-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LsgNlCIx6kllhhl1Z3cYvPFuTtRYgh9tlCUbw4Pfzo8mxonK7vpsQaLBu0DZmchp vRp2cnxQS7Ojzxek/zjqrg== 0000912057-97-008515.txt : 19970312 0000912057-97-008515.hdr.sgml : 19970312 ACCESSION NUMBER: 0000912057-97-008515 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 19970311 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANCHOR NATIONAL LIFE INSURANCE CO CENTRAL INDEX KEY: 0000006342 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 860198983 STATE OF INCORPORATION: CA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: S-1/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-08877 FILM NUMBER: 97554617 BUSINESS ADDRESS: STREET 1: 1 SUNAMERICA CENTER STREET 2: C/O THOMAS B PHILLIPS CITY: LOS ANGELES STATE: CA ZIP: 90067 BUSINESS PHONE: 3107726056 MAIL ADDRESS: STREET 1: 1 SUN AMERICA CENTER CITY: LOS ANGELES STATE: CA ZIP: 90067 FORMER COMPANY: FORMER CONFORMED NAME: ANCHOR LIFE INSURANCE CO DATE OF NAME CHANGE: 19600201 S-1/A 1 PRE EFFECTIVE AMENDMENT NO. 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 11, 1997 REGISTRATION NO. 333-08877 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-1 PRE-EFFECTIVE AMENDMENT NO. 1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ ANCHOR NATIONAL LIFE INSURANCE COMPANY (Exact name of registrant as specified in its charter) ARIZONA 6311 86-0198983 (State or other jurisdiction Primary Standard Industrial (I.R.S. Employer of Classification Number) Identification incorporation or organization) No.)
1 SUNAMERICA CENTER LOS ANGELES, CALIFORNIA 90067-6022 (310) 772-6000 (Address, including zip code, and telephone number, including area code, or registrant's principal executive offices) SUSAN L. HARRIS, ESQUIRE ANCHOR NATIONAL LIFE INSURANCE COMPANY 1 SUNAMERICA CENTER LOS ANGELES, CALIFORNIA 90067-6022 (310) 772-6000 (Name, address, including zip code, and telephone number, including area code of agent for service) ------------------------ TITLE OF PROPOSED PROPOSED EACH CLASS OF MAXIMUM MAXIMUM SECURITIES AMOUNT OFFERING AGGREGATE AMOUNT OF TO BE TO BE PRICE OFFERING REGISTRATION REGISTERED REGISTERED PER UNIT PRICE FEE Fixed Annuity Contract * * $50,000,000 $15,152
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. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CROSS REFERENCE SHEET ANCHOR NATIONAL LIFE INSURANCE COMPANY CROSS REFERENCE SHEET PURSUANT TO REGULATION S-K, ITEM 501(B)
FORM S-1 ITEM NO. AND CAPTION HEADING IN PROSPECTUS - ---------------------------------------------------------------- ----------------------------------------------------- 1. Forepart of the Registration Statement and Outside Front Cover Page of Prospectus...................... Outside Front Cover Page 2. Inside Front and Outside Back Cover Pages of Prospectus.......................................... Inside Front Cover 3. Summary of Information, Risk Factors and Ratio of Earnings to Fixed Charges........................... Front Cover; Profile; Investment Options 4. Use of Proceeds...................................... The Seasons Variable Annuity; Purchasing a Seasons Variable Annuity; Investment Options; Access to Your Money 5. Determination of Offering Price...................... Not Applicable 6. Dilution............................................. Not Applicable 7. Selling Security Holders............................. Not Applicable 8. Plan of Distribution................................. Purchasing a Seasons Variable Annuity; Access to Your Money 9. Description of Securities to be Registered........... The Seasons Variable Annuity; Annuity Income Options; Investment Options; Expenses 10. Interests of Named Experts and Counsel............... Not Applicable 11. Information with Respect to the Registrant........... Other Information 12. Disclosure of Commission Position on Indemnification for Securities Act Liabilities...................... Not Applicable
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. [LOGO] April , 1997 [LOGO] PROFILE This Profile is a summary of some of the more important points you should know before purchasing the Seasons Variable Annuity. The sections in this Profile correspond to sections in the prospectus which discuss the topics in more detail. Please read the prospectus carefully. THE SEASONS VARIABLE ANNUITY The Seasons Variable Annuity Contract is a contract between you and Anchor National Life Insurance Company. It is designed to help you save on a tax-deferred basis and diversify your investments among asset classes and managers to 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. The Seasons Variable Annuity helps you meet these goals by offering four variable investment STRATEGIES which are managed by five different professional investment managers. The value of any portion of your contract allocated to the STRATEGIES will fluctuate up or down based on the performance of the STRATEGIES you select and you may experience a loss. Five fixed investment options, each for a different length of time and offering different interest rates that are guaranteed by Anchor National and a one year DCA account offering a fixed interest rate guaranteed by Anchor National are also available under the contract. The STRATEGIES and fixed investment options are designed to be used in concert in order to achieve your desired investment goals. You may put money into any of the STRATEGIES and/or fixed investment options. You may transfer between STRATEGIES and/or the fixed investment options four times per year without charge. Like all annuities, the contract has an Accumulation Phase, and if you choose to annuitize, an Income Phase. During the Accumulation Phase, you invest money in your contract. Your earnings are based on the investment performance of the STRATEGY or STRATEGIES to which your money is allocated and/or the interest rate earned on the fixed investment option. You may withdraw money from your contract during the Accumulation Phase. However, as with other tax-deferred investments, you will pay taxes on earnings and untaxed contributions when you withdraw them. An IRS tax penalty may apply if you make withdrawals before age 59 1/2. During the Income Phase, you will receive payments from your annuity. Your payments may be fixed in dollar amount, vary with investment performance or be a combination of both, depending on the annuity option you select. Among other factors, the amount of money you are able to accumulate in your contract during the Accumulation Phase will determine the amount of your payments during the Income Phase. ANNUITY PAYMENT OPTIONS You can select from one of five annuity payment 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 120 months; (4) payments for your lifetime, but for not less than 120 or 240 months; and (5) payments for a specified period of 5 to 30 years. You will also need to decide if you want your payments to fluctuate with investment performance or remain constant, and the date on which your [LOGO] payments will begin. Once you begin receiving payments, you cannot change your annuity option. If your contract is Non-qualified, 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 Qualified contracts, the entire payment is taxable as income. PURCHASING A SEASONS VARIABLE ANNUITY You can buy a contract through your financial representative, who can also help you complete the proper forms. For Non-Qualified contracts the minimum initial investment is $5000. For Qualified contracts the minimum initial investment is $2000. You can add $500 or more to your contract at any time during the Accumulation Phase. INVESTMENT OPTIONS You can put your money into any one or more of the four multi-manager variable investment STRATEGIES and/or one or more of the six fixed investment options. The fixed investment options offer fixed rates of interest for specified lengths of time. Each STRATEGY has a different investment objective and uses an asset allocation investment approach, investing in a combination of underlying investment portfolios which invest in a combination of stocks, bonds and cash in varying degrees, in order to achieve its investment objective. The four investment STRATEGIES are: GROWTH MODERATE GROWTH BALANCED GROWTH CONSERVATIVE GROWTH Each STRATEGY invests in three underlying investment portfolios. The underlying investment portfolios are managed by the following five investment managers: PUTNAM INVESTMENT MANAGEMENT, INC. T. ROWE PRICE ASSOCIATES, INC. JANUS CAPITAL CORPORATION SUNAMERICA ASSET MANAGEMENT CORP. WELLINGTON MANAGEMENT COMPANY, LLP EXPENSES Each year we deduct a $35 ($30 in North Dakota and Washington) contract administration fee on your contract anniversary. We currently waive this fee if your contract value is at least $50,000. We also deduct insurance charges which amount to 1.40% annually of the average daily value of your contract allocated to the STRATEGIES. The insurance charges include Mortality and Expense Risk, 1.25% and Distribution Expense, .15%. There are also investment charges and other expenses if you put money into the STRATEGIES, which may range from 1.12% to 1.25%. Investment charges may be more or less than the percentages reflected here. If you take your money out, we may assess a withdrawal charge which is a percentage of the Purchase Payment you withdraw. The percentage declines with each year the Purchase Payment is in the contract as follows: Year 1......... 7% Year 5......... 4% Year 2......... 6% Year 6......... 3% Year 3......... 6% Year 7......... 2% Year 4......... 5% Year 8......... 0%
After a Purchase Payment has been in your contract for 7 full years, there is no withdrawal charge when that Purchase Payment is withdrawn. Additionally, if you take money out of a multi-year fixed investment option before the term you initially agreed to ends, you may be assessed an adjustment which could increase or decrease the value of your money. In some states you may also be assessed a state premium tax of up to 3.5%, depending upon the state in which you reside. If you transfer among the STRATEGIES and/or fixed investment options more than four times per year, you will be charged a $25 dollar transfer fee per transfer ($10 in Pennsylvania and Texas). The following chart is designed to help you understand the charges in your contract. The column "Total Annual Charges" shows the total of the $35 contract administration charge, the 1.40% insurance charges and the investment charges for each STRATEGY. We converted the contract [LOGO] administration charge to a percentage using an assumed contract size of $30,000. The actual impact of this charge on your contract may differ from this percentage. The examples assume that you invested $1,000 in a STRATEGY which earns 5% annually and that you withdrew your money at the end of a 1 year period and at the end of a 10 year period. For year 1, the total annual charges are assessed as well as the withdrawal charge. For year 10, the example reflects the total annual charges but there is no withdrawal charge. The annual investment-related expenses reflect the waiver or reimbursement of expenses by the investment adviser. No premium taxes are assumed. Please see the Fee Tables in the prospectus for more detailed information regarding the fees and expenses incurred under the contract.
EXAMPLES Total Annual Total Annual Total Total Insurance Investment Total Expenses Expenses Related Related Annual at end of at end of STRATEGY Charges Charges Charges 1 YEAR 10 YEARS Growth 1.52% 1.25% 2.77% $98 $309 Moderate Growth 1.52% 1.21% 2.73% $97 $305 Balanced Growth 1.52% 1.17% 2.69% $97 $301 Conservative Growth 1.52% 1.12% 2.64% $97 $296
TAXES Unlike taxable investments where earnings are taxed in the year they are earned, taxes on amounts earned in a Non-qualified Contract, one that is established with after tax dollars, are deferred until they are withdrawn. In a Qualified Contract, one that is established with before tax dollars, like an IRA, all amounts are taxable when they are withdrawn. When you begin taking distributions or withdrawals from your contract, earnings are considered to be taken out first and will be taxed at your ordinary income tax rate. You may be subject to a 10% federal tax penalty for distributions or withdrawals before age 59 1/2. ACCESS TO YOUR MONEY Withdrawals may be made from your contract in the amount of $1000 or more. You can take out up to 10% of your total Purchase Payments each year without charge. Withdrawals in excess of the 10% will be assessed a withdrawal charge as described above. If you withdraw your entire contract value you will not receive the benefit of any free withdrawal amount. After a Purchase Payment has been in your contract for 7 full years, there is no withdrawal charge. Additionally, withdrawal charges are not assessed when a death benefit is paid. Of course, you may also have to pay income tax and a 10% IRS tax penalty may apply. PERFORMANCE The value of your annuity will fluctuate depending upon the investment performance of the STRATEGY or STRATEGIES you select. From time to time we may advertise a STRATEGY'S total return. The total return figures are based on historical data and are not intended to indicate future performance. As of the date of the prospectus, the sale of Seasons Variable Annuity had not begun. Therefore, no performance data is presented here. [LOGO] DEATH BENEFIT If you, or, if there is a joint owner, the younger of the two, should die during the Accumulation Phase, your Beneficiary will receive a death benefit. If you die before age 75, the death benefit will be the greater of: (1) the money you put into the contract less any withdrawals, charges and market value adjustments, accumulated at 3%; or (2) the current value of your contract. If you die after age 75, the death benefit will be the greater of: (1) the money you put into the contract less any withdrawals, charges and market value adjustments, accumulated at 3% until your 75th birthday plus any subsequent Purchase Payments and less any withdrawals; or (2) the current value of your contract. OTHER INFORMATION OWNERSHIP: The contract is an allocated fixed and variable group annuity contract. A group contract is issued to a contractholder, for the benefit of the participants in the group. You, as an owner of a Seasons Variable Annuity, are a participant in the group and will receive a certificate evidencing your ownership. You, as the owner of a certificate, are entitled to all the rights and privileges of ownership. As used in this Profile and the prospectus, the term contract refers to your certificate. In some states an individual fixed and variable annuity contract may be available instead, which is identical to the group contract described in this Profile and the prospectus except that it is issued directly to the individual owner. FREE LOOK: You may cancel your contract within 10 days of receiving it (or whatever period is 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. Thus, the investment risk is borne by you during the free look period. SYSTEMATIC WITHDRAWAL PROGRAM: If selected by you, this program allows you to receive either monthly, quarterly, semi-annual or annual checks during the Accumulation Phase. Systematic withdrawals may also be electronically wired to your bank account. Of course, withdrawals during the Accumulation Phase may be taxable and a 10% IRS 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 into one or more of the STRATEGIES. PRINCIPAL ADVANTAGE PROGRAM: If selected by you, this program allows you to put money in a fixed investment option and one or more STRATEGIES and we will guarantee that the portion allocated to the fixed investment option will grow to equal your principal investment. AUTOMATIC PAYMENT PLAN: You can add to your contract directly from your bank account with as little as $50 per month. CONFIRMATIONS AND QUARTERLY STATEMENTS: You will receive a confirmation of each transaction within your contract. On a quarterly basis, you will receive a complete statement of your transactions over the past quarter and a summary of your account values. INQUIRIES: If you have questions about your contract or need to make changes, call your financial representative or contact us at: Anchor National Life Insurance Company Annuity Service Center P.O. Box 54299 Los Angeles, California 90054-0299 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 [LOGO] ALLOCATED FIXED AND VARIABLE GROUP ANNUITY issued by VARIABLE ANNUITY ACCOUNT FIVE and ANCHOR NATIONAL LIFE INSURANCE COMPANY The annuity contract has 10 investment choices - 6 fixed investment options which offer interest rates guaranteed by Anchor National for different periods of time and 4 variable investment STRATEGIES: GROWTH MODERATE GROWTH BALANCED GROWTH CONSERVATIVE GROWTH which invest in the underlying portfolios of SEASONS SERIES TRUST which is managed by: PUTNAM INVESTMENT MANAGEMENT, INC. T. ROWE PRICE ASSOCIATES, INC. JANUS CAPITAL CORPORATION SUNAMERICA ASSET MANAGEMENT CORP. WELLINGTON MANAGEMENT COMPANY, LLP You can put your money into any one or all of the STRATEGIES and/or fixed investment options. Please read this prospectus carefully before investing and keep it for your future reference. It contains important information you should know about the Seasons Variable Annuity. To learn more about the annuity offered by this prospectus, you can obtain a copy of the Statement of Additional Information dated April , 1997. The Statement of Additional has been filed with the Securities and Exchange Commission and is incorporated by reference into this prospectus. The table of contents of the Statement of Additional Information appears on page of this prospectus. For a free copy of the Statement of Additional Information, call us at 800/445-SUN2 or write us at our Annuity Service Center, P.O. Box 54299, Los Angeles, California 90054-0299. ANNUITIES INVOLVE RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL, AND ARE NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR ENDORSED BY, ANY BANK. THEY ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. 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. [LOGO] TABLE OF CONTENTS Profile Glossary.......................................................................................................... 2 Fee Tables........................................................................................................ 3 Owner Transaction Expenses............................................................................. 3 Annual Separate Account Expenses....................................................................... 3 Portfolio Expenses..................................................................................... 3 Examples.......................................................................................................... 4 THE SEASONS VARIABLE ANNUITY...................................................................................... 5 ANNUITY INCOME OPTIONS............................................................................................ 5 Options................................................................................................ 6 Allocation of Annuity Payments......................................................................... 6 Transfers During the Income Phase...................................................................... 6 Deferment of Payments.................................................................................. 6 PURCHASING A SEASONS VARIABLE ANNUITY............................................................................. 7 Allocation of Purchase Payments........................................................................ 7 Accumulation Units..................................................................................... 7 Free Look Period....................................................................................... 7 INVESTMENT OPTIONS................................................................................................ 8 Variable Investment Options: The STRATEGIES............................................................ 8 Substitution........................................................................................... 11 Fixed Investment Options............................................................................... 11 Transfers During the Accumulation Phase................................................................ 12 EXPENSES.......................................................................................................... 13 Insurance Charges...................................................................................... 13 Investment Charges..................................................................................... 13 Contract Maintenance Charge............................................................................ 13 Withdrawal Charge...................................................................................... 13 Transfer Fee........................................................................................... 14 Premium Taxes.......................................................................................... 14 Income Taxes........................................................................................... 14 Reduction or Elimination of Certain Charges............................................................ 14 TAXES............................................................................................................. 15 Annuity Contracts in General........................................................................... 15 Tax Treatment of Distributions -- Non-Qualified Contracts................................................................................ 15 Tax Treatment of Distributions -- Qualified Contracts.................................................................................... 15 Diversification........................................................................................ 15 ACCESS TO YOUR MONEY.............................................................................................. 16 Suspension of Payments................................................................................. 16 Minimum Contract Value................................................................................. 16 PERFORMANCE....................................................................................................... 17 DEATH BENEFIT..................................................................................................... 17 Death of the Annuitant................................................................................. 18 OTHER INFORMATION................................................................................................. 18 Anchor National........................................................................................ 18 The Separate Account................................................................................... 18 The General Account.................................................................................... 19 Distribution........................................................................................... 19 Administration......................................................................................... 19 Other Information about Anchor National................................................................ 19 Financials............................................................................................. 23 Appendix A............................................................................................. 52 Appendix B--Premium Taxes.............................................................................. 53
GLOSSARY OF TERMS We have capitalized some of the technical terms used in this prospectus. To help you understand these terms, we have defined them below: ACCUMULATION PHASE -- The period during which you invest money in your contract. ACCUMULATION UNITS -- A measurement we use to calculate the value of the variable portion of your contract during the Accumulation Phase. ANNUITANT(S) -- The person(s) on whose life(lives) we base annuity payments. ANNUITY DATE -- The date on which annuity payments are to begin, as selected by you. BENEFICIARY(IES) -- The person(s) designated to receive any benefits under the contract if you or the Annuitant dies. INCOME PHASE -- The period during which we make annuity payments to you. 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. PURCHASE PAYMENTS -- The money you give us to buy a contract, as well as any additional money you give us to invest after you own it. QUALIFIED (CONTRACT) -- A contract purchased with pre-tax dollars. These contracts are generally purchased under a pension plan, specially sponsored program or individual retirement account. STRATEGY(IES) -- A sub-account of Variable Annuity Account Five which provides for the variable investment options available under the contract. Each STRATEGY has its own investment objective and is invested in the underlying investment portfolios of Seasons Series Trust. 2 [LOGO] SEASONS VARIABLE ANNUITY FEE TABLES ------------------------------------------------------------ OWNER TRANSACTION EXPENSES Withdrawal Charge as a percentage of Purchase Payments: Year 1... 7% Year 5... 4% Year 2... 6% Year 6... 3% Year 3... 6% Year 7... 2% Year 4... 5% Year 8... 0%
Contract Maintenance Charge........ $35 each year ($30 in North Dakota and Washington) Transfer Fee....................... No charge for first 4 transfers each year; thereafter, the fee is $25 per transfer ($10 in Pennsylvania and Texas)
ANNUAL SEPARATE ACCOUNT EXPENSES (as a percentage of daily net asset value) Mortality Risk Charge............................... 0.90% Expense Risk Charge................................. 0.35% Distribution Expense Charge......................... 0.15% --- Total Separate Account Expenses............... 1.40%
The Investment Portfolio Expenses table set forth below identifies the total investment expenses charged by the underlying investment portfolios of Seasons Series Trust. Each contractholder within a STRATEGY will incur a portion of these total investment expenses in relation to the investment by such STRATEGY in the respective portfolio. The table entitled "Investment Portfolio Expenses by STRATEGY" which follows the table below identifies the total investment portfolio expenses by STRATEGY based upon the allocation of contract values within each STRATEGY to the underlying investment portfolios after the quarterly rebalancing described on page 11. However, the actual investment portfolio expenses incurred by contractholders within a STRATEGY will vary depending upon the daily net asset value of each investment portfolio in which such STRATEGY is invested. INVESTMENT PORTFOLIO EXPENSES (as a percentage of daily net asset value of each investment portfolio after reimbursement of expenses.)*
MANAGEMENT OTHER TOTAL ANNUAL FEE EXPENSES EXPENSES - ------------------------------------------------------------------------------------------------------------ Stock .85% .36% 1.21% Asset Allocation: Diversified Growth .85% .36% 1.21% Multi-Managed Growth .89% .40% 1.29% Multi-Managed Moderate Growth .85% .36% 1.21% Multi-Managed Income/Equity .81% .33% 1.14% Multi-Managed Income .77% .29% 1.06% - ------------------------------------------------------------------------------------------------------------ * The percentages set forth above are based on estimated amounts for the current fiscal year.
THE ABOVE INVESTMENT PORTFOLIO EXPENSES WERE PROVIDED BY SEASONS SERIES TRUST. WE HAVE NOT INDEPENDENTLY VERIFIED THE ACCURACY OF THE INFORMATION. 3 [LOGO] INVESTMENT PORTFOLIO EXPENSES BY STRATEGY* (based on the total annual expenses of the underlying investment portfolios reflected above, after reimbursement of expenses)
MANAGEMENT OTHER TOTAL ANNUAL FEE EXPENSES EXPENSES - ------------------------------------------------------------------------------------------------ STRATEGY Growth .87% .38% 1.25% Moderate Growth .85% .36% 1.21% Balanced Growth .83% .34% 1.17% Conservative Growth .80% .32% 1.12% - ------------------------------------------------------------------------------------------------ *The percentages set forth above are based on estimates for the current fiscal year.
EXAMPLES You will pay the following expenses on a $1,000 investment in each STRATEGY, assuming a 5% annual return on assets and: (a) surrender of the contract at the end of the stated time period; (b) if the contract is not surrendered or annuitized.
TIME PERIODS STRATEGY 1 YEAR 3 YEARS Growth (a) $98 (a) $146 (b) $28 (b) $ 86 Moderate Growth (a) $97 (a) $144 (b) $27 (b) $ 84 Balanced Growth (a) $97 (a) $143 (b) $27 (b) $ 83 Conservative Growth (a) $97 (a) $142 (b) $27 (b) $ 82
EXPLANATION OF FEE TABLES AND EXAMPLES 1. The purpose of the Fee Tables is to show you the various expenses you will incur directly and indirectly by investing in the contract. The example reflects owner transaction expenses, separate account expenses and investment portfolio expenses by STRATEGY. 2. For certain investment portfolios in which the STRATEGIES invest, 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 following percentages of each investment portfolio's average net assets: Stock and Asset Allocation: Diversified Growth Portfolios: 1.21%; Multi-Managed Growth: 1.29%; Multi-Managed Moderate Growth: 1.21%; Multi-Managed Income/Equity: 1.14%, Multi-Managed Income: 1.06%. The adviser also may voluntarily waive or reimburse additional amounts to increase an investment portfolios' investment return. All waivers and/or reimbursements may be terminated at any time. Furthermore, the adviser may recoup any waivers or reimbursements within the following two years, provided that the investment 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. Premium taxes are not reflected but may be applicable. 4. THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. AS OF THE DATE OF THIS PROSPECTUS, THE SALE OF SEASONS HAD NOT BEGUN AND THE STRATEGIES DID NOT HAVE ANY ASSETS. THEREFORE, NO CONDENSED FINANCIAL INFORMATION IS PRESENTED HERE. 4 [LOGO] THE SEASONS VARIABLE ANNUITY - -------------------------------------------------------------------------------- An annuity is a contract between you, the owner, and an insurance company. The contract provides tax deferral for your earnings, as well as a death benefit and guaranteed income in the form of annuity payments beginning on a date you select. Until you decide to begin receiving annuity payments, your annuity is in the Accumulation Phase. Once you begin receiving annuity payments, your contract switches to the Income Phase. If you die during the Accumulation Phase, the insurance company guarantees a death benefit to your Beneficiary. The Seasons Variable Annuity is issued by Anchor National Life Insurance Company. During the Accumulation Phase, the value of your annuity benefits from tax deferral. This means your earnings accumulate on a tax-deferred basis until you take money out of your contract. The Income Phase occurs when you begin to receive annuity payments. You select the date on which annuity payments are to begin. The contract is called a variable annuity because you can choose among four variable investment STRATEGIES, which invest in underlying investment portfolios managed by five investment managers. Depending upon market conditions, you can make or lose money in any of these STRATEGIES. If you allocate money to the STRATEGIES, the amount of money you are able to accumulate in your contract during the Accumulation Phase depends upon the investment performance of the STRATEGIES you select. The amount of the annuity payments you receive during the Income Phase from the variable portion of your contract also depends upon the investment performance of the STRATEGIES you select for the Income Phase. The contract also offers six fixed investment options. Your money will earn interest at the rate guaranteed by us for the period of time you agree to leave your money in the fixed investment option. We currently offer fixed investment options for periods of one, three, five, seven and ten years and a special one year DCA fixed account specifically for the Dollar Cost Averaging Program. If you allocate money to a fixed investment option, the amount of money you are able to accumulate in your contract during the Accumulation Phase depends upon the total interest credited to your contract. An adjustment to your contract will apply to withdrawals or transfers from the multi-year fixed investment options prior to the end of the selected guarantee period. The amount of annuity payments you receive during the Income Phase from the fixed portion of your contract will remain level for the entire Income Phase. ANNUITY INCOME OPTIONS - -------------------------------------------------------------------------------- When you switch to the Income Phase, you will receive regular income payments under the contract. You can choose to have your annuity payments sent to you by check or electronically wired to your bank. The contract offers 5 annuity options. Other annuity options may be available in the future. You select the date on which annuity payments are to begin, which must be the first day of a month at least two years after the date of your contract. We call this the Annuity Date. You may change your Annuity Date at least seven days prior to the date that your payments are to begin. However, annuity payments must begin by the later of your 90th birthday or ten years after the date your contract is issued. We call this the Latest Annuity Date. If no Annuity Date is selected we will begin payments based on the Latest Annuity Date. Certain states may require that you begin receiving annuity payments prior to this date. If the Annuity Date is past your 85th birthday, it is possible that the contract would not be treated as an annuity and you may incur adverse tax consequences. Unless you are a non-natural owner, you may change the Annuitant at any time prior to the Annuity Date. You may also designate a second person on whose life annuity payments are based. If the Annuitant dies before the Annuity Date, you must notify us and designate a new Annuitant. If you do not choose an annuity option, annuity payments will be made in accordance with option 4 (below) for 120 months. If the annuity payments are for joint lives, then we will make payments in accordance with option 3. If permitted by state law, we may pay the annuity in one lump sum if your contract is less than $5,000. Likewise, if your annuity payments would be less than $50 a month, we have the right to change the frequency of 5 [LOGO] your payment to be quarterly, semi-annual or annual so that your annuity payments are at least $50. Annuity payments will be made to you unless you designate another person to receive them. In that case, you must notify us in writing at least 30 days before the Annuity Date. You will remain fully responsible for any taxes related to annuity payments. OPTION 1 - LIFE INCOME Under this option, we will make annuity payments as long as the Annuitant is alive. Annuity payments stop when the Annuitant dies. OPTION 2 - JOINT AND SURVIVOR ANNUITY Under this option, we will make annuity payments as long as the Annuitant and a designated second person are alive. Upon the death of either person, we will continue to make annuity payments so long as the survivor is alive. You choose the amount of the annuity payments to the survivor, which can be equal to 100%, 66.66% or 50% of the full amount. Annuity payments stop upon the death of the survivor. OPTION 3 - JOINT AND SURVIVOR LIFE ANNUITY - 120 MONTHLY PAYMENTS GUARANTEED This option is similar to option 2 above, with the additional guarantee that payments will be made for at least 120 months. If the Annuitant and survivor die before all guaranteed payments have been made, the rest will be made to the Beneficiary. OPTION 4 - LIFE ANNUITY WITH 120 OR 240 MONTHLY PAYMENTS GUARANTEED This option is similar to option 1 above, with the additional guarantee that payments will be made for at least 120 or 240 months, as selected by you. Under this option, if the Annuitant dies before all guaranteed payments have been made, the rest will be made to the Beneficiary. OPTION 5 - INCOME FOR A SPECIFIED PERIOD Under this option, we will make annuity payments for any period of time from 5 to 30 years, as selected by you. However, the period must be for full 12 month increments. Under this option, if the Annuitant dies before all guaranteed payments have been made, the rest will be made to the beneficiary. This option does not contain an element of mortality risk. Therefore, you will not get the benefit of the mortality component of the mortality and expense risk charge if this option is selected. ALLOCATION OF ANNUITY PAYMENTS On the Annuity Date, if your money is invested in a fixed investment option(s), your annuity payments will be fixed in amount. If your money is invested in a STRATEGY(IES), your annuity payments will vary depending on the investment performance of the STRATEGY(IES) you select. If you have money in the fixed and variable investment options, your annuity payments will be based on the respective allocations. You may not convert between fixed and variable payments once annuity payments begin. VARIABLE ANNUITY PAYMENTS If you choose to have any portion of your annuity payments come from the STRATEGIES, the dollar amount of your payment will depend upon three things: (1) the value of your contract in the STRATEGIES on the Annuity Date, (2) the 3.5% assumed investment rate used in the annuity table for the contract and (3) the performance of the STRATEGIES you selected. If the actual performance exceeds the 3.5% assumed rate, your annuity payments will increase. Similarly, if the actual rate is less than 3.5%, your annuity payments will decrease. The Statement of Additional Information contains detailed information and sample calculations. TRANSFERS DURING THE INCOME PHASE You may transfer money among the STRATEGIES during the Income Phase. Transfers are subject to the same limitations as transfers during the Accumulation Phase. However, you may not transfer money from the fixed account into the STRATEGIES or from the STRATEGIES into the fixed accounts during the Income Phase. DEFERMENT OF PAYMENTS We may defer making fixed payments for up to six months, or less if required by state law. Interest will be credited to you during the deferral period. 6 [LOGO] PURCHASING A SEASONS VARIABLE ANNUITY - -------------------------------------------------------------------------------- A Purchase Payment is the money you give us to buy the contract, as well as any additional money you give us to invest in the contract after you own it. You can purchase a Non-Qualified contract with a minimum initial investment of $5,000 and a Qualified contract with a minimum initial investment of $2,000. The maximum we accept is $1,000,000 without our prior approval. Payments in amounts of $500 or more may be added to your contract at any time during the Accumulation Phase. You can make scheduled subsequent Purchase Payments of $50 or more per month by enrolling in the Automatic Payment Plan. We may refuse any Purchase Payment. In general, we will not issue a Non-Qualified contract to anyone who is age 90 or older or a Qualified contract to anyone who is age 70 1/2 or older. ALLOCATION OF PURCHASE PAYMENTS When you purchase a contract, you will allocate your Purchase Payment to one or more of the STRATEGIES and/or the fixed investment options. You should specify your investment allocations on the contract application. If you make additional Purchase Payments, we will allocate them the same way as your first Purchase Payment unless you tell us otherwise. Once we receive your Purchase Payment and a complete application at our principal place of business, we will issue your contract and allocate your first Purchase Payment within two business days. If we are unable to complete this process within five business days, we will either send back your money or get your permission to keep it until we get all the necessary information. ACCUMULATION UNITS The value of the variable portion of your contract will go up or down depending upon the investment performance of the STRATEGY(IES) you select. In order to keep track of the value of your contract, we use a unit of measure called an Accumulation Unit which works like a share of a mutual fund. During the Income Phase, we call them Annuity Units. An Accumulation Unit value is determined each day that the New York Stock Exchange ("NYSE") is open. We calculate an Accumulation Unit for each STRATEGY after the NYSE closes each day. We do this by: (1) determining the total value of money invested in the particular STRATEGY; (2) subtracting from that amount any asset-based charges and any other charges such as taxes we have deducted; and (3) dividing this amount by the number of outstanding Accumulation Units. The value of an Accumulation Unit may go up or down from day to day. When you make a Purchase Payment, we credit your contract with Accumulation Units. The number of Accumulation Units credited is determined by dividing the amount of the Purchase Payment allocated to a STRATEGY by the value of the Accumulation Unit for that STRATEGY. Example: We receive a $25,000 Purchase Payment from you on Wednesday. You want your money to be invested in the Moderate Growth STRATEGY. We determine that the value of an Accumulation Unit for the Moderate Growth STRATEGY is $11.10 when the NYSE closes on Wednesday. We then divide $25,000 by $11.10 and credit your contract on Wednesday night with 2252.252 Accumulation Units for the Moderate Growth STRATEGY. FREE LOOK PERIOD If you change your mind about owning the contract, you can cancel it within 10 days after receiving it (or longer if required by state law) by mailing it back to our Annuity Service Center. Unless otherwise required by state law, you will receive back whatever your contract is worth on the day we receive your request. Its value may be more or less than the money you initially invested. Thus, the investment risk is borne by you during the free look period. 7 [LOGO] INVESTMENT OPTIONS - -------------------------------------------------------------------------------- The contract offers variable investment options which we call STRATEGIES and fixed investment options. The contract was designed to meet your varying investment needs over time, which can be achieved by using the STRATEGIES alone or in concert with the fixed investment options in order to lower the risk associated with investing only in a variable investment option. VARIABLE INVESTMENT OPTIONS: THE STRATEGIES The contract offers four multi-manager variable investment STRATEGIES, each with a different investment objective. The STRATEGIES are designed to meet your investment needs over time and considering factors such as your age, goals and risk tolerance. However, each STRATEGY is designed to achieve different levels of growth over time. Each STRATEGY invests in three underlying investment portfolios of the Seasons Series Trust. The allocation of money among these investment portfolios will vary depending on the objective of the STRATEGY. Seasons Series Trust is managed by SunAmerica Asset Management Corp. ("SAAMCo."), which is affiliated with Anchor National. SAAMCo. has engaged sub-advisers to provide investment advice for certain investment portfolios. The underlying investment portfolios of Seasons Series Trust include the Asset Allocation: Diversified Growth Portfolio, the Stock Portfolio and the Multi-Managed Growth, Multi-Managed Moderate Growth, Multi-Managed Income/Equity and Multi-Managed Income Portfolios (the "Multi-Managed Portfolios"). The Asset Allocation: Diversified Growth Portfolio is managed by Putnam Investment Management, Inc. The Stock Portfolio is managed by T. Rowe Price Associates, Inc. All of the Multi-Managed Portfolios include the same three basic investment components: a growth component managed by Janus Capital Corporation, a balanced component managed by SAAMCo. and a fixed income component managed by Wellington Management Company, LLP. The Growth STRATEGY and the Moderate Growth STRATEGY also have an aggressive growth component which is managed by SAAMCo. The percentage that any one of these components represents in the Multi-Managed Portfolios varies in accordance with each STRATEGY's objective. YOU SHOULD READ THE PROSPECTUS FOR SEASONS SERIES TRUST CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS DETAILED INFORMATION ABOUT THE INVESTMENT PORTFOLIOS AND IS ATTACHED TO THIS PROSPECTUS. Each STRATEGY uses an asset allocation investment approach to achieve its objective and allocates your money into underlying investment portfolios which invest in a combination of stocks, both domestic and international, bonds and cash. Although the asset mix within each STRATEGY will vary over time, each STRATEGY has a neutral asset allocation mix, including a cash component in order to reflect the anticipated cash holdings required to rebalance each STRATEGY quarterly, as reflected on the following pages. Additionally, after the quarterly rebalancing described on page 10, the contract value within each STRATEGY will be allocated to the various underlying investment portfolios in the percentages identified on the following pages. 8 [LOGO] GROWTH GOAL: Long-term growth of capital, allocating its assets primarily to stocks. This STRATEGY may be best suited for those with longer periods to invest. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Stocks 80% Bonds 15% Cash 5%
UNDERLYING INVESTMENT PORTFOLIOS & MANAGERS ASSET ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO 25% Managed by Putnam Investment Management, Inc. STOCK PORTFOLIO 25% Managed by T. Rowe Price Associates, Inc. MULTI-MANAGED GROWTH PORTFOLIO 50% Managed by: Janus Capital Corporation SunAmerica Asset Management Corp. Wellington Management Company, LLP MODERATE GROWTH GOAL: Growth of capital through investments in equities, with a secondary objective of conservation of principal by allocating more of its assets to bonds than the Growth STRATEGY. This STRATEGY may be best suited for those nearing retirement years but still earning income. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Stocks 70% Bonds 25% Cash 5%
UNDERLYING INVESTMENT PORTFOLIOS & MANAGERS ASSET ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO 25% Managed by Putnam Investment Management, Inc. STOCK PORTFOLIO 20% Managed by T. Rowe Price Associates, Inc. MULTI-MANAGED MODERATE GROWTH PORTFOLIO 55% Managed by: Janus Capital Corporation SunAmerica Asset Management Corp. Wellington Management Company, LLP 9 [LOGO] BALANCED GROWTH Goal: Focuses on conservation of principal by investing in a more balanced weighting of stocks and bonds, with a secondary objective of seeking a high total return. This STRATEGY may be best suited for those approaching retirement and with less tolerance for investment risk. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Stocks 55% Bonds 40% Cash 5%
UNDERLYING INVESTMENT PORTFOLIOS & MANAGERS ASSET ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO 25% Managed by Putnam Investment Management, Inc. STOCK PORTFOLIO 20% Managed by T. Rowe Price Associates, Inc. MULTI-MANAGED INCOME/EQUITY PORTFOLIO 55% Managed by: Janus Capital Corporation SunAmerica Asset Management Corp. Wellington Management Company, LLP CONSERVATIVE GROWTH Goal: Capital preservation while maintaining some potential for growth over the long term. This STRATEGY may be best suited for those with lower investment risk tolerance. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Stocks 42% Bonds 53% Cash 5%
UNDERLYING INVESTMENT PORTFOLIOS & MANAGERS ASSET ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO 25% Managed by Putnam Investment Management, Inc. STOCK PORTFOLIO 15% Managed by T. Rowe Price Associates, Inc. MULTI-MANAGED INCOME PORTFOLIO 60% Managed by: Janus Capital Corporation SunAmerica Asset Management Corp. Wellington Management Company, LLP 10 [LOGO] STRATEGY REBALANCING Each STRATEGY is designed to meet its investment objective by allocating a portion of your money to three different investment portfolios. In order to maintain the mix of investment portfolios consistent with each STRATEGY's objective, each STRATEGY within your contract will be rebalanced on the first business day of each quarter so that it is allocated among the various investment portfolios according to the percentages set forth on pages 9 and 10. Additionally, within each Multi-Managed Portfolio, your money will be rebalanced among the various components. Rebalancing your contract may involve shifting assets out of better performing investments into an investment with relatively lower returns. SUBSTITUTION If any of the underlying investment portfolios is no longer available, we may be required to substitute shares of another investment portfolio. We will seek any required prior approval of the SEC and give you notice before doing this. FIXED INVESTMENT OPTIONS The contract also offers six fixed investment options. Anchor National will guarantee the interest rate earned on money you allocate to any of these fixed investment options. We currently offer fixed investment options for periods of one, three, five, seven and ten years, which we call Guarantee Periods. Additionally, we guarantee the interest rate for money allocated to the one year DCA fixed account (the "DCA Account") which is available only in conjunction with the Dollar Cost Averaging Program. Please see the section on the Dollar Cost Averaging Program on the next page for additional information about, including limitations on, the availability of the DCA Account. Interest rates offered for the different Guarantee Periods and the DCA Account will differ from time to time due to changes in market conditions but will not be less than 3%. The interest rate offered for a particular Guarantee Period for new Purchase Payments may differ from the interest rate offered for money already invested in such account. An interest rate established for a Guarantee Period or the DCA Account will not change during the term of that period. You may reallocate money to a fixed investment option (other than the DCA account) or to any of the STRATEGIES after the end of the Guarantee Period. However, if you do not give us different instructions within 30 days after the end of your Guarantee Period, we will keep your money in the fixed account for the same Guarantee Period you previously selected. You will receive the interest rate then in effect for that Guarantee Period. MARKET VALUE ADJUSTMENT THE FOLLOWING DISCUSSION APPLIES TO MONIES YOU PUT INTO THE THREE, FIVE, SEVEN AND TEN YEAR FIXED INVESTMENT OPTIONS ONLY AND DOES NOT APPLY TO WITHDRAWALS TO PAY A DEATH BENEFIT OR CONTRACT FEES AND CHARGES. If you take your money out of a multi-year fixed investment option (whether by withdrawal, transfer or annuitization) before the end of the Guarantee Period, we will make an adjustment to the value of your contract. We call this a Market Value Adjustment. The Market Value Adjustment reflects the differing interest rate environments between the time you put your money into the fixed account and the time you take your money out of the fixed account. The adjustment can increase or decrease the value of your contract. You may withdraw your money within 30 days followng the end of a Guarantee Period without incurring a Market Value Adjustment. We calculate the Market Value Adjustment by comparing the interest rate you received on the money you put into the fixed account against the interest rate we are currently offering to contract owners for the period of time remaining in the Guarantee Period. If the amount of time remaining is not equal to an available guarantee period for which we offer a fixed interest rate, the interest rate will be determined by linear interpolation between interest rates for the two nearest periods that are available. Generally, if interest rates have dropped between the time you put your money into the fixed account and the time you take it out, there will be a positive adjustment to the value of your contract. Conversely, if interest rates have increased between the time you put your money into the fixed account and the time you take it out, there will be a negative adjustment to the value of your contract. If the Market Value Adjustment is negative, it will be assessed first against any remaining money allocated to the fixed account out of which you took your money and then against the 11 [LOGO] amount of money you take out of the fixed account. If the Market Value Adjustment is positive, it will be added to the amount you take out of the fixed account. Appendix A provides more information about how we calculate the Market Value Adjustment and gives some examples of the impact of the adjustment. The one year fixed investment option and DCA Account do not impose a market value adjustment and are not registered under the Securities Act of 1933 and are not subject to the provisions of the Investment Company Act of 1940. TRANSFERS DURING THE ACCUMULATION PHASE Except as provided in the next sentence with respect to the DCA Account, you can transfer money among the STRATEGIES and the fixed investment options by written request or by telephone. Although you may transfer money out of the DCA Account, you may not transfer money into the DCA Account from any STRATEGY or any fixed investment option. You can make four transfers every year without incurring a transfer charge. We measure a year from the anniversary of the day we issued your contract. If you make more than four transfers in a year, there is a $25 transfer fee per transfer ($10 in Pennsylvania and Texas). Additionally, transfers out of a multi-year fixed investment option may be subject to a market value adjustment. The minimum amount you can transfer is $500 or a lesser amount if you transfer the entire balance from a STRATEGY or a fixed investment option. If any money will remain in a STRATEGY or fixed investment option after making a transfer, it must be at least $500. Your request for transfer must clearly state which STRATEGY(IES) and/or fixed investment option(s) are involved and the amount you want to transfer. Please see the section below on Dollar Cost Averaging for specific rules regarding the DCA Account. We will accept transfers by telephone unless you specify otherwise on your contract application. We have in place procedures to provide reasonable assurance that instructions given to us by telephone are genuine. Thus, we disclaim all liability for any claim, loss or expense from any error. If we fail to use such procedures, we may be liable for any losses due to unauthorized or fraudulent instructions. We reserve the right to modify, suspend or terminate the transfer privileges at any time. DOLLAR COST AVERAGING PROGRAM The Dollar Cost Averaging Program allows you to systematically transfer a set percentage or amount from any STRATEGY or the one year fixed investment option (we call these source accounts) to another STRATEGY. You can also select to transfer the entire value in a STRATEGY or the one year fixed investment option in a stated number of transfers. Transfers may be monthly or quarterly. You can change the amount or frequency at any time by notifying us in writing. When you make either your initial Purchase Payment or a subsequent Purchase Payment and want to participate in the Dollar Cost Averaging Program with that money, you may also use the DCA Account as a source account. You cannot transfer money from a STRATEGY or other fixed investment option into the DCA Account. When the DCA Account is used, all of your money in the account will be transferred to the STRATEGY(IES) you select in either monthly or quarterly transfers (as selected by you) by the end of the one year period for which the interest rate is guaranteed. Once selected, you can not change the frequency of transfers under the program. If you want to stop participation in the Dollar Cost Averaging Program and you are using the DCA Account as your source account, we will either transfer your money to the STRATEGY (IES) or fixed investment option(s) you select, or, in the absence of express instructions, we will transfer your money to the one year fixed investment option which will earn interest at the rate then being offered for a period of one year. By allocating amounts on a regular schedule as opposed to allocating the total amount at one particular time, you may be less susceptible to the impact of market fluctuations. However, there is no assurance that you will earn a greater profit. You are still subject to loss in a declining market. Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels. You should consider your financial ability to continue to invest through periods of low prices. Transfers under this program are not counted against your four free transfers per year. We reserve the right to modify, suspend or terminate this program at any time. PRINCIPAL ADVANTAGE PROGRAM The Principal Advantage Program allows you to allocate Purchase Payments to a fixed investment option (other than the DCA Account) and one or more STRATEGIES without any market risk to your principal. You decide how much you want 12 [LOGO] to invest and when you would like a return of your principal. We will calculate how much of your Purchase Payment must be allocated to the fixed investment option to ensure that this money will grow to equal the full amount of your purchase payment by the end of the selected period. The remaining portion of the Purchase Payment is then invested in a STRATEGY(IES), where it has the potential to achieve greater growth. We reserve the right to modify, suspend or terminate this program at any time. EXPENSES - -------------------------------------------------------------------------------- There are charges and other expenses associated with the contract that will reduce your investment return. These charges and deductions are described below. INSURANCE CHARGES Each day, we make a deduction for our insurance charges from amounts allocated to the STRATEGIES. This is done as part of our calculation of the values of the Accumulation Units and Annuity Units during the Accumulation Phase and the Income Phase, respectively. The asset based charges consist of the Mortality and Expense Risk Charge and the Distribution Expense Charge. There are no asset based charges deducted from the portion of your contract (if any) allocated to a fixed investment option. MORTALITY AND EXPENSE RISK CHARGE This charge is equal, on an annual basis, to 1.25% of the daily value of the contract invested in a STRATEGY. This charge is for our obligation to make annuity payments, to provide a death benefit and for assuming the risk that the current charges will be insufficient in the future to cover the cost of administering the contract. Approximately .90% is for mortality risks and .35% is for expense risks. If the charges under the contract are not sufficient, we will bear the loss. We will not increase this charge. We may use any profits from this charge to pay for the costs of distributing the contract. DISTRIBUTION EXPENSE CHARGE This charge is equal, on an annual basis, to .15% of the daily value of the contract invested in a STRATEGY. This charge is for all expenses associated with the distribution of the contract. These expenses include preparing the contract, confirmations and statements, providing sales support, and maintaining contract records. If this charge is not enough to cover the costs of distributing the contract, we will bear the loss. INVESTMENT CHARGES If you have money allocated to the STRATEGIES, there are deductions from and expenses paid out of the assets of the various underlying investment portfolios. These investment charges are summarized in the Fee Tables on pages 3 and 4. For more detailed information, you should refer to the prospectuses for the Seasons Series Trust. CONTRACT MAINTENANCE CHARGE During the Accumulation Phase, every year on the anniversary of the date when your contract was issued, we deduct $35 ($30 in North Dakota and Washington) from the value of your contract as a contract maintenance charge. This charge is for expenses incurred to establish and maintain your contract. This charge cannot be increased. If you make a complete withdrawal from your contract, the contract maintenance charge will be deducted prior to the withdrawal. We will not deduct the contract maintenance charge if, when the deduction is to be made, the value of your contract is $50,000 or more. We may discontinue this practice at some point in the future. WITHDRAWAL CHARGE During the Accumulation Phase you may make withdrawals from your contract. However, a withdrawal charge may apply. For purposes of calculating any applicable withdrawal charge, amounts withdrawn from your contract will come first from the Free Withdrawal Amount (as described below), then from Purchase Payments no longer subject to a withdrawal charge which have not previously been withdrawn, then from Purchase Payments subject to a withdrawal charge which have not previously been withdrawn and last from earnings. However, for tax purposes, earnings are considered withdrawn first. You will not receive the benefit of the Free Withdrawal Amount if you make a complete surrender of your contract. 13 [LOGO] Each contract year you may withdraw up to 10% of your total Purchase Payments which are subject to a withdrawal charge free of any withdrawal charge (the "Free Withdrawal Amount"). Any portion of a withdrawal in excess of the Free Withdrawal Amount which is still subject to a withdrawal charge will be assessed one as described below. In order to determine the applicable withdrawal charge, we keep track of each Purchase Payment and assess a charge based on the length of time a Purchase Payment is in your contract before being withdrawn. After a Purchase Payment has been in your contract for seven years, no withdrawal charge is assessed against withdrawals of the Purchase Payment. The withdrawal charge is assessed as a percentage of the Purchase Payment you are withdrawing as follows: Year 1......... 7% Year 5......... 4% Year 2......... 6% Year 6......... 3% Year 3......... 6% Year 7......... 2% Year 4......... 5% Year 8......... 0%
If the withdrawal is for only part of the contract, we will deduct the withdrawal charge from the remaining value in your contract. We will not assess any withdrawal charges for withdrawals to pay contract charges, a death benefit or for annuity payments during the Income Phase. The withdrawal charge is intended to cover the actual costs of distribution. However, to the extent that such charge is insufficient, the Company may use any of its corporate assets to make up any difference. TRANSFER FEE You can make four free transfers every year. We measure a year from the day we issued your contract. If you make more than four transfers a year, we will deduct a $25 transfer fee per transfer ($10 in Pennsylvania and Texas). The transfer fee will be deducted from the STRATEGY or fixed investment option from which the transfer is requested. If the transfer is part of the Dollar Cost Averaging Program, it will not count against your four free transfers per year. PREMIUM TAXES We are responsible for the payment of premium taxes charged by a limited number of states and will make a deduction from your contract for them. These taxes are due either when the contract is issued or when annuity payments begin or when you make a full surrender of the contract. It is our current practice not to charge you for these taxes until annuity payments begin or when a full surrender is made. In the future, we may discontinue this practice and assess the tax when it is due or upon the payment of the death benefit. Appendix B provides more information about the premium taxes assessed in each state. INCOME TAXES Although we do not currently deduct any income taxes borne under your contract, we reserve the right to do so in the future. REDUCTION OR ELIMINATION OF CERTAIN CHARGES We will reduce or eliminate the amount of certain insurance charges when the contract is sold to groups of individuals under circumstances which reduce its sales and administrations expenses. We will determine the eligibility of such groups by considering the following factors: (1) the size of the group; (2) the total amount of Purchase Payments we expect to receive from the group; (3) the nature of the purchase and the persistency we expect in that group; (4) the purpose of the purchase and whether that purpose makes it likely that expenses will be reduced; and (5) any other circumstances which we believe to be relevant in determining whether reduced sales expenses may be expected. 14 [LOGO] TAXES - -------------------------------------------------------------------------------- NOTE: WE HAVE PREPARED THE FOLLOWING INFORMATION ON TAXES AS A GENERAL DISCUSSION OF THE SUBJECT. IT IS NOT INTENDED AS TAX ADVICE. YOU ARE CAUTIONED TO SEEK COMPETENT TAX ADVICE ABOUT YOUR OWN CIRCUMSTANCES. WE DO NOT GUARANTEE THE TAX STATUS OF THE ANNUITY. ANNUITY CONTRACTS IN GENERAL The Internal Revenue Code ("IRC") provides for special rules regarding the tax treatment of annuity contracts. Generally, you will not be taxed on the earnings on the money held in your annuity contract until you take the money out. Different rules apply depending on how you take the money out and whether your contract is Qualified or Non-Qualified. If you do not purchase your contract under a pension plan, specially sponsored program or an individual retirement account, your contract is referred to as a Non-Qualified contract and receives different tax treatment than a Qualified contract. In general, your cost basis in a Non-Qualified contract is equal to the Purchase Payments you put into the contract. You have already been taxed on the cost basis in your contract. If you purchase your contract under a pension plan, specially sponsored program or as an individual retirement account, your contract is referred to as a Qualified contract. Examples of Qualified plans are: Individual Retirement Annuities, Tax-sheltered Annuities (referred to as 403(b) contracts), H.R. 10 Plans (referred to as Keogh Plans) and pension and profit sharing plans, including 401(k) plans. Typically you have not paid any tax on the Purchase Payments used to buy your contract and therefore you have no cost basis in your contract. TAX TREATMENT OF DISTRIBUTIONS -- NON-QUALIFIED CONTRACTS If you make a withdrawal from your contract, the IRC treats such a withdrawal as first coming from the earnings and then as coming from your Purchase Payments. For annuity payments, a portion of each payment is considered a return of your Purchase Payment and will not be taxed. Withdrawn earnings are treated as income to you and are taxable. The IRC further provides for a 10% tax penalty on any earnings that are withdrawn other than in conjunction with the following circumstances: (1) after you reach age 59 1/2; (2) after you die; (3) after you become disabled (as described in the IRC); (4) in a series of substantially equal installments made for the life of the taxpayer or for the joint lives of the taxpayer and his or her Beneficiary; (5) under an immediate annuity; or (6) which come from Purchase Payments made prior to August 14, 1982. TAX TREATMENT OF DISTRIBUTIONS -- QUALIFIED CONTRACTS Generally, you have not paid any taxes on the Purchase Payments used to buy a Qualified contract or on any earnings and therefore any amount you take out as a withdrawal or as annuity payments will be taxable income. The IRC further provides for a 10% tax penalty on any withdrawal or annuitization other than in conjunction with the following circumstances: (1) after reaching age 59 1/2; (2) after you die; (3) after you become disabled (as defined in the IRC); (4) in a series of substantially equal installments made for the life of the taxpayer or for the joint lives of the taxpayer and his or her Beneficiary; and, except in the case of an IRA as to the following (5) after you separate from service after attaining age 55; (6) to the extent such withdrawals do not exceed limitations set by the IRC for amounts paid during the taxable year for medical care; and (7) paid to an alternate payee pursuant to a qualified domestic relations order. The IRC limits the withdrawal of Purchase Payments made by owners from certain Tax-sheltered Annuities. Withdrawals can only be made when an owner: (1) reaches age 59 1/2; (2) leaves his or her job; (3) dies; (4) becomes disabled (as defined in the IRC); or (5) in the case of hardship. In the case of hardship, the owner can only withdraw Purchase Payments and not any earnings. DIVERSIFICATION The IRC imposes certain diversification requirements on the underlying investments for a variable annuity in order to be treated as a variable annuity for tax purposes. We believe that the underlying investment portfolios are being managed so as to comply with these requirements. 15 [LOGO] Neither the IRC nor any guidelines issued in conjunction with the IRC provide guidance regarding when you, because of the degree of control you exercise over the way your money is invested, and not Anchor National, would be considered the owner of the shares of the underlying investment portfolios. It is unknown to what extent the ability to select investments, make transfers among STRATEGIES or choose from a wide selection of investment options will ultimately impact this issue. If guidance is provided, generally it would be applied prospectively. However, if such guidance is not considered a new position, it may be applied retroactively. Due to the uncertainty is this area, we reserve the right to modify the contract in an attempt to maintain favorable tax treatment. ACCESS TO YOUR MONEY - -------------------------------------------------------------------------------- Under your contract, money can be accessed in the following ways: (1) by making a withdrawal either for a part of the value of your contract or for the entire value of your contract during the Accumulation Phase; (2) by receiving annuity payments during the Income Phase; and (3) when a death benefit is paid to your Beneficiary. Generally, withdrawals are subject to a withdrawal charge, a market value adjustment if the money withdrawn comes from a multi-year fixed investment option and, if you withdraw your full contract value, premium taxes and a contract maintenance charge. (See Section 5 - Expenses for more complete information.) If you make a complete withdrawal you will receive the value of your contract, less any applicable fees, charges and market value adjustments, at the price calculated following receipt of a complete request to make such a withdrawal at our Annuity Service Center. Your contract must be submitted as well. Under most circumstances, partial withdrawals must be for a minimum of $1,000. We require that the value left in any STRATEGY or fixed investment option be at least $500 after a withdrawal. Unless you provide us with different instructions, partial withdrawals will be made pro rata from each STRATEGY and fixed investment option in which your contract is invested. You must send a written withdrawal request to us prior to any withdrawal being made. SYSTEMATIC WITHDRAWAL PROGRAM This program allows you to receive either monthly, quarterly, semi-annual or annual checks during the Accumulation Phase. You can also choose to have systematic withdrawals electronically wired to your bank account. Any withdrawals you make using this program count against your Free Withdrawal Amount as described in Section 5 - Expenses. Withdrawals in excess of the Free Withdrawal Amount may be subject to a withdrawal charge. The minimum amount of each withdrawal is $250. Withdrawals may be taxable and a 10% IRS tax penalty may apply if you are under age 59 1/2. There is no charge for participating in this program. This program is not available to everyone, so 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. SUSPENSION OF PAYMENTS We may be required to suspend or postpone the payment of a withdrawal for any period of time when: (1) the New York Stock Exchange is closed (other than a customary weekend and holiday closings); (2) trading on the New York Stock Exchange is restricted; (3) an emergency exists such that disposal of or determination of the value of shares of the investment portfolios is not reasonably practicable; (4) the Securities and Exchange Commission, by order, so permits for the protection of contract owners. Additionally, we reserve the right to defer payments for a withdrawal from the fixed account for the period permitted by law but not for more than six months. MINIMUM CONTRACT VALUE Where permitted by state law, we may terminate your contract if it is less than $500 as a result of withdrawals and no Purchase Payments have been made during the past three years. We will provide you with sixty days written notice and distribute the contract's remaining value to you. WITHDRAWAL CHARGES, MARKET VALUE ADJUSTMENTS, INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY WITHDRAWAL YOU MAKE. 16 [LOGO] PERFORMANCE - -------------------------------------------------------------------------------- From time to time we will advertise the performance of the STRATEGIES. Any such performance results are based on historical earnings and are not intended to indicate future performance. For each STRATEGY we will show performance against a comparison index which is made up of the S&P 500 Index, the Lehman Brothers Corporate/Government Index and the Lipper Money Market Index. The comparison index will blend the referenced indices in proportion to the neutral allocation of stocks, bonds and cash within each STRATEGY as indicated on pages 9 and 10 of this prospectus. Additionally, we may show performance of each STRATEGY in comparison to various appropriate indexes and the performance of other similar variable annuity products with similar objectives as reported by such independent reporting services as Morningstar, Inc., Lipper Analytical Services, Inc. and Variable Annuity Reporting Data Service. Please see the Statement of Additional Information for additional information regarding the methods used to calculate performance data. DEATH BENEFIT - -------------------------------------------------------------------------------- If you should die before beginning the Income Phase of your contract, we will pay a death benefit to your Beneficiary. If you should die prior to reaching age 75 or, if there are joint owners, if an owner should die prior to the youngest owner reaching age 75, the death benefit will be equal to the greater of: 1. The value of your contract at the time we receive adequate proof of death and the Beneficiary's election as to how the benefit should be paid; or 2. Total Purchase Payments less any withdrawals, applicable charges, market value adjustments and taxes, accumulated at 3% from the date your contract was issued until the date of death, plus any Purchase Payments received, less any withdrawals, applicable charges, market value adjustments and taxes made or charged, after the date of death. If the contract was issued after your 75th birthday or if you should die after you reach age 75, or, if there are joint owners, if the contract was issued after both owners' 75th birthday or if an owner dies after the youngest owner reaches age 75, the death benefit will be the greater of: 1. The value of your contract at the time we receive adequate proof of death and the Beneficiary's election as to how the death benefit will be paid; or 2. Total Purchase Payments received by us before age 75 (in the case of joint owners, before the younger owner reaches age 75) less any withdrawals, applicable charges, market value adjustments and taxes, accumulated at 3% from the date your contract was issued until your 75th birthday (or, if there is a joint owner, the 75th birthday of the youngest owner), plus any subsequent Purchase Payments received, less any withdrawals, applicable charges, market value adjustments and taxes made or charged, after your 75th birthday. The entire 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 annuity. If the Beneficiary elects an annuity option, it must be paid over the Beneficiary's lifetime or for a period not extending beyond the Beneficiary's life expectancy and payments must begin within one year of your death. If the Beneficiary is the spouse of the owner, he or she can elect to continue the contract at the then current value. The death benefit will be paid out when we receive adequate proof of death and the Beneficiary's election as to how the death benefit will be paid. If the Beneficiary does not make a specific election within 60 days of our receipt of proof of death, the death benefit will be paid in a lump sum. You may select a Beneficiary to receive the death benefit. You may change the Beneficiary at anytime before the Income 17 [LOGO] Phase begins, unless you previously made an irrevocable Beneficiary designation. A new Beneficiary designation is not effective until we record the change. A death benefit is not paid if you should die after beginning the Income Phase of your contract. In that event, to the extent there are remaining guaranteed annuity payments, they will be paid to your beneficiary. DEATH OF THE ANNUITANT If the Annuitant dies before annuity payments begin, you can name a new Annuitant. If no Annuitant is named within 30 days, you will become the Annuitant. However, if the owner is a non-natural person (for example, a corporation), then the death of the Annuitant will be treated as the death of the owner, no new Annuitant may be named and the death benefit will be paid. Your Beneficiary will receive the value of any annuity payments which we are obligated to make under options 3, 4 and 5 as described in Section 3 - Annuity Payment Options, if you die before the total annuity payments are made. OTHER INFORMATION - -------------------------------------------------------------------------------- ANCHOR NATIONAL Anchor National is a stock life insurance company domiciled under the laws of the state of Arizona. Its principal business address is 1 SunAmerica Center, Los Angeles, California 90067-6022. Anchor National conducts business in the District of Columbia and in all states except New York. Anchor National is an indirect wholly owned subsidiary of SunAmerica Inc., a Maryland corporation. Anchor National and its affiliates, SunAmerica Life Insurance Company, First SunAmerica Life Insurance Company, CalFarm Life Insurance Company, SunAmerica Asset Management Corp., Imperial Premium Finance, Inc., Resources Trust Company and four broker-dealers, offer a full line of financial services, including fixed and variable annuities, mutual funds, premium finance and trust administration services. THE SEPARATE ACCOUNT Anchor National established a separate account, Variable Annuity Account Five ("Separate Account"), under Arizona law on July 3, 1996. The Separate Account is registered with the Securities and Exchange Commission as a unit investment trust under the Investment Company Act of 1940. There are no pending legal proceedings affecting the Separate Account. Anchor National and its subsidiaries are engaged in various kinds of routine litigation which, in management's judgment, are not of material importance to their respective total assets or material with respect to the Separate Account. Anchor National owns the assets in the Separate Account. However, the assets in the Separate Account are not chargeable with liabilities arising out of any other business Anchor National may conduct. Income, gains and losses (realized and unrealized) resulting from the assets in the Separate Account are credited to or charged against the Separate Account. CUSTODIAN State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, serves as the custodian of the assets of the Separate Account. We pay State Street Bank for services based on a schedule of fees. STATEMENT OF ADDITIONAL INFORMATION Additional information concerning the operations of the Separate Account is contained in a Statement of Additional Information, which is available without charge upon written request to us at our Annuity Service Center at the address provided in the Profile preceding this prospectus. The Separate Account has not yet begun operations and, therefore, no financial statements are available. 18 [LOGO] TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL INFORMATION
Page ----- Separate Account........................ 3 General Account......................... 3 Performance Date........................ 4 Annuity Payments........................ 4 Annuity Unit Values..................... 5 Taxes................................... 6 Distribution of Contracts............... 9 Financial Statements.................... 10
THE GENERAL ACCOUNT If you put your money into a fixed investment option it goes into Anchor National's general account ("General Account"). The General Account is made up of all of Anchor National's assets other than assets attributable to a separate account. All of the assets in the General Account are chargeable with the claims of any Anchor National contract holder, as well as all creditors. The General Account is invested in assets permitted by state insurance law. DISTRIBUTION The contract is sold through registered representatives of broker-dealers. We pay commissions to registered representatives for the sale of contracts. Commissions are not expected to exceed 7.25% of your Purchase Payment. Under some circumstances we pay a persistency bonus in addition to standard commissions. Usually the standard commission is lower when we pay a persistency bonus, which is not anticipated to exceed 1.00% annually. SunAmerica Capital Services, Inc., 733 Third Avenue, 4th Floor, New York, New York, 10017, acts as the distributor of the contracts. SunAmerica Capital Services, Inc. is an affiliate of Anchor National. ADMINISTRATION We are responsible for all the administrative servicing of your contract. Please contact Anchor National's Annuity Service Center at the telephone number and address provided in the Profile of this prospectus if you have any comment, question or service request. We will send out transaction confirmations and quarterly statements. Please review these documents carefully and notify us of any questions immediately. We will investigate all questions and, to the extent we have made an error, we will retroactively adjust your contract provided you have notified us within 30 days of receiving the transaction confirmation or quarterly statement, as applicable. All other adjustments will be made as of the time we receive notice of the error. OTHER INFORMATION ABOUT ANCHOR NATIONAL Anchor National is subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and in accordance therewith files reports and other information with the Securities and Exchange Commission ("SEC"). Such reports and other information filed by the Company can be inspected and copied; and copies can be obtained at the public reference facilities of the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, or at the regional offices in Chicago and New York. The addresses of these regional offices are as follows: 500 West Madison Street, Chicago, Illinois 60661, and 7 World Trade Center, 13th Floor, New York, New York 10048. Copies of such material also can be obtained by mail from the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington D.C. 20549, upon payment of the fees prescribed by the rules and regulations of the SEC at prescribed rates. Registration statements have been filed with the SEC, Washington, D.C., under the Securities Act of 1933 as amended, with respect to the contracts offered by this prospectus. This prospectus does not contain all the information set forth in the registration statements and the exhibits filed as part of the registration statements, to all of which reference is hereby made for further information concerning the Separate Account, Anchor National and its general account, the investment portfolios and the contract. Statements found in this prospectus as to the terms of the contracts and other legal instruments are summaries, and reference is made to such instruments as filed. PROPERTIES Anchor National's principal office is leased at 1 SunAmerica Center, Los Angeles, California, 90067-6022. We also lease office space in Torrance, California which is utilized for certain 19 [LOGO] recordkeeping and data processing functions. Anchor National's broker-dealer and asset management subsidiaries lease office space in New York, New York. STATE REGULATION Anchor National is subject to regulation and supervision by the states in which it is authorized to transact business. State insurance laws establish supervisory agencies with broad administrative and supervisory powers relating to granting and revoking licenses to transact business, regulating marketing and other trade practices, operating guaranty associations, licensing agents, approving policy forms, regulating certain premium rates, regulating insurance holding company systems, establishing reserve requirements, prescribing the form and content of required financial statements and reports, performing financial and other examinations, determining the reasonableness and adequacy of statutory capital and surplus, regulating the type, valuation and amount of investments permitted, limiting the amount of dividends that can be paid and the size of transactions that can be consummated without first obtaining regulatory approval and other related matters. During the last decade, the insurance regulatory framework has been placed under increased scrutiny by various states, the federal government and the National Association of Insurance Commissioners ("NAIC"). Various states have considered or enacted legislation that changes, and in many cases increases, the states' authority to regulate insurance companies. Legislation has been introduced from time to time in Congress that could result in the federal government assuming some role in the regulation of insurance companies. In recent years, the NAIC has approved and recommended to the states for adoption and implementation several regulatory initiatives designed to reduce the risk of insurance company insolvencies and market conduct violations. These initiatives include investment reserve requirements, risk-based capital standards and restrictions on an insurance company's ability to pay dividends to its stockholders. The NAIC is also currently developing model laws relating to product design and illustrations for annuity products. Current proposals are still being debated and we are monitoring developments in this area and the effects any changes would have on the Company. SunAmerica Asset Management Corp. is registered with the Securities and Exchange Commission ("SEC") as a registered investment adviser under the Investment Advisers Act of 1940. The mutual funds that is markets are subject to regulation under the Investment Company Act of 1940. SunAmerica Asset Management Corp. and the mutual funds are subject to regulation and examination by the SEC. In addition, variable annuities and Anchor National's related separate accounts are subject to regulation by the SEC under the Securities Act of 1933 and the Investment Company Act of 1940. Anchor National's broker-dealer subsidiary is subject to regulation and supervision by the states in which it transacts business, as well as by the National Association of Securities Dealers, Inc. ("NASD"). The NASD has broad administrative and supervisory powers relative to all aspects of business and may examine the subsidiary's business and accounts at any time. 20 [LOGO] DIRECTORS AND EXECUTIVE OFFICERS Anchor National's directors and executive officers as of January 1, 1997 are listed below:
YEAR ASSUMED PRESENT OTHER POSITIONS AND OTHER BUSINESS NAME AGE PRESENT POSITION POSITION EXPERIENCE WITHIN LAST FIVE YEARS** FROM-TO - --------------------- --- -------------------------------------- ------------ ------------------------------------- --------- Eli Broad* 63 Chairman, CEO and President of Anchor 1994 Cofounded SunAmerica Inc. ("SAI") in National; 1957 Chairman, CEO and President of SAI 1986 Joseph M. Tumbler* 48 EVP of Anchor National; 1996 President and Chief Executive 1989-1995 Vice Chairman of SAI 1995 Officer, Providian Capital Management Jay S. Wintrob* 39 EVP of Anchor National; 1991 SVP 1989-1991 Vice Chairman of SAI 1995 Victor E. Akin 32 SVP of Anchor National 1996 VP, SunAmerica Life Companies 1995-1996 Director, SunAmerica Life Companies Manager, SunAmerica Life Companies 1994-1995 Actuary, Milliman & Robertson Consultant, Chalke Inc. 1993-1994 1992-1993 1991-1992 James R. Belardi* 39 SVP of Anchor National; 1992 VP and Treasurer 1989-1992 EVP of SAI 1995 Lorin M. Fife* 43 SVP, General Counsel and Asst. 1994 VP and General Counsel-Regulatory 1994-1995 Secretary of Anchor National; Affairs of SAI; SVP, General Counsel-Regulatory 1995 VP and Associate General Counsel of 1989-1994 Affairs of SAI SAI N. Scott Gillis 43 SVP and Controller of Anchor National 1994 VP and Controller, SunAmerica Life 1989-1994 Companies Jana Waring Greer* 45 SVP of Anchor National and SAI; 1991 VP 1981-1991 President of SunAmerica Marketing 1995 Susan L. Harris* 39 SVP and Secretary of Anchor National; 1994 VP, General Counsel-Corporate Affairs 1994-1995 SVP, General Counsel-Corporate Affairs and Secretary of SAI; and Secretary of SAI 1995 VP, Associate General Counsel and 1989-1994 Secretary of SAI Peter McMillan, III* 39 EVP and Chief Investment Officer of 1994 SVP of SunAmerica Investments, Inc. 1989-1994 SunAmerica Investments, Inc. Edwin R. Reoliquio 39 SVP and Chief Actuary of Anchor 1995 VP and Actuary, SunAmerica Life 1989-1994 National Companies Scott L. Robinson* 50 SVP of Anchor National; 1991 VP and Controller 1986-1991 SVP and Controller of SAI James W. Rowan 33 SVP of Anchor National and SAI 1996 VP; 1993-1995 Asst. to the Chairman; 1992 SVP, Security Pacific Corp. 1990-1992
* Also serves as a director CEO = Chief Executive Officer ** Unless otherwise noted, positions EVP = Executive Vice President with SunAmerica Inc. SVP = Senior Vice President VP = Vice President 21 [LOGO] EXECUTIVE COMPENSATION All of Anchor National's executive officers are also employees of SunAmerica Inc. or its affiliates and do not receive direct compensation from Anchor National. We allocated the time each executive officer spent devoted to his or her duties as an executive officer of Anchor National to determine the executive compensation set forth below for the Chief Executive Officer and the other four highest compensated executive officers, as well as the executive officers as a group, for services rendered during 1996.
Name of Individual or Number Allocated Cash in Group Capacities in Which Served Compensation Eli Broad Chairman, Chief Executive Officer and President $ 1,444,146 Joseph M. Tumbler Executive Vice President 834,708 Jay S. Wintrob Executive Vice President 836,327 James R. Belardi Senior Vice President 341,329 Jana Waring Greer Senior Vice President 420,171 All Executive Officers as a Group (12) 5,056,560
Security Ownership of Owners and Management No shares of Anchor National are owned by any executive officer or director. Anchor National is an indirect wholly owned subsidiary of SunAmerica Inc. The only officer or director that owns more than 1% of the shares of SunAmerica Inc. is Mr. Eli Broad, Chairman, Chief Executive Officer and President. At February 28, 1997, Mr. Broad beneficially owned 6,655,176 shares of Common Stock (approximately 5.8% of the class outstanding) and 9,160,294 shares of Class B Common Stock (approximately 84.4% of the class outstanding). Of the Common Stock, 715,872 shares represent restricted shares granted under the Company's employee stock plans as to which Mr. Broad has no investment power; 75,846 shares are registered in the name of a corporation of which Mr. Broad is a director and has sole voting and investment power; 4,150,932 shares represent employee stock options which are or will become exercisable within the next 60 days and as to which he has no voting or investment power; 65,136 shares are held by a foundation of which Mr. Broad is a director and as to which he has shared voting and investment power. At February 28, 1997, all directors and officers as a group beneficially owned 10,344,440 shares of Common Stock (approximately 9% of the class outstanding) and 9,160,294 shares of Class B Common Stock (approximately 84.4% of the class outstanding). 22 [LOGO] FINANCIALS Selected Consolidated Financial Data The following selected consolidated financial information of Anchor National Life Insurance Company, insofar as it relates to each of the years 1992-1996, has been derived from audited annual financial statements, including the consolidated balance sheets at September 30, 1995 and 1996 and the related consolidated statements of income and cash flow for each of the three years in the period ended September 30, 1996 and the notes thereto appearing elsewhere herein. The information for the three months ended December 31, 1995 and 1996 has been derived from unaudited financial information also appearing herein and which, in the opinion of management, includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the unaudited interim periods. This information should be read in conjunction with the consolidated financial statements and notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations, both of which follow this selected information.
THREE MONTHS ENDED YEARS ENDED SEPTEMBER 30, DECEMBER 31, --------------------------------------------------------------- -------------------------- 1992 1993 1994 1995 1996 1995 1996 ----------- ----------- ----------- ----------- ----------- ----------- ------------- (IN THOUSANDS) RESULTS OF OPERATIONS Net investment income................. $ 36,499 $ 48,912 $ 58,996 $ 50,083 $ 56,843 $ 14,617 $ 14,544 Net realized investment losses........ (22,749) (22,247) (33,713) (4,363) (13,355) (12,800) (19,116) Fee income............................ 97,220 118,247 131,225 135,214 160,931 37,284 44,820 General and administrative expenses... (55,615) (55,142) (52,636) (61,629) (80,048) (16,997) (22,322) Provision for future guaranty fund assessments.......................... -- (4,800) -- -- -- -- -- Amortization of deferred acquisition costs................................ (18,224) (30,825) (44,195) (58,713) (57,520) (13,658) (13,817) Annual commissions.................... (215) (312) (1,158) (2,658) (4,613) (939) (1,433) Other income and expenses............. 9,218 9,679 8,801 7,063 7,070 1,768 2,270 ----------- ----------- ----------- ----------- ----------- ----------- ------------- PRETAX INCOME......................... 46,134 63,512 67,320 64,997 69,308 9,275 4,946 Income tax expense.................... (15,361) (21,794) (22,705) (25,739) (24,252) (3,449) (1,600) ----------- ----------- ----------- ----------- ----------- ----------- ------------- Income from continuing operations..... 30,773 41,718 44,615 39,258 45,056 5,826 3,346 Net income of subsidiaries sold to affiliates........................... 1,312 -- -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- ----------- ------------- INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES................................ 32,085 41,718 44,615 39,258 45,056 5,826 3,346 Cumulative effect of change in accounting for income taxes.......... -- -- (20,463) -- -- -- -- ----------- ----------- ----------- ----------- ----------- ----------- ------------- NET INCOME............................ $ 32,085 $ 41,718 $ 24,152 $ 39,258 $ 45,056 $ 5,826 $ 3,346 ----------- ----------- ----------- ----------- ----------- ----------- ------------- ----------- ----------- ----------- ----------- ----------- ----------- ------------- AT SEPTEMBER 30, AT DECEMBER 31, --------------------------------------------------------------- -------------------------- 1992 1993 1994 1995 1996 1995 1996 ----------- ----------- ----------- ----------- ----------- ----------- ------------- (IN THOUSANDS) FINANCIAL POSITION Investments........................... $ 2,126,899 $ 2,093,100 $ 1,632,072 $ 2,114,908 $ 2,329,232 $ 1,964,418 $ 2,703,683 Variable annuity assets............... 3,284,507 4,170,275 4,486,703 5,230,246 6,311,557 5,418,534 6,784,374 Deferred acquisition costs............ 288,264 336,677 416,289 383,069 443,610 379,922 461,637 Other assets.......................... 91,588 71,337 67,062 55,474 120,136 81,466 76,014 ----------- ----------- ----------- ----------- ----------- ----------- ------------- TOTAL ASSETS.......................... $ 5,791,258 $ 6,671,389 $ 6,602,126 $ 7,783,697 $ 9,204,535 $ 7,844,340 $ 10,025,708 ----------- ----------- ----------- ----------- ----------- ----------- ------------- ----------- ----------- ----------- ----------- ----------- ----------- ------------- Reserves for fixed annuity contracts............................ $ 1,735,565 $ 1,562,136 $ 1,437,488 $ 1,497,052 $ 1,789,962 $ 1,473,964 $ 2,024,873 Reserves for guaranteed investment contracts............................ -- -- -- 277,095 415,544 277,167 420,871 Variable annuity liabilities.......... 3,284,507 4,170,275 4,486,703 5,230,246 6,311,557 5,418,534 6,784,374 Other reserves, payables and accrued liabilities.......................... 398,045 495,308 195,134 227,953 96,196 79,466 157,622 Subordinated notes payable to Parent............................... 15,500 34,432 34,712 35,832 35,832 35,832 35,903 Deferred income taxes................. 35,163 38,145 64,567 73,459 70,189 72,934 71,943 Shareholder's equity.................. 322,478 371,093 383,522 442,060 485,255 486,443 530,122 ----------- ----------- ----------- ----------- ----------- ----------- ------------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY............................... $ 5,791,258 $ 6,671,389 $ 6,602,126 $ 7,783,697 $ 9,204,535 $ 7,844,340 $ 10,025,708 ----------- ----------- ----------- ----------- ----------- ----------- ------------- ----------- ----------- ----------- ----------- ----------- ----------- -------------
23 [LOGO] Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion and analysis of financial condition and results of operations of Anchor National Life Insurance Company (the "Company") for the three years in the period ended September 30, 1996 follows. In connection with, and because it desires to take advantage of, the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the Company cautions readers regarding certain forward-looking statements contained in the following discussion and in any other statements made by, or on behalf of, the Company, whether or not in future filings with the Securities and Exchange Commission (the "SEC"). Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results, or other developments. In particular, statements using verbs such as "expect," "anticipate," "believe" or words of similar import generally involve forward-looking statements. Without limiting the foregoing, forward-looking statements which represent the Company's beliefs concerning future or projected levels of sales of the Company's products, investment spreads or yields, or the earnings or profitability of the Company's activities. Forward-looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company's control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company. Whether or not actual results differ materially from the forward-looking statements may depend on numerous foreseeable and unforeseeable events or developments, some of which may be national in scope, such as general economic conditions and changes in interest rates, some of which may be related to the insurance industry generally, such as pricing competition, regulatory developments and industry consolidation, and others of which may relate to the Company specifically, such as credit, volatility, and other risks associated with the Company's investment portfolio, and other factors. Investors are also directed to consider other risks and uncertainties discussed in documents filed by the Company with the SEC. The Company disclaims any obligation to update forward-looking information. RESULTS OF OPERATIONS FOR THE FISCAL YEARS 1994, 1995 AND 1996 INCOME BEFORE CUMULATIVE EFFECTIVE OF CHANGE IN ACCOUNTING FOR INCOME TAXES totaled $45.1 million in 1996, compared with $39.3 million in 1995 and $44.6 million in 1994. The cumulative effect of the change in accounting for income taxes resulting from the 1994 implementation of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," amounted to a nonrecurring non-cash charge of $20.5 million. Accordingly, net income amounted to $24.1 million in 1994. PRETAX INCOME totaled $69.3 million in 1996, $65.0 million in 1995, and $67.3 million in 1994. The $4.3 million improvement in 1996 over 1995 primarily resulted from increased net investment income and significantly increased fee income partially offset by increased net realized investment losses and additional general and administrative expenses. The $2.3 million decline in 1995 over 1994 primarily resulted from additional amortization of deferred acquisition costs, increased general and administrative expenses and decreased net investment income, partially offset by decreased net realized investment losses. NET INVESTMENT INCOME, which is the spread between the income earned on invested assets and the interest paid on fixed annuities and other interest-bearing liabilities, totaled $56.8 million in 1996, $50.1 million in 1995 and $59.0 million in 1994. These amounts represent 2.59% on average invested assets (computed on a daily basis) of $2.19 billion in 1996, 2.95% on average invested assets of $1.70 billion in 1995 and 3.78% on average invested assets of $1.56 billion in 1994. Net investment income also includes the effect of income earned on the excess of average invested assets over average interest-bearing liabilities. This excess amounted to $142.9 million in 1996, $108.4 million in 1995 and $49.5 million in 1994. The difference between the Company's yield on average invested assets and the rate paid on average interest-bearing liabilities was 2.25% in 1996, 2.63% in 1995 and 3.64% in 1994. Investment income and the related yields on average invested assets totaled $164.6 million or 7.50% in 1996, compared with $129.5 million or 7.62% in 1995 and $127.8 million or 8.20% in 1994. Investment income rose during 1996 as a result of higher levels of average invested assets, partially offset by reduced 24 [LOGO] investment yields. Investment yields were lower in 1996 because of a generally declining interest rate environment since early 1995 and lower contributions from the Company's investments in partnerships. Partnership income totaled $4.1 million in 1996, $5.1 million in 1995 and $9.5 million in 1994. This income represents a yield of 10.12% on average investments in partnerships of $40.2 million in 1996, compared with 10.60% on average investments in partnerships of $48.4 million in 1995 and 23.78% on average investments in partnerships of $39.9 million in 1994. Partnership income is based upon cash distributions received from limited partnerships, the operations of which the Company does not significantly influence. Consequently, such income is not predictable and there can be no assurance that the Company will realize comparable levels of such income in the future. The decline in investment yield in 1995 compared with 1994 is primarily due to lower contributions from the Company's investments in partnerships and a significant decline from the $3.7 million of yield enhancement recorded in 1994 through the Company's use of dollar roll transactions ("Dollar Rolls"). Although the Company continues to use Dollar Rolls, their use did not have a significant impact on investment income in 1995 or 1996. Total interest expense aggregated $107.8 million in 1996, $79.4 million in 1995 and $68.8 million in 1994. The average rate paid on all interest-bearing liabilities increased to 5.25% (5.11% on fixed annuity contracts and 5.87% on guaranteed investment contracts ("GICs")) in 1996, compared with 4.99% (4.90% on fixed annuity contracts and 6.14% on GICs) in 1995 and 4.56% (4.50% on fixed annuity contracts) in 1994. Interest-bearing liabilities averaged $2.05 billion during 1996, compared with $1.59 billion during 1995 and $1.51 billion during 1994. The increase in the average rates paid on all interest-bearing liabilities during 1996 primarily resulted from the growth in average reserves for GICs, which credit at higher rates of interest than fixed annuity contracts. Average GIC reserves were $340.5 million in 1996 and $60.8 million in 1995. The increase in average crediting rates in 1995 resulted from higher crediting rates on fixed annuity contracts as interest rates rose from the low levels experienced in 1994. The growth in average invested assets since 1994 primarily reflects sales of the Company's fixed-rate products, consisting of both fixed accounts of variable annuity products and GICs. Fixed annuity premiums totaled $741.8 million in 1996, compared with $284.4 million in 1995 and $140.7 million in 1994. These increased premiums resulted from greater inflows into the one-year fixed account of the Company's Polaris variable annuity product. GIC premiums totaled $135.0 million in 1996 and $275.0 million in 1995. In 1995, the Company began to issue GICs, which guarantee the payment of principal and interest at fixed or variable rates for a term of one year. The Company's GICs that are purchased by asset management firms either prohibit withdrawals or permit withdrawals with notice ranging from 90 to 270 days. Contracts that are purchased by banks or state and local governmental authorities either prohibit withdrawals or permit scheduled book value withdrawals subject to terms of the underlying indenture or agreement. In pricing GICs, the Company analyzes cash flow information and prices accordingly so that it is compensated for possible withdrawals prior to maturity. NET REALIZED INVESTMENT LOSSES totaled $13.4 million in 1996, $4.4 million in 1995 and $33.7 million in 1994. Net realized investment losses include impairment writedowns of $16.0 million in 1996, $4.8 million in 1995 and $14.2 million in 1994. Therefore, net gains from sales of investments totaled $2.6 million in 1996 and $0.4 million in 1995. In 1994, the Company incurred $19.5 million of net losses from sales of investments. Net gains from sales of investments in 1996 include $4.1 million of net gains realized on $1.27 billion of sales of bonds and $288.6 million of redemptions of bonds. Net gains from sales of investments in 1995 include a $4.4 million gain on sales of real estate, common stock and other invested assets offset by $4.0 million of net losses realized on $1.11 billion of sales of bonds. Net losses from sales of investments in 1994 include $17.3 million of net losses realized on $673.6 million of sales of bonds. These bond sales include approximately $289.3 million of sales of MBSs made primarily to acquire other MBSs that were then used in Dollar Rolls. Sales of investments are generally made to maximize total return. Impairment writedowns in 1996 include $13.4 million of provisions applied to certain real estate owned in Arizona on December 31, 1995. Prior to that date, the statutory carrying value of this real estate had been guaranteed by the Company's ultimate parent, SunAmerica Inc. ("SunAmerica"). On December 31, 1995, SunAmerica made a $27.4 million capital contribution to the Company through the Company's direct parent in exchange for the termination of its guaranty with respect to this real estate. Accordingly, the Company reduced 25 [LOGO] the carrying value of this real estate to estimated fair value to reflect the termination of the guaranty. (SunAmerica's guaranty of the statutory carrying value of the Company's other real estate owned in Arizona was fully terminated on December 31, 1996). Impairment writedowns in 1995 include $2.0 million of additional provisions applied to defaulted bonds and $1.8 million of additional provisions applied to certain interest-only strips ("IOs"). IOs, a type of MBS used as an asset-liability matching tool to hedge against rising interest rates, are investment grade securities that give the holder the right to receive only the interest payments on a pool of underlying mortgage loans. At September 30, 1996, the amortized cost of the IOs held by the Company was $2.6 million and their fair value was $3.7 million. Impairment writedowns in 1994 of $14.2 million reflect additional provisions applied to bonds, primarily made in response to the adverse impact of declining interest rates on certain MBSs. Impairment writedowns represent 0.73%, 0.28% and 0.91% of average invested assets in 1996, 1995 and 1994, respectively. Such writedowns are based upon estimates of the net realizable value of the applicable assets. Actual realization will be dependent upon future events. VARIABLE ANNUITY FEES are based on the market value of assets supporting variable annuity contracts in separate accounts. Such fees totaled $104.0 million in 1996, $84.2 million in 1995 and $79.1 million in 1994. Increases in variable annuity fees in 1996 and 1995 reflect growth in average variable annuity assets, principally due to increased market values and the receipt of variable annuity premiums, partially offset by surrenders. Variable annuity assets averaged $5.70 billion during 1996, $4.65 billion during 1995 and $4.40 billion during 1994. Variable annuity premiums, which exclude premiums allocated to the fixed accounts of variable annuity products, totaled $919.8 million in 1996, $577.2 million in 1995 and $769.6 million in 1994. The increase in premiums in 1996 may be attributed, in part, to a heightened demand for equity investments, principally as a result of generally improved market performance. The decline in premiums in 1995 may be attributed, in part, to a heightened demand for fixed-rate investment options, including the fixed accounts of variable annuities. The Company has encountered increased competition in the variable annuity marketplace during recent years and anticipates that the market will remain highly competitive for the foreseeable future. NET RETAINED COMMISSIONS are primarily derived from commissions on the sales of nonproprietary investment products by the Company's broker-dealer subsidiary, after deducting the substantial portion of such commissions that is passed on to registered representatives. Net retained commissions totaled $31.5 million in 1996, $24.1 million in 1995 and $20.8 million in 1994. Broker-dealer sales (mainly sales of general securities, mutual funds, and annuities) totaled $8.75 billion in 1996, $5.67 billion in 1995 and $5.21 billion in 1994. The significant increases in sales and net retained commissions during 1996 reflect a greater number of registered representatives and higher average production, combined with generally favorable market conditions. Increases in net retained commissions may not be proportionate to increases in sales primarily due to differences in sales mix. ASSET MANAGEMENT FEES, which include investment advisory fees and 12b-1 distribution fees, are based on the market value of assets managed in mutual funds by SunAmerica Asset Management Corp. Such fees totaled $25.4 million on average assets managed of $2.14 billion in 1996, $26.9 million on average assets managed of $2.07 billion in 1995 and $31.3 million on average assets managed of $2.39 billion in 1994. Asset management fees decreased slightly in 1996, despite a modest increase in average assets managed, principally due to changes in product mix. The decrease in asset management fees during 1995 principally resulted from the decline in average assets managed, primarily due to an excess of redemptions over sales. Redemptions of mutual funds, excluding redemptions of money market accounts, amounted to $379.9 million in 1996, compared with $426.5 million in 1995 and $561.0 million in 1994. Sales of mutual funds, excluding sales of money market accounts, amounted to $223.4 million in 1996, compared with $140.2 million in 1995 and $342.6 million in 1994. Higher mutual fund sales and lower redemptions in 1996 both reflect the combined effects of additional advertising, the favorable performance records of certain of the Company's mutual funds and heightened demand for equity investments, principally as a result of improved market performance. SURRENDER CHARGES on fixed and variable annuities totaled $5.2 million in 1996, $5.9 million in 1995 and $5.0 million in 1994. Surrender charges generally are assessed on annuity withdrawals at declining rates during the first five to seven years of the contract. Withdrawal payments, which include surrenders and lump-sum annuity benefits, totaled $898.0 million in 1996, $908.9 million in 1995 and $723.9 million in 1994. These payments represent 12.4%, 15.1% and 26 [LOGO] 12.5%, respectively, of average fixed and variable annuity reserves. Withdrawals include variable annuity payments from the separate accounts totaling $634.1 million in 1996, $646.4 million in 1995 and $459.1 million in 1994. Such variable annuity surrenders represent 11.2%, 14.0% and 10.5%, respectively, of average variable annuity liabilities in 1996, 1995 and 1994. Variable annuity surrender rates increased in 1995 primarily due to surrenders on a closed block of business, policies coming off surrender charge restrictions and increased competition in the marketplace. Fixed annuity surrenders have remained relatively constant, totaling $263.8 million in 1996, $262.4 million in 1995 and $264.8 million in 1994. Management anticipates that withdrawal rates will remain relatively stable for the foreseeable future. GENERAL AND ADMINISTRATIVE EXPENSES totaled $80.0 million in 1996, compared with $61.6 million in 1995 and $52.6 million in 1994. Expenses in 1996 include expenses related to a national advertising campaign, as well as additional administrative expenses related to a growing block of business. Expenses remain closely controlled through a company-wide cost containment program and represent approximately 1% of average total assets. AMORTIZATION OF DEFERRED ACQUISITION COSTS totaled $57.5 million in 1996, $58.7 million in 1995 and $44.2 million in 1994. The decline in amortization for 1996 is due to lower redemptions of mutual funds from the rate experienced in 1995, partially offset by additional fixed and variable annuity and mutual fund sales in recent years and the subsequent amortization of related deferred commissions and other acquisition costs. The increase in amortization in 1995 was primarily caused by the substantial reduction in net realized capital losses from the level experienced in 1994. ANNUAL COMMISSIONS represent renewal commissions paid quarterly in arrears to maintain the persistency of certain of the Company's variable annuity contracts. Substantially all of the Company's currently available variable annuity products allow for an annual commission payment option in return for a lower immediate commission. Annual commissions totaled $4.6 million in 1996, $2.7 million in 1995 and $1.2 million in 1994. The increase in annual commissions since 1994 reflects increased sales of annuities that offer this commission option. The Company estimates that during 1996 approximately 35% of the average balances of its variable annuity products are currently subject to such annual commissions. Based on current sales, this percentage is expected to increase in future periods. INCOME TAX EXPENSE totaled $24.3 million in 1996, $25.7 million in 1995 and $22.7 million in 1994, representing effective tax rates of 35% in 1996, 40% in 1995 and 34% in 1994. The increase in the effective tax rate in 1995 was due to a prior year tax settlement. Without such payment, the effective tax rate would have been 33%. FINANCIAL CONDITION AND LIQUIDITY AT SEPTEMBER 30, 1996 SHAREHOLDER'S EQUITY increased by $43.2 million to $485.3 million at September 30, 1996 from $442.1 million at September 30, 1995, primarily as a result of the $45.1 million of net income recorded in 1996 and a $0.2 million reduction of net unrealized losses on debt and equity securities available for sale charged directly to shareholder's equity. In addition, the Company received a contribution of capital of $27.4 million in December 1995 and paid a dividend of $29.4 million in March 1996. TOTAL ASSETS increased by $1.42 billion to $9.20 billion at September 30, 1996 from $7.78 billion at September 30, 1995, principally due to a $1.08 billion increase in the separate accounts for variable annuities and a $214.3 million increase in invested assets. INVESTED ASSETS at year end totaled $2.33 billion in 1996, compared with $2.11 billion in 1995. This $214.3 million increase primarily resulted from a $208.2 million increase in amounts receivable from brokers for sales of securities. The Company manages most of its invested assets internally. The Company's general investment philosophy is to hold fixed maturity assets for long-term investment. Thus, it does not have a trading portfolio. Effective December 1, 1995, pursuant to guidelines issued by the Financial Accounting Standards Board, the Company determined that all of its portfolio of bonds, notes and redeemable preferred stocks (the "Bond Portfolio") is available to be sold in response to changes in market interest rates, changes in prepayment risk, the Company's need for liquidity and other similar factors. Accordingly, the Company no longer classifies a portion of its Bond Portfolio as held for investment. THE BOND PORTFOLIO had an aggregate amortized cost that exceeded its fair value by $13.8 million at September 30, 1996, compared with $3.7 million at September 30, 1995 (including net unrealized losses of $10.8 million on the portion of the portfolio that was designated as available for sale at 27 [LOGO] September 30, 1995). The increase in net unrealized losses on the Bond Portfolio since September 30, 1995, principally reflects the higher prevailing interest rates at September 30, 1996 and their corresponding effect on the fair value of the Bond Portfolio. All of the Bond Portfolio ($1.99 billion at amortized cost, excluding $9.1 million of redeemable preferred stocks) at September 30, 1996 was rated by Standard & Poor's Corporation ("S&P"), Moody's Investors Service ("Moody's"), Duff and Phelps Credit Rating Co. ("DCR"), Fitch Investors Service, L.P. ("Fitch") or under comparable statutory rating guidelines established by the National Association of Insurance Commissioners ("NAIC") and implemented by either the NAIC or the Company. At September 30, 1996, approximately $1.83 billion of the Bond Portfolio (at amortized cost) was rated investment grade by one or more of these agencies or by the Company or the NAIC, pursuant to applicable NAIC guidelines, including $1.05 billion of U.S. government/agency securities and MBSs. At September 30, 1996, the Bond Portfolio included $160.8 million (fair value, $160.2 million) of bonds not rated investment grade by S&P, Moody's, DCR, Fitch or the NAIC. Based on their September 30, 1996 amortized cost, these non- investment-grade bonds accounted for 1.8% of the Company's total assets and 6.9% of its invested assets. Non-investment-grade securities generally provide higher yields and involve greater risks than investment-grade securities because their issuers typically are more highly leveraged and more vulnerable to adverse economic conditions than investment-grade issuers. In addition, the trading market for these securities is usually more limited than for investment-grade securities. The Company intends that the proportion of its portfolio in such securities not exceed current levels, but its policies may change from time to time, including in connection with any possible acquisition. The Company had no material concentrations of non-investment-grade securities at September 30, 1996. The table on the following page summarizes the Company's rated bonds by rating classification as of September 30, 1996. 28 [LOGO] RATED BONDS BY RATING CLASSIFICATION (Dollars in thousands)
ISSUES NOT RATED BY S&P/ MOODY'S/ ISSUES RATED BY S&P/MOODY'S/DCR/FITCH DCR/FITCH, BY NAIC CATEGORY TOTAL - ------------------------------------------------------- ----------------------------------- ------------------------------------- S&P/(MOODY'S)/ NAIC PERCENT OF [DCR]/{FITCH} AMORTIZED ESTIMATED CATEGORY AMORTIZED ESTIMATED AMORTIZED INVESTED ESTIMATED CATEGORY (1) COST FAIR VALUE (2) COST FAIR VALUE COST ASSETS (3) FAIR VALUE - ------------------------------ ----------- ----------- --------- ----------- ----------- ----------- ----------- ----------- AAA+ to A- (Aaa to A3) [AAA to A-] {AAA to A-}................. $ 1,345,960 $ 1,333,515 1 $ 125,115 $ 125,046 $ 1,471,075 62.81% $ 1,458,561 BBB+ to BBB- (Baal to Baa3) [BBB+ to BBB-] {BBB+ to BBB-}.............. 226,312 226,191 2 133,773 133,698 360,085 15.38 359,889 BB+ to BB- (Ba1 to Ba3) [BB+ to BB-] {BB+ to BB-}................ 30,023 30,368 3 5,597 5,597 35,620 1.52 35,965 B+ to B- (B1 to B3) [B+ to B-] {B+ to B-}.................. 87,580 90,468 4 17,136 18,089 104,716 4.47 108,557 CCC+ to C (Caa to C) [CCC] {CCC+ to C-}................ 19,847 15,018 5 -- -- 19,847 0.85 15,018 C1 to D [DD] {D}......................... -- -- 6 618 618 618 0.03 618 ----------- ----------- ----------- ----------- ----------- ----------- Total rated issues $ 1,709,722 $ 1,695,560 $ 282,239 $ 283,048 $ 1,991,961 $ 1,978,608 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
- ------------------------------ (1) S&P and Fitch rate debt securities in rating categories ranging from AAA (the highest) to D (in payment default). A plus (+) or minus (-) indicates the debt's relative standing within the rating category. A security rated BBB- or higher is considered investment grade. Moody's rates debt securities in rating categories ranging from Aaa (the highest) to C (extremely poor prospects of ever attaining any real investment standing). The number 1, 2 or 3 (with 1 the highest and 3 the lowest) indicates the debt's relative standing within the rating category. A security rated Baa3 or higher is considered investment grade. DCR rates debt securities in rating categories ranging from AAA (the highest) to DD (in payment default). A plus (+) or minus (-) indicates the debt's relative standing within the rating category. A security rated BBB- or higher is considered investment grade. Issues are categorized based on the highest of the S&P, Moody's, DCR and Fitch ratings if rated by multiple agencies. (2) Bonds and short-term promissory instruments are divided into six quality categories for NAIC rating purposes, ranging from 1 (highest) to 5 (lowest) for nondefaulted bonds plus one category, 6, for bonds in or near default. These six categories correspond with the S&P/Moody's/DCR/Fitch rating groups listed above, with categories 1 and 2 considered investment grade. A substantial portion of the assets in the NAIC categories were rated by the Company pursuant to applicable of NAIC rating guidelines. (3) At amortized cost. 29 [LOGO] SENIOR SECURED LOANS ("Secured Loans") are included in the Bond Portfolio and their amortized cost aggregated $200.8 million at September 30, 1996. Secured Loans are senior to subordinated debt and equity, and are secured by assets of the issuer. At September 30, 1996, Secured Loans consisted of loans to 52 borrowers spanning 20 industries, with 22% of these assets (at amortized cost) concentrated in the leisure industry. No other industry concentration constituted more than 9% of these assets. While the trading market for Secured Loans is more limited than for publicly traded corporate debt issues, management believes that participation in these transactions has enabled the Company to improve its investment yield. Although, as a result of restrictive financial covenants, Secured Loans involve greater risk of technical default than do publicly traded investment-grade securities, management believes that the risk of loss upon default for its Secured Loans is mitigated by their financial covenants and senior secured positions. The Company's Secured Loans are rated by S&P, Moody's, DCR, Fitch or by the Company or the NAIC, pursuant to comparable statutory rating guidelines established by the NAIC. MORTGAGE LOANS aggregated $98.3 million at September 30, 1996 and consisted of 17 first mortgage loans with an average loan balance of approximately $5.8 million, collateralized by properties located in 11 states. At September 30, 1996, the Company had no concentrations in any single state or in any single type of property that amounted to more than 23% of the mortgage loan portfolio. At September 30, 1996, there were four loans with outstanding balances of $10 million or more, the largest of which had a balance of approximately $21 million, which collectively aggregated approximately 61% of the portfolio. At September 30, 1996, approximately 33% of the mortgage loan portfolio consisted of loans with balloon payments due before October 1, 1999. At September 30, 1996, loans delinquent by more than 90 days totaled $1.5 million (1.6% of total mortgages). There were no loans foreclosed upon and transferred to real estate in the balance sheet during 1996. At September 30, 1996, mortgage loans having an aggregate carrying value of $21.3 million had been previously restructured. Of this amount, $16.5 million was restructured during 1995 and $4.8 million was restructured during 1992. No mortgage loans were restructured during 1996. Approximately 62% of the mortgage loans in the portfolio at September 30, 1996 were seasoned loans underwritten to the Company's standards and purchased at or near par from another financial institution which was downsizing its portfolio. Such loans generally have higher average interest rates than loans that could be originated today. The balance of the mortgage loan portfolio has been originated by the Company under strict underwriting standards. Commercial mortgage loans on properties such as offices, hotels and shopping centers generally represent a higher level of risk than do mortgage loans secured by multifamily residences. This greater risk is due to several factors, including the larger size of such loans and the effects of general economic conditions on these commercial properties. However, due to the seasoned nature of the Company's mortgage loans and its strict underwriting standards, the Company believes that it has reduced the risk attributable to its mortgage loan portfolio while maintaining attractive yields. REAL ESTATE aggregated $39.7 million at September 30, 1996 and consisted of non-income producing land in the Phoenix, Arizona metropolitan area. Of this amount, the Company has undertaken to dispose of $28.4 million during the next year, either to affiliated or nonaffiliated parties, and SunAmerica the ultimate parent, has guaranteed that the Company will receive its statutory carrying value of these assets. (This guaranty was terminated on December 31, 1996-See "Results of Operations for the First Three Months of Fiscal 1997"). OTHER INVESTED ASSETS aggregated $77.9 million at September 30, 1996, including $45.1 million of investments in limited partnerships and an aggregate of $32.8 million of miscellaneous investments, including policy loans, residuals, separate account investments, and leveraged leases. The Company's limited partnership interests, accounted for by using the cost method of accounting, invest mainly in equity securities. ASSET-LIABILITY MATCHING is utilized by the Company to minimize the risks of interest rate fluctuations and disintermediation. The Company believes that its fixed-rate liabilities should be backed by a portfolio principally composed of fixed maturities that generate predictable rates of return. The Company does not have a specific target rate of return. Instead, its rates of return vary over time depending on the current interest rate environment, the slope of the yield curve, the spread at which fixed maturities are priced over the yield curve and general competitive conditions within the industry. 30 [LOGO] Its portfolio strategy is designed to achieve adequate risk-adjusted returns consistent with its investment objectives of effective asset-liability matching, liquidity and safety. The Company designs its fixed-rate products and conducts its investment operations in order to closely match the duration of the assets in its investment portfolio to its annuity and GIC obligations. The Company seeks to achieve a predictable spread between what it earns on its assets and what it pays on its liabilities by investing principally in fixed-rate securities. The Company's fixed-rate products incorporate surrender charges or other limitations on when contracts can be surrendered for cash to encourage persistency. Approximately 63% of the Company's fixed annuity and GIC reserves had surrender penalties or other restrictions at September 30, 1996. As part of its asset-liability matching discipline, the Company conducts detailed computer simulations that model its fixed-maturity assets and liabilities under commonly used stress-test interest rate scenarios. Based on the results of these computer simulations, the investment portfolio has been constructed with a view to maintaining a desired investment spread between the yield on portfolio assets and the rate paid on its reserves under a variety of possible future interest rate scenarios. At September 30, 1996 the weighted average life of the Company's investments was approximately five years and the duration was approximately three. Weighted average life is the average time to receipt of all principal, incorporating the effects of scheduled amortization and expected prepayments, weighted by book value. Duration is a common option-adjusted measure for the price sensitivity of a fixed-income portfolio to changes in interest rates. It measures the approximate percentage change in market value of a portfolio if interest rates change by 100 basis points, recognizing the changes in portfolio cashflows resulting from embedded options such as prepayments and bond calls. As a component of its investment strategy, the Company utilizes interest rate swap agreements ("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 into fixed-rate instruments. The Company also seeks to provide liquidity from time to time by using reverse repurchase agreements ("Reverse Repos"), Dollar Rolls and by investing in MBSs. It also seeks to enhance its spread income by using Reverse Repos and Dollar Rolls. Reverse Repos involve a sale of securities and an agreement to repurchase the same securities at a later date at an agreed upon price and are generally over-collateralized. Dollar Rolls are similar to Reverse Repos except that the repurchase involves securities that are only substantially the same as the securities sold and the arrangement is not collateralized, nor is it governed by a repurchase agreement. MBSs are generally investment-grade securities collateralized by large pools of mortgage loans. MBSs generally pay principal and interest monthly. The amount of principal and interest payments may fluctuate as a result of prepayments of the underlying mortgage loans. There are risks associated with some of the techniques the Company uses to provide liquidity, enhance its spread income and match its assets and liabilities. The primary risk associated with the Company's Dollar Rolls, Reverse Repos and Swap Agreements is counterparty risk. The Company believes, however, that the counterparties to its Dollar Rolls, Reverse Repos and Swap Agreements are financially responsible and that the counterparty risk associated with those transactions is minimal. Counterparty risk associated with Dollar Rolls is further mitigated by the Company's participation in an MBS trading clearinghouse. The sell and buy transactions that are submitted to this clearinghouse are marked to market on a daily basis and each participant is required to over-collateralize its net loss position by 30% with either cash, letters of credit or government securities. In addition to counterparty risk, Swap Agreements also have interest rate risk. However, the Company's Swap Agreements typically hedge variable-rate assets or liabilities, and interest rate fluctuations that adversely affect the net cash received or paid under the terms of a Swap Agreement would be offset by increased interest income earned on the variable-rate assets or reduced interest expense paid on the variable-rate liabilities. The primary risk associated with MBSs is that a changing interest rate environment might cause prepayment of the underlying obligations at speeds slower or faster than anticipated at the time of their purchase. INVESTED ASSETS EVALUATION routinely includes a review by the Company of its portfolio of debt securities. Management identifies monthly those investments that require additional monitoring and carefully reviews the carrying value of such investments at least quarterly to determine whether 31 [LOGO] specific investments should be placed on a nonaccrual basis and to determine declines in value that may be other than temporary. In making these reviews for bonds, management principally considers the adequacy of collateral (if any), compliance with contractual covenants, the borrower's recent financial performance, news reports and other externally generated information concerning the creditor's affairs. In the case of publicly traded bonds, management also considers market value quotations, if available. For mortgage loans, management generally considers information concerning the mortgaged property and, among other things, factors impacting the current and expected payment status of the loan and, if available, the current fair value of the underlying collateral. The carrying values of bonds that are determined to have declines in value that are other than temporary are reduced to net realizable value and no further accruals of interest are made. The valuation allowances on mortgage loans are based on losses expected by management to be realized on transfers of mortgage loans to real estate, on the disposition and settlement of mortgage loans and on mortgage loans that management believes may not be collectible in full. Accrual of interest is suspended when principal and interest payments on mortgage loans are past due more than 90 days. DEFAULTED INVESTMENTS, comprising all investments that are in default as to the payment of principal or interest, totaled $3.1 million at September 30, 1996 (at amortized cost, with a fair value of $2.9 million) including $1.6 million of bonds and notes and $1.5 million of mortgage loans. At September 30, 1996, defaulted investments constituted 0.1% of total invested assets. At September 30, 1995, defaulted investments totaled $5.0 million which constituted 0.2% of total invested assets. SOURCES OF LIQUIDITY are readily available to the Company in the form of the Company's existing portfolio of cash and short-term investments, Reverse Repo capacity on invested assets and, if required, proceeds from invested asset sales. At September 30, 1996, approximately $936.8 million of the Company's Bond Portfolio had an aggregate unrealized gain of $20.1 million, while approximately $1.06 billion of the Bond Portfolio had an aggregate unrealized loss of $33.9 million. In addition, the Company's investment portfolio currently provides approximately $21.6 million of monthly cash flow from scheduled principal and interest payments. Management is aware that prevailing market interest rates may shift significantly and has strategies in place to manage either an increase or decrease in prevailing rates. In a rising interest rate environment, the Company's average cost of funds would increase over time as it prices its new and renewing annuities and GICs to maintain a generally competitive market rate. Management would seek to place new funds in investments that were matched in duration to, and higher yielding than, the liabilities assumed. The Company believes that liquidity to fund withdrawals would be available through incoming cash flow, the sale of short-term or floating-rate instruments or Reverse Repos on the Company's substantial MBS segment of the Bond Portfolio, thereby avoiding the sale of fixed-rate assets in an unfavorable bond market. In a declining rate environment, the Company's cost of funds would decrease over time, reflecting lower interest crediting rates on its fixed annuities and GICs. Should increased liquidity be required for withdrawals, the Company believes that a significant portion of its investments could be sold without adverse consequences in light of the general strengthening that would be expected in the bond market. RESULTS OF OPERATIONS FOR THE FIRST THREE MONTHS OF FISCAL 1997 NET INCOME totaled $3.3 million for the three months ended December 31, 1996 ("Fiscal 1997"), compared with $5.8 million for the three months ended December 31, 1995 ("Fiscal 1996"). PRETAX INCOME totaled $4.9 million in Fiscal 1997 and $9.3 million in Fiscal 1996. This $4.4 million decline primarily resulted from increased net realized investment losses and general and administrative expenses, partially offset by an increase in fee income. NET INVESTMENT INCOME totaled $14.5 million in Fiscal 1997 and $14.6 million in Fiscal 1996. These amounts represent 2.32% on average invested assets (computed on a daily basis) of $2.50 billion in Fiscal 1997 and 3.00% on average invested assets of $1.95 billion in Fiscal 1996. The excess of average invested assets over average interest-bearing liabilities amounted to $150.5 million in Fiscal 1997 and $131.2 million in Fiscal 1996. The difference between the Company's yield on average invested assets and the rate paid on average interest-bearing liabilities was 1.99% in Fiscal 1997 and 2.65% in Fiscal 1996. 32 [LOGO] Investment income and the related yields on average invested assets totaled $46.7 million or 7.46% in Fiscal 1997, compared with $38.7 million or 7.95% in Fiscal 1996. Investment income rose during Fiscal 1997 as a result of higher levels of average invested assets, partially offset by reduced investment yields. Investment yields were lower in Fiscal 1997 because of a generally declining interest rate environment since early 1995 and lower contributions from the Company's investments in partnerships. Partnership income totaled $0.7 million in Fiscal 1997 and $1.4 million in Fiscal 1996. This income represents a yield of 6.71% on related average assets of $44.6 million in Fiscal 1997, compared with 11.60% on related average assets of $48.7 million in Fiscal 1996. Partnership income is based upon cash distributions received from limited partnerships, the operations of which the Company does not significantly influence. Consequently, such income is not predictable and there can be no assurance that the Company will realize comparable levels of such income in the future. Total interest expense aggregated $32.2 million in Fiscal 1997 and $24.0 million in Fiscal 1996. The average rate paid on all interest-bearing liabilities was 5.47% (5.34% on fixed annuity contracts and 5.81% on GICs) in Fiscal 1997, compared with 5.30% (5.10% on fixed annuity contracts and 6.19% on GICs) in Fiscal 1996. Interest-bearing liabilities averaged $2.35 billion during Fiscal 1997, compared with $1.81 billion during Fiscal 1996. The increase in the average rates paid on fixed annuity contracts during Fiscal 1997 primarily resulted from the impact of certain promotional one-year interest rates offered on the Company's Polaris variable annuity product. The decline in interest paid on GICs reflects the generally declining interest rate environment and its effect on the variable-rate GIC portfolio. The growth in average invested assets since 1995 primarily reflects sales of the Company's fixed-rate products, consisting of both fixed accounts of variable annuity products and GICs. Since December 31, 1995, fixed annuity premiums have aggregated $1.04 billion and GIC premiums have totaled $140.0 million. Fixed annuity premiums totaled $362.8 million in Fiscal 1997, compared with $62.5 million in Fiscal 1996. This increase in premiums resulted primarily from greater inflows into the one-year fixed account of the Company's Polaris variable annuity product. The Company has observed that many purchasers of its variable annuity contracts allocate new premiums to the one-year fixed account and concurrently sign up for the option to dollar costs average into the variable fund. Accordingly, the Company anticipates that it will see a large portion of these premiums transferred into the separate accounts. GIC premiums totaled $5.0 million in Fiscal 1997. There were no GIC premiums in Fiscal 1996. NET REALIZED INVESTMENT LOSSES totaled $19.1 million in Fiscal 1997 and $12.8 million in Fiscal 1996. Net realized investment losses include impairment writedowns of $16.1 million in Fiscal 1997 and $14.9 million in Fiscal 1996. Therefore, net losses from sales of investments totaled $3.0 million in Fiscal 1997, compared with net gains of $2.1 million in Fiscal 1996. Impairment writedowns reflect $15.7 million and $14.9 million of provisions applied to non-income producing land in Arizona in Fiscal 1997 and Fiscal 1996, respectively. The statutory carrying value of this land had been guaranteed by the Company's ultimate Parent, SunAmerica. SunAmerica made capital contributions of $28.4 million and $27.4 million on December 31, 1996 and 1995, respectively, to the Company through the Company's direct parent in exchange for the termination of its guaranty with respect to this land. Accordingly, the Company reduced the carrying value of this land to estimated fair value to reflect the termination of the guaranty. SunAmerica's guaranty has been fully terminated. Impairment writedowns, on an annualized basis, represent 2.51% and 3.06% of average invested assets in Fiscal 1997 and 1996, respectively. Such writedowns are based upon estimates of the net realizable value of the applicable assets. Actual realization will be dependent upon future events. VARIABLE ANNUITY FEES increased to $30.6 million in Fiscal 1997 from $24.3 million in Fiscal 1996. The increase in variable annuity fees in Fiscal 1997 reflects growth in average variable annuity assets, principally due to increased market values and the receipt of variable annuity premiums, partially offset by surrenders. Variable annuity assets averaged $6.60 billion during Fiscal 1997 and $5.29 billion during Fiscal 1996. Variable annuity premiums, which exclude premiums allocated to the fixed accounts of variable annuity products, have aggregated $937.1 million since December 31, 1995. Variable annuity premiums increased to $226.8 million in Fiscal 1997 from $209.5 million in Fiscal 1996. This increase may be 33 [LOGO] attributed, in part, to a heightened demand for equity investments, principally as a result of generally improved market performance. NET RETAINED COMMISSIONS totaled $7.8 million in Fiscal 1997 and $6.5 million in Fiscal 1996. Broker-dealer sales (mainly sales of general securities, mutual funds and annuities) totaled $2.03 billion in Fiscal 1997 and $1.75 billion in Fiscal 1996. The significant increases in sales and net retained commissions during Fiscal 1997 reflect a greater number of registered representatives and higher average production, combined with generally favorable market conditions. ASSET MANAGEMENT FEES totaled $6.4 million on average assets managed of $2.21 billion in Fiscal 1997 and $6.5 million on average assets managed of $2.15 billion in Fiscal 1996. Asset management fees decreased slightly in Fiscal 1997, despite a modest increase in average assets managed, principally due to changes in product mix. Sales of mutual funds, excluding sales of money market accounts, have aggregated $249.5 million since December 31, 1995. Mutual fund sales totaled $62.3 million in Fiscal 1997 and $36.3 million in Fiscal 1996. Higher mutual funds sales in Fiscal 1997 include $14.3 million of sales from the Company's "Style Select Series," a product introduced in November 1996. Sales in Fiscal 1997 also reflect the combined effects of additional advertising, increased distribution, the favorable performance records of certain of the Company's mutual funds, and heightened demand for equity investments, principally as a result of improved market performance. Redemptions of mutual funds, excluding redemptions of money market accounts, amounted to $103.7 million in Fiscal 1997 and $97.6 million in Fiscal 1996. SURRENDER CHARGES on fixed and variable annuities totaled $1.4 million in Fiscal 1997 and $1.3 million in Fiscal 1996. Withdrawal payments, which include surrenders and lump-sum annuity benefits, totaled $238.1 million in Fiscal 1997 and $215.1 million in Fiscal 1996. These payments represent 11.4% and 12.9%, respectively, of the aggregate of average fixed and variable annuity reserves. Withdrawals include variable annuity payments from the separate accounts totaling $176.0 million in Fiscal 1997 and $154.5 million in Fiscal 1996. Approximately 67% of the Company's fixed annuity and GIC reserves had surrender penalties or other restrictions at December 31, 1996. Although variable annuity surrenders have increased, principally as a result of growth in the variable annuity separate accounts, variable annuity withdrawal rates have declined. Variable annuity surrenders represent 10.7% and 11.8%, respectively, of average variable annuity liabilities in Fiscal 1997 and Fiscal 1996. Fixed annuity surrenders have increased slightly to $62.1 million in Fiscal 1997 from $60.6 million in Fiscal 1996 as the fixed annuity reserves have grown. Management anticipates that withdrawal rates will remain relatively stable for the foreseeable future. GENERAL AND ADMINISTRATIVE EXPENSES totaled $22.3 million in Fiscal 1997, compared with $17.0 million in Fiscal 1996. Expenses in Fiscal 1997 increased primarily due to a growing block of business. Expenses remain closely controlled through a company-wide cost containment program and continue to represent approximately 1% of average total assets on an annualized basis. AMORTIZATION OF DEFERRED ACQUISITION COSTS totaled $13.8 million in Fiscal 1997 and $13.7 million in Fiscal 1996 and represent for each period, on an annualized basis, approximately 14% of the balance of deferred acquisition costs at the beginning of each period. The slight increase in Fiscal 1997 was primarily due to additional fixed and variable annuity and mutual fund sales and the subsequent amortization of related deferred commissions and other acquisition costs. ANNUAL COMMISSIONS totaled $1.4 million in Fiscal 1997 and $0.9 million in Fiscal 1996. The increase in annual commissions reflects increased sales of annuities that offer this commission option. The Company estimates that approximately 43% of the average balances of its variable annuity products are currently subject to such annual commissions. Based on current sales, this percentage is expected to increase in future periods. INCOME TAX EXPENSE totaled $1.6 million in Fiscal 1997 and $3.4 million in Fiscal 1996, representing effective tax rates of 32% and 37%, respectively. The lower rate in Fiscal 1997 is primarily due to the impact of state taxes in the prior year. FINANCIAL CONDITION AND LIQUIDITY AT DECEMBER 31, 1996 SHAREHOLDER'S EQUITY increased by $44.9 million to $530.1 million at December 31, 1996 from $485.3 million at September 30, 1996, primarily as a result of a $28.4 million capital contribution and $3.3 million of net income recorded in Fiscal 1997. Shareholder's equity at December 31, 1996 was also favorably impacted by the recording of a $7.6 million net 34 [LOGO] unrealized gain on debt and equity securities available for sale, a $13.1 million improvement over the $5.5 million net unrealized loss recorded at September 30, 1996. TOTAL ASSETS increased by $821.2 million to $10.03 billion at December 31, 1996 from $9.20 billion at September 30, 1996, principally due to a $472.8 million increase in the separate accounts for variable annuities and a $374.5 million increase in invested assets. INVESTED ASSETS at December 31, 1996 totaled $2.70 billion, compared with $2.33 billion at September 30, 1996. This $374.5 million increase primarily resulted from the sales of fixed annuities and a net increase in the amount payable to brokers for purchases of securities. THE BOND PORTFOLIO had an aggregate fair value that exceeded its amortized cost by $17.0 million at December 31, 1996. At September 30, 1996, the amortized cost of the Bond Portfolio exceeded its fair value by $13.8 million. The net unrealized gain on the Bond Portfolio since September 30, 1996 principally reflects the lower relative prevailing interest rates at December 31, 1996 and their corresponding effect on the fair value of the Bond Portfolio. All of the Bond Portfolio ($2.26 billion at amortized cost, excluding $6.5 million of redeemable preferred stocks), at December 31, 1996 was rated by S&P, Moody's, DCR, Fitch or under comparable statutory rating guidelines established by the NAIC and implemented by either the NAIC or the Company. At December 31, 1996, approximately $2.06 billion of the Bond Portfolio (at amortized cost) was rated investment grade by one or more of these agencies or by the Company or the NAIC, pursuant to applicable NAIC guidelines, including $1.13 billion of U.S. government/agency securities and MBSs. At December 31, 1996, the Bond Portfolio included $198.9 million (fair value, $202.8 million) of bonds not rated investment grade by S&P, Moody's, DCR, Fitch or the NAIC. Based on their December 31, 1996 amortized cost, these non- investment-grade bonds accounted for 2.0% of the Company's total assets and 7.4% of invested assets. The Company had no material concentrations of non-investment-grade securities at December 31, 1996. SENIOR SECURED LOANS are included in the Bond Portfolio and their amortized cost aggregated $201.4 million at December 31, 1996. At December 31, 1996, Secured Loans consisted of loans to 65 borrowers spanning 22 industries, with 12.7% of these assets (at amortized cost) concentrated in the air transport industry. No other industry concentration constituted more than 11.7% of these assets. MORTGAGE LOANS aggregated $120.7 million at December 31, 1996 and consisted of 22 first mortgage loans with an average loan balance of approximately $5.5 million, collateralized by properties located in 13 states. At December 31, 1996, the Company had no concentrations in any single state or in any single type of property that amounted to more than 24% of the mortgage loan portfolio. At December 31, 1996, there were four loans with outstanding balances of $10 million or more, the largest of which had a balance of approximately $20.5 million, which collectively aggregated approximately 49% of the portfolio. At December 31, 1996, approximately 26% of the mortgage loan portfolio consisted of loans with balloon payments due before January 1, 2000. During Fiscal 1997 and Fiscal 1996, loans delinquent by more than 90 days, foreclosed loans and restructured loans have not been significant in relation to the portfolio. Approximately 49% of the mortgage loans in the portfolio at December 31, 1996 were seasoned loans underwritten to the Company's standards and purchased at or near par from another financial institution which was downsizing its portfolio. OTHER INVESTED ASSETS aggregated $77.5 million at December 31, 1996, including $45.6 million of investments in limited partnerships and an aggregate of $31.9 million of miscellaneous investments, including policy loans, residuals, separate account investments and leveraged leases. The 35 Company's limited partnership interests, accounted for by using the cost method of accounting, invest mainly in equity securities. DEFAULTED INVESTMENTS, comprising all investments that are in default as to the payment of principal or interest, totaled $6.5 million at December 31, 1996 (at amortized cost, with a fair value of $5.4 million) including $5.0 million of bonds and notes and $1.5 million of mortgage loans. At December 31, 1996 defaulted investments constituted 0.2% of total invested assets. At September 30, 1996, defaulted investments totaled $3.1 million, which constituted 0.1% of total invested assets. SOURCES OF LIQUIDITY are readily available to the Company in the form of the Company's existing portfolio of cash and short-term investments, Reverse Repo capacity on invested assets and, if required, proceeds from invested asset sales. At December 31, 1996, approximately $1.22 billion of the Company's Bond Portfolio had an aggregate unrealized gain of $38.4 million, while approximately $1.04 billion of the Bond Portfolio had an aggregate unrealized loss of $21.4 million. In addition, the Company's investment portfolio currently provides approximately $22.6 million of monthly cash flow from scheduled principal and interest payments. INDEPENDENT ACCOUNTANTS The consolidated financial statements of Anchor National Life Insurance Company as of September 30, 1996 and 1995 and for each of the three years in the period ended September 30, 1996 included in this prospectus have been so included in reliance on the report of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. FINANCIAL STATEMENTS The consolidated financial statements of Anchor National have been included in this prospectus. You should consider these financial statements only with respect to Anchor National's ability to meet its obligations under the fixed investment options to pay death benefits under the contracts, to assume the mortality and expense risks under the Contract and any risk resulting from the withdrawal charge not being adequate to cover the costs of distributing the contracts. These financial statements provide no information as it relates to Seasons Series Trust, its investment portfolios or the value of any money allocated to the STRATEGIES. REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholder of Anchor National Life Insurance Company In our opinion, the accompanying consolidated balance sheet and the related consolidated income statement and statement of cash flows present fairly, in all material respects, the financial position of Anchor National Life Insurance Company and its subsidiaries at September 30, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 1996, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Note 2, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," in fiscal 1994. Price Waterhouse LLP Los Angeles, California November 8, 1996 36 ANCHOR NATIONAL LIFE INSURANCE COMPANY CONSOLIDATED BALANCE SHEET ASSETS
SEPTEMBER 30, SEPTEMBER 30, 1995 1996 --------------- --------------- DECEMBER 31, 1996 --------------- (UNAUDITED) Investments: Cash and short-term investments........................... $ 249,209,000 $ 122,058,000 $ 196,142,000 Bonds, notes and redeemable preferred stocks: Available for sale, at fair value (amortized cost: September 1995, $1,500,062,000; September 1996, $2,001,024,000; December 1996, $2,264,485,000)......... 1,489,213,000 1,987,271,000 2,281,527,000 Held for investment, at amortized cost (fair value: September 1995, $165,004,000).......................... 157,901,000 -- -- Mortgage loans............................................ 94,260,000 98,284,000 120,680,000 Common stocks, at fair value (cost: September 1995, $6,576,000; September 1996, $2,911,000; December 1996, $2,510,000).............................................. 4,097,000 3,970,000 3,842,000 Real estate............................................... 55,798,000 39,724,000 24,000,000 Other invested assets..................................... 64,430,000 77,925,000 77,492,000 --------------- --------------- --------------- Total investments..................................... 2,114,908,000 2,329,232,000 2,703,683,000 Variable annuity assets..................................... 5,230,246,000 6,311,557,000 6,784,374,000 Receivable from brokers for sales of securities............. -- 52,348,000 -- Accrued investment income................................... 14,192,000 19,675,000 20,404,000 Deferred acquisition costs.................................. 383,069,000 443,610,000 461,637,000 Other assets................................................ 41,282,000 48,113,000 55,610,000 --------------- --------------- --------------- TOTAL ASSETS.......................................... $ 7,783,697,000 $ 9,204,535,000 $10,025,708,000 --------------- --------------- --------------- --------------- --------------- --------------- LIABILITIES AND SHAREHOLDER'S EQUITY Reserves, payables and accrued liabilities: Reserves for fixed annuity contracts...................... $ 1,497,052,000 $ 1,789,962,000 $ 2,024,873,000 Reserves for guaranteed investment contracts.............. 277,095,000 415,544,000 420,871,000 Payable to brokers for purchases of securities............ 155,861,000 -- 49,991,000 Income taxes currently payable............................ 15,720,000 21,486,000 23,807,000 Other liabilities......................................... 56,372,000 74,710,000 83,824,000 --------------- --------------- --------------- Total reserves, payables and accrued liabilities...... 2,002,100,000 2,301,702,000 2,603,366,000 --------------- --------------- --------------- Variable annuity liabilities................................ 5,230,246,000 6,311,557,000 6,784,374,000 --------------- --------------- --------------- Subordinated notes payable to Parent........................ 35,832,000 35,832,000 35,903,000 --------------- --------------- --------------- Deferred income taxes....................................... 73,459,000 70,189,000 71,943,000 --------------- --------------- --------------- Shareholder's equity: Common Stock.............................................. 3,511,000 3,511,000 3,511,000 Additional paid-in capital................................ 252,876,000 280,263,000 308,674,000 Retained earnings......................................... 191,346,000 207,002,000 210,348,000 Net unrealized gains (losses) on debt and equity securities available for sale............................ (5,673,000) (5,521,000) 7,589,000 --------------- --------------- --------------- Total shareholder's equity............................ 442,060,000 485,255,000 530,122,000 --------------- --------------- --------------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY............ $ 7,783,697,000 $ 9,204,535,000 $10,025,708,000 --------------- --------------- --------------- --------------- --------------- ---------------
See accompanying notes 37 ANCHOR NATIONAL LIFE INSURANCE COMPANY CONSOLIDATED INCOME STATEMENT
THREE MONTHS ENDED YEARS ENDED SEPTEMBER 30, DECEMBER 31, ------------------------------------------ --------------------------- 1994 1995 1996 1995 1996 ------------ ------------ ------------ ------------ ------------ (UNAUDITED) Investment income................................. $127,758,000 $129,466,000 $164,631,000 $ 38,653,000 $ 46,712,000 ------------ ------------ ------------ ------------ ------------ Interest expense on: Fixed annuity contracts......................... (66,311,000) (72,975,000) (82,690,000) (18,936,000) (25,191,000) Guaranteed investment contracts................. -- (3,733,000) (19,974,000) (4,272,000) (6,038,000) Senior indebtedness............................. (71,000) (227,000) (2,568,000) (195,000) (181,000) Subordinated notes payable to Parent............ (2,380,000) (2,448,000) (2,556,000) (633,000) (758,000) ------------ ------------ ------------ ------------ ------------ Total interest expense.......................... (68,762,000) (79,383,000) (107,788,000) (24,036,000) (32,168,000) ------------ ------------ ------------ ------------ ------------ NET INVESTMENT INCOME............................. 58,996,000 50,083,000 56,843,000 14,617,000 14,544,000 ------------ ------------ ------------ ------------ ------------ NET REALIZED INVESTMENT LOSSES.................... (33,713,000) (4,363,000) (13,355,000) (12,800,000) (19,116,000) ------------ ------------ ------------ ------------ ------------ Fee income: Variable annuity fees........................... 79,101,000 84,171,000 103,970,000 24,290,000 30,606,000 Net retained commissions........................ 20,822,000 24,108,000 31,548,000 6,491,000 7,796,000 Asset management fees........................... 31,302,000 26,935,000 25,413,000 6,503,000 6,418,000 ------------ ------------ ------------ ------------ ------------ TOTAL FEE INCOME.................................. 131,225,000 135,214,000 160,931,000 37,284,000 44,820,000 ------------ ------------ ------------ ------------ ------------ Other income and expenses: Surrender charges............................... 5,034,000 5,889,000 5,184,000 1,261,000 1,350,000 General and administrative expenses............. (52,636,000) (61,629,000) (80,048,000) (16,997,000) (22,322,000) Amortization of deferred acquisition costs...... (44,195,000) (58,713,000) (57,520,000) (13,658,000) (13,817,000) Annual commissions.............................. (1,158,000) (2,658,000) (4,613,000) (939,000) (1,433,000) Other, net...................................... 3,767,000 1,174,000 1,886,000 507,000 920,000 ------------ ------------ ------------ ------------ ------------ TOTAL OTHER INCOME AND EXPENSES................... (89,188,000) (115,937,000) (135,111,000) (29,826,000) (35,302,000) ------------ ------------ ------------ ------------ ------------ PRETAX INCOME..................................... 67,320,000 64,997,000 69,308,000 9,275,000 4,946,000 Income tax expense................................ (22,705,000) (25,739,000) (24,252,000) (3,449,000) (1,600,000) ------------ ------------ ------------ ------------ ------------ INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES...................... 44,615,000 39,258,000 45,056,000 5,826,000 3,346,000 Cumulative effect of change in accounting for income taxes..................................... (20,463,000) -- -- -- -- ------------ ------------ ------------ ------------ ------------ NET INCOME........................................ $ 24,152,000 $ 39,258,000 $ 45,056,000 $ 5,826,000 $ 3,346,000 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
See accompanying notes 38 ANCHOR NATIONAL LIFE INSURANCE COMPANY CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, ------------------------------------------------------ 1994 1995 1996 ---------------- ---------------- ---------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income............................................ $ 24,152,000 $ 39,258,000 $ 45,056,000 Adjustments to reconcile net income to net cash provided by operating activities: Interest credited to: Fixed annuity contracts........................... 66,311,000 72,975,000 82,690,000 Guaranteed investment contracts................... -- 3,733,000 19,974,000 Net realized investment losses.................... 33,713,000 4,363,000 13,355,000 Accretion of net discounts on investments......... (2,050,000) (6,865,000) (8,976,000) Amortization of goodwill.......................... 1,169,000 1,168,000 1,169,000 Provision for deferred income taxes............... 19,395,000 (1,489,000) (3,351,000) Cumulative effect of change in accounting for income taxes..................................... 20,463,000 -- -- Change in: Accrued investment income........................... (1,310,000) 3,373,000 (5,483,000) Deferred acquisition costs.......................... (34,612,000) (7,180,000) (60,941,000) Other assets........................................ 5,133,000 7,047,000 (8,000,000) Income taxes currently payable...................... 6,559,000 3,389,000 5,766,000 Other liabilities................................... 46,000 4,063,000 5,474,000 Other, net............................................ 360,000 7,000 (129,000) ---------------- ---------------- ---------------- NET CASH PROVIDED BY OPERATING ACTIVITIES:............ 139,329,000 123,842,000 86,604,000 ---------------- ---------------- ---------------- CASH FLOWS FROM FINANCING ACTIVITIES: Premium receipts on: Fixed annuity contracts........................... 138,526,000 245,320,000 651,649,000 Guaranteed investment contracts................... -- 275,000,000 134,967,000 Net exchanges to (from) the fixed accounts of variable annuity contracts......................... (29,286,000) 10,475,000 (236,705,000) Withdrawal payments on: Fixed annuity contracts........................... (269,412,000) (237,977,000) (173,489,000) Guaranteed investment contracts................... -- (1,638,000) (16,492,000) Claims and annuity payments on fixed annuity contracts.......................................... (31,146,000) (31,237,000) (31,107,000) Net receipts from (repayments of) other short-term financings......................................... (166,685,000) 3,202,000 (119,712,000) Capital contributions received...................... -- -- 27,387,000 Dividend paid....................................... -- -- (29,400,000) ---------------- ---------------- ---------------- NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES...... (358,003,000) 263,145,000 207,098,000 ---------------- ---------------- ---------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of: Bonds, notes and redeemable preferred stocks...... (1,197,743,000) (1,556,586,000) (1,937,890,000) Mortgage loans.................................... (10,666,000) -- (15,000,000) Other investments, excluding short-term investments...................................... (26,317,000) (13,028,000) (36,770,000) Sales of: Bonds, notes and reedeemable preferred stocks..... 877,068,000 1,026,078,000 1,241,928,000 Real estate....................................... 33,443,000 36,813,000 900,000 Other investments, excluding short-term investments...................................... 2,353,000 5,130,000 4,937,000 Redemptions and maturities of: Bonds, notes and redeemable preferred stocks...... 173,763,000 178,688,000 288,969,000 Mortgage loans.................................... 10,087,000 14,403,000 11,324,000 Other investments, excluding short-term investments...................................... 13,500,000 13,286,000 20,749,000 ---------------- ---------------- ---------------- NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES...... (124,512,000) (295,216,000) (420,853,000) ---------------- ---------------- ---------------- NET INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS.......................................... (343,186,000) 91,771,000 (127,151,000) CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF PERIOD............................................... 500,624,000 157,438,000 249,209,000 ---------------- ---------------- ---------------- CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD...... $ 157,438,000 $ 249,209,000 $ 122,058,000 ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Supplemental cash flow information: Interest paid on indebtedness....................... $ 1,175,000 $ 3,235,000 $ 5,982,000 ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Net income taxes paid (recovered)................... $ (3,328,000) $ 23,656,000 $ 22,031,000 ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- THREE MONTHS ENDED DECEMBER 31, ----------------------------------- 1995 1996 ---------------- ---------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income............................................ $ 5,826,000 $ 3,346,000 Adjustments to reconcile net income to net cash provided by operating activities: Interest credited to: Fixed annuity contracts........................... 18,936,000 25,191,000 Guaranteed investment contracts................... 4,272,000 6,038,000 Net realized investment losses.................... 12,800,000 19,116,000 Accretion of net discounts on investments......... (1,669,000) (2,615,000) Amortization of goodwill.......................... 293,000 291,000 Provision for deferred income taxes............... (6,541,000) (5,305,000) Cumulative effect of change in accounting for income taxes..................................... -- -- Change in: Accrued investment income........................... (3,683,000) (729,000) Deferred acquisition costs.......................... (5,853,000) (28,927,000) Other assets........................................ (6,902,000) (7,788,000) Income taxes currently payable...................... 5,749,000 2,321,000 Other liabilities................................... 428,000 3,924,000 Other, net............................................ 85,000 (6,000) ---------------- ---------------- NET CASH PROVIDED BY OPERATING ACTIVITIES:............ 23,741,000 14,857,000 ---------------- ---------------- CASH FLOWS FROM FINANCING ACTIVITIES: Premium receipts on: Fixed annuity contracts........................... 62,536,000 325,993,000 Guaranteed investment contracts................... -- 5,000,000 Net exchanges to (from) the fixed accounts of variable annuity contracts......................... (36,865,000) (82,234,000) Withdrawal payments on: Fixed annuity contracts........................... (60,577,000) (25,292,000) Guaranteed investment contracts................... (4,200,000) (5,711,000) Claims and annuity payments on fixed annuity contracts.......................................... (7,202,000) (8,741,000) Net receipts from (repayments of) other short-term financings......................................... (131,379,000) 10,308,000 Capital contributions received...................... 27,387,000 28,411,000 Dividend paid....................................... -- -- ---------------- ---------------- NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES...... (150,300,000) 247,734,000 ---------------- ---------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of: Bonds, notes and redeemable preferred stocks...... (230,071,000) (1,068,608,000) Mortgage loans.................................... -- (25,124,000) Other investments, excluding short-term investments...................................... (2,698,000) (3,108,000) Sales of: Bonds, notes and reedeemable preferred stocks..... 186,979,000 833,249,000 Real estate....................................... -- -- Other investments, excluding short-term investments...................................... 1,397,000 856,000 Redemptions and maturities of: Bonds, notes and redeemable preferred stocks...... 44,943,000 67,201,000 Mortgage loans.................................... 1,428,000 2,806,000 Other investments, excluding short-term investments...................................... 2,658,000 4,221,000 ---------------- ---------------- NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES...... 4,636,000 (188,507,000) ---------------- ---------------- NET INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS.......................................... (121,923,000) 74,084,000 CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF PERIOD............................................... 249,209,000 122,058,000 ---------------- ---------------- CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD...... $ 127,286,000 $ 196,142,000 ---------------- ---------------- ---------------- ---------------- Supplemental cash flow information: Interest paid on indebtedness....................... $ 661,000 $ 288,000 ---------------- ---------------- ---------------- ---------------- Net income taxes paid (recovered)................... $ 4,247,000 $ 4,584,000 ---------------- ---------------- ---------------- ----------------
See accompanying notes 39 ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. NATURE OF OPERATIONS Anchor National Life Insurance Company (the "Company") is a wholly owned indirect subsidiary of SunAmerica, Inc. (the "Parent"). The Company is an Arizona-domiciled life insurance company and, on a consolidated basis, conducts its business through three segments: annuity operations, asset management operations and broker-dealer operations. Annuity operations include the sale and administration of fixed and variable annuities and guaranteed investment contracts. Asset management operations, which include the sale and management of mutual funds, is conducted by SunAmerica Asset Management Corp. Broker-dealer operations include the sale of securities and financial services products, and is conducted by Royal Alliance Associates, Inc. The operations of the Company are influenced by many factors, including general economic conditions, monetary and fiscal policies of the federal government, and policies of state and other regulatory authorities. The level of sales of the Company's financial products is influenced by many factors, including general market rates of interest; strength, weakness and volatility of equity markets; and terms and conditions of competing financial products. The Company is exposed to the typical risks normally associated with a portfolio of fixed-income securities, namely interest rate, option, liquidity and credit risks. 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 1995 and 1994 amounts have been reclassified to conform with the 1996 presentation. The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates. RECENTLY ISSUED ACCOUNTING STANDARDS: Effective October 1, 1993, the Company adopted the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Accordingly, the cumulative effect of this change in accounting for income taxes was recorded on October 1, 1993 to increase the liability for Deferred Income Taxes by $20,463,000. INVESTMENTS: Cash and short-term investments primarily include cash, commercial paper, money market investments, repurchase agreements and short-term bank participations. All such investments are carried at cost plus accrued interest, which approximates fair value, have maturities of three months or less and are considered cash equivalents for purposes of reporting cash flows. Bonds, notes and redeemable preferred stocks available for sale and common stocks are carried at aggregate fair value and changes in unrealized gains or losses, net of tax, are credited or charged directly to shareholder's equity. Bonds, notes and redeemable preferred stocks held for investment (the "Held for Investment Portfolio") are carried at amortized cost. On December 1, 1995, the Company reassessed the appropriateness of classifying a portion of its portfolio of bonds, notes and redeemable preferred stocks as held for investment. This reassessment was made pursuant to the provisions of "Special Report: A Guide to Implementation of Statement 115 on Accounting for Certain Investments in Debt and Equity Securities," issued by the Financial Accounting Standards Board in November 1995. As a result of its reassessment, the Company reclassified all of its Held for Investment Portfolio as available for sale. At December 1, 1995, the amortized cost of the Held for Investment Portfolio aggregated $157,830,000 and its fair value was $166,215,000. Upon reclassification, the resulting net unrealized gain of $8,385,000 was credited to Net Unrealized Losses on Debt and Equity Securities Available for Sale in the shareholder's equity section of the balance sheet. 40 ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Bonds, notes and redeemable preferred stocks are reduced to estimated net realizable value when necessary for declines in value considered to be other than temporary. Estimates of net realizable value are subjective and actual realization will be dependent upon future events. Mortgage loans are carried at amortized unpaid balances, net of provisions for estimated losses. Real estate is carried at the lower of cost or fair value. Other invested assets include investments in limited partnerships, which are accounted for by using the cost method of accounting; separate account investments; leveraged leases; policy loans, which are carried at unpaid balances; and collateralized mortgage obligation residuals. Realized gains and losses on the sale of investments are recognized in operations at the date of sale and are determined using the specific cost identification method. Premiums and discounts on investments are amortized to investment income using the interest method over the contractual lives of the investments. DEFERRED ACQUISITION COSTS: Policy acquisition costs are deferred and amortized, with interest, over the estimated lives of the contracts in relation to the present value of estimated gross profits, which are composed of net interest income, net realized investment gains and losses, variable annuity fees, surrender charges and direct administrative expenses. Costs incurred to sell mutual funds are also deferred and amortized over the estimated lives of the funds obtained. Deferred acquisition costs consist of commissions and other costs that vary with, and are primarily related to, the production or acquisition of new business. As debt and equity securities available for sale are carried at aggregate fair value, an adjustment is made to deferred acquisition costs equal to the change in amortization that would have been recorded if such securities had been sold at their stated aggregate fair value and the proceeds reinvested at current yields. The change in this adjustment, net of tax, is included with the change in net unrealized gains or losses on debt and equity securities available for sale that is credited or charged directly to shareholder's equity. Deferred Acquisition Costs have been increased by $4,200,000 at September 30, 1996, and by $4,600,000 at September 30, 1995 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 $19,478,000 at September 30, 1996, is amortized by using the straight-line method over periods averaging 25 years and is included in Other Assets in the balance sheet. CONTRACTHOLDER RESERVES: Contractholder reserves for fixed annuity contracts and guaranteed investment contracts are accounted for as investment-type contracts in accordance with Statement of Financial Accounting Standards No. 97, "Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments," and are recorded at accumulated value (premiums received, plus accrued interest, less withdrawals and assessed fees). FEE INCOME: Variable annuity fees and asset management fees are recorded in income as earned. Net retained commissions are recognized as income on a trade-date basis. INCOME TAXES: The Company is included in the consolidated federal income tax return of the Parent and files as a "life insurance company" under the provisions of the Internal Revenue Code of 1986. Income taxes have been calculated as if the Company filed a separate return. Deferred income tax assets and liabilities are recognized based on the difference between financial statement carrying amounts and income tax bases of assets and liabilities using enacted income tax rates and laws. 41 ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. INVESTMENTS The amortized cost and estimated fair value of bonds, notes and redeemable preferred stocks available for sale and held for investment by major category follow:
ESTIMATED FAIR AMORTIZED COST VALUE ---------------- ---------------- AT SEPTEMBER 30, 1996: AVAILABLE FOR SALE: Securities of the United States Government............................................... $ 311,458,000 $ 304,538,000 Mortgage-backed securities............................................................... 747,653,000 741,876,000 Securities of public utilities........................................................... 3,684,000 3,672,000 Corporate bonds and notes ............................................................... 590,071,000 591,148,000 Redeemable preferred stocks.............................................................. 9,064,000 8,664,000 Other debt securities.................................................................... 339,094,000 337,373,000 ---------------- ---------------- Total available for sale................................................................. $ 2,001,024,000 $ 1,987,271,000 ---------------- ---------------- ---------------- ---------------- AT SEPTEMBER 30, 1995: AVAILABLE FOR SALE: Securities of the United States Government............................................... $ 59,756,000 $ 60,258,000 Mortgage-backed securities............................................................... 1,121,064,000 1,110,676,000 Securities of public utilities........................................................... 792,000 774,000 Corporate bonds and notes................................................................ 290,924,000 288,883,000 Redeemable preferred stocks.............................................................. 3,945,000 4,937,000 Other debt securities ................................................................... 23,581,000 23,685,000 ---------------- ---------------- Total available for sale................................................................. $ 1,500,062,000 $ 1,489,213,000 ---------------- ---------------- ---------------- ---------------- HELD FOR INVESTMENT: Securities of the United States Government............................................... $ 10,379,000 $ 10,797,000 Mortgage-backed securities............................................................... 8,378,000 8,378,000 Corporate bonds and notes................................................................ 105,980,000 112,665,000 Other debt securities.................................................................... 33,164,000 33,164,000 ---------------- ---------------- Total held for investment................................................................ $ 157,901,000 $ 165,004,000 ---------------- ---------------- ---------------- ----------------
The amortized cost and estimated fair value of bonds, notes and redeemable preferred stocks available for sale by contractual maturity, as of September 30, 1996, follow:
ESTIMATED FAIR AMORTIZED COST VALUE ---------------- ---------------- AVAILABLE FOR SALE: Due in one year or less.................................................................. $ 18,792,000 $ 19,357,000 Due after one year through five years.................................................... 505,564,000 499,163,000 Due after five years through ten years................................................... 378,249,000 378,250,000 Due after ten years...................................................................... 350,766,000 348,625,000 Mortgage-backed securities............................................................... 747,653,000 741,876,000 ---------------- ---------------- Total available for sale................................................................. $ 2,001,024,000 $ 1,987,271,000 ---------------- ---------------- ---------------- ----------------
Actual maturities of bonds, notes and redeemable preferred stocks will differ from those shown above due to prepayments and redemptions. 42 ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. INVESTMENTS (CONTINUED) Gross unrealized gains and losses on bonds, notes and redeemable preferred stocks available for sale and held for investment by major category follow:
GROSS GROSS UNREALIZED UNREALIZED GAINS LOSSES ------------- -------------- AT SEPTEMBER 30, 1996: AVAILABLE FOR SALE: Securities of the United States Government..................................................... $ 284,000 $ (7,204,000) Mortgage-backed securities..................................................................... 7,734,000 (13,511,000) Securities of public utilities................................................................. 1,000 (13,000) Corporate bonds and notes...................................................................... 11,709,000 (10,632,000) Redeemable preferred stocks.................................................................... 16,000 (416,000) Other debt securities.......................................................................... 431,000 (2,152,000) ------------- -------------- Total available for sale....................................................................... $ 20,175,000 $ (33,928,000) ------------- -------------- ------------- -------------- AT SEPTEMBER 30, 1995: AVAILABLE FOR SALE: Securities of the United States Government..................................................... $ 553,000 $ (51,000) Mortgage-backed securities..................................................................... 12,013,000 (22,401,000) Securities of public utilities................................................................. -- (18,000) Corporate bonds and notes...................................................................... 5,344,000 (7,385,000) Redeemable preferred stocks.................................................................... 992,000 -- Other debt securities.......................................................................... 104,000 -- ------------- -------------- Total available for sale....................................................................... $ 19,006,000 $ (29,855,000) ------------- -------------- ------------- -------------- HELD FOR INVESTMENT: Securities of the United States Government..................................................... $ 432,000 $ (14,000) Corporate bonds and notes...................................................................... 6,685,000 -- ------------- -------------- Total held for investment...................................................................... $ 7,117,000 $ (14,000) ------------- -------------- ------------- --------------
At September 30, 1996, gross unrealized gains on equity securities aggregated $1,368,000 and gross unrealized losses aggregated $309,000. At September 30, 1995, gross unrealized gains on equity securities aggregated $1,082,000 and gross unrealized losses aggregated $3,561,000. 43 ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. INVESTMENTS (CONTINUED) Gross realized investment gains and losses on sales of all types of investments are as follows:
YEARS ENDED SEPTEMBER 30, ---------------------------------------------- 1996 1995 1994 -------------- -------------- -------------- BONDS, NOTES AND REDEEMABLE PREFERRED STOCKS: Available for sale: Realized gains ............................................................ $ 14,532,000 $ 15,983,000 $ 12,760,000 Realized losses............................................................ (10,432,000) (21,842,000) (31,066,000) Held for investment: Realized gains ............................................................ -- 2,413,000 890,000 Realized losses ........................................................... -- (586,000) (1,913,000) EQUITIES: Realized gains............................................................... 511,000 994,000 467,000 Realized losses.............................................................. (3,151,000) (114,000) (303,000) OTHER INVESTMENTS: Realized gains .............................................................. 1,135,000 3,561,000 -- Realized losses.............................................................. (1,729,000) (12,000) (358,000) IMPAIRMENT WRITEDOWNS.......................................................... (14,221,000) (4,760,000) (14,190,000) -------------- -------------- -------------- Total net realized investment losses........................................... $ (13,355,000) $ (4,363,000) $ (33,713,000) -------------- -------------- -------------- -------------- -------------- --------------
The sources and related amounts of investment income are as follows:
YEARS ENDED SEPTEMBER 30, ---------------------------------------------- 1996 1995 1994 -------------- -------------- -------------- Short-term investments........................................................ $ 10,647,000 $ 8,308,000 $ 4,648,000 Bonds, notes and redeemable preferred stocks.................................. 140,387,000 107,643,000 98,935,000 Mortgage loans................................................................ 8,701,000 7,419,000 12,133,000 Common stocks................................................................. 8,000 3,000 1,000 Real estate................................................................... (196,000) (51,000) 1,379,000 Limited partnerships.......................................................... 4,073,000 5,128,000 9,487,000 Other invested assets......................................................... 1,011,000 1,016,000 1,175,000 -------------- -------------- -------------- Total investment income................................................. $ 164,631,000 $ 129,466,000 $ 127,758,000 -------------- -------------- -------------- -------------- -------------- --------------
Expenses incurred to manage the investment portfolio amounted to $1,737,000 for the year ended September 30, 1996, $1,983,000 for the year ended September 30, 1995, and $1,714,000 for the year ended September 30, 1994 and are included in General and Administrative Expenses in the income statement. At September 30, 1996, no investment exceeded 10% of the Company's consolidated shareholder's equity. At September 30, 1996, mortgage loans were collateralized by properties located in 11 states, with loans totaling approximately 21% of the aggregate carrying value of the portfolio secured by properties located in Colorado, approximately 17% by properties located in New Jersey and approximately 14% by properties located in California. No more than 12% of the portfolio was secured by properties in any other single state. At September 30, 1996, bonds, notes and redeemable preferred stocks included $160,801,000 (fair value, $160,158,000) of bond and notes not rated investment grade by either Standard & Poor's Corporation, Moody's Investors Service, Duff and Phelps Credit Rating Co., Fitch Investor Service, Inc. or under National Association of Insurance Commissioners' guidelines. The Company had no material concentrations of non-investment-grade assets at September 30, 1996. 44 ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. INVESTMENTS (CONTINUED) At September 30, 1996, the amortized cost of investments in default as to the payment of principal or interest was $3,115,000, consisting of $1,580,000 of non-investment-grade bonds and $1,535,000 of mortgage loans. Such nonperforming investments had an estimated fair value of $2,935,000. At September 30, 1996, $6,486,000 of bonds, at amortized cost, were on deposit with regulatory authorities in accordance with statutory requirements. The Company has undertaken to dispose of certain real estate investments, having an aggregate carrying value of $28,410,000, during the next year, to affiliated or nonaffiliated parties, and the Parent has guaranteed that the Company will receive its current carrying value for these assets. (This guaranty was terminated on December 31, 1996. See Note 11--"Subsequent Event"). 4. FAIR VALUE OF FINANCIAL INSTRUMENTS The following estimated fair value disclosures are limited to reasonable estimates of the fair value of only the Company's financial instruments. The disclosures do not address the value of the Company's recognized and unrecognized nonfinancial assets (including its other invested assets, equity investments and real estate investments) 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. VARIABLE ANNUITY ASSETS: Variable annuity assets are carried at the market value of the underlying securities. RECEIVABLE FROM (PAYABLE TO) BROKERS FOR SALES (PURCHASES) OF SECURITIES: Such obligations represent net transactions of a short-term nature for which the carrying value is considered a reasonable estimate of fair value. RESERVES FOR FIXED ANNUITY CONTRACTS: Deferred annuity contracts and single premium life contracts are assigned a fair value equal to current net surrender value. Annuitized contracts are valued based on the present value of future cash flows at current pricing rates. RESERVES FOR GUARANTEED INVESTMENT CONTRACTS: Fair value is based on the present value of future cash flows at current pricing rates. VARIABLE ANNUITY LIABILITIES: Fair values of contracts in the accumulation phase are based on net surrender values. Fair values of contracts in the payout phase are based on the present value of future cash flows at assumed investment rates. SUBORDINATED NOTES PAYABLE TO PARENT: Fair value is estimated based on the quoted market prices for similar issues. 45 ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 4. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) The estimated fair values of the Company's financial instruments at September 30, 1996 and 1995, compared with their respective carrying values, are as follows:
CARRYING VALUE FAIR VALUE ---------------- ---------------- 1996: ASSETS: Cash and short-term investments................................................ $ 122,058,000 $ 122,058,000 Bonds, notes and redeemable preferred stocks................................... 1,987,271,000 1,987,271,000 Mortgage loans................................................................. 98,284,000 102,112,000 Receivable from brokers for sales of securities................................ 52,348,000 52,348,000 Variable annuity assets........................................................ 6,311,557,000 6,311,557,000 LIABILITIES: Reserves for fixed annuity contracts........................................... 1,789,962,000 1,738,784,000 Reserves for guaranteed investment contracts................................... 415,544,000 416,695,000 Variable annuity liabilities................................................... 6,311,557,000 6,117,508,000 Subordinated notes payable to Parent........................................... 35,832,000 37,339,000 ---------------- ---------------- ---------------- ---------------- 1995: ASSETS: Cash and short-term investments................................................ $ 249,209,000 $ 249,209,000 Bonds, notes and redeemable preferred stocks................................... 1,647,114,000 1,654,217,000 Mortgage loans................................................................. 94,260,000 95,598,000 Variable annuity assets........................................................ 5,230,246,000 5,230,246,000 LIABILITIES: Reserves for fixed annuity contracts........................................... 1,497,052,000 1,473,757,000 Reserves for guaranteed investment contracts................................... 277,095,000 277,095,000 Payable to brokers for purchases of securities................................. 155,861,000 155,861,000 Variable annuity liabilities................................................... 5,230,246,000 5,077,257,000 Subordinated notes payable to Parent........................................... 35,832,000 34,620,000 ---------------- ---------------- ---------------- ----------------
5. SUBORDINATED NOTES PAYABLE TO PARENT Subordinated notes payable to Parent averaged $35,832,000 at a weighted average interest rate of 8.71% (with rates ranging from 7% to 9%) at September 30, 1996 and require principal payments of $5,272,000 in 1997, $7,500,000 in 1998 and $23,060,000 in 1999. 6. CONTINGENT LIABILITIES The Company has entered into two agreements in which it has guaranteed the liquidity of certain short-term securities of two municipalities by agreeing to purchase such securities in the event there is no other buyer in the short-term marketplace. In return the Company receives a fee. These guarantees total up to $182,600,000. Management does not anticipate any material future losses with respect to these guarantees. 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 are adequate and any further liabilities and costs will not have a material adverse impact upon the Company's financial position or results of operations. 7. SHAREHOLDER'S EQUITY The Company is authorized to issue 4,000 shares of its $1,000 par value Common Stock. At September 30, 1996, 1995 and 1994, 3,511 shares are outstanding. 46 ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 7. SHAREHOLDER'S EQUITY (CONTINUED) Changes in shareholder's equity are as follows:
YEARS ENDED SEPTEMBER 30, ---------------------------------------------- 1996 1995 1994 -------------- -------------- -------------- ADDITIONAL PAID-IN CAPITAL: Beginning balance................................................. $ 252,876,000 $ 252,876,000 $ 252,876,000 Capital contributions received.................................... 27,387,000 -- -- -------------- -------------- -------------- Ending balance.................................................... $ 280,263,000 $ 252,876,000 $ 252,876,000 -------------- -------------- -------------- -------------- -------------- -------------- RETAINED EARNINGS: Beginning balance................................................. $ 191,346,000 $ 152,088,000 $ 127,936,000 Net income........................................................ 45,056,000 39,258,000 24,152,000 Dividend paid..................................................... (29,400,000) -- -- -------------- -------------- -------------- Ending balance.................................................... $ 207,002,000 $ 191,346,000 $ 152,088,000 -------------- -------------- -------------- -------------- -------------- --------------
YEARS ENDED SEPTEMBER 30, ---------------------------------------------- 1996 1995 1994 -------------- -------------- -------------- NET UNREALIZED LOSSES ON DEBT AND EQUITY SECURITIES AVAILABLE FOR SALE: Beginning balance.................................................. $ (5,673,000) $ (24,953,000) $ (13,230,000) Change in net unrealized gains/losses on debt securities available for sale.......................................................... (2,904,000) 71,302,000 (69,407,000) Change in net unrealized gains/losses on equity securities available for sale................................................ 3,538,000 (1,240,000) (753,000) Change in adjustment to deferred acquisition costs................. (400,000) (40,400,000) 45,000,000 Tax effects of net changes......................................... (82,000) (10,382,000) 13,437,000 -------------- -------------- -------------- Ending balance..................................................... $ (5,521,000) $ (5,673,000) $ (24,953,000) -------------- -------------- -------------- -------------- -------------- --------------
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. A dividend in the amount of $29,400,000 was paid on March 18, 1996. No dividends were paid in fiscal years 1995 or 1994. Under statutory accounting principles utilized in filings with insurance regulatory authorities, the Company's net income for the nine months ended September 30, 1996 was $21,898,000. The statutory net income for the year ended December 31, 1995 was $30,673,000 and for the year ended December 31, 1994 was $35,060,000. The Company's statutory capital and surplus was $282,275,000 at September 30, 1996, $294,767,000 at December 31, 1995 and $219,577,000 at December 31, 1994. 47 ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 8. INCOME TAXES The components of the provisions for federal income taxes on pretax income consist of the following:
NET REALIZED INVESTMENT GAINS (LOSSES) OPERATIONS TOTAL -------------- ------------- ------------- 1996: Currently payable...................................................... $ 5,754,000 $ 21,849,000 $ 27,603,000 Deferred............................................................... (10,347,000) 6,996,000 (3,351,000) -------------- ------------- ------------- Total income tax expense............................................... $ (4,593,000) $ 28,845,000 $ 24,252,000 -------------- ------------- ------------- -------------- ------------- ------------- 1995: Currently payable...................................................... $ 4,248,000 $ 22,980,000 $ 27,228,000 Deferred............................................................... (6,113,000) 4,624,000 (1,489,000) -------------- ------------- ------------- Total income tax expense............................................... $ (1,865,000) $ 27,604,000 $ 25,739,000 -------------- ------------- ------------- -------------- ------------- ------------- 1994: Currently payable...................................................... $ (6,825,000) $ 10,135,000 $ 3,310,000 Deferred............................................................... (1,320,000) 20,715,000 19,395,000 -------------- ------------- ------------- Total income tax expense............................................... $ (8,145,000) $ 30,850,000 $ 22,705,000 -------------- ------------- ------------- -------------- ------------- -------------
Income taxes computed at the United States federal income tax rate of 35% and income taxes provided differ as follows:
YEARS ENDED SEPTEMBER 30, ------------------------------------------- 1996 1995 1994 ------------- ------------- ------------- Amount computed at statutory rate....................................... $ 24,258,000 $ 22,749,000 $ 23,562,000 Increases (decreases) resulting from: Amortization of differences between book and tax bases of net assets acquired............................................................. 464,000 3,049,000 465,000 State income taxes, net of federal tax benefit........................ 2,070,000 437,000 (662,000) Dividends-received deduction.......................................... (2,357,000) -- -- Tax credits........................................................... (257,000) (168,000) (612,000) Other, net............................................................ 74,000 (328,000) (48,000) ------------- ------------- ------------- Total income tax expense................................................ $ 24,252,000 $ 25,739,000 $ 22,705,000 ------------- ------------- ------------- ------------- ------------- -------------
For United States federal income tax purposes, certain amounts from life insurance operations are accumulated in a memorandum policyholders' surplus account and are taxed only when distributed to shareholders or when such account exceeds prescribed limits. The accumulated policyholders' surplus was $14,300,000 at September 30, 1996. The Company does not anticipate any transactions which would cause any part of this surplus to be taxable. 48 ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 8. INCOME TAXES (CONTINUED) Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting purposes. The significant components of the liability for Deferred Income Taxes are as follows:
SEPTEMBER 30, ------------------------------ 1996 1995 -------------- -------------- DEFERRED TAX LIABILITIES: Investments................................................................ $ 15,036,000 $ 14,181,000 Deferred acquisition costs................................................. 136,747,000 118,544,000 State income taxes......................................................... 1,466,000 1,847,000 -------------- -------------- Total deferred tax liabilities............................................. 153,249,000 134,572,000 -------------- -------------- DEFERRED TAX ASSETS: Contractholder reserves.................................................... (77,522,000) (55,910,000) Guaranty fund assessments.................................................. (1,031,000) (1,123,000) Other assets............................................................... (1,534,000) (1,025,000) Net unrealized losses on certain debt and equity securities................ (2,973,000) (3,055,000) -------------- -------------- Total deferred tax assets.................................................. (83,060,000) (61,113,000) -------------- -------------- Deferred income taxes...................................................... $ 70,189,000 $ 73,459,000 -------------- -------------- -------------- --------------
9. RELATED PARTY MATTERS The Company pays commissions to two affiliated companies, SunAmerica Securities, Inc. and Advantage Capital Corp. These broker-dealers represent a significant portion of the Company's business, amounting to approximately 15.6%, 14.1% and 14.5% of premiums in 1996, 1995 and 1994, respectively. Commissions paid to these broker-dealers totaled $16,906,000 in 1996, $9,435,000 in 1995 and $9,725,000 in 1994. The Company purchases administrative, investment management, accounting, marketing and data processing services from SunAmerica Financial, Inc., whose purpose is to provide services to the SunAmerica companies. Amounts paid for such services totaled $65,351,000 for the year ended September 30, 1996, $42,083,000 for the year ended September 30, 1995 and $36,934,000 for the year ended September 30, 1994. Such amounts are included in General and Administrative Expenses in the income statement. On December 31, 1995, the Parent made a $27,387,000 capital contribution to the Company, through the Company's direct parent, in exchange for the termination of its guaranty with respect to certain real estate owned in Arizona. Accordingly, the Company reduced the carrying value of this real estate to estimated fair value to reflect the termination of the guaranty. On December 31, 1996, the Parent made a similar capital contribution for $28,410,000 in exchange for the termination of the remaining guaranty with respect to such real estate. During the year ended September 30, 1995, the Company sold to the Parent real estate for cash equal to its carrying value of $29,761,000. During the year ended September 30, 1996, the Company sold various invested assets to the Parent, SunAmerica Life Insurance Company and Ford Life Insurance Company ("Ford") for cash equal to their current market values of $274,000, $8,968,000 and $38,353,000, respectively. The Company recorded net losses of $3,000 on such transactions. During the year ended September 30, 1996, the Company also purchased certain invested assets from SunAmerica Life Insurance Company and Ford for cash equal to their current market values of $5,159,000 and $23,220,000, respectively. 49 ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 10. BUSINESS SEGMENTS Summarized data for the Company's business segments follow:
TOTAL DEPRECIATION AND AMORTIZATION TOTAL REVENUES EXPENSE PRETAX INCOME TOTAL ASSETS -------------- ------------- ------------- ---------------- 1996: Annuity operations.................................. $ 250,645,000 $ 43,974,000 $ 53,827,000 $ 9,092,770,000 Asset management.................................... 29,711,000 18,295,000 2,448,000 74,410,000 Broker-dealer operations............................ 31,851,000 449,000 13,033,000 37,355,000 -------------- ------------- ------------- ---------------- Total............................................... $ 312,207,000 $ 62,718,000 $ 69,308,000 $ 9,204,535,000 -------------- ------------- ------------- ---------------- -------------- ------------- ------------- ---------------- 1995: Annuity operations.................................. $ 205,698,000 $ 38,350,000 $ 55,462,000 $ 7,667,946,000 Asset management.................................... 30,253,000 24,069,000 510,000 86,510,000 Broker-dealer operations............................ 24,366,000 411,000 9,025,000 29,241,000 -------------- ------------- ------------- ---------------- Total............................................... $ 260,317,000 $ 62,830,000 $ 64,997,000 $ 7,783,697,000 -------------- ------------- ------------- ---------------- -------------- ------------- ------------- ---------------- 1994: Annuity operations.................................. $ 171,553,000 $ 26,501,000 $ 52,284,000 $ 6,473,065,000 Asset management.................................... 32,803,000 19,330,000 7,916,000 102,192,000 Broker-dealer operations............................ 20,914,000 408,000 7,120,000 26,869,000 -------------- ------------- ------------- ---------------- Total............................................... $ 225,270,000 $ 46,239,000 $ 67,320,000 $ 6,602,126,000 -------------- ------------- ------------- ---------------- -------------- ------------- ------------- ----------------
11. SUBSEQUENT EVENT (UNAUDITED) On December 31, 1996, the Parent made a capital contribution of $28,410,000 to the Company through the Company's direct parent, in exchange for the termination of its guaranty with respect to the remainder of the land owned in Arizona. Accordingly, on December 31, 1996, the Company reduced the carrying value of this land to estimated fair value to reflect the termination of the guaranty. 50 APPENDIX A - MARKET VALUE ADJUSTMENT - -------------------------------------------------------------------------------- The Market Value Adjustment reflects the impact that changing interest rates have on the value of money invested at a fixed interest rate. The longer the period of time remaining in the term you initially agreed to leave your money in the fixed investment option, the greater the impact of the Market Value Adjustment. The impact of the Market Value Adjustment can be either positive or negative, and is computed by multiplying the amount withdrawn, transferred or annuitized by the following factor: N/12 [(1+I)/ (1+J+0.005*)] -1 where: I is the Guarantee Rate you are earning on the money invested in the fixed investment option; J is the Guarantee Rate then currently available for the period of time equal to the number of years remaining in the term you initially agreed to leave your money in the fixed investment option; and N is the number of full months remaining in the term you initially agreed to leave your money in the fixed investment option. * if you live in the state of Pennsylvania this number will be zero. EXAMPLES OF THE MARKET VALUE ADJUSTMENT The examples below assume the following: (1) You made an initial Purchase Payment of $10,000 and allocated it to the ten year fixed investment option at a Guarantee Rate of 7%; (2) You make a partial withdrawal of $4,000 when 2 1/2 years (30 months) remain in the ten year term you initially agreed to leave your money in the fixed investment option (N=30); (3) you have not made any other transfers, additional Purchase Payments, or withdrawals. No withdrawal charges are reflected in the examples because your Purchase Payment has been in the contract for more than 7 full years. NEGATIVE ADJUSTMENT: Assume that on the date of withdrawal, the Guarantee Rate in effect for a new investment in the three year (rounded up to the next full year) fixed investment option is 8%: The Market Value Adjustment factor is equal to: N/12 [(1+I)/(1+J+.005)] -1 30/12 [(1.07)/(1.08+.005)] -1 2.5 (0.986175) -1 0.965795-1 - -0.034205 The requested withdrawal amount is multiplied by the Market Value Adjustment factor to determine the Market Value Adjustment: $4,000 X (-0.034205)= -$136.82 $136.82 represents the Market Value Adjustment that will be deducted from the remaining money in the ten year fixed investment option. POSITIVE ADJUSTMENT: Assume that on the date of withdrawal, the Guarantee Rate in effect for a new investment in the three year (rounded up to the next full year) fixed investment option is 6%: The Market Value Adjustment factor is equal to: N/12 [(1+I)/(1+J+.005)] -1 30/12 [(1.07)/(1.06+.005)] -1 2.5 (1.004695) -1 1.011778-1 +0.011778 The requested withdrawal amount is multiplied by the Market Value Adjustment factor to determine the Market Value Adjustment: $4,000 X .011778= +47.11 $47.11 represents the Market Value Adjustment that would be added to your withdrawal. 51 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 tax rates payable on premiums in effect in those states that assess a premium tax, as of the date of this prospectus. For current information you should consult your tax advisor. Additionally, please see Section 5 "Expenses" for additional information on Premium Taxes.
QUALIFIED NON-QUALIFIED STATE CONTRACT CONTRACT - -------------------------------------------------------------------------------------------- ----------- ------------- California.................................................................................. .50% 2.35% District of Columbia........................................................................ 2.25% 2.25% Kansas...................................................................................... 0% 2% Kentucky.................................................................................... 2% 2% Maine....................................................................................... 0% 2% Michigan.................................................................................... .00075% .00075% Nevada...................................................................................... 0% 3.5% South Dakota................................................................................ 0% 1.25% West Virginia............................................................................... 1% 1% Wyoming..................................................................................... 0% 1%
52 Please forward a copy (without charge) of the Statement of Additional Information concerning SEASONS Variable Annuity Contracts to: (Please print or type and fill in all information.) - -------------------------------------------------------------------------------- Name - -------------------------------------------------------------------------------- Address - -------------------------------------------------------------------------------- City/State/Zip - -------------------------------------------------------------------------------- Date: ________________________________ Signed: ________________________________ Return to: Anchor National Life Insurance Company, Annuity Service Center, P.O. Box 54299, Los Angeles, California 90054-0299. 53 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. Other Expenses of Issuance and Distribution. Not Applicable ITEM 14. Indemnification of Directors and Officers. Not Applicable ITEM 15. Recent Sales of Unregistered Securities. Not Applicable ITEM 16. Exhibits and Financial Statement Schedules.
EXHIBIT NO. DESCRIPTION - ----------- -------------------------------------------------------------------------------------- (1) Form of Underwriting Agreement* (2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession** (3) (a) Articles of Incorporation* (b) By-Laws* (4) (a) Allocated Fixed and Variable Group Annuity Certificate* (b) Individual Fixed and Variable Annuity Contract* (c) Participant Enrollment Form* (d) Deferred Annuity Application* (5) Opinion of Counsel re: Legality* (6) Opinion re Discount on Capital Shares** (7) Opinion re Liquidation Preference** (8) Opinion re Tax Matters** (9) Voting Trust Agreement** (10) Material Contracts** (11) Statement re Computation of Per Share Earnings** (12) Statement re Computation of Ratios** (14) Material Foreign Patents** (15) Letter re Unaudited Financial Information** (16) Letter re Change in Certifying Accountant** (21) Subsidiaries of Registrant* (23) (a) Consent of Independent Accountants* (b) Consent of Attorney* (24) Powers of Attorney (included on signature page)* (25) Statement of Eligibility of Trustee** (26) Invitation for Competitive Bids** (27) Financial Data Schedule (28) Information Reports Furnished to State Insurance Regulatory Authority** (29) Other Exhibits**
FINANCIAL STATEMENTS*** * Herewith ** Not Applicable II-1 ITEM 17. UNDERTAKINGS. The undersigned registrant, Anchor National Life Insurance Company, hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment hereof) which, individually or in the aggregate, represents a fundamental change in the information in the registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (2) That, for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. II-2 SIGNATURES As required by the Securities Act of 1933, the Registrant has caused this Pre-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 10th day of March, 1997. ANCHOR NATIONAL LIFE INSURANCE COMPANY By: /s/ JAY S. WINTROB ---------------------------------------------- Jay S. Wintrob Executive Vice President As required by the Securities Act of 1933, this Pre-Effective Amendment to the Registration Statement has been signed by the following persons in the capacity and on the dates indicated.
SIGNATURE TITLE DATE - ------------------------------------------------ --------------------------------------- ---------------------- ELI BROAD* President, Chief Executive Officer, & -------------------------------------- Chairman of Board (Principal Executive Eli Broad Officer) SCOTT L. ROBINSON* -------------------------------------- Senior Vice President & Director Scott L. Robinson (Principal Financial Officer) N. SCOTT GILLIS* -------------------------------------- Senior Vice President & Controller N. Scott Gillis (Principal Accounting Officer) LORIN M. FIFE* -------------------------------------- Director Lorin M. Fife JANA W. GREER* -------------------------------------- Director Jana W. Greer /s/ SUSAN L. HARRIS -------------------------------------- Director March 10, 1997 Susan L. Harris PETER MCMILLAN* -------------------------------------- Director Peter McMillan JAMES W. ROWAN* -------------------------------------- Director James W. Rowan JAY S. WINTROB* -------------------------------------- Director Jay S. Wintrob *By: /s/ SUSAN L. HARRIS ---------------------------------- Attorney-in-Fact Susan L. Harris
March 10, 1997 POWER-OF-ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints LORIN M. FIFE, SUSAN L. HARRIS AND CHRISTINE A. NIXON or each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, as fully to all intents as he or she might or could do in person, including specifically, but without limiting the generality of the foregoing, to (i) take any action to comply with any rules, regulations or requirements of the Securities and Exchange Commission under the federal securities laws; (ii) make application for and secure any exemptions from the federal securities laws; (iii) register additional annuity contracts under the federal securities laws, if registration is deemed necessary. The undersigned hereby ratifies and confirms all that said attorneys-in-fact and agents or any of them, or their substitutes, shall do or cause to be done by virtue thereof. As required by the Securities Act of 1933, this Pre-Effective Amendment to the Registration Statement has been signed by the following persons in the capacity and on the dates indicated. SIGNATURE TITLE DATE - ------------------------------ -------------------------- ------------------- /s/ JAMES R. BELARDI - ------------------------------ Director March 10, 1997 James R. Belardi /s/ JOSEPH M. TUMBLER - ------------------------------ Director March 10, 1997 Joseph M. Tumbler EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION - ----------- -------------------------------------------------------------------------------------- (1) Form of Underwriting Agreement* (3) (a) Articles of Incorporation* (b) By-Laws* (4) (a) Allocated Fixed and Variable Group Annuity Certificate* (b) Individual Fixed and Variable Annuity Contract* (c) Participant Enrollment Form* (d) Deferred Annuity Application* (5) Opinion of Counsel re: Legality* (21) Subsidiaries of Registrant* (23) (a) Consent of Independent Accountants* (b) Consent of Attorney* (24) Powers of Attorney* (included on signature page) (27) Financial Data Schedule
EX-1 2 DISTRIBUTION AGREEMENT DISTRIBUTION AGREEMENT THIS AGREEMENT, entered into on this 2nd day of January, 1997, by and between ANCHOR NATIONAL LIFE INSURANCE COMPANY ("Anchor"), a life insurance company organized under the laws of the State of Arizona, on behalf of itself and VARIABLE ANNUITY ACCOUNT FIVE ("Separate Account"), a Separate Account established by Anchor pursuant to the insurance laws of the State of Arizona, and SUNAMERICA CAPITAL SERVICES, INC. ("Distributor"), a corporation organized under the laws of the state of Delaware. WITNESSETH: WHEREAS, Anchor proposes to issue to the public certain variable annuity contracts identified on the contract specification sheet attached hereto as Attachment A ("Contracts"); and WHEREAS, Anchor, by resolution adopted on July 3, 1996, established the Separate Account on its books of account, for the purpose of issuing the Contracts; and WHEREAS, the Separate Account is registered with the Securities and Exchange Commission ("Commission") as a unit investment trust under the Investment Company Act of 1940 (File No. 811-07727); and WHEREAS, the Contracts to be issued by Anchor are registered with the Commission under the Securities Act of 1933 (File Nos. 33-08859 and 33-08877) for offer and sale to the public, and otherwise are in compliance with all applicable laws; and WHEREAS, Distributor, a broker-dealer registered under the Securities Exchange Act of 1934 and a member of the National Association of Securities Dealers, Inc., proposes to act as distributor on an agency basis in the marketing and distribution of said Contracts; and WHEREAS, Anchor desires to obtain the services of Distributor as distributor of said Contracts issued by Anchor through the Separate Account; NOW THEREFORE, in consideration of the foregoing, and of the mutual covenants and conditions set forth herein, and for other good and valuable consideration, Anchor, the Separate Account, and Distributor hereby agree as follows: 1. Distributor will serve as distributor on an agency basis for the Contracts which will be issued by Anchor through the Separate Account. 2. Distributor, will use its best efforts to provide information and marketing assistance to licensed insurance agents and broker-dealers on a continuing basis. However, Distributor shall be responsible for compliance with the requirements of state broker-dealer regulations and the Securities Exchange Act of 1934 as each applies to Distributor in connection with its duties as distributor of said Contracts. Moreover, Distributor shall conduct its affairs in accordance with the Rules of Fair Practice of the National Association of Securities Dealers, Inc. 3. Subject to the agreement of Anchor, Distributor may enter into dealer agreements with broker-dealers registered under the Securities Exchange Act of 1934 and authorized by applicable law to sell variable annuity contracts issued by Anchor through the Separate Account. Any such contractual arrangement is expressly made subject to this Agreement, and Distributor will at all times be responsible to Anchor for purposes of the federal securities laws for the distribution of Contracts issued through the Separate Account. Distributor will use its respective best efforts to provide information and marketing assistance to such broker- dealers on a continuing basis. 4. WARRANTIES (a) Anchor represents and warrants to Distributor that: (i) Registration Statements on Forms N-4 and S-1 for each of the contracts identified on Attachment A have been filed with the Commission in the form previously delivered to Distributor and that copies of any and all amendments thereto will be forwarded to Distributor at the time that they are filed with the Commission; (ii) The Registration Statements and any further amendments or supplements thereto will, when they become effective, conform in all material respects to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, and the rules and regulations of the Commission under such Acts, and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that this representation and warranty shall not apply to any statement or omission made in reliance upon and in conformity with information furnished in writing to Anchor by Distributor expressly for use therein; (iii) Anchor is validly existing as a stock life insurance company in good standing under the laws of the State of Arizona, with power (corporate or other) to own its properties and conduct its business as described in the Prospectus, and has been duly qualified for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties, or conducts any business, so as to require such qualification; -2- (iv) The Contracts to be issued through the Separate Account and offered for sale by Distributor on behalf of Anchor hereunder have been duly and validly authorized and, when issued and delivered against payment therefor as provided herein, will be duly and validly issued and will conform to the description of such Contracts contained in the Prospectuses relating thereto; (v) Those persons who offer and sell the Contracts are to be appropriately licensed in a manner as to comply with the state insurance laws; (vi) The performance of this Agreement and the consummation of the transactions contemplated by this Agreement will not result in a breach or violation of any of the terms or provisions of, or constitute a default under any statute, any indenture, mortgage, deed of trust, note agreement or other agreement or instrument to which Anchor is a party or by which Anchor is bound, Anchor's Charter as a stock life insurance company or By-laws, or any order, rule or regulation of any court or governmental agency or body having jurisdiction over Anchor or any of its properties; and no consent, approval, authorization or order of any court or governmental agency or body is required for the consummation by Anchor of the transactions contemplated by this Agreement, except such as may be required under the Securities Exchange Act of 1934 or state insurance or securities laws in connection with the distribution of the Contracts by Distributor; and (vii) There are no material legal or governmental proceedings pending to which Anchor or the Separate Account is a party or of which any property of Anchor or the Separate Account is the subject, other than as set forth in the Prospectus relating to the Contracts, and other than litigation incident to the kind of business conducted by Anchor, if determined adversely to Anchor, would individually or in the aggregate have a material adverse effect on the financial position, surplus or operations of Anchor. (b) Distributor, jointly and severally, represent and warrant to Anchor that: (i) It is a broker-dealer duly registered with the Commission pursuant to the Securities Exchange Act of 1934 and a member in good standing of the National Association of Securities Dealers, Inc., and is in compliance with the securities laws in those states in which it conducts business as a broker-dealer; -3- (ii) It shall permit the offer and sale of Contracts to the public only by and through persons who are appropriately licensed under both the securities laws and state insurance laws and who are appointed in writing by Anchor to be authorized insurance agents; (iii) The performance of this Agreement and the consummation of the transactions herein contemplated will not result in a breach or violation of any of the terms or provisions of or constitute a default under any statute, any indenture, mortgage, deed of trust, note agreement or other agreement or instrument to which either Distributor is a party or by which either Distributor is bound, the Certificate of Incorporation or By-laws of either Distributor, or any order, rule or regulation of any court or governmental agency or body having jurisdiction over either Distributor or its property; and (iv) To the extent that any statements or omissions made in the Registration Statements, or any amendment or supplement thereto are made in reliance upon and in conformity with written information furnished to Anchor by Distributor expressly for use therein, such Registration Statement and any amendments or supplements thereto will, when they become effective or are filed with the Commission, as the case may be, conform in all material respects to the requirements of the Securities Act of 1933 and the rules and regulations of the Commission thereunder and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. 5. Distributor shall keep, in a manner and form prescribed or approved by Anchor and in accordance with Rules 17a-3 and 17a-4 under the Securities Exchange Act of 1934, correct records and books of account as required to be maintained by a registered broker-dealer, acting as distributor, of all transactions entered into on behalf of Anchor and with respect to its activities under this Agreement for Anchor. Distributor shall make such records and books of account available for inspection by the Commission, and Anchor shall have the right to inspect, make copies of or take possession of such records and books of account at any time on demand. 6. Subsequent to having been authorized to commence the activities contemplated herein, Distributor shall utilize the currently effective Prospectus relating to the subject Contracts in connection with their marketing and distribution efforts. As to the other types of sales material, Distributor agree that they will use only sales materials as have been authorized for use by Anchor and which conform to the requirements of federal and state -4- laws and regulations, and which have been filed where necessary with the appropriate regulatory authorities, including the National Association of Securities Dealers, Inc. 7. Distributor shall not distribute any Prospectus, sales literature, or any other printed matter or material in the marketing and distribution of any Contract if, to the knowledge of Distributor, any of the foregoing misstates the duties, obligation or liabilities of Anchor or Distributor. 8. Distributor shall bear all expenses of providing services pursuant to this Agreement including the cost of sales presentations, mailings, advertising and any other marketing efforts they conduct in connection with the distribution or sale of the Contracts. 9. Distributor, as distributor of the Contracts, shall not be entitled to remuneration for its services. 10. Distributor shall ensure that all premium payments collected on the sale of the Contracts are properly transmitted to Anchor for immediate allocation to the Separate Account in accordance with the directions furnished by the purchasers of such Contracts at the time of purchase. 11. If any purchase payment premiums shall be required to be returned by Anchor or should Anchor become liable for the return thereof for any cause other than surrenders or withdrawals by Contract Owners pursuant to the terms of the Contracts either before or after termination of this Agreement, Distributor agrees to pay Anchor the amount of remuneration previously paid over to it by Anchor with respect to such premiums. 12. Distributor makes no representations or warranties regarding the number of Contracts to be sold by licensed broker-dealers and insurance agents or the amount to be paid thereunder. Distributor does, however, represent that it will actively engage in its duties under this Agreement on a continuous basis while there is an effective registration statement with the Commission. 13. It is understood and agreed that Distributor may render similar services or act as a distributor or dealer in the distribution of other variable contracts. 14. Distributor shall use its best efforts to ensure that the Contracts will be offered for sale by licensed broker-dealers and insurance agents on the terms described in the currently effective Prospectus describing such Contracts. 15. Anchor shall use its best efforts to assure that the Contracts are continuously registered under the Securities Act of 1933 and, should it ever be required, under state Blue Sky Laws and to file for approval under state insurance laws when necessary. -5- 16. Anchor reserves the right at any time to suspend or limit the public offering of the subject Contracts upon one day's written notice to Distributor. 17. Anchor agrees to advise Distributor immediately of: (a) any request by the Commission (i) for amendment of the Registration Statements relating to the Contracts, or (ii) for additional information; (b) the issuance by the Commission of any stop order suspending the effectiveness of either Registration Statement relating to the Contracts or the initiation of any proceedings for that purpose; and (c) the happening of any material event, if known, which makes untrue any statement made in the Registration Statements relating to the Contracts or which requires the making of a change therein in order to make any statement made therein not misleading. 18. Anchor shall furnish to Distributor such information with respect to the Separate Account and the Contracts in such form and signed by such of its officers as Distributor may reasonably request; and shall warrant that the statements therein contained when so signed will be true and correct. 19. Each of the undersigned parties agrees to notify the other in writing upon being apprised of the institution of any proceeding, investigation or hearing involving the offer or sale of the subject Contracts. 20. This Agreement shall terminate automatically upon its assignment. This Agreement shall terminate, without the payment of any penalty by either party: (a) at the option of Anchor, upon sixty days' advance written notice to Distributor; or (b) at the option of Distributor upon 90 days' written notice to Anchor; or (c) at the option of Anchor upon institution of formal proceedings against Distributor by the National Association of Securities Dealers, Inc. or by the Commission; or (d) at the option of Anchor, if Distributor or any representative thereof at any time (i) employs any device, scheme, or artifice to defraud; makes any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or engages in any act, practice, or course of -6- business which operates or would operate as a fraud or deceit upon any person; (ii) fails to account and pay over promptly to Anchor money due it according to its records; or (iii) violates the conditions of this Agreement; or 21. Each notice required by this Agreement may be given by telephone or telefax and confirmed in writing. 22. Anchor agrees to indemnify Distributor for any liability that it may incur to a Contract Owner or party-in-interest under a Contract (i) arising out of any act or omission in the course of, or in connection with, rendering services under this Agreement, or (ii) arising out of the purchase, retention or surrender of a contract; provided however that Anchor will not indemnify Distributor for any such liability that results from the willful misfeasance, bad faith or gross negligence of such Distributor, or from the reckless disregard, by such Distributor, of its duties and obligations arising under this Agreement. 23. This Agreement shall be subject to the laws of the State of California and construed so as to interpret the Contracts and insurance contracts written within the business operation of Anchor. 24. This Agreement covers and includes all agreements, verbal and written, between Anchor and Distributor with regard to the marketing and distribution of the Contracts, and supersedes and annuls any and all agreements between the parties with regard to the distribution of the Contracts; except that this Agreement shall not affect the operation of previous or future agreements entered into between Anchor and Distributor unrelated to the sale of the Contracts. THIS AGREEMENT, along with any Schedules of Remuneration attached hereto and incorporated herein by reference, may be amended from time to time by the mutual agreement and consent of the undersigned parties; provided that such amendment shall not affect the rights of existing Contract Owners, and that such amendment be in writing and duly executed. -7- IN WITNESS WHEREOF, the undersigned parties have caused this Agreement to be duly executed and their respective corporate seals to be hereunto affixed and attested on the date first stated above. ANCHOR NATIONAL LIFE INSURANCE COMPANY By: /s/ Jana Waring Greer ---------------------- Jana Waring Greer Senior Vice President VARIABLE ANNUITY ACCOUNT FIVE BY: ANCHOR NATIONAL LIFE INSURANCE COMPANY By: /s/ Jana Waring Greer ---------------------- Jana Waring Greer Senior Vice President SUNAMERICA CAPITAL SERVICES, INC. By: /s/ J. Steven Neamtz -------------------- J. Steven Neamtz President -8- ATTACHMENT A CONTRACT SPECIFICATION SHEET The following variable annuity contracts are the subject of the Distribution Agreement between Anchor National Life Insurance Company and SunAmerica Capital Services, Inc. dated January 2, 1997, regarding the sale of contracts funded in Variable Annuity Account Five: 1. Seasons \\Broad3\sys\DATA\LEGAL\NIXON\SEASONS\DistAgr.doc EX-3.A 3 AMENDED AND RESTATED ARTICLES OF INCORPORATION AMENDED AND RESTATED ARTICLES OF INCORPORATION AND ARTICLES OF REDOMESTICATION OF ANCHOR NATIONAL LIFE INSURANCE COMPANY We, the undersigned, acting as incorporators for the purpose of redomesticating Anchor National Life Insurance Company, a California corporation, which intends to continue its existence, without interruption, as a corporation organized under the laws of the State of Arizona pursuant to Arizona Revised Statutes Section 20-231.A, do hereby adopt the following Amended and Restated Articles of Incorporation and Articles of Redomestication for said corporation. ARTICLE I --------- The name of the corporation shall be Anchor National Life Insurance Company. ARTICLE II ---------- The corporation was incorporated in the State of California on April 12, 1965. ARTICLE III ----------- The existence of the corporation shall be perpetual. ARTICLE IV ---------- Upon the approval of these Amended and Restated Articles of Incorporation and Articles of Redomestication by the necessary regulatory authorities, Anchor National Life Insurance Company shall be and continue to be possessed of all privileges, franchises and powers to the same extent as if it had been originally incorporated under the laws of the State of Arizona; and all privileges, franchises and powers belonging to said corporation, and all property, real, personal and mixed, and all debts due on whatever account, all Certificates of Authority, agent appointments, and all chooses in action, shall be and the same are hereby ratified, approved, confirmed and assured to Anchor National Life Insurance Company with like effect and to all intents and purposes as if it had been originally incorporated under the laws of the State of Arizona. Said corporation shall be given recognition as a domestic corporation of the State of Arizona from and after April 12, 1965, and as a domestic insurer of the State of Arizona from and after December 2, 1966, the dates of its initial incorporation and authorization to transact insurance business under the laws of the State of California, effective the latter of January 1, 1996 or the date of filing with the Arizona Corporation Commission. ARTICLE V --------- The nature of the business to be transacted and the objects and purposes for which this corporation is organized include the transaction of any and all lawful business for which insurance corporations may be incorporated under the laws of the State of Arizona without limitation, and as said laws may be amended from time to time, and specifically said corporation shall be authorized to transact life insurance, disability insurance and annuities, as defined under Arizona Revised Statutes, Section 20-254, 20-253 and 20-254.01 respectively, together with such other kinds of insurance as the corporation may from time to time be authorized to transact, and to act as a reinsurer of business for which it is duly authorized. Consistent with the applicable federal and state requirements, the Company may issue funding agreements and guaranteed investment contracts as defined under Arizona Revised Statutes, Section 20-208. ARTICLE VI ---------- The authorized capital of the corporation shall be $4,000,000, and shall consist of 4,000 shares of voting common stock with a par value of $1,000.00 per share. No holders of stock of the corporation shall have any preferential right to subscription to any shares or securities convertible into shares of stock of the corporation, nor any right of subscription to any thereof other than such, if any, as the Board of Directors in its discretion may determine, and at such price as the Board of Directors in its discretion may fix; and any shares or convertible securities which the Board of Directors may determine to offer for subscription to the holders of stock at the time existing. Nothing herein contained shall be construed as prohibiting the corporation from issuing any shares of authorized but unissued common stock for such consideration as the Board of Directors may determine, provided such issuance is approved by the shareholders of the corporation by a majority of the votes entitled to be cast at any annual or special meeting of shareholders called for that purpose. No such authorized but unissued stock may, however, be issued to the shareholders of the corporation by way of a stock dividend, split-up or in any other manner of distribution unless the same ratable stock dividend, stock split-up or other distribution be declared or made in voting common stock to the holder of such voting common stock at the time outstanding. Each holder of common stock shall be entitled to participate share for share in any cash dividends which may be declared from time to time on the common stock of the corporation by the Board of Directors and to receive pro rata the net assets of the corporation on liquidation. -2- ARTICLE VII ----------- The affairs of the corporation shall be conducted by a Board of Directors consisting of not less than five (5) nor more than fifteen (15) directors as fixed by the bylaws, and such officers as said directors may at any time elect or appoint. No officer or director need be a shareholder of this corporation. Ten (10) directors shall constitute the initial Board of Directors. The names and addresses of the persons who are to serve as directors until the next annual meeting of shareholders or until their successors are elected and qualified, and of the persons who are to serve as officers until the next annual meeting of the directors or until their successors are elected and qualify, are: BOARD OF DIRECTORS Eli Broad, Chairman 1 SunAmerica Center, Century City Los Angeles, California 90067-6022 James Richard Belardi, Director 1 SunAmerica Center, Century City Los Angeles, California 90067-6022 Lorin Merrill Fife, III, Director 1 SunAmerica Center, Century City Los Angeles, California 90067-6022 Jana Waring Greer, Director 1 SunAmerica Center, Century City Los Angeles, California 90067-6022 Susan Louis Harris, Director 1 SunAmerica Center, Century City Los Angeles, California 90067-6022 Gary Walden Krat, Director 1 SunAmerica Center, Century City Los Angeles, California 90067-6022 , Director (Vacant) 1 SunAmerica Center, Century City Los Angeles, California 90067-6022 Peter McMillian, Director 1 SunAmerica Center, Century City Los Angeles, California 90067-6022 -3- Scott Lawrence Robinson, Director 1 SunAmerica Center, Century City Los Angeles, California 90067-6022 Jay Steven Wintrob, Director 1 SunAmerica Center, Century City Los Angeles, California 90067-6022 OFFICERS Victor Edward Akin, Vice President Eli Broad, President and Chief Executive Officer James Richard Belardi, Senior Vice President Lorin Merrill Fife, III, Senior Vice President, General Counsel and Assistant Secretary Michael Lee Fowler, Vice President Nelson Scott Gillis, Vice President and Controller Jana Waring Greer, Senior Vice President J. Franklin Grey, Vice President Susan Louise Harris, Senior Vice President and Secretary Keith Bernard Jones, Vice President Gary Walden Krat, Senior Vice President Michael Lee Lindquist, Vice President Edward Poli Nolan, Jr., Vice President Gregory Mark Outcalt, Vice President Edwin Raquel Reoliquio, Senior Vice President and Actuary Scott Harris Richland, Vice President and Treasurer Scott Lawrence Robinson, Senior Vice President James Warren Rowan, Vice President Jay Steven Wintrob, Executive Vice President The directors shall have the power to adopt, amend, alter and repeal the Bylaws, to manage the corporate affairs and make all rules and regulations expedient for the management of the affairs of the corporation, to remove any officer and to fill all vacancies occurring in the Board of Directors and offices for any cause, and to appoint from their own number an executive committee and other committees and vest said committees with all the powers permitted by the Bylaws. ARTICLE VIII ------------ Subject to the further provisions hereof, the corporation shall indemnify any and all of its existing and former directors and officers and their spouses against all expenses incurred by them and each of them, including but not confined to legal fees, judgments and penalties which may be incurred, rendered or levied in any legal or administrative action brought against any of them, for or on account of any action or omission alleged to have been committed while acting within the scope of employment as a -4- director or officer of the corporation to the fullest extent allowable pursuant to A.R.S. Section 10-005, et al. as my be amended from time to time. Whenever any such person has grounds to believe that he may incur any such aforementioned expense, he shall promptly make a full report of the matter to the President and the Secretary of the Corporation. Thereafter, the Board of Directors of the corporation shall, within a reasonable time, determine if such person acted, or failed to act, in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. If the Board of Directors determines that such person acted, or failed to act, in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful, then indemnification shall be mandatory and shall be automatically extended as specified herein, provided, however, that the corporation shall have the right to refuse indemnification, wholly or partially, in any instance in which the person to whom indemnification would otherwise have been applicable shall have unreasonably refused to permit the corporation, at its own expense and through counsel of its own choosing, to defend him in the action, or shall have unreasonable refused to cooperate in the defense of such action. ARTICLE IX ---------- All directors of the corporation shall be elected at the annual meeting of the shareholders, which shall be held on the third Thursday of March of each year or such other date and time as may be determined by the Board of Directors, unless such day falls on a holiday, in which event the regular annual meeting shall be held on the next succeeding business day. ARTICLE X --------- The principal place of business of the corporation shall be located in the City of Phoenix, Maricopa County, Arizona, but it may have other places of business and transact business, and its Board of Directors or shareholders may meet for the transaction of business, at such other place or places within or without the State of Arizona which its Board of Directors may designate. ARTICLE XI ---------- The fiscal year of the corporation shall be the calendar year. -5- ARTICLE XII ----------- In no event shall the corporation incur indebtedness in excess of the amount authorized by law. ARTICLE XIII ------------ The shares of the corporation, when issued, shall be non-assessable, except to the extent required by the Constitution, specifically, but not in limitation thereof, as provided by Article XIV, Section 11 of the Constitution of the State of Arizona and the laws of the State of Arizona. ARTICLE XIV ----------- The private property of the shareholders, directors and officers of the corporation shall be forever exempt from debts and obligations of the corporation. ARTICLE XV ---------- The Bylaws of the corporation may be repealed, altered amended, or substitute Bylaws may be adopted, by the directors or the shareholders, in accordance with the provisions contained in said Bylaws. ARTICLE XVI ----------- J. Michael Low of 2999 North 44th Street, Suite 250, Phoenix, Arizona, 85018, having been a bona fide resident of Arizona for at least three (3) years, is hereby appointed the statutory agent of this corporation in the State of Arizona, upon whom notices and processes, including service of summons, may be served, and which, when so served shall have lawful personal service on the corporation. The Board of Directors may revoke this appointment at any time, and shall fill the vacancy in such position whenever one exists. ARTICLE XVII ------------ The names and addresses of the incorporators of the corporation are: J. Michael Low Low & Childers, P.C. 2999 North 44th Street, Suite 250 Phoenix, Arizona 85018 -6- S. David Childers Low & Childers, P.C. 2999 North 44th Street, Suite 250 Phoenix, Arizona 85018 Steven R. Henry Low & Childers, P.C. 2999 North 44th Street, Suite 250 Phoenix, Arizona 85018 Carrie M. McDonald Low & Childers, P.C. 2999 North 44th Street, Suite 250 Phoenix, Arizona 85018 Kathy A. Steadman Low & Childers, P.C. 2999 North 44th Street, Suite 250 Phoenix, Arizona 85018 All individual incorporators are eighteen (18) years of age or older. All powers, duties and responsibilities of the incorporators shall cease at the time of delivery of these Amended and Restated Articles of Incorporation and Articles of Redomestication to the Arizona Corporation Commission for filing. -7- IN WITNESS WHEREOF, we hereunto affix our signatures as of the 14th day of December, 1997. /s/ J. Michael Low /s/ S. David Childers - ------------------ ---------------------- J. Michael Low S. David Childers /s/ Steven R. Henry /s/ Carrie M. McDonald - ------------------- ---------------------- Steven R. Henry Carrie M. McDonald /s/ Kathy A. Steadman - --------------------- Kathy A. Steadman Subscribed, sworn to and acknowledged before me this 14th day of December, 1997. [unreadable] --------------------------- Notary Public My Commission Expires: 8-15-99 - ------- -8- APPOINTMENT OF STATUTORY AGENT I, J. Michael Low, being a resident of the State of Arizona for at least three (3) years preceding this appointment, do hereby accept appointment as Statutory Agent for Anchor National Life Insurance Company in accordance with the Arizona Revised Statutes until appointment of a successor Statutory Agent and removal. DATED, this 14th day of December, 1997. /s/ J. Michael Low ------------------ J. Michael Low, Esq. Low & Childers, P.C. -9- EX-3.B 4 AMENDED AND RESTATED BYLAWS AMENDED AND RESTATED BYLAWS OF ANCHOR NATIONAL LIFE INSURANCE COMPANY ARTICLE I. SHAREHOLDERS. SECTION 1. ANNUAL MEETINGS. The annual meeting of the shareholders of the Corporation shall be held on the fourth Thursday in April of each year or such other dates and times as may be determined. Not less than ten (10) nor more than fifty (50) days' written or printed notice stating the place, day and hour of each annual meeting shall be given in the manner provided in Section 1 of Article IX hereof. The business to be transacted at the annual meeting shall include the election of directors, consideration and action upon the reports of officers and directors and any other business within the power of the corporation. All annual meetings shall be general meetings. SECTION 2. SPECIAL MEETINGS CALLED BY PRESIDENT OR BOARD OF DIRECTORS. At any time in the interval between annual meetings, special meetings of shareholders may be called by the President, the Secretary or by two (2) or more directors, upon ten (10) days' written or printed notice, stating the place, day and hour of such meeting and the business proposed to be transacted thereat. Such notice shall be given in the manner provided in Section 1 of Article IX. No business shall be transacted at any special meeting except that named in the notice. SECTION 3. SPECIAL MEETING CALLED BY SHAREHOLDERS. Upon the request in writing delivered to the President or Secretary of the Corporation by the holders of ten percent (10%) or more of all shares outstanding and entitled to vote, it shall be the duty of the President or Secretary of the Corporation to call forthwith a special meeting of the shareholders. Such request shall state the purpose or purposes of such meeting and the matters proposed to be acted on thereat. The Secretary of the Corporation shall inform such shareholders of the reasonably estimated cost of preparing and mailing the notice of the meeting. If upon payment of such costs to the corporation, the person to whom such request in writing shall have been delivered shall fail to issue a call for such meeting within ten (10) days after the receipt of such request and payment of costs, then the shareholders owning ten percent (10%) or more of the voting shares may do so upon giving fifteen (15) days' notice of the time, place and object of the meeting in the manner provided in Section 1 of Article IX. SECTION 4. REMOVAL OF DIRECTORS. At any special meeting of the shareholders called in the manner provided for by this Article, the shareholders, by a vote of a majority of all shares of stock outstanding and entitled to vote, may remove any director or the entire Board of Directors from office and may elect a successor or successors to fill any resulting vacancies for the remainder of his or their terms. SECTION 5. VOTING; PROXIES; RECORD DATE. At all meetings of shareholders any shareholder entitled to vote may vote by proxy. Such proxy shall be in writing and signed by the shareholder or by his duly authorized attorney in fact. It shall be dated, but need not be sealed, witnessed or acknowledged. The board of directors may fix the record date for the determination of shareholders entitled to vote in the manner provided in Section 4 of Article IX hereof. SECTION 6. QUORUM. The presence in person or by proxy of the persons entitled to vote a majority of the voting shares of any meeting shall constitute a quorum for the transaction of business. If at any annual or special meeting of shareholders a quorum shall fail to attend in person or by proxy, a majority in interest attending in person or by proxy may adjourn the meeting from time to time, not exceeding thirty (30) days in all, and thereupon any business may be transacted which might have been transacted at the meeting originally called had the same been held at the time so called. SECTION 7. FILING PROXIES. At all meetings of shareholders, the proxies shall be filed with and be verified by the secretary of the corporation or, if the meeting shall so decide, by the secretary of the meeting. SECTION 8. PLACE OF MEETINGS. All meetings of shareholders shall be held at such place, either within or without the State of Arizona, on such date and at such time as may be determined from time to time by the Board of Directors (or the Chairman in the absence of a designation by the Board of Directors). SECTION 9. ORDER OF BUSINESS. The order of business at all meetings of shareholders shall be as determined by the Chairman of the meeting. SECTION 10. ACTION WITHOUT MEETING. Directors may be elected without a shareholders' meeting by a consent in writing, setting forth the action so taken, signed by all persons entitled to vote for the election of directors; provided, however, that the foregoing shall not limit the power of directors to fill vacancies in the Board of Directors, and that a director may be elected to fill a vacancy not filled by the directors by written consent in the manner provided by the General Corporation Law. 2 Any other action, which under any provision of the General Corporation Law, may be taken at a meeting of the shareholders, may be taken without a meeting, and without notice except as hereinafter set forth, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. All written consents shall be filed with the Secretary of the Corporation. Any shareholder giving a written consent, or the shareholder's proxyholders, or a transferee of the shares of a personal representative of the shareholder or their respective proxyholders, may revoke the consent by a writing receiving by the Corporation prior to the time that written consents of the number of shares required to authorize the proposed action have been filed with the Secretary of the Corporation, but may not do so thereafter. Such revocation is effective upon its receipt by the Secretary of the Corporation. ARTICLE II. DIRECTORS. SECTION 1. POWERS. The Board of Directors shall have the control and management of the affairs, business and properties of the Corporation. They shall have and exercise in the name of the Corporation and on behalf of the Corporation all the rights and privileges legally exercisable by the Corporation, except as otherwise provided by law, by the Charter or by these Bylaws. A director need not be a shareholder or a resident of Arizona. SECTION 2. NUMBER; TERM OF OFFICE; REMOVAL. The number of directors of the Corporation shall be not less than five (5) nor more than fifteen (15). The number to be elected at each annual meeting shall be fixed by resolution of the directors and stated in the notice of the meeting, subject, however, to approval by the shareholders voting at the meeting. The directors shall hold office for the term of one year, or until their successors are elected and qualify. A director may be removed from office as provided in Section 4 of Article I hereof. SECTION 3. VACANCIES. If the office of a director becomes vacant, or if the number of directors is increased, such vacancy may be filled by the Board by a vote of a majority of directors then in office though not less than a quorum. The shareholders may, however, at any time during the term of such director, elect some other person to fill said vacancy and thereupon the election by the Board shall be superseded and such election by the shareholders shall be deemed a filling of the vacancy and not a removal and may be made at any special meeting called for that purpose. 3 SECTION 4. ORGANIZATION MEETINGS; REGULAR MEETINGS. The Board of Directors shall meet for the election of officers and any other business as soon as practicable after the adjournment of the annual meeting of the shareholders. No notice of the organization meeting shall be required if it is held at the same place and immediately following the annual meeting of the shareholders. Other regular meetings of the Board of Directors may be held at such intervals as the Board may from time to time prescribe. Any action required or permitted to be taken at a meeting of the Board of Directors or of a committee of the Board may be taken without a meeting, if a unanimous written consent which sets forth the action is signed by each member of the Board or committee and filed with the minutes of proceedings of the Board or committee. Unless otherwise restricted by the Articles of Incorporation or these Bylaws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or such committee, as the case may be, by means of telephone conference or similar communications equipment by means of which are persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. SECTION 5. SPECIAL MEETINGS. Special meetings of the Board may be called by the President or by a majority of the directors. At least twenty-four (24) hours' notice shall be given of all special meetings; with the consent of the majority of the directors, a shorter notice may be given. SECTION 6. QUORUM. A majority of the Board of Directors shall constitute a quorum for the transaction of business, but such number may be decreased and/or increased at any time or from time to time by vote of a majority of the entire Board to any number not less than two (2) directors or not less than one-third of the directors, whichever is greater. SECTION 7. PLACE OF MEETINGS. The Board of Directors shall hold its meetings at such place, either within or without the State of Arizona, and at such time as may be determined from time to time by the Board of Directors (or the Chairman in the absence of a determination by the Board of Directors). SECTION 8. RULES AND REGULATIONS. The Board of Directors may adopt such rules and regulations for the conduct of its meetings and the management of the affairs of the Corporation as the Board may deem proper and not inconsistent with the laws of the State of Arizona or these Bylaws or the Charter. 4 SECTION 9. COMPENSATION. The directors, as such, may receive a stated salary for their services and/or a fixed sum and expenses of attendance may be allowed for attendance at each regular or special meeting of the Board of Directors. Such stated salary and/or attendance fee shall be determined by resolution of the Board unless the shareholders have adopted a resolution relating thereto, provided that nothing herein contained shall be construed to preclude a director from serving in any other capacity and receiving compensation therefor. SECTION 10. CHAIRMAN OF THE BOARD. The Board of Directors shall provide for a Chairman of the Board from among its members. So long as there shall be a person so active, he shall preside at all meetings of the Board and at all joint meetings of officers and directors. In the absence of the Chairman, the Vice Chairman, if any, or in his absence, the President, shall preside at all meetings of the Board and all joint meetings of officers and directors. SECTION 11. INVESTMENT COMMITTEE. There shall be an Investment Committee consisting of the President of the Corporation EX OFFICIO and such members of the Board of Directors and/or officers and employees as the Board may by resolution prescribe. No investments or loans (other than policy loans or annuity contract loans) shall be made unless the same be authorized or approved by the Board of Directors or the Investment Committee. The Investment Committee shall maintain minutes of its meetings and shall submit regular reports to the Board of Directors. SECTION 12. EXECUTIVE COMMITTEE. The Board of Directors may appoint from among its members an Executive Committee composed of three (3) or more directors, and may delegate to such Committee, in the interval between the meetings of the Board of Directors, any and all of the powers of the Board of Directors in the management of the business and affairs of the Corporation, except the power to declare dividends, issue stock, select directors to fill vacancies in the membership of the Executive Committee or recommend to shareholders any action requiring shareholders' approval. The members of such Committee shall constitute a quorum for the transaction of business at any meeting and the act of a majority of the members present at any meeting at which the quorum requirement is satisfied shall be the act of the Board of Directors. In the absence of any member of the Executive Committee necessary to constitute a quorum, the members thereof present at any meeting, whether or not they constitute a quorum, may, with telephonic approval of one of the absent members of the Executive Committee, appoint a member of the Board of Directors to act in place of such absent member. SECTION 13. OTHER COMMITTEES. The Board of Directors may appoint from its own members and, where permitted by law, from the Corporation's officers and/or employees, such standing, temporary, special or AD HOC committees as the Board may determine, investing such committees with such powers, duties 5 and functions as the Board may prescribe. All such committees shall include the President, EX OFFICIO. SECTION 14. ADVISORY BOARD. The Board of Directors may elect an Advisory Board to serve until the next annual meeting of the Board of Directors or until their successors are elected and qualify. Such Board shall consist of a number as determined from time to time by the Board of Directors, and they shall be advised of the meetings of the Board of Directors and authorized to attend the meetings and counsel with them, but shall have no vote. The Board of Directors (and between meeting of the Board of Directors, the Executive Committee) shall have the authority to increase or decrease the number of members to the Advisory Board and to elect one or more members to the Advisory Board to serve until the next meeting of the Board of Directors and until their successors are elected and qualify, and may provide for the compensation and other rules and regulations with respect to such Board. SECTION 15. PROCEDURES; MEETINGS. The Committees shall keep minutes of their proceedings and shall report the same to the Board of Directors at the meeting next succeeding, and any action by the Committees shall be subject to revision and alteration by the Board of Directors, provided that no rights of third persons shall be affected by any such revision or alteration. ARTICLE III. OFFICERS. SECTION 1. IN GENERAL. The officers of the Corporation shall consist of a President, one or more Vice Presidents, a Secretary, a Treasurer, and one or more Assistant Secretaries and Assistant Treasurers, and such other officers bearing such titles as may be fixed pursuant to these Bylaws. The President, Vice Presidents, Secretary, and Treasurer shall be chosen by the Board of Directors and, except those persons holding contracts for fixed terms, shall hold office only during the pleasure of the Board or until their successors are chosen and qualify. The President may from time to time appoint Assistant Vice Presidents, Assistant Secretaries, Assistant Treasurers, and other officers bearing such titles and exercising such authority as he may from time to time deem appropriate, and except those persons holding contracts for fixed terms, those officers appointed by the President shall hold office only during his pleasure or until their successors are appointed and qualify. Any two (2) officers, except those of President, Executive Vice President and Secretary, may be held by the same persons, but no officer shall execute, acknowledge or verify any instrument in more than one capacity when such instrument is required to be executed, acknowledged, or verified by any two (2) or more officers. The Board of Directors or the President may from time 6 to time appoint other agents and employees, with such powers and duties as they may deem proper. SECTION 2. PRESIDENT. The President shall be Chief Executive Officer of the Corporation and shall have the general management of the Corporation's business in all departments. In the absence of the Chairman of the Board, the President shall preside at all meetings of the Board of Directors and shall call to order all meetings of shareholders. The President shall perform such other duties as the Board of Directors may direct. SECTION 3. VICE PRESIDENTS. In the absence or disability of the President, the Vice Presidents, if any, in order of their rank as designated by the Board of Directors or, if not ranked, the Vice President designated by the Board of Directors, shall perform all the duties of the President, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the President. The Vice Presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board of Directors or the Bylaws. SECTION 4. TREASURER. Unless there shall be a financial Vice President designated by the Board of Directors as the chief financial officer of the Corporation, having general supervision over its finances, the Treasurer shall be the chief financial officer with such authority. He shall also have authority to attest to the seal of the Corporation and shall perform such other duties as may be assigned to him by the Board of Directors. SECTION 5. SECRETARY OF THE CORPORATION. The Secretary of the Corporation shall keep the minutes of the meetings of the shareholders and of the Board of Directors, and shall attend to the giving and serving of all notices of the Corporation required by law or these Bylaws. The Secretary shall maintain at all times in the principal office of the Corporation at least one copy of the Bylaws with all amendments to date, and shall make the same, together with the minutes of the meetings of the shareholders, the annual statement of the affairs of the Corporation and any voting trust agreement on file at the office of the Corporation, available for inspection by any officer, director, or shareholder during reasonable business hours. The Secretary shall have authority to attest to the seal of the Corporation and shall perform such other duties as may be assigned to the Secretary by the Board of Directors. SECTION 6. OTHER SECRETARIES, ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. Secretaries other than the Secretary of the Corporation, the Assistant Treasurers and the Assistant Secretaries shall have authority to attest to the seal of the Corporation and shall perform such other duties as may from time to time be assigned to them by the Board of Directors or the President. 7 SECTION 7. SUBSTITUTES. The Board of Directors may from time to time in the absence of any one of said officers or, at any other time, designate any other person or persons on behalf of the Corporation, to sign any contracts, deeds, notes, or other instruments in the place or stead of any of said officers, and designate any person to fill any one of said offices, temporarily or for any particular purpose; and any instruments so signed in accordance with a resolution of the Board shall be the valid act of this Corporation as fully as if executed by any regular officer. ARTICLE IV. RESIGNATION. Any director or officer may resign his office at any time. Such resignation shall be made in writing and shall take effect from the time of its receipt by the Corporation, unless some time be fixed in the resignation, and then from that date. The acceptance of a resignation shall not be required to make it effective. ARTICLE V. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Corporation shall indemnify any and all of its existing and former directors and officers and their spouses against all expenses incurred by them and each of them, including but not confined to legal fees, judgments and penalties which may be incurred, rendered or levied in any legal or administrative action brought against any of then, for or on account of any action or omission alleged to have been committed while acting within the scope of employment as director of officer of the Corporation to the fullest extent allowable pursuant to the Arizona General Corporation Law as may be amended from time to time. Whenever any such person has grounds to believe that he may incur any such aforementioned expense, he shall promptly make a full report of the matter to the President and the Secretary of the Corporation. Thereafter, the Board of Directors of the Corporation shall, within a reasonable time, determine if such person acted, or failed to act, in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. If the Board of Directors determines that such person acted, or failed to act, in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful, then indemnification shall be mandatory and shall be automatically extended as specified herein, provided, however, that the Corporation shall have the right to refuse 8 indemnification, wholly or partially, in any instance in which the person to whom indemnification would otherwise have been applicable shall have unreasonably refused to permit the Corporation, at its own expense and through counsel of its own choosing, to defend him in the action, or shall have unreasonably refused to cooperate in the defense of such action. ARTICLE VI. FISCAL YEAR. The fiscal year of the Corporation shall be the calendar year. ARTICLE VII. SEAL. The seal of the Corporation shall be a circular disc inscribed with the name of the Corporation, "Anchor National Life Insurance Company," and the word "Incorporated." ARTICLE VIII. MISCELLANEOUS PROVISIONS - STOCK. SECTION 1. ISSUE. All certificates of shares of the Corporation shall be signed by the manual or facsimile signatures of the President or any Vice President, and countersigned by the Treasurer or Secretary of the Corporation and sealed with the seal or facsimile seal of the Corporation. Any stock certificates bearing the facsimile signatures of the officers above named shall be manually signed by an authorized representative of the Corporation's duly constituted transfer agent. If an officer whose signature appears on a certificate ceases to be an officer before the certificate is issued, it may, nevertheless, be issued with the same effect as if such officer were still in office. SECTION 2. TRANSFERS. No transfers of shares shall be recognized or binding upon the Corporation until recorded on the transfer books of the Corporation upon surrender and cancellation of certificates for a like number of shares. All transfers shall be effected only by the holder of record of such shares or by his legal representative, or by his attorney thereunto authorized by power of attorney duly executed. The person in whose name shares shall stand on the books of the Corporation may be deemed by the Corporation the owner thereof for all purposes. The Corporation's transfer agent shall maintain a stock transfer book, shall record therein all stock transfers and shall forward copies of all transfer sheets at regular prompt intervals to the Corporation's registrar, if there 9 be one, or, if not, then to the Corporation's principal office for transcription on the stock registry books. SECTION 3. FORM OF CERTIFICATES; PROCEDURE. The Board of Directors shall have power and authority to determine the form of stock certificates (except insofar as prescribed by law), and to make all such rules and regulations as the Board may deem expedient concerning the issue; transfer and registration of said certificates, and to appoint one or more transfer agents and/or registrars to countersign and register the same. The transfer agent and registrar may be the same party. SECTION 4. RECORD DATES FOR DIVIDENDS AND SHAREHOLDERS' MEETINGS. The Board of Directors may fix the time, not exceeding twenty (20) days preceding the date of any meeting of shareholders, any dividend payment date or any date for the allotment of rights, during which the books of the Corporation shall be closed against transfers of stock, or the Board of Directors may fix a date not exceeding forty (40) days preceding the date of any meeting of shareholders, any dividend payment date or any date for the allotment of rights, as a record date for the determination of the shareholders entitled to notice of and to vote at such meeting, or entitled to receive such dividends or rights, as the case may be, and only shareholders of record on such date shall be entitled to notice of and to vote at such meeting or to receive such dividends or rights, as the case may be. In the case of a meeting of shareholders, the record date shall be fixed not less than ten (10) days prior to the date of the meeting. SECTION 5. LOST CERTIFICATES. In case any certificate of shares is lost, mutilated or destroyed, the Board of Directors may issue a new certificate in place thereof, upon indemnity to the Corporation against loss and upon such other terms and conditions as the Board of Directors may deem advisable. ARTICLE IX. NOTICE. SECTION 1. NOTICE TO SHAREHOLDERS. Whenever by law or these Bylaws notice is required to be given to any shareholder, such notice may be given to each shareholder, whether or not such shareholder is entitled to vote, by leaving the same with him or at his residence or usual place of business, or by mailing it, postage prepaid, and addressed to him at his address as it appears on the books of the Corporation. Such leaving or mailing of notice shall be deemed the time of giving such notice. SECTION 2. NOTICE TO DIRECTORS AND OFFICERS. Whenever by law of these Bylaws notice is required to be given to any director or officer, such notice may be given in any one of 10 the following ways: by personal notice to such director or officer; by telephone communication with such director or officer personally; by wire, addressed to such director or officer at his then address or at his address as it appears on the books of the Corporation; or by depositing the same in writing in the post office or in a letter box in a postage paid, sealed wrapper addressed to such director or officer at his then address or at his address as it appears on the books of the Corporation; and the time when such notice shall be mailed or consigned to a telegraph company for delivery shall be deemed to be the time of the giving of such notice. ARTICLE X. VOTING OF SECURITIES IN OTHER CORPORATIONS. Any stock or other voting securities in other corporations, which may from time to time be held by the Corporation, may be represented and voted at any meeting of shareholders of such other corporation by the President, any Vice President, or the Treasurer, or by proxy or proxies appointed by the President, any Vice President, or the Treasurer, or otherwise pursuant to authorization thereunto given by a resolution of the Board of Directors. ARTICLE XI. AMENDMENTS. These Bylaws may be added to, altered, amended or repealed by a majority vote of the entire Board of Directors at any regular meeting of the Board or at any special meeting called for that purpose. Any action of the Board of Directors in adding to, altering, amending or repealing these Bylaws shall be reported to the shareholders at the next annual meeting and may be changed or rescinded by majority vote of all of the stock then outstanding and entitled to vote, without, however, affecting the validity of any action taken in the meanwhile in reliance on these Bylaws so added to, altered, amended or repealed as aforesaid by the Board of Directors. In no event shall the Board of Directors have any power to amend this Article. H:\DATA\LEGAL\PUZON\CORP\ANLIC\BYLAWS.DOC 11 EX-4.A 5 ALLOCATED FIXED AND VARIABLE GROUP ANNUITY CERT. ANCHOR NATIONAL LIFE INSURANCE COMPANY A STOCK COMPANY LOS ANGELES, CALIFORNIA CERTIFICATE NUMBER P9999999999 PARTICIPANT JOHN DOE STATUTORY HOME OFFICE EXECUTIVE OFFICE ANNUITY SERVICE CENTER 2999 NORTH 44TH ST., STE 250 1 SUNAMERICA CENTER P.O. BOX 54299 PHOENIX, AZ 85018 LOS ANGELES, CA LOS ANGELES, CA 90067-6022 90054-0299 ANCHOR NATIONAL LIFE INSURANCE COMPANY ("We", "Us", the "Company", or "Anchor National") agrees to provide benefits to the Participant under the Group Contract, in accordance with the provisions set forth in this Certificate and in consideration of the Participant's Enrollment Form and Purchase Payments We received. THIS CERTIFICATE IS EVIDENCE OF COVERAGE UNDER THE GROUP CONTRACT IF A PARTICIPANT ENROLLMENT FORM IS ATTACHED. THE COVERAGE WILL BEGIN AS OF THE CERTIFICATE DATE, SHOWN ON THE CERTIFICATE DATA PAGE. THE VALUE OF AMOUNTS ALLOCATED TO THE SEPARATE ACCOUNT DURING THE ACCUMULATION AND ANNUITY PERIODS IS NOT GUARANTEED. THE VALUE WILL INCREASE OR DECREASE BASED UPON THE INVESTMENT EXPERIENCE OF THE INVESTMENTS UNDERLYING THE SUBACCOUNTS YOU CHOOSE. THE CASH SURRENDER BENEFIT OF AMOUNTS ALLOCATED TO ANY FIXED-MVA ACCOUNT OPTION INCREASES OR DECREASES BASED ON THE APPLICATION OF THE MARKET VALUE ADJUSTMENT. THE UNADJUSTED CASH SURRENDER BENEFIT IS AVAILABLE FOR 30 DAYS AFTER THE END OF THE GUARANTEED PERIOD. THERE IS NO MARKET VALUE ADJUSTMENT FOR ANY CASH SURRENDER BENEFIT OF AMOUNTS ALLOCATED TO NON-MVA FIXED ACCOUNT OPTIONS. TEN DAY RIGHT TO EXAMINE CERTIFICATE - YOU MAY RETURN THIS CERTIFICATE TO OUR ANNUITY SERVICE CENTER OR TO THE AGENT THROUGH WHOM THE CERTIFICATE WAS PURCHASED WITHIN 10 DAYS AFTER YOU RECEIVE IT, IF YOU ARE NOT SATISFIED WITH IT. THE COMPANY WILL REFUND THE CERTIFICATE VALUE ON THE BUSINESS DAY DURING WHICH THE CERTIFICATE IS RECEIVED. UPON SUCH REFUND, THE CERTIFICATE SHALL BE VOID. THIS IS A LEGAL DOCUMENT. READ IT CAREFULLY. /s/ SUSAN L. HARRIS /s/ ELI BROAD ____________________ __________________ Susan L. Harris Eli Broad Secretary President ALLOCATED FIXED AND VARIABLE GROUP ANNUITY CERTIFICATE Nonparticipating 1 TABLE OF CONTENTS CERTIFICATE DATA PAGE.....................................................PAGE 3 PURCHASE PAYMENT ALLOCATION...............................................PAGE 4 DEFINITIONS...............................................................PAGE 5 PURCHASE PAYMENT PROVISIONS...............................................PAGE 7 Purchase Payments; Deferment of Payments; Suspension of Payments; Substitution of Investment Portfolios ACCUMULATION PROVISIONS...................................................PAGE 8 Separate Account Accumulation Value; Number of Accumulation Units; Accumulation Unit Value (AUV); Fixed Account Accumulation Value; Fixed Account Guarantee Period Options And Interest Crediting ; Market Value Adjustment CHARGES AND DEDUCTIONS...................................................PAGE 10 Certificate Administration Charge; Withdrawal Charge; Expense Risk Charge; Distribution Expense Charge; Mortality Risk Charge TRANSFER PROVISION.......................................................PAGE 11 Transfers of Accumulation Units and Annuity Units Between Subaccounts; Transfers of Accumulation Units To and From the Fixed Account WITHDRAWAL PROVISION.....................................................PAGE 12 Withdrawal Charge GENERAL PROVISIONS.......................................................PAGE 13 Entire Contract; Change of Annuitant; Death of Annuitant; Misstatement of Age or Sex; Proof of Age, Sex or Survival; Conformity With State Laws; Changes in Law; Assignment; Claims of Creditors; Premium Taxes and Other Taxes; Written Notice; Periodic Reports; Incontestability; Non-Participating DEATH PROVISIONS.........................................................PAGE 14 Death of Participant Before the Annuity Date; Due Proof of Death; Amount of Death Benefit; Death of Participant or Annuitant on or After the Annuity Date; Beneficiary ANNUITY PROVISIONS.......................................................PAGE 16 Annuity Date; Payments to Participant; Fixed Annuity Payments; Amount of Fixed Annuity Payments; Amount of Variable Annuity Payments ANNUITY PAYMENT OPTIONS .................................................PAGE 18 FIXED ANNUITY PAYMENT OPTIONS TABLE......................................PAGE 19 VARIABLE ANNUITY PAYMENT OPTIONS TABLE...................................PAGE 21 2 CERTIFICATE DATA PAGE CERTIFICATE NUMBER: ANNUITY SERVICE CENTER: P9999999999 P.O. BOX 54299 LOS ANGELES, CA 90054-0299 PARTICIPANT: AGE AT ISSUE: JOHN DOE 35 ANNUITANT: FIRST PURCHASE PAYMENT: JOHN DOE $10,000.00 ANNUITY DATE: CERTIFICATE DATE: JULY 1, 2026 JULY 1, 1996 LATEST ANNUITY DATE: FIXED ACCOUNT - JULY 1, 2051 Minimum Guarantee Rate: (3.0%) BENEFICIARY: As stated in the Participant Enrollment Form ANNUAL CERTIFICATE ADMINISTRATION CHARGE: $35.00 SEPARATE ACCOUNT: VARIABLE ANNUITY ACCOUNT FIVE FOR INQUIRIES CALL 1-800-445-SUN2 3 PURCHASE PAYMENT ALLOCATION Subaccounts ----------- 80.00% Growth Strategy 0.00% Moderate Growth Strategy 0.00% Balanced Growth Strategy 0.00% Conservative Growth Strategy Fixed Account Options --------------------- Guarantee Initial Period Interest Rate ------ ------------- 20.00% 1 Year Fixed Non-MVA 3.0% 0.00% 1 Year DCA Fixed Non-MVA 0.00% 3 Year Fixed MVA 0.00% 5 Year Fixed MVA 0.00% 7 Year Fixed MVA 0.00% 10 Year Fixed MVA 4 DEFINITIONS Defined in this section are some of the words and phrases used in this Certificate. These terms are capitalized when used in the Certificate. Other capitalized terms in the Certificate refer to the captioned paragraph explaining that particular concept in the Certificate. ACCUMULATION UNIT A unit of measurement used to compute the Certificate Value in a Subaccount prior to the Annuity Date. AGE Age as of last birthday. ANNUITANT The natural person on whose life the annuity benefits under the Certificate are based. The Annuitant is as named on the Certificate Data Page. If the Certificate is in force and the Annuitant is alive on the Annuity Date, We will begin payments to the Payee. ANNUITY DATE The date on which annuity payments to the Payee are to start. The Participant must specify the Annuity Date, which must be at least two years after the Certificate Date. ANNUITY SERVICE CENTER As specified on the Certificate Data Page. ANNUITY UNIT A unit of measurement used to compute annuity payments from the Subaccounts. AUTOMATIC DOLLAR COST AVERAGING PROGRAM (DCA) You may authorize the automatic transfer of amounts at regular intervals from a source account to one or more Subaccounts (other than the source account). The source account may be either the One Year DCA Fixed Account Option or any of the Subaccounts. The unit values are determined on the dates of transfers. You may terminate DCA at any time. However, upon termination, any amounts remaining in the One Year DCA Fixed Account Option will be transferred to the One Year Fixed Account Option. We reserve the right to change the terms and conditions of the DCA program at any time. BENEFICIARY The Beneficiary is as designated on the Participant Enrollment Form unless later changed by the Participant. CERTIFICATE The Certificate describes Your interest as a Participant under the group annuity contract. CERTIFICATE DATE The date Your Certificate is issued, as shown on the Certificate Data Page. It is the date from which Certificate Years and anniversaries are measured. 5 CERTIFICATE VALUE The sum of: (1) Your share of the Subaccounts' Accumulation Unit values and (2) the value of amounts allocated to the Fixed Account Options. CERTIFICATE YEAR A year starting from the Certificate Date in one calendar year and ending on the day preceding the anniversary of such date in the succeeding calendar years. CONTRIBUTION YEAR A year starting from the date of the Purchase Payment in one calendar year and ending on the day preceding the anniversary of such date in the succeeding calendar years. CURRENT INTEREST RATE The rates of interest declared by Us applicable to allocations of Subsequent Purchase Payments to the Fixed Account Options. The Current Interest Rate will not be less than the Minimum Guarantee Rate as shown on the Certificate Data Page. FIXED ACCOUNT OPTIONS The investment options under this Certificate that are credited with a fixed rate of interest declared by the Company. All Purchase Payments allocated to the Fixed Account Options become part of the Company's general asset account. The general asset account contains all the assets of the Company except for the Separate Account and other segregated asset accounts. The Fixed Account Options for this Certificate are shown on page 4. FIXED ANNUITY A series of periodic annuity payments of predetermined amounts that do not vary with investment experience. Such payments are made from the Company's general asset account. GUARANTEE PERIOD The period for which either the Initial Interest Rate, the Current Interest Rate or the Renewal Interest Rate is credited to the amounts allocated to the Fixed Account Options. INITIAL INTEREST RATE The rates of interest credited to the first Purchase Payment as described in the Accumulation Provisions section. The Initial Interest Rate for this Certificate's first Purchase Payment is listed on page 4. The Initial Interest Rate may not be less than the Minimum Guarantee Rate as shown on the Certificate Data Page. IRC The Internal Revenue Code of 1986, as amended, as the same may be amended or superseded. NYSE New York Stock Exchange PARTICIPANT The person or entity named in the Certificate who is entitled to exercise all rights and privileges of ownership under the Certificate. 6 PAYEE The person receiving payment of annuity benefits under this Certificate. PURCHASE PAYMENTS Payments in U.S. currency made by or on behalf of the Participant to the Company for the Certificate. RENEWAL INTEREST RATE The rate(s) of interest declared by Us applicable to transfers from the Subaccounts into any of the Fixed Account Options and to amounts previously allocated to a Fixed Account Option wherein the Guarantee Period has expired. The Renewal Interest Rate may not be less than the Minimum Guarantee Rate as shown on the Certificate Data Page. SEPARATE ACCOUNT The segregated asset account named on the Certificate Data Page. The Separate Account consists of several Subaccounts. The assets of the Separate Account are not comingled with the general assets and liabilities of the Company. Each Subaccount is not chargeable with liabilities arising out of any other Subaccount. The value of amounts allocated to the Subaccounts of the Separate Account is not guaranteed. SUBACCOUNT A variable investment option available under the Certificate, comprising a division of the Separate Account. The available Subaccounts are shown on page 4. SUBSEQUENT PURCHASE PAYMENTS Purchase Payments made subsequent to the first Purchase Payment. VARIABLE ANNUITY A series of periodic annuity payments, which vary in amount according to the investment experience of one or more Subaccounts, as selected by You . WE, OUR, US, THE COMPANY Anchor National Life Insurance Company. YOU, YOUR The Participant. PURCHASE PAYMENT PROVISIONS PURCHASE PAYMENTS Purchase Payments are flexible. This means that, subject to Company declared minimums and maximums, You may change the amounts, frequency or timing of Purchase Payments. Purchase Payments may be allocated to the Fixed Account Options and one or more Subaccounts in accordance with instructions from You. We reserve the right to specify the minimum Purchase Payment that may be allocated to a Subaccount under the Certificate. 7 DEFERMENT OF PAYMENTS We may defer making payments from the Fixed Account Options for up to six (6) months. Interest, subject to state requirements, will be credited during the deferral period. SUSPENSION OF PAYMENTS We may suspend or postpone any payments from the Subaccounts if any of the following occur: (a) the NYSE is closed, (b) trading on the NYSE is restricted, (c) an emergency exists such that it is not reasonably practical to dispose of or determine the value of the assets held in a Subaccount, or (d) the Securities and Exchange Commission, by order, so permits for the protection of Participants. Conditions in (b) and (c) will be decided by or in accordance with rules of the Securities and Exchange Commission. SUBSTITUTION OF INVESTMENT PORTFOLIOS If: (a) the shares of the underlying investment portfolios in which the Subaccounts invest should no longer be available for investment by the Separate Account; or (b) if further investment in the shares of an investment portfolio is no longer appropriate in view of the purpose of the Certificate, then We may substitute shares of another underlying investment series, for shares already purchased, or to be purchased in the future by Purchase Payments under the Certificate. No substitution of securities may take place without prior approval of the Securities and Exchange Commission and under such requirements as it may impose. ACCUMULATION PROVISIONS SEPARATE ACCOUNT ACCUMULATION VALUE The Separate Account Accumulation Value under the Certificate shall be the sum of the values of the Accumulation Units held in the Subaccounts for the Participant. NUMBER OF ACCUMULATION UNITS For each Subaccount, the number of Accumulation Units is the sum of each Purchase Payment and transfer allocated to the Subaccount, reduced by premium taxes, if any: DIVIDED BY The Accumulation Unit Value for that Subaccount as of the NYSE business day in which the Purchase Payment or transfer amount is received. The number of Accumulation Units will be similarly adjusted for withdrawals, annuitizations, transfers, Certificate Administration Charge and Withdrawal Charge. Adjustments will be made as of the end of the NYSE business day in which We receive all requirements for the transaction, as appropriate. 8 ACCUMULATION UNIT VALUE (AUV) The AUV of a Subaccount for any NYSE business day is calculated by subtracting (2) from (1) and dividing the result by (3) where: (1) is the total value at the end of the given NYSE business day of the assets attributable to the Accumulation Units of the Subaccount minus the total liabilities; (2) is the cumulative unpaid charge for assumption of Expense Risk, Distribution Expense and Mortality Risk charges (See CHARGES AND DEDUCTIONS); (3) is the number of Accumulation Units outstanding at the end of the given NYSE business day. FIXED ACCOUNT ACCUMULATION VALUE Under a Certificate, the Fixed Account Accumulation Value shall be the sum of all monies allocated or transferred to the Fixed Account Option(s), reduced by any applicable premium taxes, plus all interest credited on the Fixed Account Option(s) during the period that the Certificate has been in effect. This amount shall be adjusted for withdrawals, annuitizations, transfers, Certificate Administration Charge and Withdrawal Charge. The Fixed Account Accumulation Value shall not be less than the minimum values required by law in the state where this Certificate is issued. FIXED ACCOUNT GUARANTEE PERIOD OPTIONS AND INTEREST CREDITING Any amounts allocated to the Fixed Account Options from the first Purchase Payment will earn interest at the Initial Interest Rate for the Fixed Account Option(s) selected for the duration of the Guarantee Period. Subsequent Purchase Payments allocated to the Fixed Account Options will earn interest at the Current Interest Rate for the Fixed Account Option(s) selected for the duration of the Guarantee Period. Transfers to the Fixed Account Options from the Subaccounts and amounts renewed into the Fixed Account Options will earn interest at the Renewal Interest Rate for the Fixed Account Option(s) selected for the duration of the Guarantee Period. For thirty (30) days following the date of expiration of a Guarantee Period, You may renew for the same or any other Guarantee Period at the Renewal Interest Rate or You may transfer all or a portion of the amount to the Subaccounts. If the Participant does not specify a Guarantee Period at the time of renewal, We will select the same Guarantee Period as has just expired, crediting the Certificate with the Renewal Interest Rate in effect on the date of expiration of the Guarantee Period, so long as such Guarantee Period does not extend beyond the Annuity Date. If a renewal occurs within one year of the latest Annuity Date, We will credit interest up to the Annuity Date at the Renewal Interest Rate for the One Year Fixed Account Option. If you are participating in the DCA program, Purchase Payments will be allocated to the One Year DCA Fixed Account Option. Upon termination of the DCA program, any amounts remaining in the One Year DCA Fixed Account Option will be transferred to the One Year Fixed Account Option. Such amounts will earn interest at the Renewal Interest Rate for the One Year Fixed Account Option. 9 MARKET VALUE ADJUSTMENT (MVA) Any payments and values based on a multi-year Fixed Account Option may be subject to a MVA, the operation of which may result in upward or downward adjustments in the Certificate Value, if withdrawn, transferred or annuitized prior to the end of the respective Guarantee Period. The MVA will be calculated by multiplying the amount withdrawn, transferred or annuitized by the formula described below: N/12 {(1 + I)/(1+J+0.0050)} -1 I = The interest rate currently in effect for that Guarantee Period. J = The Initial Interest Rate available for the Guarantee Period equal to the number of years (rounded up to an integer) remaining in the current Guarantee Period at the time of withdrawal, transfer or annuitization. In the determination of J, if the Company currently does not offer the applicable Guarantee Period, then the rate will be determined by linear interpolation of the Initial Interest Rate for the nearest two Guarantee Periods that are available. N = The number of full months remaining in the current Guarantee Period at the time the withdrawal or annuitization request is processed. If a Withdrawal Charge is applied to a withdrawal, then the MVA will be applied to the withdrawal amount net of the Withdrawal Charge. There will be no MVA on withdrawals from the Fixed Account Options in the following situations: (1) to pay a Death Benefit paid upon death of the Participant; (2) on amounts withdrawn to pay fees or charges; (3) on amounts withdrawn from the Fixed Account Option within thirty (30) days after the end of the Guarantee Period; (4) on annuitizations on the Latest Annuity Date; (5) on amounts withdrawn from the One Year Fixed Account Option or the One Year DCA Fixed Account Option . CHARGES AND DEDUCTIONS We will deduct the following charges from the Certificate: CERTIFICATE ADMINISTRATION CHARGE The charge specified on the Certificate Data Page will be deducted on each Certificate anniversary that occurs on or prior to the Annuity Date. It will also be deducted when the Certificate Value is withdrawn in full if withdrawal is not on the Certificate anniversary. We reserve the right to assess a charge on a class basis which is less than the charge specified on the Certificate Data Page. WITHDRAWAL CHARGE This charge may be deducted upon withdrawal of the Certificate Value, in whole or in part. See WITHDRAWAL PROVISIONS. EXPENSE RISK CHARGE On an annual basis this charge equals 0.35% of the average daily total net asset value of Your Purchase Payments allocated to the Subaccounts. This charge is to compensate Us for assuming the expense risks under the Certificate. 10 DISTRIBUTION EXPENSE CHARGE On an annual basis this charge equals 0.15% of the average daily total net asset value of Your Purchase Payments allocated to the Subaccounts. This charge is to compensate Us for all distribution expenses associated with the Certificate. MORTALITY RISK CHARGE On an annual basis this charge equals 0.90% of the average daily total net asset value of Your Purchase Payments allocated to the Subaccounts. This charge is to compensate Us for assuming the mortality risks under the Certificate. TRANSFER PROVISION Prior to the Annuity Date, You may transfer all or part of Your Certificate Value to any of the Subaccounts or the Fixed Account Options, subject to certain restrictions. We reserve the right to charge a fee for transfers if the number of transfers exceeds the limit specified by Us. TRANSFERS OF ACCUMULATION AND ANNUITY UNITS BETWEEN SUBACCOUNTS Prior to the Annuity Date, You may transfer all or a portion of Your Certificate Value from one Subaccount to another Subaccount. A transfer will result in the purchase of Accumulation Units in a Subaccount and the redemption of Accumulation Units in the other Subaccount. Transfers will be effected at the end of the NYSE business day in which We receive Your completed request for the transfer. After the Annuity Date, You may transfer all or a portion of Your Certificate Value from one Subaccount to another Subaccount. A transfer will result in the purchase of Annuity Units in a Subaccount and the redemption of Annuity Units in the other Subaccount. Transfers will be effected at the end of the NYSE business day in which We receive Your completed request for the transfer. The minimum amount that can be transferred between Subaccounts and the amount that can remain in the Subaccount are subject to Company limits. TRANSFERS OF ACCUMULATION UNITS TO AND FROM THE FIXED ACCOUNT Prior to the Annuity Date, You may transfer all or any part of Your Certificate Value from the Subaccount(s) to the Fixed Account Options or from the Fixed Account Options to the Subaccount(s) of the Certificate. However, You may only transfer to the One Year DCA Fixed Account Option if You are participating in the DCA program. After the Annuity Date, transfers into or out of the Fixed Account Options are not allowed. 11 WITHDRAWAL PROVISION On or before the Annuity Date and while the Participant is living, You may withdraw all or part of Your Certificate Value under this Certificate by informing Us at Our Annuity Service Center. For a full withdrawal, this Certificate must be returned to Our Annuity Service Center. Without a written notice to the contrary, withdrawals will be deducted from the Certificate Value in proportion to their allocation among the Fixed Account Options and the Subaccounts. Withdrawals will be based on values at the end of the NYSE business day in which the request for withdrawal and the Certificate (in the case of a full withdrawal), are received at the Annuity Service Center. Unless the SUSPENSION OF PAYMENTS or DEFERMENT OF PAYMENTS sections are in effect, payment of withdrawals will be made within seven calendar days. WITHDRAWAL CHARGE Each Certificate Year, a Participant may withdraw, free of a Withdrawal Charge, 10% of all Purchase Payments which are still subject to a Withdrawal Charge. Amounts withdrawn as a free withdrawal do not reduce Purchase Payments for purposes of calculating future free withdrawals. The Participant will not receive the benefit of a free withdrawal in a full surrender. Withdrawals in excess of this free withdrawal amount may be subject to a Withdrawal Charge. The withdrawal charge applied to any withdrawal will depend on the age of the Purchase Payment to which the withdrawal is attributed. See chart below. For the purpose of determining the Withdrawal Charge, a withdrawal will be attributed to amounts in the following order: (1) free withdrawal amount (partial withdrawals only); (2) Purchase Payments which are both no longer subject to the Withdrawal Charge and are not yet withdrawn; (3) Purchase Payments subject to a Withdrawal Charge; and (4) other Certificate Value. Purchase Payments, when withdrawn, are assumed to be withdrawn on a first-in-first-out (FIFO) basis. Number of Contribution Years Elapsed Withdrawal Charge as a Between Contribution Year of Purchase Payment Percentage of Withdrawn and Contribution Year of Withdrawal Purchase Payment - -------------------------------------------------------------------------------- 1 7% 2 6% 3 6% 4 5% 5 4% 6 3% 7 2% 8+ 0% The Withdrawal Charge will be assessed against the Subaccounts and the Fixed Account Options in the same proportion as the remaining Certificate Value is allocated unless You request that the withdrawal come from a particular Fixed Account Option or Subaccount. If the remaining Certificate Value is insufficient to cover the Withdrawal Charge, any remaining balance will be deducted from the withdrawal amount requested. 12 GENERAL PROVISIONS ENTIRE CONTRACT The entire contract between You and Us consists of the group annuity contract, the application, the Participant Enrollment Form as completed by You at the time of purchase, this Certificate and any attached endorsement(s). An agent cannot change the terms or conditions of this contract. Any change must be in writing and approved by Us. Only Our President, Secretary, or one of Our Vice-Presidents can give Our approval. CHANGE OF ANNUITANT If the Participant is an individual, the Participant may change the Annuitant at any time prior to the Annuity Date. To make a change, the Participant must send a written notice to Us at least 30 days before the Annuity Date. If the Participant is not an individual, the Participant may not change the Annuitant. DEATH OF ANNUITANT If the Participant and Annuitant are different and the Annuitant dies before the Annuity Date, the Participant becomes the Annuitant until such time as the Participant elects a new Annuitant. The preceding sentence shall not apply if the Participant is not an individual. MISSTATEMENT OF AGE OR SEX If the Age or sex of any Annuitant has been misstated, future annuity payments will be adjusted using the correct Age and sex, according to Our rates in effect on the date that annuity payments were determined. Any overpayment from the Fixed Account Options, plus interest at the rate of 4% per year, will be deducted from the next payment(s) due. Any underpayment from the Fixed Account Options, plus interest at the rate of 4% per year, will be paid in full with the next payment due. Any overpayment from the Subaccounts will be deducted from the next payment(s) due. Any underpayment from the Subaccounts will be paid in full with the next payment due. PROOF OF AGE, SEX, OR SURVIVAL The Company may require satisfactory proof of correct Age or sex at any time. If any payment under this Certificate depends on the Annuitant being alive, the Company may require satisfactory proof of survival. CONFORMITY WITH STATE LAWS The provisions of this Certificate will be interpreted by the laws of the state in which the enrollment form was signed or such state as is required by law. Any provision which, on the Certificate Date, is in conflict with the law of such state is amended to conform to the minimum requirements of such law. CHANGES IN LAW If the laws governing this Certificate or the taxation of benefits under the Certificate change, We reserve the right to amend this Certificate to comply with these changes. 13 ASSIGNMENT You may assign this Certificate before the Annuity Date, but We will not be bound by an assignment unless it is received by Us in writing. Your rights and those of any other person referred to in this Certificate will be subject to the assignment. Certain assignments may be taxable. We do not assume any responsibility for the validity or tax consequences of any assignment. CLAIMS OF CREDITORS To the extent permitted by law, no right or proceeds payable under this Certificate will be subject to claims of creditors or legal process. PREMIUM TAXES AND OTHER TAXES The Company may deduct from Your Certificate Value any premium tax or other taxes payable to a state or other government entity, if applicable. Should We advance any amount so due, We are not waiving any right to collect such amount at a later date. The Company will deduct any withholding taxes required by applicable law. WRITTEN NOTICE Any notice We send to You will be sent to Your address shown in the Participant Enrollment Form unless You request otherwise. Any written request or notice to Us must be sent to Our Annuity Service Center, as specified on the Certificate Data Page. PERIODIC REPORTS At least once during each Certificate Year, We will send You a statement of the account activity of the Certificate. The statement will include all transactions which have occurred during the accounting period shown on the statement. Statements of Your Certificate Value will cease to be provided to You after the Annuity Date. INCONTESTABILITY This Certificate will be incontestable from the Certificate Date. NONPARTICIPATING This Certificate does not share in Our surplus. DEATH PROVISIONS Notwithstanding any provision of this Certificate to the contrary, all payments of benefits under this Certificate will be made in a manner that satisfies IRC Section 72(s), as amended from time to time. If the Certificate is owned by a trust or other non-individual, We will treat the death of the Annuitant as the death of the "Primary Annuitant", as defined in IRC Section 72(s)(6), and as the death of any Participant. DEATH OF PARTICIPANT BEFORE THE ANNUITY DATE. We will pay a death benefit to the Beneficiary upon Our receiving: (a) due proof that a Participant died before the Annuity Date; and (b) an election form selecting the death benefit option. If no election form is received within 60 days of our receipt of due proof of death, the death benefit will be paid in accordance with death benefit option 1 below. The Beneficiary must select one of the following death benefit options: 14 1. Immediately collect the death benefit in a lump sum payment. If a lump sum payment is elected, payment will be in accordance with any applicable laws and regulations governing payments and death; or 2. Collect the death benefit in the form of one of the Annuity Payment Options. The payments must be over the life of the Beneficiary or over a period not extending beyond the life expectancy of the Beneficiary. Payments under this death benefit option must commence within one year after the Participant's death, otherwise, the death benefit will be paid in accordance with death benefit option 1; or 3. If the Beneficiary is the Participant's spouse, the Beneficiary may elect to become the Participant and continue the Certificate in force, however, no death benefit is paid. Upon the new Participant's subsequent death, the entire interest must be distributed immediately. In any event, the entire interest in the Certificate will be distributed within five years from the date of death of the Participant. DUE PROOF OF DEATH Due Proof of Death means: 1. a certified copy of a 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 Participant at the time of death; Or 4. any other proof satisfactory to Us. AMOUNT OF DEATH BENEFIT Before You attain age 75 the amount of the death benefit is equal to the greater of: 1. the Certificate Value at the end of the NYSE business day during which We receive, at Our Annuity Service Center, due proof of the Participant's death and an election of the type of payment to be made; Or 2. Purchase Payments less any partial withdrawals, compounded until the date of death at 3% interest, plus any Purchase Payments and less any withdrawals recorded after the date of death. After You attain age 75, the death benefit will be the greater of: 1. the Certificate Value at the end of the NYSE business day during which We receive, at Our Annuity Service Center, due proof of the Participant's death and an election of the type of payment to be made; Or 2. Purchase Payments less any partial withdrawals, compounded until the attainment of age 75 at 3% interest, plus any Purchase Payments and less any partial withdrawals recorded after the attainment of age 75. 15 DEATH OF PARTICIPANT OR ANNUITANT ON OR AFTER THE ANNUITY DATE. If the Participant or Annuitant dies on or after the Annuity Date and before the entire interest in the Certificate has been distributed, We will pay the remaining portion of the interest of the Certificate as under the annuity payment option being used on the date of death. For further information pertaining to death of the Annuitant, see ANNUITY PAYMENT OPTIONS. BENEFICIARY The Beneficiary is as designated on the Participant Enrollment Form unless later changed by the Participant. While: (a) the Participant is living and (b) before the Annuity Date, the Participant may change the Beneficiary by written notice in a form satisfactory to Us. The change will take effect on the date We record the notice subject to any payments We have made. If two or more persons are named: (a) those surviving the Participant will share equally unless otherwise stated; and (b) the Beneficiaries must elect to receive their respective portions of the death benefit according to the death benefit options. If the Annuitant survives the Participant, and there are no surviving Beneficiaries, the Annuitant will be deemed the Beneficiary. If the Participant is also the Annuitant and there are no surviving Beneficiaries at the death of the Participant, the death benefit will be paid to the estate of the Participant in accordance with death benefit option 1. ANNUITY PROVISIONS ANNUITY DATE The Participant selects an Annuity Date (the date on which annuity payments are to begin) at the time of application. The Participant may change the Annuity Date at any time, at least seven days prior to the Annuity Date, by written notice to the Company at its Annuity Service Center. The Annuity Date must always be the first day of the calendar month and must be at least two years after the Certificate Date, but not beyond the later of the Participant's 90th birthday or ten years after the Certificate Date. If the Participant is a non-natural person, the latest annuity date is the later of the Annuitant's 90th birthday or ten years after the Certificate Date. If no Annuity Date is selected, the Annuity Date will be the latest Annuity Date, as set by the Company. PAYMENTS TO PARTICIPANT Unless You request otherwise, We will make annuity payments to You. If You want the annuity payments to be made to some other Payee, We will make such payments subject to receipt of a written request filed at the Annuity Service Center no later than thirty (30) days before the date of the first annuity payment. Any such request is subject to the rights of any assignee. No payments available to or being paid to the Payee while the Annuitant is alive can be transferred, commuted, anticipated or encumbered. FIXED ANNUITY PAYMENTS If a Fixed Annuity payment option has been elected, the proceeds payable under this Certificate less any applicable premium taxes, shall be applied to the payment of the Fixed Annuity payment option elected at rates which are at least equal to the annuity rates based upon the applicable tables in the Certificate. In no event will the Fixed Annuity payments be changed once they begin. 16 AMOUNT OF FIXED ANNUITY PAYMENTS The amount of each Fixed Annuity payment will be determined by applying the portion of the Certificate Value allocated to Fixed Annuity payments less any applicable premium taxes to the annuity table applicable to the Fixed Annuity payment option chosen. AMOUNT OF VARIABLE ANNUITY PAYMENTS (a) FIRST VARIABLE ANNUITY PAYMENT: The dollar amount of the first Variable Annuity payment will be determined by applying the portion of the Certificate Value allocated to the Subaccount, less any applicable premium taxes, to the annuity table applicable to the Variable Annuity payment option chosen. If the Certificate Value is allocated to more than one Subaccount, the value of Your interest in each Subaccount is applied separately to the Variable Annuity payment option table to determine the amount of the first annuity payment attributable to each Subaccount. (b) NUMBER OF VARIABLE ANNUITY UNITS: The number of Annuity Units for each applicable Subaccount is the amount of the first annuity payment attributable to that Subaccount divided by the value of the applicable Annuity Unit for that Subaccount as of the Annuity Date. The number will not change as a result of investment experience. (c) VALUE OF EACH VARIABLE ANNUITY UNIT: The initial value of an Annuity Unit of each Subaccount was set at $10 when the Subaccounts were established. The value may increase or decrease from one month to the next. For any month, the value of an Annuity Unit of a particular Subaccount is the value of that Annuity Unit as of the last NYSE business day of the preceding month, multiplied by the Net Investment Factor for that Subaccount for the last NYSE business day of the current month. The Net Investment Factor for any Subaccount for a certain month is determined by dividing (1) by (2) where: (1) the Accumulation Unit Value of the Subaccount determined as of the last business day at the end of that month; (2) the Accumulation Unit value of the Subaccount determined as of the last business day at the end of the preceding month. The result is then multiplied by a factor that neutralizes the assumed investment rate of 3.5%. (d) SUBSEQUENT VARIABLE ANNUITY PAYMENTS: After the first Variable Annuity payment, payments will vary in amount according to the investment performance of the applicable Subaccount(s) to which your Purchase Payments are allocated. The amount may change from month to month. The amount of each subsequent payment for each Subaccount is: The number of Annuity Units for each Subaccount as determined for the first annuity payment MULTIPLIED BY The value of an Annuity Unit for that Subaccount at the end of the month immediately preceding the month in which payment is due. We guarantee that the amount of each Variable Annuity payment will not be affected by variations in expenses or mortality experience. 17 ANNUITY PAYMENT OPTIONS During the Annuitant's life, upon written election and the return of this Certificate to the Company at its Annuity Service Center, the Certificate Value may be applied to provide one of the following options or any annuity payment option that is mutually agreeable. After two years from the Certificate Date, and prior to the Annuity Date, You can choose one of the options described below. If no option has been elected by the Annuity Date, You will automatically receive Option 4 below with 120 monthly payments guaranteed. OPTIONS 1 & 1V - LIFE ANNUITY, LIFETIME MONTHLY PAYMENTS GUARANTEED Payments payable to a Payee during the lifetime of the Annuitant. No further payments are payable after the death of the Annuitant. OPTIONS 2 & 2V - JOINT AND SURVIVOR LIFE ANNUITY Payments payable to the Payee during the lifetime of the Annuitant and during the lifetime of a designated second person. No further payments are payable after the deaths of both the Annuitant and the designated second person. OPTIONS 3 & 3V - JOINT AND SURVIVOR LIFE ANNUITY - 120 MONTHLY PAYMENTS GUARANTEED Payments are payable to the Payee during the lifetime of the Annuitant and during the lifetime of a designated second person. If, at the death of the survivor, payments have been made for less than 120 monthly periods, the remaining guaranteed annuity payments will be continued to the Beneficiary. OPTIONS 4 & 4V - LIFE ANNUITY WITH 120 OR 240 MONTHLY PAYMENTS GUARANTEED Payments payable to the Payee during the lifetime of the Annuitant. If, at the death of the Annuitant, payments have been made for less than the 120 or 240 monthly periods, as selected at the time of annuitization, the remaining guaranteed annuity payments will be continued to the Beneficiary. OPTIONS 5 & 5V - FIXED PAYMENTS FOR A SPECIFIED PERIOD CERTAIN Payments payable to the Payee for any specified period of time for five (5) years or more, but not exceeding thirty (30) years, as selected at the time of annuitization. The selection must be made for full twelve month periods. In the event of death of the Annuitant, any remaining guaranteed annuity payments will be continued to the Beneficiary. 18 FIXED ANNUITY PAYMENT OPTIONS TABLE BASIS OF COMPUTATION The actuarial basis for the Fixed Annuity Payment Options Table is the 1983a Annuitant Mortality Table, without projection with a guaranteed interest rate of 3%. The Fixed Annuity Payment Options Table does not include any applicable premium tax. OPTIONS 1 & 4 - TABLE OF MONTHLY INSTALLMENTS PER $1,000. (Monthly installments for ages not shown will be furnished upon request.)
OPTION 1 OPTION 4 OPTION 4 AGE OF LIFE ANNUITY LIFE ANNUITY PAYEE LIFE ANNUITY (W/120 PAYMENTS GUARANTEED) (W/240 PAYMENTS GUARANTEED) MALE FEMALE MALE FEMALE MALE FEMALE 55 4.70 4.25 4.62 4.22 4.39 4.11 56 4.80 4.34 4.72 4.30 4.45 4.17 57 4.91 4.42 4.82 4.38 4.51 4.23 58 5.03 4.52 4.92 4.47 4.58 4.30 59 5.15 4.61 5.03 4.56 4.64 4.37 60 5.28 4.72 5.14 4.66 4.71 4.44 61 5.42 4.83 5.26 4.76 4.78 4.51 62 5.57 4.95 5.39 4.86 4.84 4.58 63 5.74 5.07 5.52 4.98 4.90 4.65 64 5.91 5.21 5.66 5.10 4.96 4.72 65 6.10 5.35 5.81 5.22 5.02 4.79 66 6.29 5.51 5.96 5.36 5.08 4.86 67 6.50 5.67 6.11 5.50 5.13 4.93 68 6.73 5.85 6.28 5.65 5.18 5.00 69 6.97 6.04 6.44 5.80 5.23 5.06 70 7.23 6.25 6.61 5.96 5.27 5.12 71 7.51 6.47 6.78 6.14 5.31 5.18 72 7.80 6.71 6.96 6.31 5.34 5.23 73 8.12 6.97 7.14 6.50 5.37 5.28 74 8.45 7.26 7.32 6.69 5.40 5.32 75 8.82 7.56 7.49 6.89 5.42 5.35 76 9.21 7.90 7.67 7.09 5.44 5.39 77 9.62 8.26 7.84 7.29 5.45 5.41 78 10.07 8.65 8.01 7.49 5.47 5.43 79 10.55 9.07 8.17 7.69 5.48 5.45 80 11.06 9.53 8.33 7.89 5.49 5.47 81 11.61 10.03 8.48 8.08 5.49 5.48 82 12.19 10.57 8.61 8.26 5.50 5.49 83 12.81 11.16 8.74 8.43 5.50 5.49 84 13.46 11.79 8.86 8.59 5.51 5.50 85 14.16 12.48 8.97 8.74 5.51 5.50
19 OPTION 2 - TABLE OF MONTHLY INSTALLMENTS PER $1,000. (MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST.) JOINT & 100% SURVIVOR LIFE ANNUITY
AGE OF MALE PAYEE AGE OF FEMALE PAYEE ----- ------------------- 55 60 65 70 75 80 85 55 3.88 4.06 4.23 4.38 4.50 4.58 4.63 60 3.99 4.24 4.49 4.72 4.91 5.06 5.16 65 4.07 4.38 4.72 5.07 5.39 5.65 5.84 70 4.14 4.50 4.93 5.40 5.89 6.34 6.68 75 4.18 4.58 5.08 5.68 6.37 7.07 7.68 80 4.21 4.64 5.19 5.90 6.78 7.77 8.76 85 4.23 4.67 5.26 6.04 7.07 8.36 9.78
OPTION 3 - TABLE OF MONTHLY INSTALLMENTS PER $1,000. (MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST) JOINT AND 100% SURVIVOR LIFE ANNUITY (W/120 PAYMENTS GUARANTEED)
AGE OF MALE PAYEE AGE OF FEMALE PAYEE ----- ------------------- 55 60 65 70 75 80 85 55 3.87 4.06 4.23 4.37 4.48 4.56 4.60 60 3.98 4.23 4.48 4.71 4.89 5.02 5.09 65 4.07 4.38 4.71 5.05 5.35 5.57 5.71 70 4.13 4.49 4.91 5.36 5.81 6.18 6.42 75 4.17 4.57 5.05 5.62 6.23 6.78 7.17 80 4.20 4.61 5.14 5.79 6.54 7.27 7.82 85 4.21 4.64 5.19 5.89 6.73 7.60 8.30
OPTION 5 - TABLE OF MONTHLY INSTALLMENTS PER $1,000. FIXED PAYMENT FOR SPECIFIED PERIOD
NUMBER MONTHLY NUMBER MONTHLY NUMBER MONTHLY NUMBER MONTHLY OF YEARS PAYMENT OF YEARS PAYMENT OF YEARS PAYMENT OF YEARS PAYMENT -------- ------- -------- ------- -------- ------- -------- ------- 10 9.61 17 6.23 24 4.84 11 8.86 18 5.96 25 4.71 5 17.91 12 8.24 19 5.73 26 4.59 6 15.14 13 7.71 20 5.51 27 4.47 7 13.16 14 7.26 21 5.32 28 4.37 8 11.68 15 6.87 22 5.15 29 4.27 9 10.53 16 6.53 23 4.99 30 4.18
20 VARIABLE ANNUITY PAYMENT OPTIONS TABLE BASIS OF COMPUTATION The actuarial basis for the Variable Annuity Payment Options Table is the 1983a Annuitant Mortality Table, without projection with an effective annual assumed investment rate of 3.5%. Variable Annuity Payment Options Table does not include any applicable Premium Tax. OPTIONS 1V& 4V - TABLE OF MONTHLY INSTALLMENTS PER $1,000 (Monthly installments for ages not shown will be furnished upon request.)
OPTION 1V OPTION 4V OPTION 4V AGE OF LIFE ANNUITY LIFE ANNUITY PAYEE LIFE ANNUITY (W/120 PAYMENTS GUARANTEED) (W/240 PAYMENTS GUARANTEED) MALE FEMALE MALE FEMALE MALE FEMALE 55 4.99 4.54 4.91 4.51 4.66 4.38 56 5.09 4.62 5.00 4.58 4.72 4.44 57 5.20 4.71 5.10 4.66 4.78 4.51 58 5.32 4.80 5.20 4.75 4.85 4.57 59 5.44 4.90 5.31 4.84 4.91 4.64 60 5.57 5.00 5.42 4.93 4.97 4.70 61 5.71 5.11 5.54 5.03 5.04 4.77 62 5.86 5.23 5.67 5.14 5.10 4.84 63 6.02 5.36 5.80 5.25 5.16 4.91 64 6.20 5.49 5.94 5.37 5.22 4.98 65 6.38 5.64 6.08 5.50 5.28 5.05 66 6.58 5.79 6.23 5.63 5.33 5.12 67 6.79 5.95 6.38 5.77 5.38 5.19 68 7.02 6.13 6.54 5.91 5.43 5.25 69 7.26 6.32 6.71 6.07 5.48 5.32 70 7.52 6.53 6.87 6.23 5.52 5.37 71 7.80 6.75 7.05 6.40 5.55 5.43 72 8.09 6.99 7.22 6.58 5.59 5.48 73 8.41 7.26 7.40 6.76 5.62 5.52 74 8.75 7.54 7.57 6.95 5.64 5.57 75 9.12 7.85 7.75 7.14 5.66 5.60 76 9.51 8.18 7.92 7.34 5.68 5.63 77 9.92 8.54 8.09 7.54 5.70 5.66 78 10.37 8.94 8.26 7.74 5.71 5.68 79 10.85 9.36 8.42 7.94 5.72 5.70 80 11.37 9.82 8.57 8.13 5.73 5.71 81 11.92 10.32 8.71 8.32 5.74 5.72 82 12.50 10.87 8.85 8.50 5.74 5.73 83 13.12 11.46 8.97 8.67 5.75 5.74 84 13.78 12.09 9.09 8.83 5.75 5.74 85 14.47 12.78 9.20 8.97 5.75 5.75
21 OPTION 2V - TABLE OF MONTHLY INSTALLMENTS PER $1,000. (MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST.) JOINT & 100% SURVIVOR LIFE ANNUITY
AGE OF MALE PAYEE AGE OF FEMALE PAYEE ----- ------------------- 55 60 65 70 75 80 85 55 4.16 4.34 4.51 4.66 4.78 4.86 4.92 60 4.27 4.51 4.76 4.99 5.19 5.33 5.44 65 4.35 4.66 4.99 5.34 5.66 5.92 6.11 70 4.42 4.78 5.20 5.67 6.16 6.60 6.96 75 4.47 4.86 5.35 5.95 6.63 7.33 7.95 80 4.50 4.92 5.46 6.17 7.04 8.04 9.02 85 4.52 4.95 5.53 6.31 7.34 8.63 10.05
OPTION 3V - TABLE OF MONTHLY INSTALLMENTS PER $1,000. (MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST) JOINT AND 100% SURVIVOR LIFE ANNUITY (W/120 PAYMENTS GUARANTEED)
AGE OF MALE PAYEE AGE OF FEMALE PAYEE ----- ------------------- 55 60 65 70 75 80 85 55 4.16 4.34 4.51 4.65 4.76 4.84 4.88 60 4.26 4.51 4.75 4.98 5.16 5.29 5.37 65 4.35 4.65 4.98 5.31 5.61 5.84 5.98 70 4.41 4.76 5.17 5.62 6.07 6.44 6.68 75 4.46 4.84 5.32 5.88 6.48 7.03 7.42 80 4.48 4.89 5.41 6.05 6.79 7.52 8.07 85 4.50 4.92 5.46 6.15 6.99 7.85 8.53
OPTION 5V - TABLE OF MONTHLY INSTALLMENTS PER $1,000. PAYMENTS FOR A SPECIFIED PERIOD
NUMBER MONTHLY NUMBER MONTHLY NUMBER MONTHLY NUMBER MONTHLY OF YEARS PAYMENT OF YEARS PAYMENT OF YEARS PAYMENT OF YEARS PAYMENT -------- ------- -------- ------- -------- ------- -------- ------- 10 9.83 17 6.47 24 5.09 11 9.09 18 6.20 25 4.96 5 18.12 12 8.46 19 5.97 26 4.84 6 15.35 13 7.94 20 5.75 27 4.73 7 13.38 14 7.49 21 5.56 28 4.63 8 11.90 15 7.10 22 5.39 29 4.53 9 10.75 16 6.76 23 5.24 30 4.45
22 ANCHOR NATIONAL LIFE INSURANCE COMPANY A STOCK COMPANY LOS ANGELES, CALIFORNIA ALLOCATED FIXED AND VARIABLE GROUP ANNUITY CERTIFICATE Nonparticipating 23 EX-4.B 6 INDIVIDUAL FIXED AND VARIABLE ANNUITY CONTRACT ANCHOR NATIONAL LIFE INSURANCE COMPANY A STOCK COMPANY LOS ANGELES, CALIFORNIA CONTRACT NUMBER P9999999999 OWNER JOHN DOE STATUTORY HOME OFFICE 2999 NORTH 44TH ST., STE 250 PHOENIX, AZ 85018 EXECUTIVE OFFICE 1 SUNAMERICA CENTER LOS ANGELES, CA 90067-6022 ANNUITY SERVICE CENTER P.O. BOX 54299 LOS ANGELES, CA 90054-0299 ANCHOR NATIONAL LIFE INSURANCE COMPANY ("We", "Us", the "Company", or "Anchor National") agrees to provide benefits to the Owner in accordance with the provisions set forth in this Contract and in consideration of the Owner's application and Purchase Payments We received. THE VALUE OF AMOUNTS ALLOCATED TO THE SEPARATE ACCOUNT DURING THE ACCUMULATION AND ANNUITY PERIODS IS NOT GUARANTEED. THE VALUE WILL INCREASE OR DECREASE BASED UPON THE INVESTMENT EXPERIENCE OF THE INVESTMENTS UNDERLYING THE SUBACCOUNTS YOU CHOOSE. THE CASH SURRENDER BENEFIT OF AMOUNTS ALLOCATED TO ANY FIXED-MVA ACCOUNT OPTION INCREASES OR DECREASES BASED ON THE APPLICATION OF THE MARKET VALUE ADJUSTMENT. THE UNADJUSTED CASH SURRENDER BENEFIT IS AVAILABLE FOR 30 DAYS AFTER THE END OF THE GUARANTEED PERIOD. THERE IS NO MARKET VALUE ADJUSTMENT FOR ANY CASH SURRENDER BENEFIT OF AMOUNTS ALLOCATED TO NON-MVA FIXED ACCOUNT OPTIONS. TEN DAY RIGHT TO EXAMINE CONTRACT - YOU MAY RETURN THIS CONTRACT TO OUR ANNUITY SERVICE CENTER OR TO THE AGENT THROUGH WHOM THE CONTRACT WAS PURCHASED WITHIN 10 DAYS AFTER YOU RECEIVE IT, IF YOU ARE NOT SATISFIED WITH IT. THE COMPANY WILL REFUND THE CONTRACT VALUE ON THE BUSINESS DAY DURING WHICH THE CONTRACT IS RECEIVED. UPON SUCH REFUND, THE CONTRACT SHALL BE VOID. THIS IS A LEGAL CONTRACT. READ IT CAREFULLY. /s/ SUSAN L. HARRIS /s/ ELI BROAD ____________________ ________________ SUSAN L. HARRIS ELI BROAD Secretary President INDIVIDUAL FIXED AND VARIABLE ANNUITY CONTRACT Nonparticipating 1 TABLE OF CONTENTS CONTRACT DATA PAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . .PAGE 3 PURCHASE PAYMENT ALLOCATION. . . . . . . . . . . . . . . . . . . . . . . .PAGE 4 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .PAGE 5 PURCHASE PAYMENT PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . .PAGE 7 Purchase Payments; Deferment of Payments; Suspension of Payments; Substitution of Investment Portfolios ACCUMULATION PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . .PAGE 8 Separate Account Accumulation Value; Number of Accumulation Units; Accumulation Unit Value (AUV); Fixed Account Accumulation Value; Fixed Account Guarantee Period Options And Interest Crediting ; Market Value Adjustment CHARGES AND DEDUCTIONS . . . . . . . . . . . . . . . . . . . . . . . . . PAGE 10 Contract Administration Charge; Withdrawal Charge; Expense Risk Charge; Distribution Expense Charge; Mortality Risk Charge TRANSFER PROVISION . . . . . . . . . . . . . . . . . . . . . . . . . . . PAGE 11 Transfers of Accumulation Units and Annuity Units Between Subaccounts; Transfers of Accumulation Units To and From the Fixed Account WITHDRAWAL PROVISION . . . . . . . . . . . . . . . . . . . . . . . . . . PAGE 12 Withdrawal Charge GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . PAGE 13 Entire Contract; Change of Annuitant; Death of Annuitant; Misstatement of Age or Sex; Proof of Age, Sex or Survival; Conformity With State Laws; Changes in Law; Assignment; Claims of Creditors; Premium Taxes and Other Taxes; Written Notice; Periodic Reports; Incontestability; Non-Participating DEATH PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . PAGE 14 Death of Owner Before the Annuity Date; Due Proof of Death; Amount of Death Benefit; Death of Owner or Annuitant on or After the Annuity Date; Beneficiary ANNUITY PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . PAGE 16 Annuity Date; Payments to Owner; Fixed Annuity Payments; Amount of Fixed Annuity Payments; Amount of Variable Annuity Payments ANNUITY PAYMENT OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . PAGE 18 FIXED ANNUITY PAYMENT OPTIONS TABLE. . . . . . . . . . . . . . . . . . . PAGE 19 VARIABLE ANNUITY PAYMENT OPTIONS TABLE . . . . . . . . . . . . . . . . . PAGE 21 2 CONTRACT DATA PAGE CONTRACT NUMBER: ANNUITY SERVICE CENTER: P9999999999 P.O. BOX 54299 LOS ANGELES, CA 90054-0299 OWNER: AGE AT ISSUE: JOHN DOE 35 ANNUITANT: FIRST PURCHASE PAYMENT: JOHN DOE $10,000.00 ANNUITY DATE: CONTRACT DATE: JULY 1, 2026 JULY 1, 1996 LATEST ANNUITY DATE: FIXED ACCOUNT - JULY 1, 2051 Minimum Guarantee Rate: (3.0%) BENEFICIARY: As stated in the application ANNUAL CONTRACT ADMINISTRATION CHARGE: $35.00 SEPARATE ACCOUNT: VARIABLE ANNUITY ACCOUNT FIVE FOR INQUIRIES CALL 1-800-445-SUN2 3 PURCHASE PAYMENT ALLOCATION SUBACCOUNTS 80.00% Growth Strategy 0.00% Moderate Growth Strategy 0.00% Balanced Growth Strategy 0.00% Conservative Growth Strategy FIXED ACCOUNT OPTIONS Guarantee Initial Period Interest Rate --------- ------------- 20.00% 1 Year Fixed Non-MVA 3.0% 0.00% 1 Year DCA Fixed Non-MVA 0.00% 3 Year Fixed MVA 0.00% 5 Year Fixed MVA 0.00% 7 Year Fixed MVA 0.00% 10 Year Fixed MVA 4 DEFINITIONS Defined in this section are some of the words and phrases used in this Contract. These terms are capitalized when used in the Contract. Other capitalized terms in the Contract refer to the captioned paragraph explaining that particular concept in the Contract. ACCUMULATION UNIT A unit of measurement used to compute the Contract Value in a Subaccount prior to the Annuity Date. AGE Age as of last birthday. ANNUITANT The natural person on whose life the annuity benefits under the Contract are based. The Annuitant is as named on the Contract Data Page. If the Contract is in force and the Annuitant is alive on the Annuity Date, We will begin payments to the Payee. ANNUITY DATE The date on which annuity payments to the Payee are to start. The Owner must specify the Annuity Date, which must be at least two years after the Contract Date. ANNUITY SERVICE CENTER As specified on the Contract Data Page. ANNUITY UNIT A unit of measurement used to compute annuity payments from the Subaccount. AUTOMATIC DOLLAR COST AVERAGING PROGRAM (DCA) You may authorize the automatic transfer of amounts at regular intervals from a source account to one or more Subaccounts (other than the source account). The source account may be either the One Year DCA Fixed Account Option or any of the Subaccounts. The unit values are determined on the dates of transfers. You may terminate DCA at any time. However, upon termination, any amounts remaining in the One Year DCA Fixed Account Option will be transferred to the One Year Fixed Account Option. We reserve the right to change the terms and conditions of the DCA program at any time. BENEFICIARY The Beneficiary is as designated on the application unless later changed by the Owner. CONTRACT DATE The date Your Contract is issued, as shown on the Contract Data Page. It is the date from which Contract Years and anniversaries are measured. CONTRACT VALUE The sum of: (1) Your share of the Subaccounts' Accumulation Unit values and (2) the value of amounts allocated to the Fixed Account Options. 5 CONTRACT YEAR A year starting from the Contract Date in one calendar year and ending on the day preceding the anniversary of such date in the succeeding calendar years. CONTRIBUTION YEAR A year starting from the date of the Purchase Payment in one calendar year and ending on the day preceding the anniversary of such date in the succeeding calendar years. CURRENT INTEREST RATE The rates of interest declared by Us applicable to allocations of Subsequent Purchase Payments to the Fixed Account Options. The Current Interest Rate will not be less than the Minimum Guarantee Rate as shown on the Contract Data Page. FIXED ACCOUNT OPTIONS The investment options under this Contract that are credited with a fixed rate of interest declared by the Company. All Purchase Payments allocated to the Fixed Account Options become part of the Company's general asset account. The general asset account contains all the assets of the Company except for the Separate Account and other segregated asset accounts. The Fixed Account Options for this Contract are shown on page 4. FIXED ANNUITY A series of periodic annuity payments of predetermined amounts that do not vary with investment experience. Such payments are made from the Company's general asset account. GUARANTEE PERIOD The period for which either the Initial Interest Rate, the Current Interest Rate or the Renewal Interest Rate is credited to the amounts allocated to the Fixed Account Options. INITIAL INTEREST RATE The rates of interest credited to the first Purchase Payment as described in the Accumulation Provisions section. The Initial Interest Rate for this Contract's first Purchase Payment is listed on page 4. The Initial Interest Rate may not be less than the Minimum Guarantee Rate as shown on the Contract Data Page. IRC The Internal Revenue Code of 1986, as amended, as the same may be amended or superseded. NYSE New York Stock Exchange OWNER The person or entity named in the Contract who is entitled to exercise all rights and privileges of ownership under the Contract. PAYEE The person receiving payment of annuity benefits under this Contract. 6 PURCHASE PAYMENTS Payments in U.S. currency made by or on behalf of the Owner to the Company for the Contract. RENEWAL INTEREST RATE The rate(s) of interest declared by Us applicable to transfers from the Subaccounts into any of the Fixed Account Options and to amounts previously allocated to a Fixed Account Option wherein the Guarantee Period has expired. The Renewal Interest Rate may not be less than the Minimum Guarantee Rate as shown on the Contract Data Page. SEPARATE ACCOUNT The segregated asset account named on the Contract Data Page. The Separate Account consists of several Subaccounts. The assets of the Separate Account are not comingled with the general assets and liabilities of the Company. Each Subaccount is not chargeable with liabilities arising out of any other Subaccount. The value of amounts allocated to the Subaccounts of the Separate Account is not guaranteed. SUBACCOUNT A variable investment option available under the Contract, comprising a division of the Separate Account. The available Subaccounts are shown on page 4. SUBSEQUENT PURCHASE PAYMENTS Purchase Payments made subsequent to the first Purchase Payment. VARIABLE ANNUITY A series of periodic annuity payments, which vary in amount according to the investment experience of one or more Subaccounts, as selected by You . WE, OUR, US, THE COMPANY Anchor National Life Insurance Company. YOU, YOUR The Owner. PURCHASE PAYMENT PROVISIONS PURCHASE PAYMENTS Purchase Payments are flexible. This means that, subject to Company declared minimums and maximums, You may change the amounts, frequency or timing of Purchase Payments. Purchase Payments may be allocated to the Fixed Account Options and one or more Subaccounts in accordance with instructions from You. We reserve the right to specify the minimum Purchase Payment that may be allocated to a Subaccount under the Contract. DEFERMENT OF PAYMENTS We may defer making payments from the Fixed Account Options for up to six (6) months. Interest, subject to state requirements, will be credited during the deferral period. 7 SUSPENSION OF PAYMENTS We may suspend or postpone any payments from the Subaccounts if any of the following occur: (a) the NYSE is closed, (b) trading on the NYSE is restricted, (c) an emergency exists such that it is not reasonably practical to dispose of or determine the value of the assets held in a Subaccount, or (d) the Securities and Exchange Commission, by order, so permits for the protection of Owners. Conditions in (b) and (c) will be decided by or in accordance with rules of the Securities and Exchange Commission. SUBSTITUTION OF INVESTMENT PORTFOLIOS If: (a) the shares of the underlying investment portfolios in which the Subaccounts invest should no longer be available for investment by the Separate Account; or (b) if further investment in the shares of an investment portfolio is no longer appropriate in view of the purpose of the Contract, then We may substitute shares of another underlying investment series, for shares already purchased, or to be purchased in the future by Purchase Payments under the Contract. No substitution of securities may take place without prior approval of the Securities and Exchange Commission and under such requirements as it may impose. ACCUMULATION PROVISIONS SEPARATE ACCOUNT ACCUMULATION VALUE The Separate Account Accumulation Value under the Contract shall be the sum of the values of the Accumulation Units held in the Subaccounts for the Owner. NUMBER OF ACCUMULATION UNITS For each Subaccount, the number of Accumulation Units is the sum of each Purchase Payment and transfer allocated to the Subaccount, reduced by premium taxes, if any: DIVIDED BY The Accumulation Unit Value for that Subaccount as of the NYSE business day in which the Purchase Payment or transfer amount is received. The number of Accumulation Units will be similarly adjusted for withdrawals, annuitizations, transfers, Contract Administration Charge and Withdrawal Charge. Adjustments will be made as of the end of the NYSE business day in which We receive all requirements for the transaction, as appropriate. 8 ACCUMULATION UNIT VALUE (AUV) The AUV of a Subaccount for any NYSE business day is calculated by subtracting (2) from (1) and dividing the result by (3) where: (1) is the total value at the end of the given NYSE business day of the assets attributable to the Accumulation Units of the Subaccount minus the total liabilities; (2) is the cumulative unpaid charge for assumption of Expense Risk, Distribution Expense and Mortality Risk charges (See CHARGES AND DEDUCTIONS); (3) is the number of Accumulation Units outstanding at the end of the given NYSE business day. FIXED ACCOUNT ACCUMULATION VALUE Under the Contract, the Fixed Account Accumulation Value shall be the sum of all monies allocated or transferred to the Fixed Account Option(s), reduced by any applicable premium taxes, plus all interest credited on the Fixed Account Option(s) during the period that the Contract has been in effect. This amount shall be adjusted for withdrawals, annuitizations, transfers, Contract Administration Charge and Withdrawal Charge. The Fixed Account Accumulation Value shall not be less than the minimum values required by law in the state where this Contract is issued. FIXED ACCOUNT GUARANTEE PERIOD OPTIONS AND INTEREST CREDITING Any amounts allocated to the Fixed Account Options from the first Purchase Payment will earn interest at the Initial Interest Rate for the Fixed Account Option(s) selected for the duration of the Guarantee Period. Subsequent Purchase Payments allocated to the Fixed Account Options will earn interest at the Current Interest Rate for the Fixed Account Option(s) selected for the duration of the Guarantee Period. Transfers to the Fixed Account Options from the Subaccounts and amounts renewed into the Fixed Account Options will earn interest at the Renewal Interest Rate for the Fixed Account Option(s) selected for the duration of the Guarantee Period. For thirty (30) days following the date of expiration of a Guarantee Period, You may renew for the same or any other Guarantee Period at the Renewal Interest Rate or You may transfer all or a portion of the amount to the Subaccounts. If the Owner does not specify a Guarantee Period at the time of renewal, We will select the same Guarantee Period as has just expired, crediting the Contract with the Renewal Interest Rate in effect on the date of expiration of the Guarantee Period, so long as such Guarantee Period does not extend beyond the Annuity Date. If a renewal occurs within one year of the latest Annuity Date, We will credit interest up to the Annuity Date at the Renewal Interest Rate for the One Year Fixed Account Option. If You are participating in the DCA program, Purchase Payments will be allocated to the One Year DCA Fixed Account Option. Upon termination of the DCA program, any amounts remaining in the One Year DCA Fixed Account Option will be transferred to the One Year Fixed Account Option. Such amounts will earn interest at the Renewal Interest Rate for the One Year Fixed Account Option. 9 MARKET VALUE ADJUSTMENT (MVA) Any payments and values based on a multi-year Fixed Account Option may be subject to a MVA, the operation of which may result in upward or downward adjustments in the Contract Value, if withdrawn, transferred or annuitized prior to the end of the respective Guarantee Period. The MVA will be calculated by multiplying the amount withdrawn, transferred or annuitized by the formula described below: N/12 {(1 + I)/(1+J+0.0050)} -1 I = The interest rate currently in effect for that Guarantee Period. J = The Initial Interest Rate available for the Guarantee Period equal to the number of years (rounded up to an integer) remaining in the current Guarantee Period at the time of withdrawal, transfer or annuitization. In the determination of J, if the Company currently does not offer the applicable Guarantee Period, then the rate will be determined by linear interpolation of the Initial Interest Rate for the nearest two Guarantee Periods that are available. N = The number of full months remaining in the current Guarantee Period at the time the withdrawal or annuitization request is processed. If a Withdrawal Charge is applied to a withdrawal, then the MVA will be applied to the withdrawal amount net of the Withdrawal Charge. There will be no MVA on withdrawals from the Fixed Account Options in the following situations: (1) to pay a Death Benefit paid upon death of the Owner; (2) on amounts withdrawn to pay fees or charges; (3) on amounts withdrawn from the Fixed Account Option within thirty (30) days after the end of the Guarantee Period; (4) on annuitizations on the Latest Annuity Date; (5) on amounts withdrawn from the One Year Fixed Account Option or the One Year DCA Fixed Account Option . CHARGES AND DEDUCTIONS We will deduct the following charges from the Contract: CONTRACT ADMINISTRATION CHARGE The charge specified on the Contract Data Page will be deducted on each Contract anniversary that occurs on or prior to the Annuity Date. It will also be deducted when the Contract Value is withdrawn in full if withdrawal is not on the Contract anniversary. We reserve the right to assess a charge on a class basis which is less than the charge specified on the Contract Data Page. WITHDRAWAL CHARGE This charge may be deducted upon withdrawal of the Contract Value, in whole or in part. See WITHDRAWAL PROVISIONS. EXPENSE RISK CHARGE On an annual basis this charge equals 0.35% of the average daily total net asset value of Your Purchase Payments allocated to the Subaccounts. This charge is to compensate Us for assuming the expense risks under the Contract. 10 DISTRIBUTION EXPENSE CHARGE On an annual basis this charge equals 0.15% of the average daily total net asset value of Your Purchase Payments allocated to the Subaccounts. This charge is to compensate Us for all distribution expenses associated with the Contract. MORTALITY RISK CHARGE On an annual basis this charge equals 0.90% of the average daily total net asset value of Your Purchase Payments allocated to the Subaccounts. This charge is to compensate Us for assuming the mortality risks under the Contract. TRANSFER PROVISION Prior to the Annuity Date, You may transfer all or part of Your Contract Value to any of the Subaccounts or the Fixed Account Options, subject to certain restrictions. We reserve the right to charge a fee for transfers if the number of transfers exceeds the limit specified by Us. TRANSFERS OF ACCUMULATION AND ANNUITY UNITS BETWEEN SUBACCOUNTS Prior to the Annuity Date, You may transfer all or a portion of Your Contract Value from one Subaccount to another Subaccount. A transfer will result in the purchase of Accumulation Units in a Subaccount and the redemption of Accumulation Units in the other Subaccount. Transfers will be effected at the end of the NYSE business day in which We receive Your completed request for the transfer. After the Annuity Date, You may transfer all or a portion of Your Contract Value from one Subaccount to another Subaccount. A transfer will result in the purchase of Annuity Units in a Subaccount and the redemption of Annuity Units in the other Subaccount. Transfers will be effected at the end of the NYSE business day in which We receive Your completed request for the transfer. The minimum amount that can be transferred between Subaccounts and the amount that can remain in the Subaccount are subject to Company limits. TRANSFERS OF ACCUMULATION UNITS TO AND FROM THE FIXED ACCOUNT Prior to the Annuity Date, You may transfer all or any part of Your Contract Value from the Subaccount(s) to the Fixed Account Options or from the Fixed Account Options to the Subaccount(s) of the Contract. However, You may only transfer to the One Year DCA Fixed Account Option if You are participating in the DCA program. After the Annuity Date, transfers into or out of the Fixed Account Options are not allowed. 11 WITHDRAWAL PROVISION On or before the Annuity Date and while the Owner is living, You may withdraw all or part of Your Contract Value under this Contract by informing Us at Our Annuity Service Center. For a full withdrawal, this Contract must be returned to Our Annuity Service Center. Without a written notice to the contrary, withdrawals will be deducted from the Contract Value in proportion to their allocation among the Fixed Account Options and the Subaccounts. Withdrawals will be based on values at the end of the NYSE business day in which the request for withdrawal and the Contract (in the case of a full withdrawal), are received at the Annuity Service Center. Unless the SUSPENSION OF PAYMENTS or DEFERMENT OF PAYMENTS sections are in effect, payment of withdrawals will be made within seven calendar days. WITHDRAWAL CHARGE Each Contract Year, the Owner may withdraw, free of a Withdrawal Charge, 10% of all Purchase Payments which are still subject to a Withdrawal Charge. Amounts withdrawn as a free withdrawal do not reduce Purchase Payments for purposes of calculating future free withdrawals. The Owner will not receive the benefit of a free withdrawal in a full surrender. Withdrawals in excess of this free withdrawal amount may be subject to a Withdrawal Charge. The withdrawal charge applied to any withdrawal will depend on the age of the Purchase Payment to which the withdrawal is attributed. See chart below. For the purpose of determining the Withdrawal Charge, a withdrawal will be attributed to amounts in the following order: (1) free withdrawal amount (partial withdrawals only); (2) Purchase Payments which are both no longer subject to the Withdrawal Charge and are not yet withdrawn; (3) Purchase Payments subject to a Withdrawal Charge; and (4) other Contract Value. Purchase Payments, when withdrawn, are assumed to be withdrawn on a first-in-first-out (FIFO) basis. Number of Contribution Years Elapsed Withdrawal Charge as a Between Contribution Year of Purchase Payment Percentage of Withdrawn and Contribution Year of Withdrawal Purchase Payment - -------------------------------------------------------------------------------- 1 7% 2 6% 3 6% 4 5% 5 4% 6 3% 7 2% 8+ 0% The Withdrawal Charge will be assessed against the Subaccounts and the Fixed Account Options in the same proportion as the remaining Contract Value is allocated unless You request that the withdrawal come from a particular Fixed Account Option or Subaccount. If the remaining Contract Value is insufficient to cover the Withdrawal Charge, any remaining balance will be deducted from the withdrawal amount requested. 12 GENERAL PROVISIONS ENTIRE CONTRACT The entire contract between You and Us consists of the application as completed by You at the time of purchase, this Contract and any attached endorsement(s). An agent cannot change the terms or conditions of this Contract. Any change must be in writing and approved by Us. Only Our President, Secretary, or one of Our Vice-Presidents can give Our approval. CHANGE OF ANNUITANT If the Owner is an individual, the Owner may change the Annuitant at any time prior to the Annuity Date. To make a change, the Owner must send a written notice to Us at least 30 days before the Annuity Date. If the Owner is not an individual, the Owner may not change the Annuitant. DEATH OF ANNUITANT If the Owner and Annuitant are different and the Annuitant dies before the Annuity Date, the Owner becomes the Annuitant until such time as the Owner elects a new Annuitant. The preceding sentence shall not apply if the Owner is not an individual. MISSTATEMENT OF AGE OR SEX If the Age or sex of any Annuitant has been misstated, future annuity payments will be adjusted using the correct Age and sex, according to Our rates in effect on the date that annuity payments were determined. Any overpayment from the Fixed Account Options, plus interest at the rate of 4% per year, will be deducted from the next payment(s) due. Any underpayment from the Fixed Account Options, plus interest at the rate of 4% per year, will be paid in full with the next payment due. Any overpayment from the Subaccounts will be deducted from the next payment(s) due. Any underpayment from the Subaccounts will be paid in full with the next payment due. PROOF OF AGE, SEX, OR SURVIVAL The Company may require satisfactory proof of correct Age or sex at any time. If any payment under this Contract depends on the Annuitant being alive, the Company may require satisfactory proof of survival. CONFORMITY WITH STATE LAWS The provisions of this Contract will be interpreted by the laws of the state in which the application was signed or such state as is required by law. Any provision which, on the Contract Date, is in conflict with the law of such state is amended to conform to the minimum requirements of such law. CHANGES IN LAW If the laws governing this Contract or the taxation of benefits under the Contract change, We reserve the right to amend this Contract to comply with these changes. 13 ASSIGNMENT You may assign this Contract before the Annuity Date, but We will not be bound by an assignment unless it is received by Us in writing. Your rights and those of any other person referred to in this Contract will be subject to the assignment. Certain assignments may be taxable. We do not assume any responsibility for the validity or tax consequences of any assignment. CLAIMS OF CREDITORS To the extent permitted by law, no right or proceeds payable under this Contract will be subject to claims of creditors or legal process. PREMIUM TAXES AND OTHER TAXES The Company may deduct from Your Contract Value any premium tax or other taxes payable to a state or other government entity, if applicable. Should We advance any amount so due, We are not waiving any right to collect such amount at a later date. The Company will deduct any withholding taxes required by applicable law. WRITTEN NOTICE Any notice We send to You will be sent to Your address shown in the application unless You request otherwise. Any written request or notice to Us must be sent to Our Annuity Service Center, as specified on the Contract Data Page. PERIODIC REPORTS At least once during each Contract Year, We will send You a statement of the account activity of the Contract. The statement will include all transactions which have occurred during the accounting period shown on the statement. Statements of Your Contract Value will cease to be provided to You after the Annuity Date. INCONTESTABILITY This Contract will be incontestable from the Contract Date. NONPARTICIPATING This Contract does not share in Our surplus. DEATH PROVISIONS Notwithstanding any provision of this Contract to the contrary, all payments of benefits under this Contract will be made in a manner that satisfies IRC Section 72(s), as amended from time to time. If the Contract is owned by a trust or other non-individual, We will treat the death of the Annuitant as the death of the "Primary Annuitant", as defined in IRC Section 72(s)(6), and as the death of any Owner. DEATH OF OWNER BEFORE THE ANNUITY DATE. We will pay a death benefit to the Beneficiary upon Our receiving: (a) due proof that a Owner died before the Annuity Date; and (b) an election form selecting the death benefit option. If no election form is received within 60 days of our receipt of due proof of death, the death benefit will be paid in accordance with death benefit option 1 below. The Beneficiary must select one of the following death benefit options: 14 1. Immediately collect the death benefit in a lump sum payment. If a lump sum payment is elected, payment will be in accordance with any applicable laws and regulations governing payments and death; or 2. Collect the death benefit in the form of one of the Annuity Payment Options. The payments must be over the life of the Beneficiary or over a period not extending beyond the life expectancy of the Beneficiary. Payments under this death benefit option must commence within one year after the Owner's death, otherwise, the death benefit will be paid in accordance with death benefit option 1; or 3. If the Beneficiary is the Owner's spouse, the Beneficiary may elect to become the Owner and continue the Contract in force, however, no death benefit is paid. Upon the new Owner's subsequent death, the entire interest must be distributed immediately. In any event, the entire interest in the Contract will be distributed within five years from the date of death of the Owner. DUE PROOF OF DEATH Due Proof of Death means: 1. a certified copy of a 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 Owner at the time of death; Or 4. any other proof satisfactory to Us. AMOUNT OF DEATH BENEFIT Before You attain age 75 the amount of the death benefit is equal to the greater of: 1. the Contract Value at the end of the NYSE business day during which We receive, at Our Annuity Service Center, due proof of the Owner's death and an election of the type of payment to be made; Or 2. Purchase Payments less any partial withdrawals, compounded until the date of death at 3% interest, plus any Purchase Payments and less any withdrawals recorded after the date of death. After You attain age 75, the death benefit will be the greater of: 1. the Contract Value at the end of the NYSE business day during which We receive, at Our Annuity Service Center, due proof of the Owner's death and an election of the type of payment to be made; Or 2. Purchase Payments less any partial withdrawals, compounded until the attainment of age 75 at 3% interest, plus any Purchase Payments and less any partial withdrawals recorded after the attainment of age 75. 15 DEATH OF OWNER OR ANNUITANT ON OR AFTER THE ANNUITY DATE. If the Owner or Annuitant dies on or after the Annuity Date and before the entire interest in the Contract has been distributed, We will pay the remaining portion of the interest of the Contract as under the annuity payment option being used on the date of death. For further information pertaining to death of the Annuitant, see ANNUITY PAYMENT OPTIONS. BENEFICIARY The Beneficiary is as designated on the application unless later changed by the Owner. While: (a) the Owner is living and (b) before the Annuity Date, the Owner may change the Beneficiary by written notice in a form satisfactory to Us. The change will take effect on the date We record the notice subject to any payments We have made. If two or more persons are named: (a) those surviving the Owner will share equally unless otherwise stated; and (b) the Beneficiaries must elect to receive their respective portions of the death benefit according to the death benefit options. If the Annuitant survives the Owner, and there are no surviving Beneficiaries, the Annuitant will be deemed the Beneficiary. If the Owner is also the Annuitant and there are no surviving Beneficiaries at the death of the Owner, the death benefit will be paid to the estate of the Owner in accordance with death benefit option 1. ANNUITY PROVISIONS ANNUITY DATE The Owner selects an Annuity Date (the date on which annuity payments are to begin) at the time of application. The Owner may change the Annuity Date at any time, at least seven days prior to the Annuity Date, by written notice to the Company at its Annuity Service Center. The Annuity Date must always be the first day of the calendar month and must be at least two years after the Contract Date, but not beyond the later of the Owner's 90th birthday or ten years after the Contract Date. If the Owner is a non-natural person, the latest annuity date is the later of the Annuitant's 90th birthday or ten years after the Contract Date. If no Annuity Date is selected, the Annuity Date will be the latest Annuity Date, as set by the Company. PAYMENTS TO OWNER Unless You request otherwise, We will make annuity payments to You. If You want the annuity payments to be made to some other Payee, We will make such payments subject to receipt of a written request filed at the Annuity Service Center no later than thirty (30) days before the date of the first annuity payment. Any such request is subject to the rights of any assignee. No payments available to or being paid to the Payee while the Annuitant is alive can be transferred, commuted, anticipated or encumbered. FIXED ANNUITY PAYMENTS If a Fixed Annuity payment option has been elected, the proceeds payable under this Contract less any applicable premium taxes, shall be applied to the payment of the Fixed Annuity payment option elected at rates which are at least equal to the annuity rates based upon the applicable tables in the Contract. In no event will the Fixed Annuity payments be changed once they begin. 16 AMOUNT OF FIXED ANNUITY PAYMENTS The amount of each Fixed Annuity payment will be determined by applying the portion of the Contract Value allocated to Fixed Annuity payments less any applicable premium taxes to the annuity table applicable to the Fixed Annuity payment option chosen. AMOUNT OF VARIABLE ANNUITY PAYMENTS (a) FIRST VARIABLE ANNUITY PAYMENT: The dollar amount of the first Variable Annuity payment will be determined by applying the portion of the Contract Value allocated to the Subaccount, less any applicable premium taxes, to the annuity table applicable to the Variable Annuity payment option chosen. If the Contract Value is allocated to more than one Subaccount, the value of Your interest in each Subaccount is applied separately to the Variable Annuity payment option table to determine the amount of the first annuity payment attributable to each Subaccount. (b) NUMBER OF VARIABLE ANNUITY UNITS: The number of Annuity Units for each applicable Subaccount is the amount of the first annuity payment attributable to that Subaccount divided by the value of the applicable Annuity Unit for that Subaccount as of the Annuity Date. The number will not change as a result of investment experience. (c) VALUE OF EACH VARIABLE ANNUITY UNIT: The initial value of an Annuity Unit of each Subaccount was set at $10 when the Subaccounts were established. The value may increase or decrease from one month to the next. For any month, the value of an Annuity Unit of a particular Subaccount is the value of that Annuity Unit as of the last NYSE business day of the preceding month, multiplied by the Net Investment Factor for that Subaccount for the last NYSE business day of the current month. The Net Investment Factor for any Subaccount for a certain month is determined by dividing (1) by (2) where: (1) the Accumulation Unit Value of the Subaccount determined as of the last business day at the end of that month; (2) the Accumulation Unit value of the Subaccount determined as of the last business day at the end of the preceding month. The result is then multiplied by a factor that neutralizes the assumed investment rate of 3.5%. (d) SUBSEQUENT VARIABLE ANNUITY PAYMENTS: After the first Variable Annuity payment, payments will vary in amount according to the investment performance of the applicable Subaccount(s) to which your Purchase Payments are allocated. The amount may change from month to month. The amount of each subsequent payment for each Subaccount is: The number of Annuity Units for each Subaccount as determined for the first annuity payment MULTIPLIED BY The value of an Annuity Unit for that Subaccount at the end of the month immediately preceding the month in which payment is due. We guarantee that the amount of each Variable Annuity payment will not be affected by variations in expenses or mortality experience. 17 ANNUITY PAYMENT OPTIONS During the Annuitant's life, upon written election and the return of this Contract to the Company at its Annuity Service Center, the Contract Value may be applied to provide one of the following options or any annuity payment option that is mutually agreeable. After two years from the Contract Date, and prior to the Annuity Date, You can choose one of the options described below. If no option has been elected by the Annuity Date, You will automatically receive Option 4 below with 120 monthly payments guaranteed. OPTIONS 1 & 1V - LIFE ANNUITY, LIFETIME MONTHLY PAYMENTS GUARANTEED Payments payable to a Payee during the lifetime of the Annuitant. No further payments are payable after the death of the Annuitant. OPTIONS 2 & 2V - JOINT AND SURVIVOR LIFE ANNUITY Payments payable to the Payee during the lifetime of the Annuitant and during the lifetime of a designated second person. No further payments are payable after the deaths of both the Annuitant and the designated second person. OPTIONS 3 & 3V - JOINT AND SURVIVOR LIFE ANNUITY - 120 MONTHLY PAYMENTS GUARANTEED Payments are payable to the Payee during the lifetime of the Annuitant and during the lifetime of a designated second person. If, at the death of the survivor, payments have been made for less than 120 monthly periods, the remaining guaranteed annuity payments will be continued to the Beneficiary. OPTIONS 4 & 4V - LIFE ANNUITY WITH 120 OR 240 MONTHLY PAYMENTS GUARANTEED Payments payable to the Payee during the lifetime of the Annuitant. If, at the death of the Annuitant, payments have been made for less than the 120 or 240 monthly periods, as selected at the time of annuitization, the remaining guaranteed annuity payments will be continued to the Beneficiary. OPTIONS 5 & 5V - FIXED PAYMENTS FOR A SPECIFIED PERIOD CERTAIN Payments payable to the Payee for any specified period of time for five (5) years or more, but not exceeding thirty (30) years, as selected at the time of annuitization. The selection must be made for full twelve month periods. In the event of death of the Annuitant, any remaining guaranteed annuity payments will be continued to the Beneficiary. 18 FIXED ANNUITY PAYMENT OPTIONS TABLE BASIS OF COMPUTATION The actuarial basis for the Fixed Annuity Payment Options Table is the 1983a Annuitant Mortality Table, without projection with a guaranteed interest rate of 3%. The Fixed Annuity Payment Options Table does not include any applicable premium tax. OPTIONS 1 & 4 - TABLE OF MONTHLY INSTALLMENTS PER $1,000. (Monthly installments for ages not shown will be furnished upon request.) OPTION 1 OPTION 4 OPTION 4 AGE OF LIFE ANNUITY LIFE ANNUITY PAYEE LIFE ANNUITY (W/120 PAYMENTS GUARANTEED) (W/240 PAYMENTS GUARANTEED) MALE FEMALE MALE FEMALE MALE FEMALE 55 4.70 4.25 4.62 4.22 4.39 4.11 56 4.80 4.34 4.72 4.30 4.45 4.17 57 4.91 4.42 4.82 4.38 4.51 4.23 58 5.03 4.52 4.92 4.47 4.58 4.30 59 5.15 4.61 5.03 4.56 4.64 4.37 60 5.28 4.72 5.14 4.66 4.71 4.44 61 5.42 4.83 5.26 4.76 4.78 4.51 62 5.57 4.95 5.39 4.86 4.84 4.58 63 5.74 5.07 5.52 4.98 4.90 4.65 64 5.91 5.21 5.66 5.10 4.96 4.72 65 6.10 5.35 5.81 5.22 5.02 4.79 66 6.29 5.51 5.96 5.36 5.08 4.86 67 6.50 5.67 6.11 5.50 5.13 4.93 68 6.73 5.85 6.28 5.65 5.18 5.00 69 6.97 6.04 6.44 5.80 5.23 5.06 70 7.23 6.25 6.61 5.96 5.27 5.12 71 7.51 6.47 6.78 6.14 5.31 5.18 72 7.80 6.71 6.96 6.31 5.34 5.23 73 8.12 6.97 7.14 6.50 5.37 5.28 74 8.45 7.26 7.32 6.69 5.40 5.32 75 8.82 7.56 7.49 6.89 5.42 5.35 76 9.21 7.90 7.67 7.09 5.44 5.39 77 9.62 8.26 7.84 7.29 5.45 5.41 78 10.07 8.65 8.01 7.49 5.47 5.43 79 10.55 9.07 8.17 7.69 5.48 5.45 80 11.06 9.53 8.33 7.89 5.49 5.47 81 11.61 10.03 8.48 8.08 5.49 5.48 82 12.19 10.57 8.61 8.26 5.50 5.49 83 12.81 11.16 8.74 8.43 5.50 5.49 84 13.46 11.79 8.86 8.59 5.51 5.50 85 14.16 12.48 8.97 8.74 5.51 5.50 19 OPTION 2 - TABLE OF MONTHLY INSTALLMENTS PER $1,000. (MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST.) JOINT & 100% SURVIVOR LIFE ANNUITY AGE OF MALE PAYEE AGE OF FEMALE PAYEE - ----- ------------------- 55 60 65 70 75 80 85 55 3.88 4.06 4.23 4.38 4.50 4.58 4.63 60 3.99 4.24 4.49 4.72 4.91 5.06 5.16 65 4.07 4.38 4.72 5.07 5.39 5.65 5.84 70 4.14 4.50 4.93 5.40 5.89 6.34 6.68 75 4.18 4.58 5.08 5.68 6.37 7.07 7.68 80 4.21 4.64 5.19 5.90 6.78 7.77 8.76 85 4.23 4.67 5.26 6.04 7.07 8.36 9.78 OPTION 3 - TABLE OF MONTHLY INSTALLMENTS PER $1,000. (MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST) JOINT AND 100% SURVIVOR LIFE ANNUITY (W/120 PAYMENTS GUARANTEED) AGE OF MALE PAYEE AGE OF FEMALE PAYEE - ----- ------------------- 55 60 65 70 75 80 85 55 3.87 4.06 4.23 4.37 4.48 4.56 4.60 60 3.98 4.23 4.48 4.71 4.89 5.02 5.09 65 4.07 4.38 4.71 5.05 5.35 5.57 5.71 70 4.13 4.49 4.91 5.36 5.81 6.18 6.42 75 4.17 4.57 5.05 5.62 6.23 6.78 7.17 80 4.20 4.61 5.14 5.79 6.54 7.27 7.82 85 4.21 4.64 5.19 5.89 6.73 7.60 8.30 OPTION 5 - TABLE OF MONTHLY INSTALLMENTS PER $1,000. FIXED PAYMENT FOR SPECIFIED PERIOD NUMBER MONTHLY NUMBER MONTHLY NUMBER MONTHLY NUMBER MONTHLY OF YEARS PAYMENT OF YEARS PAYMENT OF YEARS PAYMENT OF YEARS PAYMENT - -------- ------- -------- ------- -------- ------- -------- ------- 10 9.61 17 6.23 24 4.84 11 8.86 18 5.96 25 4.71 5 17.91 12 8.24 19 5.73 26 4.59 6 15.14 13 7.71 20 5.51 27 4.47 7 13.16 14 7.26 21 5.32 28 4.37 8 11.68 15 6.87 22 5.15 29 4.27 9 10.53 16 6.53 23 4.99 30 4.18 20 VARIABLE ANNUITY PAYMENT OPTIONS TABLE BASIS OF COMPUTATION The actuarial basis for the Variable Annuity Payment Options Table is the 1983a Annuitant Mortality Table, without projection with an effective annual assumed investment rate of 3.5%. Variable Annuity Payment Options Table does not include any applicable Premium Tax. OPTIONS 1V& 4V - TABLE OF MONTHLY INSTALLMENTS PER $1,000 (Monthly installments for ages not shown will be furnished upon request.) OPTION 1V OPTION 4V OPTION 4V AGE OF LIFE ANNUITY LIFE ANNUITY PAYEE LIFE ANNUITY (W/120 PAYMENTS GUARANTEED) (W/240 PAYMENTS GUARANTEED) MALE FEMALE MALE FEMALE MALE FEMALE ---- ------ ---- ------ ---- ------ 55 4.99 4.54 4.91 4.51 4.66 4.38 56 5.09 4.62 5.00 4.58 4.72 4.44 57 5.20 4.71 5.10 4.66 4.78 4.51 58 5.32 4.80 5.20 4.75 4.85 4.57 59 5.44 4.90 5.31 4.84 4.91 4.64 60 5.57 5.00 5.42 4.93 4.97 4.70 61 5.71 5.11 5.54 5.03 5.04 4.77 62 5.86 5.23 5.67 5.14 5.10 4.84 63 6.02 5.36 5.80 5.25 5.16 4.91 64 6.20 5.49 5.94 5.37 5.22 4.98 65 6.38 5.64 6.08 5.50 5.28 5.05 66 6.58 5.79 6.23 5.63 5.33 5.12 67 6.79 5.95 6.38 5.77 5.38 5.19 68 7.02 6.13 6.54 5.91 5.43 5.25 69 7.26 6.32 6.71 6.07 5.48 5.32 70 7.52 6.53 6.87 6.23 5.52 5.37 71 7.80 6.75 7.05 6.40 5.55 5.43 72 8.09 6.99 7.22 6.58 5.59 5.48 73 8.41 7.26 7.40 6.76 5.62 5.52 74 8.75 7.54 7.57 6.95 5.64 5.57 75 9.12 7.85 7.75 7.14 5.66 5.60 76 9.51 8.18 7.92 7.34 5.68 5.63 77 9.92 8.54 8.09 7.54 5.70 5.66 78 10.37 8.94 8.26 7.74 5.71 5.68 79 10.85 9.36 8.42 7.94 5.72 5.70 80 11.37 9.82 8.57 8.13 5.73 5.71 81 11.92 10.32 8.71 8.32 5.74 5.72 82 12.50 10.87 8.85 8.50 5.74 5.73 83 13.12 11.46 8.97 8.67 5.75 5.74 84 13.78 12.09 9.09 8.83 5.75 5.74 85 14.47 12.78 9.20 8.97 5.75 5.75 21 OPTION 2V - TABLE OF MONTHLY INSTALLMENTS PER $1,000. (MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST.) JOINT & 100% SURVIVOR LIFE ANNUITY AGE OF MALE PAYEE AGE OF FEMALE PAYEE - ----- ------------------- 55 60 65 70 75 80 85 55 4.16 4.34 4.51 4.66 4.78 4.86 4.92 60 4.27 4.51 4.76 4.99 5.19 5.33 5.44 65 4.35 4.66 4.99 5.34 5.66 5.92 6.11 70 4.42 4.78 5.20 5.67 6.16 6.60 6.96 75 4.47 4.86 5.35 5.95 6.63 7.33 7.95 80 4.50 4.92 5.46 6.17 7.04 8.04 9.02 85 4.52 4.95 5.53 6.31 7.34 8.63 10.05 OPTION 3V - TABLE OF MONTHLY INSTALLMENTS PER $1,000. (MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST) JOINT AND 100% SURVIVOR LIFE ANNUITY (W/120 PAYMENTS GUARANTEED) AGE OF MALE PAYEE AGE OF FEMALE PAYEE - ----- ------------------- 55 60 65 70 75 80 85 55 4.16 4.34 4.51 4.65 4.76 4.84 4.88 60 4.26 4.51 4.75 4.98 5.16 5.29 5.37 65 4.35 4.65 4.98 5.31 5.61 5.84 5.98 70 4.41 4.76 5.17 5.62 6.07 6.44 6.68 75 4.46 4.84 5.32 5.88 6.48 7.03 7.42 80 4.48 4.89 5.41 6.05 6.79 7.52 8.07 85 4.50 4.92 5.46 6.15 6.99 7.85 8.53 OPTION 5V - TABLE OF MONTHLY INSTALLMENTS PER $1,000. PAYMENTS FOR A SPECIFIED PERIOD NUMBER MONTHLY NUMBER MONTHLY NUMBER MONTHLY NUMBER MONTHLY OF YEARS PAYMENT OF YEARS PAYMENT OF YEARS PAYMENT OF YEARS PAYMENT - -------- ------- -------- ------- -------- ------- -------- ------- 10 9.83 17 6.47 24 5.09 11 9.09 18 6.20 25 4.96 5 18.12 12 8.46 19 5.97 26 4.84 6 15.35 13 7.94 20 5.75 27 4.73 7 13.38 14 7.49 21 5.56 28 4.63 8 11.90 15 7.10 22 5.39 29 4.53 9 10.75 16 6.76 23 5.24 30 4.45 22 ANCHOR NATIONAL LIFE INSURANCE COMPANY A STOCK COMPANY LOS ANGELES, CALIFORNIA INDIVIDUAL FIXED AND VARIABLE ANNUITY CONTRACT Nonparticipating 23 EX-4.C 7 PARTICIPANT ENROLLMENT FORM
Anchor National Life New Business Documents New Business Documents Insurance Company with checks: without checks: [Anchor National Logo] 1 Sun America Center P. O. Box 100330 P. O. Box 54299 Los Angeles, CA 90067-6022 Pasadena, CA 91189-0001 Los Angeles, CA 90054-0299 ____________________________________________________________________________________________________________________________________ PARTICIPANT ENROLLMENT FORM DO NOT USE HIGHLIGHTER. Please print or type. A. PARTICIPANT / /Mr. / /Mrs. / /Ms. / /Miss / /Dr. / /Sr. / /Jr. ___________________________________________________________________________________________________ LAST NAME/CUSTODIAN/TRUST/PLAN NAME FIRST NAME MIDDLE INITIAL ___________________________________________________________________________________________________ STREET ADDRESS CITY STATE ZIP CODE MO_________DAY_______YR_____ / /M_____/ /F____ __________________________ (____)______________ DATE OF BIRTH SEX SOC. SEC. OR TAX ID NUMBER TELEPHONE NUMBER JOINT ___________________________________________________________________________________________________ PARTICIPANT LAST NAME FIRST NAME MIDDLE INITIAL (If applicable, must be MO_________DAY_______YR.____ / /M_____/ /F___ ________________________________________________ spouse of Participant) DATE OF BIRTH SEX SOCIAL SECURITY OR TAX ID NUMBER B. ANNUITANT / /Mr. / /Mrs. / /Ms. / /Miss / /Dr./ /Sr./ /Jr. (Complete only if ___________________________________________________________________________________________________ different from Participant) LAST NAME FIRST NAME MIDDLE INITIAL ___________________________________________________________________________________________________ STREET ADDRESS CITY STATE ZIP CODE MO____DAY___YR.____ / /M_____/ /_____F____ __________________________ (____)______________ DATE OF BIRTH SEX SOC. SEC. OR TAX ID NUMBER TELEPHONE NUMBER C. BENEFICIARY PRIMARY/CONTINGENT ___________________________________________________________________________________________________ LAST NAME FIRST NAME MIDDLE INITIAL CIRCLE ONE PRIMARY/CONTINGENT ___________________________________________________________________________________________________ LAST NAME FIRST NAME MIDDLE INITIAL CIRCLE ONE D. TYPE OF / / NONQUALIFIED. If nonqualified, is this a 1035 Exchange? / / YES / / NO CONTRACT Is this a Transfer of Assets (funds to be transferred from a mutual fund, CD, etc.)? / / YES / / NO If either of the above is yes, please complete a "Request for Transfer or 1035 Exchange" (G-2500NB). / / QUALIFIED, as indicated below. Is this a direct transfer? / / YES / / NO If yes, please complete a "Request for Transfer or 1035 Exchange" (form G-2500NB). An appropriate retirement plan/prototype must be established for purposes of qualified monies / /SEP / / 403(b) / / Terminal funding_/ / 457 plan_/ / 401 retirement plan_ / / IRA Tax Year__________ / / IRA rollover/ / IRA transfer/ /Other_________________ PLEASE SPECIFY E. ANNUITY DATE MO.____ DAY____ YR.____ Date annuity payments begin. (Must be at least 2 years after the ANNUITY DATE Contract Date. Maximum age is the later of the Participant Age 90 or 10 years after Certificate Date. NOTE: If left blank that date will default to maximum for nonqualified and to 70 1/2 for qualified contracts.) F. PURCHASE / / INITIAL PAYMENT: $_____________________ PAYMENT(S) Minimum initial payment is [$5,000] for nonqualified contracts; [$2,000] for qualified contracts. Payments may be wired or mailed. Make check payable to Anchor National Life Insurance Company. / / AUTOMATIC PAYMENTS: $_____________________ To establish automatic bank drafts for future payments, include a completed "Automatic Payment Authorization" form (G-2233POS), and a voided check and the initial payment for the policy. G. SPECIAL / / SYSTEMATIC WITHDRAWAL: Check the box at left and include a "Systematic Withdrawal FEATURES Application" form (V-5550SW). / / AUTOMATIC DOLLAR COST AVERAGING: Check the box at left and include a completed "Dollar Cost Averaging Application" form (V-5551DCA). / / PRINCIPAL ADVANTAGE: Check the box at left. In section H, indicate the fixed account desired and specify other allocations as percentages. - ------------------------------------------------------------------------------------------------------------------------------------ PARTICIPANT ENROLLMENT FORM ANG-504 (8/96) SIDE 2 - ------------------------------------------------------------------------------------------------------------------------------------ H. INVESTMENT __________ Variable Investment Options___________ ___________ Fixed Account Options ___________ INSTRUCTIONS ________ Subaccounts ________ (Allocations must be _____% Growth Strategy ____% 1 yr. ____% 1 yr. DCA expressed in whole _____% Moderate Growth Strategy ____% 3 yr. ____% 5 yr. percentages and _____% Balanced Growth Strategy ____% 7 yr. ____% 10 yr. total allocations _____% Conservative Growth Strategy must equal 100%) I. TELEPHONE Do you wish to authorize telephone TRANSFERS, subject to the conditions set forth below?/ / YES / / NO TRANSFERS (If no election is indicated the Company will default to YES for transfers.) AUTHORIZATION If indicated above, I authorize the Company to accept telephone instructions for transfers in any amount among subaccounts from anyone providing proper identification subject to restrictions and limitations contained in the certificate and related prospectus, if any. I understand that I bear the risk of loss in the event of a telephone instruction not authorized by me. The Company will not be responsible for any losses resulting from unauthorized transactions if it follows reasonable procedures designed to verify the identity of the caller and therefore, the Company will record telephone conversations containing transaction instructions, request personal identification information before acting upon telephone instructions and send written confirmation statements of transactions to the address of record. J. SPECIAL INSTRUCTIONS _____________________________________________________________________________________________________________ K. STATEMENT OF This Contract / / WILL / / WILL NOT replace in whole or in part an existing life insurance or annuity contract. PARTICIPANT (If this will replace an existing policy, please indicate name of issuing company and contract number below.) _______________________________________________________ ______________________________________________ COMPANY NAME CONTRACT NUMBER I hereby represent my answers to the above questions to be correct and true to the best of my knowledge and belief and agree that this Application Form shall be a part of any Contract issued by the Company. I VERIFY MY UNDERSTANDING THAT THE VALUE OF PURCHASE PAYMENTS DIRECTED INTO THE VARIABLE INVESTMENT OPTIONS ARE VARIABLE AND NOT GUARANTEED AS TO DOLLAR AMOUNT. I UNDERSTAND THAT THE VALUE OF PURCHASE PAYMENTS DIRECTED INTO THE MULTI-YEAR FIXED ACCOUNT OPTIONS, IF PREMATURELY WITHDRAWN, MAY BE SUBJECT TO A MARKET VALUE ADJUSTMENT, WHICH MAY RESULT IN UPWARD AND DOWNWARD ADJUSTMENTS IN THE VALUE OF SUCH AMOUNTS. I ACKNOWLEDGE RECEIPT OF THE CURRENT PROSPECTUSES FOR SEASONS VARIABLE ANNUITY, SEASONS SERIES TRUST, VARIABLE INSURANCE PRODUCTS FUND AND VARIABLE INSURANCE PRODUCTS FUND II. I HAVE READ THEM CAREFULLY AND UNDERSTAND THEIR CONTENTS. Signed at ______________________________________________________ _________________________________________ CITY STATE DATE ______________________________________________________ _________________________________________ PARTICIPANT'S SIGNATURE REGISTERED REPRESENTATIVE'S SIGNATURE ______________________________________________________ JOINT PARTICIPANT'S SIGNATURE(IF APPLICABLE) L. LICENSED / Will this Contract replace in whole or in part any existing life insurance or annuity contract? / / YES / / NO REGISTERED ___________________________________________________________________________ ______________________________ REPRESENTATIVE REPRESENTATIVE'S LAST NAME FIRST NAME MIDDLE INITIAL SOC. SEC. NUMBER INFORMATION _____________________________________________________________________________ ______________________________ REPRESENTATIVE'S STREET ADDRESS CITY STATE ZIP CODE _______________________________________________________________________________ _____________________________ BROKER/DEALER FIRM NAME REPRESENTATIVE'S TELEPHONE NO. LICENSED AGENT ID NUMBER FRAUD WARNING: ANY PERSON WHO, WITH INTENT TO DEFRAUD OR KNOWING THAT HE IS FACILITATING A FRAUD AGAINST AN INSURER, SUBMITS AN APPLICATION OR FILES A CLAIM CONTAINING A FALSE OR DECEPTIVE STATEMENT MAY BE GUILTY OF INSURANCE FRAUD. OFFICE USE ONLY BOX ANA-505 (8/96)
EX-4.D 8 DEFERRED ANNUITY APPLICATION
Anchor National Life New Business Documents New Business Documents Insurance Company with checks: without checks: [LOGO] 1 Sun America Center P. O. Box 100330 P. O. Box 54299 Los Angeles, CA 90067-6022 Pasadena, CA 91189-0001 Los Angeles, CA 90054-0299 ____________________________________________________________________________________________________________________________________ DEFERRED ANNUITY APPLICATION DO NOT USE HIGHLIGHTER. Please print or type. A. OWNER / /Mr. / /Mrs. / /Ms. / /Miss / /Dr. / /Sr. / /Jr. ___________________________________________________________________________________________________ LAST NAME/CUSTODIAN/TRUST/PLAN NAME FIRST NAME MIDDLE INITIAL ___________________________________________________________________________________________________ STREET ADDRESS CITY STATE ZIP CODE MO_________DAY_______YR_____ / /M_____/ /F____ __________________________ (____)______________ DATE OF BIRTH SEX SOC. SEC. OR TAX ID NUMBER TELEPHONE NUMBER JOINT OWNER ___________________________________________________________________________________________________ (If any, must be LAST NAME FIRST NAME MIDDLE INITIAL spouse of Owner) MO_________DAY_______YR____ / /M_____/ /F___ ________________________________________________ DATE OF BIRTH SEX SOCIAL SECURITY OR TAX ID NUMBER B. ANNUITANT / /Mr. / /Mrs. / /Ms. / /Miss / /Dr. / /Sr. / /Jr. (Complete only if ___________________________________________________________________________________________________ different from Owner) LAST NAME FIRST NAME MIDDLE INITIAL ___________________________________________________________________________________________________ STREET ADDRESS CITY STATE ZIP CODE MO____DAY___YR.____ / /M_____/ /F____ __________________________ (____)______________ DATE OF BIRTH SEX SOC. SEC. OR TAX ID NUMBER TELEPHONE NUMBER C. BENEFICIARY PRIMARY/CONTINGENT ___________________________________________________________________________________________________ LAST NAME FIRST NAME MIDDLE INITIAL CIRCLE ONE PRIMARY/CONTINGENT ___________________________________________________________________________________________________ LAST NAME FIRST NAME MIDDLE INITIAL CIRCLE ONE D. TYPE OF / / NONQUALIFIED. If nonqualified, is this a 1035 Exchange? / / YES / / NO CONTRACT Is this a Transfer of Assets (funds to be transferred from a mutual fund, CD, etc.)? / / YES / / NO If either of the above is yes, please complete a "Request for Transfer or 1035 Exchange" (G-2500NB). / / QUALIFIED, as indicated below. Is this a direct transfer? / / YES / / NO If yes, please complete a "Request for Transfer or 1035 Exchange" (form G-2500NB). An appropriate retirement plan/prototype must be established for purposes of qualified monies / /SEP / / 403(b) / / Terminal funding / / 457 plan / / 401 retirement plan / / IRA Tax Year__________ / / IRA rollover / / IRA transfer / /Other_______________ PLEASE SPECIFY E. ANNUITY DATE MO.____ DAY____ YR.____ Date annuity payments begin. (Must be at least 2 years after the ANNUITY DATE Contract Date. Maximum age is the later of the Owner's Age 90 or 10 years after Contract Date. NOTE: If left blank that date will default to maximum for nonqualified and to 70 1/2 for qualified contracts.) F. PURCHASE / / INITIAL PAYMENT: $_____________________ PAYMENT(S) Minimum initial payment is [$5,000] for nonqualified contracts; [$2,000] for qualified contracts. Payments may be wired or mailed. Make check payable to Anchor National Life Insurance Company. / / AUTOMATIC PAYMENTS: $_____________________ To establish automatic bank drafts for future payments, include a completed "Automatic Payment Authorization" form (G-2233POS), and a voided check and the initial payment for the policy. G. SPECIAL / / SYSTEMATIC WITHDRAWAL: Check the box at left and include a "Systematic Withdrawal FEATURES Application" form (V-5550SW). / / AUTOMATIC DOLLAR COST AVERAGING: Check the box at left and include a completed "Dollar Cost Averaging Application" form (V-5551DCA). / / PRINCIPAL ADVANTAGE: Check the box at left. In section H, indicate the fixed account desired and specify other allocations as percentages. - ---------------------------------------------------------------------------------------------------------------------------------- DEFERRED ANNUITY APPLICATION ANA-505 (8/96) SIDE 2 - ---------------------------------------------------------------------------------------------------------------------------------- H. INVESTMENT __________ Variable Investment Options___________ ___________ Fixed Account Options ___________ INSTRUCTIONS ________ Subaccounts ________ (Allocations must be _____% Growth Strategy ____% 1 yr. ____% 1 yr. DCA expressed in whole _____% Moderate Growth Strategy ____% 3 yr. ____% 5 yr. percentages and _____% Balanced Growth Strategy ____% 7 yr. ____% 10 yr. total allocations _____% Conservative Growth Strategy must equal 100%) I. TELEPHONE Do you wish to authorize telephone TRANSFERS, subject to the conditions set forth below? / / YES / / NO TRANSFERS (If no election is indicated the Company will default to YES for transfers.) AUTHORIZATION If indicated above, I authorize the Company to accept telephone instructions for transfers in any amount among subaccounts from anyone providing proper identification subject to restrictions and limitations contained in the contract and related prospectus, if any. I understand that I bear the risk of loss in the event of a telephone instruction not authorized by me. The Company will not be responsible for any losses resulting from unauthorized transactions if it follows reasonable procedures designed to verify the identity of the caller and therefore, the Company will record telephone conversations containing transaction instructions, request personal identification information before acting upon telephone instructions and send written confirmation statements of transactions to the address of record. J. SPECIAL INSTRUCTIONS _____________________________________________________________________________________________________________ K. STATEMENT OF This Contract / / WILL / / WILL NOT replace in whole or in part an existing life insurance or annuity contract. OWNER (If this will replace an existing policy, please indicate name of issuing company and contract number below.) __________________________________ ____________________________________________________________________ COMPANY NAME CONTRACT NUMBER I hereby represent my answers to the above questions to be correct and true to the best of my knowledge and belief and agree that this Application Form shall be a part of any Contract issued by the Company. I verify my understanding that the value of purchase payments directed into the variable investment options are variable and not guaranteed as to dollar amount. I understand that the value of purchase payments directed into the multi-year fixed account options, if prematurely withdrawn, may be subject to a market value adjustment, which may result in upward and downward adjustments in the value of such amounts. I acknowledge receipt of the current prospectuses for Seasons Variable Annuity, Seasons Series Trust, Variable Insurance Products Fund and Variable Insurance Products Fund II. I have read them carefully and understand their contents. Signed at ______________________________________________________ _________________________________________ CITY STATE DATE ______________________________________________________ _________________________________________ OWNER'S SIGNATURE REGISTERED REPRESENTATIVE'S SIGNATURE ______________________________________________________ JOINT OWNER'S SIGNATURE(IF APPLICABLE) L. LICENSED / Will this Contract replace in whole or in part any existing life insurance or annuity contract? / / YES / / NO REGISTERED ___________________________________________________________________________ ______________________________ REPRESENTATIVE REPRESENTATIVE'S LAST NAME FIRST NAME MIDDLE INITIAL SOC. SEC. NUMBER INFORMATION ___________________________________________________________________________ ______________________________ REPRESENTATIVE'S STREET ADDRESS CITY STATE ZIP CODE ___________________________________ _____________________________________ ______________________________ BROKER/DEALER FIRM NAME REPRESENTATIVE'S TELEPHONE NO. LICENSED AGENT ID NUMBER FRAUD WARNING: ANY PERSON WHO, WITH INTENT TO DEFRAUD OR KNOWING THAT HE IS FACILITATING A FRAUD AGAINST AN INSURER, SUBMITS AN APPLICATION OR FILES A CLAIM CONTAINING A FALSE OR DECEPTIVE STATEMENT MAY BE GUILTY OF INSURANCE FRAUD. _________________________________________________________________________________________________________________ OFFICE USE ONLY BOX _________________________________________________________________________________________________________________
EX-5 9 EXHIBIT 5 - OPINION OF COUNSEL RE: LEGALITY Anchor National Life Insurance Company 1 SunAmerica Center Los Angeles, CA 90067-6022 310.772.6000 Mailing Address ANCHOR NATIONAL LOGO P.O. Box 54197 A SunAmerica Company Los Angeles, CA 90054-0197 VIA EDGAR - --------- January 15, 1997 Anchor National Life Insurance Company 1 SunAmerica Center Los Angeles, CA 90067 Ladies and Gentlemen: Referring to the Registration Statement on Form S-1 filed July 25, 1996 (the "Registration Statement") by Anchor National Life Insurance Company ("Anchor National") with the Securities and Exchange Commission, under the Securities Act of 1933, as amended, I am of the opinion that: 1) Anchor National is a duly organized and existing stock life insurance company under the laws of the State of Arizona; and 2) the annuity contracts being registered by the Registration Statement will, upon sale thereof, be legally issued, fully paid and nonassessable, and, to the extent that they are construed to constitute debt securities, will be binding obligations of Anchor National, except as enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting the rights of creditors generally. I am licensed to practice law only in the State of California, and the foregoing opinions are limited to the laws of the State of California, the general corporate law of the State of Arizona and federal law. I hereby consent to the filing of this opinion with the Securities and Exchange Commission in connection with the Registration Statement. Very truly yours, /s/ Susan L. Harris Susan L. Harris EX-21 10 EXHIBIT 21 - SUBISIDIARIES OF REGISTRANT EXHIBIT (14) SunAmerica Inc. (a Maryland corporation) owns 100% of SunAmerica Funding Corp. (a Delaware corporation); SunAmerica Financial, Inc. (a Georgia corporation); Resources Trust Company (a Colorado corporation); SunAmerica Life Insurance Company (an Arizona corporation); Imperial Premium Finance, Inc. (a Delaware corporation); IPF Funding Corp. (a Delaware corporation); SA Investment Group, Inc. (a California corporation); SunAmerica Capital Trust I (a Delaware business trust); SunAmerica Capital Trust II (a Delaware business trust); SunAmerica Capital Trust III (a Delaware business trust); SunAmerica Capital Trust IV (a Delaware business trust); SunAmerica Capital Trust V (a Delaware business trust); SunAmerica Capital Trust VI (a Delaware business trust); SunAmerica Affordable Housing Finance Corp. (a Delaware corporation); Stanford Ranch, Inc. (a Delaware corporation), which owns 100% of Stanford Ranch, Inc. (a California corporation). In addition, SunAmerica Inc. owns 80% of AMSUN Realty Holdings (a California corporation); and 33% of New California Life Holdings, Inc. (a Delaware corporation) which owns 100% of Aurora National Life Assurance Company (a California corporation). SunAmerica Financial, Inc. owns 100% of SunAmerica Marketing, Inc. (a Maryland corporation); SunAmerica Advertising, Inc. (a Georgia corporation); SunAmerica Investments, Inc. (a Delaware corporation) which owns 100% of Accelerated Capital Corp. (a Florida corporation; 1401 Sepulveda Corp. (a California corporation); SunAmerica Louisiana Properties, Inc. (a California corporation); SunAmerica Real Estate and Office Administration, Inc. (a Delaware corporation); SunAmerica Affordable Housing Partners, Inc. (a California corporation); SUN- PLA, Inc. (a California corporation); Hampden I & II Corp. (a California corporation); Sunport Holdings, Inc. (a California corporation) which owns 100% of Sunport Property Co. (a Florida corporation); Sun Chino Property, Inc. (a California corporation); SunAmerica Mortgages, Inc. (a Delaware corporation); Sun Princeton II, Inc. (a California corporation) which owns 100% of Sun Princeton I (a California corporation); Advantage Capital Corporation (a New York corporation); SunAmerica Planning, Inc. (a Maryland corporation); SunAmerica Company (Cayman), Ltd., a Cayman Islands corporation; Sun Mexico Holdings, Inc. (a Delaware corporation) which owns 100% of Sun Cancun I, Inc. (a Delaware corporation), Sun Cancun II, Inc. (a Delaware corporation), Sun Ixtapa I, Inc. (a Delaware corporation) and Sun Ixtapa II, Inc. (a Delaware corporation); Sun Hechs, Inc. (a California corporation); and SunAmerica Travel Services, Inc. (a California corporation); SAI Investment Adviser, Inc. (a Delaware corporation); Sun GP Corp. (a California corporation), and 70% of Home Systems Partners (a California limited partnership) which owns 100% of Extraneous Holdings Corp. (a Delaware corporation). SunAmerica Planning, Inc. owns 100% of SunAmerica Securities, Inc. (a Delaware corporation) which owns 100% of Anchor Insurance Services, Inc. (a Hawaii corporation). SunAmerica Life Insurance Company owns 100% of First SunAmerica Life Insurance Company (a New York corporation); SunAmerica National Life Insurance Company (an Arizona corporation); Anchor National Life Insurance Company (a California corporation) which owns 100% of Anchor Pathway Fund, Anchor Series Trust, SunAmerica Series Trust (all Massachusetts business trusts); UG Corporation (a Georgia corporation); Export Leasing FSC, Inc. (a U.S. Virgin Islands corporation); SunAmerica Virginia Properties, Inc. (a California corporation); SAL Investment Group (a California corporation); CalFarm Life Insurance Company (a California corporation); and Saamsun Holding Corporation (a Delaware corporation). Saamsun Holding Corporation owns 100% of SAM Holdings Corporation (a California corporation) which owns 100% of SunAmerica Asset Management Corp. (a Delaware corporation), Anchor Investment Adviser, Incorporated (a Maryland corporation), SunAmerica Capital Services, Inc. (a Delaware corporation); SunAmerica Fund Services, Inc. (a Delaware corporation), ANF Property Holdings, Inc. (a California corporation), Capitol Life Mortgage Corp. (a Delaware corporation) and Sun Royal Holdings Corporation (a California corporation). Sun Royal Holdings Corporation and Anchor Insurance Services, Inc. each owns 50% of Royal Alliance Associates, Inc. (a Delaware corporation). In addition, SunAmerica Life Insurance Company owns 80% of SunAmerica Realty Partners (a California corporation) and 33% of New California Life Holdings, Inc. (a Delaware corporation) which owns 100% of Aurora National Life Assurance Company (a California corporation) and Premier Life Insurance Company (a Pennsylvania corporation); and 88.75% of Sun Quorum L.L.C. (a Delaware limited liability company). Imperial Premium Finance, Inc. (Delaware) owns 100% of Imperial Premium Finance, Inc. (a California corporation); Imperial Premium Funding, Inc. (a Delaware corporation); and SunAmerica Financial Resources, Inc. (a Delaware corporation). Updated As of 12/31/96 EX-23.A 11 CONSENT OF INDEPENDENT ACCOUNTANTS EXHIBIT 23(A) CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in the Prospectus constituting part of this Registration Statement on Form S-1 of our report dated November 8, 1996 relating to the consolidated financial statements of Anchor National Life Insurance Company, which appears in such Prospectus. We also consent to the reference to us under the heading "Independent Accountants" in such Prospectus. PRICE WATERHOUSE LLP Los Angeles, California March 7, 1997 EX-23.B 12 EXHIBIT 23(B) - CONSENT OF ATTORNEY Anchor National Life Insurance Company 1 SunAmerica Center Los Angeles, CA 90067-6022 310.772.6000 Mailing Address ANCHOR NATIONAL LOGO P.O. Box 54197 A SunAmerica Company Los Angeles, CA 90054-0197 VIA EDGAR - --------- January 15, 1997 Anchor National Life Insurance Company 1 SunAmerica Center Los Angeles, CA 90067 Ladies and Gentlemen: Referring to the Registration Statement on Form S-1 filed July 25, 1996 (the "Registration Statement") by Anchor National Life Insurance Company ("Anchor National") with the Securities and Exchange Commission, under the Securities Act of 1933, as amended, I am of the opinion that: 1) Anchor National is a duly organized and existing stock life insurance company under the laws of the State of Arizona; and 2) the annuity contracts being registered by the Registration Statement will, upon sale thereof, be legally issued, fully paid and nonassessable, and, to the extent that they are construed to constitute debt securities, will be binding obligations of Anchor National, except as enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting the rights of creditors generally. I am licensed to practice law only in the State of California, and the foregoing opinions are limited to the laws of the State of California, the general corporate law of the State of Arizona and federal law. I hereby consent to the filing of this opinion with the Securities and Exchange Commission in connection with the Registration Statement. Very truly yours, /s/ Susan L. Harris Susan L. Harris EX-27 13 FINANCIAL DATA SCHEDULE
7 THIS SCHEDULE CONTAINS SUMMARY FINANICAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AND INCOME STATEMENT OF ANCHOR NATIONAL LIFE INSURANCE COMPANY'S FORM 10-Q FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS SEP-30-1996 DEC-31-1996 2,281,527,000 0 0 3,842,000 120,680,000 24,000,000 2,703,683,000 196,142,000 0 461,637,000 10,025,708,000 2,445,744,000 0 0 0 35,903,000 0 0 3,511,000 526,611,000 10,025,708,000 0 45,773,000 (19,116,000) 44,820,000 31,229,000 13,817,000 (837,000) 4,946,000 1,600,000 3,346,000 0 0 0 3,346,000 0 0 0 0 0 0 0 0 0
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