<PAGE> 1
As filed with the Securities and Exchange Commission on January 18, 2001
File Nos. 33-86642
811-8874
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 10 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [X]
Amendment No. 11
(Check appropriate box or boxes)
VARIABLE ANNUITY ACCOUNT FOUR
(Exact Name of Registrant)
Anchor National Life Insurance Company
(Name of Depositor)
1 SunAmerica Center
Los Angeles, California 90067-6022
(Address of Depositor's Principal Offices) (Zip Code)
Depositor's Telephone Number, including Area Code
(310) 772-6000
Christine A. Nixon, Esq.
Anchor National Life Insurance Company
1 SunAmerica Center
Los Angeles, California 90067-6022
(Name and Address of Agent for Service)
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
[X] 60 days after filing pursuant to paragraph (a) of Rule 485
[ ] on _________________ pursuant to paragraph (a) of Rule 485
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
shall determine.
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VARIABLE ANNUITY ACCOUNT FOUR
CROSS REFERENCE SHEET
PART A - PROSPECTUS
<TABLE>
<CAPTION>
Item Number in Form N-4 Caption
----------------------- -------
<S> <C>
1. Cover Page................................... Cover Page
2. Definitions ................................. Glossary
3. Synopsis..................................... Profile; Fee Tables;
Examples
4. Condensed Financial Information.............. Appendix A - Condensed
Financial Information
5. General Description of Registrant,
Depositor and Portfolio Companies............ Investment Options; Other
Information
6. Deductions and Expenses...................... Expenses
7. General Description of
Variable Annuity Contracts................... The Anchor Advisor
Variable Annuity; Income
Options
8. Annuity Period............................... Income Options
9. Death Benefit................................ Death Benefit
10. Purchases and Contract Value ................ Purchasing An Anchor
Advisor Variable Annuity
Contract
11. Redemptions ................................. Withdrawals
12. Taxes ....................................... Taxes
13. Legal Proceedings ........................... Other Information
14 Table of Contents of Statement
of Additional Information.................... Additional Information
About the Separate Account
</TABLE>
<PAGE> 3
PART B - STATEMENT OF ADDITIONAL INFORMATION
--------------------------------------------
Certain information required in Part B of the Registration Statement has
been included within the Prospectus forming part of this Registration Statement;
the following cross-references suffixed with a "P" are made by reference to the
captions in the Prospectus.
<TABLE>
<CAPTION>
Item Number in Form N-4 Caption
----------------------- ---------
<S> <C>
15. Cover Page ........................... Cover Page
16. Table of Contents .................... Table of Contents
17. General Information and History....... The Anchor Advisor
Variable Annuity(P);
Investment Options(P);
Other Information(P)
18. Services ............................. Other Information(P)
19. Purchase of Securities Being Offered . Purchasing An Anchor
Advisor Variable Annuity
Contract(P)
20. Underwriters ......................... Distribution of Contracts
21. Calculation of Performance Data ...... Performance Data
22. Annuity Payments ..................... Income Options(P);
Annuity Unit Values;
Annuity Payments
23. Financial Statement .................. Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE> 4
[ANCHOR ADVISOR LOGO]
THIS PROFILE IS A SUMMARY OF SOME OF THE MORE IMPORTANT POINTS THAT YOU SHOULD
KNOW AND CONSIDER BEFORE PURCHASING THE ANCHOR ADVISOR VARIABLE ANNUITY. THE
ANNUITY IS MORE FULLY DESCRIBED IN THE PROSPECTUS. PLEASE READ THE PROSPECTUS
CAREFULLY.
March 19, 2001
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1. THE ANCHOR ADVISOR VARIABLE ANNUITY
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The Anchor Advisor Variable Annuity is a contract between you and Anchor
National Life Insurance Company. It is designed to help you invest on a
tax-deferred basis and meet long-term financial goals, such as retirement
funding. Tax deferral means all your money, including the amount you would
otherwise pay in current income taxes, remains in your contract to generate more
earnings. Your money could grow faster than it would in a comparable taxable
investment.
Anchor Advisor offers a diverse selection of money managers and investment
options. You may divide your money among any or all of our 28 variable
portfolios and the one-year fixed account and one-year DCA fixed account
options. Your investment is not guaranteed. The value of your Anchor Advisor
contract can fluctuate up and down, based on the performance of the underlying
investments you select and you may experience a loss.
The variable portfolios offer professionally managed investment choices with
goals ranging from capital preservation to aggressive growth. Your choices for
the various investment options are found on the next page.
The contract also offers a one-year fixed account option and a one-year DCA
fixed account option. The interest rates are guaranteed by Anchor National.
Like most annuities, the contract has an accumulation phase and an income phase.
During the accumulation phase, you invest money in your contract. Your earnings
are based on the investment performance of the variable portfolios to which your
money is allocated and/or the interest rate earned on the fixed account option
in which you invest. You may withdraw money from your contract during the
accumulation phase. However, as with other tax-deferred investments, you will
pay taxes on earnings and untaxed contributions when you withdraw them. A
federal tax penalty may apply if you make withdrawals before age 59 1/2.
During the income phase, you may receive income payments from your annuity. Your
income payments may be fixed in dollar amount, vary with investment performance
or a combination of both, depending on where your money is allocated. Among
other factors, the amount of money you are able to accumulate in your contract
during the accumulation phase will affect the amount of your income payments
during the income phase.
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2. INCOME OPTIONS
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You can select from one of five income options:
(1) payments for your lifetime;
(2) payments for your lifetime and your survivor's lifetime;
(3) payments for your lifetime and your survivor's lifetime, but for not less
than 10 years;
(4) payments for your lifetime, but for not less than 10, or 20 years; and
(5) payments for a specified period of 5 to 30 years.
You will also need to decide when your income payments begin and if you want
your income payments to fluctuate with investment performance or remain
constant. Once you begin receiving income payments, you cannot change your
income option.
If your contract is part of a non-qualified retirement plan (one that is
established with after-tax dollars), payments during the income phase are
considered partly a return of your original investment. The "original
investment" part of each payment is not taxable as income. For contracts which
are part of a qualified retirement plan using before-tax dollars, the entire
income payment is taxable as income.
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3. PURCHASING AN ANCHOR ADVISOR
VARIABLE ANNUITY CONTRACT
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You can buy a contract through your financial representative, who can also help
you complete the proper forms. The minimum initial purchase payment is $10,000
and subsequent amounts of $500 or more may be added to your contract at any time
during the accumulation phase.
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4. INVESTMENT OPTIONS
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You may allocate money to the following variable portfolios of the Anchor Series
Trust ("AST") and/or the SunAmerica Series Trust ("SST"):
STOCKS:
MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
- Alliance Growth Portfolio SST
- Global Equities Portfolio SST
- Growth & Income Portfolio SST
MANAGED BY DAVIS SELECTED ADVISERS L.P.
- Davis Venture Value Portfolio SST
MANAGED BY FEDERATED INVESTORS L.P.
- Federated Value Portfolio SST
- Telecom Utility SST
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
- Goldman Sachs Research Portfolio SST
MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
- MFS Growth & Income Portfolio SST
- MFS Mid Cap Growth Portfolio SST
MANAGED BY MORGAN STANLEY ASSET MANAGEMENT
- International Diversified Equities Portfolio SST
- Technology Portfolio SST
MANAGED BY PUTNAM INVESTMENT MANAGEMENT COMPANY INC.
- International Growth & Income Portfolio SST
- Putnam Growth Portfolio SST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION
- Aggressive Growth Portfolio SST
- Blue Chip Growth Portfolio SST
- "Dogs" of Wall Street Portfolio SST
- Growth Opportunities Portfolio SST
MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP
- Capital Appreciation Portfolio AST
- Growth Portfolio AST
- Natural Resources Portfolio AST
BALANCED:
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
- Asset Allocation Portfolio SST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION
- SunAmerica Balanced Portfolio SST
BONDS:
MANAGED BY FEDERATED INVESTORS L.P.
- Corporate Bond Portfolio SST
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
- Global Bond Portfolio SST
MANAGED BY MORGAN STANLEY ASSET MANAGEMENT
- Worldwide High Income Portfolio SST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION
- High-Yield Bond Portfolio SST
MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP
- Government & Quality Portfolio AST
CASH:
MANAGED BY BANC OF AMERICA CAPITAL MANAGEMENT, INC.
- Cash Management Portfolio SST
You may also allocate money to the one-year fixed account option or the one-year
DCA fixed account option. The interest rate applicable to the account will
differ from time to time, however, we will never credit less than a 3% annual
effective rate. Once established, the rate will not change during the one-year
period.
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5. EXPENSES
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We deduct insurance charges which equal 1.52% annually of the average daily
value of your contract allocated to the variable portfolios.
As with other professionally managed investments, there are also investment
charges imposed on contracts with money allocated to the variable portfolios. We
estimate these fees to range from .53% to 1.55%.
If you elect the optional EstatePlus death benefit, we charge a [0.25%] fee. The
EstatePlus fee is an annualized charge that we deduct daily from your net asset
value. EstatePlus is not available if you are age 81 or older at the time of
contract issue.
Each year, you are allowed to make 15 transfers without charge. After your first
15 free transfers, a $25 transfer fee ($10 in Pennsylvania and Texas) applies to
each subsequent transfer. There are no withdrawal charges under the contract.
In a limited number of states, you may also be assessed a state premium tax of
up to 3.5% depending upon the state.
The following chart is designed to help you understand the charges in your
contract. The column "Total Annual Charges" shows the total of the 1.52%
insurance charges and the investment charges for each variable portfolio.
The next two columns show two examples of the charges you would pay under the
contract. The examples assume that you invested $1,000 in a contract which earns
5% annually and that you withdraw your money: (1) at the end of year 1, and (2)
at the end of year 10. The premium tax is assumed to be 0% in both examples.
<PAGE> 6
<TABLE>
<CAPTION>
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EXAMPLES:
TOTAL ANNUAL TOTAL ANNUAL TOTAL EXPENSES TOTAL EXPENSES
INSURANCE INVESTMENT TOTAL ANNUAL AT END OF AT END OF
ANCHOR SERIES TRUST PORTFOLIO CHARGES CHARGES CHARGES 1 YEAR 10 YEARS
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<S> <C> <C> <C> <C> <C>
Capital Appreciation(1) 1.52% 0.74% 2.26% $ 23 $256
Government and Quality Bond 1.52% 0.66% 2.18% $ 22 $248
Growth 1.52% 0.73% 2.25% $ 23 $255
Natural Resources 1.52% 1.00% 2.52% $ 25 $282
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SUNAMERICA SERIES TRUST PORTFOLIO
Aggressive Growth 1.52% 0.75% 2.27% $ 23 $257
Alliance Growth 1.52% 0.63% 2.15% $ 22 $245
Asset Allocation 1.52% 0.63% 2.15% $ 22 $245
Blue Chip Growth(2,3) 1.52% 0.85% 2.37% $ 24 $267
Cash Management(4) 1.52% 0.53% 2.05% $ 21 $234
Corporate Bond 1.52% 0.71% 2.23% $ 22 $253
Davis Venture Value 1.52% 0.74% 2.26% $ 23 $256
"Dogs" of Wall Street(3) 1.52% 0.67% 2.19% $ 22 $249
Federated Value 1.52% 0.77% 2.29% $ 23 $259
Global Bond 1.52% 0.84% 2.36% $ 24 $266
Global Equities 1.52% 0.84% 2.36% $ 24 $266
Goldman Sachs Research(2,3) 1.52% 1.35% 2.87% $ 29 $316
Growth-Income 1.52% 0.56% 2.08% $ 21 $238
Growth Opportunities(2,3) 1.52% 1.00% 2.52% $ 25 $282
High-Yield Bond 1.52% 0.67% 2.19% $ 22 $249
International Diversified Equities 1.52% 1.22% 2.74% $ 27 $304
International Growth & Income 1.52% 1.21% 2.73% $ 27 $303
MFS Growth & Income 1.52% 0.75% 2.27% $ 23 $257
MFS Mid-Cap Growth(3) 1.52% 1.15% 2.67% $ 27 $297
Putnam Growth 1.52% 0.80% 2.32% $ 23 $262
SunAmerica Balanced 1.52% 0.66% 2.18% $ 22 $248
Technology(2,3) 1.52% 1.55% 3.07% $ 31 $335
Telecom Utility(5) 1.52% 0.84% 2.36% $ 24 $266
Worldwide High Income 1.52% 1.12% 2.64% $ 26 $294
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</TABLE>
(1) The Total Annual Investment Charge noted here is restated to reflect an
estimate of the fees for the portfolio for the current fiscal year. This
fee increase became effective August 1, 2000 following approval by the
Board of Directors of the Trust and the shareholders.
(2) This portfolio was not available for sale during fiscal year 2000. The
Total Annual Investment Charges are based on estimated amounts for the
current fiscal year.
(3) For this portfolio, the adviser, SunAmerica Asset Management Corp., has
voluntarily agreed to waive fees or reimburse expenses, if necessary, to
keep operating expenses at or below established maximum amounts. All
waivers or reimbursements may be terminated at any time. Only certain
portfolios relied on these waivers and or reimbursements during this fiscal
year as follows: MFS Mid-Cap Growth (1.17%). Absent recoupment of expenses
by the adviser, the Total Annual Expenses during the last fiscal year for
the "Dogs" of Wall Street Portfolio would have been 0.67%. For the "Dogs"
of Wall Street portfolio for fiscal year ended January 31, 2000, the
adviser recouped prior year expense reimbursements that were mathematically
insignificant, resulting in the expense ratio before and after the
recoupment remaining at .67%.
(4) Formerly managed by SunAmerica Asset Management Corp.
(5) Formerly named Utility Portfolio. The name change will not result in any
modifications to the portfolio's principal investment goal or fundamental
investment policies.
<PAGE> 7
If you elect the EstatePlus benefit [0.25%]:
<TABLE>
<CAPTION>
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EXAMPLES:
TOTAL ANNUAL TOTAL EXPENSES TOTAL EXPENSES
TOTAL ANNUAL INVESTMENT TOTAL ANNUAL AT END OF AT END OF
ANCHOR SERIES TRUST PORTFOLIO INSURANCE CHARGES CHARGES CHARGES 1 YEAR 10 YEARS
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<S> <C> <C> <C> <C> <C>
Capital Appreciation(1) 1.77(1.52% + 0.25%) 0.74% 2.51% $ $
Government and Quality Bond 1.77(1.52% + 0.25%) 0.66% 2.43% $ $
Growth 1.77(1.52% + 0.25%) 0.73% 2.50% $ $
Natural Resources 1.77(1.52% + 0.25%) 1.00% 2.77% $ $
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SUNAMERICA SERIES TRUST PORTFOLIO
Aggressive Growth 1.77 (1.52% + 0.25%) 0.75% 2.52% $ $
Alliance Growth 1.77 (1.52% + 0.25%) 0.63% 2.40% $ $
Asset Allocation 1.77 (1.52% + 0.25%) 0.63% 2.40% $ $
Blue Chip Growth(2,3) 1.77 (1.52% + 0.25%) 0.85% 2.62% $ $
Cash Management(4) 1.77 (1.52% + 0.25%) 0.53% 2.30% $ $
Corporate Bond 1.77 (1.52% + 0.25%) 0.71% 2.48% $ $
Davis Venture Value 1.77 (1.52% + 0.25%) 0.74% 2.51% $ $
"Dogs" of Wall Street(3) 1.77 (1.52% + 0.25%) 0.67% 2.44% $ $
Federated Value 1.77 (1.52% + 0.25%) 0.77% 2.54% $ $
Global Bond 1.77 (1.52% + 0.25%) 0.84% 2.61% $ $
Global Equities 1.77 (1.52% + 0.25%) 0.84% 2.61% $ $
Goldman Sachs Research(2,3) 1.77 (1.52% + 0.25%) 1.35% 3.12% $ $
Growth-Income 1.77 (1.52% + 0.25%) 0.56% 2.33% $ $
Growth Opportunities(2,3) 1.77 (1.52% + 0.25%) 1.00% 2.77% $ $
High-Yield Bond 1.77 (1.52% + 0.25%) 0.67% 2.44% $ $
International Diversified
Equities 1.77 (1.52% + 0.25%) 1.22% 2.99% $ $
International Growth & Income 1.77 (1.52% + 0.25%) 1.21% 2.98% $ $
MFS Growth & Income 1.77 (1.52% + 0.25%) 0.75% 2.52% $ $
MFS Mid-Cap Growth(3) 1.77 (1.52% + 0.25%) 1.15% 2.92% $ $
Putnam Growth 1.77 (1.52% + 0.25%) 0.80% 2.57% $ $
SunAmerica Balanced 1.77 (1.52% + 0.25%) 0.66% 2.43% $ $
Technology(2,3) 1.77 (1.52% + 0.25%) 1.55% 3.32% $ $
Telecom Utility(5) 1.77 (1.52% + 0.25%) 0.84% 2.61% $ $
Worldwide High Income 1.77 (1.52% + 0.25%) 1.12% 2.89% $ $
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</TABLE>
(1) The Total Annual Investment Charge noted here is restated to reflect an
estimate of the fees for the portfolio for the current fiscal year. This fee
increase became effective August 1, 2000 following approval by the Board of
Directors of the Trust and the shareholders.
(2) This portfolio was not available for sale during fiscal year 2000. The Total
Annual Investment Charges are based on estimated amounts for the current
fiscal year.
(3) For this portfolio, the adviser, SunAmerica Asset Management Corp., has
voluntarily agreed to waive fees or reimburse expenses, if necessary, to
keep operating expenses at or below established maximum amounts. All waivers
or reimbursements may be terminated at any time. Only certain portfolios
relied on these waivers and or reimbursements during this fiscal year as
follows: MFS Mid-Cap Growth (1.17%). Absent recoupment of expenses by the
adviser, the Total Annual Expenses during the last fiscal year for the
"Dogs" of Wall Street Portfolio would have been 0.67%. For the "Dogs" of
Wall Street portfolio for fiscal year ended January 31, 2000, the adviser
recouped prior year expense reimbursements that were mathematically
insignificant, resulting in the expense ratio before and after the
recoupment remaining at .67%.
(4) Formerly managed by SunAmerica Asset Management Corp.
(5) Formerly named Utility Portfolio. The name change will not result in any
modifications to the portfolio's principal investment goal or fundamental
investment policies.
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6. TAXES
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Unlike taxable investments where earnings are taxed in the year they are earned,
taxes on amounts earned in a non-qualified contract are deferred until they are
withdrawn. In a qualified contract, all amounts are taxable when they are
withdrawn.
When you begin taking distributions or withdrawals from your contract, earnings
are considered to be taken out first and will be taxed at your ordinary income
rate. You may be subject to a 10% federal tax penalty for distributions or
withdrawals before age 59 1/2.
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7. WITHDRAWALS
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You may take withdrawals from your contract at any time in the amount of $1,000
or more. Withdrawal requests must be in writing. You may also establish
systematic withdrawals in a minimum amount of $250. There are no withdrawal
charges under the contract.
<PAGE> 8
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8. PERFORMANCE
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When you invest in the Anchor Advisor Variable Annuity, your money is actually
invested in the underlying portfolios of the Anchor Series Trust and/or the
SunAmerica Series Trust. The value of your annuity will fluctuate depending upon
the investment performance of the portfolio(s) you choose.
The following chart shows total returns for each portfolio for the time periods
shown. These numbers reflect the insurance charges, the contract maintenance fee
and the investment charges. Past performance is no guarantee of future results.
<TABLE>
<CAPTION>
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ANCHOR SERIES CALENDAR YEAR
TRUST PORTFOLIO 1997 1998 1999 2000
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<S> <C> <C> <C> <C>
Capital Appreciation 23.56 % 20.36 % 65.37 % [TO BE
Government and Quality Bond 7.90 % 7.47 % -3.10 % UP-
Growth 28.43 % 27.00 % 25.02 % DATED
Natural Resources -9.94 % -18.61 % 39.46 % BY
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SUNAMERICA SERIES AMEND-
TRUST PORTFOLIO MENT]
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Aggressive Growth 10.64 % 15.67 % 81.90 %
Alliance Growth 29.46 % 49.89 % 31.09 %
Asset Allocation 19.98 % 1.74 % 7.83 %
Blue Chip Growth -- -- --
Cash Management 3.58 % 3.51 % 3.20 %
Corporate Bond 9.24 % 4.38 % -3.31 %
Davis Venture Value 32.25 % 12.02 % 14.37 %
"Dogs" of Wall Street -- -- -8.49 %
Federated Value 29.46 % 16.13 % 4.62 %
Global Bond 8.41 % 9.14 % -2.48 %
Global Equities 13.33 % 20.97 % 28.96 %
Goldman Sachs Research -- -- --
Growth-Income 31.90 % 28.80 % 28.08 %
Growth Opportunities -- -- --
High-Yield Bond 12.74 % -4.43 % 4.92 %
International Diversified
Equities 4.80 % 16.70 % 22.68 %
International Growth &
Income+ -- 9.13 % 22.37 %
MFS Growth & Income 21.35 % 27.33 % 4.36 %
MFS Mid-Cap Growth+ -- -- --
Putnam Growth 30.49 % 32.69 % 27.76 %
SunAmerica Balanced 22.60 % 22.76 % 19.56 %
Technology -- -- --
Telecom Utility 23.87 % 12.32 % 0.25 %
Worldwide High -
Income 13.81 % 18.33 % 17.48 %
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</TABLE>
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9. DEATH BENEFIT
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If you should die during the accumulation phase, your beneficiary will receive a
death benefit. You must select from the two death benefit options described
below at the time you purchase your contract. Once selected, your death benefit
may not be changed. You should discuss with your financial advisor the options
available to you and which option is best for you.
OPTION 1 - PURCHASE PAYMENT ACCUMULATION OPTION:
The death benefit is the greater of:
(1) the value of your contract at the time we receive satisfactory proof of
death; or
(2) total purchase payments less withdrawals (and any fees or charges applicable
to such withdrawals), compounded at a 4% annual growth rate until the date
of death (3% growth rate if 70 or older at the time of contract issue) plus
any purchase payments less withdrawals recorded after the date of death (and
any fees or charges applicable to such withdrawals; or
(3) the contract value on the seventh contract anniversary, plus any purchase
payments since the seventh anniversary and less any withdrawals (and any
fees or charges applicable to such withdrawals), all compounded at a 4%
annual growth rate until the date of death (3% if 70 or older at the time of
contract issue) plus any purchase payments less withdrawals recorded after
the date of death (and any fees or charges applicable to such withdrawals).
OPTION 2 - MAXIMUM ANNIVERSARY OPTION:
The death benefit is the greater of:
(1) the contract value at the time we receive satisfactory proof of death; or
(2) total purchase payments less any withdrawals (and any fees or charges
applicable to such withdrawals); or
(3) the maximum anniversary value on any contract anniversary prior to your 81st
birthday. The anniversary value equals the value of your contract on a
contract anniversary plus any purchase payments and less any withdrawals
(and any fees or charges applicable to such withdrawals) since that
anniversary.
If you are age 90 or older at the time of death and selected the option 2
(Maximum Anniversary) death benefit, the death benefit will be equal to the
contract value at the time we receive satisfactory proof of death.
In addition, for a fee you may elect the EstatePlus benefit, which can increase
your selected death benefit when payable. This feature is not available if you
are age 81 or older at the time of contract issue.
EstatePlus may not be available in your state or through the broker-dealer with
which your financial advisor is affiliated. See your financial advisor for
information on availability.
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10. OTHER INFORMATION
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FREE LOOK: You may cancel your contract within ten days (or longer if required
by your state) by mailing it to our Annuity Service Center. Your contract will
be treated as void on the date we receive it and we will pay you an amount equal
to the value of your contract (unless otherwise required by state law). Its
value may be more or less than the money you initially invested.
ASSET ALLOCATION REBALANCING: If selected by you, this program seeks to keep
your investment in line with your goals. We will maintain your specified
allocation mix in the variable portfolios and the 1-year fixed account option by
readjusting your money on a calendar quarter, semiannual or annual basis.
SYSTEMATIC WITHDRAWAL PROGRAM: If selected by you, this program allows you to
receive either monthly, quarterly, semiannual or annual checks during the
accumulation phase. Systematic withdrawals may also be electronically
transferred to your bank account. Of course, withdrawals may be taxable and a
10% federal tax penalty may apply if you are under age 59 1/2.
DOLLAR COST AVERAGING: If selected by you, this program allows you to invest
gradually in the variable portfolios from any of the variable portfolios, the
1-year fixed account option or the 1-year DCA fixed account option.
<PAGE> 9
AUTOMATIC PAYMENT PLAN: You can add to your contract directly from your bank
account with as little as $20 per month.
CONFIRMATIONS AND QUARTERLY STATEMENTS: You will receive a confirmation of each
transaction within your contract. Transactions made pursuant to contractual or
systematic agreements, such as deduction of the annual maintenance fee and
dollar cost averaging may be confirmed quarterly. Purchase payments received
through the automatic payment plan or salary reduction arrangement, may also be
confirmed quarterly. For all other transactions, we send confirmations
immediately. On a quarterly basis, you will receive a complete statement of your
transactions over the past quarter and a summary of your account values.
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11. INQUIRIES
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If you have questions about your contract or need to make changes, call your
financial representative or contact us at:
Anchor National Life Insurance Company
Annuity Service Center
P.O. Box 54299
Los Angeles, California 90054-0299
Telephone Number: (800) 445-SUN2
If money accompanies your correspondence, you should direct it to:
Anchor National Life Insurance Company
P.O. Box 100330
Pasadena, California 91189-0001
<PAGE> 10
[ANCHOR ADVISOR LOGO]
PROSPECTUS
MARCH 19, 2001
<TABLE>
<S> <C> <C>
Please read this prospectus carefully FLEXIBLE PAYMENT DEFERRED ANNUITY CONTRACTS
before investing and keep it for issued by
future reference. It contains ANCHOR NATIONAL LIFE INSURANCE COMPANY
important information about the in connection with
Anchor Advisor Variable Annuity. VARIABLE ANNUITY ACCOUNT FOUR
The annuity has 30 investment choices -- a one-year fixed
To learn more about the annuity account option, a one-year DCA fixed account option and the
offered by this prospectus, you can 28 Variable Portfolios listed below. The 28 Variable
obtain a copy of the Statement of Portfolios are part of the Anchor Series Trust ("AST") or
Additional Information ("SAI") dated the SunAmerica Series Trust ("SST").
March 19, 2001. The SAI has been
filed with the Securities and STOCKS:
Exchange Commission ("SEC") and is MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
incorporated by reference into this - Alliance Growth Portfolio SST
prospectus. The Table of Contents of - Global Equities Portfolio SST
the SAI appears on page 18 of this - Growth & Income Portfolio SST
prospectus. For a free copy of the MANAGED BY DAVIS SELECTED ADVISERS L.P.
SAI, call us at (800) 445-SUN2 or - Davis Venture Value Portfolio SST
write to us at our Annuity Service MANAGED BY FEDERATED INVESTORS L.P.
Center, P.O. Box 54299, Los Angeles, - Federated Value Portfolio SST
California 90054-0299. - Telecom Utility SST
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
In addition, the SEC maintains a - Goldman Sachs Research Portfolio SST
website (http://www.sec.gov) that MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
contains the SAI, materials - MFS Growth & Income Portfolio SST
incorporated by reference and other - MFS Mid Cap Growth Portfolio SST
information filed electronically with MANAGED BY MORGAN STANLEY ASSET MANAGEMENT
the SEC by Anchor National. - International Diversified Equities Portfolio SST
- Technology Portfolio SST
ANNUITIES INVOLVE RISKS, INCLUDING MANAGED BY PUTNAM INVESTMENT MANAGEMENT COMPANY INC.
POSSIBLE LOSS OF PRINCIPAL, AND ARE - International Growth & Income Portfolio SST
NOT A DEPOSIT OR OBLIGATION OF, OR - Putnam Growth Portfolio SST
GUARANTEED OR ENDORSED BY, ANY BANK. MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION
THEY ARE NOT FEDERALLY INSURED BY THE - Aggressive Growth Portfolio SST
FEDERAL DEPOSIT INSURANCE - Blue Chip Growth Portfolio SST
CORPORATION, THE FEDERAL RESERVE - "Dogs" of Wall Street Portfolio SST
BOARD OR ANY OTHER AGENCY. - Growth Opportunities Portfolio SST
MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP
- Capital Appreciation Portfolio AST
- Growth Portfolio AST
- Natural Resources Portfolio AST
BALANCED:
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
- Asset Allocation Portfolio SST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION
- SunAmerica Balanced Portfolio SST
BONDS:
MANAGED BY FEDERATED INVESTORS L.P.
- Corporate Bond Portfolio SST
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
- Global Bond Portfolio SST
MANAGED BY MORGAN STANLEY ASSET MANAGEMENT
- Worldwide High Income Portfolio SST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION
- High-Yield Bond Portfolio SST
MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP
- Government & Quality Portfolio AST
CASH:
MANAGED BY BANC OF AMERICA CAPITAL MANAGEMENT, INC.
- Cash Management Portfolio SST
</TABLE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE> 11
<TABLE>
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TABLE OF CONTENTS
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<S> <C>
GLOSSARY.................................................... 2
FEE TABLES.................................................. 3
Owner Transaction Expenses............................ 3
Annual Separate Account Expenses...................... 3
Optional EstatePlus Fee............................... 3
Portfolio Expenses.................................... 3
EXAMPLES.................................................... 4
THE ANCHOR ADVISOR VARIABLE ANNUITY......................... 6
PURCHASING AN ANCHOR ADVISOR VARIABLE
ANNUITY................................................... 6
Allocation of Purchase Payments....................... 7
Accumulation Units.................................... 7
Joint Ownership....................................... 7
Free Look............................................. 7
INVESTMENT OPTIONS.......................................... 7
Variable Portfolios................................... 7
Anchor Series Trust................................... 8
SunAmerica Series Trust............................... 8
Fixed Account Options................................. 8
Transfers During the Accumulation Phase............... 8
Dollar Cost Averaging................................. 9
Asset Allocation Rebalancing.......................... 10
Voting Rights......................................... 10
Substitution.......................................... 10
WITHDRAWAL.................................................. 10
Systematic Withdrawal Program......................... 11
Minimum Contract Value................................ 11
DEATH BENEFIT............................................... 11
Option 1 - Purchase Payment Accumulation Option....... 11
Option 2 - Maximum Anniversary Option................. 11
EstatePlus............................................ 12
Spousal Continuation.................................. 13
EXPENSES.................................................... 13
Insurance Charges..................................... 13
Investment Charges.................................... 13
Transfer Fee.......................................... 13
Optional EstatePlus Fee............................... 13
Premium Tax........................................... 13
Income Taxes.......................................... 13
Reduction or Elimination of Charges and Expenses, and
Additional Amounts Credited........................... 13
INCOME OPTIONS.............................................. 14
Annuity Date.......................................... 14
Income Options........................................ 14
Fixed or Variable Income Payments..................... 14
Income Payments....................................... 15
Transfers During the Income Phase..................... 15
Deferment of Payments................................. 15
TAXES....................................................... 15
Annuity Contracts in General.......................... 15
Tax Treatment of Distributions -
Non-Qualified Contracts............................... 15
Tax Treatment of Distributions -
Qualified Contracts................................... 15
Minimum Distributions................................. 16
Diversification....................................... 16
PERFORMANCE................................................. 16
OTHER INFORMATION........................................... 17
Anchor National....................................... 17
The Separate Account.................................. 17
The General Account................................... 17
Distribution of the Contract.......................... 17
Administration........................................ 17
Legal Proceedings..................................... 17
Ownership............................................. 17
Custodian............................................. 18
Additional Information................................ 18
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION....
18
APPENDIX A -- CONDENSED FINANCIAL INFORMATION............... A-1
APPENDIX B -- PREMIUM TAXES................................. B-1
APPENDIX C -- DEATH BENEFITS FOLLOWING SPOUSAL
CONTINUATION.............................................. C-1
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GLOSSARY
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We have capitalized some of the technical terms used in this
prospectus. To help you understand these terms, we have defined
them in this glossary.
ACCUMULATION PHASE - The period during which you invest money in
your contract.
ACCUMULATION UNITS - A measurement we use to calculate the value
of the variable portion of your contract during the Accumulation
Phase.
ANNUITANT(S) - The person(s) on whose life (lives) we base income
payments.
ANNUITY DATE - The date on which income payments are to begin, as
selected by you.
ANNUITY UNITS - A measurement we use to calculate the amount of
income payments you receive from the variable portion of your
contract during the Income Phase.
BENEFICIARY - The person designated to receive any benefits under
the contract if you or the Annuitant dies.
COMPANY - Anchor National Life Insurance Company, We, Us, the
insurer which issues this contract.
INCOME PHASE - The period during which we make income payments to
you.
IRS - The Internal Revenue Service.
NON-QUALIFIED (CONTRACT) - A contract purchased with after-tax
dollars. In general, these contracts are not under any pension
plan, specially sponsored program or individual retirement account
("IRA").
PURCHASE PAYMENTS - The money you give us to buy the contract, as
well as any additional money you give us to invest in the contract
after you own it.
QUALIFIED (CONTRACT) - A contract purchased with pretax dollars.
These contracts are generally purchased under a pension plan,
specially sponsored program or IRA.
TRUSTS - Refers to the Anchor Series Trust and the SunAmerica
Series Trust collectively.
VARIABLE PORTFOLIO(S) - The variable investment options available
under the contract. Each Variable Portfolio has its own investment
objective and is invested in the underlying investments of the
Anchor Series Trust or the SunAmerica Series Trust.
</TABLE>
2
<PAGE> 12
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FEE TABLES
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OWNER TRANSACTION EXPENSES
<TABLE>
<S> <C> <C> <C>
WITHDRAWAL CHARGE................ None
CONTRACT MAINTENANCE CHARGE...... None
TRANSFER FEE..................... No charge for first 15 transfers
each contract year; thereafter,
fee is $25 ($10 in Pennsylvania
and Texas) per transfer
</TABLE>
ANNUAL SEPARATE ACCOUNT EXPENSES
(AS A PERCENTAGE OF AVERAGE ACCOUNT VALUE)
<TABLE>
<S> <C>
Mortality and Expense Risk Charge................... 1.37%
Distribution Expense Charge......................... 0.15%
-----
TOTAL SEPARATE ACCOUNT EXPENSES 1.52%
=====
</TABLE>
OPTIONAL ESTATEPLUS FEE
(ESTATEPLUS, AN ENHANCED DEATH BENEFIT FEATURE, IS OPTIONAL AND IF ELECTED, THE
FEE IS AN ANNUALIZED CHARGE THAT IS DEDUCTED DAILY.)
<TABLE>
<S> <C>
Fee as a percentage of your daily net asset
value........................................... [0.25%]
</TABLE>
PORTFOLIO EXPENSES
ANCHOR SERIES TRUST
(AS A PERCENTAGE OF AVERAGE NET ASSETS FOR THE TRUST'S FISCAL YEAR ENDED
DECEMBER 31, 1999)
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEE EXPENSES EXPENSES
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital Appreciation(1) 0.70% 0.04% 0.74%
-----------------------------------------------------------------------------------------------------------
Government and Quality Bond 0.60% 0.06% 0.66%
-----------------------------------------------------------------------------------------------------------
Growth 0.68% 0.05% 0.73%
-----------------------------------------------------------------------------------------------------------
Natural Resources 0.75% 0.25% 1.00%
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
</TABLE>
(1) The expenses noted here are restated to reflect an estimate of the fees
for the portfolio for the current fiscal year. This fee increase became
effective on August 1, 2000 following approval by the Board of Directors
of the Trust and shareholders.
SUNAMERICA SERIES TRUST
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER REIMBURSEMENT OR WAIVER OF EXPENSES
FOR THE TRUST'S FISCAL YEAR ENDED
JANUARY 31, 2000)
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEE EXPENSES EXPENSES
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aggressive Growth 0.70% 0.05% 0.75%
-----------------------------------------------------------------------------------------------------------
Alliance Growth 0.60% 0.03% 0.63%
-----------------------------------------------------------------------------------------------------------
Asset Allocation 0.58% 0.05% 0.63%
-----------------------------------------------------------------------------------------------------------
Blue Chip Growth(1,2) 0.70% 0.15% 0.85%
-----------------------------------------------------------------------------------------------------------
Cash Management(3) 0.49% 0.04% 0.53%
-----------------------------------------------------------------------------------------------------------
Corporate Bond 0.62% 0.09% 0.71%
-----------------------------------------------------------------------------------------------------------
Davis Venture Value 0.71% 0.03% 0.74%
-----------------------------------------------------------------------------------------------------------
"Dogs" of Wall Street(1) 0.60% 0.07% 0.67%
-----------------------------------------------------------------------------------------------------------
Federated Value 0.71% 0.06% 0.77%
-----------------------------------------------------------------------------------------------------------
Global Bond 0.69% 0.15% 0.84%
-----------------------------------------------------------------------------------------------------------
Global Equities 0.72% 0.12% 0.84%
-----------------------------------------------------------------------------------------------------------
Goldman Sachs Research(1,2) 1.20% 0.15% 1.35%
-----------------------------------------------------------------------------------------------------------
Growth-Income 0.53% 0.03% 0.56%
-----------------------------------------------------------------------------------------------------------
Growth Opportunities(1,2) 0.75% 0.25% 1.00%
-----------------------------------------------------------------------------------------------------------
High-Yield Bond 0.62% 0.05% 0.67%
-----------------------------------------------------------------------------------------------------------
International Diversified Equities 1.00% 0.22% 1.22%
-----------------------------------------------------------------------------------------------------------
International Growth & Income 0.98% 0.23% 1.21%
-----------------------------------------------------------------------------------------------------------
MFS Growth & Income 0.70% 0.05% 0.75%
-----------------------------------------------------------------------------------------------------------
MFS Mid-Cap Growth(1) 0.75% 0.40% 1.15%
-----------------------------------------------------------------------------------------------------------
Putnam Growth 0.76% 0.04% 0.80%
-----------------------------------------------------------------------------------------------------------
Technology(1,2) 1.20% 0.35% 1.55%
-----------------------------------------------------------------------------------------------------------
Telecom Utility(4) 0.75% 0.09% 0.84%
-----------------------------------------------------------------------------------------------------------
SunAmerica Balanced 0.62% 0.04% 0.66%
-----------------------------------------------------------------------------------------------------------
Worldwide High Income 1.00% 0.12% 1.12%
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
</TABLE>
(1) For this portfolio, the adviser, SunAmerica Asset Management Corp., has
voluntarily agreed to waive fees or reimburse expenses, if necessary, to
keep operating expenses at or below established maximum amounts. All
waivers or reimbursements may be terminated at any time. Only certain
portfolios relied on these during this fiscal year as follows: MFS
Mid-Cap Growth (1.17%). Absent recoupment of expenses by the adviser,
the Total Annual Expenses during the last fiscal year for the "Dogs" of
Wall Street Portfolio would have been 0.67%. For the "Dogs" of Wall
Street portfolio for fiscal year ended January 31, 2000, the adviser
recouped prior year expense reimbursements that were mathematically
insignificant, resulting in the expense ratio before and after the
recoupment remaining at .67%.
(2) This portfolio was not available for sale during fiscal year 2000. The
percentages are based on estimated amounts for the current fiscal year.
(3) Formerly managed by SunAmerica Asset Management Corp.
(4) Formerly named Utility Portfolio. The name change will not result in any
modifications to the portfolio's principal investment goal or
fundamental investment policies.
THE ABOVE PORTFOLIO EXPENSES WERE PROVIDED BY THE TRUSTS. WE HAVE NOT
INDEPENDENTLY VERIFIED THE ACCURACY OF THE INFORMATION.
3
<PAGE> 13
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EXAMPLES
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You will pay the following expenses on a $1,000 investment in each Variable
Portfolio, assuming a 5% annual return on assets, Portfolio Expenses after
waiver, reimbursement or recoupment, if applicable and:
(a)you surrender the contract at the end of the stated time period.
(b)you elect the optional EstatePlus benefit and you surrender the
contract at the end of the stated period.
(c)you do not surrender the contract.*
(d)you elect the optional EstatePlus benefit and you do not surrender
the contract.
<TABLE>
<CAPTION>
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Appreciation (a) $23 (a) $70 (a) $119 (a) $256
(b) (b) (b) (b)
(c) $23 (c) $70 (c) $119 (c) $256
(d) (d) (d) (d)
---------------------------------------------------------------------------------------------------------
Government and Quality Bond (a) $22 (a) $67 (a) $115 (a) $248
(b) (b) (b) (b)
(c) $22 (c) $67 (c) $115 (c) $248
(d) (d) (d) (d)
---------------------------------------------------------------------------------------------------------
Growth (a) $23 (a) $69 (a) $119 (a) $255
(b) (b) (b) (b)
(c) $23 (c) $69 (c) $119 (c) $255
(d) (d) (d) (d)
---------------------------------------------------------------------------------------------------------
Natural Resources (a) $25 (a) $77 (a) $132 (a) $282
(b) (b) (b) (b)
(c) $25 (c) $77 (c) $132 (c) $282
(d) (d) (d) (d)
---------------------------------------------------------------------------------------------------------
Aggressive Growth (a) $23 (a) $70 (a) $120 (a) $257
(b) (b) (b) (b)
(c) $23 (c) $70 (c) $120 (c) $257
(d) (d) (d) (d)
---------------------------------------------------------------------------------------------------------
Alliance Growth (a) $22 (a) $66 (a) $114 (a) $245
(b) (b) (b) (b)
(c) $22 (c) $66 (c) $114 (c) $245
(d) (d) (d) (d)
---------------------------------------------------------------------------------------------------------
Asset Allocation (a) $22 (a) $66 (a) $114 (a) $245
(b) (b) (b) (b)
(c) $22 (c) $66 (c) $114 (c) $245
(d) (d) (d) (d)
---------------------------------------------------------------------------------------------------------
Blue Chip Growth (a) $24 (a) $73 (a) $125 (a) $267
(b) (b) (b) (b)
(c) $24 (c) $73 (c) $125 (c) $267
(d) (d) (d) (d)
---------------------------------------------------------------------------------------------------------
Cash Management (a) $21 (a) $63 (a) $109 (a) $234
(b) (b) (b) (b)
(c) $21 (c) $63 (c) $109 (c) $234
(d) (d) (d) (d)
---------------------------------------------------------------------------------------------------------
Corporate Bond (a) $22 (a) $69 (a) $118 (a) $253
(b) (b) (b) (b)
(c) $22 (c) $69 (c) $118 (c) $253
(d) (d) (d) (d)
---------------------------------------------------------------------------------------------------------
Davis Venture Value (a) $23 (a) $70 (a) $119 (a) $256
(b) (b) (b) (b)
(c) $23 (c) $70 (c) $119 (c) $256
(d) (d) (d) (d)
---------------------------------------------------------------------------------------------------------
"Dogs" of Wall Street (a) $22 (a) $68 (a) $116 (a) $249
(b) (b) (b) (b)
(c) $22 (c) $68 (c) $116 (c) $249
(d) (d) (d) (d)
---------------------------------------------------------------------------------------------------------
Federated Value (a) $23 (a) $71 (a) $121 (a) $259
(b) (b) (b) (b)
(c) $23 (c) $71 (c) $121 (c) $259
(d) (d) (d) (d)
---------------------------------------------------------------------------------------------------------
Global Bond (a) $24 (a) $73 (a) $124 (a) $266
(b) (b) (b) (b)
(c) $24 (c) $73 (c) $124 (c) $266
(d) (d) (d) (d)
---------------------------------------------------------------------------------------------------------
Global Equities (a) $24 (a) $73 (a) $124 (a) $266
(b) (b) (b) (b)
(c) $24 (c) $73 (c) $124 (c) $266
(d) (d) (d) (d)
---------------------------------------------------------------------------------------------------------
Goldman Sachs Research (a) $29 (a) $88 (a) $150 (a) $316
(b) (b) (b) (b)
(c) $29 (c) $88 (c) $150 (c) $316
(d) (d) (d) (d)
---------------------------------------------------------------------------------------------------------
Growth-Income (a) $21 (a) $64 (a) $110 (a) $238
(b) (b) (b) (b)
(c) $21 (c) $64 (c) $110 (c) $238
(d) (d) (d) (d)
---------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 14
<TABLE>
<CAPTION>
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Growth Opportunities (a) $25 (a) $77 (a) $132 (a) $282
(b) (b) (b) (b)
(c) $25 (c) $77 (c) $132 (c) $282
(d) (d) (d) (d)
---------------------------------------------------------------------------------------------------------
High-Yield Bond (a) $22 (a) $68 (a) $116 (a) $249
(b) (b) (b) (b)
(c) $22 (c) $68 (c) $116 (c) $249
(d) (d) (d) (d)
---------------------------------------------------------------------------------------------------------
International Diversified Equities (a) $27 (a) $84 (a) $143 (a) $304
(b) (b) (b) (b)
(c) $27 (c) $84 (c) $143 (c) $304
(d) (d) (d) (d)
---------------------------------------------------------------------------------------------------------
International Growth Income (a) $27 (a) $84 (a) $143 (a) $303
(b) (b) (b) (b)
(c) $27 (c) $84 (c) $143 (c) $303
(d) (d) (d) (d)
---------------------------------------------------------------------------------------------------------
MFS Growth & Income (a) $23 (a) $70 (a) $120 (a) $257
(b) (b) (b) (b)
(c) $23 (c) $70 (c) $120 (c) $257
(d) (d) (d) (d)
---------------------------------------------------------------------------------------------------------
MFS Mid-Cap Growth (a) $27 (a) $82 (a) $140 (a) $297
(b) (b) (b) (b)
(c) $23 (c) $70 (c) $120 (c) $257
(d) (d) (d) (d)
---------------------------------------------------------------------------------------------------------
Putnam Growth (a) $23 (a) $71 (a) $122 (a) $262
(b) (b) (b) (b)
(c) $23 (c) $71 (c) $122 (c) $262
(d) (d) (d) (d)
---------------------------------------------------------------------------------------------------------
SunAmerica Balanced (a) $22 (a) $67 (a) $115 (a) $248
(b) (b) (b) (b)
(c) $22 (c) $67 (c) $115 (c) $248
(d) (d) (d) (d)
---------------------------------------------------------------------------------------------------------
Technology (a) $31 (a) $94 (a) $160 (a) $335
(b) (b) (b) (b)
(c) $31 (c) $94 (c) $160 (c) $335
(d) (d) (d) (d)
---------------------------------------------------------------------------------------------------------
Telecom Utility (a) $24 (a) $73 (a) $124 (a) $266
(b) (b) (b) (b)
(c) $24 (c) $73 (c) $124 (c) $266
(d) (d) (d) (d)
---------------------------------------------------------------------------------------------------------
Worldwide High Income (a) $26 (a) $81 (a) $138 (a) $294
(b) (b) (b) (b)
(c) $26 (c) $81 (c) $138 (c) $294
(d) (d) (d) (d)
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
</TABLE>
* Anchor National does not impose any fees or charges when beginning the
Income Phase of your contract.
5
<PAGE> 15
EXPLANATION OF FEE TABLES AND EXAMPLES
1. The purpose of the Fee Tables is to show you the various expenses you would
incur directly and indirectly by investing in the contract. The tables
represent both fees at the separate account (contract level) as well as
portfolio company investment management expenses. Additional information on
the portfolio company fees can be found in the Trust prospectuses located
behind this prospectus.
2. For certain Variable Portfolios, the adviser, SunAmerica Asset Management
Corp., has voluntarily agreed to waive fees or reimburse certain expenses,
if necessary, to keep annual operating expenses at or below the lesser of
the maximum allowed by any applicable state expense limitations or the
following percentages of each Variable Portfolio's average net assets:
"Dogs" of Wall Street (.85%); MFS Mid-Cap Growth (1.15%); Growth
Opportunities (1.00%); Technology (1.55%); Goldman Sachs Research (1.35%)
and Blue Chip Growth (0.85%). The adviser also may voluntarily waive or
reimburse additional amounts to increase a Variable Portfolio's investment
return. All waivers and/or reimbursements may be terminated at any time.
Furthermore, the adviser may recoup any waivers or reimbursements within two
years after such waivers or reimbursements are granted, provided that the
Variable Portfolio is able to make such payment and remain in compliance
with the foregoing expense limitations.
3. The Examples assume that no transfer fees were imposed. Although premium
taxes may apply in certain states, they are not reflected in the Examples.
4. THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
THE HISTORICAL ACCUMULATION UNIT VALUES ARE CONTAINED IN
APPENDIX A -- CONDENSED FINANCIAL INFORMATION.
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THE ANCHOR ADVISOR VARIABLE ANNUITY
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----------------------------------------------------------------
An annuity is a contract between you and an insurance company. You are the owner
of the contract. The contract provides three main benefits:
- Tax Deferral: This means that you do not pay taxes on your earnings from
the annuity until you withdraw them.
- Death Benefit: If you die during the Accumulation Phase, the insurance
company pays a death benefit to your Beneficiary.
- Guaranteed Income: If elected, you receive a stream of income for your
lifetime, or another available period you select.
Tax-qualified retirement plans (e.g., IRAs, 401(k) or 403(b) plans) defer
payment of taxes on earnings until withdrawal. If you are considering funding a
tax-qualified retirement plan with an annuity, you should know that an annuity
does not provide any additional tax deferral treatment of earnings beyond the
treatment provided by the tax-qualified retirement plan itself. However,
annuities do provide other features and benefits which may be valuable to you.
You should fully discuss this decision with your financial representative.
This annuity was developed to help you contribute to your retirement savings.
This annuity works in two stages, the Accumulation Phase and the Income Phase.
Your contract is in the Accumulation Phase during the period when you make
payments into the contract. The Income Phase begins when you request us to start
making income payments to you out of the money accumulated in your contract.
The contract is called a "variable" annuity because it allows you to invest in
variable portfolios which, like mutual funds, have different investment
objectives and performance which varies. You can gain or lose money if you
invest in these Variable Portfolios. The amount of money you accumulate in your
contract depends on the performance of the Variable Portfolios in which you
invest. This contract currently offers 28 Variable Portfolios.
The contract also offers a one-year fixed account option and a one-year DCA
fixed account option. Fixed account options earn interest at a rate set and
guaranteed by Anchor National. If you allocate money to a fixed account option,
the amount of money that accumulates in the contract depends on the total
interest credited to the fixed account option.
For more information on investment options available under this contract SEE
INVESTMENT OPTIONS ON PAGE 7.
Anchor National Life Insurance Company (Anchor National, The Company, Us, We)
issues the Anchor Advisor Variable Annuity. When you purchase an Anchor Advisor
Variable Annuity, a contract exists between you and Anchor National. The Company
is a stock life insurance company organized under the laws of the state of
Arizona. Its principal place of business is 1 SunAmerica Center, Los Angeles,
California 90067. The Company conducts life insurance and annuity business in
the District of Columbia and all states except New York. Anchor National is an
indirect, wholly owned subsidiary of American International Group, a Delaware
corporation ("AIG").
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PURCHASING AN ANCHOR ADVISOR VARIABLE ANNUITY
----------------------------------------------------------------
----------------------------------------------------------------
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. The minimum initial and Purchase Payments is $10,000 and
subsequent amounts of $500 or more may be added to your contract. Prior Company
approval is required to accept
6
<PAGE> 16
Purchase Payments greater than $1,500,000. Also, the optional automatic payment
plan allows you to make subsequent Purchase Payments of as little as $100.00.
We may refuse any Purchase Payment. In general, we will not issue a Qualified
contract to anyone who is age 70 1/2 or older, unless it is shown that the
minimum distribution required by the IRS is being made. In addition we may not
issue a contract to anyone over age 90.
ALLOCATION OF PURCHASE PAYMENTS
We invest your Purchase Payments in the fixed and variable investment options
according to your instructions. If we receive a Purchase Payment without
allocation instructions, we will invest the money according to your last
allocation instructions. SEE INVESTMENT OPTIONS.
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, based on the AUV next
determined after receipt. The value of an Accumulation Unit goes up and down
based on the performance of the Variable Portfolios.
We calculate the value of an Accumulation Unit each day that the New York Stock
Exchange ("NYSE") is open as follows:
1. We determine the total value of money invested in a particular Variable
Portfolio;
2. We subtract from that amount all applicable contract charges; and
3. We divide this amount by the number of outstanding Accumulation Units.
We determine the number of Accumulation Units credited to your contract by
dividing the Purchase Payment 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 Global Bond Portfolio. We determine that the value of an
Accumulation Unit for the Global Bond Portfolio is $11.10 when the NYSE
closes on Wednesday. We then divide $25,000 by $11.10 and credit your
contract on Wednesday night with 2252.52 Accumulation Units for the Global
Bond Portfolio.
Performance of the Variable Portfolios and expenses under your contract affect
Accumulation Unit values. These factors cause the value of your contract to go
up and down.
JOINT OWNERSHIP
Joint ownership is permitted for spouses. Non-spousal joint owners may be
permitted in certain states.
FREE LOOK
You may cancel your contract within ten days after receiving it (or longer if
required by state law). We call this a "free look." To cancel, you must mail the
contract along with your free look request to our Annuity Service Center at P.O.
Box 54299, Los Angeles, California 90054-0299. We will refund to you 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.
Certain states require us to return your Purchase Payments upon a free look
request. Additionally, all contracts issued as an IRA require the full return of
Purchase Payments upon a free look. With respect to those contracts, we reserve
the right to put your money in the Cash Management Portfolio or the 1-year fixed
investment option during the free look period. If you cancel your contract
during the free look period, we return your Purchase Payment or the value of
your contract, whichever is larger. At the end of the free look period, we
allocate your money according to your instructions.
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INVESTMENT OPTIONS
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VARIABLE PORTFOLIOS
The contract currently offers 28 Variable Portfolios. These Variable Portfolios
invest in shares of the Anchor Series Trust and the SunAmerica Series Trust (the
"Trusts"). Additional Variable Portfolios may be available in the future. The
Variable Portfolios operate similar to a mutual fund but are only available
through the purchase of certain insurance contracts.
SunAmerica Asset Management Corp., an indirect wholly owned subsidiary of AIG,
is the investment adviser to the Trusts. The Trusts serve as the underlying
investment vehicles for other variable annuity contracts issued by Anchor
National, and other affiliated/unaffiliated insurance companies. Neither Anchor
National nor the Trusts believe that offering shares of the Trusts in this
manner disadvantages you. The adviser monitors the Trusts for potential
conflicts.
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<PAGE> 17
The 28 Variable Portfolios along with their respective subadvisers are listed
below:
ANCHOR SERIES TRUST
Wellington Management Company, LLP serves as subadviser to the Anchor Series
Trust Portfolios. Anchor Series Trust has Variable Portfolios in addition to
those listed below which are not available for investment under the contract.
SUNAMERICA SERIES TRUST
Various subadvisers provide investment advice for the SunAmerica Series Trust
Portfolios. SunAmerica Series Trust has Variable Portfolios in addition to those
listed below which are not available for investment under the contract.
STOCKS:
MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
- Alliance Growth Portfolio SST
- Global Equities Portfolio SST
- Growth & Income Portfolio SST
MANAGED BY DAVIS SELECTED ADVISERS L.P.
- Davis Venture Value Portfolio SST
MANAGED BY FEDERATED INVESTORS L.P.
- Federated Value Portfolio SST
- Telecom Utility SST
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
- Goldman Sachs Research Portfolio SST
MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
- MFS Growth & Income Portfolio SST
- MFS Mid Cap Growth Portfolio SST
MANAGED BY MORGAN STANLEY ASSET MANAGEMENT
- International Diversified Equities Portfolio SST
- Technology Portfolio SST
MANAGED BY PUTNAM INVESTMENT MANAGEMENT COMPANY INC.
- International Growth & Income Portfolio SST
- Putnam Growth Portfolio SST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION
- Aggressive Growth Portfolio SST
- Blue Chip Growth Portfolio SST
- "Dogs" of Wall Street Portfolio SST
- Growth Opportunities Portfolio SST
MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP
- Capital Appreciation Portfolio AST
- Growth Portfolio AST
- Natural Resources Portfolio AST
BALANCED:
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
- Asset Allocation Portfolio SST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION
- SunAmerica Balanced Portfolio SST
BONDS:
MANAGED BY FEDERATED INVESTORS L.P.
- Corporate Bond Portfolio SST
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
- Global Bond Portfolio SST
MANAGED BY MORGAN STANLEY ASSET MANAGEMENT
- Worldwide High Income Portfolio SST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION
- High-Yield Bond Portfolio SST
MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP
- Government & Quality Portfolio AST
CASH:
MANAGED BY BANC OF AMERICA CAPITAL MANAGEMENT, INC.
- Cash Management Portfolio SST
YOU SHOULD READ THE PROSPECTUSES FOR THE TRUSTS ATTACHED HERETO CAREFULLY. THESE
PROSPECTUSES CONTAIN DETAILED INFORMATION ABOUT THE PORTFOLIOS, INCLUDING EACH
VARIABLE PORTFOLIO'S INVESTMENT OBJECTIVE AND RISK FACTORS.
FIXED ACCOUNT OPTIONS
The contract also offers a one-year fixed account option and a one-year DCA
fixed account option. The one-year DCA account provides a fixed interest rate
when participating in the DCA program.
The fixed account options pay interest at a rate set and guaranteed by Anchor
National. Interest rates may differ from time to time and are set at our sole
discretion. We never credit less than a 3% annual effective rate. The interest
rate offered for new Purchase Payments may differ from that offered for
subsequent Purchase Payments and money already in the one-year fixed account
option. Once established, the interest rate does not change during the specified
period.
As for Purchase Payments allocated to the one-year fixed account, you may leave
your money in the account at the end of the one-year period or reallocate your
funds. If you want to reallocate your money you must contact us within 30 days
after the end of the one-year period and instruct us how to reallocate the
money. If we do not hear from you, we will keep your money in the one-year fixed
account where it will earn the renewal interest rate applicable at that time.
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase you may transfer funds between the Variable
Portfolios and/or the fixed account options. Funds already in your contract
cannot be transferred into the DCA fixed accounts. You must transfer at least
$100.
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<PAGE> 18
If less than $100 will remain in any Variable Portfolio after a transfer, that
amount must be transferred as well.
You may request transfers of your account value between the Variable Portfolios
and/or the fixed account options in writing or by telephone. We currently allow
15 free transfers per contract per year. We charge $25 ($10 in Pennsylvania and
Texas) for each additional transfer in any contract year. Transfers resulting
from your participation in the DCA program count against your 15 free transfers
per contract year. However, transfers resulting from your participation in the
automatic asset rebalancing program do not count against your 15 free transfers.
We accept transfer requests by telephone unless you tell us not to on your
contract application. Additionally, 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 transactions we will have appropriate
procedures in place to provide reasonable assurance that the transactions
executed are genuine. Thus, we 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 our procedures, we may be liable for any losses due to
unauthorized or fraudulent instructions.
We may limit the number of transfers in any contract year or refuse any transfer
request for you or others invested in the contract if we believe that excessive
trading or a specific transfer request or group transfer requests may have a
detrimental effect on unit values or the share prices of the underlying Variable
Portfolios.
Where permitted by law, we may accept your authorization for a third party to
make transfers for you subject to our rules. We reserve the right to suspend or
cancel such acceptance at any time and will notify you accordingly.
Additionally, we may restrict the investment options available for transfers
during any period in which such third party acts for you. We notify such third
party beforehand regarding any restrictions. However, we will not enforce these
restrictions if we are satisfied that:
- such third party has been appointed by a court of competent jurisdiction
to act on your behalf; or
- such third party is a trustee/fiduciary, for you or appointed by you, to
act on your behalf for all your financial affairs.
We may provide administrative or other support services to independent third
parties you authorize to make transfers on your behalf. We do not currently
charge you extra for providing these support services. This includes, but is not
limited to, transfers between investment options in accordance with market
timing strategies. Such independent third parties may or may not be appointed
with us for the sale of annuities. However, WE DO NOT ENGAGE ANY THIRD PARTIES
TO OFFER INVESTMENT ALLOCATION SERVICES OF ANY TYPE. WE TAKE NO RESPONSIBILITY
FOR THE INVESTMENT ALLOCATION AND TRANSFERS TRANSACTED ON YOUR BEHALF BY SUCH
THIRD PARTIES OR FOR ANY INVESTMENT ALLOCATION RECOMMENDATIONS MADE BY SUCH
PARTIES.
For information regarding transfers during the Income Phase, SEE INCOME OPTIONS
ON PAGE 14.
We reserve the right to modify, suspend, waive or terminate these transfer
provisions at any time.
DOLLAR COST AVERAGING
The Dollar Cost Averaging ("DCA") program allows you to invest gradually in the
Variable Portfolios. Under the program you systematically transfer a set dollar
amount or percentage of portfolio value from one Variable Portfolio or the
1-year fixed account option (source accounts) to any other Variable Portfolio.
Transfers may be monthly or quarterly and count against your 15 free transfers
per contract year. You may change the frequency at any time by notifying us in
writing. The minimum transfer amount under the DCA program is $100, regardless
of the source account.
We also offer the one-year DCA fixed account exclusively to facilitate this
program. The DCA fixed account only accepts new Purchase Payments. You can not
transfer money already in your contract into the account. If you allocate a
Purchase Payment into the DCA fixed account, we transfer all your money into the
Variable Portfolios over the one-year period. You cannot change the option or
the frequency of transfers once selected.
We determine the amount of the transfers from the one-year DCA fixed account
based on:
- the total amount of money allocated to the account, and
- the frequency of transfers selected.
For example, let's say you allocate $1,000 to the 1-year DCA account. You select
monthly transfers. We completely transfer all of your money to the selected
investment options over a period of ten months.
You may terminate your DCA program at any time. If money remains in the DCA
fixed account, we transfer the remaining money to the one-year fixed account
option, unless we receive different instructions from you. Transfers resulting
from a termination of this program do not count towards your 15 free transfers.
The DCA program is designed to lessen the impact of market fluctuations on your
investment. However, we cannot ensure that you will make a profit. When you
elect the DCA program,
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<PAGE> 19
you are continuously investing in securities regardless of fluctuating price
levels. You should consider your tolerance for investing through periods of
fluctuating price levels.
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want to gradually move $750 each quarter from the Cash
Management Portfolio to the Aggressive Growth Portfolio over six quarters.
You set up dollar cost averaging and purchase Accumulation Units at the
following values:
<TABLE>
<CAPTION>
-------------------------------------------
ACCUMULATION UNITS
QUARTER UNIT PURCHASED
-------------------------------------------
<S> <C> <C>
1 $ 7.50 100
2 $ 5.00 150
3 $10.00 75
4 $ 7.50 100
5 $ 5.00 150
6 $ 7.50 100
-------------------------------------------
</TABLE>
You paid an average price of only $6.67 per Accumulation Unit over six
quarters, while the average market price actually was $7.08. By investing
an equal amount of money each month, you automatically buy more
Accumulation Units when the market price is low and fewer Accumulation
Units when the market price is high. This example is for illustrative
purposes only.
ASSET ALLOCATION REBALANCING
Earnings in your contract may cause the percentage of your investment in each
investment option to differ from your original allocations. The Automatic Asset
Rebalancing program addresses this situation. At your election, we periodically
rebalance your investments in the Variable Portfolios to return your allocations
to their original percentages. Asset rebalancing typically involves shifting a
portion of your money out of an investment option with a higher return into an
investment option with a lower return.
At your request, rebalancing occur on a quarterly, semiannual or annual basis.
Transfers made as a result of rebalancing do not count against your 15 free
transfers for the contract year.
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want your initial Purchase Payment split between two
Variable Portfolios. You want 50% in the Corporate Bond Portfolio and 50%
in the Growth Portfolio. Over the next calendar quarter, the bond market
does very well while the stock market performs poorly. At the end of the
calendar quarter, the Corporate Bond Portfolio now represents 60% of your
holdings because it has increased in value and the Growth Portfolio
represents 40% of your holdings. If you had chosen quarterly rebalancing,
on the last day of that quarter, we would sell some of your units in the
Corporate Bond Portfolio to bring its holdings back to 50% and use the
money to buy more units in the Growth Portfolio to increase those holdings
to 50%.
VOTING RIGHTS
Anchor National is the legal owner of the Trusts' shares. However, when a
Variable Portfolio solicits proxies in conjunction with a vote of shareholders,
we must obtain your instructions on how to vote those shares. We vote all of the
shares we own in proportion to your instructions. This includes any shares we
own on our own behalf. Should we determine that we are no longer required to
comply with these rules, we will vote the shares in our own right.
SUBSTITUTION
If Variable Portfolios become unavailable for investment, we may be required to
substitute shares of another Variable Portfolio. We will seek prior approval of
the SEC and give you notice before substituting shares.
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WITHDRAWAL
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You can access money in your contract in two ways:
- by making a partial or total withdrawal, and/or;
- by receiving income payments during the Income Phase. SEE INCOME OPTIONS
ON PAGE 14.
Under most circumstances, the partial withdrawals minimum is $1,000. We require
that the value left in any investment option be at least $100, after the
withdrawal. You must send a written withdrawal request. Unless you provide us
with different instructions, partial withdrawals will be made pro rata from each
Variable Portfolio and the fixed account option in which your contract is
invested.
Under certain Qualified plans, access to the money in your contract may be
restricted. Additionally, withdrawals made prior to age 59 1/2 may result in a
10% IRS penalty tax. SEE TAXES ON PAGE 15.
We may be required to suspend or postpone the payment of a withdrawal for any
period of time when: (1) the NYSE is closed (other than a customary weekend and
holiday closings); (2) trading with the NYSE is restricted; (3) an emergency
exists such that disposal of or determination of the value of shares of the
Variable Portfolios is not reasonably practicable; (4) the SEC, by order, so
permits for the protection of contract owners.
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<PAGE> 20
Additionally, we reserve the right to defer payments for a withdrawal from a
fixed account in option. Such deferrals are limited to no longer than six
months.
SYSTEMATIC WITHDRAWAL PROGRAM
During the Accumulation Phase, you may elect to receive periodic income payments
under the systematic withdrawal program. Under the program, you may choose to
take monthly, quarterly, semi-annual or annual payments from your contract.
Electronic transfer of these funds to your bank account is also available. The
minimum amount of each withdrawal is $250. There must be at least $100 remaining
in your contract at all times. Withdrawals may be taxable and a 10% IRS penalty
tax may apply if you are under age 59 1/2. There is no additional charge for
participating in this program.
The program is not available to everyone. Please check with our Annuity Service
Center, which can provide the necessary enrollment forms. We reserve the right
to modify, suspend or terminate this program at any time.
MINIMUM CONTRACT VALUE
Where permitted by state law, we may terminate your contract if both of the
following occur: (1) your contract is less than $500 as a result of withdrawals;
and (2) you have not made any Purchase Payments during the past three years. We
will provide you with sixty days written notice. At the end of the notice
period, we will distribute the contract's remaining value to you.
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DEATH BENEFIT
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If you die during the Accumulation Phase of your contract, we pay a death
benefit to your Beneficiary. At the time you purchase your contract, you must
select one of the two death benefits described below. Once selected, you can not
change your death benefit option. You should discuss the available options with
your financial representative to determine which option is best for you.
We do not pay the death benefit if you die after you switch to the Income Phase.
However, if you die during the Income Phase, your Beneficiary receives any
remaining guaranteed income payments in accordance with the income option you
selected. SEE INCOME OPTIONS ON PAGE 14.
You name your Beneficiary. You may change the Beneficiary at any time, unless
you previously made an irrevocable Beneficiary designation.
We pay the death benefit when we receive satisfactory proof of death. We
consider the following satisfactory proof of death:
1.a certified copy of the death certificate; or
2.a certified copy of a decree of a court of competent jurisdiction as to
the finding of death; or
3.a written statement by a medical doctor who attended the deceased at the
time of death; or
4. any other proof satisfactory to us.
We may require additional proof before we pay the death benefit.
The death benefit payment must begin immediately upon receipt of all necessary
documents. In any event, the death benefit must be paid within 5 years of the
date of death unless the Beneficiary elects to have it payable in the form of an
income option. If the Beneficiary elects an income option, it must be paid over
the Beneficiary's lifetime or for a period not extending beyond the
Beneficiary's life expectancy. Payments must begin within one year of your
death.
If the Beneficiary is the spouse of a deceased owner, he or she can elect to
continue the Contract. SEE SPOUSAL CONTINUATION ON PAGE 13.
If a Beneficiary does not elect a specific form of pay out within 60 days of our
receipt of proof of death, we pay a lump sum death benefit to the Beneficiary.
OPTION 1 - PURCHASE PAYMENT ACCUMULATION OPTION
The death benefit is the greater of:
1.the contract value at the time we receive satisfactory proof of death; or
2.total Purchase Payments less withdrawals (and any fees or charges
applicable to such withdrawals), compounded at a 4% annual growth rate
until the date of death (3% growth rate if age 70 or older at the time of
contract issue) plus any Purchase Payments less withdrawals recorded
after the date of death (and any fees or charges applicable to such
withdrawals); or
3.the contract value on the seventh contract anniversary, plus any Purchase
Payments and less any withdrawals (and any fees or charges applicable to
such withdrawals), since the seventh contract anniversary, all compounded
at a 4% annual growth rate until the date of death (3% growth rate if age
70 or older at the time of contract issue) plus any Purchase Payments
less withdrawals recorded after the date of death (and any fees or
charges applicable to such withdrawals).
OPTION 2 - MAXIMUM ANNIVERSARY OPTION
The death benefit is the greater of:
1.the contract value at the time we receive satisfactory proof of death; or
2.total Purchase Payments less any withdrawals (and any fees or charges
applicable to such withdrawals); or
3.the maximum anniversary value on any contract anniversary prior to your
81st birthday. The anniversary value equals the contract value on a
contract anniversary plus any Purchase Payments and less any withdrawals
(and any fees or charges applicable to such withdrawals), since that
contract anniversary.
If you are age 90 or older at the time of death and selected the Option 2 death
benefit, the death benefit will be equal to
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<PAGE> 21
the contract value at the time we receive satisfactory proof of death.
Accordingly, you do not get the advantage of option 2 if:
- you are age 81 or older at the time of contract issue, or
- you are age 90 or older at the time of your death.
ESTATEPLUS
EstatePlus is an optional benefit that, if selected, may increase your death
benefit amount.
The term "Net Purchase Payment" is used frequently in explaining the EstatePlus
benefit. We define Net Purchase Payments as Purchase Payments less an adjustment
for each withdrawal.
To calculate the adjustment amount for a withdrawal, you first determine the
percentage by which the contract value is reduced by the withdrawal, on the date
of the withdrawal. This percentage is calculated by dividing the amount of each
withdrawal (including fees and charges applicable to the withdrawal) by the
contract value immediately before taking that withdrawal. The percentage amount
is then multiplied by the amount of Net Purchase Payments immediately before the
withdrawal to get the adjustment amount. This amount is subtracted from the
amount of Net Purchase Payment(s) immediately before the withdrawal.
If you have not taken any withdrawals from your contract, Net Purchase Payments
equals total Purchase Payments into your contract.
The EstatePlus benefit may increase the death benefit amount. If you have
earnings in your contract at the time of death, we will add a percentage of
those earnings (the "EstatePlus Percentage"), subject to a maximum dollar amount
(the "Maximum EstatePlus Percentage"), to the death benefit payable. The
EstatePlus benefit, if any, is added to the death benefit payable under the
Purchase Payment Accumulation or Maximum Anniversary options. The contract year
of your death will determine the EstatePlus percentage and the Maximum
EstatePlus percentage.
The table below provides the details if you are age 69 or younger at the time we
issue your contract:
<TABLE>
<CAPTION>
-------------------------------------------------------------
CONTRACT YEAR ESTATEPLUS MAXIMUM
OF DEATH PERCENTAGE ESTATEPLUS PERCENTAGE
-------------------------------------------------------------
<S> <C> <C>
Years [0-4] [25%] of earnings [40%] of Net Purchase
Payments
-------------------------------------------------------------
Years [5-9] [40%] of earnings [65%] of Net Purchase
Payments*
-------------------------------------------------------------
Years [10+] [50%] of earnings [75%] of Net Purchase
Payments*
-------------------------------------------------------------
</TABLE>
If you are between your 70th and 81st birthdays at the time we issue your
contract the table below shows the available EstatePlus benefit:
<TABLE>
<S> <C> <C>
---------------------------------------------------------------
CONTRACT YEAR ESTATEPLUS MAXIMUM
OF DEATH PERCENTAGE ESTATEPLUS
PERCENTAGE
---------------------------------------------------------------
Years [0-10+] [25%] of earnings [40%] of Net
Purchase Payments*
---------------------------------------------------------------
</TABLE>
*Purchase Payments received after the 5(th) contract anniversary must remain in
the contract for at least 6 full months to be included as part of Net Purchase
Payments for the purpose of the Maximum EstatePlus calculation.
What is the Contract Year of Death?
Contract Year of Death is the number of full 12 month periods beginning with the
date your contract is issued and ending on the date of death.
What is the EstatePlus Percentage Amount?
We determine the amount of the EstatePlus benefit, based on a percentage of the
earnings in your contract at the time of your death. For the purpose of this
calculation, earnings equals contract value minus Net Purchase Payments as of
the date of death. If the earnings amount is negative, no EstatePlus amount will
be added.
What is the Maximum EstatePlus Amount?
The EstatePlus benefit is subject to a maximum dollar amount. The maximum
EstatePlus amount is equal to a percentage of your Net Purchase Payments.
You must elect EstatePlus at the time of contract application. Once elected, you
may not terminate or change this election.
We assess a [.25%] fee for EstatePlus. On a daily basis we deduct this annual
charge from the average daily ending value of the assets you have allocated to
the Variable Portfolios.
EstatePlus is not available if you are age 81 or older at the time we issue your
contract. Furthermore, a Continuing Spouse cannot benefit from EstatePlus if
he/she is age 81 or older on the Continuation Date. SEE SPOUSAL CONTINUATION
BELOW. The EstatePlus benefit is not payable after the latest Annuity Date. You
may pay for the EstatePlus benefit and your beneficiary may never receive the
benefit if you live past the latest Annuity Date. SEE INCOME OPTIONS ON PAGE 14.
EstatePlus may not be available in your state or through the broker-dealer with
which your financial advisor is affiliated. See your financial advisor for
information regarding availability.
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<PAGE> 22
WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE ESTATEPLUS BENEFIT (IN
ITS ENTIRETY OR ANY COMPONENT AT ANY TIME) AT ANY TIME.
SPOUSAL CONTINUATION
If you are the original owner of the contract and the Beneficiary is your
spouse, your spouse may elect to continue the contract after your death. The
spouse becomes the new owner ("Continuing Spouse"). Generally, the contract and
its elected features, if any, remain the same. The Continuing Spouse is subject
to the same fees, charges and expenses applicable to the original owner of the
contract. A spousal continuation can only take place upon the death of the
original owner of the contract.
Upon a spouse's continuation of the contract, we will contribute to the contract
value an amount by which the death benefit that would have been paid to the
beneficiary upon the death of the original owner exceeds the contract value
("Continuation Contribution"), if any. We calculate the Continuation
Contribution as of the date of the original owner's death. We will add the
Continuation Contribution as of the date we receive both the Continuing Spouse's
written request to continue the contract and proof of death of the original
owner in a form satisfactory to us ("Continuation Date"). The Continuation
Contribution is not considered a Purchase Payment for the purposes of any other
calculations except as explained in Appendix C. SEE APPENDIX C FOR FURTHER
EXPLANATION OF THE DEATH BENEFIT CALCULATIONS FOLLOWING A SPOUSAL CONTINUATION.
To the extent that the Continuing Spouse invests in the Variable Portfolios,
they will be subject to investment risk as was the original owner.
Generally, the Continuing Spouse cannot change any contract provisions as the
new owner. However, on the Continuation Date, the Continuing Spouse may
terminate the original owner's election of EstatePlus. We will terminate
EstatePlus if the Continuing Spouse is age 81 or older on the Continuation Date.
If EstatePlus is terminated or if the Continuing Spouse dies after the latest
Annuity Date, no EstatePlus benefit will be payable. The age of the Continuing
Spouse on the Continuation Date and on the date of the Continuing Spouse's death
will be used in determining any future death benefits under the Contract. SEE
APPENDIX C FOR A DISCUSSION OF THE DEATH BENEFIT CALCULATIONS AFTER A SPOUSAL
CONTINUATION.
WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE SPOUSAL CONTINUATION
PROVISION (IN ITS ENTIRETY OR ANY COMPONENT) AT ANY TIME.
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EXPENSES
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There are charges and expenses associated with your contract. These charges and
expenses reduce your investment return. We will not increase the contract
maintenance fee and withdrawal charges under your contract. However, the
investment charges under your contract may increase or decrease. Some states may
require that we charge less than the amounts described below.
INSURANCE CHARGES
The amount of this charge is 1.52% annually, of the value of your contract
invested in the Variable Portfolios. We deduct the charge daily.
The insurance charge compensates us for the mortality and expense risks and the
costs of contract distribution assumed by Anchor National.
If these charges do not cover all of our expenses, we will pay the difference.
Likewise, if these charges exceed our expenses, we will keep the difference.
INVESTMENT CHARGES
Charges are deducted from your Variable Portfolios for the advisory and other
expenses of the Variable Portfolios. THE FEE TABLES LOCATED AT PAGE 3 illustrate
these charges and expenses. For more detailed information on these investment
charges, refer to the prospectuses for the Trusts, enclosed or attached.
TRANSFER FEE
We currently permit 15 free transfers between investment options each contract
year. We charge you $25 for each additional transfer that contract year ($10 in
Pennsylvania and Texas). SEE INVESTMENT OPTIONS ON PAGE 7.
OPTIONAL ESTATEPLUS FEE
Please see page 12 for more information on the EstatePlus fee.
PREMIUM TAX
Certain states charge the Company a tax on the premiums you pay into the
contract. We deduct from your contract these premium tax charges. Currently we
deduct the charge for premium taxes when you take a full withdrawal or begin the
Income Phase of the contract. In the future, we may assess this deduction at the
time you put Purchase Payment(s) into the contract or upon payment of a death
benefit.
APPENDIX B 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
13
<PAGE> 23
to such groups. We determine which groups are eligible for such treatment. Some
of the criteria we evaluate to make a determination are: size of the group;
amount of expected Purchase Payments; relationship existing between us and
prospective purchaser; nature of the purchase; length of time a group of
contracts is expected to remain active; purpose of the purchase and whether that
purpose increases the likelihood that our expenses will be reduced; and/or any
other factors that we believe indicate that administrative and/or sales expenses
may be reduced.
Anchor National may make such a determination regarding sales to its employees,
it affiliates' employees and employees of currently contracted broker-dealers,
its registered representatives and immediate family members of all of those
described.
We reserve the right to change or modify any such determination or the treatment
applied to a particular group, at any time.
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INCOME OPTIONS
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ANNUITY DATE
During the Income Phase, we use the money accumulated in your contract to make
regular income payments to you. You may switch to the Income Phase any time
after your second contract anniversary. You select the month and year you want
income payments to begin. The first day of that month is the Annuity Date. You
may change your Annuity Date, so long as you do so at least seven days before
the income payments are scheduled to begin. Once you begin receiving income
payments, you cannot change your income option. Except as discussed under Option
5 below, after your income payments begin you cannot otherwise access your money
through a withdrawal or surrender.
Income payments must begin on or before your 90th birthday or on your tenth
contract anniversary, whichever occurs later. If you do not choose an Annuity
Date, your income payments will automatically begin on this date. Certain states
may require your income payments to start earlier.
If the Annuity Date is past your 85th birthday, your contract could lose its
status as an annuity under Federal tax laws. This may cause you to incur adverse
tax consequences.
In addition, most Qualified contracts require you to take minimum distributions
after you reach age 70 1/2. SEE TAXES ON PAGE 15.
INCOME OPTIONS
Currently, this Contract offers five income options. If you elect to receive
income payments but do not select an option, your income payments will be made
in accordance with option 4 for a period of 10 years. For income payments based
on joint lives, we pay according to option 3.
We base our calculation of income payments on the life of the Annuitant and the
annuity rates set forth in your contract. As the contract owner, you may change
the Annuitant at any time prior to the Annuity Date. You must notify us if the
Annuitant dies before the Annuity Date and designate a new Annuitant.
OPTION 1 - LIFE INCOME ANNUITY
This option provides income payments for the life of the Annuitant. Income
payments stop when the Annuitant dies.
OPTION 2 - JOINT AND SURVIVOR LIFE ANNUITY
This option provides income payments for the life of the Annuitant and for the
life of another designated person. Upon the death of either person, we will
continue to make income payments during the lifetime of the survivor. Income
payments stop when the survivor dies.
OPTION 3 - JOINT AND SURVIVOR LIFE ANNUITY WITH 10 YEARS GUARANTEED
This option is similar to option 2 above, with an additional guarantee of
payments for at least 10 years. If the Annuitant and the survivor die before all
of the guaranteed income payments have been made, the remaining payments are
made to the Beneficiary under your contract.
OPTION 4 - LIFE ANNUITY WITH 10 OR 20 YEARS GUARANTEED
This option is similar to option 1 above. In addition, this option provides a
guarantee that income payments will be made for at least 10 or 20 years. You
select the number of years. If the Annuitant dies before all guaranteed income
payments are made, the remaining income payments go to the Beneficiary under
your contract.
OPTION 5 - INCOME FOR A SPECIFIED PERIOD
This option provides income payments for a guaranteed period ranging from 5 to
30 years. If the Annuitant dies before all of the guaranteed income payments are
made, the remaining income payments are made to the Beneficiary under your
contract. Additionally, if variable income payments are elected under this
option, you (or the Beneficiary under the contract if the Annuitant dies prior
to all guaranteed payments being made) may redeem the contract value after the
Annuity Date. The amount available upon such redemption would be the discounted
present value of any remaining guaranteed payments.
The value of an Annuity Unit, regardless of the option chosen, takes into
account the Mortality and Expense Risk Charge. Since Option 5 does not contain
an element of mortality risk, no benefit is derived from this charge.
Please read the Statement of Additional Information ("SAI") for a more detailed
discussion of the income options.
FIXED OR VARIABLE INCOME PAYMENTS
You can choose income payments that are fixed, variable or both. If at the date
when income payments begin you are invested in the Variable Portfolios only,
your income
14
<PAGE> 24
payments will be variable. If your money is only in fixed accounts at that time,
your income payments will be fixed in amount. Further, if you are invested in
both fixed and variable investment options when income payments begin, your
payments will be fixed and variable. If income payments are fixed, Anchor
National guarantees the amount of each payment. If the income payments are
variable the amount is not guaranteed.
INCOME PAYMENTS
We make income payments on a monthly, quarterly, semiannual or annual basis. You
instruct us to send you a check or to have the payments directly deposited into
your bank account. If state law allows, we distribute annuities with a contract
value of $5,000 or less in a lump sum. Also, if the selected income option
results in income payments of less than $50 per payment, we may decrease the
frequency of payments, state law allowing.
If you are invested in the Variable Portfolios after the Annuity date, your
income payments vary depending on four things:
- for life options, your age when payments begin, and;
- the value of your contract in the Variable Portfolios on the Annuity
Date, and;
- the 3.5% assumed investment rate used in the annuity table for the
contract, and;
- the performance of the Variable Portfolios in which you are invested
during the time you receive income payments.
If you are invested in both the fixed account options and the Variable
Portfolios after the Annuity Date, the allocation of funds between the fixed and
variable options also impacts the amount of your annuity payments.
TRANSFERS DURING THE INCOME PHASE
During the Income Phase, one transfer per month is permitted between the
Variable Portfolios. No other transfers are allowed during the Income Phase.
DEFERMENT OF PAYMENTS
We may defer making fixed payments for up to six months, or less if required by
law. Interest is credited to you during the deferral period.
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TAXES
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NOTE: WE PREPARED THE FOLLOWING INFORMATION ON TAXES AS A GENERAL DISCUSSION OF
THE SUBJECT. IT IS NOT TAX ADVICE. WE CAUTION YOU TO SEEK COMPETENT TAX ADVICE
ABOUT YOUR OWN CIRCUMSTANCES. WE DO NOT GUARANTEE THE TAX STATUS OF YOUR
ANNUITY. TAX LAWS CONSTANTLY CHANGE, THEREFORE WE CANNOT GUARANTEE THAT THE
INFORMATION CONTAINED HEREIN IS COMPLETE AND/OR ACCURATE.
ANNUITY CONTRACTS IN GENERAL
The Internal Revenue Code ("IRC") provides for special rules regarding the tax
treatment of annuity contracts. Generally, taxes on the earnings in your annuity
contract are deferred until you take the money out. Qualified retirement
investments automatically provide tax deferral regardless of whether the
underlying contract is an annuity. Different rules apply depending on how you
take the money out and whether your contract is Qualified or Non-qualified.
If you do not purchase your contract under a pension plan, a specially sponsored
employer program or an individual retirement account, your contract is referred
to as a Non-qualified contract. A Non-qualified contract receives different tax
treatment than a Qualified contract. In general, your cost basis in a
Non-qualified contract is equal to the Purchase Payments you put into the
contract. You have already been taxed on the cost basis in your contract.
If you purchase your contract under a pension plan, a specially sponsored
employer program or as an individual retirement account, your contract is
referred to as a Qualified contract. Examples of qualified plans are: Individual
Retirement Accounts ("IRAs"), Roth IRAs, Tax-Sheltered Annuities (referred to as
403(b) contracts), H.R. 10 Plans (referred to as Keogh Plans) and pension and
profit sharing plans, including 401(k) plans. Typically you have not paid any
tax on the Purchase Payments used to buy your contract and therefore, you have
no cost basis in your contract.
TAX TREATMENT OF DISTRIBUTIONS -
NON-QUALIFIED CONTRACTS
If you make a withdrawal from a Non-qualified contract, the IRC treats such a
withdrawal as first coming from the earnings and then as coming from your
Purchase Payments. For income payments, any portion of each payment that is
considered a return of your Purchase Payment will not be taxed. Withdrawn
earnings are treated as income to you and are taxable. The IRC provides for a
10% penalty tax on any earnings that are withdrawn other than in conjunction
with the following circumstances: (1) after reaching age 59 1/2; (2) when paid
to your Beneficiary after you die; (3) after you become disabled (as defined in
the IRC); (4) when paid in a series of substantially equal installments made for
your life or for the joint lives of you and you Beneficiary; (5) under an
immediate annuity; or (6) which come from Purchase Payments made prior to August
14, 1982.
TAX TREATMENT OF DISTRIBUTIONS - QUALIFIED CONTRACTS
Generally, you have not paid any taxes on the Purchase Payments used to buy a
Qualified contract. Any amount of money you take out as a withdrawal or as
income payments is taxable income. The IRC further provides for a 10% penalty
tax on any withdrawal or income payment paid to you other than in conjunction
with the following circumstances: (1) after reaching age 59 1/2; (2) when paid
to your Beneficiary after you die; (3) after you become disabled (as
15
<PAGE> 25
defined in the IRC); (4) in a series of substantially equal installments made
for your life or for the joint lives of you and your Beneficiary; (5) to the
extent such withdrawals do not exceed limitations set by the IRC for amounts
paid during the taxable year for medical care; (6) to fund higher education
expenses (as defined in IRC); (7) to fund certain first-time home purchase
expenses; and, except in the case of an IR; (8) when you separate from service
after attaining age 55; and (9) when paid to an alternate payee pursuant to a
qualified domestic relations order.
The IRC limits the withdrawal of Purchase Payments from certain Tax-Sheltered
Annuities. Withdrawals can only be made when an owner: (1) reaches age 59 1/2;
(2) leaves his or her job; (3) dies; (4) becomes disabled (as defined in the
IRC); or (5) experiences a hardship (as defined in the IRC). In the case of
hardship, the owner can only withdraw Purchase Payments.
MINIMUM DISTRIBUTIONS
Generally, the IRS requires that you begin taking annual distributions from
qualified annuity contracts by April 1 of the calendar year following the later
of (1) the calendar year in which you attain age 70 1/2 or (2) the calendar year
in which you retire. Failure to satisfy the minimum distribution requirements
may result in a tax penalty. You should consult your tax advisor for more
information.
You may elect to have the required minimum distribution amount on your contract
calculated and withdrawn each year under the automatic withdrawal option. You
may select either monthly, quarterly, semiannual or annual withdrawals for this
purpose. This service is provided as a courtesy and we do not guarantee the
accuracy of our calculations. Accordingly, we recommend you consult your tax
advisor concerning your required minimum distribution. You may terminate your
election for automated minimum distribution at any time by sending a written
request to our Annuity Service Center. We reserve the right to change or
discontinue this service at any time.
DIVERSIFICATION
The IRC imposes certain diversification requirements on the underlying
investments for a variable annuity. We believe that each underlying Variable
Portfolios' management monitors the Variable Portfolios so as to comply with
these requirements. To be treated as a variable annuity for tax purposes, the
underlying investments must meet these requirements.
The diversification regulations do not provide guidance as to the circumstances
under which you, because of the degree of control you exercise over the
underlying investments, and not Anchor National, would be considered the owner
of the shares of the Variable Portfolios. It is unknown to what extent owners
are permitted to select investments, to make transfers among Variable Portfolios
or the number and type of Variable Portfolios owners may select from. If any
guidance is provided which is considered a new position, then the guidance would
generally be applied prospectively. However, if such guidance is considered not
to be a new position, it may be applied retroactively. This would mean you, as
the owner of the contract, could be treated as the owner of the underlying
Variable Portfolios. Due to the uncertainty in this area, we reserve the right
to modify the contract in an attempt to maintain favorable tax treatment.
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PERFORMANCE
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----------------------------------------------------------------
We advertise the Cash Management Portfolio's yield and effective yield. In
addition, the other Variable Portfolios advertise total return, gross yield and
yield-to-maturity. These figures represent past performance of the Variable
Portfolios. These performance numbers do not indicate future results.
When we advertise performance for periods prior to the date the contracts were
first issued, we derive the figures from the performance of the corresponding
portfolios for the Trusts, if available. We modify these numbers to reflect
charges and expenses as if the contract was in existence during the period
stated in the advertisement. Figures calculated in this manner do not represent
actual historic performance of the particular Variable Portfolio.
Consult the SAI for more detailed information regarding the calculation of
performance data. The performance of each Variable Portfolio may also be
measured against unmanaged market indices. The indices we use include but are
not limited to the Dow Jones Industrial Average, the Standard & Poor's 500, the
Russell 1000 Growth Index, the Morgan Stanley Capital International Europe,
Australia and Far East Index ("EAFE") and the Morgan Stanley Capital
International World Index. We may compare the Variable Portfolios' performance
to that of other variable annuities with similar objectives and policies as
reported by independent ranking agencies such as Morningstar, Inc., Lipper
Analytical Services, Inc. or Variable Annuity Research & Data Service ("VARDS").
Anchor National may also advertise the rating and other information assigned to
it by independent industry ratings organizations. Some of those organizations
are A.M. Best Company ("A.M. Best"), Moody's Investor's Service ("Moody's"),
Standard & Poor's Insurance Rating Services ("S&P"), and Duff & Phelps. A.M.
Best's and Moody's ratings reflect their current opinion of our financial
strength and performance in comparison to others in the life and health
insurance industry. S&P's and Duff & Phelps' ratings measure the ability of an
insurance company to meet its obligations under insurance policies it issues.
These two ratings do not measure the insurer's ability to meet non-policy
obligations. Ratings in general do not relate to the performance of the Variable
Portfolios.
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OTHER INFORMATION
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ANCHOR NATIONAL
Anchor National is a stock life insurance company originally organized under the
laws of the state of California in April 1965. On January 1, 1996, Anchor
National redomesticated under the laws of the state of Arizona.
Anchor National and its affiliates, SunAmerica Life Insurance Company, First
SunAmerica Life Insurance Company, SunAmerica Asset Management Corp., SunAmerica
Trust Company, and the SunAmerica Financial Network, Inc. (comprising six wholly
owned broker-dealers), specialize in retirement savings and investment products
and services. Business focuses include fixed and variable annuities, mutual
funds, premium finance, broker-dealer services and trust administration
services.
THE SEPARATE ACCOUNT
Anchor National established a separate account, Variable Annuity Account Four
("separate account"), under California law on November 8, 1994. The separate
account is registered with the SEC as a unit investment trust under the
Investment Company Act of 1940, as amended.
Anchor National owns the assets in the separate account. However, the assets in
the separate account are not chargeable with liabilities arising out of any
other business conducted by Anchor National. Income gains and losses (realized
and unrealized) resulting from assets in the separate account are credited to or
charged against the separate account without regard to other income gains or
losses of Anchor National.
THE GENERAL ACCOUNT
Money allocated to the fixed account options goes into Anchor National's general
account. The general account consists of all of Anchor National's assets other
than assets attributable to a separate account. All of the assets in the general
account are chargeable with the claims of any Anchor National contract holders
as well as all of its creditors. The general account funds are invested as
permitted under state insurance laws.
DISTRIBUTION OF THE CONTRACT
Registered representatives of broker-dealers sell the contract. We pay
commissions to these representatives for the sale of the contracts. We do not
expect the total commissions to exceed 7% of your Purchase Payments. 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. No underwriting fees are paid in connection with the distribution of
the contract.
From time to time, we may pay or allow additional promotional incentives in the
form of cash or other compensation. We reserve the right to offer these
additional incentives only to certain broker-dealers that sell or are expected
to sell, certain minimum amounts of the contract, or other contracts offered by
us. Promotional incentives may change at any time.
SunAmerica Capital Services, Inc., 733 Third Avenue, 4th Floor, New York, New
York 10017 distributes the contracts. SunAmerica Capital Services, an affiliate
of Anchor National, is registered as a broker-dealer under the Exchange Act of
1934 and a member of the National Association of Securities Dealers, Inc. No
underwriting fees are paid in connection with the distribution of the contracts.
ADMINISTRATION
We are responsible for the administrative servicing of your contract. Please
contact our Annuity Service Center
at 1-800-445-SUN2, if you have any comment, question or service request.
We send out transaction confirmations and quarterly statements. During the
accumulation phase, you will receive confirmation of transactions within your
contract. Transactions made pursuant to contractual or systematic agreements,
such as deduction of the dollar cost averaging may be confirmed quarterly.
Purchase payments received through the automatic payment plan or a salary
reduction arrangement, may also be confirmed quarterly. For all other
transactions, we send confirmations immediately. It is your responsibility to
review these documents carefully and notify us of any inaccuracies immediately.
We investigate all inquiries. To the extent that we believe we made an error, we
retroactively adjust your contract, provided you notify us within 30 days of
receiving the transaction confirmation or quarterly statement. Any other
adjustments we deem warranted are made as of the time we receive notice of the
error.
LEGAL PROCEEDINGS
There are no pending legal proceedings affecting the separate account. Anchor
National and its subsidiaries engage in various kinds of routine litigation. In
management's opinion, these matters are not of material importance to their
respective total assets nor are they material with respect to the separate
account.
OWNERSHIP
The Anchor Advisor Variable Annuity is a Flexible Payment Group Deferred Annuity
contract. We issue a group contract to a contract holder for the benefit of the
participants in the group. As a participant in the group, you will receive a
certificate which evidences your ownership. As used in this prospectus, the term
contract refers to your certificate. In
17
<PAGE> 27
some states, a Flexible Payment Individual Modified Guaranteed and Variable
Deferred Annuity contract is available instead. Such a contract is identical to
the contract described in this prospectus, with the exception that we issue it
directly to the owner.
CUSTODIAN
State Street Bank and Trust Company, 255 Franklin Street, Boston, Massachusetts
02110, serves as the custodian of the assets of the separate account. Anchor
National pays State Street Bank for services provided, based on a schedule of
fees.
ADDITIONAL INFORMATION
Anchor National is subject to the informational requirements of the Securities
and Exchange Act of 1934 (as amended). We file reports and other information
with the SEC to meet those requirements. You can inspect and copy this
information at SEC public facilities at the following locations:
WASHINGTON, DISTRICT OF COLUMBIA
450 Fifth Street, N.W., Room 1024
Washington, D.C. 20549
CHICAGO, ILLINOIS
500 West Madison Street
Chicago, IL 60661
NEW YORK, NEW YORK
7 World Trade Center, 13th Fl.
New York, NY 10048
To obtain copies by mail contact the Washington, D.C. location. After you pay
the fees as prescribed by the rules and regulations of the SEC, the required
documents are mailed.
Registration statements under the Securities Act of 1933, as amended, related to
the contracts offered by this prospectus are on file with the SEC. This
prospectus does not contain all of the information contained in the
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.
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TABLE OF CONTENTS OF
STATEMENT OF ADDITIONAL INFORMATION
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<TABLE>
<S> <C>
Separate Account.............................. 3
General Account............................... 3
Performance Data.............................. 4
Income Payments............................... 8
Annuity Unit Values........................... 8
Taxes......................................... 11
Distribution of Contracts..................... 16
Financial Statements.......................... 16
</TABLE>
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<PAGE> 28
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
APPENDIX A - CONDENSED FINANCIAL INFORMATION
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION FISCAL FISCAL
TO YEAR YEAR
PORTFOLIOS 12/31/97 12/31/98 12/31/99
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital Appreciation (Inception Date - 8/27/96)
Beginning AUV.......................... $ 16.67 $ 21.69 $ 26.11
End AUV................................ $ 21.69 $ 26.11 $ 43.17
Ending Number of AUs................... 573,130 1,213,172 1,886,515
-----------------------------------------------------------------------------------------------
Government and Quality Bond (Inception Date - 9/16/96)
Beginning AUV.......................... $ 11.47 $ 12.75 $ 13.70
End AUV................................ $ 12.75 $ 13.70 $ 13.28
Ending Number of AUs................... 319,183 1,357,580 1,815,032
-----------------------------------------------------------------------------------------------
Growth (Inception Date - 9/12/96)
Beginning AUV.......................... $ 14.31 $ 20.54 $ 26.09
End AUV................................ $ 20.54 $ 26.09 $ 32.61
Ending Number of AUs................... 349,685 723,131 1,118,706
-----------------------------------------------------------------------------------------------
Natural Resources (Inception Date - 9/12/96)
Beginning AUV.......................... $ 11.56 $ 11.01 $ 8.96
End AUV................................ $ 11.01 $ 8.96 $ 12.50
Ending Number of AUs................... 150,500 184,017 192,519
-----------------------------------------------------------------------------------------------
Aggressive Growth (Inception Date - 8/29/96)
Beginning AUV.......................... $ 9.26 $ 11.55 $ 13.36
End AUV................................ $ 11.55 $ 13.36 $ 24.30
Ending Number of AUs................... 409,605 617,169 1,027,840
-----------------------------------------------------------------------------------------------
Alliance Growth (Inception Date - 9/12/96)
Beginning AUV.......................... $ 16.39 $ 24.71 $ 37.04
End AUV................................ $ 24.71 $ 37.04 $ 48.56
Ending Number of AUs................... 741,769 2,011,482 3,077,398
-----------------------------------------------------------------------------------------------
Asset Allocation (Inception Date - 9/16/96)
Beginning AUV.......................... $ 13.75 $ 18.06 $ 18.37
End AUV................................ $ 18.06 $ 18.37 $ 19.81
Ending Number of AUs................... 949,305 1,848,466 1,713,807
-----------------------------------------------------------------------------------------------
Blue Chip Growth (Inception Date - n/a)*
Beginning AUV.......................... -- -- --
End AUV................................ -- -- --
Ending Number of AUs................... -- -- --
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Cash Management (Inception Date - 9/5/96)
Beginning AUV.......................... $ 10.95 $ 11.47 $ 11.87
End AUV................................ $ 11.47 $ 11.87 $ 12.25
Ending Number of AUs................... 528,132 2,559,027 4,829,410
-----------------------------------------------------------------------------------------------
Corporate Bond (Inception Date - 9/23/96)
Beginning AUV.......................... $ 11.13 $ 12.64 $ 13.19
End AUV................................ $ 12.64 $ 13.19 $ 12.76
Ending Number of AUs................... 192,290 880,027 1,120,278
-----------------------------------------------------------------------------------------------
Davis Venture Value (Inception Date - 8/27/96)
Beginning AUV.......................... $ 14.43 $ 21.76 $ 24.38
End AUV................................ $ 21.76 $ 24.38 $ 27.88
Ending Number of AUs................... 1,593,009 3,095,903 3,806,242
-----------------------------------------------------------------------------------------------
"Dogs" of Wall Street (Inception Date - 4/1/98)
Beginning AUV.......................... -- $ 10.00 $ 9.82
End AUV................................ -- $ 9.82 $ 8.99
Ending Number of AUs................... -- 1,075,745 1,121,165
-----------------------------------------------------------------------------------------------
Federated Value (Inception Date - 9/16/96)
Beginning AUV.......................... $ 9.63 $ 13.90 $ 16.14
End AUV................................ $ 13.90 $ 16.14 $ 16.89
Ending Number of AUs................... 292,403 735,956 1,055,045
-----------------------------------------------------------------------------------------------
</TABLE>
A-1
<PAGE> 29
<TABLE>
<CAPTION>
INCEPTION FISCAL FISCAL
TO YEAR YEAR
PORTFOLIOS 12/31/97 12/31/98 12/31/99
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Goldman Sachs Research (Inception Date - n/a)*
Beginning AUV.......................... -- -- --
End AUV................................ -- -- --
Ending Number of AUs................... -- -- --
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Global Bond (Inception Date - 9/4/96)
Beginning AUV.......................... $ 11.61 $ 13.24 $ 14.45
End AUV................................ $ 13.24 $ 14.45 $ 14.09
Ending Number of AUs................... 220,299 399,930 391,261
-----------------------------------------------------------------------------------------------
Global Equities (Inception Date - 8/27/96)
Beginning AUV.......................... $ 14.13 $ 17.03 $ 20.60
End AUV................................ $ 17.03 $ 20.60 $ 26.57
Ending Number of AUs................... 342,337 657,968 1,566,813
-----------------------------------------------------------------------------------------------
Growth-Income (Inception Date - 9/6/96)
Beginning AUV.......................... $ 14.27 $ 21.77 $ 28.03
End AUV................................ $ 21.77 $ 28.03 $ 35.91
Ending Number of AUs................... 968,033 2,191,913 3,293,412
-----------------------------------------------------------------------------------------------
Growth Opportunities (Inception Date - n/a)*
Beginning AUV.......................... -- -- --
End AUV................................ -- -- --
Ending Number of AUs................... -- -- --
-----------------------------------------------------------------------------------------------
High-Yield Bond (Inception Date - 9/23/96)
Beginning AUV.......................... $ 12.46 $ 14.83 $ 14.18
End AUV................................ $ 14.83 $ 14.18 $ 14.87
Ending Number of AUs................... 542,769 1,090,941 1,161,206
-----------------------------------------------------------------------------------------------
International Diversified Equities (Inception Date - 9/12/96)
Beginning AUV.......................... $ 10.61 $ 11.82 $ 13.79
End AUV................................ $ 11.82 $ 13.79 $ 16.92
Ending Number of AUs................... 874,983 1,544,767 3,129,678
-----------------------------------------------------------------------------------------------
International Growth & Income (Inception Date - n/a)*
Beginning AUV.......................... -- -- --
End AUV................................ -- -- --
Ending Number of AUs................... -- -- --
-----------------------------------------------------------------------------------------------
MFS Growth & Income (Inception Date - n/a)*
Beginning AUV.......................... -- -- --
End AUV................................ -- -- --
Ending Number of AUs................... -- -- --
-----------------------------------------------------------------------------------------------
MFS Mid-Cap Growth (Inception Date - n/a)*
Beginning AUV.......................... -- -- --
End AUV................................ -- -- --
Ending Number of AUs................... -- -- --
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Putnam Growth (Inception Date - n/a)*
Beginning AUV.......................... -- -- --
End AUV................................ -- -- --
Ending Number of AUs................... -- -- --
-----------------------------------------------------------------------------------------------
SunAmerica Balanced (Inception Date - 9/16/96)
Beginning AUV.......................... $ 10.12 $ 13.42 $ 16.47
End AUV................................ $ 13.42 $ 16.47 $ 19.69
Ending Number of AUs................... 325,748 1,400,997 2,491,907
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Technology (Inception Date - n/a)*
Beginning AUV.......................... -- -- --
End AUV................................ -- -- --
Ending Number of AUs................... -- -- --
-----------------------------------------------------------------------------------------------
</TABLE>
A-2
<PAGE> 30
<TABLE>
<CAPTION>
INCEPTION FISCAL FISCAL
TO YEAR YEAR
PORTFOLIOS 12/31/97 12/31/98 12/31/99
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Telecom Utility (Inception Date - 9/16/96)
Beginning AUV.......................... $ 10.08 $ 13.42 $ 15.07
End AUV................................ $ 13.42 $ 15.07 $ 15.11
Ending Number of AUs................... 130,317 499,807 801,759
-----------------------------------------------------------------------------------------------
Worldwide High Income (Inception
Date - 8/27/96)
Beginning AUV.......................... $ 13.10 $ 16.36 $ 13.36
End AUV................................ $ 16.36 $ 13.36 $ 15.70
Ending Number of AUs................... 303,039 429,041 349,619
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
</TABLE>
AUV - Accumulation Unit Value
AU - Accumulation Units
* This portfolio was not available for sale in this product
until December 29, 2000.
A-3
<PAGE> 31
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
APPENDIX B - 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 0.50% 2.35%
----------------------------------------------------------------------------------------
Maine 0% 2.0%
----------------------------------------------------------------------------------------
Nevada 0% 3.5%
----------------------------------------------------------------------------------------
South Dakota 0% 1.25%
----------------------------------------------------------------------------------------
West Virginia 1.0% 1.0%
----------------------------------------------------------------------------------------
Wyoming 0% 1.0%
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
</TABLE>
B-1
<PAGE> 32
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
APPENDIX C - DEATH BENEFITS FOLLOWING SPOUSAL CONTINUATION
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Capitalized terms used in this Appendix have the same meaning as they have in
prospectus.
The following details the death benefit options and EstatePlus benefit upon the
Continuing Spouse's death:
A. DEATH BENEFIT PAYABLE UPON CONTINUING SPOUSE'S DEATH:
1.Purchase Payment Accumulation Option -- the death benefit is the greater
of:
a.The contract value on the date we receive satisfactory proof of the
Continuing Spouse's death; or
b.Purchase Payments minus withdrawals (and fees and charges applicable
to those withdrawals) made from the original contract issue date
including the Continuation Contribution, compounded to the date of
death at a 4% annual growth rate, (3% growth rate if age 70 or older
at the time of contract issue) plus any Purchase Payments minus
withdrawals recorded after the date of death (and any fees and
charges applicable to those withdrawals).
c.The contract value on the seventh contract anniversary following the
original issue date of the contract, plus any Purchase Payments and
less any withdrawals (and any fees or charges applicable to such
withdrawals), since the seventh contract anniversary, all compounded
at a 4% annual growth rate until the date of death (3% growth rate
if age 70 or older at the time of contract issue) plus any Purchase
Payments less withdrawals recorded after the date of death (and any
fees or charges applicable to such withdrawals).
2.Maximum Anniversary Option -- if the Continuing Spouse is below age 90 at
the time of death, the death benefit is greater of:
a.The contract value at the time we receive satisfactory proof of the
Continuing Spouse's death; or
b.Purchase Payments since the Continuation Date minus withdrawals and
any fees and charges applicable to those withdrawals; or
c.The maximum anniversary value on any contract anniversary occurring
after the Continuation Date prior to the Continuing Spouse's 81st
birthday. The anniversary value equals the contract value on a
contract anniversary plus any Purchase Payments minus withdrawals
and fees and charges applicable to withdrawals recorded since that
contract anniversary. Contract anniversary is defined as any
anniversary following the full 12 month period after the original
contract issue date.
If the Continuing Spouse is age 90 or older at the time of death, under the
Maximum Anniversary death benefit, their beneficiary will receive contract value
only.
B. THE ESTATEPLUS BENEFIT PAYABLE UPON CONTINUING SPOUSE'S DEATH:
The EstatePlus benefit may increase the death benefit amount. The EstatePlus
benefit is only available if the original owner elected EstatePlus and it has
not been terminated. If the Continuing Spouse had earnings in the contract at
the time of his/her death, we will add a percentage of those earnings (the
"EstatePlus Percentage"), subject to a maximum dollar amount (the "Maximum
EstatePlus Percentage"), to the death benefit payable, based on the number of
years the Continuing Spouse has held the contract since the Continuation Date.
The EstatePlus benefit, if any, is added to the death benefit payable under the
Purchase Payment Accumulation or the Maximum Anniversary option.
The term "Continuation Net Purchase Payment" is used frequently to describe the
EstatePlus benefit payable to the beneficiary of the Continuing Spouse. We
define Continuation Net Purchase Payment as Net Purchase Payments made as of the
Continuation Date. For the purpose of calculating Continuation Net Purchase
Payments, the amount that equals the contract value on the Continuation Date,
including the Continuation Contribution is considered a Purchase Payment. If the
Continuing Spouse makes no additional Purchase Payments or withdrawal,
Continuation Net Purchase Payments equals the contract value on the Continuation
Date, including the Continuation Contribution.
The following table provides the details, if the Continuing Spouse is age 69 or
younger on the Continuation Date:
<TABLE>
<CAPTION>
-------------------------------------------------------------
CONTRACT YEAR ESTATEPLUS MAXIMUM
OF DEATH PERCENTAGE ESTATEPLUS PERCENTAGE
-------------------------------------------------------------
<S> <C> <C>
Years [0-4] [25%] of earnings [40%] of Continuation
Net Purchase Payments
-------------------------------------------------------------
Years [5-9] [40%] of earnings [65%] of Continuation
Net Purchase
Payments*
-------------------------------------------------------------
Years [10+] [50%] of earnings [75%] of Continuation
Net Purchase
Payments*
-------------------------------------------------------------
</TABLE>
C-1
<PAGE> 33
If the Continuing Spouse is between their 70th and 81st birthdays on the
Continuation Date, the table below shows the available EstatePlus benefit:
<TABLE>
<CAPTION>
--------------------------------------------------------------
CONTRACT YEAR ESTATEPLUS MAXIMUM
OF DEATH PERCENTAGE ESTATEPLUS PERCENTAGE
--------------------------------------------------------------
<S> <C> <C>
Years [0-10+] [25%] of earnings [40%] of Continuation
Net Purchase
Payments*
--------------------------------------------------------------
</TABLE>
*Purchase Payments received after the 5(th) year following the Continuation Date
must remain in the contract for at least six months to be included as part of
Continuation Net Purchase Payments for purpose of the Maximum EstatePlus
calculation.
What is the Contract Year of Death?
Contract Year of Death is the number of full 12 month periods starting on the
Continuation Date and ending on the Continuing Spouse's date of death.
What is the EstatePlus amount?
We determine the EstatePlus amount based upon a percentage of earnings in the
contract at the time of the Continuing Spouse's death. For the purpose of this
calculation, earnings are defined as (1) minus (2) where
(1)equals the contract value on the Continuing Spouse's date of death;
(2)equals the Continuation Net Purchase Payment(s).
What is the Maximum EstatePlus amount?
The EstatePlus benefit is subject to a maximum dollar amount. The Maximum
EstatePlus amount is a percentage of the Continuation Net Purchase Payments.
WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE SPOUSAL CONTINUATION
PROVISION (IN ITS ENTIRETY OR ANY COMPONENT) AT ANY TIME.
C-2
<PAGE> 34
--------------------------------------------------------------------------------
Please forward a copy (without charge) of the Anchor Advisor Variable Annuity
Statement of Additional Information to:
(Please print or type and fill in all information.)
------------------------------------------------------------------------
Name
------------------------------------------------------------------------
Address
------------------------------------------------------------------------
City/State/Zip
Date: ------------------------------ Signed: ------------------------------
Return to: Anchor National Life Insurance Company, Annuity Service Center,
P.O. Box 52499, Los Angeles, California 90054-0299
--------------------------------------------------------------------------------
<PAGE> 35
STATEMENT OF ADDITIONAL INFORMATION
FIXED AND VARIABLE GROUP DEFERRED
ANNUITY CONTRACTS ISSUED BY
VARIABLE ANNUITY ACCOUNT FOUR
DEPOSITOR: ANCHOR NATIONAL LIFE INSURANCE COMPANY
This Statement of Additional Information is not a prospectus; it should be read
with the prospectus relating to the annuity contracts described above, a copy of
which may be obtained without charge by written request addressed to:
ANCHOR NATIONAL LIFE INSURANCE COMPANY
ANNUITY SERVICE CENTER
P.O. BOX 54299
LOS ANGELES, CALIFORNIA 90054-0299
THE DATE OF THIS STATEMENT OF ADDITIONAL INFORMATION IS
MARCH 19, 2001
<PAGE> 36
TABLE OF CONTENTS
<TABLE>
PAGE
----
<S> <C>
Separate Account............................................................ 3
General Account............................................................. 4
Performance Data ........................................................... 4
Income Payments............................................................. 8
Annuity Unit Values......................................................... 8
Taxes....................................................................... 11
Distribution of Contracts................................................... 16
Financial Statements........................................................ 16
</TABLE>
<PAGE> 37
SEPARATE ACCOUNT
Variable Annuity Account Four was established by Anchor National Life
Insurance Company (the "Company") on November 8, 1994, pursuant to the
provisions of California law, as a segregated asset account of the Company. The
separate account meets the definition of a "separate account" under the federal
securities laws and is registered with the Securities and Exchange Commission
(the "SEC") as a unit investment trust under the Investment Company Act of 1940.
This registration does not involve supervision of the management of the separate
account or the Company by the SEC.
The assets of the separate account are the property of the Company.
However, the assets of the separate account, equal to its reserves and other
contract liabilities, are not chargeable with liabilities arising out of any
other business the Company may conduct. Income, gains, and losses, whether or
not realized, from assets allocated to the separate account are credited to or
charged against the separate account without regard to other income, gains, or
losses of the Company.
The separate account is divided into Variable Portfolios, with the assets
of each Variable Portfolio invested in the shares of one of the underlying
funds. The Company does not guarantee the investment performance of the separate
account, its Variable Portfolios or the underlying funds. Values allocated to
the separate account and the amount of variable Income Payments will vary with
the values of shares of the underlying funds, and are also reduced by contract
charges.
The basic objective of a variable annuity contract is to provide variable
Income Payments which will be to some degree responsive to changes in the
economic environment, including inflationary forces and changes in rates of
return available from various types of investments. The Contract is designed to
seek to accomplish this objective by providing that variable Income Payments
will reflect the investment performance of the separate account with respect to
amounts allocated to it both before and after the Annuity Date. Since the
separate account is always fully invested in shares of the underlying funds, its
investment performance reflects the investment performance of those entities.
The values of such shares held by the separate account fluctuate and are subject
to the risks of changing economic conditions as well as the risk inherent in the
ability of the underlying funds' managements to make necessary changes in their
funds to anticipate changes in economic conditions. Therefore, the owner bears
the entire investment risk that the basic objectives of the contract may not be
realized, and that the adverse effects of inflation may not be lessened. There
can be no assurance that the aggregate amount of variable Income Payments will
equal or exceed the Purchase Payments made with respect to a particular account
for the reasons described above, or because of the premature death of an
Annuitant.
Another important feature of the contract related to its basic objective
is the Company's promise that the dollar amount of variable Income Payments made
during the lifetime of the Annuitant will not be adversely affected by the
actual mortality experience of the Company or by the actual expenses incurred by
the Company in excess of expense deductions provided for in the Contract
(although the Company does not guarantee the amounts of the variable
3
<PAGE> 38
Income Payments).
GENERAL ACCOUNT
The General Account is made up of all of the general assets of the Company
other than those allocated to the separate account or any other segregated asset
account of the Company. A Purchase Payment may be allocated to the one-year
fixed investment option and/or the one year DCA fixed account available in
connection with the general account, as elected by the owner at the time of
purchasing a contract or upon making a subsequent payment. Assets supporting
amounts allocated to the one-year fixed investment option and/or the one-year
DCA account become part of the Company's general account assets and are
available to fund the claims of all classes of customers of the Company, as well
as of its creditors. Accordingly, all of the Company's assets held in the
general account will be available to fund the Company's obligations under the
contracts as well as such other claims.
The Company will invest the assets of the general account in the manner
chosen by the Company and allowed by applicable state laws regarding the nature
and quality of investments that may be made by life insurance companies and the
percentage of their assets that may be committed to any particular type of
investment. In general, these laws permit investments, within specified limits
and subject to certain qualifications, in federal, state and municipal
obligations, corporate bonds, preferred and common stocks, real estate
mortgages, real estate and certain other investments.
PERFORMANCE DATA
From time to time the separate account may advertise the Cash Management
Portfolio's "yield" and "effective yield." Both yield figures are based on
historical earnings and are not intended to indicate future performance. The
"yield" of the Cash Management Portfolio refers to the net income generated for
a contract funded by an investment in the Cash Management Portfolio (which
invests in shares of the Cash Management Portfolio of SunAmerica Series Trust)
over a seven-day period (which period will be stated in the advertisement). This
income is then "annualized." That is, the amount of income generated by the
investment during that week is assumed to be generated each week over a 52-week
period and is shown as a percentage of the investment. The "effective yield" is
calculated similarly but, when annualized, the income earned by an investment in
the Cash Management Portfolio is assumed to be reinvested at the end of each
seven day period. The "effective yield" will be slightly higher than the "yield"
because of the compounding effect of this assumed reinvestment. Neither the
yield nor the effective yield takes into consideration the effect of any capital
changes that might have occurred during the seven day period, nor do they
reflect the impact of premium taxes. 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" date for
its other Variable
4
<PAGE> 39
Portfolios. Like the yield figures described above, total return figures are
based on historical data and are not intended to indicate future performance.
The "total return" is a computed rate of return that, when compounded annually
over a stated period of time and applied to a hypothetical initial investment in
a Variable Portfolio made at the beginning of the period, will produce the same
contract value at the end of the period that the hypothetical investment would
have produced over the same period (assuming a complete redemption of the
contract at the end of the period.) Recurring contract charges are reflected in
the total return figures in the same manner as they are reflected in the yield
data for contracts funded through the Cash Management Portfolio.
For periods starting prior to the date the contracts were first offered to
the public, the total return data for the Variable Portfolios of the separate
account will be derived from the performance of the corresponding underlying
funds of Anchor Series Trust and SunAmerica Series Trust, modified to reflect
the charges and expenses as if the separate account Variable Portfolio had been
in existence since the inception date of each respective Anchor Series Trust and
SunAmerica Series Trust underlying fund. Thus, such performance figures should
not be construed to be actual historic performance of the relevant separate
account Variable Portfolio. Rather, they are intended to indicate the historical
performance of the corresponding underlying funds of Anchor Series Trust and
SunAmerica Series Trust, adjusted to provide direct comparability to the
performance of the Variable Portfolios after the date the contracts were first
offered to the public (which will reflect the effect of fees and charges imposed
under the contracts). Anchor Series Trust and SunAmerica Series Trust have
served since their inception as underlying investment media for separate
accounts of other insurance companies in connection with variable contracts not
having the same fee and charge schedules as those imposed under the contracts.
Performance data for the various Variable Portfolios are computed in the
manner described below.
CASH MANAGEMENT PORTFOLIO
The annualized current yield and the effective yield for the Cash
Management Portfolio for the 7 day period ending December 31, 1999 were
4.61% and 4.71%, respectively. [To be updated by Amendment]
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)/(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
5
<PAGE> 40
The value of the Accumulation Unit at the end of the period (EV) is
determined by (1) adding, to the value of the Accumulation Unit at the beginning
of the period (SV), the investment income from the underlying fund attributed to
the Accumulation Unit over the period, and (2) subtracting, from the result, the
portion of the annual mortality and expense risk and distribution expense
charges allocable to the 7 day period (obtained by multiplying the
annually-based charges by the fraction 7/365).
The current yield is then obtained by annualizing the Base Period Return:
Current Yield = (Base Period Return) x (365/7)
The Cash Management Portfolio also quotes an "effective yield" that
differs from the current yield given above in that it takes into account the
effect of dividend reinvestment in the underlying fund. The effective yield,
like the current yield, is derived from the Base Period Return over a 7 day
period. However, the effective yield accounts for dividend reinvestment by
compounding the current yield according to the formula:
Effective Yield = [(Base Period Return + 1)365/7 - 1]
The yield quoted should not be considered a representation of the yield of
the Cash Management Portfolio in the future since the yield is not fixed. Actual
yields will depend on the type, quality and maturities of the investments held
by the underlying fund and changes in interest rates on such investments.
Yield information may be useful in reviewing the performance of the Cash
Management Portfolio and for providing a basis for comparison with other
investment alternatives. However, the Cash Management Portfolio's yield
fluctuates, unlike bank deposits or other investments that typically pay a fixed
yield for a stated period of time.
OTHER VARIABLE PORTFOLIOS
The Variable Portfolios of the separate account other than the Cash
Management Portfolio compute their performance data as "total return".
The total returns of the various Variable Portfolios for 1 year and since
each Variable Portfolio's inception date are shown below.
These rates of return do not reflect election of the EstatePlus feature.
The rates of return would be lower if the feature were included in the
calculations. The total return figures are based on historical data and are not
intended to indicate future performance.
6
<PAGE> 41
VARIABLE ANNUITY ACCOUNT FOUR
STANDARDIZED PERFORMANCE
TOTAL ANNUAL RETURN (IN PERCENT)
FOR PERIOD ENDING
DECEMBER 31, 1999
[To be updated by Amendment]
<TABLE>
<CAPTION>
SINCE
PORTFOLIO INCEPTION INCEPTION 1 YEAR 3 YEAR
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Appreciation 08/27/96 32.91 65.37 34.98
Government & Quality Bond 09/16/96 4.55 -3.10 3.96
Growth 09/12/96 28.17 25.02 26.81
Natural Resources 09/12/96 2.39 39.46 0.74
Aggressive Growth 08/29/96 33.47 81.89 32.53
Alliance Growth 09/12/96 38.95 31.09 36.51
Asset Allocation 09/16/96 11.74 7.83 9.59
Blue Chip Growth* N/A N/A N/A N/A
Corporate Bond 09/23/96 4.25 -3.31 3.30
Davis Venture Value 08/27/96 21.75 14.38 19.22
"Dogs" of Wall Street 04/01/98 -5.90 -8.49 N/A
Federated Value 09/16/96 18.45 4.61 16.29
Global Bond 09/04/96 6.00 -2.48 4.89
Global Equities 08/27/96 20.79 28.96 20.92
Goldman Sachs Research* N/A N/A N/A N/A
Growth-Income 09/06/96 32.08 28.08 29.58
Growth Opportunities* N/A N/A N/A N/A
High Yield Bond 09/23/96 5.56 4.92 4.17
International Diversified Equities 09/12/96 15.17 22.68 14.48
International Growth & Income* N/A N/A N/A N/A
MFS Growth & Income* N/A N/A N/A N/A
MFS Mid-Cap Growth* N/A N/A N/A N/A
Putnam Growth* N/A N/A N/A N/A
SunAmerica Balanced 09/16/96 22.41 19.56 21.63
Technology* N/A N/A N/A N/A
Telecom Utility 09/16/96 13.08 0.25 11.73
Worldwide High Income 08/27/96 5.56 17.48 2.98
</TABLE>
*This portfolio was not available for sale in this product until December 29,
2000.
Total return figures are based on historical data and are not intended to
indicate future performance.
VARIABLE ANNUITY ACCOUNT FOUR
HYPOTHETICAL ADJUSTED HISTORICAL PERFORMANCE
TOTAL ANNUAL RETURN (IN PERCENT)
FOR PERIOD ENDING
DECEMBER 31, 1999
[To be updated by Amendment]
<TABLE>
<CAPTION>
FUND SINCE FUND
PORTFOLIO INCEPTION INCEPTION 1 YEAR 5 YEAR 10 YEAR
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Capital Appreciation 03/23/87 18.38 65.37 32.06 21.76
Government & Quality Bond 09/05/84 7.39 -3.10 6.01 5.86
Growth 09/05/84 14.90 25.01 25.59 15.71
Natural Resources 01/04/88 5.88 39.46 5.85 4.46
Aggressive Growth 06/03/96 28.17 81.89 N/A N/A
Alliance Growth 02/09/93 25.76 31.09 35.59 N/A
Asset Allocation 07/01/93 11.08 7.83 13.91 N/A
Blue Chip Growth* N/A N/A N/A N/A N/A
Corporate Bond 07/01/93 3.81 -3.31 5.64 N/A
Davis Venture Value 10/28/94 21.93 14.38 23.05 N/A
"Dogs" of Wall Street 04/01/98 -5.90 -8.49 N/A N/A
Federated Value 06/03/96 15.77 4.61 N/A N/A
Global Bond 07/01/93 5.41 -2.48 7.57 N/A
Global Equities 02/09/93 15.23 28.96 18.48 N/A
Goldman Sachs Research* N/A N/A N/A N/A N/A
Growth-Income 02/09/93 20.38 28.08 28.55 N/A
Growth Opportunities* N/A N/A N/A N/A N/A
High Yield Bond 02/09/93 5.93 4.92 7.49 N/A
International Diversified Equities 10/28/94 10.70 22.68 11.91 N/A
International Growth & Income 06/02/97 14.16 22.68 N/A N/A
MFS Growth & Income 02/09/93 13.31 4.36 19.12 N/A
MFS Mid-Cap Growth 04/01/99 63.06 N/A N/A N/A
Putnam Growth 02/09/93 18.20 27.76 26.38 N/A
SunAmerica Balanced 06/03/96 20.85 19.56 N/A N/A
Technology* N/A N/A N/A N/A N/A
Telecom Utility 06/03/96 12.22 0.25 N/A N/A
Worldwide High Income 10/28/94 9.10 17.48 9.95 N/A
</TABLE>
*This portfolio was not available for sale during the December 31, 1999,
fiscal year of the Trust.
Total return for a Variable Portfolio represents a single computed annual
rate of return that, when compounded annually over a specified time period (one,
five, and ten years, or since inception) and applied to a hypothetical initial
investment in a contract funded by that Variable Portfolio made at the beginning
of the period, will produce the same contract value at the end of the period
that the hypothetical investment would have produced over the same period. The
total rate of return (T) is computed so that it satisfies the formula:
P(1+T)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1, 5, or 10 year period as of the
end of the period (or fractional portion thereof).
7
<PAGE> 42
The total return figures reflect the effect of recurring charges, as
discussed herein. Recurring charges are taken into account in a manner similar
to that used for the yield computations for the Cash Management Portfolio,
described above. As with the Cash Management Portfolio yield figures, total
return figures are derived from historical data and are not intended to be a
projection of future performance.
INCOME PAYMENTS
INITIAL MONTHLY INCOME PAYMENTS
The initial Income Payment is determined by applying separately that
portion of the contract value allocated to the fixed investment option and the
Variable Portfolio(s), less any premium tax, and then applying it to the annuity
table specified in the contract for fixed and variable Income Payments. Those
tables are based on a set amount per $1,000 of proceeds applied. The appropriate
rate must be determined by the sex (except where, as in the case of certain
Qualified contracts and other employer-sponsored retirement plans, such
classification is not permitted) and age of the Annuitant and designated second
person, if any.
The dollars applied are then divided by 1,000 and the result multiplied by
the appropriate annuity factor appearing in the table to compute the amount of
the first monthly Income Payment. In the case of a variable annuity, that amount
is divided by the value of an Annuity Unit as of the Annuity Date to establish
the number of Annuity Units representing each variable Income Payment. The
number of Annuity Units determined for the first variable Income Payment remains
constant for the second and subsequent monthly variable Income Payments,
assuming that no reallocation of contract values is made.
SUBSEQUENT MONTHLY PAYMENTS
For fixed Income Payments, the amount of the second and each subsequent
monthly Income Payment is the same as that determined above for the first
monthly payment.
For variable Income Payments, the amount of the second and each subsequent
monthly Income Payment is determined by multiplying the number of Annuity Units,
as determined in connection with the determination of the initial monthly
payment, above, by the Annuity Unit value as of the day preceding the date on
which each Income Payment is due.
ANNUITY UNIT VALUES
The value of an Annuity Unit is determined independently for each Variable
Portfolio.
8
<PAGE> 43
The annuity tables contained in the contract are based on a 3.5% per annum
assumed investment rate. If the actual net investment rate experienced by a
Variable Portfolio exceed 3.5%, variable Income Payments derived from
allocations to that Variable Portfolio will increase over time. Conversely, if
the actual rate is less than 3.5%, variable Income Payments will decrease over
time. If the net investment rate equals 3.5%, the variable Income Payments will
remain constant. If a higher assumed investment rate had been used, the initial
monthly payment would be higher, but the actual net investment rate would also
have to be higher in order for Income Payments to increase (or not to decrease).
The payee receives the value of a fixed number of Annuity Units each
month. The value of a fixed number of Annuity Units will reflect the investment
performance of the Variable Portfolios elected, and the amount of each Income
Payment will vary accordingly.
For each Variable Portfolio, the value of an Annuity Unit is determined by
multiplying the Annuity Unit value for the preceding month by the Net Investment
Factor for the month for which the Annuity Unit value is being calculated. The
result is then multiplied by a second factor which offsets the effect of the
assumed net investment rate of 3.5% per annum which is assumed in the annuity
tables contained in the contract.
NET INVESTMENT FACTOR
The Net Investment Factor ("NIF") is an index applied to measure the net
investment performance of a Variable Portfolio from one day to the next. The NIF
may be greater or less than or equal to one; therefore, the value of an Annuity
Unit may increase, decrease or remain the same.
The NIF for any Variable Portfolio for a certain month is determined by
dividing (a) by (b) where:
(a) is the Accumulation Unit value of the Variable Portfolio determined
as of the end of that month, and
(b) is the Accumulation Unit value of the Variable Portfolio determined
as of the end of the preceding month.
The NIF for a Variable Portfolio for a given month is a measure of the net
investment performance of the Variable Portfolio from the end of the prior month
to the end of the given month. A NIF of 1.000 results from no change in the
value of the Variable Portfolio; a NIF greater than 1.000 results in from
increase in the value of the Variable Portfolio; and a NIF less than 1.000
results from a decrease in the value of the Variable Portfolio. The NIF is
increased (or decreased) in accordance with the increases (or decreases,
respectively) in the value of a share of the underlying fund in which the
Variable Portfolio invests; it is also reduced by separate account asset
charges.
9
<PAGE> 44
ILLUSTRATIVE EXAMPLE
Assume that one share of a given Variable Portfolio had an Accumulation
Unit value of $11.46 as of the close of the New York Stock Exchange ("NYSE") on
the last business day in September; that its Accumulation Unit value had been
$11.44 at the close of the NYSE on the last business day at the end of the
previous month. The NIF for the month of September is:
NIF = ($11.46/$11.44)
= 1.00174825
ILLUSTRATIVE EXAMPLE
The change in Annuity Unit value for a Variable Portfolio from one month
to the next is determined in part by multiplying the Annuity Unit value at the
prior month end by the NIF for that Variable Portfolio for the new month. In
addition, however, the result of that computation must also be multiplied by an
additional factor that takes into account, and neutralizes, the assumed
investment rate of 3.5 percent per annum upon which the Income Payment tables
are based. For example, if the net investment rate for a Variable Portfolio
(reflected in the NIF) were equal to the assumed investment rate, the variable
Income Payments should remain constant (i.e., the Annuity Unit value should not
change). The monthly factor that neutralizes the assumed investment rate of 3.5
percent per annum is:
1/[(1.035)(1/12)] = 0.99713732
In the example given above, if the Annuity Unit value for the Variable
Portfolio was $10.103523 on the last business day in August, the Annuity Unit
value on the last business day in September would have been:
$10.103523 x 1.00174825 x 0.99713732 = $10.092213
VARIABLE INCOME PAYMENTS
ILLUSTRATIVE EXAMPLE
Assume that a male owner, P, owns a contract in connection with which P
has allocated all of his contract value to a single Variable Portfolio. P is
also the sole Annuitant and, at age 60, has elected to annuitize his contract
under Option 4, a Life Annuity With 120 Monthly Payments Guaranteed. As of the
last valuation preceding the Annuity Date, P's Account was credited with
7543.2456 Accumulation Units each having a value of $15.432655, (i.e., P's
account value is equal to 7543.2456 x $15.432655 = $116,412.31). Assume also
that the Annuity Unit value for the Variable Portfolio on that same date is
$13.256932, and that the Annuity Unit value on the day immediately prior to the
second Income Payment date is
10
<PAGE> 45
$13.327695.
P's first variable Income Payment is determined from the annuity rate tables in
P's contract, using the information assumed above. From the tables, which supply
monthly Income Payments for each $1,000 of applied contract value, P's first
variable Income Payment is determined by multiplying the monthly installment of
$5.42 (Option 4v table, male Annuitant age 60 at the Annuity Date) by the result
of dividing P's account value by $1,000:
First Payment = $5.42 x ($116,412.31/$1,000) = $630.95
The number of P's Annuity Units (which will be fixed; i.e., it will not
change unless he transfers his Annuity Units to Annuity Units of another
Variable Portfolio) is also determined at this time and is equal to the amount
of the first variable Income Payment divided by the value of an Annuity Unit on
the day immediately prior to annuitization:
Annuity Units = $630.95/$13.256932 = 47.593968
P's second variable Income Payment is determined by multiplying the number
of Annuity Units by the Annuity Unit value as of the day immediately prior to
the second payment due date:
Second Payment = 47.593968 x $13.327695 = $634.32
The third and subsequent variable Income Payments are computed in a manner
similar to the second variable Income Payment.
Note that the amount of the first variable Income Payment depends on the
contract value in the relevant Variable Portfolio on the Annuity Date and thus
reflects the investment performance of the Variable Portfolio net of fees and
charges during the Accumulation Phase. The amount of that payment determines the
number of Annuity Units, which will remain constant during the Annuity Phase
(assuming no transfers from the Variable Portfolio). The net investment
performance of the Variable Portfolio during the Annuity Phase is reflected in
continuing changes during this phase in the Annuity Unit value, which determines
the amounts of the second and subsequent variable Income Payments.
TAXES
GENERAL
Section 72 of the Internal Revenue Code of 1986, as amended (the "Code")
governs taxation of annuities in general. An owner is not taxed on increases in
the value of a contract until distribution occurs, either in the form of a
non-annuity distribution or as income payments under the annuity option elected.
For a lump sum payment received as a total surrender (total redemption), the
recipient is taxed on the portion of the payment that exceeds the cost basis of
11
<PAGE> 46
the contract. For a payment received as a withdrawal (partial redemption),
federal tax liability is determined on a last-in, first-out basis, meaning
taxable income is withdrawn before the cost basis of the contract is withdrawn.
For contracts issued in connection with Nonqualified plans, the cost basis is
generally the Purchase Payments, while for contracts issued in connection with
Qualified plans there may be no cost basis. The taxable portion of the lump sum
payment is taxed at ordinary income tax rates. Tax penalties may also apply.
For income payments, the taxable portion is determined by a formula which
establishes the ratio that the cost basis of the contract bears to the total
value of income payments for the term of the annuity contract. The taxable
portion is taxed at ordinary income tax rates. Owners, Annuitants and
Beneficiaries under the contracts should seek competent financial advice about
the tax consequences of distributions under the retirement plan under which the
contracts are purchased.
The Company is taxed as a life insurance company under the Code. For
federal income tax purposes, the separate account is not a separate entity from
the Company and its operations form a part of the Company.
WITHHOLDING TAX ON DISTRIBUTIONS
The Code generally requires the Company (or, in some cases, a plan
administrator) to withhold tax on the taxable portion of any distribution or
withdrawal from a contract. For "eligible rollover distributions" from contracts
issued under certain types of Qualified plans, 20% of the distribution must be
withheld, unless the payee elects to have the distribution "rolled over" to
another eligible plan in a direct "trustee to trustee" transfer. This
requirement is mandatory and cannot be waived by the owner. Withholding on other
types of distributions can be waived.
An "eligible rollover distribution" is the estimated taxable portion of
any amount received by a covered employee from a plan qualified under Section
401(a) or 403(a) of the Code, or from a tax-sheltered annuity qualified under
Section 403(b) of the Code (other than (1) income payments for the life (or life
expectancy) of the employee, or joint lives (or joint life expectancies) of the
employee and his or her designated Beneficiary, or for a specified period of ten
years or more; and (2) distributions required to be made under the Code).
Failure to "roll over" the entire amount of an eligible rollover distribution
(including an amount equal to the 20% portion of the distribution that was
withheld) could have adverse tax consequences, including the imposition of a
penalty tax on premature withdrawals, described later in this section.
Withdrawals or distributions from a contract other than eligible rollover
distributions are also subject to withholding on the estimated taxable portion
of the distribution, but the owner may elect in such cases to waive the
withholding requirement. If not waived, withholding is imposed (1) for periodic
payments, at the rate that would be imposed if the payments were wages, or (2)
for other distributions, at the rate of 10%. If no withholding exemption
certificate is in effect for the payee, the rate under (1) above is computed by
treating the payee as a married individual claiming 3 withholding exemptions.
12
<PAGE> 47
DIVERSIFICATION - SEPARATE ACCOUNT INVESTMENTS
Section 817(h) of the Code imposes certain diversification standards on
the underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not adequately
diversified, in accordance with regulations prescribed by the United States
Treasury Department ("Treasury Department"). Disqualification of the contract as
an annuity contract would result in imposition of federal income tax to the
owner with respect to earnings allocable to the contract prior to the receipt of
payments under the contract. The Code contains a safe harbor provision which
provides that annuity contracts such as the contracts meet the diversification
requirements if, as of the close of each calendar quarter, the underlying assets
meet the diversification standards for a regulated investment company, and no
more than 55% of the total assets consist of cash, cash items, U.S. government
securities and securities of other regulated investment companies.
The Treasury Department has issued regulations which establish
diversification requirements for the investment portfolios underlying variable
contracts such as the contracts. The regulations amplify the diversification
requirements for variable contracts set forth in the Code and provide an
alternative to the safe harbor provision described above. Under the regulations
an investment portfolio will be deemed adequately diversified if (1) no more
than 55% of the value of the total assets of the portfolio is represented by any
one investment; (2) no more than 70% of the value of the total assets of the
portfolio is represented by any two investments; (3) no more than 80% of the
value of the total assets of the portfolio is represented by any three
investments; and (4) no more than 90% of the value of the total assets of the
portfolio is represented by any four investments. For purposes of determining
whether or not the diversification standards imposed on the underlying assets of
variable contracts by Section 817(h) of the Code have been met, "each United
States government agency or instrumentality shall be treated as a separate
issuer."
MULTIPLE CONTRACTS
Multiple annuity contracts which are issued within a calendar year to the
same contract owner by one company or its affiliates are treated as one annuity
contract for purposes of determining the tax consequences of any distribution.
Such treatment may result in adverse tax consequences including more rapid
taxation of the distributed amounts from such multiple contracts. The Company
believes that Congress intended to affect the purchase of multiple deferred
annuity contracts which may have been purchased to avoid withdrawal income tax
treatment. Owners should consult a tax adviser prior to purchasing more than one
annuity contract in any calendar year.
TAX TREATMENT OF ASSIGNMENTS
An assignment of a Contract may have tax consequences, and may also be
prohibited by ERISA in some circumstances. Owners should therefore consult
competent legal advisers should they wish to assign their contracts.
PARTIAL 1035 EXCHANGES
Section 1035 of the Code provides that an annuity contract may be
exchanged in a tax-free transaction for another annuity contract. Historically,
it was presumed that only the exchange of an entire contract, as opposed to a
partial exchange, would be accorded tax-free status. In 1998 in Conway vs.
Commissioner, the Tax Court held that the direct transfer of a portion of an
annuity contract into another annuity contract qualified as a non-taxable
exchange. On November 22, 1999, the Internal Revenue Service filed an Action on
Decision which indicated that it acquiesced in the Tax Court decision in
Conway. However, in its acquiescence with the decision of the Tax Court, the
Internal Revenue Service stated that it will challenge transactions where
taxpayers enter into a series of partial exchanges and annuitizations as part
of a design to avoid application of the 10% premature distribution penalty or
other limitations imposed on annuity contracts under Section 72 of the Code. In
the absence of further guidance from the Internal Revenue Service it is unclear
what specific types of partial exchange designs and transactions will be
challenged by the Internal Revenue Service. Due to the uncertainty in this area
owners should seek their own tax advice.
13
<PAGE> 48
QUALIFIED PLANS
The contracts offered by this prospectus are designed to be suitable for
use under various types of Qualified plans. Taxation of owners in each Qualified
plan varies with the type of plan and terms and conditions of each specific
plan. Owners, Annuitants and Beneficiaries are cautioned that benefits under a
Qualified plan may be subject to the terms and conditions of the plan,
regardless of the terms and conditions of the contracts issued pursuant to the
plan.
Following are general descriptions of the types of Qualified plans with
which the contracts may be used. Such descriptions are not exhaustive and are
for general information purposes only. The tax rules regarding Qualified plans
are very complex and will have differing applications depending on individual
facts and circumstances. Each purchaser should obtain competent tax advice prior
to purchasing a contract issued under a Qualified plan.
Contracts issued pursuant to Qualified plans include special provisions
restricting contract provisions that may otherwise be available and described in
this prospectus. Generally, contracts issued pursuant to Qualified plans are not
transferable except upon surrender or annuitization. Various penalty and excise
taxes may apply to contributions or distributions made in violation of
applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from Qualified contracts.
(a) H.R. 10 PLANS
Section 401 of the Code permits self-employed individuals to
establish Qualified plans for themselves and their employees, commonly
referred to as "H.R.10" or "Keogh" Plans. Contributions made to the plan
for the benefit of the employees will not be included in the gross income
of the employees until distributed from the plan. The tax consequences to
owners may vary depending upon the particular plan design. However, the
Code places limitations and restrictions on all plans on such items as:
amounts of allowable contributions; form, manner and timing of
distributions; vesting and nonforfeitability of interests;
nondiscrimination in eligibility and participation; and the tax treatment
of distributions, withdrawals and surrenders. Purchasers of contracts for
use with an H.R. 10 Plan should obtain competent tax advice as to the tax
treatment and suitability of such an investment.
(b) TAX-SHELTERED ANNUITIES
Section 403(b) of the Code permits the purchase of "tax-sheltered
annuities" by public 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
14
<PAGE> 49
employee should obtain competent tax advice as to the tax treatment and
suitability of such an investment.
(c) INDIVIDUAL RETIREMENT ANNUITIES
Section 408(b) of the Code permits eligible individuals to
contribute to an individual retirement program known as an "Individual
Retirement Annuity" ("IRA"). Under applicable limitations, certain amounts
may be contributed to an IRA which will be deductible from the
individual's gross income. These IRAs are subject to limitations on
eligibility, contributions, transferability and distributions. Sales of
contracts for use with IRAs are subject to special requirements imposed by
the Code, including the requirement that certain informational disclosure
be given to persons desiring to establish an IRA. Purchasers of contracts
to be qualified as IRAs should obtain competent tax advice as to the tax
treatment and suitability of such an investment.
(d) ROTH IRAS
Section 408A 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 resulting income tax may be spread over four years if
the conversion occurs before January 1, 1999. If and when Contracts are
made available for use with Roth IRAs they may be subject to special
requirements imposed by the Internal Revenue Service. Purchasers of the
Contracts for this purpose will be provided with such supplementary
information as may be required by the Internal Revenue Service or other
appropriate agency.
(e) CORPORATE PENSION AND PROFIT-SHARING PLANS
Sections 401(a) and 401(k) of the Code permit corporate employers to
establish various types of retirement plans for employees. These
retirement plans may permit the purchase of the contracts to provide
benefits under the plan. Contributions to the plan for the benefit of
employees will not be includible in the gross income of the employee until
distributed from the plan. The tax consequences to owners may vary
depending upon the particular plan design. However, the Code places
limitations on all plans on such items as amount of allowable
contributions; form, manner and timing of distributions; vesting and
nonforfeitability of interests; nondiscrimination in eligibility and
participation; and the tax treatment of distributions, withdrawals and
surrenders. Purchasers of contracts for use with corporate pension or
profit sharing plans should obtain competent tax advice as to the tax
treatment and suitability of such an investment.
15
<PAGE> 50
(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.
DISTRIBUTION OF CONTRACTS
The contracts are offered on a continuous basis through SunAmerica
Capital Services, Inc., located at 733 Third Avenue, 4th Floor, New York, New
York 10017. SunAmerica Capital Services, Inc. is registered as a broker-dealer
under the Securities Exchange Act of 1934, as amended, and is a member of the
National Association of Securities Dealers, Inc. The Company and SunAmerica
Capital Services, Inc. are each an indirect wholly owned subsidiary of
SunAmerica Inc. No underwriting fees are paid in connection with the
distribution of the contracts.
Contracts are offered on a continuous basis.
FINANCIAL STATEMENTS
[To be updated by Amendment]
The audited consolidated financial statements of the Company as of
December 31, 1999, December 31, 1998, and September 30, 1998, and for the year
ended December 31, 1999, for the three months ended December 31, 1998, and for
each of the two fiscal years in the period ended September 30, 1998 are
presented in this Statement of Additional Information. Effective December 31,
1998, the Company changed its fiscal year from September 30 to December 31. 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. Additionally, effective December 31, 1999, the separate account
changed its fiscal year end from September 30 to December 31. Reflecting this
change, the interim financial statements of Variable Annuity Account Four as of
and for the three months ended December 31, 1999, and as of September 30, 1999
and for each of the two years in the period ended September 30, 1999 are
included in this Statement of Additional Information.
PricewaterhouseCoopers LLP, 21650 Oxnard Street, Suite 1900, Woodland
Hills, California 91367, serves as the independent accountants for the Separate
Account and the Company. The financial
16
<PAGE> 51
statements referred to above 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.
17
<PAGE> 52
Report of Independent Accountants
To the Board of Directors and Shareholder of
Anchor National Life Insurance Company:
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income and comprehensive income and of cash flows
present fairly, in all material respects, the financial position of Anchor
National Life Insurance Company and its subsidiaries (the "Company") at December
31, 1999, December 31, 1998, and September 30, 1998, and the results of their
operations and their cash flows for the year ended December 31, 1999, for the
three months ended December 31, 1998 and for each of the two fiscal years in the
period ended September 30, 1998, in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Los Angeles, California
January 31, 2000
18
<PAGE> 53
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31, December 31, September 30,
1999 1998 1998
--------------- --------------- ---------------
<S> <C> <C> <C>
ASSETS
Investments:
Cash and short-term investments $ 475,162,000 $ 3,303,454,000 $ 333,735,000
Bonds, notes and redeemable
preferred stocks available for sale,
at fair value (amortized cost:
December 1999, $4,155,728,000;
December 1998, $4,252,740,000;
September 1998, $1,934,863,000) 3,953,169,000 4,248,840,000 1,954,754,000
Mortgage loans 674,679,000 388,780,000 391,448,000
Policy loans 260,066,000 320,688,000 11,197,000
Separate account seed money 141,499,000 --- ---
Common stocks available for sale,
at fair value (cost: December 1999,
$0; December 1998, $1,409,000;
September 1998, $115,000) --- 1,419,000 169,000
Partnerships 4,009,000 4,577,000 4,403,000
Real estate 24,000,000 24,000,000 24,000,000
Other invested assets 19,385,000 15,185,000 15,036,000
--------------- --------------- ---------------
Total investments 5,551,969,000 8,306,943,000 2,734,742,000
Variable annuity assets held in separate
accounts 19,949,145,000 13,767,213,000 11,133,569,000
Accrued investment income 60,584,000 73,441,000 26,408,000
Deferred acquisition costs 1,089,979,000 866,053,000 539,850,000
Receivable from brokers for sales of
securities 54,760,000 22,826,000 23,904,000
Income taxes currently receivable --- --- 5,869,000
Deferred income taxes 53,445,000 --- ---
Other assets 114,612,000 109,857,000 85,926,000
--------------- --------------- ---------------
TOTAL ASSETS $26,874,494,000 $23,146,333,000 $14,550,268,000
=============== =============== ===============
</TABLE>
See accompanying notes
19
<PAGE> 54
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEET (Continued)
<TABLE>
<CAPTION>
December 31, December 31, September 30,
1999 1998 1998
---------------- ---------------- ----------------
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDER'S EQUITY
Reserves, payables and accrued liabilities:
Reserves for fixed annuity contracts $ 3,254,895,000 $ 5,500,157,000 $ 2,189,272,000
Reserves for universal life insurance
contracts 1,978,332,000 2,339,194,000 ---
Reserves for guaranteed investment
contracts 305,570,000 306,461,000 282,267,000
Payable to brokers for purchases of
securities 139,000 --- 50,957,000
Income taxes currently payable 23,490,000 11,123,000 ---
Modified coinsurance deposit liability 140,757,000 --- ---
Other liabilities 249,224,000 160,020,000 106,594,000
---------------- ---------------- ----------------
Total reserves, payables
and accrued liabilities 5,952,407,000 8,316,955,000 2,629,090,000
---------------- ---------------- ----------------
Variable annuity liabilities related to
separate accounts 19,949,145,000 13,767,213,000 11,133,569,000
---------------- ---------------- ----------------
Subordinated notes payable to affiliates 37,816,000 209,367,000 39,182,000
---------------- ---------------- ----------------
Deferred income taxes --- 105,772,000 95,758,000
---------------- ---------------- ----------------
Shareholder's equity:
Common Stock 3,511,000 3,511,000 3,511,000
Additional paid-in capital 493,010,000 378,674,000 308,674,000
Retained earnings 551,158,000 366,460,000 332,069,000
Accumulated other comprehensive
income (loss) (112,553,000) (1,619,000) 8,415,000
---------------- ---------------- ----------------
Total shareholder's equity 935,126,000 747,026,000 652,669,000
---------------- ---------------- ----------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 26,874,494,000 $ 23,146,333,000 $ 14,550,268,000
================ ================ ================
</TABLE>
See accompanying notes
20
<PAGE> 55
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
Years Ended September 30,
Year Ended Three Months Ended --------------------------------
December 31, 1999 December 31, 1998 1998 1997
----------------- ------------------- ------------ ---------------
<S> <C> <C> <C> <C>
Investment income $ 521,953,000 $ 54,278,000 $ 221,966,000 $ 210,759,000
------------- ------------- ------------- -------------
Interest expense on:
Fixed annuity contracts (231,929,000) (22,828,000) (112,695,000) (109,217,000)
Universal life insurance
contracts (102,486,000) --- --- ---
Guaranteed investment
contracts (19,649,000) (3,980,000) (17,787,000) (22,650,000)
Senior indebtedness (199,000) (34,000) (1,498,000) (2,549,000)
Subordinated notes payable
to affiliates (3,474,000) (853,000) (3,114,000) (3,142,000)
------------- ------------- ------------- -------------
Total interest expense (357,737,000) (27,695,000) (135,094,000) (137,558,000)
------------- ------------- ------------- -------------
NET INVESTMENT INCOME 164,216,000 26,583,000 86,872,000 73,201,000
------------- ------------- ------------- -------------
NET REALIZED INVESTMENT
GAINS (LOSSES) (19,620,000) 271,000 19,482,000 (17,394,000)
------------- ------------- ------------- -------------
Fee income:
Variable annuity fees 306,417,000 58,806,000 200,867,000 139,492,000
Net retained commissions 51,039,000 11,479,000 48,561,000 39,143,000
Asset management fees 43,510,000 8,068,000 29,592,000 25,764,000
Universal life insurance
fees 23,290,000 --- --- ---
Surrender charges 17,137,000 3,239,000 7,404,000 5,529,000
Other fees 13,999,000 1,738,000 3,938,000 3,218,000
------------- ------------- ------------- -------------
TOTAL FEE INCOME 455,392,000 83,330,000 290,362,000 213,146,000
------------- ------------- ------------- -------------
GENERAL AND ADMINISTRATIVE
EXPENSES (154,665,000) (21,993,000) (96,102,000) (98,802,000)
------------- ------------- ------------- -------------
AMORTIZATION OF DEFERRED
ACQUISITION COSTS (116,840,000) (27,070,000) (72,713,000) (66,879,000)
------------- ------------- ------------- -------------
ANNUAL COMMISSIONS (40,760,000) (6,624,000) (18,209,000) (8,977,000)
------------- ------------- ------------- -------------
PRETAX INCOME 287,723,000 54,497,000 209,692,000 94,295,000
Income tax expense (103,025,000) (20,106,000) (71,051,000) (31,169,000)
------------- ------------- ------------- -------------
NET INCOME 184,698,000 34,391,000 138,641,000 63,126,000
------------- ------------- ------------- -------------
Other comprehensive income
(loss), net of tax:
Net unrealized gains (losses)
on debt and equity securities
available for sale:
Net unrealized gains
(losses) identified in
the current period (118,669,000) (10,249,000) (4,027,000) 16,605,000
Less reclassification
adjustment for net
realized (gains) losses
included in net income 7,735,000 215,000 (5,963,000) 7,321,000
------------- ------------- ------------- -------------
OTHER COMPREHENSIVE INCOME
(LOSS) (110,934,000) (10,034,000) (9,990,000) 23,926,000
------------- ------------- ------------- -------------
COMPREHENSIVE INCOME $ 73,764,000 $ 24,357,000 $ 128,651,000 $ 87,052,000
============= ============= ============= =============
</TABLE>
See accompanying notes
21
<PAGE> 56
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION> Year Ended September 30,
Year Ended Three Months Ended -------------------------------------
December 31, 1999 December 31, 1998 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 184,698,000 $ 34,391,000 $ 138,641,000 $ 63,126,000
Adjustments to reconcile net
income to net cash provided
by operating activities:
Interest credited to:
Fixed annuity contracts 231,929,000 22,828,000 112,695,000 109,217,000
Universal life insurance
contracts 102,486,000 --- --- ---
Guaranteed investment
contracts 19,649,000 3,980,000 17,787,000 22,650,000
Net realized investment
losses (gains) 19,620,000 (271,000) (19,482,000) 17,394,000
Amortization (accretion) of
net premiums (discounts)
on investments (18,343,000) (1,199,000) 447,000 (18,576,000)
Universal life insurance
fees (23,290,000) --- --- ---
Amortization of goodwill 776,000 356,000 1,422,000 1,187,000
Provision for deferred
income taxes (100,013,000) 15,945,000 34,087,000 (16,024,000)
Change in:
Accrued investment income 9,155,000 (1,512,000) (4,649,000) (2,084,000)
Deferred acquisition costs (208,228,000) (34,328,000) (160,926,000) (113,145,000)
Other assets (5,661,000) (21,070,000) (19,374,000) (14,598,000)
Income taxes currently
payable 12,367,000 16,992,000 (38,134,000) 10,779,000
Other liabilities 49,504,000 5,617,000 (2,248,000) 14,187,000
Other, net 15,087,000 5,510,000 (5,599,000) 418,000
--------------- --------------- --------------- ---------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 289,736,000 47,239,000 54,667,000 74,531,000
--------------- --------------- --------------- ---------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of:
Bonds, notes and redeemable
preferred stocks (4,130,682,000) (392,515,000) (1,970,502,000) (2,566,211,000)
Mortgage loans (331,398,000) (4,962,000) (131,386,000) (266,771,000)
Other investments, excluding
short-term investments (227,268,000) (1,992,000) --- (75,556,000)
Sales of:
Bonds, notes and redeemable
preferred stocks 2,660,931,000 265,039,000 1,602,079,000 2,299,063,000
Other investments, excluding
short-term investments 65,395,000 142,000 42,458,000 6,421,000
Redemptions and maturities of:
Bonds, notes and redeemable
preferred stocks 1,274,764,000 37,290,000 424,393,000 376,847,000
Mortgage loans 46,760,000 7,699,000 80,515,000 25,920,000
Other investments, excluding
short-term investments 33,503,000 853,000 67,213,000 23,940,000
Cash and short-term investments
acquired in coinsurance
transaction with MBL Life
Assurance Corporation --- 3,083,211,000 --- ---
Short-term investments
transferred to First
SunAmerica Life Insurance
Company in assumption
reinsurance transaction with
MBL Life Assurance Corporation (371,634,000) --- --- ---
--------------- --------------- --------------- ---------------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES (979,629,000) 2,994,765,000 114,770,000 (176,347,000)
--------------- --------------- --------------- ---------------
</TABLE>
22
<PAGE> 57
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
<TABLE>
<CAPTION> Year Ended September 30,
Year Ended Three Months Ended -------------------------------------
December 31, 1999 December 31, 1998 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES:
Premium receipts on:
Fixed annuity contracts $ 2,016,851,000 $ 351,616,000 $ 1,512,994,000 $ 1,097,937,000
Universal life insurance
contracts 78,864,000 --- --- ---
Guaranteed investment
contracts --- --- 5,619,000 55,000,000
Net exchanges from the fixed
accounts of variable annuity
contracts (1,821,324,000) (448,762,000) (1,303,790,000) (620,367,000)
Withdrawal payments on:
Fixed annuity contracts (2,232,374,000) (41,554,000) (191,690,000) (242,589,000)
Universal life insurance
contracts (81,634,000) --- --- ---
Guaranteed investment
contracts (19,742,000) (3,797,000) (36,313,000) (198,062,000)
Claims and annuity payments on:
Fixed annuity contracts (46,578,000) (9,333,000) (40,589,000) (35,731,000)
Universal life insurance
contracts (158,043,000) --- --- ---
Net receipts from (repayments
of) other short-term
financings (129,512,000) 9,545,000 (10,944,000) 34,239,000
Net receipt/(payment) related
to a modified coinsurance
transaction 140,757,000 (170,436,000) 166,631,000 ---
Receipts from issuance of
subordinated note payable
to affiliate --- 170,436,000 --- ---
Net of capital contributions
and return of capital 114,336,000 70,000,000 --- 28,411,000
Dividends paid --- --- (51,200,000) (25,500,000)
--------------- --------------- --------------- ---------------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES (2,138,399,000) (72,285,000) 50,718,000 93,338,000
--------------- --------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH
AND SHORT-TERM INVESTMENTS (2,828,292,000) 2,969,719,000 220,155,000 (8,478,000)
CASH AND SHORT-TERM INVESTMENTS
AT BEGINNING OF PERIOD 3,303,454,000 333,735,000 113,580,000 122,058,000
--------------- --------------- --------------- ---------------
CASH AND SHORT-TERM INVESTMENTS
AT END OF PERIOD $ 475,162,000 $ 3,303,454,000 $ 333,735,000 $ 113,580,000
=============== =============== =============== ===============
SUPPLEMENTAL CASH FLOW
INFORMATION:
Interest paid on indebtedness $ 3,787,000 $ 1,169,000 $ 3,912,000 $ 7,032,000
=============== =============== =============== ===============
Net income taxes paid
(refunded) $ 190,126,000 $ (12,302,000) $ 74,932,000 $ 36,420,000
=============== =============== =============== ===============
</TABLE>
See accompanying notes
23
<PAGE> 58
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
Anchor National Life Insurance Company, including its wholly owned
subsidiaries, (the "Company") is an Arizona-domiciled life insurance
company which conducts its business through three segments: annuity
operations, asset management operations and broker-dealer operations.
Annuity operations include the sale and administration of deposit-type
insurance contracts, including fixed and variable annuities, universal
life contracts and guaranteed investment contracts. Asset management
operations, which include the distribution and management of mutual
funds, are conducted by SunAmerica Asset Management Corp. Broker-dealer
operations include the sale of securities and financial services
products, and are conducted by Royal Alliance Associates, Inc.
The Company is an indirect wholly owned subsidiary of American
International Group, Inc. ("AIG"), an international insurance and
financial services holding company. At December 31, 1998, the Company
was a wholly owned indirect subsidiary of SunAmerica Inc., a Maryland
Corporation. On January 1, 1999, SunAmerica Inc. merged with and into
AIG in a tax-free reorganization that has been treated as a pooling of
interests for accounting purposes. Thus, SunAmerica Inc. ceased to exist
on that date. However, immediately prior to the date of the merger,
substantially all of the net assets of SunAmerica Inc. were contributed
to a newly formed subsidiary of AIG named SunAmerica Holdings, Inc., a
Delaware Corporation. SunAmerica Holdings, Inc. subsequently changed its
name to SunAmerica Inc. ("SunAmerica").
The operations of the Company are influenced by many factors, including
general economic conditions, monetary and fiscal policies of the federal
government, and policies of state and other regulatory authorities. The
level of sales of the Company's financial products is influenced by many
factors, including general market rates of interest, the strength,
weakness and volatility of equity markets, and terms and conditions of
competing financial products. The Company is exposed to the typical
risks normally associated with a portfolio of fixed-income securities,
namely interest rate, option, liquidity and credit risk. The Company
controls its exposure to these risks by, among other things, closely
monitoring and matching the duration of its assets and liabilities,
monitoring and limiting prepayment and extension risk in its portfolio,
maintaining a large percentage of its portfolio in highly liquid
securities, and engaging in a disciplined process of underwriting,
reviewing and monitoring credit risk. The Company also is exposed to
market risk, as market volatility may result in reduced fee income in
the case of assets managed in mutual funds and held in separate
accounts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION: The accompanying consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles and include the accounts of the Company and all of
its wholly owned subsidiaries. All significant intercompany accounts and
transactions are eliminated in consolidation. Certain items have been
reclassified to conform to the current period's presentation.
24
<PAGE> 59
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Under generally accepted accounting principles, premiums collected on
the non-traditional life and annuity insurance products, such as those
sold by the Company, are not reflected as revenues in the Company's
statement of earnings, as they are recorded directly to policyholders
liabilities upon receipt.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and
assumptions that affect the amounts reported in the financial statements
and the accompanying notes. Actual results could differ from those
estimates.
INVESTED ASSETS: Cash and short-term investments primarily include cash,
commercial paper, money market investments, repurchase agreements and
short-term bank participations. All such investments are carried at cost
plus accrued interest, which approximates fair value, have maturities of
three months or less and are considered cash equivalents for purposes of
reporting cash flows.
Bonds, notes and redeemable preferred stocks available for sale and
common stocks are carried at aggregate fair value and changes in
unrealized gains or losses, net of tax, are credited or charged directly
to shareholder's equity. Bonds, notes and redeemable preferred stocks
are reduced to estimated net realizable value when necessary for
declines in value considered to be other than temporary. Estimates of
net realizable value are subjective and actual realization will be
dependent upon future events.
Mortgage loans are carried at amortized unpaid balances, net of
provisions for estimated losses. Policy loans are carried at unpaid
balances. Separate account seed money consists of seed money for mutual
funds used as investment vehicles for the Company's variable annuity
separate accounts and is valued at market. Limited partnerships are
accounted for by the cost method of accounting. Real estate is carried
at cost, reduced by impairment provisions. Other invested assets include
collateralized bond obligations.
Realized gains and losses on the sale of investments are recognized in
operations at the date of sale and are determined by using the specific
cost identification method. Premiums and discounts on investments are
amortized to investment income by using the interest method over the
contractual lives of the investments.
INTEREST RATE SWAP AGREEMENTS: The net differential to be paid or
received on interest rate swap agreements ("Swap Agreements") entered
into to reduce the impact of changes in interest rates is recognized
over the lives of the agreements, and such differential is classified as
Investment Income or Interest Expense in the income statement.
Initially, Swap Agreements are designated as hedges and, therefore, are
not marked to market. However, when a hedged asset/liability is sold or
repaid before the related Swap Agreement matures, the Swap Agreement is
marked to market and any gain/loss is classified with any gain/loss
realized on the disposition of the hedged asset/liability. Subsequently,
the Swap Agreement is marked to market and the resulting change in fair
value is included in Investment Income in the income
25
<PAGE> 60
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
statement. When a Swap Agreement that is designated as a hedge is
terminated before its contractual maturity, any resulting gain/loss is
credited/charged to the carrying value of the asset/liability that it
hedged and is treated as a premium/discount for the remaining life of
the asset/liability.
DEFERRED ACQUISITION COSTS: Policy acquisition costs are deferred and
amortized, with interest, in relation to the incidence of estimated
gross profits to be realized over the estimated lives of the annuity
contracts. Estimated gross profits are composed of net interest income,
net realized investment gains and losses, variable annuity fees,
universal life insurance fees, surrender charges and direct
administrative expenses. Costs incurred to sell mutual funds are also
deferred and amortized over the estimated lives of the funds obtained.
Deferred acquisition costs ("DAC") consist of commissions and other
costs that vary with, and are primarily related to, the production or
acquisition of new business.
As debt and equity securities available for sale are carried at
aggregate fair value, an adjustment is made to DAC equal to the change
in amortization that would have been recorded if such securities had
been sold at their stated aggregate fair value and the proceeds
reinvested at current yields. The change in this adjustment, net of tax,
is included with the change in accumulated other comprehensive
income/(loss) that is credited or charged directly to shareholder's
equity. DAC has been increased by $29,400,000 at December 31, 1999,
increased by $1,400,000 at December 31, 1998, and decreased by
$7,000,000 at September 30, 1998 for this adjustment.
VARIABLE ANNUITY ASSETS AND LIABILITIES: The assets and liabilities
resulting from the receipt of variable annuity premiums are segregated
in separate accounts. The Company receives administrative fees for
managing the funds and other fees for assuming mortality and certain
expense risks. Such fees are included in Variable Annuity Fees in the
income statement.
GOODWILL: Goodwill, amounting to $22,206,000 at December 31, 1999, is
amortized by using the straight-line method over periods averaging 25
years and is included in Other Assets in the balance sheet. Goodwill is
evaluated for impairment when events or changes in economic conditions
indicate that the carrying amount may not be recoverable.
CONTRACTHOLDER RESERVES: Contractholder reserves for fixed annuity
contracts, universal life insurance contracts and guaranteed investment
contracts are accounted for as investment-type contracts in accordance
with Statement of Financial Accounting Standards No. 97, "Accounting and
Reporting by Insurance Enterprises for Certain Long-Duration Contracts
and for Realized Gains and Losses from the Sale of Investments," and are
recorded at accumulated value (premiums received, plus accrued interest,
less withdrawals and assessed fees).
MODIFIED COINSURANCE DEPOSIT LIABILITY: Cash received as part of the
modified coinsurance transaction described in Note 8 is recorded as a
deposit liability.
26
<PAGE> 61
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
FEE INCOME: Variable annuity fees, asset management fees, universal life
insurance fees and surrender charges are recorded in income as earned.
Net retained commissions are recognized as income on a trade date basis.
INCOME TAXES: The Company files as a "life insurance company" under the
provisions of the Internal Revenue Code of 1986. Its federal income tax
return is consolidated with those of its direct parent, SunAmerica Life
Insurance Company (the "Parent"), and its affiliate, First SunAmerica
Life Insurance Company. Income taxes have been calculated as if the
Company filed a separate return. Deferred income tax assets and
liabilities are recognized based on the difference between financial
statement carrying amounts and income tax bases of assets and
liabilities using enacted income tax rates and laws.
RECENTLY ISSUED ACCOUNTING STANDARDS: In June 1998, the FASB issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133
addresses the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, and hedging
activities. SFAS 133 was postponed by SFAS 137, and now will be
effective for the Company as of January 1, 2001. Therefore, it is not
included in the accompanying financial statements. The Company has not
completed its analysis of the effect of SFAS 133, but management
believes that it will not have a material impact on the Company's
results of operations, financial condition or liquidity.
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information," was adopted for the
year ended December 31, 1999 and is included in Note 14 of the
accompanying financial statements.
3. FISCAL YEAR CHANGE
Effective December 31, 1998, the Company changed its fiscal year end
from September 30 to December 31. Accordingly, the consolidated
financial statements include the results of operations and cash flows
for the three-month transition period ended December 31, 1998. Such
results are not necessarily indicative of operations for a full year.
The consolidated financial statements as of and for the three months
ended December 31, 1998 were originally filed as the Company's unaudited
Transition Report on Form 10-Q.
Results for the comparable prior year period are summarized below.
<TABLE>
<CAPTION>
Three Months Ended
December 31, 1997
<S> <C>
Investment income 59,855,000
Net investment income 26,482,000
Net realized investment gains 20,935,000
Total fee income 63,984,000
Pretax income 67,654,000
Net income 44,348,000
==========
</TABLE>
27
<PAGE> 62
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. ACQUISITION
On December 31, 1998, the Company acquired the individual life business
and the individual and group annuity business of MBL Life Assurance
Corporation ("MBL Life") ("the Acquisition"), via a 100% coinsurance
transaction, for a cash purchase price of $128,420,000. As part of this
transaction, the Company acquired assets having an aggregate fair value
of $5,718,227,000, composed primarily of invested assets totaling
$5,715,010,000. Liabilities assumed in this acquisition totaled
$5,831,266,000, including $3,460,503,000 of fixed annuity reserves,
$2,308,742,000 of universal life reserves and $24,011,000 of guaranteed
investment contract reserves. The excess of the purchase price over the
fair value of net assets received amounted to $104,509,000 at December
31, 1999, after adjustment for the transfer of the New York business to
First SunAmerica Life Insurance Company (see below), and is included in
Deferred Acquisition Costs in the accompanying consolidated balance
sheet. The income statement for the year ended December 31, 1999
includes the impact of the Acquisition. On a pro forma basis, assuming
the Acquisition had been consummated on October 1, 1996, the beginning
of the prior-year periods discussed within, investment income would have
been $517,606,000 and net income would have been $158,887,000 for the
year ended September 30, 1998. For the year ended September 30, 1997,
investment income would have been $506,399,000 and net income would have
been $83,372,000.
Included in the block of business acquired from MBL Life were policies
whose owners are residents of New York State ("the New York Business").
On July 1, 1999, the New York Business was acquired by the Company's New
York affiliate, First SunAmerica Life Insurance Company ("FSA"), via an
assumption reinsurance agreement, and the remainder of the business
converted to assumption reinsurance in the Company, which superseded the
coinsurance agreement. As part of this transfer, invested assets equal
to $678,272,000, life reserves equal to $282,247,000, group pension
reserves equal to $406,118,000, and other net assets of $10,093,000 were
transferred to FSA.
The $128,420,000 purchase price was allocated between the Company and
FSA based on the estimated future gross profits of the two blocks of
business. The portion allocated to FSA was $10,000,000.
As part of the Acquisition, the Company received $242,473,000 from MBL
to pay policy enhancements guaranteed by the MBL Life rehabilitation
agreement to policyholders meeting certain requirements. A primary
requirement was that annuity policyholders must have converted their MBL
Life policy to a policy type currently offered by the Company or one of
its affiliates by December 31, 1999. The enhancements are to be credited
in four installments on January 1, 2000, June 30, 2001, June 30, 2002
and June 30, 2003, to eligible policies still active on each of those
dates. On December 31, 1999, the enhancement reserve for such payments
totaled $223,032,000, which includes interest accredited at 6.75% on the
original reserve. Of this amount, $69,836,000 was credited to
policyholders in February 2000 for the January 1, 2000 installment.
28
<PAGE> 63
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. INVESTMENTS
The amortized cost and estimated fair value of bonds, notes and
redeemable preferred stocks available for sale by major category follow:
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
-------------- --------------
<S> <C> <C>
AT DECEMBER 31, 1999:
Securities of the United States
Government $ 24,688,000 $ 22,884,000
Mortgage-backed securities 1,505,729,000 1,412,134,000
Securities of public utilities 114,933,000 107,596,000
Corporate bonds and notes 1,676,006,000 1,596,469,000
Redeemable preferred stocks 4,375,000 4,547,000
Other debt securities 829,997,000 809,539,000
-------------- --------------
Total $4,155,728,000 $3,953,169,000
============== ==============
AT DECEMBER 31, 1998:
Securities of the United States
Government $ 6,033,000 $ 6,272,000
Mortgage-backed securities 546,790,000 553,990,000
Securities of public utilities 208,074,000 205,119,000
Corporate bonds and notes 2,624,330,000 2,616,073,000
Redeemable preferred stocks 6,125,000 7,507,000
Other debt securities 861,388,000 859,879,000
-------------- --------------
Total $4,252,740,000 $4,248,840,000
============== ==============
AT SEPTEMBER 30, 1998:
Securities of the United States
Government $ 84,377,000 $ 88,239,000
Mortgage-backed securities 569,613,000 584,007,000
Securities of public utilities 108,431,000 106,065,000
Corporate bonds and notes 883,890,000 884,209,000
Redeemable preferred stocks 6,125,000 6,888,000
Other debt securities 282,427,000 285,346,000
-------------- --------------
Total $1,934,863,000 $1,954,754,000
============== ==============
</TABLE>
29
<PAGE> 64
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. INVESTMENTS (Continued)
The amortized cost and estimated fair value of bonds, notes and
redeemable preferred stocks available for sale by contractual maturity,
as of December 31, 1999, follow:
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
-------------- --------------
<S> <C> <C>
Due in one year or less $ 199,679,000 $ 199,198,000
Due after one year through
five years 552,071,000 530,289,000
Due after five years through
ten years 1,243,298,000 1,187,044,000
Due after ten years 654,951,000 624,504,000
Mortgage-backed securities 1,505,729,000 1,412,134,000
-------------- --------------
Total $4,155,728,000 $3,953,169,000
============== ==============
</TABLE>
Actual maturities of bonds, notes and redeemable preferred stocks will
differ from those shown above due to prepayments and redemptions.
30
<PAGE> 65
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. INVESTMENTS (Continued)
Gross unrealized gains and losses on bonds, notes and redeemable
preferred stocks available for sale by major category follow:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized
Gains Losses
------------- -------------
<S> <C> <C>
AT DECEMBER 31, 1999:
Securities of the United States
Government $ 47,000 $ (1,852,000)
Mortgage-backed securities 3,238,000 (96,832,000)
Securities of public utilities 13,000 (7,350,000)
Corporate bonds and notes 10,222,000 (89,758,000)
Redeemable preferred stocks 172,000 ---
Other debt securities 4,275,000 (24,734,000)
------------- -------------
Total $ 17,967,000 $(220,526,000)
============= =============
AT DECEMBER 31, 1998:
Securities of the United States
Government $ 239,000 $ ---
Mortgage-backed securities 9,398,000 (2,198,000)
Securities of public utilities 926,000 (3,881,000)
Corporate bonds and notes 22,227,000 (30,484,000)
Redeemable preferred stocks 1,382,000 ---
Other debt securities 2,024,000 (3,533,000)
------------- -------------
Total $ 36,196,000 $ (40,096,000)
============= =============
AT SEPTEMBER 30, 1998:
Securities of the United States
Government $ 3,862,000 $ ---
Mortgage-backed securities 15,103,000 (709,000)
Securities of public utilities 2,420,000 (4,786,000)
Corporate bonds and notes 31,795,000 (31,476,000)
Redeemable preferred stocks 763,000 ---
Other debt securities 5,235,000 (2,316,000)
------------- -------------
Total $ 59,178,000 $ (39,287,000)
============= =============
</TABLE>
There were no gross unrealized gains on equity securities available for
sale at December 31, 1999. Gross unrealized gains on equity securities
available for sale aggregated $10,000 and $54,000 at December 31, 1998
and September 30, 1998, respectively. There were no unrealized losses at
December 31, 1999, December 31, 1998, or September 30, 1998.
31
<PAGE> 66
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. INVESTMENTS (Continued)
Gross realized investment gains and losses on sales of investments are
as follows:
<TABLE>
<CAPTION>
Years Ended September 30,
Year Ended Three Months Ended -------------------------------
December 31, 1999 December 31, 1998 1998 1997
----------------- ------------------ ------------ ------------
<S> <C> <C> <C> <C>
BONDS, NOTES AND
REDEEMABLE PREFERRED
STOCKS:
Realized gains $ 8,333,000 $ 6,669,000 $ 28,086,000 $ 22,179,000
Realized losses (26,113,000) (5,324,000) (4,627,000) (25,310,000)
COMMON STOCKS:
Realized gains 4,239,000 12,000 337,000 4,002,000
Realized losses (11,000) (9,000) --- (312,000)
OTHER INVESTMENTS:
Realized gains --- 573,000 8,824,000 2,450,000
IMPAIRMENT WRITEDOWNS (6,068,000) (1,650,000) (13,138,000) (20,403,000)
------------ ------------ ------------ ------------
Total net realized
investment gains
and losses $(19,620,000) $ 271,000 $ 19,482,000 $(17,394,000)
============ ============ ============ ============
</TABLE>
The sources and related amounts of investment income are as follows:
<TABLE>
<CAPTION>
Years Ended September 30,
Year Ended Three Months Ended ---------------------------------
December 31,1999 December 31, 1998 1998 1997
---------------- ------------------ ------------- -------------
<S> <C> <C> <C> <C>
Short-term investments $ 61,764,000 $ 4,649,000 $ 12,524,000 $ 11,780,000
Bonds, notes and
redeemable preferred
stocks 348,373,000 39,660,000 156,140,000 163,038,000
Mortgage loans 47,480,000 7,904,000 29,996,000 17,632,000
Common stocks 7,000 --- 34,000 16,000
Real estate (525,000) 13,000 (467,000) (296,000)
Cost-method partnerships 6,631,000 352,000 24,311,000 6,725,000
Other invested assets 58,223,000 1,700,000 (572,000) 11,864,000
------------- ------------- ------------- -------------
Total investment
income $ 521,953,000 $ 54,278,000 $ 221,966,000 $ 210,759,000
============= ============= ============= =============
</TABLE>
Expenses incurred to manage the investment portfolio amounted to
$10,014,000 for the year ended December 31, 1999, $500,000 for the three
months ended December 31, 1998, $1,910,000 for the year ended September
30, 1998 and $2,050,000 for the year ended September 30, 1997, and are
included in General and Administrative Expenses in the income statement.
Investment expenses have increased significantly because the size of the
portfolio increased as a result of the Acquisition.
32
<PAGE> 67
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. INVESTMENTS (Continued)
At December 31, 1999, the following investments exceeded 10% of the
Company's consolidated shareholder's equity of $935,126,000:
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
------------ ------------
<S> <C> <C>
Provident Institutional Funds Inc.
Del Treasury Trust Fund 113,000,000 113,000,000
Salomon Smith Barney Repurchase
Agreement 97,000,000 97,000,000
------------ ------------
Total $210,000,000 $210,000,000
============ ============
</TABLE>
At December 31, 1999, mortgage loans were collateralized by properties
located in 29 states, with loans totaling approximately 36% of the
aggregate carrying value of the portfolio secured by properties located
in California and approximately 11% by properties located in New York.
No more than 8% of the portfolio was secured by properties in any other
single state.
At December 31, 1999, bonds, notes and redeemable preferred stocks
included $377,149,000 of bonds and notes not rated investment grade. The
Company had no material concentrations of non-investment-grade assets at
December 31, 1999.
At December 31, 1999, the carrying value of investments in default as to
the payment of principal or interest was $1,529,000, composed of
$870,000 of bonds and $659,000 of mortgage loans. Such nonperforming
investments had an estimated fair value of $872,000.
As a component of its asset and liability management strategy, the
Company utilizes Swap Agreements to match assets more closely to
liabilities. Swap Agreements are agreements to exchange with a
counterparty interest rate payments of differing character (for example,
variable-rate payments exchanged for fixed-rate payments) based on an
underlying principal balance (notional principal) to hedge against
interest rate changes. The Company typically utilizes Swap Agreements to
create a hedge that effectively converts floating-rate assets and
liabilities to fixed-rate instruments. At December 31, 1999, the Company
had one outstanding Swap Agreement with a notional principal amount of
$21,538,000, which matures in December 2024. The net interest paid
amounted to $215,000 for the year ended December 31, 1999, $54,000 for
the three months ended December 31, 1998, $278,000 for the year ended
September 30, 1998, and $125,000 for the year ended September 30, 1997,
and is included in Interest Expense on Guaranteed Investment Contracts
in the income statement.
At December 31, 1999, $7,418,000 of bonds, at amortized cost, were on
deposit with regulatory authorities in accordance with statutory
requirements.
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following estimated fair value disclosures are limited to
33
<PAGE> 68
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
reasonable estimates of the fair value of only the Company's financial
instruments. The disclosures do not address the value of the Company's
recognized and unrecognized nonfinancial assets (including its real
estate investments and other invested assets except for cost-method
partnerships) and liabilities or the value of anticipated future
business. The Company does not plan to sell most of its assets or settle
most of its liabilities at these estimated fair values.
The fair value of a financial instrument is the amount at which the
instrument could be exchanged in a current transaction between willing
parties, other than in a forced or liquidation sale. Selling expenses
and potential taxes are not included. The estimated fair value amounts
were determined using available market information, current pricing
information and various valuation methodologies. If quoted market prices
were not readily available for a financial instrument, management
determined an estimated fair value. Accordingly, the estimates may not
be indicative of the amounts the financial instruments could be
exchanged for in a current or future market transaction.
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable
to estimate that value:
CASH AND SHORT-TERM INVESTMENTS: Carrying value is considered to be a
reasonable estimate of fair value.
BONDS, NOTES AND REDEEMABLE PREFERRED STOCKS: Fair value is based
principally on independent pricing services, broker quotes and other
independent information.
MORTGAGE LOANS: Fair values are primarily determined by discounting
future cash flows to the present at current market rates, using expected
prepayment rates.
SEPARATE ACCOUNT SEED MONEY: Carrying value is the market value of the
underlying securities.
COMMON STOCKS: Fair value is based principally on independent pricing
services, broker quotes and other independent information.
COST-METHOD PARTNERSHIPS: Fair value of limited partnerships accounted
for by using the cost method is based upon the fair value of the net
assets of the partnerships as determined by the general partners.
VARIABLE ANNUITY ASSETS HELD IN SEPARATE ACCOUNTS: Variable annuity
assets are carried at the market value of the underlying securities.
RESERVES FOR FIXED ANNUITY CONTRACTS: Deferred annuity contracts are
assigned a fair value equal to current net surrender value. Annuitized
contracts are valued based on the present value of future cash flows at
current pricing rates.
RESERVES FOR UNIVERSAL LIFE INSURANCE CONTRACTS: Universal life and
34
<PAGE> 69
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
single life premium life contracts are assigned a fair value equal to
current net surrender value.
RESERVES FOR GUARANTEED INVESTMENT CONTRACTS: Fair value is based on the
present value of future cash flows at current pricing rates and is net
of the estimated fair value of a hedging Swap Agreement, determined from
independent broker quotes.
RECEIVABLE FROM/PAYABLE TO BROKERS FOR PURCHASES OF SECURITIES: Such
obligations represent transactions of a short-term nature for which the
carrying value is considered a reasonable estimate of fair value.
MODIFIED COINSURANCE DEPOSIT LIABILITY: Fair value is based on
discounting the liability by the appropriate cost of funds, and
therefore approximates carrying value.
VARIABLE ANNUITY LIABILITIES RELATED TO SEPARATE ACCOUNTS: Fair values
of contracts in the accumulation phase are based on net surrender
values. Fair values of contracts in the payout phase are based on the
present value of future cash flows at assumed investment rates.
SUBORDINATED NOTES PAYABLE TO AFFILIATES: Fair value is estimated based
on the quoted market prices for similar issues.
35
<PAGE> 70
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
The estimated fair values of the Company's financial instruments at
December 31, 1999, December 31, 1998 and September 30, 1998 compared
with their respective carrying values, are as follows:
<TABLE>
<CAPTION>
Carrying Fair
Value Value
--------------- ---------------
<S> <C> <C>
DECEMBER 31, 1999:
ASSETS:
Cash and short-term investments $ 475,162,000 $ 475,162,000
Bonds, notes and redeemable
preferred stocks 3,953,169,000 3,953,169,000
Mortgage loans 674,679,000 673,781,000
Separate account seed money 141,499,000 141,499,000
Common stocks --- ---
Cost-method partnerships 4,009,000 9,114,000
Variable annuity assets held in
separate accounts 19,949,145,000 19,949,145,000
Receivable from brokers for sales
of securities 54,760,000 54,760,000
LIABILITIES:
Reserves for fixed annuity contracts 3,254,895,000 3,053,660,000
Reserves for universal life insurance
contracts 1,978,332,000 1,853,442,000
Reserves for guaranteed investment
contracts 305,570,000 305,570,000
Payable to brokers for purchases
of securities 139,000 139,000
Modified coinsurance deposit
liability 140,757,000 140,757,000
Variable annuity liabilities related
to separate accounts 19,949,145,000 19,367,834,000
Subordinated notes payable to
affiliates 37,816,000 38,643,000
=============== ===============
DECEMBER 31, 1998:
ASSETS:
Cash and short-term investments $ 3,303,454,000 $ 3,303,454,000
Bonds, notes and redeemable
preferred stocks 4,248,840,000 4,248,840,000
Mortgage loans 388,780,000 411,230,000
Separate account seed money --- ---
Common stocks 1,419,000 1,419,000
Cost-method partnerships 4,577,000 12,802,000
Variable annuity assets held in
separate accounts 13,767,213,000 13,767,213,000
Receivable from brokers for sales
of securities 22,826,000 22,826,000
LIABILITIES:
Reserves for fixed annuity contracts 5,500,157,000 5,437,045,000
Reserves for universal life
insurance contracts 2,339,194,000 2,339,061,000
Reserves for guaranteed investment
contracts 306,461,000 306,461,000
Variable annuity liabilities related
to separate accounts 13,767,213,000 13,287,434,000
Subordinated notes payable to
affiliates 209,367,000 211,058,000
=============== ===============
</TABLE>
36
<PAGE> 71
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
<TABLE>
<CAPTION>
Carrying Fair
Value Value
--------------- ---------------
<S> <C> <C>
SEPTEMBER 30, 1998:
ASSETS:
Cash and short-term investments $ 333,735,000 $ 333,735,000
Bonds, notes and redeemable
preferred stocks 1,954,754,000 1,954,754,000
Mortgage loans 391,448,000 415,981,000
Separate account seed money --- ---
Common stocks 169,000 169,000
Cost-method partnerships 4,403,000 12,744,000
Variable annuity assets held in
separate accounts 11,133,569,000 11,133,569,000
Receivable from brokers for sales
of securities 23,904,000 23,904,000
LIABILITIES:
Reserves for fixed annuity contracts 2,189,272,000 2,116,874,000
Reserves for guaranteed investment
contracts 282,267,000 282,267,000
Payable to brokers for purchases
of securities 50,957,000 50,957,000
Variable annuity liabilities related
to separate accounts 11,133,569,000 10,696,607,000
Subordinated notes payable to
affiliates 39,182,000 41,272,000
=============== ===============
</TABLE>
7. SUBORDINATED NOTES PAYABLE TO AFFILIATES
At December 31, 1998, Subordinated Notes Payable to Affiliates included
a surplus note (the "Note") payable to its immediate parent, SunAmerica
Life Insurance Company (the "Parent"), for $170,436,000. On June 30,
1999, the Parent cancelled the Note and forgave the interest earned.
Funds received were reclassified to Additional Paid-in Capital in the
accompanying consolidated balance sheet.
Subordinated notes and accrued interest payable to affiliates totaled
$37,816,000 at interest rates ranging from 8% to 9% at December 31,
1999, and require principal payments of $5,400,000 in 2000, $10,000,000
in 2001 and $22,060,000 in 2002.
8. REINSURANCE
The business which was assumed from MBL Life is subject to existing
reinsurance ceded agreements. At December 31, 1998, the maximum
retention on any single life was $2,000,000, and a total credit of
$5,057,000 was taken against the life insurance reserves, representing
predominantly yearly renewable term reinsurance. In order to limit even
further the exposure to loss on any single insured and to recover an
additional portion of the benefits paid over such limits, the Company
entered into a reinsurance treaty effective January 1, 1999 under which
the Company retains no more than $100,000 of risk on any
37
<PAGE> 72
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. REINSURANCE (Continued)
one insured life. At December 31, 1999, a total reserve credit of
$3,560,000 was taken against the life insurance reserves. With respect
to these coinsurance agreements, the Company could become liable for all
obligations of the reinsured policies if the reinsurers were to become
unable to meet the obligations assumed under the respective reinsurance
agreements. The Company monitors its credit exposure with respect to
these agreements. However, due to the high credit ratings of the
reinsurers, such risks are considered to be minimal.
On August 1, 1999, the Company entered into a modified coinsurance
transaction, approved by the Arizona Department of Insurance, which
involved the ceding of approximately $6,000,000,000 of variable
annuities to ANLIC Insurance Company (Hawaii), a non-affiliated stock
life insurer. The transaction is accounted for as reinsurance for
statutory reporting purposes. As part of the transaction, the Company
received cash in the amount of $150,000,000 and recorded a corresponding
deposit liability. As payments are made to the reinsurer, the deposit
liability is relieved. The cost of this program, $3,621,000 in 1999, is
classified as General and Administrative Expenses in the income
statement.
On August 11, 1998, the Company entered into a similar modified
coinsurance transaction, approved by the Arizona Department of
Insurance, which involved the ceding of approximately $6,000,000,000 of
variable annuities to ANLIC Insurance Company (Cayman), a Cayman Islands
stock life insurance company, effective December 31, 1997. As a part of
this transaction, the Company received cash amounting to approximately
$188,700,000, and recorded a corresponding reduction of DAC related to
the coinsured annuities. As payments were made to the reinsurer, the
reduction of DAC was relieved. Certain expenses related to this
transaction were charged directly to DAC amortization in the income
statement. The net effect of this transaction in the income statement
was not material.
On December 31, 1998, the Company recaptured this business. As part of
this recapture, the Company paid cash of $170,436,000 and recorded an
increase in DAC of $167,202,000 with the balance of $3,234,000 being
recorded as DAC amortization in the income statement.
9. CONTINGENT LIABILITIES
The Company has entered into four agreements in which it has provided
liquidity support for certain short-term securities of municipalities
and non-profit organizations by agreeing to purchase such securities in
the event there is no other buyer in the short-term marketplace. In
return the Company receives a fee. The maximum liability under these
guarantees is $359,400,000. The Company's Parent currently shares in the
liabilities and fees of two of these agreements. The Parent's share in
these liabilities will increase by $150,000,000 subsequent to December
31, 1999, and the Company's share will decrease to $209,400,000.
Management does not anticipate any material future losses with respect
to these liquidity support facilities.
38
<PAGE> 73
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. CONTINGENT LIABILITIES (Continued)
The Company is involved in various kinds of litigation common to its
businesses. These cases are in various stages of development and, based
on reports of counsel, management believes that provisions made for
potential losses relating to such litigation are adequate and any
further liabilities and costs will not have a material adverse impact
upon the Company's financial position, results of operations or cash
flows.
The Company's current financial strength and counterparty credit ratings
from Standard & Poor's are based in part on a guarantee (the
"Guarantee") of the Company's insurance policy obligations by American
Home Assurance Company ("American Home"), a subsidiary of AIG, and a
member of an AIG intercompany pool, and the belief that the Company is
viewed as a strategically important member of AIG. The Guarantee is
unconditional and irrevocable, and policyholders have the right to
enforce the Guarantee directly against American Home.
The Company's current financial strength rating from Moody's is based in
part on a support agreement between the Company and AIG (the "Support
Agreement"), pursuant to which AIG has agreed that AIG will cause the
Company to maintain a policyholder's surplus of not less than $1 million
or such greater amount as shall be sufficient to enable the Company to
perform its obligations under any policy issued by it. The Support
Agreement also provides that if the Company needs funds not otherwise
available to it to make timely payment of its obligations under policies
issued by it, AIG will provide such funds at the request of the Company.
The Support Agreement is not a direct or indirect guarantee by AIG to
any person of any obligation of the Company. AIG may terminate the
Support Agreement with respect to outstanding obligations of the Company
only under circumstances where the Company attains, without the benefit
of the Support Agreement, a financial strength rating equivalent to that
held by the Company with the benefit of the support agreement.
Policyholders have the right to cause the Company to enforce its rights
against AIG and, if the Company fails or refuses to take timely action
to enforce the Support Agreement or if the Company defaults in any claim
or payment owed to such policyholder when due, have the right to enforce
the Support Agreement directly against AIG.
American Home does not publish financial statements, although it files
statutory annual and quarterly reports with the New York State Insurance
Department, where such reports are available to the public. AIG is a
reporting company under the Securities Exchange Act of 1934, and
publishes annual reports on Form 10-K and quarterly reports on Form
10-Q, which are available from the Securities and Exchange Commission.
39
<PAGE> 74
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. SHAREHOLDER'S EQUITY
The Company is authorized to issue 4,000 shares of its $1,000 par value
Common Stock. At December 31, 1999, December 31, 1998 and September 30,
1998, 3,511 shares were outstanding.
Changes in shareholder's equity are as follows:
<TABLE>
<CAPTION>
Years Ended September 30,
Year Ended Three Months Ended ---------------------------------
December 31, 1999 December 31, 1998 1998 1997
----------------- ------------------ ------------- -------------
<S> <C> <C> <C> <C>
ADDITIONAL PAID-IN
CAPITAL:
Beginning balances $ 378,674,000 $ 308,674,000 $ 308,674,000 $ 280,263,000
Reclassification of
Note by the Parent 170,436,000 --- --- ---
Return of capital (170,500,000) --- --- ---
Capital contributions
received 114,250,000 70,000,000 --- 28,411,000
Contribution of
partnership
investment 150,000 --- --- ---
------------- ------------- ------------- -------------
Ending balances $ 493,010,000 $ 378,674,000 $ 308,674,000 $ 308,674,000
============= ============= ============= =============
RETAINED EARNINGS:
Beginning balances $ 366,460,000 $ 332,069,000 $ 244,628,000 $ 207,002,000
Net income 184,698,000 34,391,000 138,641,000 63,126,000
Dividends paid --- --- (51,200,000) (25,500,000)
------------- ------------- ------------- -------------
Ending balances $ 551,158,000 $ 366,460,000 $ 332,069,000 $ 244,628,000
============= ============= ============= =============
ACCUMULATED OTHER
COMPREHENSIVE INCOME
(LOSS):
Beginning balances $ (1,619,000) $ 8,415,000 $ 18,405,000 $ (5,521,000)
Change in net
unrealized gains
(losses) on debt
securities
available for sale (198,659,000) (23,791,000) (23,818,000) 57,463,000
Change in net
unrealized gains
(losses) on equity
securities
available for sale (10,000) (44,000) (950,000) (55,000)
Change in adjustment
to deferred
acquisition costs 28,000,000 8,400,000 9,400,000 (20,600,000)
Tax effects of net
changes $ 59,735,000 5,401,000 5,378,000 (12,882,000)
------------- ------------- ------------- -------------
Ending balances $(112,553,000) $ (1,619,000) $ 8,415,000 $ 18,405,000
============= ============= ============= =============
</TABLE>
40
<PAGE> 75
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. SHAREHOLDER'S EQUITY (Continued)
Dividends that the Company may pay to its shareholder in any year
without prior approval of the Arizona Department of Insurance are
limited by statute. The maximum amount of dividends which can be paid to
shareholders of insurance companies domiciled in the state of Arizona
without obtaining the prior approval of the Insurance Commissioner is
limited to the lesser of either 10% of the preceding year's statutory
surplus or the preceding year's statutory net gain from operations less
equity in undistributed income or loss of subsidiaries included in net
investment income if, after paying the dividend, the Company's capital
and surplus would be adequate in the opinion of the Arizona Department
of Insurance. No dividends were paid in the year ended December 31, 1999
or the three months ended December 31, 1998. Dividends in the amounts of
$51,200,000 and $25,500,000 were paid on June 4, 1998 and April 1, 1997,
respectively. Dividends of $69,000,000 were paid on March 1, 2000.
Under statutory accounting principles utilized in filings with insurance
regulatory authorities, the Company's net income for the year ended
December 31, 1999 was $261,539,000. The statutory net loss for the year
ended December 31, 1998 was $98,766,000. The statutory net income for
the year ended December 31, 1997 totaled $74,407,000. The Company's
statutory capital and surplus totaled $694,621,000 at December 31, 1999,
$443,394,000 at December 31, 1998 and $537,542,000 at September 30,
1998.
On June 30, 1999, the Parent cancelled the Company's surplus note
payable of $170,436,000 and funds received were reclassified to
Additional Paid-in Capital in the accompanying consolidated balance
sheet. On September 9, 1999, the Company paid $170,500,000 to its Parent
as a return of capital. On September 14, 1999 and October 25, 1999, the
Parent contributed additional capital to the Company in the amounts of
$54,250,000 and $60,000,000, respectively. Also on December 31, 1999,
the Parent made a $150,000 contribution of partnership investments.
41
<PAGE> 76
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. INCOME TAXES
The components of the provisions for federal income taxes on pretax
income consist of the following:
<TABLE>
<CAPTION>
Net Realized
Investment
Gains (Losses) Operations Total
------------- ------------- -------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999:
Currently payable $ 6,846,000 $ 196,192,000 $ 203,038,000
Deferred (13,713,000) (86,300,000) (100,013,000)
------------- ------------- -------------
Total income tax expense
(benefit) $ (6,867,000) $ 109,892,000 $ 103,025,000
============= ============= =============
THREE MONTHS ENDED DECEMBER 31, 1998:
Currently payable $ 740,000 $ 3,421,000 $ 4,161,000
Deferred (620,000) 16,565,000 15,945,000
------------- ------------- -------------
Total income tax expense $ 120,000 $ 19,986,000 $ 20,106,000
============= ============= =============
YEAR ENDED SEPTEMBER 30, 1998:
Currently payable $ 4,221,000 $ 32,743,000 $ 36,964,000
Deferred (550,000) 34,637,000 34,087,000
------------- ------------- -------------
Total income tax expense $ 3,671,000 $ 67,380,000 $ 71,051,000
============= ============= =============
YEAR ENDED SEPTEMBER 30, 1997:
Currently payable $ (3,635,000) $ 50,828,000 $ 47,193,000
Deferred (2,258,000) (13,766,000) (16,024,000)
------------- ------------- -------------
Total income tax expense
(benefit) $ (5,893,000) $ 37,062,000 $ 31,169,000
============= ============= =============
</TABLE>
42
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ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. INCOME TAXES (Continued)
Income taxes computed at the United States federal income tax rate of
35% and income taxes provided differ as follows:
<TABLE>
<CAPTION> Years Ended September 30,
Year Ended Three Months Ended ---------------------------------
December 31, 1999 December 31, 1998 1998 1997
---------------- ------------------ ------------- -------------
<S> <C> <C> <C> <C>
Amount computed at
statutory rate $ 100,703,000 $ 19,074,000 $ 73,392,000 $ 33,003,000
Increases (decreases)
resulting from:
Amortization of
differences between
book and tax bases
of net assets
acquired 609,000 146,000 460,000 666,000
State income taxes,
net of federal tax
benefit 7,231,000 1,183,000 5,530,000 1,950,000
Dividends-received
deduction (3,618,000) (345,000) (7,254,000) (4,270,000)
Tax credits (1,346,000) (1,296,000) (318,000)
Other, net (554,000) 48,000 219,000 138,000
------------- ------------- ------------- -------------
Total income tax
expense $ 103,025,000 $ 20,106,000 $ 71,051,000 $ 31,169,000
============= ============= ============= =============
</TABLE>
For United States federal income tax purposes, certain amounts from life
insurance operations are accumulated in a memorandum policyholders'
surplus account and are taxed only when distributed to shareholders or
when such account exceeds prescribed limits. The accumulated
policyholders' surplus was $14,300,000 at December 31, 1999. The Company
does not anticipate any transactions which would cause any part of this
surplus to be taxable.
43
<PAGE> 78
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. INCOME TAXES (Continued)
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
reporting purposes. The significant components of the liability for
Deferred Income Taxes are as follows:
<TABLE>
<CAPTION>
December 31, December 31, September 30,
1999 1998 1998
------------- ------------- -------------
<S> <C> <C> <C>
DEFERRED TAX LIABILITIES:
Investments $ 23,208,000 $ 18,174,000 $ 17,643,000
Deferred acquisition costs 272,697,000 222,943,000 223,392,000
State income taxes 5,203,000 3,143,000 2,873,000
Other liabilities 18,658,000 13,906,000 144,000
Net unrealized gains on debt
and equity securities
available for sale --- --- 4,531,000
------------- ------------- -------------
Total deferred tax liabilities $ 319,766,000 258,166,000 248,583,000
------------- ------------- -------------
DEFERRED TAX ASSETS:
Contractholder reserves (261,781,000) (148,587,000) (149,915,000)
Guaranty fund assessments (2,454,000) (2,935,000) (2,910,000)
Deferred income (48,371,000) --- ---
Other assets --- --- ---
Net unrealized losses on
debt and equity securities
available for sale (60,605,000) (872,000) ---
------------- ------------- -------------
Total deferred tax assets (373,211,000) (152,394,000) (152,825,000)
------------- ------------- -------------
Deferred income taxes $ (53,445,000) $ 105,772,000 $ 95,758,000
============= ============= =============
</TABLE>
12. COMPREHENSIVE INCOME
Effective October 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130") which requires the reporting of comprehensive income in addition
to net income from operations. Comprehensive income is a more inclusive
financial reporting methodology that includes disclosure of certain
financial information that historically has not been recognized in the
calculation of net income. The adoption of SFAS 130 did not have an
impact on the Company's results of operations, financial condition or
liquidity. Comprehensive income amounts for the prior years are
disclosed to conform to the current year's presentation.
44
<PAGE> 79
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. COMPREHENSIVE INCOME (Continued)
The before tax, after tax, and tax benefit (expense) amounts for each
component of the increase or decrease in unrealized losses or gains on
debt and equity securities available for sale for both the current and
prior periods are summarized below:
<TABLE>
<CAPTION>
Tax Benefit
Before Tax (Expense) Net of Tax
------------- ------------- -------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31,
1999:
Net unrealized losses on debt and
equity securities available
for sale identified in the
current period $(217,259,000) $ 76,041,000 $(141,218,000)
Increase in deferred acquisition
cost adjustment identified in
the current period 34,690,000 (12,141,000) 22,549,000
------------- ------------- -------------
Subtotal (182,569,000) 63,900,000 (118,669,000)
------------- ------------- -------------
Reclassification adjustment for:
Net realized losses included
in net income 18,590,000 (6,507,000) 12,083,000
Related change in deferred
acquisition costs (6,690,000) 2,342,000 (4,348,000)
------------- ------------- -------------
Total reclassification
adjustment 11,900,000 (4,165,000) 7,735,000
------------- ------------- -------------
Total other comprehensive
loss $(170,669,000) $ 59,735,000 $(110,934,000)
============= ============= =============
THREE MONTHS ENDED DECEMBER 31,
1998:
Net unrealized losses on debt
and equity securities available
for sale identified in the
current period $ (24,345,000) $ 8,521,000 $ (15,824,000)
Increase in deferred acquisition
cost adjustment identified in
the current period 8,579,000 (3,004,000) 5,575,000
------------- ------------- -------------
Subtotal (15,766,000) 5,517,000 (10,249,000)
------------- ------------- -------------
Reclassification adjustment for:
Net realized losses included
in net income 510,000 (179,000) 331,000
Related change in deferred
acquisition costs (179,000) 63,000 (116,000)
------------- ------------- -------------
Total reclassification
adjustment 331,000 (116,000) 215,000
------------- ------------- -------------
Total other comprehensive loss $ (15,435,000) $ 5,401,000 $ (10,034,000)
============= ============= =============
</TABLE>
45
<PAGE> 80
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. COMPREHENSIVE INCOME (Continued)
<TABLE>
<CAPTION>
Tax Benefit
Before Tax (Expense) Net of Tax
------------ ------------ ------------
<S> <C> <C> <C>
YEAR ENDED SEPTEMBER 30,
1998:
Net unrealized losses on debt and
equity securities available
for sale identified in the
current period $(10,281,000) $ 3,598,000 $ (6,683,000)
Increase in deferred acquisition
cost adjustment identified in
the current period 4,086,000 (1,430,000) 2,656,000
------------ ------------ ------------
Subtotal (6,195,000) 2,168,000 (4,027,000)
------------ ------------ ------------
Reclassification adjustment for:
Net realized losses included
in net income (14,487,000) 5,070,000 (9,417,000)
Related change in deferred
acquisition costs 5,314,000 (1,860,000) 3,454,000
------------ ------------ ------------
Total reclassification
adjustment (9,173,000) 3,210,000 (5,963,000)
------------ ------------ ------------
Total other comprehensive loss $(15,368,000) $ 5,378,000 $ (9,990,000)
============ ============ ============
YEAR ENDED SEPTEMBER 30,
1997:
Net unrealized gains on debt
and equity securities available
for sale identified in the
current period $ 40,575,000 $(14,201,000) $ 26,374,000
Decrease in deferred acquisition
cost adjustment identified in
the current period (15,031,000) 5,262,000 (9,769,000)
------------ ------------ ------------
Subtotal 25,544,000 (8,939,000) 16,605,000
------------ ------------ ------------
Reclassification adjustment for:
Net realized losses included
in net income 16,832,000 (5,891,000) 10,941,000
Related change in deferred
acquisition costs (5,569,000) 1,949,000 (3,620,000)
------------ ------------ ------------
Total reclassification
adjustment 11,263,000 (3,942,000) 7,321,000
------------ ------------ ------------
Total other comprehensive
income $ 36,807,000 $(12,881,000) $ 23,926,000
============ ============ ============
</TABLE>
46
<PAGE> 81
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. RELATED-PARTY MATTERS
The Company pays commissions to five affiliated companies: SunAmerica
Securities, Inc.; Advantage Capital Corp.; Financial Services Corp.;
Sentra Securities Corp.; and Spelman & Co. Inc. Commissions paid to
these broker-dealers totaled $37,435,000 in the year ended December 31,
1999, $6,977,000 in the three months ended December 31, 1998, and
$32,946,000 in the year ended September 30, 1998 and $25,492,000 in the
year ended September 30, 1997. These broker-dealers, when combined with
the Company's wholly owned broker-dealer, represent a significant
portion of the Company's business, amounting to approximately 35.6% of
premiums in the year ended December 31, 1999 and the three months ended
December 31, 1998, 33.6% in the year ended September 30, 1998 and 36.1%
in the year ended September 30, 1997.
The Company purchases administrative, investment management, accounting,
marketing and data processing services from its Parent and SunAmerica,
an indirect parent. Amounts paid for such services totaled $105,059,000
for the year ended December 31, 1999, $21,593,000 for the three months
ended December 31, 1998, $84,975,000 for the year ended September 30,
1998 and $86,116,000 for the year ended September 30, 1997. The
marketing component of such costs during these periods amounted to
$53,385,000, $9,906,000, $39,482,000 and $31,968,000, respectively, and
are deferred and amortized as part of Deferred Acquisition Costs. The
other components of such costs are included in General and
Administrative Expenses in the income statement.
At December 31, 1999 and 1998, the Company held bonds with a fair value
of $50,000 and $84,965,000, respectively, which were issued by its
affiliate, International Lease Finance Corp. The amortized cost of these
bonds is equal to the fair value. At September 30, 1998 and 1997, the
Company held no investments issued by any of its affiliates.
During the year ended December 31, 1999, the Company transferred
short-term investments and bonds to FSA with an aggregate fair value of
$634,596,000 as part of the transfer of the New York Business from the
Acquisition (See Note 4). The Company recorded a net realized loss of
$5,144,000 on the transfer of these assets.
During the year ended December 31, 1999, the Company purchased certain
invested assets from SunAmerica for cash equal to their current market
value of $161,159,000.
For the three months ended December 31, 1998, the Company made no
purchases or sales of invested assets from or to the Parent or its
affiliates.
During the year ended September 30, 1998, the Company sold various
invested assets to SunAmerica for cash equal to their current market
value of $64,431,000. The Company recorded a net gain aggregating
$16,388,000 on such transactions.
During the year ended September 30, 1998, the Company purchased certain
invested assets from SunAmerica, the Parent and CalAmerica Life
Insurance Company ("CalAmerica"), a wholly-owned subsidiary of the
Parent that has since merged into the Parent, for cash equal to their
current market value which aggregated $20,666,000, $10,468,000
47
<PAGE> 82
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. RELATED-PARTY MATTERS (Continued)
and $61,000, respectively.
During the year ended September 30, 1997, the Company sold various
invested assets to the Parent and CalAmerica for cash equal to their
current market value of $15,776,000 and $15,000, respectively. The
Company recorded a net gain aggregating $276,000 on such transactions.
During the year ended September 30, 1997, the Company purchased certain
invested assets from the Parent and CalAmerica for cash equal to their
current market value of $8,717,000 and $284,000, respectively.
14. BUSINESS SEGMENTS
Effective January 1, 1999, the Company adopted Statement of Financial
Accounting Standards No. 131 ("SFAS 131"), "Disclosures about Segments
of an Enterprise and Related Information," which requires the reporting
of certain financial information by business segment. For the purpose of
providing segment information, the Company has three business segments:
annuity operations, asset management operations and broker-dealer
operations. The annuity operations focus primarily on the marketing of
variable annuity products and the administration of the universal life
business acquired from MBL Life in 1998 (See Note 4). The Company's
variable annuity products offer investors a broad spectrum of fund
alternatives, with a choice of investment managers, as well as
guaranteed fixed-rate account options. The Company earns fee income on
investments in the variable options and net investment income on the
fixed-rate options. The asset management operations are conducted by the
Company's registered investment advisor subsidiary, SunAmerica Asset
Management Corp. ("SunAmerica Asset Management"), and its related
distributor. SunAmerica Asset Management earns fee income by
distributing and managing a diversified family of mutual funds, by
managing certain subaccounts within the Company's variable annuity
products and by providing professional management of individual,
corporate and pension plan portfolios. The broker-dealer operations are
conducted by the Company's broker-dealer subsidiary, Royal Alliance
Associates, Inc. ("Royal"), which sells proprietary annuities and mutual
funds, as well as a full range of non-proprietary investment products.
48
<PAGE> 83
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. BUSINESS SEGMENTS (Continued)
Summarized data for the Company's business segments follow:
<TABLE>
<CAPTION>
Asset Broker
Annuity Management Dealer
Operations Operations Operations Total
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999:
Total assets $ 26,649,310,000 $ 150,966,000 $ 74,218,000 $ 26,874,494,000
Expenditures for long-
lived assets --- 2,563,000 2,728,000 5,291,000
Investment in subsidiaries --- --- --- ---
Revenue from external
customers 790,697,000 54,652,000 41,185,000 886,534,000
Intersegment revenue --- 62,998,000 8,193,000 71,191,000
---------------- ---------------- ---------------- ----------------
Total revenue 790,697,000 117,650,000 49,378,000 957,725,000
================ ================ ================ ================
Investment income 511,914,000 9,072,000 967,000 521,953,000
Interest expense (354,263,000) (3,085,000) (389,000) (357,737,000)
Depreciation and
amortization expense (95,408,000) (23,249,000) (3,234,000) (121,891,000)
Income from unusual
transactions --- --- --- ---
Pretax income 199,333,000 67,779,000 20,611,000 287,723,000
Income tax expense (65,445,000) (28,247,000) (9,333,000) (103,025,000)
Income from extraordinary
items --- --- --- ---
Net income $ 133,888,000 $ 39,532,000 $ 11,278,000 $ 184,698,000
================ ================ ================ ================
Significant non-cash
items $ --- $ --- $ --- $ ---
================ ================ ================ ================
</TABLE>
49
<PAGE> 84
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. BUSINESS SEGMENTS (Continued)
<TABLE>
<CAPTION>
Asset Broker-
Annuity Management Dealer
Operations Operations Operations Total
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
THREE MONTHS ENDED
DECEMBER 31, 1998:
Total assets $ 22,982,323,000 $ 104,473,000 $ 59,537,000 $ 23,146,333,000
Expenditures for long-
lived assets --- 328,000 1,005,000 1,333,000
Investment in subsidiaries --- --- --- ---
Revenue from external
customers 103,626,000 11,103,000 9,605,000 124,334,000
Intersegment revenue --- 11,871,000 1,674,000 13,545,000
---------------- ---------------- ---------------- ----------------
Total revenue 103,626,000 22,974,000 11,279,000 137,879,000
================ ================ ================ ================
Investment income 53,149,000 971,000 158,000 54,278,000
Interest expense (26,842,000) (752,000) (101,000) (27,695,000)
Depreciation and
amortization expense (23,236,000) (4,204,000) (561,000) (28,001,000)
Income from unusual
transactions --- --- --- ---
Pretax income 36,961,000 13,092,000 4,444,000 54,497,000
Income tax expense (12,978,000) (5,181,000) (1,947,000) (20,106,000)
Income from extraordinary
items --- --- --- ---
Net income $ 23,983,000 $ 7,911,000 $ 2,497,000 $ 34,391,000
================ ================ ================ ================
Significant non-cash
item $ --- $ --- $ --- $ ---
================ ================ ================ ================
</TABLE>
50
<PAGE> 85
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. BUSINESS SEGMENTS (Continued)
<TABLE>
<CAPTION>
Asset Broker-
Annuity Management Dealer
Operations Operations Operations Total
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
YEAR ENDED SEPTEMBER 30, 1998:
Total assets $ 14,389,922,000 $ 104,476,000 $ 55,870,000 $ 14,550,268,000
Expenditures for long-
lived assets --- 477,000 5,289,000 5,766,000
Investment in subsidiaries --- --- --- ---
Revenue from external
customers 410,011,000 34,396,000 39,729,000 484,136,000
Intersegment revenue --- 40,040,000 7,634,000 47,674,000
---------------- ---------------- ---------------- ----------------
Total revenue 410,011,000 74,436,000 47,363,000 531,810,000
================ ================ ================ ================
Investment income 218,044,000 2,839,000 1,083,000 221,966,000
Interest expense (131,980,000) (2,709,000) (405,000) (135,094,000)
Depreciation and
amortization expense (60,731,000) (14,780,000) (1,770,000) (77,281,000)
Income from unusual
transactions --- --- --- ---
Pretax income 148,084,000 39,207,000 22,401,000 209,692,000
Income tax expense (44,706,000) (15,670,000) (10,675,000) (71,051,000)
Income from extraordinary
items --- --- --- ---
Net income $ 103,378,000 $ 23,537,000 $ 11,726,000 $ 138,641,000
================ ================ ================ ================
Significant non-cash
items $ --- $ --- $ --- $ ---
================ ================ ================ ================
</TABLE>
51
<PAGE> 86
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. BUSINESS SEGMENTS (Continued)
<TABLE>
<CAPTION>
Asset Broker-
Annuity Management Dealer
Operations Operations Operations Total
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
YEAR ENDED SEPTEMBER 30, 1997:
Total assets $ 12,440,311,000 $ 81,518,000 $ 51,400,000 $ 12,573,229,000
Expenditures for long-
lived assets --- 804,000 4,527,000 5,331,000
Investment in subsidiaries --- --- --- ---
Revenue from external
customers 317,061,000 28,655,000 31,678,000 377,394,000
Intersegment revenue --- 22,790,000 6,327,000 29,117,000
---------------- ---------------- ---------------- ----------------
Total revenue 317,061,000 51,445,000 38,005,000 406,511,000
================ ================ ================ ================
Investment income 208,382,000 1,445,000 932,000 210,759,000
Interest expense (134,416,000) (2,737,000) (405,000) (137,558,000)
Depreciation and
amortization expense (55,675,000) (16,357,000) (689,000) (72,721,000)
Income from unusual
transactions --- --- --- ---
Pretax income 58,291,000 19,299,000 16,705,000 94,295,000
Income tax expense (16,318,000) (7,850,000) (7,001,000) (31,169,000)
Income from extraordinary
items --- --- --- ---
Net income $ 41,973,000 $ 11,449,000 $ 9,704,000 $ 63,126,000
================ ================ ================ ================
Significant non-cash
items $ --- $ --- $ --- $ ---
================ ================ ================ ================
</TABLE>
Substantially all of the Company's revenues are derived from the United
States.
The accounting policies of the segments are as described in the summary
of significant accounting policies (Note 2). The Parent makes
expenditures for long-lived assets for the annuity operations segment
and allocates depreciation of such assets to the annuity operations
segment. The annuity operations and asset management operations pay
commissions to Royal for sales of their proprietary products.
Approximately 90% of these commission payments are in turn paid to
registered representatives of Royal, with the remainder of the revenue
reflected in Net Retained Commissions. In addition, premiums from
variable annuity policies sold by the Company are held in trusts that
are owned by the Company, although the assets directly support
policyholder obligations. SunAmerica Asset Management is the Investment
Advisor for all of the subaccounts of these trusts, for which service it
receives fees which are direct expenses of the trusts. Such fees are
reported as Variable Annuity Fees in the consolidated income statement
and are shown as intersegment revenues in the business segments
disclosure above, although there is no corresponding expense on the
books of any segment.
The annuity operations segment's products are marketed through over 800
independent broker-dealers, full-service securities firms and financial
institutions, in addition to the Company's affiliated broker-dealers.
Those independent selling organizations
52
<PAGE> 87
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. BUSINESS SEGMENTS (Continued)
responsible for over 10% of sales represented 12.0% of sales in the year
ended December 31, 1999, 14.7% in the three months ended December 31,
1998, 16.8% in the year ended September 30, 1998, and 18.4% and 10.2% in
the year ended September 30, 1997. Registered representatives sell
products for the Company's asset management operations and sell products
offered by the broker-dealer operations. Revenue from any single
registered representative or group of registered representatives do not
compose a material percentage of total revenues in either the asset
management operations or the broker-dealer operations.
15. SUBSEQUENT EVENTS
On March 1, 2000, the Company paid dividends of $69,000,000 to the
Parent.
53
<PAGE> 88
VARIABLE ANNUITY ACCOUNT FOUR
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
FINANCIAL STATEMENTS
DECEMBER 31, 1999
54
<PAGE> 89
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Anchor National Life Insurance Company and the
Contractholders of its separate account, Variable Annuity Account Four
In our opinion, the accompanying statement of net assets, including the schedule
of portfolio investments, and the related statements of operations and of
changes in net assets present fairly, in all material respects, the financial
position of the Variable Accounts constituting Variable Annuity Account Four, a
separate account of Anchor National Life Insurance Company (the "Separate
Account") at December 31, 1999, the results of its operations and the changes in
their net assets for the three month period from October 1, 1999 to December 31,
1999 and the changes in their net assets for the year ended September 30, 1999,
in conformity with accounting principles generally accepted in the United
States. These financial statements are the responsibility of the Separate
Account's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities owned at December 31, 1999 by
correspondence with the custodian, provides a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Los Angeles, California
March 31, 2000
55
<PAGE> 90
VARIABLE ANNUITY ACCOUNT FOUR
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF NET ASSETS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Government International
Capital Natural and Diversified
Appreciation Growth Resources Quality Bond Equities
Portfolio Portfolio Portfolio Portfolio Portfolio
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in Anchor Series Trust,
at market value $81,430,137 $36,481,964 $ 2,409,044 $24,099,152 $ 0
Investments in SunAmerica Series Trust,
at market value 0 0 0 0 52,876,541
Liabilities 0 0 0 0 0
-----------------------------------------------------------------------
Net Assets $81,430,137 $36,481,964 $ 2,409,044 $24,099,152 $52,876,541
=======================================================================
Accumulation units outstanding 1,886,515 1,118,706 192,519 1,815,032 3,129,678
=======================================================================
Unit value of accumulation units $ 43.17 $ 32.61 $ 12.50 $ 13.28 $ 16.92
=======================================================================
</TABLE>
<TABLE>
<CAPTION>
Global Aggressive
Equities Growth
Portfolio Portfolio
--------------------------
<S> <C> <C>
Assets:
Investments in Anchor Series Trust,
at market value $ 0 $ 0
Investments in SunAmerica Series Trust,
at market value 41,624,592 24,977,207
Liabilities 0 0
--------------------------
Net Assets $41,624,592 $24,977,207
==========================
Accumulation units outstanding 1,566,813 1,027,840
==========================
Unit value of accumulation units $ 26.57 $ 24.30
==========================
</TABLE>
See accompanying notes to financial statements.
56
<PAGE> 91
VARIABLE ANNUITY ACCOUNT FOUR
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF NET ASSETS
DECEMBER 31, 1999
(Continued)
<TABLE>
<CAPTION>
Venture Federated Alliance Growth- Asset
Value Value Growth Income Allocation
Portfolio Portfolio Portfolio Portfolio Portfolio
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in Anchor Series Trust,
at market value $ 0 $ 0 $ 0 $ 0 $ 0
Investments in SunAmerica Series Trust,
at market value 106,123,442 17,816,349 149,430,393 118,259,016 33,952,707
Liabilities 0 0 0 0 0
----------------------------------------------------------------------------
Net Assets $106,123,442 $ 17,816,349 $149,430,393 $118,259,016 $ 33,952,707
============================================================================
Accumulation units outstanding 3,806,242 1,055,045 3,077,398 3,293,412 1,713,807
============================================================================
Unit value of accumulation units $ 27.88 $ 16.89 $ 48.56 $ 35.91 $ 19.81
============================================================================
</TABLE>
<TABLE>
<CAPTION>
SunAmerica
Balanced Utility
Portfolio Portfolio
----------------------------
<S> <C> <C>
Assets:
Investments in Anchor Series Trust,
at market value $ 0 $ 0
Investments in SunAmerica Series Trust,
at market value 49,070,725 12,110,613
Liabilities 0 0
----------------------------
Net Assets $ 49,070,725 $ 12,110,613
============================
Accumulation units outstanding 2,491,907 801,759
============================
Unit value of accumulation units $ 19.69 $ 15.11
============================
</TABLE>
See accompanying notes to financial statements.
57
<PAGE> 92
VARIABLE ANNUITY ACCOUNT FOUR
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF NET ASSETS
DECEMBER 31, 1999
(Continued)
<TABLE>
<CAPTION>
Worldwide High-Yield Global Corporate "Dogs" of
High Income Bond Bond Bond Wall Street
Portfolio Portfolio Portfolio Portfolio Portfolio
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in Anchor Series Trust,
at market value $ 0 $ 0 $ 0 $ 0 $ 0
Investments in SunAmerica Series Trust,
at market value 5,487,679 17,271,309 5,512,327 14,297,885 10,078,850
Liabilities 0 0 0 0 0
----------------------------------------------------------------------------
Net Assets $ 5,487,679 $ 17,271,309 $ 5,512,327 $ 14,297,885 $ 10,078,850
============================================================================
Accumulation units outstanding 349,619 1,161,206 391,261 1,120,278 1,121,165
============================================================================
Unit value of accumulation units $ 15.70 $ 14.87 $ 14.09 $ 12.76 $ 8.99
============================================================================
</TABLE>
<TABLE>
<CAPTION>
Cash
Management
Portfolio TOTAL
-----------------------------
<S> <C> <C>
Assets:
Investments in Anchor Series Trust,
at market value $ 0 $144,420,297
Investments in SunAmerica Series Trust,
at market value 59,230,861 718,120,496
Liabilities 0 0
----------------------------
Net Assets $ 59,230,861 $862,540,793
============================
Accumulation units outstanding 4,829,410
============
Unit value of accumulation units $ 12.25
============
</TABLE>
See accompanying notes to financial statements.
58
<PAGE> 93
VARIABLE ANNUITY ACCOUNT FOUR
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Market Value Market
Portfolio Investment Shares Per Share Value Cost
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ANCHOR SERIES TRUST:
Capital Appreciation Portfolio 1,427,989 $ 57.02 $ 81,430,137 $ 65,111,991
Growth Portfolio 947,114 38.52 36,481,964 30,751,461
Natural Resources Portfolio 148,478 16.22 2,409,044 2,250,125
Government and Quality Bond Portfolio 1,761,170 13.68 24,099,152 25,183,861
------------ ------------
144,420,297 123,297,438
------------ ------------
SUNAMERICA SERIES TRUST:
International Diversified Equities Portfolio 3,305,257 16.00 52,876,541 50,417,668
Global Equities Portfolio 1,910,443 21.79 41,624,592 38,763,799
Aggressive Growth Porfolio 1,069,301 23.36 24,977,207 18,646,823
Venture Value Portfolio 3,960,877 26.79 106,123,442 89,651,424
Federated Value Portfolio 1,075,155 16.57 17,816,349 16,957,139
Alliance Growth Portfolio 3,894,405 38.37 149,430,393 116,537,430
Growth-Income Portfolio 3,630,575 32.57 118,259,016 88,948,555
Asset Allocation Portfolio 2,264,894 14.99 33,952,707 34,510,393
SunAmerica Balanced Portfolio 2,498,169 19.64 49,070,725 39,713,201
Utility Portfolio 842,219 14.38 12,110,613 11,835,626
Worldwide High Income Portfolio 515,774 10.64 5,487,679 6,033,442
High-Yield Bond Portfolio 1,647,255 10.48 17,271,309 18,490,020
Global Bond Portfolio 509,788 10.81 5,512,327 5,774,747
Corporate Bond Portfolio 1,285,365 11.12 14,297,885 14,821,585
"Dogs" of Wall Street Portfolio 1,125,321 8.96 10,078,850 10,737,498
Cash Management Portfolio 5,440,895 10.89 59,230,861 59,055,362
------------ ------------
718,120,496 620,894,712
------------ ------------
$862,540,793 $744,192,150
============ ============
</TABLE>
See accompanying notes to financial statements.
59
<PAGE> 94
VARIABLE ANNUITY ACCOUNT FOUR
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE THREE MONTH PERIOD FROM OCTOBER 1, 1999 TO
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Government
Capital Natural and
Appreciation Growth Resources Quality Bond
Portfolio Portfolio Portfolio Portfolio
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income:
Dividends and capital gains distributions $ 0 $ 0 $ 0 $ 0
-------------------------------------------------------------------
Total investment income 0 0 0 0
-------------------------------------------------------------------
Expenses:
Mortality risk charge (141,447) (68,928) (5,794) (54,830)
Guarantee death benefit charge (18,860) (9,190) (773) (7,311)
Expense risk charge (55,007) (26,805) (2,253) (21,323)
Distribution expense charge (23,574) (11,488) (966) (9,137)
-------------------------------------------------------------------
Total expenses (238,888) (116,411) (9,786) (92,601)
-------------------------------------------------------------------
Net investment income (loss) (238,888) (116,411) (9,786) (92,601)
-------------------------------------------------------------------
Net realized gains (losses) from securities transactions:
Proceeds from shares sold 53,562,346 3,607,179 2,401,965 2,356,452
Cost of shares sold (47,400,868) (3,299,025) (2,436,776) (2,458,964)
-------------------------------------------------------------------
Net realized gains (losses) from
securities transactions 6,161,478 308,154 (34,811) (102,512)
Net unrealized appreciation (depreciation) of investments:
Beginning of period 620,939 444,650 7,847 (1,133,203)
End of period 16,318,146 5,730,503 158,919 (1,084,709)
-------------------------------------------------------------------
Change in net unrealized appreciation/
depreciation of investments 15,697,207 5,285,853 151,072 48,494
-------------------------------------------------------------------
Increase (decrease) in net assets from operations $ 21,619,797 $ 5,477,596 $ 106,475 $ (146,619)
===================================================================
</TABLE>
<TABLE>
<CAPTION>
International
Diversified Global Aggressive
Equities Equities Growth
Portfolio Portfolio Portfolio
-------------------------------------------------
<S> <C> <C> <C>
Investment income:
Dividends and capital gains distributions $ 0 $ 0 $ 0
-------------------------------------------------
Total investment income 0 0 0
-------------------------------------------------
Expenses:
Mortality risk charge (106,602) (64,102) (42,481)
Guarantee death benefit charge (14,214) (8,547) (5,664)
Expense risk charge (41,456) (24,929) (16,520)
Distribution expense charge (17,767) (10,683) (7,081)
-------------------------------------------------
Total expenses (180,039) (108,261) (71,746)
-------------------------------------------------
Net investment income (loss) (180,039) (108,261) (71,746)
-------------------------------------------------
Net realized gains (losses) from securities transactions:
Proceeds from shares sold 513,270,211 146,805,191 14,976,242
Cost of shares sold (505,579,871) (144,973,434) (12,569,033)
-------------------------------------------------
Net realized gains (losses) from
securities transactions 7,690,340 1,831,757 2,407,209
-------------------------------------------------
Net unrealized appreciation (depreciation) of investments:
Beginning of period 93,036 (427,330) 30,179
End of period 2,458,873 2,860,793 6,330,384
-------------------------------------------------
Change in net unrealized appreciation/
depreciation of investments 2,365,837 3,288,123 6,300,205
-------------------------------------------------
Increase (decrease) in net assets from operations $ 9,876,138 $ 5,011,619 $ 8,635,668
=================================================
</TABLE>
See accompanying notes to financial statements.
60
<PAGE> 95
VARIABLE ANNUITY ACCOUNT FOUR
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE THREE MONTH PERIOD FROM OCTOBER 1, 1999 TO
DECEMBER 31, 1999
(Continued)
<TABLE>
<CAPTION>
Venture Federated Alliance Growth-
Value Value Growth Income
Portfolio Portfolio Portfolio Portfolio
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income:
Dividends and capital gains distributions $ 0 $ 0 $ 0 $ 0
---------------------------------------------------------------
Total investment income 0 0 0 0
---------------------------------------------------------------
Expenses:
Mortality risk charge (216,897) (35,201) (295,465) (234,687)
Guarantee death benefit charge (28,920) (4,693) (39,395) (31,292)
Expense risk charge (84,349) (13,689) (114,903) (91,267)
Distribution expense charge (36,149) (5,867) (49,244) (39,114)
---------------------------------------------------------------
Total expenses (366,315) (59,450) (499,007) (396,360)
---------------------------------------------------------------
Net investment income (loss) (366,315) (59,450) (499,007) (396,360)
---------------------------------------------------------------
Net realized gains (losses) from securities transactions:
Proceeds from shares sold 5,189,089 1,695,350 8,274,077 2,246,920
Cost of shares sold (4,624,678) (1,661,284) (6,997,009) (1,917,056)
---------------------------------------------------------------
Net realized gains (losses) from
securities transactions 564,411 34,066 1,277,068 329,864
---------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments:
Beginning of period 6,572,612 (44,033) 8,644,860 11,449,965
End of period 16,472,018 859,210 32,892,963 29,310,461
---------------------------------------------------------------
Change in net unrealized appreciation/
depreciation of investments 9,899,406 903,243 24,248,103 17,860,496
---------------------------------------------------------------
Increase (decrease) in net assets from operations $ 10,097,502 $ 877,859 $ 25,026,164 $ 17,794,000
===============================================================
</TABLE>
<TABLE>
<CAPTION>
Asset SunAmerica
Allocation Balanced Utility
Portfolio Portfolio Portfolio
----------------------------------------------
<S> <C> <C> <C>
Investment income:
Dividends and capital gains distributions $ 0 $ 0 $ 0
----------------------------------------------
Total investment income 0 0 0
----------------------------------------------
Expenses:
Mortality risk charge (73,972) (98,017) (27,294)
Guarantee death benefit charge (9,863) (13,069) (3,639)
Expense risk charge (28,767) (38,118) (10,614)
Distribution expense charge (12,329) (16,336) (4,550)
----------------------------------------------
Total expenses (124,931) (165,540) (46,097)
----------------------------------------------
Net investment income (loss) (124,931) (165,540) (46,097)
----------------------------------------------
Net realized gains (losses) from securities transactions:
Proceeds from shares sold 1,443,550 468,613 1,203,894
Cost of shares sold (1,539,459) (402,387) (1,161,186)
----------------------------------------------
Net realized gains (losses) from
securities transactions (95,909) 66,226 42,708
----------------------------------------------
Net unrealized appreciation (depreciation) of investments:
Beginning of period (3,561,452) 3,255,970 (79,294)
End of period (557,686) 9,357,524 274,987
----------------------------------------------
Change in net unrealized appreciation/
depreciation of investments 3,003,766 6,101,554 354,281
----------------------------------------------
Increase (decrease) in net assets from operations $ 2,782,926 $ 6,002,240 $ 350,892
==============================================
</TABLE>
See accompanying notes to financial statements.
61
<PAGE> 96
VARIABLE ANNUITY ACCOUNT FOUR
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE THREE MONTH PERIOD FROM OCTOBER 1, 1999 TO
DECEMBER 31, 1999
(Continued)
<TABLE>
<CAPTION>
Worldwide High-Yield Global Corporate
High Income Bond Bond Bond
Portfolio Portfolio Portfolio Portfolio
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income:
Dividends and capital gains distributions $ 0 $ 0 $ 0 $ 0
-----------------------------------------------------------
Total investment income 0 0 0 0
-----------------------------------------------------------
Expenses:
Mortality risk charge (11,939) (37,060) (12,784) (31,412)
Guarantee death benefit charge (1,592) (4,941) (1,704) (4,188)
Expense risk charge (4,643) (14,412) (4,971) (12,216)
Distribution expense charge (1,990) (6,178) (2,131) (5,236)
-----------------------------------------------------------
Total expenses (20,164) (62,591) (21,590) (53,052)
-----------------------------------------------------------
Net investment income (loss) (20,164) (62,591) (21,590) (53,052)
Net realized gains (losses) from securities transactions:
Proceeds from shares sold 546,812 1,398,786 1,329,982 1,714,335
Cost of shares sold (639,903) (1,540,201) (1,400,911) (1,792,982)
-----------------------------------------------------------
Net realized gains (losses) from
securities transactions (93,091) (141,415) (70,929) (78,647)
-----------------------------------------------------------
Net unrealized appreciation (depreciation) of investments:
Beginning of period (1,083,742) (1,790,034) (356,389) (630,755)
End of period (545,763) (1,218,711) (262,420) (523,700)
-----------------------------------------------------------
Change in net unrealized appreciation/
depreciation of investments 537,979 571,323 93,969 107,055
-----------------------------------------------------------
Increase (decrease) in net assets from operations $ 424,724 $ 367,317 $ 1,450 $ (24,644)
===========================================================
</TABLE>
<TABLE>
<CAPTION>
"Dogs" of Cash
Wall Street Management
Portfolio Portfolio TOTAL
---------------------------------------------
<S> <C> <C> <C>
Investment income:
Dividends and capital gains distributions $ 0 $ 0 $ 0
---------------------------------------------
Total investment income 0 0 0
---------------------------------------------
Expenses:
Mortality risk charge (22,423) (142,939) (1,724,274)
Guarantee death benefit charge (2,990) (19,059) (229,904)
Expense risk charge (8,720) (55,587) (670,549)
Distribution expense charge (3,737) (23,823) (287,380)
---------------------------------------------
Total expenses (37,870) (241,408) (2,912,107)
---------------------------------------------
Net investment income (loss) (37,870) (241,408) (2,912,107)
Net realized gains (losses) from securities transactions:
Proceeds from shares sold 2,486,361 317,366,840 1,082,344,195
Cost of shares sold (2,634,717) (316,616,492) (1,061,646,236)
---------------------------------------------
Net realized gains (losses) from
securities transactions (148,356) 750,348 20,697,959
---------------------------------------------
Net unrealized appreciation (depreciation) of investments:
Beginning of period (479,290) 75,925 21,610,461
End of period (658,648) 175,499 118,348,643
---------------------------------------------
Change in net unrealized appreciation/
depreciation of investments (179,358) 99,574 96,738,182
---------------------------------------------
Increase (decrease) in net assets from operations $ (365,584) $ 608,514 $ 114,524,034
=============================================
</TABLE>
See accompanying notes to financial statements.
62
<PAGE> 97
VARIABLE ANNUITY ACCOUNT FOUR
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE THREE MONTH PERIOD FROM OCTOBER 1, 1999 TO
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Government
Capital Natural and
Appreciation Growth Resources Quality Bond
Portfolio Portfolio Portfolio Portfolio
---------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ (238,888) $ (116,411) $ (9,786) $ (92,601)
Net realized gains (losses) from
securities transactions 6,161,478 308,154 (34,811) (102,512)
Change in net unrealized appreciation/
depreciation of investments 15,697,207 5,285,853 151,072 48,494
---------------------------------------------------------------
Increase (decrease) in net assets from operations 21,619,797 5,477,596 106,475 (146,619)
---------------------------------------------------------------
From capital transactions:
Net proceeds from units sold 3,902,390 2,617,379 114,528 1,578,714
Cost of units redeemed (975,423) (653,272) (179,334) (586,321)
Net transfers 10,306,154 3,084,213 147,593 (165,954)
---------------------------------------------------------------
Increase (decrease) in net assets
from capital transactions 13,233,121 5,048,320 82,787 826,439
---------------------------------------------------------------
Increase (decrease) in net assets 34,852,918 10,525,916 189,262 679,820
Net assets at beginning of period 46,577,219 25,956,048 2,219,782 23,419,332
---------------------------------------------------------------
Net assets at end of period $ 81,430,137 $ 36,481,964 $ 2,409,044 $ 24,099,152
===============================================================
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 110,612 88,490 10,143 118,126
Units redeemed (26,241) (22,048) (15,928) (44,041)
Units transferred 307,559 103,104 10,756 (11,383)
---------------------------------------------------------------
Increase (decrease) in units outstanding 391,930 169,546 4,971 62,702
Beginning units 1,494,585 949,160 187,548 1,752,330
---------------------------------------------------------------
Ending units 1,886,515 1,118,706 192,519 1,815,032
===============================================================
</TABLE>
<TABLE>
<CAPTION>
International
Diversified Global Aggressive
Equities Equities Growth
Portfolio Portfolio Portfolio
----------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ (180,039) $ (108,261) $ (71,746)
Net realized gains (losses) from
securities transactions 7,690,340 1,831,757 2,407,209
Change in net unrealized appreciation/
depreciation of investments 2,365,837 3,288,123 6,300,205
----------------------------------------------
Increase (decrease) in net assets from operations 9,876,138 5,011,619 8,635,668
----------------------------------------------
From capital transactions:
Net proceeds from units sold 1,545,244 1,613,612 1,282,689
Cost of units redeemed (467,985) (561,439) (388,513)
Net transfers (15,868,674) 358,790 3,162,021
----------------------------------------------
Increase (decrease) in net assets
from capital transactions (14,791,415) 1,410,963 4,056,197
----------------------------------------------
Increase (decrease) in net assets (4,915,277) 6,422,582 12,691,865
Net assets at beginning of period 57,791,818 35,202,010 12,285,342
----------------------------------------------
Net assets at end of period $ 52,876,541 $ 41,624,592 $ 24,977,207
==============================================
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 101,538 68,715 66,102
Units redeemed (30,425) (23,129) (18,562)
Units transferred (945,188) (104,802) 206,218
----------------------------------------------
Increase (decrease) in units outstanding (874,075) (59,216) 253,758
Beginning units 4,003,753 1,626,029 774,082
----------------------------------------------
Ending units 3,129,678 1,566,813 1,027,840
==============================================
</TABLE>
See accompanying notes to financial statements.
63
<PAGE> 98
VARIABLE ANNUITY ACCOUNT FOUR
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE THREE MONTH PERIOD FROM OCTOBER 1, 1999 TO
DECEMBER 31, 1999
(Continued)
<TABLE>
<CAPTION>
Venture Federated Alliance Growth-
Value Value Growth Income
Portfolio Portfolio Portfolio Portfolio
------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ (366,315) $ (59,450) $ (499,007) $ (396,360)
Net realized gains (losses) from
securities transactions 564,411 34,066 1,277,068 329,864
Change in net unrealized appreciation/
depreciation of investments 9,899,406 903,243 24,248,103 17,860,496
------------------------------------------------------------------
Increase (decrease) in net assets from operations 10,097,502 877,859 25,026,164 17,794,000
------------------------------------------------------------------
From capital transactions:
Net proceeds from units sold 5,029,869 1,379,665 9,162,805 8,143,458
Cost of units redeemed (1,967,647) (438,473) (3,982,118) (2,926,109)
Net transfers 5,982,583 1,578,013 7,557,100 3,722,227
------------------------------------------------------------------
Increase (decrease) in net assets
from capital transactions 9,044,805 2,519,205 12,737,787 8,939,576
------------------------------------------------------------------
Increase (decrease) in net assets 19,142,307 3,397,064 37,763,951 26,733,576
Net assets at beginning of period 86,981,135 14,419,285 111,666,442 91,525,440
------------------------------------------------------------------
Net assets at end of period $ 106,123,442 $ 17,816,349 $ 149,430,393 $ 118,259,016
===================================================================
<
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 190,400 84,648 208,104 248,555
Units redeemed (74,318) (27,047) (90,304) (90,536)
Units transferred 222,590 93,804 175,749 113,669
------------------------------------------------------------------
Increase (decrease) in units outstanding 338,672 151,405 293,549 271,688
Beginning units 3,467,570 903,640 2,783,849 3,021,724
------------------------------------------------------------------
Ending units 3,806,242 1,055,045 3,077,398 3,293,412
===================================================================
</TABLE>
<TABLE>
<CAPTION>
Asset SunAmerica
Allocation Balanced Utility
Portfolio Portfolio Portfolio
------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ (124,931) $ (165,540) $ (46,097)
Net realized gains (losses) from
securities transactions (95,909) 66,226 42,708
Change in net unrealized appreciation/
depreciation of investments 3,003,766 6,101,554 354,281
------------------------------------------------
Increase (decrease) in net assets from operations 2,782,926 6,002,240 350,892
------------------------------------------------
From capital transactions:
Net proceeds from units sold 1,045,271 4,280,137 920,440
Cost of units redeemed (682,776) (992,389) (194,218)
Net transfers (832,888) 939,679 (33,900)
------------------------------------------------
Increase (decrease) in net assets
from capital transactions (470,393) 4,227,427 692,322
------------------------------------------------
Increase (decrease) in net assets 2,312,533 10,229,667 1,043,214
Net assets at beginning of period 31,640,174 38,841,058 11,067,399
------------------------------------------------
Net assets at end of period $ 33,952,707 $ 49,070,725 $ 12,110,613
=================================================
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 54,821 235,653 61,008
Units redeemed (35,975) (54,517) (12,813)
Units transferred (44,380) 50,427 259
------------------------------------------------
Increase (decrease) in units outstanding (25,534) 231,563 48,454
Beginning units 1,739,341 2,260,344 753,305
------------------------------------------------
Ending units 1,713,807 2,491,907 801,759
=================================================
</TABLE>
See accompanying notes to financial statements.
64
<PAGE> 99
VARIABLE ANNUITY ACCOUNT FOUR
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE THREE MONTH PERIOD FROM OCTOBER 1, 1999 TO
DECEMBER 31, 1999
(Continued)
<TABLE>
<CAPTION>
Worldwide High-Yield Global Corporate
High Income Bond Bond Bond
Portfolio Portfolio Portfolio Portfolio
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ (20,164) $ (62,591) $ (21,590) $ (53,052)
Net realized gains (losses) from
securities transactions (93,091) (141,415) (70,929) (78,647)
Change in net unrealized appreciation/
depreciation of investments 537,979 571,323 93,969 107,055
-------------------------------------------------------------------
Increase (decrease) in net assets from operations 424,724 367,317 1,450 (24,644)
-------------------------------------------------------------------
From capital transactions:
Net proceeds from units sold 137,410 1,340,392 423,172 1,480,472
Cost of units redeemed (205,529) (828,644) (969,557) (493,044)
Net transfers (209,624) 215,026 (169,535) (1,123,633)
-------------------------------------------------------------------
Increase (decrease) in net assets
from capital transactions (277,743) 726,774 (715,920) (136,205)
-------------------------------------------------------------------
Increase (decrease) in net assets 146,981 1,094,091 (714,470) (160,849)
Net assets at beginning of period 5,340,698 16,177,218 6,226,797 14,458,734
-------------------------------------------------------------------
Net assets at end of period $ 5,487,679 $ 17,271,309 $ 5,512,327 $ 14,297,885
===================================================================
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 8,990 91,172 30,122 115,960
Units redeemed (13,505) (56,705) (68,800) (38,577)
Units transferred (14,817) 14,888 (12,047) (88,441)
-------------------------------------------------------------------
Increase (decrease) in units outstanding (19,332) 49,355 (50,725) (11,058)
Beginning units 368,951 1,111,851 441,986 1,131,336
-------------------------------------------------------------------
Ending units 349,619 1,161,206 391,261 1,120,278
===================================================================
</TABLE>
<TABLE>
<CAPTION>
"Dogs" of Cash
Wall Street Management
Portfolio Portfolio TOTAL
-------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ (37,870) $ (241,408) $ (2,912,107)
Net realized gains (losses) from
securities transactions (148,356) 750,348 20,697,959
Change in net unrealized appreciation/
depreciation of investments (179,358) 99,574 96,738,182
-------------------------------------------------
Increase (decrease) in net assets from operations (365,584) 608,514 114,524,034
-------------------------------------------------
From capital transactions:
Net proceeds from units sold 415,651 16,571,118 62,984,416
Cost of units redeemed (1,315,538) (2,699,071) (21,507,400)
Net transfers 460,889 (27,398,836) (8,288,756)
-------------------------------------------------
Increase (decrease) in net assets
from capital transactions (438,998) (13,526,789) 33,188,260
-------------------------------------------------
Increase (decrease) in net assets (804,582) (12,918,275) 147,712,294
Net assets at beginning of period 10,883,432 72,149,136 714,828,499
-------------------------------------------------
Net assets at end of period $ 10,078,850 $ 59,230,861 $ 862,540,793
=================================================
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 45,316 1,360,071 3,298,546
Units redeemed (141,670) (221,544) (1,106,685)
Units transferred 53,775 (2,249,129) (2,117,389)
-------------------------------------------------
Increase (decrease) in units outstanding (42,579) (1,110,602) 74,472
Beginning units 1,163,744 5,940,012 35,875,140
-------------------------------------------------
Ending units 1,121,165 4,829,410 35,949,612
=================================================
</TABLE>
See accompanying notes to financial statements.
65
<PAGE> 100
VARIABLE ANNUITY ACCOUNT FOUR
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Government
Capital Natural and
Appreciation Growth Resources Quality Bond
Portfolio Portfolio Portfolio Portfolio
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ 1,464,146 $ 1,443,755 $ (371) $ 812,039
Net realized gains (losses) from
securities transactions 7,716,588 1,278,816 (104,993) 124,953
Change in net unrealized appreciation/
depreciation of investments 3,500,320 1,276,947 531,762 (1,440,592)
--------------------------------------------------------------------------
Increase (decrease) in net assets from
operations 12,681,054 3,999,518 426,398 (503,600)
--------------------------------------------------------------------------
From capital transactions:
Net proceeds from units sold 11,659,956 10,443,086 563,694 11,241,673
Cost of units redeemed (2,492,997) (1,587,647) (415,964) (1,829,653)
Net transfers 3,583,785 (953,846) (84,221) (1,463,633)
--------------------------------------------------------------------------
Increase (decrease) in net assets
from capital transactions 12,750,744 7,901,593 63,509 7,948,387
--------------------------------------------------------------------------
Increase (decrease) in net assets 25,431,798 11,901,111 489,907 7,444,787
Net assets at beginning of period 21,145,421 14,054,937 1,729,875 15,974,545
--------------------------------------------------------------------------
Net assets at end of period $ 46,577,219 $ 25,956,048 $ 2,219,782 $ 23,419,332
==========================================================================
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 425,545 383,934 51,912 831,181
Units redeemed (90,947) (59,520) (37,655) (135,746)
Units transferred 142,343 (40,459) (11,525) (107,687)
--------------------------------------------------------------------------
Increase (decrease) in units outstanding 476,941 283,955 2,732 587,748
Beginning units 1,017,644 665,205 184,816 1,164,582
--------------------------------------------------------------------------
Ending units 1,494,585 949,160 187,548 1,752,330
==========================================================================
</TABLE>
<TABLE>
<CAPTION>
International
Diversified Global Aggressive
Equities Equities Growth
Portfolio Portfolio Portfolio
-------------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ 933,489 $ 2,433,260 $ 845,662
Net realized gains (losses) from
securities transactions 10,298,407 1,740,712 2,189,660
Change in net unrealized appreciation/
depreciation of investments 1,004,464 1,065,639 503,675
-------------------------------------------------------
Increase (decrease) in net assets from
operations 12,236,360 5,239,611 3,538,997
-------------------------------------------------------
From capital transactions:
Net proceeds from units sold 5,601,770 15,209,171 5,550,035
Cost of units redeemed (2,030,068) (1,357,976) (499,172)
Net transfers 24,885,595 5,904,173 (2,029,613)
-------------------------------------------------------
Increase (decrease) in net assets
from capital transactions 28,457,297 19,755,368 3,021,250
-------------------------------------------------------
Increase (decrease) in net assets 40,693,657 24,994,979 6,560,247
Net assets at beginning of period 17,098,161 10,207,031 5,725,095
-------------------------------------------------------
Net assets at end of period $ 57,791,818 $ 35,202,010 $ 12,285,342
=======================================================
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 395,001 738,608 377,923
Units redeemed (148,884) (65,282) (33,386)
Units transferred 2,350,864 333,215 (134,211)
-------------------------------------------------------
Increase (decrease) in units outstanding 2,596,981 1,006,541 210,326
Beginning units 1,406,772 619,488 563,756
-------------------------------------------------------
Ending units 4,003,753 1,626,029 774,082
=======================================================
</TABLE>
See accompanying notes to financial statements.
66
<PAGE> 101
VARIABLE ANNUITY ACCOUNT FOUR
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
SEPTEMBER 30, 1999
(Continued)
<TABLE>
<CAPTION>
Venture Federated Alliance Growth-
Value Value Growth Income
Portfolio Portfolio Portfolio Portfolio
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ 2,581,049 $ 492,152 $ 8,228,777 $ 3,545,502
Net realized gains (losses) from
securities transactions 1,921,691 587,196 4,691,250 1,434,224
Change in net unrealized appreciation/
depreciation of investments 9,537,797 16,799 8,876,114 12,494,307
-------------------------------------------------------------------------
Increase (decrease) in net assets from
operations 14,040,537 1,096,147 21,796,141 17,474,033
-------------------------------------------------------------------------
From capital transactions:
Net proceeds from units sold 22,987,514 4,866,473 44,843,766 32,139,561
Cost of units redeemed (6,534,403) (1,187,071) (6,806,096) (5,123,126)
Net transfers (2,186,605) 811,460 7,439,564 4,947,933
-------------------------------------------------------------------------
Increase (decrease) in net assets
from capital transactions 14,266,506 4,490,862 45,477,234 31,964,368
-------------------------------------------------------------------------
Increase (decrease) in net assets 28,307,043 5,587,009 67,273,375 49,438,401
Net assets at beginning of period 58,674,092 8,832,276 44,393,067 42,087,039
-------------------------------------------------------------------------
Net assets at end of period 86,981,135 $ 14,419,285 $ 111,666,442 $ 91,525,440
=========================================================================
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 917,108 292,496 1,155,366 1,102,602
Units redeemed (260,818) (71,439) (175,280) (176,789)
Units transferred (91,538) 49,927 221,145 173,547
-------------------------------------------------------------------------
Increase (decrease) in units outstanding 564,752 270,984 1,201,231 1,099,360
Beginning units 2,902,818 632,656 1,582,618 1,922,364
-------------------------------------------------------------------------
Ending units 3,467,570 903,640 2,783,849 3,021,724
=========================================================================
</TABLE>
<TABLE>
<CAPTION>
Asset SunAmerica
Allocation Balanced Utility
Portfolio Portfolio Portfolio
------------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ 2,186,436 $ 279,625 $ 485,972
Net realized gains (losses) from
securities transactions (265,147) 260,826 136,024
Change in net unrealized appreciation/
depreciation of investments (86,376) 2,989,117 (504,632)
------------------------------------------------------
Increase (decrease) in net assets from
operations 1,834,913 3,529,568 117,364
------------------------------------------------------
From capital transactions:
Net proceeds from units sold 7,623,739 18,767,800 5,158,530
Cost of units redeemed (3,611,828) (1,872,035) (520,170)
Net transfers (5,431,075) 3,797,583 64,897
------------------------------------------------------
Increase (decrease) in net assets
from capital transactions (1,419,164) 20,693,348 4,703,257
------------------------------------------------------
Increase (decrease) in net assets 415,749 24,222,916 4,820,621
Net assets at beginning of period 31,224,425 14,618,142 6,246,778
------------------------------------------------------
Net assets at end of period $ 31,640,174 $ 38,841,058 $ 11,067,399
======================================================
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 412,851 1,115,508 348,029
Units redeemed (195,062) (110,680) (34,917)
Units transferred (293,669) 233,771 (260)
------------------------------------------------------
Increase (decrease) in units outstanding (75,880) 1,238,599 312,852
Beginning units 1,815,221 1,021,745 440,453
------------------------------------------------------
Ending units 1,739,341 2,260,344 753,305
======================================================
</TABLE>
See accompanying notes to financial statements.
67
<PAGE> 102
VARIABLE ANNUITY ACCOUNT FOUR
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
SEPTEMBER 30, 1999
(Continued)
<TABLE>
<CAPTION>
Worldwide High-Yield Global Corporate
High Income Bond Bond Bond
Portfolio Portfolio Portfolio Portfolio
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ 563,830 $ 1,423,541 $ 400,804 $ 456,432
Net realized gains (losses) from
securities transactions (465,441) (308,100) 12,970 18,157
Change in net unrealized appreciation/
depreciation of investments 777,975 (655,388) (580,785) (872,628)
-------------------------------------------------------------------------
Increase (decrease) in net assets from
operations 876,364 460,053 (167,011) (398,039)
-------------------------------------------------------------------------
From capital transactions:
Net proceeds from units sold 898,942 7,016,765 2,054,007 5,959,933
Cost of units redeemed (638,930) (2,197,129) (993,690) (782,529)
Net transfers (1,038,232) (3,875,030) 55,442 (123,750)
-------------------------------------------------------------------------
Increase (decrease) in net assets
from capital transactions (778,220) 944,606 1,115,759 5,053,654
-------------------------------------------------------------------------
Increase (decrease) in net assets 98,144 1,404,659 948,748 4,655,615
Net assets at beginning of period 5,242,554 14,772,559 5,278,049 9,803,119
-------------------------------------------------------------------------
Net assets at end of period $ 5,340,698 $ 16,177,218 $ 6,226,797 $ 14,458,734
=========================================================================
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 65,870 483,445 142,849 457,920
Units redeemed (45,804) (150,926) (69,929) (60,311)
Units transferred (77,391) (261,404) 3,310 (9,809)
-------------------------------------------------------------------------
Increase (decrease) in units outstanding (57,325) 71,115 76,230 387,800
Beginning units 426,276 1,040,736 365,756 743,536
-------------------------------------------------------------------------
Ending units 368,951 1,111,851 441,986 1,131,336
=========================================================================
</TABLE>
<TABLE>
<CAPTION>
"Dogs" of Cash
Wall Street Management
Portfolio Portfolio TOTAL
------------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ 201,398 $ 468,640 $ 29,246,138
Net realized gains (losses) from
securities transactions 96,296 1,099,440 32,463,529
Change in net unrealized appreciation/
depreciation of investments 156,813 (48,945) 38,542,383
------------------------------------------------------
Increase (decrease) in net assets from
operations 454,507 1,519,135 100,252,050
------------------------------------------------------
From capital transactions:
Net proceeds from units sold 4,955,018 70,055,973 287,597,406
Cost of units redeemed (2,213,519) (6,243,254) (48,937,257)
Net transfers 818,340 (14,756,024) 20,366,743
------------------------------------------------------
Increase (decrease) in net assets
from capital transactions 3,559,839 49,056,695 259,026,892
------------------------------------------------------
Increase (decrease) in net assets 4,014,346 50,575,830 359,278,942
Net assets at beginning of period 6,869,086 21,573,306 355,549,557
------------------------------------------------------
Net assets at end of period $ 10,883,432 $ 72,149,136 $ 714,828,499
======================================================
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 512,293 5,868,418 16,078,859
Units redeemed (221,004) (521,183) (2,665,562)
Units transferred 85,010 (1,239,771) 1,325,408
------------------------------------------------------
Increase (decrease) in units outstanding 376,299 4,107,464 14,738,705
Beginning units 787,445 1,832,548 21,136,435
------------------------------------------------------
Ending units 1,163,744 5,940,012 35,875,140
======================================================
</TABLE>
See accompanying notes to financial statements.
68
<PAGE> 103
VARIABLE ANNUITY ACCOUNT FOUR
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO THE FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Variable Annuity Account Four of Anchor National Life Insurance Company
(the "Separate Account") is a segregated investment account of Anchor
National Life Insurance Company (the "Company"). The Company is an
indirect, wholly owned subsidiary of American International Group Inc.
("AIG"), an international insurance and financial services company. At
December 31, 1998, the Company was a wholly owned indirect subsidiary of
SunAmerica Inc., a Maryland corporation. On January 1, 1999, SunAmerica
Inc. merged with and into AIG in a tax-free reorganization that has been
treated as a pooling of interests for accounting purposes. Thus,
SunAmerica Inc. ceased to exist on that date. However, immediately prior
to the effectiveness of the merger, substantially all of the net assets
of SunAmerica Inc. were contributed to a newly formed subsidiary of AIG
named SunAmerica Holdings, Inc., a Delaware corporation. SunAmerica
Holdings, Inc. subsequently changed its name to SunAmerica Inc. The
Separate Account is registered as a segregated unit investment trust
pursuant to the provisions of the Investment Company Act of 1940, as
amended.
The Separate Account is composed of twenty variable portfolios (the
"Variable Accounts"). Each of the Variable Accounts is invested solely
in the shares of either (1) one of the four currently available
investment portfolios of Anchor Series Trust (the "Anchor Trust") or (2)
one of the sixteen currently available investment portfolios of
SunAmerica Series Trust (the "SunAmerica Trust"). The Anchor Trust and
the SunAmerica Trust (collectively referred to as the "Trusts") are
diversified, open-end, affiliated investment companies, which retain
investment advisers to assist in the investment activities of the
trusts. The participant may elect to have investments allocated to a
guaranteed-interest fund of the Company (the "General Account"), which
is not part of the Separate Account. The financial statements include
balances allocated by the participant to the twenty Variable Accounts
and do not include balances allocated to the General Account.
The Variable Accounts became initially available for sale on August 19,
1996. The inception dates for the twenty individual Portfolios were as
follows: April 1, 1998 for the "Dogs" of Wall Street Portfolio;
September 23, 1996 for the High-Yield Bond and Corporate Bond
Portfolios; September 16, 1996 for the Government and Quality Bond,
Asset Allocation, SunAmerica Balanced and Utility Portfolios; September
12, 1996 for the Natural Resources, International Diversified Equities
and Alliance Growth Portfolios; September 6, 1996 for the Growth,
Federated Value and Growth-Income Portfolios; September 5, 1996 for the
Cash Management Portfolio; September 4, 1996 for the Global Bond
Portfolio; August 29, 1996 for the Aggressive Growth Portfolio; and
August 27, 1996 for the Capital Appreciation, Global Equities, Venture
Value and Worldwide High Income Portfolios.
69
<PAGE> 104
VARIABLE ANNUITY ACCOUNT FOUR
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO THE FINANCIAL STATEMENTS
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The investment objectives and policies of the four portfolios of the
Anchor Trust are summarized below:
The CAPITAL APPRECIATION PORTFOLIO seeks long-term capital appreciation.
This portfolio invests in growth equity securities which are widely
diversified by industry and company using a wide-ranging and flexible
stock picking approach; may be concentrated and will generally have less
investments in large company securities than the Growth Portfolio.
The GROWTH PORTFOLIO seeks capital appreciation. This portfolio invests
in core equity securities that are widely diversified by industry and
company.
The NATURAL RESOURCES PORTFOLIO seeks a total return in excess of the
U.S. rate of inflation as represented by the Consumer Price Index. This
portfolio invests primarily in equity securities of U.S. or foreign
companies which are expected to provide favorable returns in periods of
rising inflation.
The GOVERNMENT AND QUALITY BOND PORTFOLIO seeks relatively high current
income, liquidity and security of principal. This portfolio invests in
obligations issued, guaranteed or insured by the U.S. Government, its
agencies or instrumentalities and in high quality corporate fixed income
securities.
Anchor Trust has portfolios in addition to those identified above,
however, none of these other portfolios are currently available for
investment under the Separate Account.
The investment objectives and policies of the sixteen portfolios of the
SunAmerica Trust are summarized below:
The INTERNATIONAL DIVERSIFIED EQUITIES PORTFOLIO seeks long-term capital
appreciation. This portfolio invests (in accordance with country
weightings as determined by the Subadviser) in common stocks of foreign
issuers which, in the aggregate, replicate broad country and sector
indices.
The GLOBAL EQUITIES PORTFOLIO seeks long-term growth of capital. This
portfolio invests primarily in common stocks or securities of U.S. and
foreign issuers with common stock characteristics which demonstrate the
potential for appreciation and engages in transactions in foreign
currencies.
70
<PAGE> 105
VARIABLE ANNUITY ACCOUNT FOUR
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO THE FINANCIAL STATEMENTS
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The AGGRESSIVE GROWTH PORTFOLIO seeks capital appreciation. This
portfolio invests primarily in equity securities of high growth
companies including small companies with market capitalizations under
$1 billion.
The VENTURE VALUE PORTFOLIO seeks growth of capital. This portfolio
invests primarily in common stocks of companies with market
capitalizations of at least $5 billion.
The FEDERATED VALUE PORTFOLIO seeks growth of capital and income. This
portfolio invests primarily in the securities of high quality companies.
The ALLIANCE GROWTH PORTFOLIO seeks long-term growth of capital. This
portfolio invests primarily in equity securities of a limited number of
large, carefully selected, high quality U.S. companies that are judged
likely to achieve superior earnings.
The GROWTH-INCOME PORTFOLIO seeks growth of capital and income. This
portfolio invests primarily in common stocks or securities which
demonstrate the potential for appreciation and/or dividends.
The ASSET ALLOCATION PORTFOLIO seeks high total return (including income
and capital gains) consistent with preservation of capital over the long
term. This portfolio invests in a diversified selection of common stocks
and other securities having common stock characteristics, bonds and
other intermediate and long-term fixed-income securities and money
market instruments (debt securities maturing in one year or less) in any
combination.
The SUNAMERICA BALANCED PORTFOLIO seeks to conserve principal. This
portfolio maintains at all times a balanced portfolio of stocks and
bonds, with at least 25% invested in fixed income securities.
The UTILITY PORTFOLIO seeks high current income and moderate capital
appreciation. This portfolio invests primarily in the equity and debt
securities of utility companies.
The WORLDWIDE HIGH INCOME PORTFOLIO seeks high current income and,
secondarily, capital appreciation. This portfolio invests primarily in a
selection of high-yielding fixed-income securities of issuers located
throughout the world.
71
<PAGE> 106
VARIABLE ANNUITY ACCOUNT FOUR
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO THE FINANCIAL STATEMENTS
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The HIGH-YIELD BOND PORTFOLIO seeks a high level of current income and,
secondarily, seeks capital appreciation. This portfolio invests
primarily in intermediate and long-term corporate obligations, with
emphasis on higher-yielding, higher-risk, lower-rated or unrated
securities with a primary focus on "B" rated high-yield bonds.
The GLOBAL BOND PORTFOLIO seeks a high total return, emphasizing current
income and, to a lesser extent, providing opportunities for capital
appreciation. This portfolio invests in high quality fixed-income
securities of U.S. and foreign issuers and engages in transactions in
foreign currencies.
The CORPORATE BOND PORTFOLIO seeks a high total return with only
moderate price risk. This portfolio invests primarily in investment
grade fixed-income securities.
The "DOGS" OF WALL STREET PORTFOLIO seeks total return (including
capital appreciation and current income) primarily through the annual
selection of thirty high dividend yielding common stocks from the Dow
Jones Industrial Average and the broader market.
The CASH MANAGEMENT PORTFOLIO seeks high current yield while preserving
capital. This portfolio invests in a diversified selection of money
market instruments.
SunAmerica Trust has portfolios in addition to those identified above,
however, none of these other portfolios are currently available for
investment under the Separate Account.
Purchases and sales of shares of the portfolios of the Trusts are valued
at the net asset values of the shares on the date the shares are
purchased or sold. Dividends and capital gains distributions are
recorded when received. Realized gains and losses on the sale of
investments in the Trusts are recognized at the date of sale and are
determined on an average cost basis.
Accumulation unit values are computed daily based on the total net
assets of the Variable Accounts.
72
<PAGE> 107
VARIABLE ANNUITY ACCOUNT FOUR
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO THE FINANCIAL STATEMENTS
2. CHARGES AND DEDUCTIONS
There are no withdrawal charges and no contract maintenance charges.
Other charges and deductions are applied against the current value of
the Separate Account and are paid as follows:
TRANSFER FEE: A transfer fee of $25 ($10 in Pennsylvania and Texas) is
assessed on each transfer of funds in excess of fifteen transactions
within a contract year.
PREMIUM TAXES: Premium taxes or other taxes payable to a state or other
governmental entity will be charged against contract values. Some states
assess premium taxes at the time purchase payments are made; others
assess premium taxes at the time annuity payments begin. The Company's
current practice is to delay charging for these taxes until annuity
payments begin or a full surrender is made. In the future, the Company
may discontinue this practice and assess the tax when it is due or upon
the payment of the death benefit.
MORTALITY RISK, GUARANTEE DEATH BENEFIT AND EXPENSE RISK CHARGE: The
Company deducts mortality risk, guarantee death benefit and expense risk
charges, which total to an annual rate of 1.37% of the net asset value
of each portfolio, computed on a daily basis. The mortality risk charge
of 0.90% is compensation for the mortality risks assumed by the Company
from its contractual obligations to make annuity payments after the
contract has annuitized for the life of the annuitant. The guarantee
death benefit and expense risk charges of 0.12% and 0.35%, respectively,
are compensation for providing death benefits, and for assuming the risk
that the current charges will be insufficient in the future to cover the
cost of administering the contract.
DISTRIBUTION EXPENSE CHARGE: The Company deducts a distribution expense
charge at an annual rate of 0.15% of the net asset value of each
portfolio, computed on a daily basis. The distribution expense charge is
for all expenses associated with the distribution of the contract.
SEPARATE ACCOUNT INCOME TAXES: The Company currently does not maintain a
provision for taxes, but has reserved the right to establish such a
provision for taxes in the future if it determines, in its sole
discretion, that it will incur a tax as a result of the operation of the
Separate Account.
73
<PAGE> 108
VARIABLE ANNUITY ACCOUNT FOUR
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO THE FINANCIAL STATEMENTS
3. INVESTMENT IN ANCHOR TRUST AND SUNAMERICA TRUST
The aggregate cost of shares acquired and the aggregate proceeds from
shares sold during the three month period from October 1, 1999 to
December 31, 1999 consist of the following:
<TABLE>
<CAPTION>
Cost of Shares Proceeds from
Portfolio Investment Acquired Shares Sold
-------------------- -------------- -------------
<S> <C> <C>
ANCHOR TRUST
Capital Appreciation Portfolio $ 66,556,579 $ 53,562,346
Growth Portfolio 8,539,088 3,607,179
Natural Resources Portfolio 2,474,966 2,401,965
Government & Quality Bond Portfolio 3,090,290 2,356,452
SUNAMERICA TRUST
International Diversified Equities Portfolio 498,298,757 513,270,211
Global Equities Portfolio 148,107,893 146,805,191
Aggressive Growth Portfolio 18,960,693 14,976,242
Venture Value Portfolio 13,867,579 5,189,089
Federated Value Portfolio 4,155,105 1,695,350
Alliance Growth Portfolio 20,512,857 8,274,077
Growth-Income Portfolio 10,790,136 2,246,920
Asset Allocation Portfolio 848,226 1,443,550
SunAmerica Balanced Portfolio 4,530,500 468,613
Federated Utility Portfolio 1,850,119 1,203,894
Worldwide High Income Portfolio 248,905 546,812
High Yield Bond Portfolio 2,062,969 1,398,786
Global Bond Portfolio 592,472 1,329,982
Corporate Bond Portfolio 1,525,078 1,714,335
"Dogs" of Wall Street Portfolio 2,009,493 2,486,361
Cash Management Portfolio 303,598,643 317,366,840
</TABLE>
4. FEDERAL INCOME TAXES
The Company qualifies for federal income tax treatment granted to life
insurance companies under subchapter L of the Internal Revenue Service
Code (the "Code"). The operations of the Separate Account are part of
the total operations of the Company and are not taxed separately. The
Separate Account is not treated as a regulated investment company under
the Code.
74
<PAGE> 109
VARIABLE ANNUITY ACCOUNT FOUR
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO THE FINANCIAL STATEMENTS
5. FISCAL YEAR CHANGE
Effective December 31, 1999, the Separate Account changed its fiscal
year end from September 30 to December 31. Accordingly, the financial
statements include the results of operations for the transition period,
which are not necessarily indicative of operations for a full year.
Results for the comparable prior period are summarized below.
<TABLE>
<CAPTION>
Three Months Ended
December 31, 1998
------------------
<S> <C>
Net investment loss $(1,594,866)
Net realized gains
from securities transactions 2,863,883
Change in net unrealized appreciation/
depreciation of investments 6,142,579
------------
Increase in net assets from operations $ 67,411,596
============
</TABLE>
75
<PAGE> 110
PART C - OTHER INFORMATION
--------------------------
Item 24. Financial Statements and Exhibits
-------- ---------------------------------
(a) Financial Statements
--------------------
The following financial statements are included in Part B of the
Registration Statement:
Audited Consolidated Financial Statements of Anchor National Life
Insurance Company as of December 31, 1999, December 31, 1998, and
September 30, 1998, and for the year ended December 31, 1999, for
the three months ended December 31, 1998, and for each of the two
fiscal years in the period ended September 30, 1998.
Financial Statements of Variable Annuity Account Four as of and for the
three months ended December 31, 1999, and as of September 30, 1999 and
for each of the two years in the period ended September 30, 1999.
[To be updated by Amendment]
(b) Exhibits
--------
(1) Resolutions Establishing Separate Account .. *
(2) Custody Agreement .......................... N/A
(3) (a) Form of Distribution Contract .......... *
(b) Form of Selling Agreement .............. *
(4) Variable Annuity Contract .................. *
(5) Application for Contract ................... *
(6) Depositor - Corporate Documents
(a) Certificate of Incorporation ........... *
(b) By-Laws................................. *
(7) Reinsurance Contract ....................... N/A
(8) Form of Fund Participation Agreement ....... *
(9) Opinion of Counsel ......................... *
Consent of Counsel.......................... *
(10) Consent of Accountants...................... Filed Herewith
(11) Financial Statements Omitted from Item 23 .. None
(12) Initial Capitalization Agreement ........... N/A
(13) Performance Computations ................... N/A
(14) Diagram and Listing of All Persons Directly
or Indirectly Controlled By or Under Common
Control with Anchor National Life Insurance
Company, the Depositor of Registrant ...... **
(15) Powers of Attorney.......................... ***
(27) Financial Data Schedules ................... N/A
* Filed in Post-Effective Amendment Number 3 & 4 to this Registration
Statement, File No. 33-86642 and 811-8874.
** Filed in Post-Effective Amendment Number 8 and 9 to this Registration
Statement on April 21, 2000.
*** Filed in Post-Effective Amendment Number 9 and 10 to this Registration
Statement on December 8, 2000.
Item 25. Directors and Officers of the Depositor
-------------------------------------------------
The officers and directors of Anchor National Life Insurance Company are
listed below. Their principal business address is 1 SunAmerica Center, Los
Angeles, California 90067-6022, unless otherwise noted.
<TABLE>
<CAPTION>
Name Position
<S> <C>
Jay S. Wintrob Director and President
James R. Belardi Director and Senior Vice President
Jana W. Greer Director and Senior Vice President
Marc H. Gamsin Director and Senior Vice President
N. Scott Gillis Director and Senior Vice President
Edwin R. Raquel Senior Vice President and Chief Actuary
J. Franklin Grey Vice President
Edward P. Nolan* Vice President
Gregory M. Outcalt Senior Vice President
Maurice S. Hebert Vice President and Controller
Scott H. Richland Vice President
P. Daniel Demko, Jr. Vice President
Kevin J. Hart Vice President
Stewart R. Polakov Vice President
Lawrence M. Goldman Vice President and Assistant Secretary
Christine A. Nixon Vice President and Secretary
</TABLE>
------------
* 88 Bradley Road, P.O. Box 4005, Woodbridge, Connecticut 06525
<PAGE> 111
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. As of January 4, 1999, Anchor National became an indirect
wholly-owned subsidiary of American International Group, Inc. ("AIG").
An organizational chart for AIG can be found in Form 10-K, SEC file
number 001-08787 filed March 30, 2000.
Item 27. Number of Contract Owners
-----------------------------------
As of December 31, 2000, the number of Contracts funded by Variable
Annuity Account Four of Anchor National Life Insurance Company was
11,765 of which 82,985 were Qualified Contracts and 8,780 were
Nonqualified Contracts.
Item 28. Indemnification
-------------------------
None.
Item 29. Principal Underwriter
-------------------------------
SunAmerica Capital Services, Inc. serves as distributor to the
Registrant.
Its principal business address is 733 Third Avenue, 4th Floor, New
York, New York 10017. The following are the directors and officers of
SunAmerica Capital Services, Inc.
<TABLE>
<CAPTION>
Name Position with Distributor
---- -------------------------
<S> <C>
J. Steven Neamtz Director & President
Robert M. Zakem Director, Executive Vice President,
General Counsel & Assistant Secretary
Peter A. Harbeck Director
Debbie Potash-Turner Controller
James Nichols Vice President
Virginia N. Puzon Assistant Secretary
</TABLE>
<TABLE>
Net Distribution Compensation on
Name of Discounts and Redemption or Brokerage
Distributor Commissions Annuitization Commissions Commissions*
----------- ---------------- ---------------- ----------- ------------
<S> <C> <C> <C> <C>
SunAmerica Capital None None None None
Services, Inc.
</TABLE>
----------------
*Distribution fee is paid by Anchor National Life Insurance Company.
SunAmerica Capital Services, Inc. also acts as the principal underwriter:
- Variable Separate Account
- Variable Annuity Account One
- Presidential Variable Account One
- FS Variable Separate Account
- FS Variable Annuity Account One
- Variable Annuity Account Five
- Variable Annuity Account Seven
- SunAmerica Income Funds
- SunAmerica Equity Funds
- SunAmerica Money Market Funds, Inc.
- Style Select Series, Inc.
- SunAmerica Strategic Investment Series, Inc.
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,
<PAGE> 112
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> 113
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> 114
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
18th day of January, 2001.
VARIABLE ANNUITY ACCOUNT FOUR
(Registrant)
By: ANCHOR NATIONAL LIFE INSURANCE COMPANY
(Depositor)
By: /s/ JAY S. WINTROB
-----------------------------------------
Jay S. Wintrob
President
By: ANCHOR NATIONAL LIFE INSURANCE COMPANY
(Depositor, on behalf of itself and Registrant)
By: /s/ JAY S. WINTROB
-------------------------------------------
Jay S. Wintrob
President
As required by the Securities Act of 1933, this Post-Effective
Amendment to the Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
MARC H. GAMSIN* Senior Vice President January 18, 2001
---------------------- and Director
Marc H. Gamsin
N. SCOTT GILLIS* Senior Vice President January 18, 2001
---------------------- and Director
N. Scott Gillis (Principal Financial
Officer)
JAMES R. BELARDI* Senior Vice President January 18, 2001
---------------------- and Director
James R. Belardi
JANA W. GREER* Senior Vice President January 18, 2001
---------------------- and Director
Jana W. Greer
MAURICE S. HEBERT* Vice President January 18, 2001
---------------------- and Controller
Maurice S. Hebert (Principal Accounting
Officer)
</TABLE>
<PAGE> 115
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
JAY S. WINTROB* President and January 18, 2001
--------------------------- Director
Jay S. Wintrob
By: /s/ CHRISTINE A. NIXON Attorney-In-Fact
------------------------
Christine A. Nixon
</TABLE>
Date: January 18, 2001
<PAGE> 116
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
(10) Consent of Accountants
</TABLE>
