
<PAGE> 41
premium tax, and less any Annuity Charge (if annuity option 3 is elected), to
the annuity table specified in the Contract. Those tables are based on a set
amount per $1,000 of proceeds applied. The appropriate rate must be determined
by the sex and adjusted age of the Annuitant and joint Annuitant, if any. The
adjusted age is determined from the actual age to the nearest birthday at the
Annuity Date according to the table below. The Adjusted Age Table is used to
correct for population mortality improvements over time.
<TABLE>
<CAPTION>
ADJUSTED AGE TABLE
Adjustment Adjustment
Calendar to Actual Calendar to Actual
Year of Birth Age Year of Birth Age
- ------------- ---------- ------------- ----------
<S> <C> <C> <C>
1899-1905 +6 1946-1951 -1
1906-1911 +5 1952-1958 -2
1912-1918 +4 1959-1965 -3
1919-1925 +3 1966-1972 -4
1926-1932 +2 1973-1979 -5
1933-1938 +1 1980-1985 -6
1939-1945 0 1986-1992 -7
</TABLE>
The dollars applied are then divided by 1,000 and multiplied by the
appropriate annuity factor to indicate the amount of the first income payment.
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 income payment. The
number of Annuity Units determined for the first income payment remains constant
for the second and subsequent monthly payments.
Subsequent Monthly Payments
The amount of the second and subsequent income payments is determined
by multiplying the number of Annuity Units by the Annuity Unit value as of the
Valuation Period next preceding the date on which each income payment is due.
The dollar amount of the first income payment determined as above is divided by
the value of an Annuity Unit as of the Annuity Date to establish the number of
Annuity Units representing each income payment. The number of Annuity Units
determined for the first income payment remains constant for the second and
subsequent monthly 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 income option
elected. For a lump sum payment received as a total surrender (total
redemption),
5
<PAGE> 42
the recipient is taxed on the portion of the payment that exceeds the cost basis
of the contract. For a payment received as a withdrawal (partial redemption),
federal tax liability is determined on a last-in, first-out basis, meaning
taxable income is withdrawn before the cost basis of the contract is withdrawn.
For contracts issued in connection with Non-qualified plans, the cost basis is
generally the Purchase Payments, while for contracts issued in connection with
Qualified plans there may be no cost basis. The taxable portion of the lump sum
payment is taxed at ordinary income tax rates. Tax penalties may also apply.
For income payments, the taxable portion is determined by a formula
which establishes the ratio that the cost basis of the contract bears to the
total value of income payments for the term of the annuity contract. The taxable
portion is taxed at ordinary income tax rates. Contract Owners, Annuitants and
Beneficiaries under the contracts should seek competent financial advice about
the tax consequences of distributions under the retirement plan under which the
contracts are purchased.
The Company is taxed as a life insurance company under the Code. For
federal income tax purposes, the separate account is not a separate entity from
the Company and its operations form a part of the Company.
Withholding Tax on Distributions
The Code generally requires the Company (or, in some cases, a plan
administrator) to withhold tax on the taxable portion of any distribution or
withdrawal from a contract. For "eligible rollover distributions" from contracts
issued under certain types of Qualified plans, 20% of the distribution must be
withheld, unless the payee elects to have the distribution "rolled over" to
another eligible plan in a direct "trustee to trustee" transfer. This
requirement is mandatory and cannot be waived by the owner. Withholding on other
types of distributions can be waived.
An "eligible rollover distribution" is the estimated taxable portion of
any amount received by a covered employee from a plan qualified under Section
401(a) or 403(a) of the Code, or from a tax-sheltered annuity qualified under
Section 403(b) of the Code (other than (1) annuity payments for the life (or
life expectancy) of the employee, or joint lives (or joint life expectancies) of
the employee and his or her designated Beneficiary, or for a specified period of
ten years or more; and (2) distributions required to be made under the Code).
Failure to "roll over" the entire amount of an eligible rollover distribution
(including an amount equal to the 20% portion of the distribution that was
withheld) could have adverse tax consequences, including the imposition of a
penalty tax on premature withdrawals, described later in this section.
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
6
<PAGE> 43
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 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. Contract Owners should consult a tax adviser prior to
purchasing more than one annuity contract in any calendar year.
7
<PAGE> 44
Tax Treatment of Assignments
An assignment of a contract may have tax consequences, and may also be
prohibited by ERISA in some circumstances. Contract Owners should therefore
consult competent legal advisers should they wish to assign their contracts.
Qualified Plans
The contracts offered by this prospectus are designed to be suitable
for use under various types of Qualified plans. Taxation of owners in each
Qualified plan varies with the type of plan and terms and conditions of each
specific plan. Contract 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.
8
<PAGE> 45
(b) Tax-Sheltered Annuities
Section 403(b) of the Code permits the purchase of
"tax-sheltered annuities" by public schools and certain charitable,
education and scientific organizations described in Section 501(c)(3)
of the Code. These qualifying employers may make contributions to the
contracts for the benefit of their employees. Such contributions are
not includible in the gross income of the employee until the employee
receives distributions from the contract. The amount of contributions
to the tax-sheltered annuity is limited to certain maximums imposed by
the Code. Furthermore, the Code sets forth additional restrictions
governing such items as transferability, distributions,
nondiscrimination and withdrawals. Any employee should obtain competent
tax advice as to the tax treatment and suitability of such an
investment.
(c) Individual Retirement Accounts
Section 408(b) of the Code permits eligible individuals to
contribute to an individual retirement program known as an "Individual
Retirement Account" ("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.
9
<PAGE> 46
(e) Corporate Pension and Profit-Sharing Plans
Sections 401(a) and 401(k) of the Code permit corporate
employers to establish various types of retirement plans for employees.
These retirement plans may permit the purchase of the contracts to
provide benefits under the plan. Contributions to the plan for the
benefit of employees will not be includible in the gross income of the
employee until distributed from the plan. The tax consequences to
owners may vary depending upon the particular plan design. However, the
Code places limitations on all plans on such items as amount of
allowable contributions; form, manner and timing of distributions;
vesting and nonforfeitability of interests; nondiscrimination in
eligibility and participation; and the tax treatment of distributions,
withdrawals and surrenders. Purchasers of contracts for use with
corporate pension or profit sharing plans should obtain competent tax
advice as to the tax treatment and suitability of such an investment.
(f) Deferred Compensation Plans - Section 457
Under Section 457 of the Code, governmental and certain other
tax-exempt employers may establish, for the benefit of their employees,
deferred compensation plans which may invest in annuity contracts. The
Code, as in the case of Qualified plans, establishes limitations and
restrictions on eligibility, contributions and distributions. Under
these plans, contributions made for the benefit of the employees will
not be includible in the employees' gross income until distributed from
the plan. However, under a 457 plan all the plan assets shall remain
solely the property of the employer, subject only to the claims of the
employer's general creditors until such time as made available to an
owner or a Beneficiary.
FINANCIAL STATEMENTS
The consolidated financial statements of the Company included herein
should be considered only as bearing upon the ability of the Company to meet its
obligations under the Contracts. The financial statements of the Separate
Account are also included in this Statement of Additional Information.
[FINANCIAL STATEMENTS FOR THE SEPARATE ACCOUNT AND FOR ANCHOR NATIONAL WILL BE
PROVIDED BY AMENDMENT]
10
<PAGE> 47
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
The following financial statements are included in Part A of the
Registration Statement:
None
The following financial statements are included in Part B of the
Registration Statement: None
Consolidated Financial Statements of Anchor National Life
Insurance Company for the fiscal year ended
September 30, 1998 to be filed by Amendment
Financial Statements of Variable Annuity Account One for the
fiscal year ended December 31, 1998 to be filed by Amendment
<TABLE>
<CAPTION>
(b) Exhibits
- ----------------
<S> <C> <C>
(1) Resolutions Establishing Separate Account...... Filed Previously
(2) Custody Agreements............................. Not Applicable
(3) (a) Distribution Contract..................... Filed Previously
(b) Form of Selling Agreement................. Filed Previously
(4) Variable Annuity Contract...................... Filed Previously
(5) Application for Contract....................... Filed Previously
(6) Depositor - Corporate Documents
(a) Certificate of Incorporation.............. Filed Previously
(b) By-Laws................................... Filed Previously
(7) Reinsurance Contract........................... Not Applicable
(8) Form of Fund Participation Agreement........... Filed Previously
(9) Opinion of Counsel............................. Filed Previously
Consent of Counsel............................. Filed Previously
(10) Consent of Independent Accountants............. To be Filed
(11) Financial Statements Omitted from Item 23...... None
(12) Initial Capitalization Agreement............... Not Applicable
(13) Performance Computations....................... Not Applicable
(14) Diagram and Listing of All Persons Directly
or Indirectly Controlled By or Under Common
Control with Anchor National Life Insurance
Company, the Depositor of Registrant........... Filed Previously
(15) Powers of Attorney............................. Filed Previously
(27) Financial Data Schedules....................... Not Applicable
</TABLE>
Item 25. Directors and Officers of the Depositor
The officers and directors of Anchor National Life Insurance Company
are listed below. Their principal business address is 1 SunAmerica Center, Los
Angeles, California 90067-6022, unless otherwise noted.
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<CAPTION>
Name Position
- ---- --------
<S> <C>
Eli Broad Chairman, President and
Chief Executive Officer
Jay S. Wintrob Director and Executive Vice President
Peter McMillan Director
Jana W. Greer Director and Senior Vice President
James R. Belardi Director and Senior Vice President
Susan L. Harris Director, Senior Vice President
and Secretary
Scott L. Robinson Director and Senior Vice President
</TABLE>
<PAGE> 48
<TABLE>
<S> <C>
James W. Rowan Director and Senior Vice President
N. Scott Gillis Senior Vice President and Controller
Edwin R. Reoliquio Senior Vice President and Chief Actuary
Victor E. Akin Senior Vice President
Scott H. Richland Senior Vice President
J. Franklin Grey Vice President
Keith B. Jones Vice President
Michael Lindquist Vice President
Edward P. Nolan* Vice President
Greg Outcalt Vice President
David Bechtel Vice President and Treasurer
</TABLE>
- ------------------
* 88 Bradley Road, P.O. Box 4005, Woodbridge, Connecticut 06525
Item 26. Persons Controlled By or Under Common Control With Depositor or
Registrant
The Registrant is a separate account of Anchor National Life Insurance
Company (Depositor). For a complete listing and diagram of all persons directly
or indirectly controlled by or under common control with the Depositor or
Registrant, see Exhibit 14 which is incorporated herein by reference.
Item 27. Number of Contract Owners
As of December 31, 1997, the number of Contracts funded by Variable
Annuity Account One was 36,527 of which 24,563 were Qualified Contracts and
11,964 were Non-Qualified Contracts.
Item 28. Indemnification
None.
Item 29. Principal Underwriter
SunAmerica Capital Services, Inc. serves as distributor to the
Registrant.
Its principal business address is 733 Third Avenue, 4th Floor, New
York, New York 10017. The following are the directors and officers of SunAmerica
Capital Services, Inc.
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<CAPTION>
Name Position with Distributor
---- ------------------------
<S> <C>
J. Steven Neamtz Director and President
Robert M. Zakem Director, Executive Vice
President, General Counsel and
Assistant Secretary
Peter Harbeck Director
Per Furmark Vice President
James Nichols Vice President
Susan L. Harris Secretary
Debbie Potash-Turner Controller
</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>
- ------------------
<PAGE> 49
* The distribution fee is paid by Anchor National Life Insurance Company.
Item 30. Location of Accounts and Records
Anchor National Life Insurance Company, the Depositor for the
Registrant, is located at 1 SunAmerica Center, Los Angeles, California 90067-
6022. SunAmerica Capital Services, Inc., the distributor of the Contracts, is
located at 733 Third Avenue, 4th Floor, New York, New York 10017. Each maintains
those accounts and records required to be maintained by it pursuant to Section
31(a) of the Investment Company Act and the rules promulgated thereunder.
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02100, maintains certain accounts and records pursuant to the
instructions of the Registrant.
Item 31. Management Services
Not Applicable.
<PAGE> 50
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 and Registrant represent that the fees and charges to be
deducted under the variable annuity contract described in the prospectus
contained in this registration statement are, in the aggregate, reasonable
in relation to the services rendered, the expenses expected to be incurred,
and the risks assumed in connection with the contract.
<PAGE> 51
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant certifies that it meets the requirements of
Securities Act Rule 485 for effectiveness of this Registration Statement and
has caused this Post-Effective Amendment to the Registration Statement to be
signed on its behalf, in the City of Los Angeles, and the State of California,
on this 24th day of November, 1998.
VARIABLE ANNUITY ACCOUNT ONE
(Registrant)
By: ANCHOR NATIONAL LIFE INSURANCE COMPANY
(Depositor)
By: /s/ JAY S. WINTROB
---------------------------------------------
Jay S. Wintrob
Executive Vice President
By: ANCHOR NATIONAL LIFE INSURANCE COMPANY
(Depositor, on behalf of itself and Registrant)
By: /s/ JAY S. WINTROB
----------------------------------------------
Jay S. Wintrob
Executive Vice President
As required by the Securities Act of 1933, this Post-Effective
Amendment to the Registration Statement has been signed by the following persons
in the capacity and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
ELI BROAD* President, Chief
- -------------------- Executive Officer and
Eli Broad Chairman of the Board
(Principal Executive
Officer)
SCOTT L. ROBINSON* Senior Vice President
- -------------------- and Director
Scott L. Robinson (Principal Financial
Officer)
SCOTT GILLIS* Senior Vice President
- -------------------- and Controller
N. Scott Gillis (Principal Accounting
Officer)
JAMES R. BELARDI* Director
- --------------------
James R. Belardi
JANA W. GREER* Director
- --------------------
Jana W. Greer
</TABLE>
<PAGE> 52
<TABLE>
<S> <C> <C>
/s/ SUSAN L. HARRIS Director November 24, 1998
- --------------------
Susan L. Harris
PETER MCMILLAN* Director
- --------------------
Peter McMillan
JAY S. WINTROB* Director
- --------------------
Jay S. Wintrob
JAMES W. ROWAN* Director
- --------------------
James W. Rowan
* By: /s/ SUSAN L. HARRIS Attorney-in-Fact
--------------------
Susan L. Harris
</TABLE>
Date: November 24, 1998
<PAGE> 53
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
- ------- -----------
<S> <C>
</TABLE>
