0000950148-01-502014.txt : 20011026
0000950148-01-502014.hdr.sgml : 20011026
ACCESSION NUMBER: 0000950148-01-502014
CONFORMED SUBMISSION TYPE: 424B3
PUBLIC DOCUMENT COUNT: 1
FILED AS OF DATE: 20011019
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: ANCHOR NATIONAL LIFE INSURANCE CO
CENTRAL INDEX KEY: 0000006342
STANDARD INDUSTRIAL CLASSIFICATION: []
IRS NUMBER: 860198983
STATE OF INCORPORATION: AZ
FISCAL YEAR END: 0930
FILING VALUES:
FORM TYPE: 424B3
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-65953
FILM NUMBER: 1762535
BUSINESS ADDRESS:
STREET 1: 1 SUNAMERICA CENTER
STREET 2: C/O THOMAS B PHILLIPS
CITY: LOS ANGELES
STATE: CA
ZIP: 90067
BUSINESS PHONE: 3107726000
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
424B3
1
v75682b3e424b3.txt
424(B)(3)
As filed pursuant to Rule 424(b)(3)
under the Securities Act of 1933
Registration No. 333-65953
[POLARIS(II) A-CLASS LOGO]
PROSPECTUS
OCTOBER 15, 2001
Please read this prospectus carefully FLEXIBLE PAYMENT DEFERRED ANNUITY CONTRACTS
before investing and keep it for issued by
future reference. It contains ANCHOR NATIONAL LIFE INSURANCE COMPANY
important information about the in connection with
Polaris(II) A-Class Variable Annuity. VARIABLE ANNUITY ACCOUNT SEVEN
The annuity has 40 investment choices -- 7 fixed account
To learn more about the annuity options and 33 Variable Portfolios listed below. The 7 fixed
offered by this prospectus, you can account options include specified periods of 1, 3, 5, 7 and
obtain a copy of the Statement of 10 years and DCA accounts for 6-month and 1-year periods.
Additional Information ("SAI") dated The 33 Variable Portfolios are part of the Anchor Series
October 15, 2001. The SAI is on file Trust ("AST"), the SunAmerica Series Trust ("SST") and the
with the Securities and Exchange Van Kampen Life Investment Trust ("VKT").
Commission ("SEC") and is
incorporated by reference into this STOCKS:
prospectus. The Table of Contents of MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
the SAI appears on page 25 of this - Alliance Growth Portfolio SST
prospectus. For a free copy of the - Global Equities Portfolio SST
SAI, call us at (800) 445-SUN2 or - Growth-Income Portfolio SST
write to us at our Annuity Service MANAGED BY DAVIS SELECTED ADVISERS L.P.
Center, P.O. Box 54299, Los Angeles, - Davis Venture Value Portfolio SST
California 90054-0299. - Real Estate Portfolio SST
MANAGED BY FEDERATED INVESTORS L.P.
In addition, the SEC maintains a - Federated Value Portfolio SST
website (http://www.sec.gov) that - Telecom Utility Portfolio SST
contains the SAI, materials MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
incorporated by reference and other - Goldman Sachs Research Portfolio SST
information filed electronically with MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
the SEC by Anchor National. - MFS Growth & Income Portfolio SST
- MFS Mid-Cap Growth Portfolio SST
Annuities involve risks, including MANAGED BY MORGAN STANLEY INVESTMENT MANAGEMENT INC.
possible loss of principal. Annuities - International Diversified Equities Portfolio SST
are not a deposit or obligation of, - Technology Portfolio SST
or guaranteed or endorsed by, any MANAGED BY PUTNAM INVESTMENT MANAGEMENT INC.
bank. They are not Federally insured - Emerging Markets Portfolio SST
by the Federal Deposit Insurance - International Growth & Income Portfolio SST
Corporation, the Federal Reserve - Putnam Growth Portfolio SST
Board or any other agency. MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP.
- Aggressive Growth Portfolio SST
- Blue Chip Growth Portfolio SST
- "Dogs" of Wall Street Portfolio SST
- Growth Opportunities Portfolio SST
MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP
- Capital Appreciation Portfolio AST
- Growth Portfolio AST
MANAGED BY VAN KAMPEN ASSET MANAGEMENT INC.
- Van Kampen LIT Comstock Portfolio, Class II Shares VKT
- Van Kampen LIT Emerging Growth Portfolio, Class II
Shares VKT
- Van Kampen LIT Growth and Income Portfolio, Class II
Shares VKT
BALANCED:
MANAGED BY WM ADVISORS, INC.
- Asset Allocation Portfolio SST
MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
- MFS Total Return Portfolio SST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP.
- SunAmerica Balanced Portfolio SST
BONDS:
MANAGED BY FEDERATED INVESTORS L.P.
- Corporate Bond Portfolio SST
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT INT'L.
- Global Bond Portfolio SST
MANAGED BY MORGAN STANLEY INVESTMENT MANAGEMENT INC.
- Worldwide High Income Portfolio SST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP.
- High-Yield Bond Portfolio SST
MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP
- Government & Quality Bond Portfolio AST
CASH:
MANAGED BY BANC OF AMERICA CAPITAL MANAGEMENT, LLC
- Cash Management Portfolio SST
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.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
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Anchor National's Annual Report on Form 10-K for the year ended December 31,
2000.
All documents or reports filed by Anchor National under Section 13(a), 13(c),
14, or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") after the effective date of this prospectus are also incorporated by
reference. Statements contained in this prospectus and subsequently filed
documents which are incorporated by reference or deemed to be incorporated by
reference are deemed to modify or supersede documents incorporated herein by
reference.
Anchor National files its Exchange Act documents and reports, including its
annual and quarterly reports on Form 10-K and Form 10-Q, electronically pursuant
to EDGAR under CIK No. 0000006342.
Anchor National is subject to the informational requirements of the Securities
and Exchange Act of 1934 (as amended). We file reports and other information
with the SEC to meet those requirements. You can inspect and copy this
information at SEC public facilities at the following locations:
WASHINGTON, DISTRICT OF COLUMBIA
450 Fifth Street, N.W., Room 1024
Washington, D.C. 20549
CHICAGO, ILLINOIS
500 West Madison Street
Chicago, IL 60661
To obtain copies by mail contact the Washington, D.C. location. After you pay
the fees as prescribed by the rules and regulations of the SEC, the required
documents are mailed.
Registration statements under the Securities Act of 1933, as amended, related to
the contracts offered by this prospectus are on file with the SEC. This
prospectus does not contain all of the information contained in the registration
statements and exhibits. For further information regarding the separate account,
Anchor National and its general account, the Variable Portfolios and the
contract, please refer to the registration statements and exhibits.
The SEC also maintains a website (http://www.sec.gov) that contains the SAI,
materials incorporated by reference and other information filed electronically
with the SEC by Anchor National.
Anchor National will provide without charge to each person to whom this
prospectus is delivered, upon written or oral request, a copy of the above
documents incorporated by reference. Requests for these documents should be
directed to Anchor National's Annuity Service Center, as follows:
Anchor National Life Insurance Company
Annuity Service Center
P.O. Box 54299
Los Angeles, California 90054-0299
Telephone Number: (800) 445-SUN2
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SECURITIES AND EXCHANGE COMMISSION POSITION ON INDEMNIFICATION
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Indemnification for liabilities arising under the Securities Act of 1933 (the
"Act") is provided to Anchor National's officers, directors and controlling
persons. The SEC has advised that it believes such indemnification is against
public policy under the Act and unenforceable. If a claim for indemnification
against such liabilities (other than for Anchor National's payment of expenses
incurred or paid by its directors, officers or controlling persons in the
successful defense of any legal action) is asserted by a director, officer or
controlling person of Anchor National in connection with the securities
registered under this prospectus, Anchor National will submit to a court with
jurisdiction to determine whether the indemnification is against public policy
under the Act. Anchor National will be governed by final judgment of the issue.
However, if in the opinion of Anchor National's counsel this issue has been
determined by controlling precedent, Anchor National will not submit the issue
to a court for determination.
2
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TABLE OF CONTENTS
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 2
SECURITIES AND EXCHANGE COMMISSION POSITION ON
INDEMNIFICATION........................................... 2
GLOSSARY.................................................... 3
HIGHLIGHTS.................................................. 4
FEE TABLES.................................................. 5
Owner Transaction Expenses............................ 5
Sales Charge.......................................... 5
Transfer Fee.......................................... 5
Contract Maintenance Fee.............................. 5
Annual Separate Account Expenses...................... 5
Optional EstatePlus Fee............................... 5
Portfolio Expenses.................................... 5
EXAMPLES.................................................... 7
THE POLARIS(II) A-CLASS VARIABLE ANNUITY.................... 8
PURCHASING A POLARIS(II) A-CLASS VARIABLE ANNUITY........... 8
Allocation of Purchase Payments....................... 9
Accumulation Units.................................... 9
Free Look............................................. 9
INVESTMENT OPTIONS.......................................... 10
Variable Portfolios................................... 10
Anchor Series Trust................................... 10
SunAmerica Series Trust............................... 10
Van Kampen Life Investment Trust...................... 10
Fixed Account Options................................. 11
Market Value Adjustment ("MVA")....................... 11
Transfers During the Accumulation Phase............... 11
Dollar Cost Averaging................................. 12
Asset Allocation Rebalancing Program.................. 13
Principal Advantage Program........................... 13
Voting Rights......................................... 13
Substitution.......................................... 13
ACCESS TO YOUR MONEY........................................ 14
Systematic Withdrawal Program......................... 14
Minimum Contract Value................................ 14
DEATH BENEFIT............................................... 14
Purchase Payment Accumulation Option.................. 15
Maximum Anniversary Option............................ 15
EstatePlus............................................ 15
Spousal Continuation.................................. 16
EXPENSES.................................................... 16
Insurance Charges..................................... 16
Sales Charge.......................................... 17
Reducing Your Sales Charges........................... 17
Letter of Intent...................................... 17
Rights of Accumulation................................ 18
Purchase Payments Subject to a Withdrawal Charge...... 18
Investment Charges.................................... 19
Transfer Fee.......................................... 19
Optional EstatePlus Fee............................... 19
Premium Tax........................................... 19
Income Taxes.......................................... 19
Reduction or Elimination of Charges and Expenses, and
Additional Amounts Credited......................... 19
INCOME OPTIONS.............................................. 19
Annuity Date.......................................... 19
Income Options........................................ 19
Fixed or Variable Income Payments..................... 20
Income Payments....................................... 20
Transfers During the Income Phase..................... 20
Deferment of Payments................................. 20
The Income Protector Feature.......................... 21
TAXES....................................................... 21
Annuity Contracts in General.......................... 22
Tax Treatment of Distributions - Non-qualified
Contracts........................................... 22
Tax Treatment of Distributions - Qualified
Contracts........................................... 22
Minimum Distributions................................. 22
Tax Treatment of Death Benefits....................... 23
Contracts Owned by a Trust or Corporation............. 23
Gifts, Pledges and/or Assignments of a Non-Qualified
Contract............................................ 23
Diversification....................................... 23
PERFORMANCE................................................. 23
OTHER INFORMATION........................................... 24
Anchor National....................................... 24
The Separate Account.................................. 24
The General Account................................... 24
Distribution of the Contract.......................... 24
Administration........................................ 24
Legal Proceedings..................................... 25
Ownership............................................. 25
Custodian............................................. 25
Independent Accountants............................... 25
Registration Statement................................ 25
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.... 25
APPENDIX A -- CONDENSED FINANCIAL INFORMATION............... A-1
APPENDIX B -- MARKET VALUE ADJUSTMENT ("MVA")............... B-1
APPENDIX C -- DEATH BENEFITS FOLLOWING SPOUSAL
CONTINUATION............................................... C-1
APPENDIX D -- PREMIUM TAXES................................. D-1
APPENDIX E -- HYPOTHETICAL EXAMPLE OF THE OPERATION OF THE
INCOME PROTECTOR FEATURE................................... E-1
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GLOSSARY
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We have capitalized some of the technical terms used in this
prospectus. To help you understand these terms, we have defined
them in this glossary.
ACCUMULATION PHASE - The period during which you invest money in
your contract.
ACCUMULATION UNITS - A measurement we use to calculate the value
of the variable portion of your contract during the Accumulation
Phase.
ANNUITANT(S) - The person(s) on whose life (lives) we base income
payments.
ANNUITY DATE - The date on which income payments are to begin, as
selected by you.
ANNUITY UNITS - A measurement we use to calculate the amount of
income payments you receive from the variable portion of your
contract during the Income Phase.
BENEFICIARY - The person designated to receive any benefits under
the contract if you or the Annuitant dies.
GROSS PURCHASE PAYMENTS - The money you give us to buy the
contract, as well as any additional money you give us to invest in
the contract after you own it. Gross Purchase Payments do not
reflect the reduction of the sales charge.
INCOME PHASE - The period during which we make income payments to
you.
IRS - The Internal Revenue Service.
NON-QUALIFIED (CONTRACT) - A contract purchased with after-tax
dollars. In general, these contracts are not under any pension
plan, specially sponsored program or individual retirement account
("IRA").
PURCHASE PAYMENTS - The portion of your Gross Purchase Payments
which we invest in your contract. We calculate this amount by
deducting the applicable sales charge from your Gross Purchase
Payments.
QUALIFIED (CONTRACT) - A contract purchased with pre-tax dollars.
These contracts are generally purchased under a pension plan,
specially sponsored program or IRA.
TRUSTS - Refers to the Anchor Series Trust, the SunAmerica Series
Trust and the Van Kampen Life Investment Trust collectively.
VARIABLE PORTFOLIO(S) - The variable investment options available
under the contract. Each Variable Portfolio has its own investment
objective and is invested in the underlying investments of the
Anchor Series Trust, the SunAmerica Series Trust and the Van
Kampen Life Investment Trust.
ALL FINANCIAL REPRESENTATIVES THAT SELL THE CONTRACTS OFFERED BY THIS PROSPECTUS
ARE REQUIRED TO DELIVER A PROSPECTUS.
3
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HIGHLIGHTS
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The Polaris(II) A-Class Variable Annuity is a contract between you and Anchor
National Life Insurance Company ("Anchor National"). It is designed to help you
invest on a tax-deferred basis and meet long-term financial goals. There are
minimum Purchase Payment amounts required to purchase a contract. Purchase
Payments may be invested in a variety of variable and fixed account options.
Like all deferred annuities, the contract has an Accumulation Phase and an
Income Phase. During the Accumulation Phase, you invest money in your contract.
The Income Phase begins when you start receiving income payments from your
annuity to provide for your retirement.
FREE LOOK: You may cancel your contract within 10 days after receiving it (or
whatever period is required in your state). You will receive whatever your
contract is worth on the day that we receive your request plus any sales charge
we deducted. The amount refunded may be more or less than your original Purchase
Payment. We will return your original Purchase Payment if required by law.
Please see PURCHASING A POLARIS(II) A-CLASS VARIABLE ANNUITY in the prospectus.
EXPENSES: There are fees and charges associated with the contract. We deduct
insurance charges which equal 0.85% annually of the average daily value of your
contract allocated to the Variable Portfolios. There are investment charges on
amounts invested in the Variable Portfolios. If you elect optional features
available under the contract we may charge additional fees for those features.
We apply an up-front sales charge against Gross Purchase Payments you make to
your contract. The sales charge equals a percentage of each Gross Purchase
Payment and varies with your investment amount. Please see the FEE TABLE,
PURCHASING A POLARIS(II) A-CLASS VARIABLE ANNUITY and EXPENSES in the
prospectus.
ACCESS TO YOUR MONEY: You may withdraw money from your contract during the
Accumulation Phase. If you do so, earnings are deemed to be withdrawn first. You
will pay income taxes on earnings and untaxed contributions when you withdraw
them. Payments received during the Income Phase are considered partly a return
of your original investment. A federal tax penalty may apply if you make
withdrawals before age 59 1/2. Please see ACCESS TO YOUR MONEY and TAXES in the
prospectus.
DEATH BENEFIT: A death benefit feature is available under the contract to
protect your Beneficiaries in the event of your death during the Accumulation
Phase. Please see DEATH BENEFITS in the prospectus.
INCOME OPTIONS: When you are ready to begin taking income, you can choose to
receive income payments on a variable basis, fixed basis or a combination of
both. You may also chose from five different income options, including an option
for income that you cannot outlive. Please see INCOME OPTIONS in the prospectus.
INQUIRIES: If you have questions about your contract call your financial advisor
or contact us at Anchor National Life Insurance Company Annuity Service Center
P.O. Box 54299 Los Angeles, California 90054-0299. Telephone Number: (800)
445-SUN2.
ANCHOR NATIONAL OFFERS SEVERAL VARIABLE ANNUITY PRODUCTS TO MEET THE DIVERSE
NEEDS OF OUR INVESTORS. EACH PRODUCT MAY OFFER DIFFERENT FEATURES AND BENEFITS
AND CORRESPONDINGLY DIFFERENT FEES AND CHARGES. WHEN WORKING WITH YOUR FINANCIAL
ADVISOR TO DETERMINE THE BEST PRODUCT TO MEET YOUR NEEDS, YOU SHOULD CONSIDER,
AMONG OTHER THINGS, WHETHER THE FEATURES OF THIS CONTRACT AND THE RELATED FEES
PROVIDE THE MOST APPROPRIATE PACKAGE TO HELP YOU MEET YOUR LONG-TERM RETIREMENT
SAVINGS GOALS.
PLEASE READ THE PROSPECTUS CAREFULLY FOR MORE DETAILED INFORMATION REGARDING
THESE AND OTHER FEATURES AND BENEFITS OF THE CONTRACT, AS WELL AS THE RISKS OF
INVESTING.
4
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FEE TABLES
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OWNER TRANSACTION EXPENSES
SALES CHARGE
SALES CHARGE AS A
INVESTMENT AMOUNT (AS DEFINED PERCENTAGE OF GROSS
IN SALES CHARGE SECTION ON PAGE 17) PURCHASE PAYMENT INVESTED*
-------------------------------- --------------------------
Less than $50,000........................ 5.75%
$50,000 but less than $100,000........... 4.75%
$100,000 but less than $250,000.......... 3.50%
$250,000 but less than $500,000.......... 2.50%
$500,000 but less than $1,000,000........ 2.00%
$1,000,000 or more....................... 0.50%**
* Your Gross Purchase Payment may qualify for a reduced sales charge. SEE
EXPENSES SECTION ON PAGE 16.
** A withdrawal charge of 0.50% applies to Gross Purchase Payments subject to a
0.50% sales charge if invested less than 12 months at the time of withdrawal.
TRANSFER FEE.......................... No charge for first 15 transfers
each year; thereafter, fee is $25
($10 in Pennsylvania and Texas)
per transfer
CONTRACT MAINTENANCE FEE . . . . . . . . . . . . . . . . . . . None
ANNUAL SEPARATE ACCOUNT EXPENSES
(AS A PERCENTAGE OF YOUR DAILY NET ASSET VALUE)
Mortality and Expense Risk Charge......................... 0.70%
Distribution Expense Charge............................... 0.15%
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TOTAL SEPARATE ACCOUNT EXPENSES........................ 0.85%
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OPTIONAL ESTATEPLUS FEE
(ESTATEPLUS, AN ENHANCED DEATH BENEFIT FEATURE, IS OPTIONAL AND IF ELECTED, THE
FEE IS AN ANNUALIZED CHARGE THAT IS DEDUCTED DAILY.)
Fee as a percentage of your daily net asset value....... 0.25%
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PORTFOLIO EXPENSES
ANCHOR SERIES TRUST
(AS A PERCENTAGE OF AVERAGE NET ASSETS FOR THE TRUST'S FISCAL YEAR ENDED
DECEMBER 31, 2000)
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEE EXPENSES EXPENSES
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Capital Appreciation* 0.70% 0.05% 0.75%
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Government and Quality Bond 0.59% 0.08% 0.67%
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Growth 0.66% 0.05% 0.71%
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* The expenses noted here are restated to reflect a management fee increase for
the portfolio which became effective on August 1, 2000 following approval by
the Board of Trustees of the Trust and shareholders. Actual management fees
and total annual expenses incurred at fiscal year end 2000 were 0.65% and
0.70%, respectively.
SUNAMERICA SERIES TRUST
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER REIMBURSEMENT OR WAIVER OF EXPENSES
FOR THE TRUST'S FISCAL YEAR ENDED JANUARY 31, 2001)
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEE EXPENSES EXPENSES
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Aggressive Growth 0.66% 0.04% 0.70%
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Alliance Growth 0.60% 0.04% 0.64%
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Asset Allocation 0.59% 0.05% 0.64%
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Blue Chip Growth(1,4) 0.70% 0.15% 0.85%
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Cash Management(5) 0.49% 0.03% 0.52%
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Corporate Bond 0.62% 0.07% 0.69%
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Davis Venture Value 0.71% 0.04% 0.75%
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"Dogs" of Wall Street 0.60% 0.12% 0.72%
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Emerging Markets(1) 1.25% 0.32% 1.57%
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Federated Value 0.70% 0.06% 0.76%
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Global Bond(2) 0.69% 0.12% 0.81%
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Global Equities 0.70% 0.14% 0.84%
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Goldman Sachs Research(1,3,4) 1.20% 0.15% 1.35%
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Growth-Income 0.53% 0.04% 0.57%
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Growth Opportunities(1,4) 0.75% 0.25% 1.00%
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High-Yield Bond 0.63% 0.08% 0.71%
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International Diversified Equities 1.00% 0.21% 1.21%
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International Growth and Income 0.95% 0.23% 1.18%
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MFS Growth and Income 0.70% 0.06% 0.76%
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MFS Mid-Cap Growth(1,2) 0.75% 0.07% 0.82%
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MFS Total Return(2) 0.66% 0.08% 0.74%
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Putnam Growth 0.75% 0.04% 0.79%
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Real Estate 0.80% 0.16% 0.96%
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SunAmerica Balanced 0.59% 0.05% 0.64%
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Technology(4) 1.20% 0.29% 1.49%
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Telecom Utility(2,6) 0.75% 0.09% 0.84%
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Worldwide High Income 1.00% 0.10% 1.10%
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(1) For this portfolio, the advisor, SunAmerica Asset Management Corp., has
voluntarily agreed to waive fees or expenses, if necessary, to keep
operating expenses at or below established maximum amounts. All waivers or
reimbursements may be terminated at any time. Only certain portfolios
relied on these waivers and/or reimbursements during this fiscal year as
follows: Absent fee waivers or reimbursements of expenses by the adviser or
custody credits, you would have incurred the following expenses during the
last fiscal year: Blue Chip Growth 1.81%; Goldman Sachs Research 1.63%; and
Growth Opportunities 1.26%. Absent recoupment of expenses by the adviser,
the Total Annual Expenses during the last fiscal year for the Emerging
Markets Portfolio would have been 1.53%. For MFS Mid-Cap Growth Portfolio,
the adviser recouped prior year expense reimbursements that were
mathematically insignificant, resulting in the expense ratio before and
after recoupment remaining at 0.82%.
(2) Gross of custody credits of 0.01%.
(3) This ratio reflects an expense cap of 1.35% for Goldman Sachs Research
which is net of custody credits of 0.01% or waivers/reimbursements if
applicable.
(4) Annualized.
(5) Formerly managed by SunAmerica Asset Management Corp.
(6) Prior to July 5, 2000, the Telecom Utility Portfolio was named Utility
Portfolio. The name change will not result in any modifications to the
portfolio's principal investment goal or fundamental investment policies.
5
VAN KAMPEN LIFE INVESTMENT TRUST
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER REIMBURSEMENT OR WAIVER OF EXPENSES
FOR THE TRUST'S FISCAL YEAR ENDED DECEMBER 31, 2000)
MANAGEMENT SERVICE OTHER TOTAL ANNUAL
PORTFOLIO FEE FEE EXPENSES EXPENSES
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Van Kampen LIT Comstock(1,4) 0.00% 0.25% 0.95% 1.20%
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Van Kampen LIT Emerging Growth(2) 0.70% 0.25% 0.05% 1.00%
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Van Kampen LIT Growth and Income(3,4) 0.57% 0.25% 0.18% 1.00%
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(1) Van Kampen Life Investment Trust Comstock Portfolio, Class II Shares.
(2) Van Kampen Life Investment Trust Emerging Growth Portfolio, Class II
Shares.
(3) Van Kampen Life Investment Trust Growth and Income Portfolio, Class II
Shares.
(4) For this portfolio, the advisor, Van Kampen Asset Management Inc. has
agreed to waive fees and/or reimburse expenses, if necessary, to elect
operating expenses at or below established maximum amounts. Absent these
waivers or reimbursements, the expenses were as follows: Van Kampen LIT
Comstock 2.38% and Van Kampen LIT Growth and Income 1.03%.
THE ABOVE PORTFOLIO EXPENSES WERE PROVIDED BY THE TRUSTS. WE HAVE NOT
INDEPENDENTLY VERIFIED THE ACCURACY OF THE INFORMATION.
6
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EXAMPLES
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You will pay the following expenses on a $1,000 investment in each Variable
Portfolio, assuming a 5% annual return on assets and a sales charge of 5.75% as
well as investment management expenses after waiver, reimbursement or recoupment
(assuming the waiver, reimbursement or recoupment will continue for the period
shown), if applicable. At the 5.75% sales charge level, we do not deduct any
additional fees or charges when you surrender your contract.*
(a) If you elect the optional EstatePlus benefit.
(b) If you do not elect the optional EstatePlus benefit.
1 YEAR 3 YEARS 5 YEARS 10 YEARS
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Capital Appreciation (a) $76 (a) $113 (a) $153 (a) $263
(b) $73 (b) $106 (b) $140 (b) $237
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Government and Quality Bond (a) $75 (a) $111 (a) $149 (a) $255
(b) $73 (b) $103 (b) $136 (b) $229
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Growth (a) $75 (a) $112 (a) $151 (a) $259
(b) $73 (b) $104 (b) $138 (b) $233
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Aggressive Growth (a) $75 (a) $111 (a) $150 (a) $258
(b) $73 (b) $104 (b) $138 (b) $232
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Alliance Growth (a) $75 (a) $110 (a) $147 (a) $252
(b) $72 (b) $102 (b) $135 (b) $226
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Asset Allocation (a) $75 (a) $110 (a) $147 (a) $252
(b) $72 (b) $102 (b) $135 (b) $226
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Blue Chip Growth (a) $77 (a) $116 (a) $157 (a) $273
(b) $74 (b) $109 (b) $145 (b) $248
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Cash Management (a) $74 (a) $106 (a) $141 (a) $239
(b) $71 (b) $ 99 (b) $129 (b) $213
-----------------------------------------------------------------------------------------------------------
Corporate Bond (a) $75 (a) $111 (a) $150 (a) $257
(b) $73 (b) $104 (b) $137 (b) $231
-----------------------------------------------------------------------------------------------------------
Davis Venture Value (a) $76 (a) $113 (a) $153 (a) $263
(b) $73 (b) $106 (b) $140 (b) $237
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"Dogs" of Wall Street (a) $75 (a) $112 (a) $151 (a) $260
(b) $73 (b) $105 (b) $139 (b) $234
-----------------------------------------------------------------------------------------------------------
Emerging Market (a) $84 (a) $137 (a) $192 (a) $342
(b) $81 (b) $129 (b) $180 (b) $318
-----------------------------------------------------------------------------------------------------------
Federated Value (a) $76 (a) $113 (a) $153 (a) $264
(b) $73 (b) $106 (b) $141 (b) $238
-----------------------------------------------------------------------------------------------------------
Global Bond (a) $76 (a) $115 (a) $155 (a) $269
(b) $74 (b) $107 (b) $143 (b) $244
-----------------------------------------------------------------------------------------------------------
Global Equities (a) $77 (a) $116 (a) $157 (a) $272
(b) $74 (b) $108 (b) $145 (b) $247
-----------------------------------------------------------------------------------------------------------
Goldman Sachs Research (a) $82 (a) $130 (a) $181 (a) $321
(b) $79 (b) $123 (b) $169 (b) $297
-----------------------------------------------------------------------------------------------------------
Growth-Income (a) $74 (a) $108 (a) $144 (a) $245
(b) $72 (b) $100 (b) $131 (b) $219
-----------------------------------------------------------------------------------------------------------
Growth Opportunities (a) $78 (a) $120 (a) $165 (a) $288
(b) $76 (b) $113 (b) $153 (b) $263
-----------------------------------------------------------------------------------------------------------
High-Yield Bond (a) $75 (a) $112 (a) $151 (a) $259
(b) $73 (b) $104 (b) $138 (b) $233
-----------------------------------------------------------------------------------------------------------
International Diversified Equities (a) $80 (a) $126 (a) $175 (a) $308
(b) $78 (b) $119 (b) $163 (b) $284
-----------------------------------------------------------------------------------------------------------
International Growth & Income (a) $80 (a) $125 (a) $173 (a) $305
(b) $78 (b) $118 (b) $161 (b) $281
-----------------------------------------------------------------------------------------------------------
MFS Growth & Income (a) $76 (a) $113 (a) $153 (a) $264
(b) $73 (b) $106 (b) $141 (b) $238
-----------------------------------------------------------------------------------------------------------
MFS Mid-Cap (a) $76 (a) $115 (a) $156 (a) $270
(b) $74 (b) $108 (b) $144 (b) $245
-----------------------------------------------------------------------------------------------------------
MFS Total Return (a) $76 (a) $113 (a) $152 (a) $262
(b) $73 (b) $105 (b) $140 (b) $236
-----------------------------------------------------------------------------------------------------------
Putnam Growth (a) $76 (a) $114 (a) $154 (a) $267
(b) $74 (b) $107 (b) $142 (b) $242
-----------------------------------------------------------------------------------------------------------
Real Estate (a) $78 (a) $119 (a) $163 (a) $284
(b) $75 (b) $112 (b) $151 (b) $259
-----------------------------------------------------------------------------------------------------------
SunAmerica Balanced (a) $75 (a) $110 (a) $147 (a) $252
(b) $72 (b) $102 (b) $135 (b) $226
-----------------------------------------------------------------------------------------------------------
Technology (a) $83 (a) $134 (a) $188 (a) $334
(b) $81 (b) $127 (b) $176 (b) $311
-----------------------------------------------------------------------------------------------------------
Telecom Utility (a) $77 (a) $116 (a) $157 (a) $272
(b) $74 (b) $108 (b) $145 (b) $247
-----------------------------------------------------------------------------------------------------------
Worldwide High Income (a) $79 (a) $123 (a) $169 (a) $297
(b) $77 (b) $116 (b) $157 (b) $273
-----------------------------------------------------------------------------------------------------------
Van Kampen LIT Comstock, Class II Shares (a) $78 (a) $120 (a) $165 (a) $288
(b) $76 (b) $113 (b) $153 (b) $263
-----------------------------------------------------------------------------------------------------------
Van Kampen LIT Emerging Growth, Class II Shares (a) $80 (a) $126 (a) $174 (a) $307
(b) $78 (b) $119 (b) $162 (b) $283
-----------------------------------------------------------------------------------------------------------
Van Kampen LIT Growth and Income, Class II Shares (a) $78 (a) $120 (a) $165 (a) $288
(b) $76 (b) $113 (b) $153 (b) $263
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
7
* We do not currently charge a withdrawal charge upon annuitization, unless the
contract is annuitized using the Income Protector feature. We assess any
applicable withdrawal charge upon annuitization under the Income Protector
feature assuming a full surrender of your contract.
EXPLANATION OF FEE TABLES AND EXAMPLES
1. The purpose of the Fee Tables is to show you the various expenses you would
incur directly and indirectly by investing in the contract. The tables
represented both fees at the separate account (contract) level as well as
portfolio company investment management fees. Additional information on the
portfolio company fees can be found in the Trust prospectuses located behind
this prospectus.
2. For certain Variable Portfolios, the adviser, SunAmerica Asset Management
Corp., has voluntarily agreed to waive fees or reimburse certain expenses,
if necessary, to keep annual operating expenses at or below the lesser of
the maximum allowed by any applicable state expense limitations or the
following percentages of each Variable Portfolio's average net assets: Blue
Chip Growth 0.85%; Emerging Markets 1.90% (recouping prior expense
reimbursements); Goldman Sachs Research 1.35%; Growth Opportunities 1.00%;
MFS Mid Cap Growth 1.15% (recouping prior expense reimbursements);
Technology 1.55%. The adviser also may voluntarily waive or reimburse
additional amounts to increase a Variable Portfolio's investment return. All
waivers and/or reimbursements may be terminated at any time. Furthermore,
the adviser may recoup any waivers or reimbursements within two years after
such waivers or reimbursements are granted, provided that the Variable
Portfolio is able to make such payment and remain in compliance with the
foregoing expense limitations.
3. In addition to the stated assumptions, the Examples also assume an Insurance
Charge of 0.85% and that no transfer fees were imposed. Although premium
taxes may apply in certain states, they are not reflected in the Examples.
4. THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
THE HISTORICAL ACCUMULATION VALUES ARE CONTAINED IN APPENDIX A -- CONDENSED
FINANCIAL INFORMATION.
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THE POLARIS(II) A-CLASS VARIABLE ANNUITY
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An annuity is a contract between you and an insurance company. You are the owner
of the contract. The contract provides three main benefits:
- Tax Deferral: This means that you do not pay taxes on your earnings from
the annuity until you withdraw them.
- Death Benefit: If you die during the Accumulation Phase, the insurance
company pays a death benefit to your Beneficiary.
- Guaranteed Income: If elected, you receive a stream of income for your
lifetime, or another available period you select.
Tax-qualified retirement plans (e.g., IRAs, 401(k) or 403(b) plans) defer
payment of taxes on earnings until withdrawal. If you are considering funding a
tax-qualified retirement plan with an annuity, you should know that an annuity
does not provide any additional tax deferral treatment of earnings beyond the
treatment provided by the tax-qualified retirement plan itself. However,
annuities do provide other features and benefits which may be valuable to you.
You should fully discuss your purchase decision with your financial
representative.
This annuity was developed to help you contribute to your retirement savings.
This annuity works in two stages, the Accumulation Phase and the Income Phase.
Your contract is in the Accumulation Phase during the period when you make
payments into the contract. The Income Phase begins when you request us to start
making income payments to you out of the money accumulated in your contract.
The contract is called a "variable" annuity because it allows you to invest in
portfolios which, like mutual funds, vary with market conditions. You can gain
or lose money if you invest in these Variable Portfolios. The amount of money
you accumulate in your contract depends on the performance of the Variable
Portfolios in which you invest. This contract currently offers 33 Variable
Portfolios.
The contract also offers seven fixed account options for varying time periods.
Fixed account options earn interest at a rate set and guaranteed by Anchor
National. If you allocate money to the fixed account options, the amount of
money that accumulates in the contract depends on the total interest credited to
the particular fixed account option(s) in which you invest.
For more information on investment options available under this contract SEE
INVESTMENT OPTIONS ON PAGE 10.
This annuity is designed to assist in contributing to retirement savings of
investors whose personal circumstances allow for a long-term investment time
horizon. As a function of the Internal Revenue Code ("IRC"), you may be assessed
a 10% federal tax penalty on the taxable portion of any withdrawal made prior to
your reaching age 59 1/2.
Anchor National Life Insurance Company (Anchor National, The Company, Us, We)
issues the Polaris(II) A-Class Variable Annuity. When you purchase a Polaris(II)
A-Class Variable Annuity, a contract exists between you and Anchor National. The
Company is a stock life insurance company organized under the laws of the state
of Arizona. Its principal place of business is 1 SunAmerica Center, Los Angeles,
California 90067. The Company conducts life insurance and annuity business in
the District of Columbia and all states except New York. Anchor National is an
indirect, wholly owned subsidiary of American International Group, Inc. ("AIG"),
a Delaware corporation.
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PURCHASING A POLARIS(II) A-CLASS
VARIABLE ANNUITY
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An initial Gross Purchase Payment is the money you give us to buy a contract.
Any additional money you give us to invest
8
in the contract after purchase is a subsequent Gross Purchase Payment.
The following chart shows the minimum initial and subsequent Gross Purchase
Payments permitted under your contract. These amounts depend upon whether a
contract is Qualified or Non-qualified for tax purposes. FOR FURTHER
EXPLANATION, SEE TAXES ON PAGE 21.
-----------------------------------------------------------
Minimum Initial Minimum
Gross Purchase Subsequent Gross
Payment Purchase Payment
-----------------------------------------------------------
Qualified $2,000 $250
-----------------------------------------------------------
Non-Qualified $5,000 $500
-----------------------------------------------------------
Prior Company approval is required to accept Gross Purchase Payments greater
than $1,500,000 (or greater than $1,330,000 if EstatePlus is elected). The
Company reserves the right to refuse any Gross Purchase Payment including one
which would cause the total Gross Purchase Payments to exceed $1,500,000 (or
$1,330,000 if EstatePlus is elected) at the time of the Gross Purchase Payment.
Additionally, the optional automatic payment plan allows you to make subsequent
Gross Purchase Payments of as little as $20.
We may refuse any Gross Purchase Payment. In general, we will not issue a
Qualified contract to anyone who is age 70 1/2 or older, unless it is shown that
the minimum distribution required by the IRS is being made. In addition, we may
not issue a contract to anyone age 91 or older. You may not elect Estate Plus if
you are age 81 or older at the time of contract issue.
We allow spouses to jointly own this contract. However, the age of the older
spouse is used to determine the availability of any age driven benefits. The
addition of a joint owner after the contract has been issued is contingent upon
prior review and approval by the Company.
ALLOCATION OF PURCHASE PAYMENTS
A Purchase Payment is the portion of your Gross Purchase Payment which we invest
in your contract after we deduct the sales charge.
We invest your Purchase Payments in the fixed and variable investment options
according to your instructions. If we receive a Purchase Payment without
allocation instructions, we invest the money according to your last allocation
instructions. SEE INVESTMENT OPTIONS ON PAGE 10.
In order to issue your contract, we must receive your completed application,
Purchase Payment allocation instructions and any other required paperwork at our
principal place of business. We allocate your initial Purchase Payment within
two days of receiving it. If we do not have complete information necessary to
issue your contract, we will contact you. If we do not have the information
necessary to issue your contract within 5 business days we will send your money
back to you, or ask your permission to keep your money until we get the
information necessary to issue the contract.
ACCUMULATION UNITS
When you allocate a Purchase Payment to the Variable Portfolios, we credit your
contract with Accumulation Units of the separate account funding the Polaris(II)
A-Class variable annuity. We base the number of Accumulation Units you receive
on the value of the Variable Portfolio as of the day we receive your money, if
we receive it before 1 p.m. Pacific Standard Time, or on the next business day's
unit value if we receive your money after 1 p.m. Pacific Standard Time. The
value of an Accumulation Unit goes up and down based on the performance of the
Variable Portfolios.
We calculate the value of an Accumulation Unit each day that the New York Stock
Exchange ("NYSE") is open as follows:
1. Determining the total value of money invested in a particular Variable
Portfolio;
2. Subtracting from that amount all applicable insurance charges; and
3. Dividing this amount by the number of outstanding Accumulation Units at
the end of the given NYSE business day.
We determine the number of Accumulation Units credited to your contract by
dividing the Purchase Payment by the Accumulation Unit value for the specific
Variable Portfolio.
EXAMPLE:
We receive a $25,000 Gross Purchase Payment from you on Wednesday which you
allocate to the Global Bond Portfolio. After we deduct the sales charge,
the net amount to be invested of your Gross Purchase Payment is $23,562.50.
We determine that the value of an Accumulation Unit for the Global Bond
Portfolio is $11.10 when the NYSE closes on Wednesday. We then divide
$23,562.50 by $11.10 and credit your contract on Wednesday night with
2,122.747748 Accumulation Units for the Global Bond Portfolio.
Performance of the Variable Portfolios and the insurance charges under your
contract affect Accumulation Unit values. These factors cause the value of your
contract to go up and down.
FREE LOOK
You may cancel your contract within ten days after receiving it (or longer if
required by state law). We call this a "free look." To cancel, you must mail the
contract along with your free look request to our Annuity Service Center at P.O.
Box 54299, Los Angeles, California 90054-0299. We will refund the value of your
contract on the day we receive your request, plus the sales charge we deducted.
The amount refunded may be more or less than the amount you originally invested.
Certain states require us to return your Gross Purchase Payments upon a free
look request. Additionally, all contracts
9
issued as an IRA require the full return of Gross Purchase Payments upon a free
look. With respect to those contracts, we reserve the right to put your money in
the Cash Management Portfolio during the free look period. If you cancel your
contract during the free look period, we return the greater of (1) your Gross
Purchase Payment; or (2) the value of your contract plus the sales charge we
deducted. At the end of the free look period, we allocate your money according
to your instructions.
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INVESTMENT OPTIONS
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VARIABLE PORTFOLIOS
The contract currently offers 33 Variable Portfolios. These Variable Portfolios
invest in shares of the Anchor Series Trust, the SunAmerica Series Trust and the
Van Kampen Life Investment Trust (the "Trusts"). Additional Variable Portfolios
may be available in the future. The Variable Portfolios operate similarly to a
mutual fund but are only available through the purchase of certain insurance
contracts.
SunAmerica Asset Management Corp., an indirect wholly-owned subsidiary of AIG,
is the investment adviser to the Anchor and SunAmerica Series Trusts. Van Kampen
Asset Management Inc. is the investment advisor to the Van Kampen Life
Investment Trust. The Trusts may serve as the underlying investment vehicles for
other variable annuity contracts issued by Anchor National, and other
affiliated/ unaffiliated insurance companies. Neither Anchor National nor the
Trusts believe that offering shares of the Trusts in this manner disadvantages
you. The adviser monitors the Trusts for potential conflicts.
The Variable Portfolios along with their respective subadvisers are listed
below:
ANCHOR SERIES TRUST
Wellington Management Company, LLP serves as subadviser to the Anchor Series
Trust portfolios. Anchor Series Trust ("AST") has investment portfolios in
addition to those listed below which are not available for investment under the
contract.
SUNAMERICA SERIES TRUST
Various subadvisers provide investment advice for the SunAmerica Series Trust
portfolios. SunAmerica Series Trust ("SST") has investment portfolios in
addition to those listed below which are not available for investment under the
contract.
VAN KAMPEN LIFE INVESTMENT TRUST
Van Kampen Asset Management Inc. provides investment advice for the Van Kampen
Life Investment Trust ("VKT") portfolios. Van Kampen Life Investment Trust has
investment portfolios in addition to those listed here which are not available
for investment under the contract.
STOCKS:
MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
- Alliance Growth Portfolio SST
- Global Equities Portfolio SST
- Growth-Income Portfolio SST
MANAGED BY DAVIS SELECTED ADVISERS L.P.
- Davis Venture Value Portfolio SST
- Real Estate Portfolio SST
MANAGED BY FEDERATED INVESTORS L.P.
- Federated Value Portfolio SST
- Telecom Utility Portfolio SST
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
- Goldman Sachs Research Portfolio SST
MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
- MFS Growth & Income Portfolio SST
- MFS Mid-Cap Growth Portfolio SST
MANAGED BY MORGAN STANLEY INVESTMENT MANAGEMENT INC.
- International Diversified Equities Portfolio SST
- Technology Portfolio SST
MANAGED BY PUTNAM INVESTMENT MANAGEMENT INC.
- Emerging Markets Portfolio SST
- International Growth & Income Portfolio SST
- Putnam Growth Portfolio SST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION
- Aggressive Growth Portfolio SST
- Blue Chip Growth Portfolio SST
- "Dogs" of Wall Street Portfolio SST
- Growth Opportunities Portfolio SST
MANAGED BY VAN KAMPEN ASSET MANAGEMENT INC.
- Van Kampen LIT Comstock Portfolio, Class II Shares VKT
- Van Kampen LIT Emerging Growth Portfolio, Class II Shares VKT
- Van Kampen LIT Growth and Income Portfolio, Class II Shares VKT
MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP
- Capital Appreciation Portfolio AST
- Growth Portfolio AST
BALANCED:
MANAGED BY WM ADVISORS, INC.
- Asset Allocation Portfolio SST
MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
- MFS Total Return Portfolio SST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION
- SunAmerica Balanced Portfolio SST
BONDS:
MANAGED BY FEDERATED INVESTORS L.P.
- Corporate Bond Portfolio SST
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT INT'L.
- Global Bond Portfolio SST
MANAGED BY MORGAN STANLEY INVESTMENT MANAGEMENT INC.
- Worldwide High Income Portfolio SST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION
- High-Yield Bond Portfolio SST
MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP
- Government & Quality Bond Portfolio AST
CASH:
MANAGED BY BANC OF AMERICA CAPITAL MANAGEMENT, LLC
- Cash Management Portfolio SST
10
YOU SHOULD READ THE ATTACHED PROSPECTUSES FOR THE TRUSTS CAREFULLY. THESE
PROSPECTUSES CONTAIN DETAILED INFORMATION ABOUT THE VARIABLE PORTFOLIOS,
INCLUDING EACH VARIABLE PORTFOLIO'S INVESTMENT OBJECTIVE AND RISK FACTORS.
FIXED ACCOUNT OPTIONS
The contract also offers seven fixed account options. Anchor National will
guarantee the interest rate earned on money you allocate to any of these fixed
account options. We currently offer fixed account options for periods of one,
three, five, seven and ten years, which we call guarantee periods. Additionally,
we guarantee the interest rate for money allocated to the 6-month DCA fixed
account and/or the 1-year DCA fixed account (the "DCA fixed accounts") which are
available only in conjunction with the Dollar Cost Averaging Program. Please see
the section on DOLLAR COST AVERAGING ON PAGE 12 for additional information
about, including limitations on, and the availability and operation of the DCA
fixed accounts. The DCA fixed accounts are only available for new Purchase
Payments.
Each guarantee period may offer a different interest rate but will never be less
than an annual effective rate of 3%. Once established the rates for specified
payments do not change during the guarantee period. The guarantee period is that
period for which we credit the applicable rate (one, three, five, seven or ten
years).
There are three scenarios in which you may put money into the fixed account
options other than the DCA fixed account options. In each scenario your money
may be credited a different rate of interest as follows:
- Initial Rate: Rate credited to new Purchase Payments allocated to the
fixed account when you purchase your contract.
- Current Rate: Rate credited to subsequent Purchase Payments allocated to
the fixed account.
- Renewal Rate: Rate credited to money transferred from a fixed account or
a Variable Portfolio into a fixed account and to money remaining in a
fixed account after expiration of a guarantee period.
When a guarantee period ends, you may leave your money in the same fixed
investment option. You may also reallocate your money to another fixed
investment option (other than the DCA fixed accounts) or to the Variable
Portfolios. If you want to reallocate your money to a different fixed account
option or Variable Portfolio, you must contact us within 30 days after the end
of the current interest guarantee period and instruct us how to reallocate the
money. We do not contact you. If we do not hear from you, your money will remain
in the same fixed account option, where it will earn interest at the renewal
rate then in effect for the fixed account option.
The DCA fixed accounts also credit a fixed rate of interest. Interest is
credited to amounts allocated to the 6-month or 1-year DCA fixed account while
your investment is systematically transferred to the Variable Portfolios. The
rates applicable to the DCA fixed accounts may differ from each other and/or the
other fixed account options. See DOLLAR COST AVERAGING ON PAGE 12 for more
information.
MARKET VALUE ADJUSTMENT ("MVA")
NOTE: MARKET VALUE ADJUSTMENTS APPLY TO THE 3, 5, 7 AND 10-YEAR FIXED ACCOUNT
OPTIONS, ONLY. THESE OPTIONS ARE NOT AVAILABLE IN ALL STATES. PLEASE CONTACT
YOUR FINANCIAL ADVISOR FOR MORE INFORMATION.
If you take money out of the 3, 5, 7 or 10-year fixed account options before the
end of the guarantee period, we make market value adjustment to your contract
(the "MVA"). The MVA reflects any difference in the interest rate environment
between the time you place your money in the fixed account option and the time
when you withdraw or transfer that money. This adjustment can increase or
decrease your contract value. You have 30 days after the end of each guarantee
period to reallocate your funds without incurring any MVA.
We calculate the MVA by doing a comparison between current rates and the rate
being credited to you in the fixed account option. For the current rate we use a
rate being offered by us for a guarantee period that is equal to the time
remaining in the guarantee period from which you seek withdrawal. If we are not
currently offering a guarantee period for that period of time, we determine an
applicable rate by using a formula to arrive at a number between the interest
rates currently offered for the two closest periods available.
Generally, if interest rates drop between the time you put your money into the
fixed account options and the time you take it out, we credit a positive
adjustment to your contract. Conversely, if interest rates increase during the
same period, we post a negative adjustment to your contract.
Where the MVA is negative, we first deduct the adjustment from any money
remaining in the fixed account option. If there is not enough money in the fixed
account option to meet the negative deduction, we deduct the remainder from your
withdrawal. Where the MVA is positive, we add the adjustment to your withdrawal
amount.
Anchor National does not assess an MVA against withdrawals under the following
circumstances:
- If a withdrawal is made within 30 days after the end of a guarantee
period;
- If a withdrawal is made to pay contract charges;
- Upon payment of a death benefit; or
- Upon annuitization, if occurring on the latest Annuity Date.
APPENDIX B shows how we calculate the MVA.
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase you may transfer funds between the Variable
Portfolios and/or the fixed account options. Funds already in your contract
cannot be transferred into the DCA fixed accounts. You must transfer at least
$100.
11
If less than $100 will remain in any Variable Portfolio after a transfer, that
amount must be transferred as well.
You may request transfers of your account value between the Variable Portfolios
and/or the fixed account options in writing or by telephone. Additionally, you
may access your account and request transfers between Variable Portfolios and/or
the fixed account options through SunAmerica's website
(http://www.sunamerica.com). We currently allow 15 free transfers per contract
per year. We charge $25 ($10 in Pennsylvania and Texas) for each additional
transfer in any contract year. Transfers resulting from your participation in
the DCA program count against your 15 free transfers per contract year. However,
transfers resulting from your participation in the automatic asset rebalancing
program do not count against your 15 free transfers.
We accept transfer requests by telephone unless you tell us not to on your
contract application. When receiving instructions over the telephone or the
internet, we follow appropriate procedures to provide reasonable assurance that
the transactions executed are genuine. Thus, we are not responsible for any
claim, loss or expense from any error resulting from instructions received over
the telephone. If we fail to follow our procedures, we may be liable for any
losses due to unauthorized or fraudulent instructions.
We may limit the number of transfers in any contract year or refuse any transfer
request for you or others invested in the contract if we believe that excessive
trading or a specific transfer request or group transfer requests may have a
detrimental effect on unit values or the share prices of the underlying Variable
Portfolios.
Where permitted by law, we may accept your authorization for a third party to
make transfers for you subject to our rules. We reserve the right to suspend or
cancel such acceptance at any time and will notify you accordingly.
Additionally, we may restrict the investment options available for transfers
during any period in which such third party acts for you. We notify such third
party beforehand regarding any restrictions. However, we will not enforce these
restrictions if we are satisfied that:
- such third party has been appointed by a court of competent jurisdiction
to act on your behalf; or
- such third party is a trustee/fiduciary for you or appointed by you to
act on your behalf for all your financial affairs.
We may provide administrative or other support services to independent third
parties you authorize to make transfers on your behalf. We do not currently
charge you extra for providing these support services. This includes, but is not
limited to, transfers between investment options in accordance with market
timing strategies. Such independent third parties may or may not be appointed
with us for the sale of annuities. HOWEVER, WE DO NOT ENGAGE ANY THIRD PARTIES
TO OFFER INVESTMENT ALLOCATION SERVICES OF ANY TYPE. WE TAKE NO RESPONSIBILITY
FOR THE INVESTMENT ALLOCATION AND TRANSFERS TRANSACTED ON YOUR BEHALF BY SUCH
THIRD PARTIES OR FOR ANY INVESTMENT ALLOCATION RECOMMENDATIONS MADE BY SUCH
PARTIES.
For information regarding transfers during the Income Phase, SEE INCOME OPTIONS
ON PAGE 19.
We reserve the right to modify, suspend, waive or terminate these transfer
provisions at any time.
DOLLAR COST AVERAGING
The DCA program allows you to invest gradually in the Variable Portfolios. Under
the program you systematically transfer a set dollar amount or percentage of
portfolio value from one Variable Portfolio or the 1-year fixed account option
(source accounts) to any other Variable Portfolio. Transfers may be monthly or
quarterly. You may change the frequency at any time by notifying us in writing.
The minimum transfer amount under the DCA program is $100, regardless of the
source account. Fixed account options are not available as target accounts for
the DCA program.
We also offer the 6-month and 1-year DCA fixed accounts exclusively to
facilitate this program. The DCA fixed accounts only accept new Purchase
Payments. You cannot transfer money already in your contract into these options.
When you allocate a Purchase Payment into a DCA fixed account, your money is
transferred into the Variable Portfolios over the selected 6-month or 1-year
period. You cannot change the option or the frequency of transfers once
selected.
If allocated to the 6-month DCA fixed account, we transfer your money over a
maximum of 6 monthly transfers. We base the actual number of transfers on the
total amount allocated to the account. For example, if you allocate $500 to the
6-month DCA fixed account, we transfer your money over a period of five months,
so that each payment complies with the $100 per transfer minimum.
We determine the amount of the transfers from the 1-year DCA fixed account based
on:
- the total amount of money allocated to the account; and
- the frequency of transfers selected.
For example, if you allocate $1,000 to the 1-year DCA fixed account and you
select monthly transfers, we completely transfer all of your money to the
selected investment options over a period of ten months.
You may terminate your DCA program at any time. If money remains in the DCA
fixed accounts, we transfer the remaining money to the 1-year fixed account
option, unless we receive different instructions from you. Transfers resulting
from a termination of this program do not count towards your 15 free transfers.
12
The DCA program is designed to lessen the impact of market fluctuations on your
investment. However, we cannot ensure that you will make a profit nor guarantee
against a loss. When you elect the DCA program, you are continuously investing
in securities regardless of fluctuating price levels. You should consider your
tolerance for investing through periods of fluctuating price levels.
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want to gradually move $750 each quarter from the Cash
Management Portfolio to the Aggressive Growth Portfolio over six quarters.
You set up dollar cost averaging and purchase Accumulation Units at the
following values:
-------------------------------------------
ACCUMULATION UNITS
QUARTER UNIT PURCHASED
-------------------------------------------
1 $ 7.50 100
2 $ 5.00 150
3 $10.00 75
4 $ 7.50 100
5 $ 5.00 150
6 $ 7.50 100
-------------------------------------------
You paid an average price of only $6.67 per Accumulation Unit over six
quarters, while the average market price actually was $7.08. By investing
an equal amount of money each month, you automatically buy more
Accumulation Units when the market price is low and fewer Accumulation
Units when the market price is high. This example is for illustrative
purposes only.
ASSET ALLOCATION REBALANCING PROGRAM
Earnings in your contract may cause the percentage of your investment in each
investment option to differ from your original allocations. The Automatic Asset
Rebalancing Program addresses this situation. At your election, we periodically
rebalance your investments in the Variable Portfolios to return your allocations
to their original percentages. Asset rebalancing typically involves shifting a
portion of your money out of an investment option with a higher return into an
investment option with a lower return.
At your request, rebalancing occurs on a quarterly, semiannual or annual basis.
Transfers made as a result of rebalancing do not count against your 15 free
transfers for the contract year.
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want your initial Purchase Payment split between two
Variable Portfolios. You want 50% in the Corporate Bond Portfolio and 50%
in the Growth Portfolio. Over the next calendar quarter, the bond market
does very well while the stock market performs poorly. At the end of the
calendar quarter, the Corporate Bond Portfolio now represents 60% of your
holdings because it has increased in value and the Growth Portfolio
represents 40% of your holdings. If you had chosen quarterly rebalancing,
on the last day of that quarter, we would sell some of your units in the
Corporate Bond Portfolio to bring its holdings back to 50% and use the
money to buy more units in the Growth Portfolio to increase those holdings
to 50%.
PRINCIPAL ADVANTAGE PROGRAM
The Principal Advantage Program allows you to invest in one or more Variable
Portfolios without putting your principal at direct risk. The program
accomplishes this by allocating your investment strategically between the fixed
account options and Variable Portfolios. You decide how much you want to invest
and approximately when you want a return of principal. We calculate how much of
your Purchase Payment to allocate to the particular fixed account option to
ensure that it grows to an amount equal to your total principal invested under
this program. We invest the rest of your principal in the Variable Portfolio(s)
of your choice.
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want to allocate a portion of your initial Purchase Payment
of $100,000 to the fixed account option after we deduct sales charges. You
want the amount allocated to the fixed account option to grow to $100,000
in 7 years. If the 7-year fixed account option is offering a 5% interest
rate, we will allocate $71,069 to the 7-year fixed account option to ensure
that this amount will grow to $100,000 at the end of the 7-year period. The
remaining $28,931 may be allocated among the Variable Portfolios, as
determined by you, to provide opportunity for greater growth.
VOTING RIGHTS
Anchor National is the legal owner of the Trusts' shares. However, when a
Variable Portfolio solicits proxies in conjunction with a vote of shareholders,
we must obtain your instructions on how to vote those shares. We vote all of the
shares we own in proportion to your instructions. This includes any shares we
own on our own behalf. Should we determine that we are no longer required to
comply with these rules, we will vote the shares in our own right.
SUBSTITUTION
If underlying Trust portfolios become unavailable for investment, we may be
required to substitute shares of another underlying portfolio. We will seek
prior approval of the SEC and give you notice before substituting shares.
13
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ACCESS TO YOUR MONEY
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You can access money in your contract in two ways:
- by making a partial or total withdrawal; and/or
- by receiving income payments during the Income Phase. SEE INCOME OPTIONS
ON PAGE 19.
We deduct a MVA if a partial withdrawal comes from the 3, 5, 7 or 10-year fixed
account prior to the end of the guarantee period. Additionally, a withdrawal
charge may apply in limited circumstances. If you withdraw your entire contract
value, we also deduct premium taxes if applicable. SEE EXPENSES ON PAGE 16.
Under certain Qualified plans, access to the money in your contract may be
restricted. Additionally, withdrawals made prior to age 59 1/2 may result in a
10% IRS penalty tax. SEE TAXES ON PAGE 21.
Under most circumstances, the partial withdrawal minimum is $1,000. We require
that the value left in your contract is at least $500 after the withdrawal. You
must send a written withdrawal request. Unless you provide us with different
instructions, partial withdrawals will be made pro rata from each Variable
Portfolio and the fixed account option(s) in which your contract is invested.
We may be required to suspend or postpone the payment of a withdrawal for any
period of time when: (1) the NYSE is closed (other than a customary weekend and
holiday closings); (2) trading with the NYSE is restricted; (3) an emergency
exists such that disposal of or determination of the value of shares of the
Variable Portfolios is not reasonably practicable; (4) the SEC, by order, so
permits for the protection of contract owners.
Additionally, we reserve the right to defer payments for a withdrawal from a
fixed account option. Such deferrals are limited to no longer than six months.
SYSTEMATIC WITHDRAWAL PROGRAM
During the Accumulation Phase, you may elect to receive periodic income payments
under the systematic withdrawal program. Under the program you may choose to
take monthly, quarterly, semiannual or annual payments from your contract.
Electronic transfer of these funds to your bank account is available. The
minimum amount of each withdrawal is $100. There must be at least $500 remaining
in your contract at all times. Withdrawals may be taxable and a 10% IRS penalty
tax may apply if you are under age 59 1/2. There is no additional charge for
participating in this program, although a withdrawal charge and a MVA may apply.
SEE EXPENSES ON PAGE 16.
We reserve the right to modify, suspend or terminate this program at any time.
MINIMUM CONTRACT VALUE
Where permitted by state law, we may terminate your contract if both of the
following occur: (1) your contract is less than $500 as a result of withdrawals;
and (2) you have not made any Purchase Payments during the past three years. We
will provide you with sixty days written notice. At the end of the notice
period, we will distribute the contract value to you.
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DEATH BENEFIT
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If you die during the Accumulation Phase of your contract, we pay a death
benefit to your Beneficiary. At the time you purchase your contract, you must
select one of the two death benefit options described below. Once selected, you
cannot change your death benefit option. You should discuss the available
options with your financial advisor to determine which option is best for you.
We do not pay the death benefit if you die after you switch to the Income Phase.
However, if you die during the Income Phase, your Beneficiary receives any
remaining guaranteed income payments in accordance with the income option you
selected. SEE INCOME OPTIONS ON PAGE 19.
You name your Beneficiary. You may change the Beneficiary at any time, unless
you previously made an irrevocable Beneficiary designation.
We calculate and pay the death benefit when we receive all required paperwork
and satisfactory proof of death. We consider the following satisfactory proof of
death:
1. a certified copy of the death certificate; or
2. a certified copy of a decree of a court of competent jurisdiction as to
the finding of death; or
3. a written statement by a medical doctor who attended the deceased at the
time of death; or
4. any other proof satisfactory to us.
We may require additional proof before we pay the death benefit.
The death benefit must be paid within 5 years of the date of death unless the
Beneficiary elects to have it payable in the form of an income option. If the
Beneficiary elects an income option, it must be paid over the Beneficiary's
lifetime or for a period not extending beyond the Beneficiary's life expectancy.
Income option payments must begin within one year of your death.
If the Beneficiary is the spouse of the deceased original owner, he or she can
elect to continue the contract. SEE SPOUSAL CONTINUATION ON PAGE 16.
If a Beneficiary does not elect a specific form of pay out within 60 days of our
receipt of all required paperwork and satisfactory proof of death, we pay a lump
sum death benefit to the Beneficiary.
The term "withdrawals" as used in describing the death benefit options below is
defined as withdrawals and any fees or charges applicable to such withdrawals.
14
OPTION 1 - PURCHASE PAYMENT ACCUMULATION OPTION
The death benefit is the greater of:
1. the contract value at the time we receive all required paperwork and
satisfactory proof of death; or
2. total Gross Purchase Payments less withdrawals; or
3. total Purchase Payments less withdrawals, compounded at a 4% annual
growth rate until the date of death (3% growth rate if age 70 or older
at the time of contract issue) plus any Purchase Payments less
withdrawals recorded after the date of death; or
4. the contract value on the seventh contract anniversary, plus any
Purchase Payments and less any withdrawals since the seventh contract
anniversary, all compounded at a 4% annual growth rate until the date of
death (3% growth rate if age 70 or older at the time of contract issue)
plus any Purchase Payments less withdrawals recorded after the date of
death.
OPTION 2 - MAXIMUM ANNIVERSARY OPTION
The death benefit is the greater of:
1. the contract value at the time we receive all required paperwork and
satisfactory proof of death; or
2. total Gross Purchase Payments less withdrawals; or
3. the maximum anniversary value on any contract anniversary prior to your
81st birthday. The anniversary value equals the contract value on a
contract anniversary plus any Purchase Payments and less any withdrawals
since that contract anniversary.
If you are age 90 or older at the time of death and selected the Maximum
Anniversary option, the death benefit will be equal to the contract value at the
time we receive all required paperwork and satisfactory proof of death.
Accordingly, you do not get the advantage of this option if:
- you are age 81 or older at the time of contract issue, or
- you are age 90 or older at the time of your death.
ESTATEPLUS
EstatePlus is an optional benefit that, if selected, may increase your death
benefit amount.
The term "Net Purchase Payment" is used frequently in explaining the death
benefit options. We define Net Purchase Payments as Purchase Payments less an
adjustment for each withdrawal. If you have not taken any withdrawals from your
contract, Net Purchase Payments equals total Purchase Payments into your
contract.
To calculate the adjustment amount for the first withdrawal made under the
contract, we first determine the percentage of the withdrawal. For example, a
$10,000 withdrawal from a $100,000 contract is a 10% reduction in value. This
percentage is calculated by dividing the amount of each withdrawal (including
fees and charges applicable to the withdrawal) by the contract value immediately
before taking that withdrawal. The resulting percentage is then multiplied by
the amount of total Purchase Payments and subtracted from the amount of total
Purchase Payments on deposit at the time of the withdrawal to arrive at the Net
Purchase Payments.
For withdrawals taken after the first withdrawal, we arrive at the percentage by
which the contract value is reduced by taking the amount of withdrawal in
relation to the contract value immediately before taking each withdrawal. We
then multiply Net Purchase Payments by this percentage and subtract that amount
of Net Purchase Payments on deposit as of the withdrawal date, to arrive at Net
Purchase Payments.
The EstatePlus benefit may increase the death benefit amount. If you have
earnings in your contract at the time of death, we will add a percentage of
those earnings (the "EstatePlus Percentage"), subject to a maximum dollar amount
(the "Maximum EstatePlus Percentage"), to the death benefit payable. The
EstatePlus benefit, if any, is added to the death benefit payable under the
Purchase Payment Accumulation or Maximum Anniversary options. The contract year
of your death will determine the EstatePlus Percentage and the Maximum
EstatePlus Percentage.
The table below provides the details if you were age 69 or younger at the time
we issue your contract:
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CONTRACT YEAR ESTATEPLUS MAXIMUM
OF DEATH PERCENTAGE ESTATEPLUS PERCENTAGE
-------------------------------------------------------------
Years 0-4 25% of earnings 40% of Net Purchase
Payments
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Years 5-9 40% of earnings 65% of Net Purchase
Payments*
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Years 10+ 50% of earnings 75% of Net Purchase
Payments*
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If you are between your 70th and 81st birthday at the time we issue your
contract the table below shows the available EstatePlus benefit:
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CONTRACT YEAR ESTATEPLUS MAXIMUM
OF DEATH PERCENTAGE ESTATEPLUS
PERCENTAGE
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All Contract Years 25% of earnings 40% of Net
Purchase Payments*
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* Purchase Payments received after the 5(th) contract anniversary must remain in
the contract for at least 6 full months to be included as part of Net Purchase
Payments for the purpose of the Maximum EstatePlus calculation.
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What is the Contract Year of Death?
Contract Year of Death is the number of full 12 month periods beginning with the
date your contract is issued and ending on the date of death.
What is the EstatePlus Percentage Amount?
We determine the amount of the EstatePlus benefit, based on a percentage of the
earnings in your contract at the time of your death. For the purpose of this
calculation, earnings equals contract value minus Net Purchase Payments as of
the date of death. If the earnings amount is negative, no EstatePlus amount will
be added.
What is the Maximum EstatePlus Amount?
The EstatePlus benefit is subject to a maximum dollar amount. The maximum
EstatePlus amount is equal to a percentage of your Net Purchase Payments.
You must elect EstatePlus at the time of contract application. Once elected, you
may not terminate or change this election.
We assess a .25% fee for EstatePlus. On a daily basis we deduct this annual
charge from the average daily ending value of the assets you have allocated to
the Variable Portfolios.
EstatePlus is not available if you are age 81 or older at the time we issue your
contract. Furthermore, a Continuing Spouse cannot benefit from EstatePlus if
he/she is age 81 or older on the Continuation Date. SEE SPOUSAL CONTINUATION
BELOW. The EstatePlus benefit is not available after the latest Annuity Date.
You may pay for the EstatePlus benefit and your beneficiary may never receive
the benefit if you live past the latest Annuity Date. SEE INCOME OPTIONS ON PAGE
19.
EstatePlus may not be available in your state or through the broker-dealer with
which your financial advisor is affiliated. See your financial advisor for
information regarding availability.
WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE ESTATEPLUS BENEFIT (IN
ITS ENTIRETY OR ANY COMPONENT AT ANY TIME) AT ANY TIME FOR PROSPECTIVELY ISSUED
CONTRACTS.
SPOUSAL CONTINUATION
If you are the original owner of the contract and the Beneficiary is your
spouse, your spouse may elect to continue the contract after your death. The
spouse becomes the new owner ("Continuing Spouse"). Generally, the contract and
its elected features if any, remain the same. The Continuing Spouse is subject
to the same fees, charges and expenses applicable to the original owner of the
contract. A spousal continuation can only take place upon the death of the
original owner of the contract.
To the extent that the Continuing Spouse invests in the Variable Portfolios or
MVA fixed accounts, they will be subject to investment risk as was the original
owner.
Upon the spouse's continuation of the contract, we will contribute to the
contract value an amount by which the death benefit that would have been paid to
the beneficiary upon the death of the original owner exceeds the contract value
("Continuation Contribution"), if any. We calculate the Continuation
Contribution as of the date of the original owner's death. We will add the
Continuation Contribution as of the date we receive both the Continuing Spouse's
written request to continue the contract and proof of death of the original
owner in a form satisfactory to us ("Continuation Date"). The Continuation
Contribution is not considered a Purchase Payment for the purposes of any other
calculations, except as explained in Appendix C.
Generally, the Continuing Spouse cannot change any contract provisions as the
new owner. However, on the Continuation Date, the Continuing Spouse may
terminate the original owner's election of EstatePlus. We will terminate
EstatePlus if the Continuing Spouse is age 81 or older on the Continuation Date.
If EstatePlus is terminated or if the Continuing Spouse dies after the latest
Annuity Date, no EstatePlus benefit will be payable. The age of the Continuing
Spouse on the Continuation Date and on the date of the Continuing Spouse's death
will be used in determining any future death benefits under the Contract. SEE
APPENDIX C FOR FURTHER EXPLANATION OF THE DEATH BENEFIT CALCULATIONS FOLLOWING A
SPOUSAL CONTINUATION.
WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE SPOUSAL CONTINUATION
PROVISION (IN ITS ENTIRETY OR ANY COMPONENT) AT ANY TIME FOR PROSPECTIVELY
ISSUED CONTRACTS.
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EXPENSES
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There are charges and expenses associated with your contract. These charges and
expenses reduce your investment return. We will not increase the sales,
insurance or withdrawal charges under your contract. However, the investment
charges under your contract may increase or decrease. Some states may require
that we charge less than the amounts described below.
INSURANCE CHARGES
The amount of this charge is 0.85% annually, of the value of your contract
invested in the Variable Portfolios. We deduct the charge daily. There is no
insurance charge deducted from amounts allocated to the fixed account options.
The insurance charge compensates us for the mortality and expense risks and the
costs of contract distribution assumed by Anchor National.
16
If these charges do not cover all of our expenses, we will pay the difference.
Likewise, if these charges exceed our expenses, we will keep the difference.
SALES CHARGE
We may apply an up-front sales charge against the Gross Purchase Payments you
make to your contract. The sales charge equals a percentage of each Gross
Purchase Payment and varies with your investment amount.
Your investment amount is determined on the day we receive a Gross Purchase
Payment and is the greater of:
1. The sum of:
(a) the Gross Purchase Payment amount;
(b) the current contract value of this contract; and
(c) the current contract value of any eligible related contracts as
defined under the Rights of Accumulation section on page 18; or
2. The amount, if any, you agree to contribute to this contract and your
eligible related contracts over a 13-month period as designated by you
in a Letter of Intent (described below).
Eligible related contracts currently include any of the following contracts
issued by Anchor National: American Pathway, ICAP, Polaris, Polaris(II),
Polaris(II) Asset Manager, Polaris Platinum, Polaris Protector, Seasons, Seasons
Select, and Seasons Select(II) contracts owned by you, your spouse and/or your
children under age 21.
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SALES CHARGE AS A
PERCENTAGE OF GROSS PURCHASE
INVESTMENT AMOUNT PAYMENT INVESTED
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Less than $ 50,000 5.75%
$ 50,000 - $ 99,999 4.75%
$100,000 - $249,999 3.50%
$250,000 - $499,999 2.50%
$500,000 - $999,999 2.00%
$1,000,000 or more 0.50%*
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* Additionally, a withdrawal charge of 0.50% applies to gross purchase payments
subject to a 0.50% sales charge if invested less than 12 months at the time of
withdrawal. SEE PURCHASE PAYMENTS SUBJECT TO A WITHDRAWAL CHARGE ON PAGE 18.
We call the above investment levels "breakpoints." You can reduce your sales
charge by increasing your investment amount to reach the next breakpoint. For
example, an investment amount of $50,000 brings you to the first breakpoint and
entitles you to a reduced sales charge of 4.75%.
REDUCING YOUR SALES CHARGES
Our Letter of Intent and Rights of Accumulation features allow you to combine
your current Gross Purchase Payment with other Gross Purchase Payments and/or
contract values so that you may take advantage of the breakpoints in the sales
charge schedule.
Other sales charge reductions may be available to clients of financial planners,
institutions, broker-dealer representatives or registered investment advisors
utilizing fee based services. SEE REDUCTION OR ELIMINATION OF CHARGES AND
EXPENSES AND ADDITIONAL AMOUNTS CREDITED ON PAGE 19.
LETTER OF INTENT
The Letter of Intent feature lets you establish an investment goal up-front so
that all Gross Purchase Payments you make during a designated 13-month period
receive the sales charge corresponding to your stated investment goal. When you
submit a signed Letter of Intent, we use the amount of your stated investment
goal to determine the sales charge on any Gross Purchase Payment you make during
the 13-month period as though the total amount of Gross Purchase Payments (your
investment goal) is invested as one lump-sum.
Gross Purchase Payments made to your Polaris(II) A-Class contract and Purchase
Payments made to any eligible related contract count towards your investment
goal. Additionally, Gross Purchase Payments made to your Polaris(II) A-Class
contract and Purchase Payments made to any eligible related contract within 90
days prior to our receipt of your Letter of Intent (but not prior to the issue
date of your Polaris(II) A-Class contract) may count towards meeting your
investment goal. If you use prior Purchase Payments towards satisfying your
investment goal, the Letter of Intent start date will be backdated to the
receipt date of the earliest prior Purchase Payment. If you wish to use prior
Purchase Payments towards meeting your investment goal, you or your financial
representative must inform us of such prior Purchase Payments at the time you
submit your Letter of Intent.
EXAMPLE:
Assume as part of your contract application you sign a Letter of Intent
indicating an investment goal of $50,000 over a 13-month period. The sales
charge corresponding to your investment goal is 4.75%. You make an initial
Gross Purchase Payment of $20,000. We deduct a reduced sales charge of
4.75% from your initial Gross Purchase Payment. Ten months later you make a
subsequent Gross Purchase Payment of $30,000. We again deduct a reduced
sales charge of 4.75% from your Gross Purchase Payment. Without a Letter of
Intent the sales charge for each Gross Purchase Payment would have been
5.75%.
You may submit a Letter of Intent at any time. If you choose to submit a Letter
of Intent when you apply for the contract, you must check the corresponding box
on the application and complete the appropriate form. If you elect to submit a
Letter of Intent after your contract is issued, you must complete the
appropriate form, which is available from your financial advisor or our Annuity
Service Center.
17
You are not obligated to reach your investment goal. If you do not achieve your
investment goal by the end of the 13-month period or if you surrender or
annuitize your contract without having reached your investment goal, we will
deduct from your contract the difference between: (1) the sales charge
corresponding to the amount of Gross Purchase Payments made to your Polaris(II)
A-Class contract and purchase payments made to any eligible related contract
during the 13-month period; and (2) the sales charge you actually paid,
regardless of whether the original sales charge was based on your Letter of
Intent investment goal or Rights of Accumulation privileges. The charges are
deducted from your investment options in the same proportion as their values are
to your then current contract value. We will not deduct this amount if a death
benefit is paid on the contract prior to the end of the 13-month period.
You may increase your investment goal by sending us a written request at any
time during the 13-month period. Gross Purchase Payments made from the date of
such notice through the end of the original 13-month period will receive any
applicable reduction in sales charges. Sales charges on Gross Purchase Payments
received prior to the notice to increase your investment goal will not be
retroactively reduced.
The Letter of Intent feature may not be available in all states. Please contact
your financial advisor regarding the availability of this feature in your state.
We reserve the right to modify, suspend or terminate this program at any time.
RIGHTS OF ACCUMULATION
You may qualify for a reduced sales charge through Rights of Accumulation.
Rights of Accumulation involves combining your current Gross Purchase Payment
with the current contract values of this contract and eligible related contracts
so that you may reduce the sales charge on your current Gross Purchase
Payment(s) into this contract. The sales charge corresponding to this combined
investment amount is deducted from your current Gross Purchase Payment.
In order to use Rights of Accumulation to reduce your sales charge using
contracts other than your Polaris(II) A-Class contract, you or your financial
representative must inform us of the related contracts each time you make a
Gross Purchase Payment. The sales charge for Gross Purchase Payments submitted
using Rights of Accumulation privileges will be based on the breakpoint
corresponding to the sum of (1) your current Gross Purchase Payment; (2) your
current contract value; and (3) the current contract values of your eligible
related contracts.
For purposes of calculating your investment amount, the current contract value
is the value of your contract and any eligible related contracts as of the close
of the market on the last previous NYSE business day less any current day
withdrawals, adjusted for any current day transactions.
EXAMPLE:
Assume your contract has a current value of $20,000. You have a second
contract with us which qualifies for Rights of Accumulation that has a
current value of $25,000. You make a $5,000 Gross Purchase Payment and
inform us of your eligible related contracts at the time you make your
payment. The sales charge applicable to the current Gross Purchase Payment
is based on the sales charge corresponding to the sum of: (1) your current
Gross Purchase Payment ($5,000); (2) the current contract value of this
contract ($20,000); and (3) the current contract value of your related
contract ($25,000). The sum of these values is $50,000. We deduct the sales
charge corresponding to an investment amount of $50,000, or 4.75%, from
your $5,000 Gross Purchase Payment. Without the benefit of Rights of
Accumulation your sales charge would have been 5.75%.
Certain Rights of Accumulation privileges may not be available in your state.
Please contact your financial representative regarding the availability of this
feature in your state.
We reserve the right to modify, suspend or terminate this program at any time.
PURCHASE PAYMENTS SUBJECT TO A WITHDRAWAL CHARGE
Each Gross Purchase Payment qualifying for a sales charge of 0.50% (that is,
your investment amount is $1,000,000 or more) remains subject to a withdrawal
charge of 0.50%. The withdrawal charge applies to such Gross Purchase Payment or
any portion of it withdrawn if invested less than 12 months prior to such
withdrawal.
When calculating the withdrawal charge, we treat withdrawals as coming first
from the Purchase Payments that have been in your contract the longest. However,
for tax purposes, your withdrawals are considered earnings first, then Purchase
Payments.
Whenever possible, we deduct the withdrawal charge from the money remaining in
your contract. If you fully surrender your contract, we deduct any applicable
sales charge from the amount withdrawn.
We will not assess a withdrawal charge for money withdrawn to pay a death
benefit or to pay contract fees or charges. We will not assess a withdrawal
charge when you switch to the Income Phase, except when you elect to receive
income payments using the Income Protector program. If you elect to receive
income payments using the Income Protector program, we assess any applicable
withdrawal charge when calculating your Income Benefit Base. SEE INCOME OPTIONS
ON PAGE 19.
Withdrawals made prior to age 59 1/2 may result in a 10% IRS penalty tax. SEE
TAXES ON PAGE 21.
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INVESTMENT CHARGES
INVESTMENT MANAGEMENT FEES
Charges are deducted from your Variable Portfolios for the advisory and other
expenses of the Variable Portfolios. The FEE TABLES on page 5 illustrate these
charges and expenses. For more detailed information on these investment charges,
refer to the prospectuses for the Trusts which are attached.
SERVICE FEES
Shares of certain Trusts may be subject to fees imposed under a servicing plan
adopted by that Trust pursuant to Rule 12(b)(1) of the Investment Company Act of
1940. This service fee of 0.25% for the Van Kampen Life Investment Trust
Portfolios is also known as a 12(b)(1) fee. Generally, this fee may be paid to
financial intermediaries for services provided over the life of the Contract.
SEE FEE TABLES ON PAGE 5.
TRANSFER FEE
We currently permit 15 free transfers between investment options each contract
year. We charge you $25 for each additional transfer that contract year ($10 in
Pennsylvania and Texas). SEE INVESTMENT OPTIONS ON PAGE 10.
OPTIONAL ESTATEPLUS FEE
Please see page 15 of this Prospectus for additional information regarding the
EstatePlus Fee.
PREMIUM TAX
Certain states charge the Company a tax on the premiums you pay into the
contract. We deduct from your contract these premium tax charges. Currently we
deduct the charge for premium taxes when you take a full withdrawal or begin the
Income Phase of the contract. In the future, we may assess this deduction at the
time you put Purchase Payment(s) into the contract or upon payment of a death
benefit.
APPENDIX D provides more information about premium taxes.
INCOME TAXES
We do not currently deduct income taxes from your contract. We reserve the right
to do so in the future.
REDUCTION OR ELIMINATION OF CHARGES AND EXPENSES, AND ADDITIONAL AMOUNTS
CREDITED
Sometimes sales of the contracts to groups of similarly situated individuals may
lower our administrative and/or sales expenses. We reserve the right to reduce
or waive certain charges and expenses when this type of sale occurs. In
addition, we may also credit additional interest to policies sold to such
groups. We determine which groups are eligible for such treatment. Some of the
criteria we evaluate to make a determination are: size of the group; amount of
expected Purchase Payments; relationship existing between us and prospective
purchaser; nature of the purchase; length of time a group of contracts is
expected to remain active; purpose of the purchase and whether that purpose
increases the likelihood that our expenses will be reduced; and/or any other
factors that we believe indicate that administrative and/or sales expenses may
be reduced.
In addition, financial planners, institutions, broker-dealer representatives or
registered investment advisors utilizing the contract in fee-based investment
products pursuant to an agreement with the Distributor, may purchase a version
of Polaris(II) A-Class without incurring a front-end and/or contingent deferred
sales load.
Anchor National may make such a determination regarding sales to its employees,
it affiliates' employees and employees of currently contracted broker-dealers;
its registered representatives and immediate family members of all of those
described.
We reserve the right to change or modify any such determination or the treatment
applied to a particular group, at any time.
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INCOME OPTIONS
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ANNUITY DATE
During the Income Phase, we use the money accumulated in your contract to make
regular income payments to you. You may switch to the Income Phase any time
after your second contract anniversary. You select the month and year in which
you want income payments to begin. The first day of that month is the Annuity
Date. You may change your Annuity Date, so long as you do so at least seven days
before the income payments are scheduled to begin. Once you begin receiving
income payments, you cannot change your income option. Except as indicated under
Option 5 below, once you begin receiving income payments, you cannot access your
money through a withdrawal or surrender.
Income payments must begin on or before your 95th birthday or on your tenth
contract anniversary, whichever occurs later (latest Annuity Date). If you do
not choose an Annuity Date, your income payments will automatically begin on
this date. Certain states may require your income payments to start earlier.
If the Annuity Date is past your 85th birthday, your contract could lose its
status as an annuity under Federal tax laws. This may cause you to incur adverse
tax consequences.
In addition, most Qualified contracts require you to take minimum distributions
after you reach age 70 1/2. SEE TAXES ON PAGE 21.
INCOME OPTIONS
Currently, this contract offers five standard income options. Other payout
options may be available. Contact the Annuity Service Center for more
information. If you elect to receive income payments but do not select an
option, your income payments will be made in accordance with Option 4 for a
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period of 10 years. For income payments based on joint lives, we pay according
to Option 3, for a period of 10 years.
We base our calculation of income payments on the life of the Annuitant and the
annuity rates set forth in your contract. As the contract owner, you may change
the Annuitant at any time prior to the Annuity Date. You must notify us if the
Annuitant dies before the Annuity Date and designate a new Annuitant.
OPTION 1 - LIFE INCOME ANNUITY
This option provides income payments for the life of the Annuitant. Income
payments stop when the Annuitant dies.
OPTION 2 - JOINT AND SURVIVOR LIFE ANNUITY
This option provides income payments for the life of the Annuitant and for the
life of another designated person. Upon the death of either person, we will
continue to make income payments during the lifetime of the survivor. Income
payments stop when the survivor dies.
OPTION 3 - JOINT AND SURVIVOR LIFE ANNUITY WITH 10 OR 20 YEARS GUARANTEED
This option is similar to Option 2 above, with an additional guarantee of
payments for at least 10 years or 20 years. If the Annuitant and the survivor
die before all of the guaranteed income payments have been made, the remaining
payments are made to the Beneficiary under your contract.
OPTION 4 - LIFE ANNUITY WITH 10 OR 20 YEARS GUARANTEED
This option is similar to Option 1 above. In addition, this option provides a
guarantee that income payments will be made for at least 10 or 20 years. You
select the number of years. If the Annuitant dies before all guaranteed income
payments are made, the remaining income payments go to the Beneficiary under
your contract.
OPTION 5 - INCOME FOR A SPECIFIED PERIOD
This option provides income payments for a guaranteed period, ranging from 5 to
30 years. If the Annuitant dies before all of the guaranteed income payments are
made, the remaining income payments are made to the Beneficiary under your
contract. Additionally, if variable income payments are elected under this
option, you (or the Beneficiary under the contract if the Annuitant dies prior
to all guaranteed payments being made) may redeem the contract value after the
Annuity Date. The amount available upon such redemption would be the discounted
present value of any remaining guaranteed variable income payments. Any
applicable withdrawal charges will be deducted from the discounted value as if
you fully surrendered your contract.
The value of an Annuity Unit, regardless of the option chosen, takes into
account the mortality and expense risk charge. Since Option 5 does not contain
an element of mortality risk, no benefit is derived from this charge.
Please read the Statement of Additional Information ("SAI") for a more detailed
discussion of the income options.
For more information regarding Income Options using the Income Protector
feature, please see below.
FIXED OR VARIABLE INCOME PAYMENTS
You can choose income payments that are fixed, variable or both. If at the date
when income payments begin you are invested in the Variable Portfolios only,
your income payments will be variable. If your money is only in fixed accounts
at that time, your income payments will be fixed in amount. Further, if you are
invested in both fixed and variable investment options when income payments
begin, your payments will be fixed and variable. If income payments are fixed,
Anchor National guarantees the amount of each payment. If the income payments
are variable the amount is not guaranteed.
INCOME PAYMENTS
We make income payments on a monthly, quarterly, semi-annual or annual basis.
You instruct us to send you a check or to have the payments directly deposited
into your bank account. If state law allows, we distribute annuities with a
contract value of $5,000 or less in a lump sum. Also, if the selected income
option results in income payments of less than $50 per payment, we may decrease
the frequency of the payments, state law allowing.
If you are invested in the Variable Portfolios after the Annuity Date your
income payments vary depending on four things:
- for life options, your age when payments begin; and
- the value of your contract in the Variable Portfolios on the Annuity
Date; and
- the 3.5% assumed investment rate used in the annuity table for the
contract; and
- the performance of the Variable Portfolios in which you are invested
during the time you receive income payments.
If you are invested in both the fixed account options and the Variable
Portfolios after the Annuity Date, the allocation of funds between the fixed and
variable options also impacts the amount of your income payments.
TRANSFERS DURING THE INCOME PHASE
During the Income Phase, one transfer per month is permitted between the
Variable Portfolios. No other transfers are allowed during the Income Phase.
DEFERMENT OF PAYMENTS
We may defer making fixed payments for up to six months, or less if required by
law. Interest is credited to you during the deferral period.
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THE INCOME PROTECTOR FEATURE
The Income Protector feature is a future "safety net" which offers you the
ability to receive a guaranteed fixed minimum retirement income when you switch
to the Income Phase. With the Income Protector feature you know the level of
minimum income that will be available to you upon annuitization, regardless of
fluctuating market conditions.
The Income Protector is a standard feature of your contract. There is no
additional charge associated with this feature. This feature may not be
available in your state. Check with your financial advisor regarding
availability.
We reserve the right to modify, suspend or terminate the Income Protector
feature at any time.
HOW WE DETERMINE THE AMOUNT OF YOUR MINIMUM GUARANTEED INCOME
We base the amount of minimum income available to you if you elect to receive
income payments using the Income Protector feature upon a calculation we call
the income benefit base.
The income benefit base is only a calculation. It does not represent a contract
value, nor does it guarantee performance of the Variable Portfolios in which you
invest.
Your income benefit base increases if you make subsequent Purchase Payments and
decreases if you withdraw money from your contract. The exact income benefit
base calculation is equal to (a) plus (b) minus (c) where:
(a) is equal to, for the first year of calculation, your initial Purchase
Payment, or for each subsequent year of calculation, the income benefit
base on the prior contract anniversary, and;
(b) is equal to the sum of all subsequent Purchase Payments made into the
contract since the last contract anniversary, and;
(c) is equal to all withdrawals and applicable fees and charges since the
last contract anniversary, in an amount proportionate to the amount by
which such withdrawals decreased your contract value.
ELECTING TO RECEIVE INCOME PAYMENTS
You may elect to begin the Income Phase of your contract using the Income
Protector feature ONLY within the 30 days after the seventh or later contract
anniversary.
The contract anniversary prior to your election to begin receiving income
payments is your income benefit date. This is the date as of which we calculate
your income benefit base to use in determining your guaranteed minimum fixed
retirement income. Your final income benefit base is equal to (a) minus (b)
where:
(a) is equal to your income benefit base as of your income benefit date,
and;
(b) is equal to any partial withdrawals of contract value and any charges
applicable to those withdrawals and any withdrawal charges otherwise
applicable, calculated as if you fully surrender your contract as the
income benefit date, and any applicable premium taxes.
To arrive at the minimum guaranteed retirement income available to you we apply
to your final income benefit base the annuity rates stated in your Income
Protector endorsement for the income option you select. You then choose if you
would like to receive that income annually, semi-annually quarterly or monthly
for the time guaranteed under your selected income option. The income options
available when using the income protector feature to receive your retirement
income are:
- Life Annuity with 10 Years Guaranteed, or
- Joint and Survivor Life Annuity with 20 Years Guaranteed
At the time you elect to begin receiving income payments, we will calculate your
income payments using both your income benefit base and your contract value. We
will use the same income option for each calculation, however, the annuity
factors used to calculate your income under the Income Protector feature will be
different. You will receive whichever provides a greater stream of income. If
you elect to receive income payments using the Income Protector feature your
income payments will be fixed in amount. You are not required to use the Income
Protector feature to receive income payments.
If a Spousal Beneficiary elects to continue the contract upon the death of the
original owner, the Income Protector feature will continue. The Continuation
Contribution is not a purchase payment and therefore will not impact the income
benefit base calculation. The waiting period before electing to use the Income
Protector feature will be counted from the original issue date of the contract.
NOTE TO QUALIFIED CONTRACT HOLDERS
Qualified contracts generally require that you select an income option which
does not exceed your life expectancy. That restriction, if it applies to you,
may limit your ability to use the Income Protector feature.
You may wish to consult your tax advisor for information concerning your
particular circumstances. SEE APPENDIX E FOR AN EXAMPLE OF THE OPERATION OF THE
INCOME PROTECTOR FEATURE.
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TAXES
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NOTE: WE PREPARED THE FOLLOWING INFORMATION ON TAXES AS A GENERAL DISCUSSION OF
THE SUBJECT. IT IS NOT TAX ADVICE. WE CAUTION YOU TO SEEK COMPETENT TAX ADVICE
ABOUT YOUR OWN CIRCUMSTANCES. WE DO NOT GUARANTEE THE TAX STATUS OF YOUR
ANNUITY. TAX LAWS CONSTANTLY CHANGE, THEREFORE WE CANNOT
21
GUARANTEE THAT THE INFORMATION CONTAINED HEREIN IS COMPLETE AND/OR ACCURATE.
ANNUITY CONTRACTS IN GENERAL
The Internal Revenue Code ("IRC") provides for special rules regarding the tax
treatment of annuity contracts. Generally, taxes on the earnings in your annuity
contract are deferred until you take the money out. Qualified retirement
investments automatically provide tax deferral regardless of whether the
underlying contract is an annuity. Different rules apply depending on how you
take the money out and whether your contract is Qualified or Non-qualified.
If you do not purchase your contract under a pension plan, a specially sponsored
employer program or an individual retirement account, your contract is referred
to as a Non-qualified contract. A Non-qualified contract receives different tax
treatment than a Qualified contract. In general, your cost basis in a
Non-qualified contract is equal to the Purchase Payments you put into the
contract. You have already been taxed on the cost basis in your contract.
If you purchase your contract under a pension plan, a specially sponsored
employer program or as an individual retirement account, your contract is
referred to as a Qualified contract. Examples of Qualified plans are: Individual
Retirement Accounts ("IRAs"), Roth IRAs, Tax-Sheltered Annuities (referred to as
403(b) contracts), H.R. 10 Plans (referred to as Keogh Plans) and pension and
profit sharing plans, including 401(k) plans. Typically you have not paid any
tax on the Purchase Payments used to buy your contract and therefore, you have
no cost basis in your contract.
TAX TREATMENT OF DISTRIBUTIONS -
NON-QUALIFIED CONTRACTS
If you make a withdrawal from a Non-qualified contract, the IRC treats such a
withdrawal as first coming from the earnings and then as coming from your
Purchase Payments. For income payments, any portion of each payment that is
considered a return of your Purchase Payment will not be taxed. Withdrawn
earnings are treated as income to you and are taxable. The IRC provides for a
10% penalty tax on any earnings that are withdrawn other than in conjunction
with the following circumstances: (1) after reaching age 59 1/2; (2) when paid
to your Beneficiary after you die; (3) after you become disabled (as defined in
the IRC); (4) when paid in a series of substantially equal installments made for
your life or for the joint lives of you and you Beneficiary; (5) under an
immediate annuity; or (6) which come from Purchase Payments made prior to August
14, 1982.
TAX TREATMENT OF DISTRIBUTIONS - QUALIFIED CONTRACTS
Generally, you have not paid any taxes on the Purchase Payments used to buy a
Qualified contract. Any amount of money you take out as a withdrawal or as
income payments is taxable income. The IRC further provides for a 10% penalty
tax on any withdrawal or income payment paid to you other than in conjunction
with the following circumstances: (1) after reaching age 59 1/2; (2) when paid
to your Beneficiary after you die; (3) after you become disabled (as defined in
the IRC); (4) in a series of substantially equal installments made for your life
or for the joint lives of you and your Beneficiary; (5) to the extent such
withdrawals do not exceed limitations set by the IRC for amounts paid during the
taxable year for medical care; (6) to fund higher education expenses (as defined
in IRC); (7) to fund certain first-time home purchase expenses; and, except in
the case of an IRA, (8) when you separate from service after attaining age 55;
and (9) when paid to an alternate payee pursuant to a qualified domestic
relations order.
The IRC limits the withdrawal of Purchase Payments from certain Tax-Sheltered
Annuities. Withdrawals can only be made when an owner: (1) reaches age 59 1/2;
(2) leaves his or her job; (3) dies; (4) becomes disabled (as defined in the
IRC); or (5) experiences a hardship (as defined in the IRC). In the case of
hardship, the owner can only withdraw Purchase Payments. These restrictions do
not apply to amounts transferred to another TSA contract under Section 403(b) or
to a custodial account under Section 403(b)(7).
MINIMUM DISTRIBUTIONS
Generally, the IRS requires that you begin taking annual distributions from
Qualified annuity contracts by April 1 of the calendar year following the later
of (1) the calendar year in which you attain age 70 1/2 or (2) for Qualified
contracts other than IRAs, the calendar year in which you retire. We currently
waive withdrawal charges and MVA on withdrawals taken to meet minimum
distribution requirements. Current operational practice is to provide a free
withdrawal of the required minimum distribution amount for a particular
contract. Minimum distributions are not required under a Roth IRA contract
during your lifetime.
The IRS has issued new proposed regulations regarding required minimum
distributions from Qualified contracts. These new rules are to be effective
January 1, 2002. However, these new rules may be used in determining required
minimum distributions for 2001 by owners of IRAs, Tax-Sheltered Annuities and
pension and profit sharing plans. You should consult your Qualified plan sponsor
and your tax advisor to determine if these new rules are available for your
benefit.
Failure to satisfy the minimum distribution requirement may result in a tax
penalty. You should consult your tax advisor for more information.
You may elect to have the required minimum distribution amount on your contract
calculated and withdrawn each year under the automatic withdrawal option. You
may select either monthly, quarterly, semiannual or annual withdrawals for this
22
purpose. This service is provided as a courtesy and we do not guarantee the
accuracy of our calculations. Accordingly, we recommend you consult your tax
advisor concerning your required minimum distribution. You may terminate your
election for automated minimum distribution at any time by sending a written
request to our Annuity Service Center. We reserve the right to change or
discontinue this service at any time.
TAX TREATMENT OF DEATH BENEFITS
Any death benefits paid under the contract are taxable to the Beneficiary. The
rules governing the taxation of payments from an annuity contract, as discussed
above, generally apply whether the death benefits are paid as lump sum or
annuity payments. Estate taxes may also apply.
Certain enhanced death benefits may be purchased under your contract. Although
these types of benefits are used as investment protection and should not give
rise to any adverse tax effects, the IRS could take the position that some or
all of the charges for these death benefits should be treated as a partial
withdrawal from the contract. In such case, the amount of the partial withdrawal
may be includable in taxable income and subject to the 10% penalty if the owner
is under age 59 1/2.
If you own a Qualified contract and purchase these enhanced death benefits, the
IRS may consider these benefits "incidental death benefits." The IRC imposes
limits on the amount of the incidental death benefits allowable for Qualified
contracts. If the death benefit(s) selected by you are considered to exceed
these limits, the benefit(s) could result in taxable income to the owner of the
Qualified contract. Furthermore, the IRC provides that the assets of an IRA
(including a Roth IRA) may not be invested in life insurance, but may provide,
in the case of death during the Accumulation Phase, for a death benefit payment
equal to the greater of Purchase Payments or contract value. This Contract
offers death benefits, which may exceed the greater of Purchase Payments or
contract value. If the IRS determines that these benefits are providing life
insurance, the contract may not qualify as an IRA (including Roth IRAs). You
should consult your tax adviser regarding these features and benefits prior to
purchasing a contract.
CONTRACTS OWNED BY A TRUST OR CORPORATION
A Trust or Corporation ("Non-Natural Owner") that is considering purchasing this
contract should consult a tax advisor. Generally, the IRC does not treat a
Non-qualified contract owned by a non-natural owner as an annuity contract for
Federal income tax purposes. The non-natural owner pays tax currently on the
contract's value in excess of the owner's cost basis. SEE THE STATEMENT OF
ADDITIONAL INFORMATION FOR A MORE DETAILED DISCUSSION OF THE POTENTIAL ADVERSE
TAX CONSEQUENCES ASSOCIATED WITH NON-NATURAL OWNERSHIP OF A NON-QUALIFIED
ANNUITY CONTRACT.
GIFTS, PLEDGES AND/OR ASSIGNMENTS OF
A NON-QUALIFIED CONTRACT
If you gift your Non-qualified contract to a person other than your spouse (or
former spouse incident to divorce) you will pay federal tax on the contract's
cash value to the extent it exceeds your cost basis. The recipient's cost basis
will be increased by the amount on which you will pay federal taxes. Also, the
IRC treats any assignment or pledge (or agreement to assign or pledge) of any
portion of a Non-qualified contract as a withdrawal. PLEASE SEE THE STATEMENT OF
ADDITIONAL INFORMATION FOR A MORE DETAILED DISCUSSION REGARDING POTENTIAL TAX
CONSEQUENCES OF GIFTING, ASSIGNING OR PLEDGING A NON-QUALIFIED CONTRACT.
DIVERSIFICATION
The IRC imposes certain diversification requirements on the underlying
investments for a variable annuity. We believe that each underlying Variable
Portfolios' management monitors the Variable Portfolios so as to comply with
these requirements. To be treated as a variable annuity for tax purposes, the
underlying investments must meet these requirements.
The diversification regulations do not provide guidance as to the circumstances
under which you, because of the degree of control you exercise over the
underlying investments, and not Anchor National, would be considered the owner
of the shares of the Variable Portfolios. It is unknown to what extent owners
are permitted to select investments, to make transfers among Variable Portfolios
or the number and type of Variable Portfolios owners may select from. If any
guidance is provided which is considered a new position, then the guidance would
generally be applied prospectively. However, if such guidance is considered not
to be a new position, it may be applied retroactively. This would mean you, as
the owner of the contract, could be treated as the owner of the underlying
Variable Portfolios. Due to the uncertainty in this area, we reserve the right
to modify the contract in an attempt to maintain favorable tax treatment.
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PERFORMANCE
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We advertise the Cash Management Portfolio's yield and effective yield. In
addition, the other Variable Portfolios advertise total return, gross yield and
yield-to-maturity. These figures represent past performance of the Variable
Portfolios. These performance numbers do not indicate future results.
When we advertise performance for periods prior to the date the particular
variable portfolio was incepted through the separate account, we derive the
figures from the performance
23
of the corresponding portfolios for the Trusts, if available. We modify these
numbers to reflect charges and expenses as if the contract was in existence
during the period stated in the advertisement. Figures calculated in this manner
do not represent actual historic performance of the particular Variable
Portfolio.
Consult the Statement of Additional Information for more detailed information
regarding the calculation of performance data. The performance of each Variable
Portfolio may also be measured against unmanaged market indices. The indices we
use include but are not limited to the Dow Jones Industrial Average, the
Standard & Poor's 500, the Russell 1000 Growth Index, the Morgan Stanley Capital
International Europe, Australia and Far East Index ("EAFE") and the Morgan
Stanley Capital International World Index. We may compare the Variable
Portfolios' performance to that of other variable annuities with similar
objectives and policies as reported by independent ranking agencies such as
Morningstar, Inc., Lipper Analytical Services, Inc. or Variable Annuity Research
& Data Service ("VARDS").
Anchor National may also advertise the rating and other information assigned to
it by independent industry ratings organizations. Some of those organizations
are A.M. Best Company ("A.M. Best"), Moody's Investor's Service ("Moody's"),
Standard & Poor's Insurance Rating Services ("S&P"), and Duff & Phelps. A.M.
Best's and Moody's ratings reflect their current opinion of our financial
strength and performance in comparison to others in the life and health
insurance industry. S&P's and Fitch IBCA Duff & Phelps' ratings measure the
ability of an insurance company to meet its obligations under insurance policies
it issues. These two ratings do not measure the insurer's ability to meet
non-policy obligations. Ratings in general do not relate to the performance of
the Variable Portfolios.
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OTHER INFORMATION
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ANCHOR NATIONAL
Anchor National is a stock life insurance company originally organized under the
laws of the state of California in April 1965. On January 1, 1996, Anchor
National redomesticated under the laws of the state of Arizona.
Anchor National and its affiliates, SunAmerica Life Insurance Company, First
SunAmerica Life Insurance Company, SunAmerica Asset Management Corp., and the
SunAmerica Financial Network, Inc. (comprising six wholly-owned broker-dealers),
specialize in retirement savings and investment products and services. Business
focuses include fixed and variable annuities, mutual funds and broker-dealer
services.
THE SEPARATE ACCOUNT
Anchor National originally established a separate account, Variable Annuity
Account Seven ("separate account"), under Arizona law on August 28, 1998. The
separate account is registered with the SEC as a unit investment trust under the
Investment Company Act of 1940, as amended.
Anchor National owns the assets in the separate account. However, the assets in
the separate account are not chargeable with liabilities arising out of any
other business conducted by Anchor National. Income gains and losses (realized
and unrealized) resulting from assets in the separate account are credited to or
charged against the separate account without regard to other income gains or
losses of Anchor National. Assets in the separate account are not guaranteed by
Anchor National.
THE GENERAL ACCOUNT
Money allocated to the fixed account options goes into Anchor National's general
account. The general account consists of all of Anchor National's assets other
than assets attributable to a separate account. All of the assets in the general
account are chargeable with the claims of any Anchor National contract holders
as well as all of its creditors. The general account funds are invested as
permitted under state insurance laws.
DISTRIBUTION OF THE CONTRACT
Registered representatives of broker-dealers sell the contract. We pay
commissions to these representatives for the sale of the contracts. We do not
expect the total commissions to exceed 5.00% of your Gross Purchase Payments. We
may also pay a bonus to representatives for contracts which stay active for a
particular period of time, in addition to standard commissions. The sales
charges on your contract cover the cost of commissions we pay to the
representative.
From time to time, we may pay or allow additional promotional incentives in the
form of cash or other compensation. We reserve the right to offer these
additional incentives only to certain broker-dealers that sell, or are expected
to sell, the contract or other contracts offered by us. Promotional incentives
may change at any time.
SunAmerica Capital Services, Inc., 733 Third Avenue, 4th Floor, New York, New
York 10017 distributes the contracts. SunAmerica Capital Services, an affiliate
of Anchor National, is registered as a broker-dealer under the Exchange Act of
1934 and is a member of the National Association of Securities Dealers, Inc. No
underwriting fees are paid in connection with the distribution of the contracts.
ADMINISTRATION
We are responsible for the administrative servicing of your contract. Please
contact our Annuity Service Center at 1-800-445-SUN2, if you have any comment,
question or service request.
During the Accumulation Phase, you will receive confirmation of transactions
within your contract. Transactions made pursuant to contractual or systematic
agreements, such as deduction of the annual maintenance fee and dollar cost
24
averaging, may be confirmed quarterly. Purchase Payments received through the
automatic payment plan or a salary reduction arrangement, may also be confirmed
quarterly. For all other transactions, we send confirmations immediately.
During the Accumulation and Income Phases, you will receive a statement of your
transactions over the past quarter and a summary of your account values.
It is your responsibility to review these documents carefully and notify us of
any inaccuracies immediately. We investigate all inquiries. To the extent that
we believe we made an error, we retroactively adjust your contract, provided you
notify us within 30 days of receiving the transaction confirmation or quarterly
statement. Any other adjustments we deem warranted are made as of the time we
receive notice of the error.
LEGAL PROCEEDINGS
There are no pending legal proceedings affecting the separate account. Anchor
National and its subsidiaries engage in various kinds of routine litigation. In
management's opinion, these matters are not of material importance to their
respective total assets nor are they material with respect to the separate
account.
OWNERSHIP
The Polaris(II) A-Class Variable Annuity is a Flexible Payment Group Deferred
Annuity contract. We issue a group contract to a contract holder for the benefit
of the participants in the group. As a participant in the group, you will
receive a certificate which evidences your ownership. As used in this
prospectus, the term contract refers to your certificate. In some states, a
Flexible Payment Individual Modified Guaranteed and Variable Deferred Annuity
contract is available instead. Such a contract is identical to the contract
described in this prospectus, with the exception that we issue it directly to
the owner.
CUSTODIAN
State Street Bank and Trust Company, 255 Franklin Street, Boston, Massachusetts
02110, serves as the custodian of the assets of the separate account. Anchor
National pays State Street Bank for services provided, based on a schedule of
fees.
INDEPENDENT ACCOUNTANTS
The audited consolidated financial statements of Anchor National at December 31,
2000 and 1999, for the years ended December 31, 2000 and 1999, for the three
months ended December 31, 1998 and for the year ended September 30, 1998; and
the audited financial statements of Variable Annuity Account Seven (Portion
Relating to the Polaris II A-Class Variable Annuity) at April 30, 2001 and for
the year ended April 30, 2001 and for period from inception to April 30, 2000,
are incorporated by reference in this prospectus in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
REGISTRATION STATEMENT
A registration statement has been filed with the SEC under the Securities Act of
1933 relating to the contract. This prospectus does not contain all the
information in the registration statement as permitted by SEC regulations. The
omitted information can be obtained from the SEC's principal office in
Washington, D.C., upon payment of a prescribed fee.
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TABLE OF CONTENTS OF
STATEMENT OF ADDITIONAL INFORMATION
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Separate Account.............................. 3
General Account............................... 3
Performance Data.............................. 4
Income Payments............................... 9
Annuity Unit Values........................... 9
Taxes......................................... 12
Distribution of Contracts..................... 16
Financial Statements.......................... 16
25
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APPENDIX A - CONDENSED FINANCIAL INFORMATION
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ACCUMULATION OF UNIT VALUE AND ACCUMULATION UNITS
INCEPTION TO 4/30/00 TO
POLARIS II A-CLASS PORTFOLIOS 4/30/00 4/30/01
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Capital Appreciation (Inception Date - 10/28/99)
Beginning AUV............................................. 10.00 (a) 14.03
(b) 12.97
Ending AUV................................................ 14.03 (a) 11.59
(b) 11.59
Ending Number of AUs...................................... 226,697 (a) 1,301,826
(b) 11,589
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Government and Quality Bond (Inception Date - 12/16/99)
Beginning AUV............................................. 10.00 (a) 10.13
(b) 11.09
Ending AUV................................................ 10.13 (a) 11.18
(b) 11.18
Ending Number of AUs...................................... 10,743 (a) 142,268
(b) 2,041
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Growth (Inception Date - 11/1/99)
Beginning AUV............................................. 10.00 (a) 11.95
(b) 11.29
Ending AUV................................................ 11.95 (a) 10.26
(b) 10.25
Ending Number of AUs...................................... 93,965 (a) 563,506
(b) 6,206
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Aggressive Growth (Inception Date - 11/1/99)
Beginning AUV............................................. 10.00 (a) 14.14
(b) 11.78
Ending AUV................................................ 14.14 (a) 10.17
(b) 10.16
Ending Number of AUs...................................... 49,324 (a) 207,783
(b) 365
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Alliance Growth (Inception Date - 10/28/99)
Beginning AUV............................................. 10.00 (a) 11.75
(b) 9.76
Ending AUV................................................ 11.75 (a) 8.50
(b) 8.50
Ending Number of AUs...................................... 423,804 (a) 2,004,620
(b) 10,150
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Asset Allocation (Inception Date - 11/12/99)
Beginning AUV............................................. 10.00 (a) 10.34
(b) 10.35
Ending AUV................................................ 10.34 (a) 9.97
(b) 9.97
Ending Number of AUs...................................... 14,781 (a) 112,976
(b) --
---------------------------------------------------------------------------------------------------
Blue Chip Growth (Inception Date - 9/5/00)
Beginning AUV............................................. N/A (a) 10.00
(b) 8.03
Ending AUV................................................ N/A (a) 7.11
(b) 7.10
Ending Number of AUs...................................... N/A (a) 30,980
(b) 335
---------------------------------------------------------------------------------------------------
Cash Management (Inception Date - 11/29/99)
Beginning AUV............................................. 10.00 (a) 10.20
(b) 10.60
Ending AUV................................................ 10.20 (a) 10.71
(b) 10.71
Ending Number of AUs...................................... 3,737 (a) 58,423
(b) 495
---------------------------------------------------------------------------------------------------
(a) Without election of optional EstatePlus feature.
(b) With election of optional EstatePlus feature, which became available for sale on January 25,
2001.
AUV - Accumulation Unit Value
AU - Accumulation Units
A-1
ACCUMULATION OF UNIT VALUE AND ACCUMULATION UNITS
INCEPTION TO 4/30/00 TO
POLARIS II A-CLASS PORTFOLIOS 4/30/00 4/30/01
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Corporate Bond (Inception Date - 12/27/99)
Beginning AUV............................................. 10.00 (a) 10.01
(b) 10.64
Ending AUV................................................ 10.01 (a) 10.74
(b) 10.73
Ending Number of AUs...................................... 3,500 (a) 87,233
(b) 90
---------------------------------------------------------------------------------------------------
Davis Venture Value (Inception Date - 10/28/99)
Beginning AUV............................................. 10.00 (a) 11.61
(b) 11.59
Ending AUV................................................ 11.61 (a) 10.82
(b) 10.81
Ending Number of AUs...................................... 353,493 (a) 1,957,911
(b) 16,912
---------------------------------------------------------------------------------------------------
"Dogs" of Wall Street (Inception Date - 1/3/00)
Beginning AUV............................................. 10.00 (a) 9.51
(b) 10.18
Ending AUV................................................ 9.51 (a) 10.71
(b) 10.71
Ending Number of AUs...................................... 3,381 (a) 30,007
(b) --
---------------------------------------------------------------------------------------------------
Emerging Markets (Inception Date - 11/10/99)
Beginning AUV............................................. 10.00 (a) 11.53
(b) 9.07
Ending AUV................................................ 11.53 (a) 8.06
(b) 8.07
Ending Number of AUs...................................... 16,356 (a) 152,174
(b) 2,733
---------------------------------------------------------------------------------------------------
Federated Value (Inception Date - 11/1/99)
Beginning AUV............................................. 10.00 (a) 10.03
(b) 10.78
Ending AUV................................................ 10.03 (a) 10.68
(b) 10.67
Ending Number of AUs...................................... 49,962 (a) 227,673
(b) 206
---------------------------------------------------------------------------------------------------
Global Bond (Inception Date - 11/29/99)
Beginning AUV............................................. 10.00 (a) 10.20
(b) 10.92
Ending AUV................................................ 10.20 (a) 11.01
(b) 11.01
Ending Number of AUs...................................... 1,149 (a) 17,170
(b) 44
---------------------------------------------------------------------------------------------------
Global Equities (Inception Date - 11/8/99)
Beginning AUV............................................. 10.00 (a) 11.70
(b) 9.90
Ending AUV................................................ 11.70 (a) 8.65
(b) 8.65
Ending Number of AUs...................................... 81,597 (a) 506,012
(b) 2,756
---------------------------------------------------------------------------------------------------
Goldman Sachs Research (Inception Date - 8/1/00)
Beginning AUV............................................. N/A (a) 10.00
(b) 9.76
Ending AUV................................................ N/A (a) 8.72
(b) 8.72
Ending Number of AUs...................................... N/A (a) 31,175
(b) 326
---------------------------------------------------------------------------------------------------
Growth-Income (Inception Date - 11/1/99)
Beginning AUV............................................. 10.00 (a) 11.39
(b) 10.42
Ending AUV................................................ 11.39 (a) 9.51
(b) 9.51
Ending Number of AUs...................................... 335,543 (a) 1,673,087
(b) 8,279
---------------------------------------------------------------------------------------------------
(a) Without election of optional EstatePlus feature.
(b) With election of optional EstatePlus feature, which became available for sale on January 25,
2001.
AUV - Accumulation Unit Value
AU - Accumulation Units
A-2
ACCUMULATION OF UNIT VALUE AND ACCUMULATION UNITS
INCEPTION TO 4/30/00 TO
POLARIS II A-CLASS PORTFOLIOS 4/30/00 4/30/01
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Growth Opportunities (Inception Date - 8/22/00)
Beginning AUV............................................. N/A (a) 10.00
(b) 8.60
Ending AUV................................................ N/A (a) 6.86
(b) 6.86
Ending Number of AUs...................................... N/A (a) 54,857
(b) --
---------------------------------------------------------------------------------------------------
High-Yield Bond (Inception Date - 11/29/99)
Beginning AUV............................................. 10.00 (a) 10.06
(b) 9.71
Ending AUV................................................ 10.06 (a) 9.30
(b) 9.30
Ending Number of AUs...................................... 13,058 (a) 91,018
(b) --
---------------------------------------------------------------------------------------------------
International Diversified Equities (Inception Date -
11/23/99)
Beginning AUV............................................. 10.00 (a) 9.87
(b) 8.63
Ending AUV................................................ 9.87 (a) 7.96
(b) 7.95
Ending Number of AUs...................................... 30,627 (a) 139,489
(b) 656
---------------------------------------------------------------------------------------------------
International Growth and Income (Inception Date - 10/28/99)
Beginning AUV............................................. 10.00 (a) 10.82
(b) 10.46
Ending AUV................................................ 10.82 (a) 9.72
(b) 9.72
Ending Number of AUs...................................... 132,522 (a) 663,722
(b) 1,472
---------------------------------------------------------------------------------------------------
MFS Growth & Income (Inception Date - 11/1/99)
Beginning AUV............................................. 10.00 (a) 10.49
(b) 10.34
Ending AUV................................................ 10.49 (a) 9.74
(b) 9.74
Ending Number of AUs...................................... 114,191 (a) 581,736
(b) 5,570
---------------------------------------------------------------------------------------------------
MFS Mid-Cap Growth (Inception Date - 11/1/99)
Beginning AUV............................................. 10.00 (a) 13.69
(b) 14.87
Ending AUV................................................ 13.69 (a) 13.19
(b) 13.19
Ending Number of AUs...................................... 30,505 (a) 344,347
(b) 306
---------------------------------------------------------------------------------------------------
MFS Total Return (Inception Date - 10/28/99)
Beginning AUV............................................. 10.00 (a) 10.22
(b) 11.64
Ending AUV................................................ 10.22 (a) 11.79
(b) 11.78
Ending Number of AUs...................................... 50,264 (a) 355,139
(b) 4,588
---------------------------------------------------------------------------------------------------
Putnam Growth (Inception Date - 11/1/99)
Beginning AUV............................................. 10.00 (a) 11.33
(b) 9.55
Ending AUV................................................ 11.33 (a) 8.38
(b) 8.38
Ending Number of AUs...................................... 177,965 (a) 820,691
(b) 3,244
---------------------------------------------------------------------------------------------------
Real Estate (Inception Date - 2/7/00)
Beginning AUV............................................. 10.00 (a) 10.77
(b) 12.42
Ending AUV................................................ 10.77 (a) 12.62
(b) 12.62
Ending Number of AUs...................................... 2,461 (a) 15,795
(b) 39
---------------------------------------------------------------------------------------------------
(a) Without election of the optional EstatePlus feature.
(b) With election of the optional EstatePlus feature, which became available for sale on January
25, 2001.
AUV - Accumulation Unit Value
AU - Accumulation Units
A-3
ACCUMULATION OF UNIT VALUE AND ACCUMULATION UNITS
INCEPTION TO 4/30/00 TO
POLARIS II A-CLASS PORTFOLIOS 4/30/00 4/30/01
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
SunAmerica Balanced (Inception Date - 10/28/99)
Beginning AUV............................................. 10.00 (a) 11.01
(b) 10.08
Ending AUV................................................ 11.01 (a) 9.34
(b) 9.33
Ending Number of AUs...................................... 93,619 (a) 431,856
(b) 265
---------------------------------------------------------------------------------------------------
Technology (Inception Date - 8/21/00)
Beginning AUV............................................. N/A (a) 10.00
(b) 6.68
Ending AUV................................................ N/A (a) 4.38
(b) 4.38
Ending Number of AUs...................................... N/A (a) 23,583
(b) --
---------------------------------------------------------------------------------------------------
Telecom Utility (Inception Date - 12/16/99)
Beginning AUV............................................. 10.00 (a) 9.91
(b) 9.12
Ending AUV................................................ 9.91 (a) 9.28
(b) 9.28
Ending Number of AUs...................................... 9,175 (a) 69,692
(b) 104
---------------------------------------------------------------------------------------------------
Worldwide High Income (Inception Date - 11/10/99)
Beginning AUV............................................. 10.00 (a) 10.42
(b) 10.54
Ending AUV................................................ 10.42 (a) 9.74
(b) 9.74
Ending Number of AUs...................................... 3,802 (a) 31,309
(b) --
---------------------------------------------------------------------------------------------------
Van Kampen LIT Comstock, Class II Shares* (Inception Date -
N/A)
Beginning AUV............................................. -- --
--
Ending AUV................................................ -- --
--
Ending Number of AUs...................................... -- --
--
---------------------------------------------------------------------------------------------------
Van Kampen LIT Emerging Growth, Class II Shares* (Inception
Date - N/A)
Beginning AUV............................................. -- --
--
Ending AUV................................................ -- --
--
Ending Number of AUs...................................... -- --
--
---------------------------------------------------------------------------------------------------
Van Kampen LIT Growth and Income, Class II Shares*
(Inception Date - N/A)
Beginning AUV............................................. -- --
--
Ending AUV................................................ -- --
--
Ending Number of AUs...................................... -- --
--
---------------------------------------------------------------------------------------------------
(a) Without election of the optional EstatePlus feature.
(b) With election of the optional EstatePlus feature, which became available for sale on January
25, 2001.
AUV - Accumulation Unit Value
AU - Accumulation Units
* This fund was not available for sale until October 15, 2001.
A-4
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
APPENDIX B - MARKET VALUE ADJUSTMENT ("MVA")
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
The MVA reflects the impact that changing interest rates have on the value of
money invested at a fixed interest rate. The longer the period of time remaining
in the term you initially agreed to leave your money in the fixed account
option, the greater the impact of changing interest rates. The impact of the MVA
can be either positive or negative, and is computed by multiplying the amount
withdrawn, transferred or switched to the Income Phase by the following factor:
[(1+I)/(1+J+L)](N/12) - 1
The MVA formula may differ in certain states
where:
I is the interest rate you are earning on the money invested in the
fixed account option;
J is the interest rate then currently available for the period of time
equal to the number of years (rounded up to an integer) remaining in the
term you initially agreed to leave your money in the fixed account
option; and
N is the number of full months remaining in the term you initially
agreed to leave your money in the fixed account option.
L=0.005, except in PA where L=0 and FL where L=0.0025.
EXAMPLES OF THE MVA
The examples below assume the following:
(1) You made an initial Purchase Payment of $10,000 (net of the sales
charge) and allocated it to the 10-year fixed account option at a rate
of 5%;
(2) You make a partial withdrawal of $4,000 when 1 1/2 years (18 months)
remain in the 10-year term you initially agreed to leave your money in
the fixed account option (N=18); and
(3) You have not made any other transfers, additional Purchase Payments, or
withdrawals.
We assume no withdrawal charge applies. If a withdrawal charge applies, it is
deducted before the MVA. The MVA is assessed on the amount withdrawn less any
withdrawal charges.
POSITIVE ADJUSTMENT
Assume that on the date of withdrawal, the interest rate in effect for a new
Purchase Payments in the 1-year fixed account option is 3.5% and the 3-year
fixed account option is 4.5%. By linear interpolation, the interest rate for the
remaining 2 years (1 1/2 years rounded up to the next full year) in the contract
is calculated to be 4%.
The MVA factor is = [(1+I)/(1+J+L)](N/12) - 1 where L=0.005
= [(1.05)/(1.04+0.005)](18/12) - 1
= (1.004785)(1.5) - 1
= 1.007186 - 1
= + 0.007186
The requested withdrawal amount is multiplied by the MVA factor to determine the
MVA:
$4,000 x (+0.007186) = +$28.74
$28.74 represents the MVA that would be added to your withdrawal.
NEGATIVE ADJUSTMENT
Assume that on the date of withdrawal, the interest rate in effect for new
Purchase Payments in the 1-year fixed account option is 5.5% and the 3-year
fixed account option is 6.5%. By linear interpolation, the interest rate for the
remaining 2 years (1 1/2 years rounded up to the next full year) in the contract
is calculated to be 6%.
The MVA factor is = [(1+I)/(1+J+L)](N/12) - 1 where L=0.005
= [(1.05)/(1.06+0.005)](18/12) - 1
= (0.985915)(1.5) - 1
= 0.978948 - 1
= - 0.021052
The requested withdrawal amount is multiplied by the MVA factor to determine the
MVA:
$4,000 X (- 0.021052) = -$84.21
$84.21 represents the MVA that will be deducted from the money remaining in the
10-year fixed account option.
B-1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
APPENDIX C - DEATH BENEFITS FOLLOWING SPOUSAL CONTINUATION
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Capitalized terms used in this Appendix have the same meaning as they have in
the Death Benefit section starting on page 13 of the prospectus.
The term "withdrawals" as used in describing the death benefit options below is
defined as withdrawals and any fees and charges applicable to those withdrawals.
The following details the death benefit options and EstatePlus benefit upon the
Continuing Spouse's death:
A. DEATH BENEFIT PAYABLE UPON CONTINUING SPOUSE'S DEATH:
1. Purchase Payment Accumulation Option
If a Continuation Contribution is added on the Continuation Date, the
death benefit is the greater of:
a. The contract value on the date we receive all required paperwork
and satisfactory proof of the Continuing Spouse's death; or
b. Total Gross Purchase Payments less; or
c. The contract value on the Continuation Date (including the
Continuation Contribution) plus any Purchase Payments minus any
withdrawals made since the Continuation Date compounded to the date
of death at a 4% annual growth rate, (3% growth rate if the
Continuing Spouse was age 70 or older on the Continuation Date)
plus any Purchase Payments minus withdrawals recorded after the
date of death; or
d. The contract value on the seventh contract anniversary following
the original issue date of the contract, plus any Purchase Payments
and less any withdrawals since the seventh contract anniversary,
all compounded at a 4% annual growth rate until the date of death
(3% growth rate if the Continuing Spouse is age 70 or older on the
Continuation Date) plus any Purchase Payments less withdrawals
recorded after the date of death. The Continuation Contribution is
considered a Purchase Payment received on the Continuation Date.
If a Continuation Contribution is not added on the Continuation Date,
the death benefit is the greater of:
a. The contract value on the date we receive all required paperwork
and satisfactory proof of the Continuing Spouse's death; or
b. Total Gross Purchase Payments less withdrawals; or
c. Total Purchase Payments minus withdrawals made from the original
contract issue date compounded to the date of death at a 4% annual
growth rate, (3% growth rate if the Continuing Spouse was age 70 or
older on the Contract Issue Date) plus any Purchase Payments minus
withdrawals recorded after the date of death; or
d. The contract value on the seventh contract anniversary following
the original issue date of the contract, plus any Purchase Payments
and less any withdrawals, since the seventh contract anniversary,
all compounded at a 4% annual growth rate until the date of death
(3% growth rate if the Continuing Spouse was age 70 or older on the
Contract Issue Date) plus any Purchase Payments less withdrawals
recorded after the date of death.
2.Maximum Anniversary Option - if the Continuing Spouse is below age 90 at
the time of death; and:
If a Continuation Contribution is added on the Continuation Date, the
death benefit is the greater of:
a.The contract value on the date we receive all required paperwork and
satisfactory proof of the Continuing Spouse's death; or
b.Continuation Net Purchase Payments plus Purchase Payments made since
the Continuation Date; and reduced for withdrawals in the same
proportion that the contract value was reduced on the date of such
withdrawal; or
c.The maximum anniversary value on any contract anniversary occurring
after the Continuation Date but prior to the Continuing Spouse's
81st birthday. The anniversary value equals the contract value on a
contract anniversary plus any Purchase Payments since that contract
anniversary; and reduced for any withdrawals recorded since that
contract anniversary in the same proportion that the withdrawal
reduced the contract value on the date of the withdrawal. Contract
anniversary is defined as any anniversary following the full 12
month period after the original contract issue date.
If a Continuation Contribution is not added on the Continuation Date,
the death benefit is the greater of:
a.The contract value on the date we receive all required paperwork and
satisfactory proof of the Continuing Spouse's death; or
b.Net Purchase Payments received since the original issue date; or
c.The maximum anniversary value on any contract anniversary from the
original contract issue date prior to the Continuing Spouse's 81st
birthday. The anniversary value equals the contract value on a
contract anniversary plus any Purchase Payments since that contract
anniversary; and reduced for any withdrawals recorded since that
C-1
contract anniversary in the same proportion that the withdrawal
reduced the contract value on the date of the withdrawal. Contract
anniversary is defined as any anniversary following the full 12
month period after the original contract issue date.
If the Continuing Spouse is age 90 or older at the time of death, under the
Maximum Anniversary death benefit, their beneficiary will receive only the
contract value at the time we receive all required paperwork and satisfactory
proof of death.
B. THE ESTATEPLUS BENEFIT PAYABLE UPON CONTINUING SPOUSE'S DEATH:
The EstatePlus benefit may increase the death benefit amount. The EstatePlus
benefit is only available if the original owner elected EstatePlus and it has
not been discontinued or terminated. If the Continuing Spouse had earnings in
the contract at the time of his/her death, we will add a percentage of those
earnings (the "EstatePlus Percentage"), subject to a maximum dollar amount (the
"Maximum EstatePlus Percentage"), to the death benefit payable, based on the
number of years the Continuing Spouse has held the contract since the
Continuation Date. The EstatePlus benefit, if any, is added to the death benefit
payable under the Purchase Payment Accumulation or the Maximum Anniversary
option.
The term "Continuation Net Purchase Payment" is used frequently to describe the
EstatePlus benefit payable to the beneficiary of the Continuing Spouse. We
define Continuation Net Purchase Payment as Net Purchase Payments made as of the
Continuation Date. For the purpose of calculating Continuation Net Purchase
Payments, the amount that equals the contract value on the Continuation Date,
including the Continuation Contribution is considered a Purchase Payment. If the
Continuing Spouse makes no additional Purchase Payments or withdrawal,
Continuation Net Purchase Payments equals the contract value on the Continuation
Date, including the Continuation Contribution.
The following table identifies the factors we use in determining the percentage
of earnings that will be added to the death benefit at the Continuing Spouse's
date of death, if the Continuing Spouse is age 69 or younger on the Continuation
Date:
-------------------------------------------------------------
CONTRACT YEAR ESTATEPLUS MAXIMUM
OF DEATH PERCENTAGE ESTATEPLUS PERCENTAGE
-------------------------------------------------------------
Years 0-4 25% of earnings 40% of Continuation
Net Purchase Payments
-------------------------------------------------------------
Years 5-9 40% of earnings 65% of Continuation
Net Purchase
Payments*
-------------------------------------------------------------
Years 10+ 50% of earnings 75% of Continuation
Net Purchase
Payments*
-------------------------------------------------------------
If the Continuing Spouse is between their 70th and 81st birthday on the
Continuation Date, the table below shows the available EstatePlus benefit:
-------------------------------------------------------------
CONTRACT YEAR ESTATEPLUS MAXIMUM
OF DEATH PERCENTAGE ESTATEPLUS PERCENTAGE
-------------------------------------------------------------
All Contract 25% of earnings 40% of Continuation
Years Net Purchase
Payments*
-------------------------------------------------------------
* Purchase Payments received after the 5(th) year following the Continuation
Date must remain in the contract for at least six months to be included as
part of Continuation Net Purchase Payments for purpose of the Maximum
EstatePlus calculation.
What is the Contract Year of Death?
Contract Year of Death is the number of full 12 month periods starting on the
Continuation Date and ending on the Continuing Spouse's date of death.
What is the EstatePlus amount?
We determine the EstatePlus amount based upon a percentage of earnings in the
contract at the time of the Continuing Spouse's death. For the purpose of this
calculation, earnings are defined as (1) minus (2) where
(1) equals the contract value on the Continuing Spouse's date of
death;
(2) equals the Continuation Net Purchase Payment(s).
What is the Maximum EstatePlus amount?
The EstatePlus benefit is subject to a maximum dollar amount. The Maximum
EstatePlus amount is a percentage of the Continuation Net Purchase Payments.
WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE SPOUSAL CONTINUATION
PROVISION (IN ITS ENTIRETY OR ANY COMPONENT) AT ANY TIME ON PROSPECTIVELY ISSUED
CONTRACTS.
C-2
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
APPENDIX D - PREMIUM TAXES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Premium taxes vary according to the state and are subject to change without
notice. In many states, there is no tax at all. Listed below are the current
premium tax rates in those states that assess a premium tax. For current
information, you should consult your tax adviser.
QUALIFIED NON-QUALIFIED
STATE CONTRACT CONTRACT
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
California .50% 2.35%
----------------------------------------------------------------------------------------
Maine 0% 2%
----------------------------------------------------------------------------------------
Nevada 0% 3.50%
----------------------------------------------------------------------------------------
South Dakota 0% 1.25%
----------------------------------------------------------------------------------------
West Virginia 1% 1%
----------------------------------------------------------------------------------------
Wyoming 0% 1%
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
D-1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
APPENDIX E - HYPOTHETICAL EXAMPLE OF THE OPERATION OF THE INCOME PROTECTOR
FEATURE
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
This table assumes $100,000 initial investment, net of sales charges, in a
Non-qualified contract with no withdrawals, additional Purchase Payments or
premium taxes.
-------------------------------------------------------------------------------------------------
Minimum annual income if you elect to receive income payments
If at issue on contract anniversary . . .
you are . . . 7 10 15 20
-------------------------------------------------------------------------------------------------
Male age 60* 6,108 6,672 7,716 8,832
-------------------------------------------------------------------------------------------------
Female age 60* 5,388 5,880 6,900 8,112
-------------------------------------------------------------------------------------------------
Joint** 4,716 5,028 5,544 5,928
Male-60
Female-60
-------------------------------------------------------------------------------------------------
* Life annuity with 10 years guaranteed
** Joint and survivor life annuity with 20 years guaranteed
E-1
--------------------------------------------------------------------------------
Please forward a copy (without charge) of the Polaris(II) A-Class Variable
Annuity Statement of Additional Information to:
(Please print or type and fill in all information.)
------------------------------------------------------------------------
Name
------------------------------------------------------------------------
Address
------------------------------------------------------------------------
City/State/Zip
Date: ----------------------- Signed: ----------------------------------
Return to: Anchor National Life Insurance Company, Annuity Service Center,
P.O. Box 52499, Los Angeles, California 90054-0299
--------------------------------------------------------------------------------