-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OYLh6m+vGITdRaXm3oKz4mKdsjMyC0aG+Sf2DTUAm3iukvLOBuJvTVbVL7l82hzM n8BbrEH/b93Etu8R74inMw== 0000950148-02-001011.txt : 20020416 0000950148-02-001011.hdr.sgml : 20020416 ACCESSION NUMBER: 0000950148-02-001011 CONFORMED SUBMISSION TYPE: POS AM PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20020415 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AIG SUNAMERICA LIFE ASSURANCE CO CENTRAL INDEX KEY: 0000006342 IRS NUMBER: 860198983 STATE OF INCORPORATION: AZ FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: POS AM SEC ACT: 1933 Act SEC FILE NUMBER: 033-87864 FILM NUMBER: 02610831 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 FORMER COMPANY: FORMER CONFORMED NAME: ANCHOR NATIONAL LIFE INSURANCE CO DATE OF NAME CHANGE: 19920929 POS AM 1 v78641paposam.txt POS AM As filed with the Securities and Exchange Commission on April 12, 2002 Registration No. 33-87864 - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------- Post-Effective Amendment No. 13 on Form S-3 under The Securities Act of 1933 -------------------- AIG SUNAMERICA INSURANCE COMPANY (DOING BUSINESS AS ANCHOR NATIONAL LIFE INSURANCE COMPANY) ("ANCHOR NATIONAL") (Exact name of registrant as specified in its charter) California 6311 86-0198983 (State or other (Primary Standard (I.R.S. Employer jurisdiction of Industrial Classification Identification No.) incorporation or Number) organization) 1 SunAmerica Center Los Angeles, California 90067-6022 (310) 772-6000 (Address, including zip code, and telephone number, including area code, or registrant's principal executive offices) Christine A. Nixon, Esquire Anchor National 1 SunAmerica Center Los Angeles, California 90067-6022 (310) 772-6000 (Name, address, including zip code, and telephone number, including area code of agent for service) ---------------------- Approximate date of commencement of proposed dale to the public: As soon after the effective date of this Registration Statement as is practicable. If the only securities being registered on this form are to be offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] ______________ If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] ______________ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] ---------------------- The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), shall determine. Registrant is filing this Post-Effective Amendment No. 13 for the sole purpose of adding to the Registration Statement certain Prospectuses pursuant to oral permission to do so provided by Mr. William Kotapish to Anchor National. The Registrant does not intend for this Post-Effective Amendment No. 13 to delete from the Registration Statement, any document included in the Registration Statement but not filed here, including any currently effective Prospectus or supplement thereto. [POLARIS PROTECTOR/PLATINUM LOGO] PROSPECTUS MAY 1, 2002 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 Variable Annuity. VARIABLE SEPARATE ACCOUNT The annuity has 45 investment choices -7 available fixed To learn more about the annuity account options and 38 Variable Portfolios listed below. The offered by this prospectus, you can 7 fixed account options include specified periods of 1, 3, obtain a copy of the Statement of 5, 7 and 10 years and DCA accounts for 6-month and 1-year Additional Information ("SAI") dated periods. The 38 Variable Portfolios are part of the Anchor May 1, 2002. The SAI has been filed Series Trust ("AST"), SunAmerica Series Trust ("SAST"), Van with the Securities and Exchange Kampen Life Investment Trust ("VKT") and the WM Variable Commission ("SEC") and is Trust ("WMT"). incorporated by reference into this prospectus. The Table of Contents of STOCKS: the SAI appears on page 37 of this MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P. prospectus. For a free copy of the - Alliance Growth Portfolio SAST SAI, call us at (800) 445-SUN2 or - Global Equities Portfolio SAST write to us at our Annuity Service - Growth & Income Portfolio SAST Center, P.O. Box 54299, Los Angeles, MANAGED BY DAVIS ADVISERS California 90054-0299. - Davis Venture Value Portfolio SAST - Real Estate Portfolio SAST In addition, the SEC maintains a MANAGED BY FEDERATED INVESTORS L.P. website (http://www.sec.gov) that - Federated Value Portfolio SAST contains the SAI, materials - Telecom Utility Portfolio SAST incorporated by reference and other MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT information filed electronically with - Goldman Sachs Research Portfolio SAST the SEC by Anchor National. MANAGED BY MARSICO CAPITAL MANAGEMENT, LLC - Marsico Growth Portfolio SAST ANNUITIES INVOLVE RISKS, INCLUDING MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY POSSIBLE LOSS OF PRINCIPAL, AND ARE - MFS Growth & Income Portfolio SAST NOT A DEPOSIT OR OBLIGATION OF, OR - MFS Mid-Cap Growth Portfolio SAST GUARANTEED OR ENDORSED BY, ANY BANK. MANAGED BY PUTNAM INVESTMENT MANAGEMENT INC. THEY ARE NOT FEDERALLY INSURED BY THE - Emerging Markets Portfolio SAST FEDERAL DEPOSIT INSURANCE - International Growth & Income Portfolio SAST CORPORATION, THE FEDERAL RESERVE - Putnam Growth Portfolio SAST BOARD OR ANY OTHER AGENCY. MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION - Aggressive Growth Portfolio SAST This variable annuity provides an - Blue Chip Growth Portfolio SAST optional bonus feature called - "Dogs" of Wall Street Portfolio SAST "Principal Rewards". If you elect - Growth Opportunities Portfolio SAST this feature, in exchange for bonuses MANAGED BY VAN KAMPEN/VAN KAMPEN ASSET MANAGEMENT INC. credited to your contract, your - International Diversified Equities Portfolio SAST surrender charge schedule will be - Technology Portfolio SAST longer and greater than if you chose - Van Kampen LIT Comstock Portfolio, Class II not to elect this feature. These Shares VKT withdrawal charges may offset the - Van Kampen LIT Emerging Growth Portfolio, Class II value of any bonus, if you make an Shares VKT early withdrawal. - Van Kampen LIT Growth and Income Portfolio, Class II Shares VKT MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP - Capital Appreciation Portfolio AST - Growth Portfolio AST - Natural Resources Portfolio AST BALANCED: MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY - MFS Total Return Portfolio SAST MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION - SunAmerica Balanced Portfolio SAST MANAGED BY WM ADVISORS, INC. - Asset Allocation Portfolio SAST - Balanced Portfolio WMT - Conservative Growth WMT - Strategic Growth WMT BONDS: MANAGED BY FEDERATED INVESTORS L.P. - Corporate Bond Portfolio SAST MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL - Global Bond Portfolio SAST MANAGED BY VAN KAMPEN - Worldwide High Income Portfolio SAST MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION - High-Yield Bond Portfolio SAST MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP - Government & Quality Bond Portfolio AST CASH: MANAGED BY BANC OF AMERICA CAPITAL MANAGEMENT, LLC - Cash Management Portfolio SAST
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. Anchor National Life Insurance Company is in the process of changing its name to AIG SunAmerica Life Assurance Company. We anticipate this process will take some time to implement in all jurisdictions where we do business. We expect the name change to be completed during 2003. To begin this process we officially changed the name in our state of domicile, Arizona. However, we continue to do business, today, under the name Anchor National and will refer to the Company by that name throughout this prospectus. You will be notified when the name is changed to AIG SunAmerica Life Assurance Company and we are no longer doing business as Anchor National. Please keep in mind, this is a name change only and will not affect the substance of your contract. - ---------------------------------------------------------------- - ---------------------------------------------------------------- INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE - ---------------------------------------------------------------- - ---------------------------------------------------------------- Anchor National's Annual Report on Form 10-K/A for the year ended December 31, 2001 is incorporated herein by reference. All documents or reports filed by Anchor National under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") after the effective date of this prospectus are also incorporated by reference. Statements contained in this prospectus and subsequently filed documents which are incorporated by reference or deemed to be incorporated by reference are deemed to modify or supercede documents incorporated by reference. Anchor National files its Exchange Act documents and reports, including its annual and quarterly reports on Form 10-K and Form 10-Q, electronically pursuant to EDGAR under CIK No. 0000006342. Anchor National is subject to the informational requirements of the Securities and Exchange Act of 1934 (as amended). We file reports and other information with the SEC to meet those requirements. You can inspect and copy this information at SEC public facilities at the following locations: WASHINGTON, DISTRICT OF COLUMBIA 450 Fifth Street, N.W., Room 1024 Washington, D.C. 20549 CHICAGO, ILLINOIS 500 West Madison Street Chicago, IL 60661 NEW YORK, NEW YORK 233 Broadway New York, NY 10279 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 - ---------------------------------------------------------------- - ---------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION POSITION ON INDEMNIFICATION - ---------------------------------------------------------------- - ---------------------------------------------------------------- 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 ------------------------------------------------------------------------- ------------------------------------------------------------------------- TABLE OF CONTENTS ------------------------------------------------------------------------- ------------------------------------------------------------------------- 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 Optional Income Protector Fee............................... 5 Contract Maintenance Fee.................................... 5 Annual Separate Account Expenses............................ 5 Optional EstatePlus Fee..................................... 5 Portfolio Expenses.......................................... 5 EXAMPLES.......................................................... 7 THE POLARIS PROTECTOR/PLATINUM VARIABLE ANNUITY................... 15 PURCHASING A POLARIS PROTECTOR/PLATINUM VARIABLE ANNUITY.......... 16 Allocation of Purchase Payments............................. 16 Principal Rewards Program................................... 16 Current Enhancement Levels.................................. 17 Accumulation Units.......................................... 18 Free Look................................................... 18 INVESTMENT OPTIONS................................................ 19 Variable Portfolios......................................... 19 Anchor Series Trust..................................... 19 SunAmerica Series Trust................................. 19 Van Kampen Life Investment Trust........................ 19 WM Variable Trust....................................... 19 Fixed Account Options....................................... 20 Market Value Adjustment ("MVA")............................. 20 Transfers During the Accumulation Phase..................... 21 Dollar Cost Averaging....................................... 21 Asset Allocation Rebalancing Program........................ 22 Principal Advantage Program................................. 22 Voting Rights............................................... 23 Substitution................................................ 23 ACCESS TO YOUR MONEY.............................................. 23 Systematic Withdrawal Program............................... 24 Nursing Home Waiver......................................... 24 Minimum Contract Value...................................... 25 DEATH BENEFIT..................................................... 25 Purchase Payment Accumulation Option........................ 25 Maximum Anniversary Option.................................. 26 EstatePlus.................................................. 26 Spousal Continuation........................................ 27 EXPENSES.......................................................... 27 Insurance Charges........................................... 27 Withdrawal Charges.......................................... 27 Investment Charges.......................................... 28 Contract Maintenance Fee.................................... 28 Transfer Fee................................................ 28 Optional EstatePlus Fee..................................... 28 Optional Income Protector Fee............................... 28 Premium Tax................................................. 29 Income Taxes................................................ 29 Reduction or Elimination of Charges and Expenses, and Additional Amounts Credited................................ 29 INCOME OPTIONS.................................................... 29 Annuity Date................................................ 29 Income Options.............................................. 29 Fixed or Variable Income Payments........................... 30 Income Payments............................................. 30 Transfers During the Income Phase........................... 30 Deferment of Payments....................................... 30 The Income Protector Feature................................ 30 Note to Qualified Contract Holders.......................... 32 TAXES............................................................. 32 Annuity Contracts in General................................ 33 Tax Treatment of Distributions - Non-qualified Contracts.... 33 Tax Treatment of Distributions - Qualified Contracts........ 33 Minimum Distributions....................................... 34 Tax Treatment of Death Benefits............................. 34 Contracts Owned by a Trust or Corporation................... 34 Gifts, Pledges and/or Assignments of a Non-Qualified Contract................................................... 34 Diversification............................................. 34 PERFORMANCE....................................................... 35 OTHER INFORMATION................................................. 35 Anchor National............................................. 35 The Separate Account........................................ 35 The General Account......................................... 35 Distribution of the Contract................................ 36 Administration.............................................. 36 Legal Proceedings........................................... 36 Ownership................................................... 36 Custodian................................................... 36 Independent Accountants..................................... 36 Registration Statement...................................... 36 TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.......... 37 APPENDIX A - CONDENSED FINANCIAL INFORMATION...................... A-1 APPENDIX B - PRINCIPAL REWARDS PROGRAM EXAMPLES................... B-1 APPENDIX C - MARKET VALUE ADJUSTMENT ("MVA")...................... C-1 APPENDIX D - DEATH BENEFITS FOLLOWING SPOUSAL CONTINUATION........ D-1 APPENDIX E - HYPOTHETICAL EXAMPLE OF THE OPERATION OF THE INCOME PROTECTOR FEATURE................................................ E-1 APPENDIX F - PREMIUM TAXES........................................ F-1 ------------------------------------------------------------------------- ------------------------------------------------------------------------- GLOSSARY ------------------------------------------------------------------------- ------------------------------------------------------------------------- We have capitalized some of the technical terms used in this prospectus. To help you understand these terms, we have defined them in this glossary. ACCUMULATION PHASE - The period during which you invest money in your contract. ACCUMULATION UNITS - A measurement we use to calculate the value of the variable portion of your contract during the Accumulation Phase. ANNUITANT(S) - The person(s) on whose life (lives) we base income payments. ANNUITY DATE - The date on which income payments are to begin, as selected by you. ANNUITY UNITS - A measurement we use to calculate the amount of income payments you receive from the variable portion of your contract during the Income Phase. BENEFICIARY - The person designated to receive any benefits under the contract if you or the Annuitant dies. COMPANY - Anchor National Life Insurance Company, We, Us, the insurer which issues this contract. INCOME PHASE - The period during which we make income payments to you. IRS - The Internal Revenue Service. NON-QUALIFIED (CONTRACT) - A contract purchased with after-tax dollars. In general, these contracts are not under any pension plan, specially sponsored program or individual retirement account ("IRA"). PAYMENT ENHANCEMENT(S) - The amount(s) allocated to your contract by us under the Principal Rewards Program. Payment Enhancements are calculated as a percentage of your Purchase Payments and are considered earnings. PURCHASE PAYMENTS - The money you give us to buy the contract, as well as any additional money you give us to invest in the contract after you own it. QUALIFIED (CONTRACT) - A contract purchased with pretax dollars. These contracts are generally purchased under a pension plan, specially sponsored program or IRA. TRUSTS - Refers to the Anchor Series Trust, the SunAmerica Series Trust, Van Kampen Life Investment Trust and WM Variable 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, Van Kampen Life Investment Trust or the WM Variable Trust.
ALL FINANCIAL REPRESENTATIVES OR AGENTS THAT SELL THE CONTRACTS OFFERED BY THIS PROSPECTUS ARE REQUIRED TO DELIVER A PROSPECTUS. 3 - ---------------------------------------------------------------- - ---------------------------------------------------------------- HIGHLIGHTS - ---------------------------------------------------------------- - ---------------------------------------------------------------- The Polaris Protector/Platinum 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. You may also elect to participate in the Rewards Program of the contract that can provide you with Payment Enhancements to invest in your contract. If you elect participation in this feature, your contract will be subject to a longer surrender charge schedule. 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: If you cancel your contract within 10 days after receiving it (or whatever period is required in your state), we will cancel the contract without charging a withdrawal charge. You will receive whatever your contract is worth on the day that we receive your request. This amount may be more or less than your original Purchase Payment. We will return your original Purchase Payment if required by law. If you elected to participate in the Rewards Program, you receive any gain and we bear any loss on any Payment Enhancement(s) if you decide to cancel your contract during the free look period. Please see PURCHASING A POLARIS PROTECTOR/PLATINUM VARIABLE ANNUITY in the prospectus. EXPENSES: There are fees and charges associated with the contract. Each year, we deduct a $35 contract maintenance fee from your contract, which may be waived for contracts of $50,000 or more. We also deduct insurance charges, which equal 1.52% 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 these features. A separate withdrawal charge schedule applies to each Purchase Payment. The amount of the withdrawal charge declines over time. After a Purchase Payment has been in the contract for seven complete years, or nine complete years if you participate in the Rewards Program, withdrawal charges no longer apply to that portion of the Purchase Payment. Please see the FEE TABLE, PURCHASING A POLARIS PROTECTOR/ PLATINUM 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. As noted above, a withdrawal charge may apply. 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 DIFFERENT VARIABLE ANNUITY PRODUCTS TO MEET THE DIVERSE NEEDS OF OUR INVESTORS. EACH PRODUCT MAY PROVIDE DIFFERENT FEATURES AND BENEFITS OFFERED AT DIFFERENT FEES, CHARGES AND EXPENSES. WE ALSO OFFER PRODUCTS THAT DO NOT OFFER THE PRINCIPAL REWARDS FEATURE. PRODUCTS WITHOUT THE PRINCIPAL REWARDS PROGRAM HAVE THE SAME MORTALITY AND EXPENSE RISK CHARGES AS THE SAME CONTRACT WITH THE PRINCIPAL REWARDS PROGRAM. HOWEVER, CONTRACTS WITHOUT THE PRINCIPAL REWARDS PROGRAM HAVE A SHORTER AND LOWER SURRENDER CHARGE SCHEDULE. 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 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FEE TABLES - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- OWNER TRANSACTION EXPENSES WITHDRAWAL CHARGE (AS A PERCENTAGE OF EACH PURCHASE PAYMENT) YEARS:....................... 1 2 3 4 5 6 7 8 9 10 Non-Principal Rewards........ 7% 6% 5% 4% 3% 2% 1% 0% 0% 0% Principal Rewards............ 9% 9% 8% 7% 6% 5% 4% 3% 2% 0%
TRANSFER FEE.......... No charge for first 15 transfers each contract year; thereafter, fee is $25 ($10 in Pennsylvania and Texas) per transfer
OPTIONAL INCOME PROTECTOR FEE (THE INCOME PROTECTOR WHICH IS DESCRIBED MORE FULLY IN THE PROSPECTUS IS OPTIONAL AND IF ELECTED, THE FEE IS DEDUCTED ANNUALLY FROM YOUR CONTRACT VALUE.)
ANNUAL FEE AS A % OF GROWTH RATE YOUR INCOME BENEFIT BASE* ----------- ------------------------- Base 0% .10% Plus 6% .45%
* The Income Benefit Base, which is described more fully in the prospectus is generally calculated by using your contract value on the date of your effective enrollment in the program and then each subsequent contract anniversary, adding purchase payments made since the prior contract anniversary, less proportional withdrawals, and fees and charges applicable to those withdrawals. CONTRACT MAINTENANCE FEE* $35 ($30 in North Dakota) *waived if contract value is $50,000 or more ANNUAL SEPARATE ACCOUNT EXPENSES (AS A PERCENTAGE OF YOUR DAILY NET ASSET) Mortality and Expense Risk Charge..................... 1.37% Distribution Expense Charge........................... 0.15% ----- TOTAL SEPARATE ACCOUNT EXPENSES 1.52% =====
OPTIONAL ESTATEPLUS FEE (ESTATEPLUS, AN ENHANCED DEATH BENEFIT FEATURE WHICH IS DESCRIBED MORE FULLY IN THE PROSPECTUS IS OPTIONAL AND IF ELECTED, THE FEE IS AN ANNUALIZED CHARGE THAT IS DEDUCTED DAILY FROM YOUR CONTRACT VALUE.) Fee as a percentage of your daily net asset value......... .25%
PORTFOLIO EXPENSES ANCHOR SERIES TRUST (AS A PERCENTAGE OF AVERAGE NET ASSETS FOR THE TRUST'S FISCAL YEAR ENDED DECEMBER 31, 2001)
MANAGEMENT SERVICE(12B-1) OTHER TOTAL ANNUAL PORTFOLIO FEE FEE EXPENSES EXPENSES - ------------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------- Capital Appreciation 0.70% 0.15% 0.08% 0.93% - ------------------------------------------------------------------------------------------------------------------------------- Government and Quality Bond 0.57% 0.15% 0.07% 0.79% - ------------------------------------------------------------------------------------------------------------------------------- Growth 0.67% 0.15% 0.06% 0.88% - ------------------------------------------------------------------------------------------------------------------------------- Natural Resources 0.75% 0.15% 0.16% 1.06% - ------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------
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, 2002)
MANAGEMENT SERVICE(12B-1) OTHER TOTAL ANNUAL PORTFOLIO FEE(4) FEE(4) EXPENSES(4) EXPENSES(4) - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- Aggressive Growth 0.69% 0.15% 0.08% 0.92% - --------------------------------------------------------------------------------------------------------------------------------- Alliance Growth 0.60% 0.15% 0.06% 0.81% - --------------------------------------------------------------------------------------------------------------------------------- Asset Allocation 0.59% 0.15% 0.09% 0.83% - --------------------------------------------------------------------------------------------------------------------------------- Blue Chip Growth(1) 0.70% 0.15% 0.15% 1.00% - --------------------------------------------------------------------------------------------------------------------------------- Cash Management 0.48% 0.15% 0.05% 0.68% - --------------------------------------------------------------------------------------------------------------------------------- Corporate Bond 0.59% 0.15% 0.08% 0.82% - --------------------------------------------------------------------------------------------------------------------------------- Davis Venture Value 0.71% 0.15% 0.06% 0.92% - --------------------------------------------------------------------------------------------------------------------------------- Dogs of Wall Street 0.60% 0.15% 0.11% 0.86% - --------------------------------------------------------------------------------------------------------------------------------- Emerging Markets 1.25% 0.15% 0.30% 1.70% - --------------------------------------------------------------------------------------------------------------------------------- Federated Value 0.68% 0.15% 0.08% 0.91% - --------------------------------------------------------------------------------------------------------------------------------- Global Bond 0.68% 0.15% 0.14% 0.97% - --------------------------------------------------------------------------------------------------------------------------------- Global Equities 0.73% 0.15% 0.17% 1.05% - --------------------------------------------------------------------------------------------------------------------------------- Goldman Sachs Research(1) 1.20% 0.15% 0.15% 1.50% - --------------------------------------------------------------------------------------------------------------------------------- Growth-Income 0.53% 0.15% 0.06% 0.74% - --------------------------------------------------------------------------------------------------------------------------------- Growth Opportunities(1) 0.75% 0.15% 0.25% 1.15% - --------------------------------------------------------------------------------------------------------------------------------- High-Yield Bond 0.64% 0.15% 0.09% 0.88% - --------------------------------------------------------------------------------------------------------------------------------- Int'l Diversified Equities 1.00% 0.15% 0.27% 1.42% - --------------------------------------------------------------------------------------------------------------------------------- Int'l Growth and Income 0.95% 0.15% 0.27% 1.37% - --------------------------------------------------------------------------------------------------------------------------------- Marsico Growth(1,2) 0.85% 0.15% 0.16% 1.16% - --------------------------------------------------------------------------------------------------------------------------------- MFS Growth and Income 0.70% 0.15% 0.08% 0.93% - --------------------------------------------------------------------------------------------------------------------------------- MFS Mid-Cap Growth 0.75% 0.15% 0.08% 0.98% - --------------------------------------------------------------------------------------------------------------------------------- MFS Total Return 0.66% 0.15% 0.07% 0.88% - --------------------------------------------------------------------------------------------------------------------------------- Putnam Growth 0.78% 0.15% 0.06% 0.99% - --------------------------------------------------------------------------------------------------------------------------------- Real Estate 0.80% 0.15% 0.12% 1.07% - --------------------------------------------------------------------------------------------------------------------------------- SunAmerica Balanced 0.60% 0.15% 0.07% 0.82% - --------------------------------------------------------------------------------------------------------------------------------- Technology 1.20% 0.15% 0.25% 1.60% - --------------------------------------------------------------------------------------------------------------------------------- Telecom Utility(3) 0.75% 0.15% 0.11% 1.01% - --------------------------------------------------------------------------------------------------------------------------------- Worldwide High Income(3) 1.00% 0.15% 0.12% 1.27% - --------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------
(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. Absent fee waivers or reimbursement of expenses by the adviser or custody credits, you would have incurred the following expenses during the last fiscal year: Blue Chip Growth 1.25%; Goldman Sachs Research 1.70%; Growth Opportunities 1.31%; and Marsico Growth 1.73%. (2)The expense ratio is gross of custody credits of 0.01%. The actual expense ratio is capped at 1.15%. (3)Gross of custody credits of 0.01%. (4)Annualized. 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, 2001)
MANAGEMENT SERVICE(12B-1) OTHER TOTAL ANNUAL PORTFOLIO FEE FEE EXPENSES EXPENSES - ------------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------- Van Kampen LIT Comstock(1) 0.60% 0.25% 0.21% 1.06% - ------------------------------------------------------------------------------------------------------------------------------- Van Kampen LIT Emerging Growth(2) 0.70% 0.25% 0.06% 1.01% - ------------------------------------------------------------------------------------------------------------------------------- Van Kampen LIT Growth and Income(3) 0.60% 0.25% 0.15% 1.00% - ------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------
(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. WM VARIABLE TRUST* (AS A PERCENTAGE OF DAILY NET ASSET VALUE OF EACH INVESTMENT PORTFOLIO AS OF THE FISCAL YEAR END OF THE TRUST ENDING DECEMBER 31, 2001)
MANAGEMENT OTHER TOTAL ANNUAL PORTFOLIO FEE EXPENSES EXPENSES(1) - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- STRATEGIC GROWTH 0.10% 0.21% 0.31% - ----------------------------------------------------------------------------------------------------------- CONSERVATIVE GROWTH 0.10% 0.18% 0.28% - ----------------------------------------------------------------------------------------------------------- BALANCED 0.10% 0.18% 0.28% - ----------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------
(1)The Annual Expenses of the portfolios, combined with the Annual Expenses of the underlying funds are shown under "Annual Expenses of the Portfolios and Underlying Funds Combined" below. THE ABOVE PORTFOLIO EXPENSES WERE PROVIDED BY THE TRUSTS. WE HAVE NOT INDEPENDENTLY VERIFIED THE ACCURACY OF THE INFORMATION. 6 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- EXAMPLES -- IF YOU DO NOT PARTICIPATE IN THE PRINCIPAL REWARDS PROGRAM - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- You will pay the following expenses on a $1,000 investment in each Variable Portfolio, assuming a 5% annual return on assets, Portfolio Expenses after waiver, reimbursement or recoupment, (assuming the waiver, reimbursement or recoupment will continue for the period shown) if applicable and: (a) you surrender the contract at the end of the stated time period and no optional features are elected. (b) you elect the optional EstatePlus and the Income Protector Plus features with the following charges (.25% and .45%, respectively), and you surrender the contract at the end of the stated period. (c) you do not surrender the contract and no optional features are elected.* (d) you elect the optional EstatePlus and Income Protector Plus features with the following charges (.25% and .45%, respectively), and you do not surrender the contract.
1 3 5 10 PORTFOLIO YEAR YEARS YEARS YEARS - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- Capital Appreciation (a) $ 96 (a) $129 (a) $165 (a) $287 (b) $103 (b) $150 (b) $199 (b) $354 (c) $ 26 (c) $ 79 (c) $135 (c) $287 (d) $ 33 (d) $100 (d) $169 (d) $354 - ----------------------------------------------------------------------------------------------------------- Government and Quality Bond (a) $ 94 (a) $125 (a) $158 (a) $273 (b) $101 (b) $146 (b) $192 (b) $341 (c) $ 24 (c) $ 75 (c) $128 (c) $273 (d) $ 31 (d) $ 96 (d) $162 (d) $341 - ----------------------------------------------------------------------------------------------------------- Growth (a) $ 95 (a) $127 (a) $162 (a) $282 (b) $102 (b) $148 (b) $197 (b) $349 (c) $ 25 (c) $ 77 (c) $132 (c) $282 (d) $ 32 (d) $ 98 (d) $167 (d) $349 - ----------------------------------------------------------------------------------------------------------- Natural Resources (a) $ 97 (a) $133 (a) $171 (a) $300 (b) $104 (b) $154 (b) $205 (b) $366 (c) $ 27 (c) $ 83 (c) $141 (c) $300 (d) $ 34 (d) $104 (d) $175 (d) $366 - ----------------------------------------------------------------------------------------------------------- Aggressive Growth (a) $ 96 (a) $129 (a) $164 (a) $286 (b) $103 (b) $149 (b) $199 (b) $353 (c) $ 26 (c) $ 79 (c) $134 (c) $286 (d) $ 33 (d) $ 99 (d) $169 (d) $353 - ----------------------------------------------------------------------------------------------------------- Alliance Growth (a) $ 94 (a) $125 (a) $159 (a) $275 (b) $101 (b) $146 (b) $193 (b) $343 (c) $ 24 (c) $ 75 (c) $129 (c) $275 (d) $ 31 (d) $ 96 (d) $163 (d) $343 - ----------------------------------------------------------------------------------------------------------- Asset Allocation (a) $ 95 (a) $126 (a) $160 (a) $277 (b) $102 (b) $147 (b) $194 (b) $345 (c) $ 25 (c) $ 76 (c) $130 (c) $277 (d) $ 32 (d) $ 97 (d) $164 (d) $345 - ----------------------------------------------------------------------------------------------------------- Blue Chip Growth (a) $ 96 (a) $131 (a) $168 (a) $294 (b) $103 (b) $152 (b) $203 (b) $360 (c) $ 26 (c) $ 81 (c) $138 (c) $294 (d) $ 33 (d) $102 (d) $173 (d) $360 - ----------------------------------------------------------------------------------------------------------- Cash Management (a) $ 93 (a) $121 (a) $152 (a) $262 (b) $100 (b) $142 (b) $187 (b) $331 (c) $ 23 (c) $ 71 (c) $122 (c) $262 (d) $ 30 (d) $ 92 (d) $157 (d) $331 - ----------------------------------------------------------------------------------------------------------- Corporate Bond (a) $ 95 (a) $126 (a) $159 (a) $276 (b) $102 (b) $146 (b) $194 (b) $344 (c) $ 25 (c) $ 76 (c) $129 (c) $276 (d) $ 32 (d) $ 96 (d) $164 (d) $344 - ----------------------------------------------------------------------------------------------------------- Davis Venture Value (a) $ 96 (a) $129 (a) $164 (a) $286 (b) $103 (b) $149 (b) $199 (b) $353 (c) $ 26 (c) $ 79 (c) $134 (c) $286 (d) $ 33 (d) $ 99 (d) $169 (d) $353 - ----------------------------------------------------------------------------------------------------------- "Dogs" of Wall Street (a) $ 95 (a) $127 (a) $161 (a) $280 (b) $102 (b) $148 (b) $196 (b) $347 (c) $ 25 (c) $ 77 (c) $131 (c) $280 (d) $ 32 (d) $ 98 (d) $166 (d) $347 - ----------------------------------------------------------------------------------------------------------- Emerging Markets (a) $103 (a) $152 (a) $203 (a) $360 (b) $110 (b) $172 (b) $235 (b) $421 (c) $ 33 (c) $102 (c) $173 (c) $360 (d) $ 40 (d) $122 (d) $205 (d) $421 - ----------------------------------------------------------------------------------------------------------- Federated Value (a) $ 95 (a) $128 (a) $164 (a) $285 (b) $102 (b) $149 (b) $198 (b) $352 (c) $ 25 (c) $ 78 (c) $134 (c) $285 (d) $ 32 (d) $ 99 (d) $168 (d) $352 - ----------------------------------------------------------------------------------------------------------- Global Bond (a) $ 96 (a) $130 (a) $167 (a) $291 (b) $103 (b) $151 (b) $201 (b) $357 (c) $ 26 (c) $ 80 (c) $137 (c) $291 (d) $ 33 (d) $101 (d) $171 (d) $357 - ----------------------------------------------------------------------------------------------------------- * We do not currently charge a surrender charge upon annuitization unless the contract is annuitized using the Income Protector feature. We assess the applicable surrender charge upon annuitization under the Income Protector feature assuming a full surrender of your contract.
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1 3 5 10 PORTFOLIO YEAR YEARS YEARS YEARS - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- Global Equities (a) $ 97 (a) $133 (a) $171 (a) $299 (b) $104 (b) $153 (b) $205 (b) $365 (c) $ 27 (c) $ 83 (c) $141 (c) $299 (d) $ 34 (d) $103 (d) $175 (d) $365 - ----------------------------------------------------------------------------------------------------------- Goldman Sachs Research (a) $101 (a) $146 (a) $193 (a) $342 (b) $108 (b) $166 (b) $226 (b) $404 (c) $ 31 (c) $ 96 (c) $163 (c) $342 (d) $ 38 (d) $116 (d) $196 (d) $404 - ----------------------------------------------------------------------------------------------------------- Growth-Income (a) $ 94 (a) $123 (a) $155 (a) $268 (b) $101 (b) $144 (b) $190 (b) $336 (c) $ 24 (c) $ 73 (c) $125 (c) $268 (d) $ 31 (d) $ 94 (d) $160 (d) $336 - ----------------------------------------------------------------------------------------------------------- Growth Opportunities (a) $ 98 (a) $136 (a) $176 (a) $309 (b) $105 (b) $156 (b) $210 (b) $374 (c) $ 28 (c) $ 86 (c) $146 (c) $309 (d) $ 35 (d) $106 (d) $180 (d) $374 - ----------------------------------------------------------------------------------------------------------- High-Yield Bond (a) $ 95 (a) $127 (a) $162 (a) $282 (b) $102 (b) $148 (b) $197 (b) $349 (c) $ 25 (c) $ 77 (c) $132 (c) $282 (d) $ 32 (d) $ 98 (d) $167 (d) $349 - ----------------------------------------------------------------------------------------------------------- International Diversified Equities (a) $101 (a) $144 (a) $189 (a) $334 (b) $108 (b) $164 (b) $222 (b) $397 (c) $ 31 (c) $ 94 (c) $159 (c) $334 (d) $ 38 (d) $114 (d) $192 (d) $397 - ----------------------------------------------------------------------------------------------------------- International Growth and Income (a) $100 (a) $142 (a) $187 (a) $330 (b) $107 (b) $163 (b) $220 (b) $393 (c) $ 30 (c) $ 92 (c) $157 (c) $330 (d) $ 37 (d) $113 (d) $190 (d) $393 - ----------------------------------------------------------------------------------------------------------- Marsico Growth (a) $ 98 (a) $136 (a) $176 (a) $310 (b) $105 (b) $156 (b) $210 (b) $375 (c) $ 28 (c) $ 86 (c) $146 (c) $310 (d) $ 35 (d) $106 (d) $180 (d) $375 - ----------------------------------------------------------------------------------------------------------- MFS Growth and Income (a) $ 96 (a) $129 (a) $166 (a) $287 (b) $103 (b) $150 (b) $199 (b) $354 (c) $ 26 (c) $ 79 (c) $135 (c) $287 (d) $ 33 (d) $100 (d) $169 (d) $354 - ----------------------------------------------------------------------------------------------------------- MFS Mid-Cap Growth (a) $ 96 (a) $130 (a) $167 (a) $292 (b) $103 (b) $151 (b) $202 (b) $358 (c) $ 26 (c) $ 80 (c) $137 (c) $292 (d) $ 33 (d) $101 (d) $172 (d) $358 - ----------------------------------------------------------------------------------------------------------- MFS Total Return (a) $ 95 (a) $127 (a) $162 (a) $282 (b) $102 (b) $148 (b) $197 (b) $349 (c) $ 25 (c) $ 77 (c) $132 (c) $282 (d) $ 32 (d) $ 98 (d) $167 (d) $349 - ----------------------------------------------------------------------------------------------------------- Putnam Growth (a) $ 96 (a) $131 (a) $168 (a) $293 (b) $103 (b) $151 (b) $202 (b) $359 (c) $ 26 (c) $ 81 (c) $138 (c) $293 (d) $ 33 (d) $101 (d) $172 (d) $359 - ----------------------------------------------------------------------------------------------------------- Real Estate (a) $ 97 (a) $133 (a) $172 (a) $301 (b) $104 (b) $154 (b) $206 (b) $366 (c) $ 27 (c) $ 83 (c) $142 (c) $301 (d) $ 34 (d) $104 (d) $176 (d) $366 - ----------------------------------------------------------------------------------------------------------- SunAmerica Balanced (a) $ 95 (a) $126 (a) $159 (a) $276 (b) $102 (b) $146 (b) $194 (b) $344 (c) $ 25 (c) $ 76 (c) $129 (c) $276 (d) $ 32 (d) $ 96 (d) $164 (d) $344 - ----------------------------------------------------------------------------------------------------------- Technology (a) $102 (a) $149 (a) $198 (a) $351 (b) $109 (b) $169 (b) $231 (b) $413 (c) $ 32 (c) $ 99 (c) $168 (c) $351 (d) $ 39 (d) $119 (d) $201 (d) $413 - ----------------------------------------------------------------------------------------------------------- Telecom Utility (a) $ 96 (a) $131 (a) $169 (a) $295 (b) $103 (b) $152 (b) $203 (b) $361 (c) $ 26 (c) $ 81 (c) $139 (c) $295 (d) $ 33 (d) $102 (d) $173 (d) $361 - ----------------------------------------------------------------------------------------------------------- Worldwide High Income (a) $ 99 (a) $139 (a) $182 (a) $320 (b) $106 (b) $160 (b) $215 (b) $384 (c) $ 29 (c) $ 89 (c) $152 (c) $320 (d) $ 36 (d) $110 (d) $185 (d) $384 - ----------------------------------------------------------------------------------------------------------- Van Kampen LIT Comstock, Class II Shares (a) $ 97 (a) $133 (a) $171 (a) $300 (b) $104 (b) $154 (b) $205 (b) $366 (c) $ 27 (c) $ 83 (c) $141 (c) $300 (d) $ 34 (d) $104 (d) $175 (d) $366 - ----------------------------------------------------------------------------------------------------------- Van Kampen LIT Emerging Growth, Class II Shares (a) $ 96 (a) $131 (a) $169 (a) $295 (b) $103 (b) $152 (b) $203 (b) $361 (c) $ 26 (c) $ 81 (c) $139 (c) $295 (d) $ 33 (d) $102 (d) $173 (d) $361 - ----------------------------------------------------------------------------------------------------------- Van Kampen LIT Growth and Income, Class II Shares (a) $ 96 (a) $131 (a) $168 (a) $294 (b) $103 (b) $152 (b) $203 (b) $360 (c) $ 26 (c) $ 81 (c) $138 (c) $294 (d) $ 33 (d) $102 (d) $173 (d) $360 - 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8 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- EXAMPLES -- IF YOU PARTICIPATE IN THE PRINCIPAL REWARDS PROGRAM - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- You will pay the following expenses on a $1,000 investment in each Variable Portfolio, assuming a 5% annual return on assets, Portfolio Expenses after waiver, reimbursement or recoupment (assuming the waiver, reimbursement or recoupment will continue for the period shown), if applicable and: (a) you surrender the contract at the end of the stated time period and no optional features are elected. (b) you elect the optional EstatePlus and the Income Protector Plus features with the following charges (.25% and .45%, respectively), benefit (maximum charge) and you surrender the contract at the end of the stated period. (c) you do not surrender the contract and no optional features are elected.* (d) you elect the optional EstatePlus and Income Protector Plus features at the following charges (.25% and .45% respectively), and you do not surrender the contract.
1 3 5 10 PORTFOLIO YEAR YEARS YEARS YEARS - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- Capital Appreciation (a) $116 (a) $161 (a) $198 (a) $293 (b) $123 (b) $182 (b) $233 (b) $361 (c) $ 26 (c) $ 81 (c) $138 (c) $293 (d) $ 33 (d) $102 (d) $173 (d) $361 - ----------------------------------------------------------------------------------------------------------- Government and Quality Bond (a) $115 (a) $156 (a) $190 (a) $279 (b) $122 (b) $178 (b) $226 (b) $348 (c) $ 25 (c) $ 76 (c) $130 (c) $279 (d) $ 32 (d) $ 98 (d) $166 (d) $348 - ----------------------------------------------------------------------------------------------------------- Growth (a) $116 (a) $159 (a) $195 (a) $288 (b) $123 (b) $180 (b) $230 (b) $356 (c) $ 26 (c) $ 79 (c) $135 (c) $288 (d) $ 33 (d) $100 (d) $170 (d) $356 - ----------------------------------------------------------------------------------------------------------- Natural Resources (a) $118 (a) $165 (a) $204 (a) $306 (b) $125 (b) $186 (b) $239 (b) $373 (c) $ 28 (c) $ 85 (c) $144 (c) $306 (d) $ 35 (d) $106 (d) $179 (d) $373 - ----------------------------------------------------------------------------------------------------------- Aggressive Growth (a) $116 (a) $160 (a) $197 (a) $292 (b) $123 (b) $181 (b) $232 (b) $360 (c) $ 26 (c) $ 80 (c) $137 (c) $292 (d) $ 33 (d) $101 (d) $172 (d) $360 - ----------------------------------------------------------------------------------------------------------- Alliance Growth (a) $115 (a) $157 (a) $192 (a) $281 (b) $122 (b) $178 (b) $227 (b) $350 (c) $ 25 (c) $ 77 (c) $132 (c) $281 (d) $ 32 (d) $ 98 (d) $167 (d) $350 - ----------------------------------------------------------------------------------------------------------- Asset Allocation (a) $115 (a) $157 (a) $193 (a) $283 (b) $122 (b) $179 (b) $228 (b) $351 (c) $ 25 (c) $ 77 (c) $133 (c) $283 (d) $ 32 (d) $ 99 (d) $168 (d) $351 - ----------------------------------------------------------------------------------------------------------- Blue Chip Growth (a) $117 (a) $163 (a) $201 (a) $300 (b) $124 (b) $184 (b) $236 (b) $367 (c) $ 27 (c) $ 83 (c) $141 (c) $300 (d) $ 34 (d) $104 (d) $176 (d) $367 - ----------------------------------------------------------------------------------------------------------- Cash Management (a) $114 (a) $153 (a) $185 (a) $268 (b) $121 (b) $174 (b) $220 (b) $337 (c) $ 24 (c) $ 73 (c) $125 (c) $268 (d) $ 31 (d) $ 94 (d) $160 (d) $337 - ----------------------------------------------------------------------------------------------------------- Corporate Bond (a) $115 (a) $157 (a) $192 (a) $282 (b) $122 (b) $178 (b) $227 (b) $351 (c) $ 25 (c) $ 77 (c) $132 (c) $282 (d) $ 32 (d) $ 98 (d) $167 (d) $351 - ----------------------------------------------------------------------------------------------------------- Davis Venture Value (a) $116 (a) $160 (a) $197 (a) $292 (b) $123 (b) $181 (b) $232 (b) $360 (c) $ 26 (c) $ 80 (c) $137 (c) $292 (d) $ 33 (d) $101 (d) $172 (d) $360 - ----------------------------------------------------------------------------------------------------------- "Dogs" of Wall Street (a) $115 (a) $158 (a) $194 (a) $286 (b) $123 (b) $180 (b) $229 (b) $354 (c) $ 25 (c) $ 78 (c) $134 (c) $286 (d) $ 33 (d) $100 (d) $169 (d) $354 - ----------------------------------------------------------------------------------------------------------- Emerging Markets (a) $124 (a) $184 (a) $236 (a) $367 (b) $131 (b) $204 (b) $270 (b) $430 (c) $ 34 (c) $104 (c) $176 (c) $367 (d) $ 41 (d) $124 (d) $210 (d) $430 - ----------------------------------------------------------------------------------------------------------- Federated Value (a) $116 (a) $160 (a) $197 (a) $291 (b) $123 (b) $181 (b) $232 (b) $359 (c) $ 26 (c) $ 80 (c) $137 (c) $291 (d) $ 33 (d) $101 (d) $172 (d) $359 - ----------------------------------------------------------------------------------------------------------- Global Bond (a) $117 (a) $162 (a) $200 (a) $297 (b) $124 (b) $183 (b) $235 (b) $365 (c) $ 27 (c) $ 82 (c) $140 (c) $297 (d) $ 34 (d) $103 (d) $175 (d) $365 - ----------------------------------------------------------------------------------------------------------- * We do not currently charge a surrender charge upon annuitization unless the contract is annuitized using the Income Protector feature. We assess the applicable surrender charge upon annuitization under the Income Protector feature assuming a full surrender of your contract.
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1 3 5 10 PORTFOLIO YEAR YEARS YEARS YEARS - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- Global Equities (a) $117 (a) $164 (a) $204 (a) $305 (b) $125 (b) $185 (b) $238 (b) $372 (c) $ 27 (c) $ 84 (c) $144 (c) $305 (d) $ 35 (d) $105 (d) $178 (d) $372 - ----------------------------------------------------------------------------------------------------------- Goldman Sachs Research (a) $122 (a) $178 (a) $226 (a) $349 (b) $129 (b) $199 (b) $260 (b) $412 (c) $ 32 (c) $ 98 (c) $166 (c) $349 (d) $ 39 (d) $119 (d) $200 (d) $412 - ----------------------------------------------------------------------------------------------------------- Growth-Income (a) $114 (a) $155 (a) $188 (a) $274 (b) $121 (b) $176 (b) $223 (b) $343 (c) $ 24 (c) $ 75 (c) $128 (c) $274 (d) $ 31 (d) $ 96 (d) $163 (d) $343 - ----------------------------------------------------------------------------------------------------------- Growth Opportunities (a) $118 (a) $167 (a) $209 (a) $315 (b) $126 (b) $188 (b) $243 (b) $381 (c) $ 28 (c) $ 87 (c) $149 (c) $315 (d) $ 36 (d) $108 (d) $183 (d) $381 - ----------------------------------------------------------------------------------------------------------- High-Yield Bond (a) $116 (a) $159 (a) $195 (a) $288 (b) $123 (b) $180 (b) $230 (b) $356 (c) $ 26 (c) $ 79 (c) $135 (c) $288 (d) $ 33 (d) $100 (d) $170 (d) $356 - ----------------------------------------------------------------------------------------------------------- International Diversified Equities (a) $121 (a) $175 (a) $222 (a) $341 (b) $128 (b) $196 (b) $256 (b) $405 (c) $ 31 (c) $ 95 (c) $162 (c) $341 (d) $ 38 (d) $116 (d) $196 (d) $405 - ----------------------------------------------------------------------------------------------------------- International Growth and Income (a) $121 (a) $174 (a) $220 (a) $336 (b) $128 (b) $195 (b) $254 (b) $401 (c) $ 31 (c) $ 94 (c) $160 (c) $336 (d) $ 38 (d) $115 (d) $194 (d) $401 - ----------------------------------------------------------------------------------------------------------- Marsico Growth (a) $119 (a) $168 (a) $209 (a) $316 (b) $126 (b) $189 (b) $244 (b) $382 (c) $ 29 (c) $ 88 (c) $149 (c) $316 (d) $ 36 (d) $109 (d) $184 (d) $382 - ----------------------------------------------------------------------------------------------------------- MFS Growth and Income (a) $116 (a) $161 (a) $198 (a) $293 (b) $123 (b) $182 (b) $233 (b) $361 (c) $ 26 (c) $ 81 (c) $138 (c) $293 (d) $ 33 (d) $102 (d) $173 (d) $361 - ----------------------------------------------------------------------------------------------------------- MFS Mid-Cap Growth (a) $117 (a) $162 (a) $200 (a) $298 (b) $124 (b) $183 (b) $235 (b) $365 (c) $ 27 (c) $ 82 (c) $140 (c) $298 (d) $ 34 (d) $103 (d) $175 (d) $365 - ----------------------------------------------------------------------------------------------------------- MFS Total Return (a) $116 (a) $159 (a) $195 (a) $288 (b) $123 (b) $180 (b) $230 (b) $356 (c) $ 26 (c) $ 79 (c) $135 (c) $288 (d) $ 33 (d) $100 (d) $170 (d) $356 - ----------------------------------------------------------------------------------------------------------- Putnam Growth (a) $117 (a) $162 (a) $201 (a) $299 (b) $124 (b) $184 (b) $235 (b) $366 (c) $ 27 (c) $ 82 (c) $141 (c) $299 (d) $ 34 (d) $104 (d) $175 (d) $366 - ----------------------------------------------------------------------------------------------------------- Real Estate (a) $118 (a) $165 (a) $205 (a) $307 (b) $125 (b) $186 (b) $239 (b) $374 (c) $ 28 (c) $ 85 (c) $145 (c) $307 (d) $ 35 (d) $106 (d) $179 (d) $374 - ----------------------------------------------------------------------------------------------------------- SunAmerica Balanced (a) $115 (a) $157 (a) $192 (a) $282 (b) $122 (b) $178 (b) $227 (b) $351 (c) $ 25 (c) $ 77 (c) $132 (c) $282 (d) $ 32 (d) $ 98 (d) $167 (d) $351 - ----------------------------------------------------------------------------------------------------------- Technology (a) $123 (a) $181 (a) $231 (a) $358 (b) $130 (b) $202 (b) $265 (b) $421 (c) $ 33 (c) $101 (c) $171 (c) $358 (d) $ 40 (d) $122 (d) $205 (d) $421 - ----------------------------------------------------------------------------------------------------------- Telecom Utility (a) $117 (a) $163 (a) $202 (a) $301 (b) $124 (b) $184 (b) $236 (b) $368 (c) $ 27 (c) $ 83 (c) $142 (c) $301 (d) $ 34 (d) $104 (d) $176 (d) $368 - ----------------------------------------------------------------------------------------------------------- Worldwide High Income (a) $120 (a) $171 (a) $215 (a) $327 (b) $127 (b) $192 (b) $249 (b) $392 (c) $ 30 (c) $ 91 (c) $155 (c) $327 (d) $ 37 (d) $112 (d) $189 (d) $392 - ----------------------------------------------------------------------------------------------------------- Van Kampen LIT Comstock, Class II Shares (a) $118 (a) $165 (a) $204 (a) $306 (b) $125 (b) $186 (b) $239 (b) $373 (c) $ 28 (c) $ 85 (c) $144 (c) $306 (d) $ 35 (d) $106 (d) $179 (d) $373 - ----------------------------------------------------------------------------------------------------------- Van Kampen LIT Emerging Growth, Class II Shares (a) $117 (a) $163 (a) $202 (a) $301 (b) $124 (b) $184 (b) $236 (b) $368 (c) $ 27 (c) $ 83 (c) $142 (c) $301 (d) $ 34 (d) $104 (d) $176 (d) $368 - ----------------------------------------------------------------------------------------------------------- Van Kampen LIT Growth and Income, Class II Shares (a) $117 (a) $163 (a) $201 (a) $300 (b) $124 (b) $184 (b) $236 (b) $367 (c) $ 27 (c) $ 83 (c) $141 (c) $300 (d) $ 34 (d) $104 (d) $176 (d) $367 - 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10 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- EXAMPLES -- IF YOU DO NOT PARTICIPATE IN THE PRINCIPAL REWARDS PROGRAM - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- You will pay the following expenses on a $1,000 investment in each Variable Portfolio, assuming a 5% annual return on assets, Portfolio Expenses after waiver, reimbursement or recoupment, (assuming the waiver, reimbursement or recoupment will continue for the period shown) if applicable and: (a) you surrender the contract at the end of the stated time period and no optional features are elected. (b) you elect the optional EstatePlus and the Income Protector Base features with the following charges (.25% and .10%, respectively), and you surrender the contract at the end of the stated period. (c) you do not surrender the contract and no optional features are elected.* (d) you elect the optional EstatePlus and Income Protector Base features with the following charges (.25% and .10%, respectively, and you do not surrender the contract.
1 3 5 10 PORTFOLIO YEAR YEARS YEARS YEARS - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- Capital Appreciation (a) $ 96 (a) $129 (a) $165 (a) $287 (b) $ 99 (b) $139 (b) $182 (b) $321 (c) $ 26 (c) $ 79 (c) $135 (c) $287 (d) $ 29 (d) $ 89 (d) $152 (d) $321 - ----------------------------------------------------------------------------------------------------------- Government and Quality Bond (a) $ 94 (a) $125 (a) $158 (a) $273 (b) $ 98 (b) $135 (b) $175 (b) $308 (c) $ 24 (c) $ 75 (c) $128 (c) $273 (d) $ 28 (d) $ 85 (d) $145 (d) $308 - ----------------------------------------------------------------------------------------------------------- Growth (a) $ 95 (a) $127 (a) $162 (a) $282 (b) $ 99 (b) $138 (b) $180 (b) $316 (c) $ 25 (c) $ 77 (c) $132 (c) $282 (d) $ 29 (d) $ 88 (d) $150 (d) $316 - ----------------------------------------------------------------------------------------------------------- Natural Resources (a) $ 97 (a) $133 (a) $171 (a) $300 (b) $100 (b) $143 (b) $189 (b) $333 (c) $ 27 (c) $ 83 (c) $141 (c) $300 (d) $ 30 (d) $ 93 (d) $159 (d) $333 - ----------------------------------------------------------------------------------------------------------- Aggressive Growth (a) $ 96 (a) $129 (a) $164 (a) $286 (b) $ 99 (b) $139 (b) $182 (b) $320 (c) $ 26 (c) $ 79 (c) $134 (c) $286 (d) $ 29 (d) $ 89 (d) $152 (d) $320 - ----------------------------------------------------------------------------------------------------------- Alliance Growth (a) $ 94 (a) $125 (a) $159 (a) $275 (b) $ 98 (b) $136 (b) $176 (b) $310 (c) $ 24 (c) $ 75 (c) $129 (c) $275 (d) $ 28 (d) $ 86 (d) $146 (d) $310 - ----------------------------------------------------------------------------------------------------------- Blue Chip Growth (a) $ 96 (a) $131 (a) $168 (a) $294 (b) $100 (b) $141 (b) $186 (b) $328 (c) $ 26 (c) $ 81 (c) $138 (c) $294 (d) $ 30 (d) $ 91 (d) $156 (d) $328 - ----------------------------------------------------------------------------------------------------------- Cash Management (a) $ 93 (a) $121 (a) $152 (a) $262 (b) $ 97 (b) $132 (b) $170 (b) $297 (c) $ 23 (c) $ 71 (c) $122 (c) $262 (d) $ 27 (d) $ 82 (d) $140 (d) $297 - ----------------------------------------------------------------------------------------------------------- Corporate Bond (a) $ 95 (a) $126 (a) $159 (a) $276 (b) $ 98 (b) $136 (b) $177 (b) $311 (c) $ 25 (c) $ 76 (c) $129 (c) $276 (d) $ 28 (d) $ 86 (d) $147 (d) $311 - ----------------------------------------------------------------------------------------------------------- Davis Venture Value (a) $ 96 (a) $129 (a) $164 (a) $286 (b) $ 99 (b) $139 (b) $182 (b) $320 (c) $ 26 (c) $ 79 (c) $134 (c) $286 (d) $ 29 (d) $ 89 (d) $152 (d) $320 - ----------------------------------------------------------------------------------------------------------- "Dogs" of Wall Street (a) $ 95 (a) $127 (a) $161 (a) $280 (b) $ 98 (b) $137 (b) $179 (b) $314 (c) $ 25 (c) $ 77 (c) $131 (c) $280 (d) $ 28 (d) $ 87 (d) $149 (d) $314 - ----------------------------------------------------------------------------------------------------------- Emerging Market (a) $103 (a) $152 (a) $203 (a) $360 (b) $107 (b) $162 (b) $219 (b) $391 (c) $ 33 (c) $102 (c) $173 (c) $360 (d) $ 37 (d) $112 (d) $189 (d) $391 - ----------------------------------------------------------------------------------------------------------- Federated Value (a) $ 95 (a) $128 (a) $164 (a) $285 (b) $ 99 (b) $139 (b) $181 (b) $319 (c) $ 25 (c) $ 78 (c) $134 (c) $285 (d) $ 29 (d) $ 89 (d) $151 (d) $319 - ----------------------------------------------------------------------------------------------------------- Global Bond (a) $ 96 (a) $130 (a) $167 (a) $291 (b) $100 (b) $141 (b) $184 (b) $325 (c) $ 26 (c) $ 80 (c) $137 (c) $291 (d) $ 30 (d) $ 91 (d) $154 (d) $325 - ----------------------------------------------------------------------------------------------------------- Global Equities (a) $ 97 (a) $133 (a) $171 (a) $299 (b) $100 (b) $143 (b) $188 (b) $332 (c) $ 27 (c) $ 83 (c) $141 (c) $299 (d) $ 30 (d) $ 93 (d) $158 (d) $332 - ----------------------------------------------------------------------------------------------------------- Goldman Sachs Research (a) $101 (a) $146 (a) $193 (a) $342 (b) $105 (b) $156 (b) $210 (b) $374 (c) $ 31 (c) $ 96 (c) $163 (c) $342 (d) $ 35 (d) $106 (d) $180 (d) $374 - ----------------------------------------------------------------------------------------------------------- Growth-Income (a) $ 94 (a) $123 (a) $155 (a) $268 (b) $ 97 (b) $134 (b) $173 (b) $303 (c) $ 24 (c) $ 73 (c) $125 (c) $268 (d) $ 27 (d) $ 84 (d) $143 (d) $303 - ----------------------------------------------------------------------------------------------------------- * We do not currently charge a surrender charge upon annuitization unless the contract is annuitized using the Income Protector feature. We assess the applicable surrender charge upon annuitization under the Income Protector feature assuming a full surrender of your contract.
11
1 3 5 10 PORTFOLIO YEAR YEARS YEARS YEARS - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- Growth Opportunities (a) $ 98 (a) $136 (a) $176 (a) $309 (b) $101 (b) $146 (b) $193 (b) $342 (c) $ 28 (c) $ 86 (c) $146 (c) $309 (d) $ 31 (d) $ 96 (d) $163 (d) $342 - ----------------------------------------------------------------------------------------------------------- High-Yield Bond (a) $ 95 (a) $127 (a) $162 (a) $282 (b) $ 99 (b) $138 (b) $180 (b) $316 (c) $ 25 (c) $ 77 (c) $132 (c) $282 (d) $ 29 (d) $ 88 (d) $150 (d) $316 - ----------------------------------------------------------------------------------------------------------- International Diversified Equities (a) $101 (a) $144 (a) $189 (a) $334 (b) $104 (b) $154 (b) $206 (b) $366 (c) $ 31 (c) $ 94 (c) $159 (c) $334 (d) $ 34 (d) $104 (d) $176 (d) $366 - ----------------------------------------------------------------------------------------------------------- International Growth & Income (a) $100 (a) $142 (a) $187 (a) $330 (b) $104 (b) $152 (b) $203 (b) $362 (c) $ 30 (c) $ 92 (c) $157 (c) $330 (d) $ 34 (d) $102 (d) $173 (d) $362 - ----------------------------------------------------------------------------------------------------------- Marsico Growth (a) $ 98 (a) $136 (a) $176 (a) $310 (b) $101 (b) $146 (b) $193 (b) $343 (c) $ 28 (c) $ 86 (c) $146 (c) $310 (d) $ 31 (d) $ 96 (d) $163 (d) $343 - ----------------------------------------------------------------------------------------------------------- MFS Growth & Income (a) $ 96 (a) $129 (a) $165 (a) $287 (b) $ 99 (b) $139 (b) $182 (b) $321 (c) $ 26 (c) $ 79 (c) $135 (c) $287 (d) $ 29 (d) $ 89 (d) $152 (d) $321 - ----------------------------------------------------------------------------------------------------------- MFS Mid Cap Growth (a) $ 96 (a) $130 (a) $167 (a) $292 (b) $100 (b) $141 (b) $185 (b) $326 (c) $ 26 (c) $ 80 (c) $137 (c) $292 (d) $ 30 (d) $ 91 (d) $155 (d) $326 - ----------------------------------------------------------------------------------------------------------- MFS Total Return (a) $ 95 (a) $127 (a) $162 (a) $282 (b) $ 99 (b) $138 (b) $180 (b) $316 (c) $ 25 (c) $ 77 (c) $132 (c) $282 (d) $ 29 (d) $ 88 (d) $150 (d) $316 - ----------------------------------------------------------------------------------------------------------- Putnam Growth (a) $ 96 (a) $131 (a) $168 (a) $293 (b) $100 (b) $141 (b) $185 (b) $327 (c) $ 26 (c) $ 81 (c) $138 (c) $293 (d) $ 30 (d) $ 91 (d) $155 (d) $327 - ----------------------------------------------------------------------------------------------------------- Real Estate (a) $ 97 (a) $133 (a) $172 (a) $301 (b) $101 (b) $144 (b) $189 (b) $334 (c) $ 27 (c) $ 83 (c) $142 (c) $301 (d) $ 31 (d) $ 94 (d) $159 (d) $334 - ----------------------------------------------------------------------------------------------------------- SunAmerica Balanced (a) $ 95 (a) $126 (a) $159 (a) $276 (b) $ 98 (b) $136 (b) $177 (b) $311 (c) $ 25 (c) $ 76 (c) $129 (c) $276 (d) $ 28 (d) $ 86 (d) $147 (d) $311 - ----------------------------------------------------------------------------------------------------------- Technology (a) $102 (a) $149 (a) $198 (a) $351 (b) $106 (b) $159 (b) $214 (b) $382 (c) $ 32 (c) $ 99 (c) $168 (c) $351 (d) $ 36 (d) $109 (d) $184 (d) $382 - ----------------------------------------------------------------------------------------------------------- Telecom Utility (a) $ 96 (a) $131 (a) $169 (a) $295 (b) $100 (b) $142 (b) $186 (b) $329 (c) $ 26 (c) $ 81 (c) $139 (c) $295 (d) $ 30 (d) $ 92 (d) $156 (d) $329 - ----------------------------------------------------------------------------------------------------------- Worldwide High Income (a) $ 99 (a) $139 (a) $182 (a) $320 (b) $103 (b) $149 (b) $199 (b) $353 (c) $ 29 (c) $ 89 (c) $152 (c) $320 (d) $ 33 (d) $ 99 (d) $169 (d) $353 - ----------------------------------------------------------------------------------------------------------- Balanced (a) $ 98 (a) $136 (a) $176 (a) $309 (b) $101 (b) $146 (b) $193 (b) $342 (c) $ 28 (c) $ 86 (c) $146 (c) $309 (d) $ 31 (d) $ 96 (d) $163 (d) $342 - ----------------------------------------------------------------------------------------------------------- Conservative Growth (a) $ 97 (a) $133 (a) $171 (a) $300 (b) $100 (b) $143 (b) $189 (b) $333 (c) $ 27 (c) $ 83 (c) $141 (c) $300 (d) $ 30 (d) $ 93 (d) $159 (d) $333 - ----------------------------------------------------------------------------------------------------------- Strategic Growth (a) $ 96 (a) $131 (a) $169 (a) $295 (b) $100 (b) $142 (b) $186 (b) $329 (c) $ 26 (c) $ 81 (c) $139 (c) $295 (d) $ 30 (d) $ 92 (d) $156 (d) $329 - ----------------------------------------------------------------------------------------------------------- Van Kampen LIT Comstock, Class II Shares (a) $ 97 (a) $133 (a) $171 (a) $300 (b) $100 (b) $143 (b) $189 (b) $333 (c) $ 27 (c) $ 83 (c) $141 (c) $300 (d) $ 30 (d) $ 93 (d) $159 (d) $333 - ----------------------------------------------------------------------------------------------------------- Van Kampen LIT Emerging Growth, Class II Shares (a) $ 96 (a) $131 (a) $169 (a) $295 (b) $100 (b) $142 (b) $186 (b) $329 (c) $ 26 (c) $ 81 (c) $139 (c) $295 (d) $ 30 (d) $ 92 (d) $156 (d) $329 - ----------------------------------------------------------------------------------------------------------- Van Kampen LIT Growth and Income, Class II Shares (a) $ 96 (a) $131 (a) $168 (a) $294 (b) $100 (b) $141 (b) $186 (b) $328 (c) $ 26 (c) $ 81 (c) $138 (c) $294 (d) $ 30 (d) $ 91 (d) $156 (d) $328 - ----------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------
12 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- EXAMPLES -- IF YOU PARTICIPATE IN THE PRINCIPAL REWARDS PROGRAM - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- You will pay the following expenses on a $1,000 investment in each Variable Portfolio, assuming a 5% annual return on assets, Portfolio Expenses after waiver, reimbursement or recoupment (assuming the waiver, reimbursement or recoupment will continue for the period shown), if applicable and: (a) you surrender the contract at the end of the stated time period and no optional features are elected. (b) you elect the optional EstatePlus and the Income Protector Base features with the following charges (.25% and .10%, respectively), benefit (maximum charge) and you surrender the contract at the end of the stated period. (c) you do not surrender the contract and no optional features are elected.* (d) you elect the optional EstatePlus and Income Protector Base benefits at the following charges (.25% and .10% respectively), and you do not surrender the contract.
1 3 5 10 PORTFOLIO YEAR YEARS YEARS YEARS - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- Capital Appreciation (a) $116 (a) $161 (a) $198 (a) $293 (b) $120 (b) $171 (b) $215 (b) $328 (c) $ 26 (c) $ 81 (c) $138 (c) $293 (d) $ 30 (d) $ 91 (d) $155 (d) $328 - ----------------------------------------------------------------------------------------------------------- Government and Quality Bond (a) $115 (a) $156 (a) $190 (a) $279 (b) $118 (b) $167 (b) $208 (b) $314 (c) $ 25 (c) $ 76 (c) $130 (c) $279 (d) $ 28 (d) $ 87 (d) $148 (d) $314 - ----------------------------------------------------------------------------------------------------------- Growth (a) $116 (a) $159 (a) $195 (a) $288 (b) $119 (b) $170 (b) $213 (b) $323 (c) $ 26 (c) $ 79 (c) $135 (c) $288 (d) $ 29 (d) $ 90 (d) $153 (d) $323 - ----------------------------------------------------------------------------------------------------------- Natural Resources (a) $118 (a) $165 (a) $204 (a) $306 (b) $121 (b) $175 (b) $222 (b) $340 (c) $ 28 (c) $ 85 (c) $144 (c) $306 (d) $ 31 (d) $ 95 (d) $162 (d) $340 - ----------------------------------------------------------------------------------------------------------- Aggressive Growth (a) $116 (a) $160 (a) $197 (a) $292 (b) $120 (b) $171 (b) $215 (b) $327 (c) $ 26 (c) $ 80 (c) $137 (c) $292 (d) $ 30 (d) $ 91 (d) $155 (d) $327 - ----------------------------------------------------------------------------------------------------------- Alliance Growth (a) $115 (a) $157 (a) $192 (a) $281 (b) $119 (b) $168 (b) $209 (b) $316 (c) $ 25 (c) $ 77 (c) $132 (c) $281 (d) $ 29 (d) $ 88 (d) $149 (d) $316 - ----------------------------------------------------------------------------------------------------------- Blue Chip Growth (a) $117 (a) $163 (a) $201 (a) $300 (b) $120 (b) $173 (b) $219 (b) $334 (c) $ 27 (c) $ 83 (c) $141 (c) $300 (d) $ 30 (d) $ 93 (d) $159 (d) $334 - ----------------------------------------------------------------------------------------------------------- Cash Management (a) $114 (a) $153 (a) $185 (a) $268 (b) $117 (b) $164 (b) $203 (b) $303 (c) $ 24 (c) $ 73 (c) $125 (c) $268 (d) $ 27 (d) $ 84 (d) $143 (d) $303 - ----------------------------------------------------------------------------------------------------------- Corporate Bond (a) $115 (a) $157 (a) $192 (a) $282 (b) $119 (b) $168 (b) $210 (b) $317 (c) $ 25 (c) $ 77 (c) $132 (c) $282 (d) $ 29 (d) $ 88 (d) $150 (d) $317 - ----------------------------------------------------------------------------------------------------------- Davis Venture Value (a) $116 (a) $160 (a) $197 (a) $292 (b) $120 (b) $171 (b) $215 (b) $327 (c) $ 26 (c) $ 80 (c) $137 (c) $292 (d) $ 30 (d) $ 91 (d) $155 (d) $327 - ----------------------------------------------------------------------------------------------------------- "Dogs" of Wall Street (a) $115 (a) $158 (a) $194 (a) $286 (b) $119 (b) $169 (b) $212 (b) $321 (c) $ 25 (c) $ 78 (c) $134 (c) $286 (d) $ 29 (d) $ 89 (d) $152 (d) $321 - ----------------------------------------------------------------------------------------------------------- Emerging Market (a) $124 (a) $184 (a) $236 (a) $367 (b) $128 (b) $194 (b) $253 (b) $399 (c) $ 34 (c) $104 (c) $176 (c) $367 (d) $ 38 (d) $114 (d) $193 (d) $399 - ----------------------------------------------------------------------------------------------------------- Federated Value (a) $116 (a) $160 (a) $197 (a) $291 (b) $120 (b) $171 (b) $214 (b) $326 (c) $ 26 (c) $ 80 (c) $137 (c) $291 (d) $ 30 (d) $ 91 (d) $154 (d) $326 - ----------------------------------------------------------------------------------------------------------- Global Bond (a) $117 (a) $162 (a) $200 (a) $297 (b) $120 (b) $172 (b) $217 (b) $331 (c) $ 27 (c) $ 82 (c) $140 (c) $297 (d) $ 30 (d) $ 92 (d) $157 (d) $331 - ----------------------------------------------------------------------------------------------------------- Global Equities (a) $117 (a) $164 (a) $204 (a) $305 (b) $121 (b) $175 (b) $221 (b) $339 (c) $ 27 (c) $ 84 (c) $144 (c) $305 (d) $ 31 (d) $ 95 (d) $161 (d) $339 - ----------------------------------------------------------------------------------------------------------- Goldman Sachs Research (a) $122 (a) $178 (a) $226 (a) $349 (b) $126 (b) $188 (b) $243 (b) $381 (c) $ 32 (c) $ 98 (c) $166 (c) $349 (d) $ 36 (d) $108 (d) $183 (d) $381 - ----------------------------------------------------------------------------------------------------------- Growth-Income (a) $114 (a) $155 (a) $188 (a) $274 (b) $118 (b) $165 (b) $206 (b) $309 (c) $ 24 (c) $ 75 (c) $128 (c) $274 (d) $ 28 (d) $ 85 (d) $146 (d) $309 - ----------------------------------------------------------------------------------------------------------- * We do not currently charge a surrender charge upon annuitization unless the contract is annuitized using the Income Protector feature. We assess the applicable surrender charge upon annuitization under the Income Protector feature assuming a full surrender of your contract.
13
1 3 5 10 PORTFOLIO YEAR YEARS YEARS YEARS - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- Growth Opportunities (a) $118 (a) $167 (a) $209 (a) $315 (b) $122 (b) $178 (b) $226 (b) $349 (c) $ 28 (c) $ 87 (c) $149 (c) $315 (d) $ 32 (d) $ 98 (d) $166 (d) $349 - ----------------------------------------------------------------------------------------------------------- High-Yield Bond (a) $116 (a) $159 (a) $195 (a) $288 (b) $119 (b) $170 (b) $213 (b) $323 (c) $ 26 (c) $ 79 (c) $135 (c) $288 (d) $ 29 (d) $ 90 (d) $153 (d) $323 - ----------------------------------------------------------------------------------------------------------- International Diversified Equities (a) $121 (a) $175 (a) $222 (a) $341 (b) $125 (b) $186 (b) $239 (b) $374 (c) $ 31 (c) $ 95 (c) $162 (c) $341 (d) $ 35 (d) $106 (d) $179 (d) $374 - ----------------------------------------------------------------------------------------------------------- International Growth & Income (a) $121 (a) $174 (a) $220 (a) $336 (b) $124 (b) $184 (b) $237 (b) $369 (c) $ 31 (c) $ 94 (c) $160 (c) $336 (d) $ 34 (d) $104 (d) $177 (d) $369 - ----------------------------------------------------------------------------------------------------------- Marsico Growth (a) $119 (a) $168 (a) $209 (a) $316 (b) $122 (b) $178 (b) $227 (b) $350 (c) $ 29 (c) $ 88 (c) $149 (c) $316 (d) $ 32 (d) $ 98 (d) $167 (d) $350 - ----------------------------------------------------------------------------------------------------------- MFS Growth and Income (a) $116 (a) $161 (a) $198 (a) $293 (b) $120 (b) $171 (b) $215 (b) $328 (c) $ 26 (c) $ 81 (c) $138 (c) $293 (d) $ 30 (d) $ 91 (d) $155 (d) $328 - ----------------------------------------------------------------------------------------------------------- MFS Mid Cap Growth (a) $117 (a) $162 (a) $200 (a) $298 (b) $120 (b) $173 (b) $218 (b) $332 (c) $ 27 (c) $ 82 (c) $140 (c) $298 (d) $ 30 (d) $ 93 (d) $158 (d) $332 - ----------------------------------------------------------------------------------------------------------- MFS Total Return (a) $116 (a) $159 (a) $195 (a) $288 (b) $119 (b) $170 (b) $213 (b) $323 (c) $ 26 (c) $ 79 (c) $135 (c) $288 (d) $ 29 (d) $ 90 (d) $153 (d) $323 - ----------------------------------------------------------------------------------------------------------- Putnam Growth (a) $117 (a) $162 (a) $201 (a) $299 (b) $120 (b) $173 (b) $218 (b) $333 (c) $ 27 (c) $ 82 (c) $141 (c) $299 (d) $ 30 (d) $ 93 (d) $158 (d) $333 - ----------------------------------------------------------------------------------------------------------- Real Estate (a) $118 (a) $165 (a) $205 (a) $307 (b) $121 (b) $175 (b) $222 (b) $341 (c) $ 28 (c) $ 85 (c) $145 (c) $307 (d) $ 31 (d) $ 95 (d) $162 (d) $341 - ----------------------------------------------------------------------------------------------------------- SunAmerica Balanced (a) $115 (a) $157 (a) $192 (a) $282 (b) $119 (b) $168 (b) $210 (b) $317 (c) $ 25 (c) $ 77 (c) $132 (c) $282 (d) $29 (d) $ 88 (d) $150 (d) $317 - ----------------------------------------------------------------------------------------------------------- Technology (a) $123 (a) $181 (a) $231 (a) $358 (b) $127 (b) $191 (b) $248 (b) $390 (c) $ 33 (c) $101 (c) $171 (c) $358 (d) $ 37 (d) $111 (d) $188 (d) $390 - ----------------------------------------------------------------------------------------------------------- Telecom Utility (a) $117 (a) $163 (a) $202 (a) $301 (b) $121 (b) $174 (b) $219 (b) $335 (c) $ 27 (c) $ 83 (c) $142 (c) $301 (d) $ 31 (d) $ 94 (d) $159 (d) $335 - ----------------------------------------------------------------------------------------------------------- Worldwide High Income (a) $120 (a) $171 (a) $215 (a) $327 (b) $123 (b) $181 (b) $232 (b) $360 (c) $ 30 (c) $ 91 (c) $155 (c) $327 (d) $ 33 (d) $101 (d) $172 (d) $360 - ----------------------------------------------------------------------------------------------------------- Balanced (a) $118 (a) $167 (a) $209 (a) $315 (b) $122 (b) $178 (b) $226 (b) $349 (c) $ 28 (c) $ 87 (c) $149 (c) $315 (d) $ 32 (d) $ 98 (d) $166 (d) $349 - ----------------------------------------------------------------------------------------------------------- Conservative Growth (a) $118 (a) $165 (a) $204 (a) $306 (b) $121 (b) $175 (b) $222 (b) $340 (c) $ 28 (c) $ 85 (c) $144 (c) $306 (d) $ 31 (d) $ 95 (d) $162 (d) $340 - ----------------------------------------------------------------------------------------------------------- Strategic Growth (a) $117 (a) $163 (a) $202 (a) $301 (b) $121 (b) $174 (b) $219 (b) $335 (c) $ 27 (c) $ 83 (c) $142 (c) $301 (d) $ 31 (d) $ 94 (d) $159 (d) $335 - ----------------------------------------------------------------------------------------------------------- Van Kampen LIT Comstock, Class II Shares (a) $118 (a) $165 (a) $204 (a) $306 (b) $121 (b) $175 (b) $222 (b) $340 (c) $ 28 (c) $ 85 (c) $144 (c) $306 (d) $ 31 (d) $95 (d) $162 (d) $340 - ----------------------------------------------------------------------------------------------------------- Van Kampen LIT Emerging Growth, Class II Shares (a) $117 (a) $163 (a) $202 (a) $301 (b) $121 (b) $174 (b) $219 (b) $335 (c) $ 27 (c) $ 83 (c) $142 (c) $301 (d) $ 31 (d) $ 94 (d) $159 (d) $335 - ----------------------------------------------------------------------------------------------------------- Van Kampen LIT Growth and Income, Class II Shares (a) $117 (a) $163 (a) $201 (a) $300 (b) $120 (b) $173 (b) $219 (b) $334 (c) $ 27 (c) $ 83 (c) $141 (c) $300 (d) $ 30 (d) $ 93 (d) $159 (d) $334 - ----------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------
14 EXPLANATION OF FEE TABLES AND EXAMPLES 1. The purpose of the Fee Tables is to show you the various expenses you would incur directly and indirectly by investing in the contract. The tables represent both fees at the separate account (contract level) as well as portfolio company investment management expenses. We converted the contract administration charge to a percentage (0.09%) using an assumed contract size of $40,000. The actual impact of the administration charge may differ from this percentage and may be waived for contract values over $50,000. 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 1.00%; Goldman Sachs Research 1.50%; Growth Opportunities 1.15%; Marsico Growth 1.15%. 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 1.52% and that no transfer fees were imposed. Although premium taxes may apply in certain states, they are not reflected in the Examples. 4. Examples reflecting participation in the Principal Rewards program reflect the Principal Rewards surrender charge schedule, and a 2% upfront payment enhancement. 5. Examples reflecting application of optional features and benefits use the highest fees and charges being offered for those feature. 6. THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. CONDENSED FINANCIAL INFORMATION APPEARS IN APPENDIX A OF THIS PROSPECTUS. - ---------------------------------------------------------------- - ---------------------------------------------------------------- THE POLARIS PLATINUM/PROTECTOR VARIABLE ANNUITY - ---------------------------------------------------------------- - ---------------------------------------------------------------- An annuity is a contract between you and an insurance company. You are the owner of the contract. The contract provides three main benefits: - Tax Deferral: This means that you do not pay taxes on your earnings from the annuity until you withdraw them. - Death Benefit: If you die during the Accumulation Phase, the insurance company pays a death benefit to your Beneficiary. - Guaranteed Income: If elected, you receive a stream of income for your lifetime, or another available period you select. Tax-qualified retirement plans (e.g., IRAs, 401(k) or 403(b) plans) defer payment of taxes on earnings until withdrawal. If you are considering funding a tax-qualified retirement plan with an annuity, you should know that an annuity does not provide any additional tax deferral treatment of earnings beyond the treatment provided by the tax-qualified retirement plan itself. However, annuities do provide other features and benefits which may be valuable to you. You should fully discuss this decision with your financial representative. This annuity was developed to help you contribute to your retirement savings. This annuity works in two stages, the Accumulation Phase and the Income Phase. Your contract is in the Accumulation Phase during the period when you make payments into the contract. The Income Phase begins when you request us to start making income payments to you out of the money accumulated in your contract. The contract is called a "variable" annuity because it allows you to invest in variable portfolios which, like mutual funds, have different investment objectives and performance which varies. You can gain or lose money if you invest in these Variable Portfolios. The amount of money you accumulate in your contract depends on the performance of the Variable Portfolios in which you invest. This contract currently offers 38 Variable Portfolios. The contract also offers several fixed account options for varying time periods. Fixed account options earn interest at a rate set and guaranteed by Anchor National. If you allocate money to the fixed account options, the amount of money that accumulates in the contract depends on the total interest credited to the particular fixed account option(s) in which you invest. For more information on investment options available under this contract SEE INVESTMENT OPTIONS ON PAGE 19. This annuity is designed to assist in contributing to retirement savings of investors whose personal circumstances allow for a long-term investment time horizon. As a function of the Internal Revenue Code ("IRC"), you may be assessed a 10% federal tax penalty on any withdrawal made prior to your reaching age 59 1/2. Additionally, this contract provides that you will be charged a withdrawal charge on each purchase payment withdrawn if that purchase payment has not been invested in this contract for at least 7 years, or 9 years if you elect to participate in the Principal Rewards Program. Because of these potential penalties, you should fully discuss 15 all of the benefits and risks of this contract with your financial representative prior to purchase. Anchor National Life Insurance Company (Anchor National, The Company, Us, We) issues the Polaris Platinum/Protector Variable Annuity. When you purchase a Polaris Platinum/ Protector Variable Annuity, a contract exists between you and Anchor National. The Company is a stock life insurance company organized under the laws of the state of Arizona. Its principal place of business is 1 SunAmerica Center, Los Angeles, California 90067. The Company conducts life insurance and annuity business in the District of Columbia and all states except New York. Anchor National is an indirect, wholly owned subsidiary of American International Group, Inc. ("AIG"), a Delaware corporation. - ---------------------------------------------------------------- - ---------------------------------------------------------------- PURCHASING A POLARIS PROTECTOR/PLATINUM VARIABLE ANNUITY - ---------------------------------------------------------------- - ---------------------------------------------------------------- An initial Purchase Payment is the money you give us to buy a contract. Any additional money you give us to invest in the contract after purchase is a subsequent Purchase Payment. The following chart shows the minimum initial and subsequent Purchase Payments permitted under your contract. These amounts depend upon whether a contract is Qualified or Non-qualified for tax purposes. FOR FURTHER EXPLANATION, SEE TAXES ON PAGE 32.
- ----------------------------------------------------------- Minimum Minimum Initial Subsequent Purchase Payment Purchase Payment - ----------------------------------------------------------- Qualified $2,000 $250 - ----------------------------------------------------------- Non-Qualified $5,000 $500 - -----------------------------------------------------------
Prior Company approval is required to accept Purchase Payments greater than $1,500,000 or $1,333,000 (if Estate Plus is elected). Subsequent Purchase Payments which would cause total Purchase Payments in all contracts issued by Anchor National to the same owner to exceed these limits are also subject to prior company approval. Also, the optional automatic payment plan allows you to make subsequent Purchase Payments of as little as $20.00. In general, we will not issue a Qualified contract to anyone who is age 70 1/2 or older, unless it is shown that the minimum distribution required by the IRS is being made. In addition, we may not issue a contract to anyone age 91 or older on the contract issue date. You may not elect to participate in the Principal Rewards Program or elect the EstatePlus benefit if you are age 81 or older at the time of contract issue. ALLOCATION OF PURCHASE PAYMENTS We invest your Purchase Payments in the fixed and variable investment options according to your instructions. If we receive a Purchase Payment without allocation instructions, we will invest the money according to your last allocation instructions. SEE INVESTMENT OPTIONS ON PAGE 19. In order to issue your contract, we must receive your completed application, Purchase Payment allocation instructions and any other required paperwork at our principal place of business. We allocate your initial Purchase Payment within two days of receiving it. If we do not have complete information necessary to issue your contract, we will contact you. If we do not have the information necessary to issue your contract within 5 business days we will: - Send your money back to you; or - Ask your permission to keep your money until we get the information necessary to issue the contract. PRINCIPAL REWARDS PROGRAM If you elect to participate in the Principal Rewards program at contract issue, we contribute an Upfront Payment Enhancement and, if applicable, a Deferred Payment Enhancement to your contract in conjunction with each Purchase Payment you invest during the life of your contract. If you elect to participate in this program, all Purchase Payments are subject to a nine year withdrawal charge schedule. SEE WITHDRAWAL CHARGES ON PAGE 27. These withdrawal charges may offset the value of any bonus, if you make an early withdrawal. SEE EXPENSES ON PAGE 27. You may not elect to participate in this program if you are age 81 or older at the time of contract issue. Amounts we contribute to your contract under this program are considered earnings and are allocated to your contract as described below. Purchase Payments may not be invested in the 6-month or the 1-year Dollar Cost Averaging fixed accounts if you participate in the Principal Rewards Program. However, you may use the 1-year fixed account option as a Dollar Cost Averaging source account. There may be scenarios in which due to negative market conditions and your inability to remain invested over the long-term, a contract with the Principal Rewards program may not perform as well as the contract without the feature. ENHANCEMENT LEVELS The Upfront Payment Enhancement Rate, Deferred Payment Enhancement Rate and Deferred Payment Enhancement Date may be determined based on stated Enhancement Levels. Each Enhancement Level is a range of dollar amounts which may correspond to different enhancement rates and dates. Enhancement Levels may change from time to time, at our sole discretion. The Enhancement Level applicable to your initial Purchase Payment is determined by the amount of that initial Purchase Payment. With respect to any subsequent Purchase Payments we determine your Enhancement Level by adding your contract value on the 16 date we receive each subsequent Purchase Payment plus the amount of the subsequent Purchase Payment. UPFRONT PAYMENT ENHANCEMENT An Upfront Payment Enhancement is an amount we add to your contract on the day we receive a Purchase Payment. We calculate an Upfront Payment Enhancement amount as a percentage (the "Upfront Payment Enhancement Rate") of each Purchase Payment. The Upfront Payment Enhancement Rate will always be at least 2%. We periodically review and establish the Upfront Payment Enhancement Rate, which may increase or decrease at any time, but will never be less than 2%. The applicable Upfront Payment Enhancement Rate is that which is in effect for any applicable Enhancement Level, when we receive each Purchase Payment under your contract. The Upfront Payment Enhancement amounts are allocated among the fixed and variable investment options according to the current allocation instructions in effect when we receive each Purchase Payment. DEFERRED PAYMENT ENHANCEMENT A Deferred Payment Enhancement is an amount we may add to your contract on a stated future date (the "Deferred Payment Enhancement Date") as a percentage of Purchase Payments received. We refer to this percentage amount as the Deferred Payment Enhancement Rate. We periodically review and establish the Deferred Payment Enhancement Rates and Deferred Payment Enhancement Dates. The Deferred Payment Enhancement Rate being offered may increase, decrease or be eliminated by us, at any time. The Deferred Payment Enhancement Date, if applicable, may change at any time. The applicable Deferred Payment Enhancement Date and Deferred Payment Enhancement Rate are those which may be in effect for any applicable Enhancement Level, when we receive each Purchase Payment under your contract. Any applicable Deferred Payment Enhancement, when credited, is allocated to the Cash Management Variable Portfolio. If you withdraw any portion of a Purchase Payment, to which a Deferred Payment Enhancement applies, prior to the Deferred Payment Enhancement Date, we reduce the amount of the corresponding Deferred Payment Enhancement in the same proportion that your withdrawal (and any fees and charges associated with such withdrawals) reduces that Purchase Payment. For purposes of the Deferred Payment Enhancement, withdrawals are assumed to be taken from earnings first, then from Purchase Payments, on a first-in-first-out basis. CURRENT ENHANCEMENT LEVELS The Enhancement Levels, Upfront Payment Enhancement Rate, Deferred Payment Enhancement Rate and Deferred Payment Enhancement Date applicable to all Purchase Payments currently are as follows:
- ---------------------------------------------------------------------- UPFRONT DEFERRED DEFERRED PAYMENT PAYMENT PAYMENT ENHANCEMENT ENHANCEMENT ENHANCEMENT ENHANCEMENT LEVEL RATE RATE DATE - ---------------------------------------------------------------------- Under $40,000 2% 0% N/A - ---------------------------------------------------------------------- $40,000 - $99,999 4% 0% N/A - ---------------------------------------------------------------------- $100,000 - $499,999 4% 1% Nine years from the date we receive each Purchase Payment. - ---------------------------------------------------------------------- $500,000 - more 5% 1% Nine years from the date we receive each Purchase Payment. - ----------------------------------------------------------------------
APPENDIX A shows how we calculate any applicable Deferred Payment Enhancement amount. We will not allocate any applicable Deferred Payment Enhancement to your contract if any of the following circumstances occurs prior to the Deferred Payment Enhancement Date: - You surrender your contract; - A death benefit is paid on your contract; - You switch to the Income Phase of your contract; or - You fully withdraw the corresponding Purchase Payment. See your financial advisor for information on the current Enhancement Levels and Payment Enhancements rates. 90 DAY WINDOW As of the 90th day after your contract was issued, we will total your Purchase Payments made over those 90 days, without considering any investment gain or loss in contract value on those Purchase Payments. If your total Purchase Payments bring you to an Enhancement Level which, as of the date we issued your contract, would have provided for a higher Upfront and/or Deferred Payment Enhancement Rate on each Purchase Payment, you will get the benefit of the Enhancement Rate(s) that were applicable to that higher Enhancement Level at the time your contract was issued ("Look Back Adjustment"). We will add any applicable Upfront Look Back Adjustment to your contract on the 90th day following the date of contract issue. We will send you a confirmation indicating any applicable Upfront and/or Deferred Look Back Adjustment, on or about the 90th day following the date of contract issuance. We will allocate any applicable Upfront Look Back Adjustment according to your then-current 17 allocation instructions on file for subsequent Purchase Payments at the time we make the contribution and if applicable, to the Cash Management Portfolio, for a Deferred Look Back Adjustment. APPENDIX B PROVIDES AN EXAMPLE OF THE 90 DAY WINDOW PROVISION. The Principal Rewards Program may not be available in your state or through the broker-dealer with which your financial advisor is affiliated. Please check with your financial advisor regarding the availability of this program. WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE PRINCIPAL REWARDS PROGRAM (IN ITS ENTIRETY OR ANY COMPONENT) AT ANY TIME. ACCUMULATION UNITS When you allocate a Purchase Payment to the Variable Portfolios, we credit your contract with Accumulation Units of the separate account. We base the number of Accumulation Units you receive on the unit value of the Variable Portfolio as of the day we receive your money if we receive it before 1 p.m. Pacific Standard Time, or on the next business day's unit value if we receive your money after 1 p.m. Pacific Standard Time. The value of an Accumulation Unit goes up and down based on the performance of the Variable Portfolios. We calculate the value of an Accumulation Unit each day that the New York Stock Exchange ("NYSE") is open as follows: 1. We determine the total value of money invested in a particular Variable Portfolio; 2. We subtract from that amount all applicable contract charges; and 3. We divide this amount by the number of outstanding Accumulation Units. We determine the number of Accumulation Units credited to your contract by dividing the Purchase Payment and Payment Enhancement, if applicable, by the Accumulation Unit value for the specific Variable Portfolio. EXAMPLE (CONTRACTS WITHOUT PRINCIPAL REWARDS): We receive a $25,000 Purchase Payment from you on Wednesday. You allocate the money to the Global Bond Portfolio. We determine that the value of an Accumulation Unit for the Global Bond Portfolio is $11.10 when the NYSE closes on Wednesday. We then divide $25,000 by $11.10 and credit your contract on Wednesday night with 2252.2523 Accumulation Units for the Global Bond Portfolio. EXAMPLE (CONTRACTS WITH PRINCIPAL REWARDS): We receive a $25,000 Purchase Payment from you on Wednesday. You allocate the money to the Global Bond Portfolio. If the Upfront Payment Enhancement is 2.00% of your Purchase Payment, we would add an Upfront Payment Enhancement of $500 to your contract. We determine that the value of an Accumulation Unit for the Global Bond Portfolio is $11.10 when the NYSE closes on Wednesday. We then divide $25,500 by $11.10 and credit your contract on Wednesday with 2,297.2973 Accumulation Units for the Global Bond Portfolio. Performance of the Variable Portfolios and expenses under your contract affect Accumulation Unit values. These factors cause the value of your contract to go up and down. FREE LOOK You may cancel your contract within ten days after receiving it (or longer if required by state law). We call this a "free look." To cancel, you must mail the contract along with your free look request to our Annuity Service Center at P.O. Box 54299, Los Angeles, California 90054-0299. If you decide to cancel your contract during the free look period, we will refund to you the value of your contract on the day we receive your request minus the Free Look Payment Enhancement Deduction, if applicable. The Free Look Payment Enhancement Deduction is equal to the lesser of (1) the value of any Payment Enhancement(s) on the day we receive your free look request; or (2) the Payment Enhancement amount(s), if any, which we allocated to your contract. Thus, you receive any gain and we bear any loss on any Payment Enhancement(s) if you decide to cancel your contract during the free look period. Certain states require us to return your Purchase Payments upon a free look request. Additionally, all contracts issued as an IRA require the full return of Purchase Payments upon a free look. With respect to those contracts, we reserve the right to put your money in the Cash Management Portfolio during the free look period and will allocate your money according to your instructions at the end of the applicable free look period. Currently, we do not put your money in the Cash Management Portfolio during the free look period unless you allocate your money to it. If your contract was issued in a state requiring return of Purchase Payments or as an IRA and you cancel your contract during the free look period, we return the greater of (1) your Purchase Payments; or (2) the value of your contract minus the Free Look Payment Enhancement Deduction, if applicable. At the end of the free look period, we allocate your money according to your instructions. EXCHANGE OFFERS From time to time, we may offer to allow you to exchange an older variable annuity issued by Anchor National or one of its affiliates, for a newer product with more current features and benefits, also issued by Anchor National or one of its affiliates. Such an exchange offer will be made in accordance with applicable state and federal securities and insurance rules and 18 regulations. We will explain the specific terms and conditions of any such exchange offer at the time the offer is made. - ---------------------------------------------------------------- - ---------------------------------------------------------------- INVESTMENT OPTIONS - ---------------------------------------------------------------- - ---------------------------------------------------------------- VARIABLE PORTFOLIOS The contract currently offers 38 Variable Portfolios. These Variable Portfolios invest in shares of the following trusts: Anchor Series Trust, the SunAmerica Series Trust, Van Kampen Life Investment Trust and the WM Variable Trust (the "Trusts"). Additional Trusts and/or Variable Portfolios may be available in the future. The Variable Portfolios operate similar to a mutual fund but are only available through the purchase of certain insurance contracts. SunAmerica Asset Management Corp., an indirect wholly owned subsidiary of AIG, is the investment adviser to the Anchor and SunAmerica Series Trusts. Van Kampen Asset Management Inc. is the investment adviser to the Van Kampen Life Investment Trust. WM Advisors is the investment adviser to the WM Variable Trust. The Trusts serve as the underlying investment vehicles for other variable annuity contracts issued by Anchor National, and other affiliated/unaffiliated insurance companies. Neither Anchor National nor the Trusts believe that offering shares of the Trusts in this manner disadvantages you. The adviser monitors the Trusts for potential conflicts. The Variable Portfolios along with their respective subadvisers are listed below: ANCHOR SERIES TRUST Wellington Management Company, LLP serves as subadviser to the Anchor Series Trust Portfolios. Anchor Series Trust ("AST") has investment portfolios in addition to those listed below which are not available for investment under the contract. SUNAMERICA SERIES TRUST Various subadvisers provide investment advice for the SunAmerica Series Trust Portfolios. SunAmerica Series Trust ("SAST") 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. WM VARIABLE TRUST Washington Mutual Advisors is the investment advisor to the WM Variable Trust ("WMT"). WMT has other investment portfolios in addition to those listed below which are not available for investment under the contract. STOCKS: MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P. - Alliance Growth Portfolio SAST - Global Equities Portfolio SAST - Growth & Income Portfolio SAST MANAGED BY DAVIS ADVISERS L.P. - Davis Venture Value Portfolio SAST - Real Estate Portfolio SAST MANAGED BY FEDERATED INVESTORS L.P. - Federated Value Portfolio SAST - Telecom Utility Portfolio SAST MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT - Goldman Sachs Research Portfolio SAST MANAGED BY MARSICO CAPITAL MANAGEMENT, LLC - Marsico Growth Portfolio SAST MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY - MFS Growth & Income Portfolio SAST - MFS Mid-Cap Growth Portfolio SAST MANAGED BY PUTNAM INVESTMENT MANAGEMENT INC - Emerging Markets Portfolio SAST - International Growth & Income Portfolio SAST - Putnam Growth Portfolio SAST MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION - Aggressive Growth Portfolio SAST - Blue Chip Growth Portfolio SAST - "Dogs" of Wall Street Portfolio SAST - Growth Opportunities Portfolio SAST MANAGED BY VAN KAMPEN/VAN KAMPEN ASSET MANAGEMENT INC. - International Diversified Equities Portfolio SAST - Technology Portfolio SAST - 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 - Natural Resources Portfolio AST BALANCED: MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY - MFS Total Return Portfolio SAST MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION - SunAmerica Balanced Portfolio SAST MANAGED BY WM ADVISORS, INC - Asset Allocation Portfolio SAST - Balanced Portfolio WMT - Conservative Growth Portfolio WMT - Strategic Growth Portfolio WMT BONDS: MANAGED BY FEDERATED INVESTORS L.P. - Corporate Bond Portfolio SAST 19 MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT INT'L - Global Bond Portfolio SAST MANAGED BY VAN KAMPEN - Worldwide High Income Portfolio SAST MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION - High-Yield Bond Portfolio SAST MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP - Government & Quality Bond Portfolio AST CASH: MANAGED BY BANC OF AMERICA CAPITAL MANAGEMENT, LLC - Cash Management Portfolio SAST 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. All guarantee periods may not be available in all states. If you do not elect to participate in the Principal Rewards Program, you also have the option of allocating your money to the 6-month DCA fixed account and/or the 1-year DCA fixed account (the "DCA fixed accounts") which are available in conjunction with the Dollar Cost Averaging Program. Please see the section on DOLLAR COST AVERAGING ON PAGE 21 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. In each scenario your money may be credited a different rate of interest as follows: - Initial Rate: Rate credited to amounts allocated to the fixed account when you purchase your contract. - Current Rate: Rate credited to subsequent amounts allocated to the fixed account. - Renewal Rate: Rate credited to money transferred from a fixed account or a Variable Portfolio into a fixed account and to money remaining in a fixed account after expiration of a guarantee period. (The Renewal Rate does not apply to the DCA fixed account options.) Each of these rates may differ from one another. Once declared, the applicable rate is guaranteed until the corresponding guarantee period expires. When a guarantee period ends, you may leave your money in the same fixed investment option (other than the DCA fixed accounts). You may also reallocate your money to another fixed investment option (other than the DCA fixed accounts) or to the Variable Portfolios. If you want to reallocate your money to a different fixed account option or a Variable Portfolio, you must contact us within 30 days after the end of the current interest guarantee period and instruct us how to reallocate the money. We do not contact you. If we do not hear from you, your money will remain in the same fixed account option, where it will earn interest at the renewal rate then in effect for the fixed account option. The DCA fixed accounts also credit a fixed rate of interest. Interest is credited to amounts allocated to the 6-month or 1-year DCA fixed account while your investment is systematically transferred to the Variable Portfolios. The rates applicable to the DCA fixed accounts may differ from each other and/or the other fixed account options but will never be less than an annual effective rate of 3%. See DOLLAR COST AVERAGING ON PAGE 21 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 multi-year fixed account options before the end of the guarantee period, we make an adjustment to your contract. We refer to the adjustment as a market value adjustment (the "MVA"). The MVA reflects any difference in the interest rate environment between the time you place your money in the fixed account option and the time when you withdraw or transfer that money. This adjustment can increase or decrease your contract value. You have 30 days after the end of each guarantee period to reallocate your funds without incurring any MVA. We calculate the MVA by doing a comparison between current rates and the rate being credited to you in the fixed account option. For the current rate we use a rate being offered by us for a guarantee period that is equal to the time remaining in the guarantee period from which you seek withdrawal. If we are not currently offering a guarantee period for that period of time, we determine an applicable rate by using a formula to arrive at a number between the interest rates currently offered for the two closest periods available. Generally, if interest rates drop between the time you put your money into the fixed account options and the time you take it out, we credit a positive adjustment to your contract. Conversely, if interest rates increase during the same period, we post a negative adjustment to your contract. 20 Where the MVA is negative, we first deduct the adjustment from any money remaining in the fixed account option. If there is not enough money in the fixed account option to meet the negative deduction, we deduct the remainder from your withdrawal. Where the MVA is positive, we add the adjustment to your withdrawal amount. The multi-year MVA fixed accounts are not available to Maryland and Washington state policyholders. 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 fees and charges; - To pay a death benefit; and - Upon annuitization, if occurring on the latest Annuity Date. APPENDIX B SHOWS HOW WE CALCULATE THE MVA. TRANSFERS DURING THE ACCUMULATION PHASE During the Accumulation Phase you may transfer funds between the Variable Portfolios and/or the fixed account options. Funds already in your contract cannot be transferred into the DCA fixed accounts. You must transfer at least $100. If less than $100 will remain in any Variable Portfolio after a transfer, that amount must be transferred as well. You may request transfers of your account value between the Variable Portfolios and/or the fixed account options in writing or by telephone subject to our rules. 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 may accept transfer requests by telephone unless you tell us not to on your contract application. Additionally, you may request transfers over the internet unless you indicate you do not wish your account to be traded over the internet. When receiving instructions over the telephone or the internet, we follow appropriate procedures to provide reasonable assurance that the transactions executed are genuine. Thus, we are not responsible for any claim, loss or expense from any error resulting from instructions received over the telephone. If we fail to follow our procedures, we may be liable for any losses due to unauthorized or fraudulent instructions. We may limit the number of transfers in any contract year or refuse any transfer request for you or others invested in the contract if we believe that excessive trading or a specific transfer request or group transfer requests may have a detrimental effect on unit values or the share prices of the underlying Variable Portfolios. This product is not designed for professional "market timing" organizations or other organizations or individuals engaged in trading strategies that seek to benefit from short term price fluctuations or price irregularities by making programming transfers, frequent transfers or transfers that are large in relation to the total assets of the underlying portfolio in which the Variable Portfolios invest. These marketing timing strategies are disruptive to the underlying portfolios in which the Variable Portfolios invest and thereby potentially harmful to investors. If we determine, in our sole discretion, that your transfer patterns among the Variable Portfolios reflect a market timing strategy, we reserve the right to take action to protect the other investors. Such action may include but would not be limited to restricting the mechanisms you can use to request transfers among the Variable Portfolios or imposing penalty fees on such trading activity and/or otherwise restricting transfer options in accordance with state and federal rules and regulations. For information regarding transfers during the Income Phase, SEE INCOME OPTIONS ON PAGE 29. We reserve the right to modify, suspend, waive or terminate these transfer provisions at any time. DOLLAR COST AVERAGING The Dollar Cost Averaging ("DCA") program allows you to invest gradually in the Variable Portfolios. Under the program you systematically transfer a set dollar amount or percentage of portfolio value from one Variable Portfolio or the 1-year fixed account option (source accounts) to any other Variable Portfolio. Transfers may be monthly or quarterly and count against your 15 free transfers per contract year. You may change the frequency at any time by notifying us in writing. The minimum transfer amount under the DCA program is $100, regardless of the source account. Fixed account options are not available as target account for the DCA program. We also offer the 6-month and 1-year DCA fixed accounts exclusively to facilitate this program. If you elected to participate in the Principal Rewards Program, the 6-month and 1-year DCA fixed accounts are not available under your contract. The DCA fixed accounts only accept new Purchase Payments. You cannot transfer money already in your contract into these options. If you allocate new Purchase Payments into a DCA fixed account, we transfer all your 21 money allocated to that account into the Variable Portfolios over the selected 6-month or 1-year period. You cannot change the option or the frequency of transfers once selected. If allocated to the 6-month DCA fixed account, we transfer your money over a maximum of 6 monthly transfers. We base the actual number of transfers on the total amount allocated to the account. For example, if you allocate $500 to the 6-month DCA fixed account, we transfer your money over a period of five months, so that each payment complies with the $100 per transfer minimum. We determine the amount of the transfers from the 1-year DCA fixed account based on - the total amount of money allocated to the account, and - the frequency of transfers selected. For example, let's say you allocate $1,000 to the 1-year DCA fixed account. You select monthly transfers. We completely transfer all of your money to the selected investment options over a period of ten months. You may terminate your DCA program at any time. If money remains in the DCA fixed accounts, we transfer the remaining money to the 1-year fixed account option, unless we receive different instructions from you. Transfers resulting from a termination of this program do not count towards your 15 free transfers. The DCA program is designed to lessen the impact of market fluctuations on your investment. However, we cannot ensure that you will make a profit. When you elect the DCA program, you are continuously investing in securities regardless of fluctuating price levels. You should consider your tolerance for investing through periods of fluctuating price levels. We reserve the right to modify, suspend or terminate this program at any time. EXAMPLE: Assume that you want to gradually move $750 each quarter from the Cash Management Portfolio to the Aggressive Growth Portfolio over six quarters. You set up dollar cost averaging and purchase Accumulation Units at the following values:
--------------------------------------------- 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. 22 We reserve the right to modify, suspend or terminate this program at any time. EXAMPLE: Assume that you want to allocate a portion of your initial Purchase Payment of $100,000 to the fixed account option. You want the amount allocated to the fixed account option to grow to $100,000 in 7 years. If the 7-year fixed account option is offering a 5% interest rate, we will allocate $71,069 to the 7-year fixed account option to ensure that this amount will grow to $100,000 at the end of the 7-year period. The remaining $28,931 may be allocated among the Variable Portfolios, as determined by you, to provide opportunity for greater growth. VOTING RIGHTS Anchor National is the legal owner of the Trusts' shares. However, when a Variable Portfolio solicits proxies in conjunction with a vote of shareholders, we must obtain your instructions on how to vote those shares. We vote all of the shares we own in proportion to your instructions. This includes any shares we own on our own behalf. Should we determine that we are no longer required to comply with these rules, we will vote the shares in our own right. SUBSTITUTION We may amend your contract due to changes to the Variable Portfolios offered under your contract. For example, we may offer new Variable Portfolios, delete Variable Portfolios, or stop accepting allocations and/or investments in a particular Variable Portfolio. We may move assets and re-direct future premium allocations from one Variable Portfolio to another if we receive investor approval through a proxy vote or SEC approval for a fund substitution. This would occur if a Variable Portfolio is no longer an appropriate investment for the contract, for reasons such as continuing substandard performance, or for changes to the portfolio manager, investment objectives, risks and strategies, or federal or state laws. The new Variable Portfolio offered may have different fees and expenses. You will be notified of any upcoming proxies or substitutions that affect your Variable Portfolio choices. - ---------------------------------------------------------------- - ---------------------------------------------------------------- ACCESS TO YOUR MONEY - ---------------------------------------------------------------- - ---------------------------------------------------------------- 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 29. Generally, we deduct a withdrawal charge applicable to any total or partial withdrawal and a MVA if a partial withdrawal comes from the 3, 5, 7 or 10 year fixed account options. If you withdraw your entire contract value, we also deduct premium taxes and a contract maintenance fee. SEE EXPENSES ON PAGE 27. Your contract provides for a free withdrawal amount each year. A free withdrawal amount is the portion of your account that we allow you to take out each year without being charged a surrender penalty. However, upon a future full surrender of your contract any previous free withdrawals would be subject to a surrender charge, if any is applicable at the time of the full surrender (except in the state of Washington). Additionally, if you participate in the Principal Rewards Program you will not receive your Deferred Payment Enhancement if you fully withdraw a Purchase Payment or your contract value prior to the corresponding Deferred Payment Enhancement Date. SEE PRINCIPAL REWARDS PROGRAM ON PAGE 16. Purchase payments, above and beyond the amount of your free withdrawal amount, that are withdrawn prior to the end of the seventh or ninth year if you elect to participate in the Principal Rewards Program will result in your paying a penalty in the form of a surrender charge. The amount of the charge and how it applies are discussed more fully below. SEE EXPENSES ON PAGE 27. You should consider, before purchasing this contract, the effect this charge will have on your investment if you need to withdraw more money than the free withdrawal amount. You should fully discuss this decision with your financial representative. To determine your free withdrawal amount and your withdrawal charge, we refer to two special terms. These are penalty free earnings and the total invested amount. The penalty-free earnings portion of your contract is simply your account value less your total invested amount. The total invested amount is the total of all Purchase Payments you have made into the contract less portions of some prior withdrawals you made. The portions of prior withdrawals that reduce your total invested amount are as follows: - Free withdrawals in any year that were in excess of your penalty-free earnings and were based on the part of the total invested amount that was no longer subject to withdrawal charges at the time of the withdrawal, and - Any prior withdrawals (including withdrawal charges on those withdrawals) of the total invested amount on which you already paid a surrender penalty. When you make a withdrawal, we assume that it is taken from penalty-free earnings first, then from the total invested amount on a first-in, first-out basis. This means that you can also access your Purchase Payments which are no longer subject to a withdrawal charge before those Purchase Payments which are still subject to the withdrawal charge. During the first year after we issue your contract your free withdrawal amount is the greater of (1) your penalty-free earnings; and (2) if you are participating in the Systematic 23 Withdrawal program, a total of 10% of your total invested amount. If you are a Washington resident, you may withdraw during the first contract year, the greater of (1); (2); or (3) interest earnings from the amounts allocated to the fixed account options, not previously withdrawn. After the first contract year, you can take out the greater of the following amounts each year (1) your penalty-free earnings and any portion of your total invested amount no longer subject to withdrawal charge or (2) 10% of the portion of your total invested amount that has been in your contract for at least one year. If you are a Washington resident, your maximum free withdrawal amount, after the first contract year, is the greater of (1); (2); or (3) interest earnings from amounts allocated to the fixed account options, not previously withdrawn. Although we do not assess a withdrawal charge when you take a 10% penalty-free withdrawal, we will proportionally reduce the amount of any corresponding Deferred Payment Enhancement. We calculate charges due on a total withdrawal on the day after we receive your request and your contract. We return to you your contract value less any applicable fees and charges. The withdrawal charge percentage is determined by the age of the Purchase Payment remaining in the contract at the time of the withdrawal. For the purpose of calculating the withdrawal charge, any prior Free Withdrawal is not subtracted from the total Purchase Payments still subject to withdrawal charges. For example, you make an initial Purchase Payment of $100,000. For purposes of this example we will assume a 0% growth rate over the life of the contract, no subsequent Purchase Payments, and no Principal Rewards election. In contract year 2, you take out your maximum free withdrawal of $10,000. After that free withdrawal your contract value is $90,000. In contract year 5 you request a full surrender of your contract. We will apply the following calculation, A-(B x C)=D, where: A=Your contract value at the time of your request for surrender ($90,000) B=The amount of your Purchase Payments still subject to withdrawal charge ($100,000) C=The withdrawal charge percentage applicable to the age of each Purchase Payment (3%)[B x C=$3,000] D=Your full surrender value ($87,000) Under most circumstances, the partial withdrawal minimum is $1,000. We require that the value left in any investment option be at least $100, after the withdrawal. You must send a written withdrawal request. Unless you provide us with different instructions, partial withdrawals will be made pro rata from each Variable Portfolio and the fixed account option in which your contract is invested. Under certain Qualified plans, access to the money in your contract may be restricted. Additionally, withdrawals made prior to age 59 1/2 may result in a 10% IRS penalty tax. SEE TAXES ON PAGE 32. We may be required to suspend or postpone the payment of a withdrawal for any period of time when: (1) the NYSE is closed (other than a customary weekend and holiday closings); (2) trading with the NYSE is restricted; (3) an emergency exists such that disposal of or determination of the value of shares of the Variable Portfolios is not reasonably practicable; (4) the SEC, by order, so permits for the protection of contract owners. Additionally, we reserve the right to defer payments for a withdrawal from a fixed account option. Such deferrals are limited to no longer than six months. SYSTEMATIC WITHDRAWAL PROGRAM During the Accumulation Phase, you may elect to receive periodic income payments under the systematic withdrawal program. Under the program, you may choose to take monthly, quarterly, semi-annual or annual payments from your contract. Electronic transfer of these funds to your bank account is also available. The minimum amount of each withdrawal is $100. If you are an Oregon resident, the minimum withdrawal amount is $250 per withdrawal or an amount equal to your free withdrawal amount, as described on page 10. There must be at least $500 remaining in your contract at all times. Withdrawals may be taxable and a 10% IRS penalty tax may apply if you are under age 59 1/2. There is no additional charge for participating in this program, although a withdrawal charge and/or MVA may apply. The program is not available to everyone. Please check with our Annuity Service Center, which can provide the necessary enrollment forms. We reserve the right to modify, suspend or terminate this program at any time. NURSING HOME WAIVER If you are confined to a nursing home for 60 days or longer, we may waive the withdrawal charge and/or market value adjustment on certain withdrawals prior to the Annuity Date (not available in Texas). The waiver applies only to withdrawals made while you are in a nursing home or within 90 days after you leave the nursing home. Your contract prohibits use of this waiver during the first 90 days after you purchase your contract. In addition, the confinement period for which you seek the waiver must begin after you purchase your contract. In order to use this waiver, you must submit with your withdrawal request, the following documents: (1) a doctor's note recommending admittance to a nursing home; (2) an admittance form which shows the type of facility you entered; and (3) a bill from the nursing home which shows that you met the 60 day confinement requirement. 24 MINIMUM CONTRACT VALUE Where permitted by state law, we may terminate your contract if both of the following occur: (1) your contract is less than $500 as a result of withdrawals; and (2) you have not made any Purchase Payments during the past three years. We will provide you with sixty days written notice. At the end of the notice period, we will distribute the contract's remaining value to you. - ---------------------------------------------------------------- - ---------------------------------------------------------------- DEATH BENEFIT - ---------------------------------------------------------------- - ---------------------------------------------------------------- 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 can not change your death benefit option. You should discuss the available options with your financial advisor to determine which option is best for you. We will not pay a Deferred Payment Enhancement on a Purchase Payment if you die before the corresponding Deferred Payment Enhancement Date. SEE PRINCIPAL REWARDS PROGRAM ON PAGE 16. 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 29. 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. Payments must begin within one year of your death. If the Beneficiary is the spouse of a deceased owner, he or she can elect to continue the Contract. SEE SPOUSAL CONTINUATION ON PAGE 27. 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 Net Purchase Payment is used frequently in explaining these death benefit options. Net Purchase Payments is an on-going calculation. It does not represent a contract value. 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 determine the percentage by which the withdrawal reduced the contract value. 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 (and any applicable fees and charges) by the contract value immediately before taking the withdrawal. The resulting percentage is then multiplied by the amount of the total Purchase Payments and subtracted from the amount of the total Purchase Payments on deposit at the time of the withdrawal. The resulting amount is the initial Net Purchase Payment. To arrive at the Net Purchase Payment calculation for subsequent withdrawals, we determine the percentage by which the contract value is reduced by taking the amount of the withdrawal in relation to the contract value immediately before taking the withdrawal. We then multiply the Net Purchase Payment calculation as determined prior to the withdrawal, by this percentage. We subtract that result from the Net Purchase Payment calculation as determined prior to the withdrawal to arrive at all subsequent Net Purchase Payment calculations. The term "Gross Withdrawals" as used in describing the death benefit option below is defined as withdrawals and the fees and charges applicable to those withdrawals. The information below describes the death benefits on contracts issued on or after October 24, 2001: OPTION 1 -- PURCHASE PAYMENT ACCUMULATION OPTION The death benefit is the greatest of: 1.the contract value at the time we receive all required paperwork and satisfactory proof of death; or 2.Net Purchase Payments 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 recorded after the date of death; and reduced for any Gross Withdrawals in the same proportion that the Gross Withdrawal reduced 25 contract value on the date of the Gross Withdrawal; or 3.the contract value on the seventh contract anniversary, plus any Purchase Payments since the seventh contract anniversary; and reduced for any Gross Withdrawals since the seventh contract anniversary in the same proportion that each Gross Withdrawal reduced the contract value on the date of the Gross Withdrawal, 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 recorded after the date of death; and reduced for each Gross Withdrawal recorded after the date of death in the same proportion that each Gross Withdrawal reduced the contract value on the date of the Gross Withdrawal. OPTION 2 -- MAXIMUM ANNIVERSARY OPTION The death benefit is the greatest of: 1.the contract value at the time we receive all required paperwork and satisfactory proof of death; or 2.Net Purchase Payments; 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 since that contract anniversary; and reduced for any Gross Withdrawals since the contract anniversary in the same proportion that each Gross Withdrawal reduced the contract value on the date of the Gross Withdrawal. If you are age 90 or older at the time of death and selected the Option 2 death benefit, the death benefit will be equal to contract value at the time we receive all required paperwork and satisfactory proof of death. Accordingly, you do not get the advantage of Option 2 if: - you are age 81 or older at the time of contract issue; or - you are age 90 or older at the time of your death. The death benefit options on contracts issued before October 24, 2001 would be subject to a different calculation. Please see the Statement of Additional Information for details. ESTATEPLUS The EstatePlus benefit if elected 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 Amount"), to the death benefit payable. The EstatePlus benefit, if any, is added to the death benefit payable under the Purchase Payment Accumulation or Maximum Anniversary options. The contract year of your death will determine the EstatePlus percentage and the Maximum EstatePlus percentage. The table below provides the details if you are age 69 or younger at the time we issue your contract:
- ------------------------------------------------------------- CONTRACT YEAR ESTATEPLUS MAXIMUM OF DEATH PERCENTAGE ESTATEPLUS AMOUNT - ------------------------------------------------------------- Years 0 - 4 25% of Earnings 40% of Net Purchase Payments - ------------------------------------------------------------- Years 5 - 9 40% of Earnings 65% of Net Purchase Payments* - ------------------------------------------------------------- Years 10+ 50% of Earnings 75% of Net Purchase Payments* - -------------------------------------------------------------
If you are between your 70th and 81st birthdays at the time we issue your contract the table below shows the available EstatePlus benefit:
- ------------------------------------------------------------- CONTRACT YEAR ESTATEPLUS MAXIMUM OF DEATH PERCENTAGE ESTATEPLUS AMOUNT - ------------------------------------------------------------- All Contract 25% of Earnings 40% of Net Purchase Years Payments* - -------------------------------------------------------------
* Purchase Payments received after the 5th 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 Amount calculations. We may offer different levels of this benefit based on the number of years you hold your contract and/or your age at the time of issue. 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 26 Spouse cannot benefit from EstatePlus if he/she is age 81 or older on the Continuation Date. SEE SPOUSAL CONTINUATION BELOW. The EstatePlus benefit is not payable after the latest Annuity Date. You may pay for the EstatePlus benefit and your beneficiary may never receive the benefit if you live past the latest Annuity Date. SEE INCOME OPTIONS ON PAGE 29. 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 a spouse's continuation of the contract, we will contribute to the contract value an amount by which the death benefit that would have been paid to the beneficiary upon the death of the original owner exceeds the contract value ("Continuation Contribution"), if any. We calculate the Continuation Contribution as of the date of the original owner's death. We will add the Continuation Contribution as of the date we receive both the Continuing Spouse's written request to continue the contract and proof of death of the original owner in a form satisfactory to us ("Continuation Date"). The Continuation Contribution is not considered a Purchase Payment for the purposes of any other calculations except as explained in Appendix D. SEE APPENDIX D FOR FURTHER EXPLANATION OF THE DEATH BENEFIT CALCULATIONS FOLLOWING A SPOUSAL CONTINUATION. 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. Generally, the age of the Continuing Spouse on the Continuation Date and on the date of the Continuing Spouse's death will be used in determining any future death benefits under the Contract. SEE APPENDIX D FOR A DISCUSSION OF THE DEATH BENEFIT CALCULATIONS AFTER A SPOUSAL CONTINUATION. WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE SPOUSAL CONTINUATION PROVISION (IN ITS ENTIRETY OR ANY COMPONENT) AT ANY TIME FOR PROSPECTIVELY ISSUED CONTRACTS. - ---------------------------------------------------------------- - ---------------------------------------------------------------- EXPENSES - ---------------------------------------------------------------- - ---------------------------------------------------------------- There are charges and expenses associated with your contract. These charges and expenses reduce your investment return. We will not increase the contract maintenance fee or the insurance and withdrawal charges under your contract. However, the investment charges under your contract may increase or decrease. Some states may require that we charge less than the amounts described below. INSURANCE CHARGES The Company deducts a mortality and expense risk charge in the amount of 1.52%, annually of the value of your contract invested in the Variable Portfolios. We deduct the charge daily. This charge compensates the Company for the mortality and expense risk and the costs of contract distribution assumed by the Company. Generally, the mortality risks assumed by the Company arise from its contractual obligations to make income payments after the Annuity Date and to provide a death benefit. The expense risk assumed by the Company is that the costs of administering the contracts and the Separate Account will exceed the amount received from the administrative fees and charges assessed under the contract. 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. The insurance charge is expected to result in a profit. Profit may be used for any legitimate cost/expense including distribution, depending upon market conditions. OTHER REVENUE We may receive compensation of up to 0.25% from the investment advisers of certain of the Underlying Funds for services related to the availability of those Underlying Funds in the Contract. WITHDRAWAL CHARGES The contract provides a free withdrawal amount every year. SEE ACCESS TO YOUR MONEY ON PAGE 23. If you take money out in excess of the free withdrawal amount, you may incur a withdrawal charge. You may also incur a withdrawal charge upon a full surrender. 27 We apply a withdrawal charge against each Purchase Payment you put into the contract. After a Purchase Payment has been in the contract for 7 complete years, or 9 years if you elected to participate in the Principal Rewards Program, no withdrawal charge applies. The withdrawal charge equals a percentage of the Purchase Payment you take out of the contract. The withdrawal charge percentage declines each year a Purchase Payment is in the contract. The two withdrawal charge schedules are as follows: WITHDRAWAL CHARGE WITHOUT THE PRINCIPAL REWARDS PROGRAM (SCHEDULE A)
- ----------------------------------------------------------------------------------------- YEAR 1 2 3 4 5 6 7 8 - ----------------------------------------------------------------------------------------- WITHDRAWAL CHARGE 7% 6% 5% 4% 3% 2% 1% 0% - -----------------------------------------------------------------------------------------
WITHDRAWAL CHARGE WITH THE PRINCIPAL REWARDS PROGRAM (SCHEDULE B)
- ----------------------------------------------------------------------------------------------------------- YEAR 1 2 3 4 5 6 7 8 9 10 - ----------------------------------------------------------------------------------------------------------- WITHDRAWAL CHARGE 9% 9% 8% 7% 6% 5% 4% 3% 2% 0% - -----------------------------------------------------------------------------------------------------------
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. SEE ACCESS TO YOUR MONEY ON PAGE 23. These higher potential withdrawal charges may compensate us for the expenses associated with the Principal Rewards Program. The Principal Rewards feature of this contract is designed to reward long term investing. We expect that if you remain committed to this investment over the long term, we will profit as a result of fees charged over the life of your contract. However, neither the mortality and expense fees, distribution expenses, contract administration fee nor the investment management fees are higher on the Principal Rewards version, than the contract without an election of the bonus feature. Whenever possible, we deduct the withdrawal charge from the money remaining in your contract. If you withdraw all of your contract value, we deduct any applicable withdrawal charges from the amount withdrawn. We will not assess a withdrawal charge for money withdrawn to pay a death benefit or to pay contract fees or charges. We will not assess a withdrawal charge when you switch to the Income Phase, except when you elect to receive income payments using the Income Protector feature. If you elect to receive income payments using the Income Protector feature, we assess the entire withdrawal charge applicable to Purchase Payments remaining in your contract when calculating your income benefit base. SEE INCOME OPTIONS ON PAGE 29. Withdrawals made prior to age 59 1/2 may result in tax penalties. SEE TAXES ON PAGE 32. 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 LOCATED AT PAGE 5 illustrate these charges and expenses. For more detailed information on these investment charges, refer to the prospectuses for the Trusts, enclosed or 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) under the Investment Company Act of 1940. This service fee of .15% for the Anchor and SunAmerica Series Trust portfolios and .25% for the Van Kampen Life Investment Trust 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 TABLE ON PAGE 5. CONTRACT MAINTENANCE FEE During the Accumulation Phase, we subtract a contract maintenance fee from your account once per year. This charge compensates us for the cost of contract administration. We deduct the $35 contract maintenance fee ($30 in North Dakota) from your account value on your contract anniversary. If you withdraw your entire contract value, we deduct the fee from that withdrawal. If your contract value is $50,000 or more on your contract anniversary date, we will waive the charge. This waiver is subject to change without notice. TRANSFER FEE We currently permit 15 free transfers between investment options each contract year. We charge you $25 for each additional transfer that contract year ($10 in Pennsylvania and Texas). SEE INVESTMENT OPTIONS ON PAGE 19. OPTIONAL ESTATEPLUS FEE Please see page 26 for more information on the EstatePlus fee. OPTIONAL INCOME PROTECTOR FEE Please see page 30 for more information of the income protector fee. 28 PREMIUM TAX Certain states charge the Company a tax on the premiums you pay into the contract. We deduct from your contract these premium tax charges. Currently we deduct the charge for premium taxes when you take a full withdrawal or begin the Income Phase of the contract. In the future, we may assess this deduction at the time you put Purchase Payment(s) into the contract or upon payment of a death benefit. APPENDIX E provides more information about premium taxes. INCOME TAXES We do not currently deduct income taxes from your contract. We reserve the right to do so in the future. REDUCTION OR ELIMINATION OF CHARGES AND EXPENSES, AND ADDITIONAL AMOUNTS CREDITED Sometimes sales of the contracts to groups of similarly situated individuals may lower our administrative and/or sales expenses. We reserve the right to reduce or waive certain charges and expenses when this type of sale occurs. In addition, we may also credit additional interest to policies sold to such groups. We determine which groups are eligible for such treatment. Some of the criteria we evaluate to make a determination are: size of the group; amount of expected Purchase Payments; relationship existing between us and prospective purchaser; nature of the purchase; length of time a group of contracts is expected to remain active; purpose of the purchase and whether that purpose increases the likelihood that our expenses will be reduced; and/or any other factors that we believe indicate that administrative and/or sales expenses may be reduced. Anchor National may make such a determination regarding sales to its employees, it affiliates' employees and employees of currently contracted broker-dealers; its registered representatives and immediate family members of all of those described. We reserve the right to change or modify any such determination or the treatment applied to a particular group, at any time. - ---------------------------------------------------------------- - ---------------------------------------------------------------- INCOME OPTIONS - ---------------------------------------------------------------- - ---------------------------------------------------------------- ANNUITY DATE During the Income Phase, we use the money accumulated in your contract to make regular income payments to you. You may switch to the Income Phase any time after your second contract anniversary. You select the month and year you want income payments to begin. The first day of that month is the Annuity Date. You may change your Annuity Date, so long as you do so at least seven days before the income payments are scheduled to begin. Once you begin receiving income payments, you cannot change your income option. Except as indicated under Option 5 below, once you begin receiving income payments, you cannot otherwise access your money through a withdrawal or surrender. If you switch to the Income Phase prior to a Deferred Payment Enhancement Date, we will not allocate the corresponding Deferred Payment Enhancement to your contract. SEE PRINCIPAL REWARDS PROGRAM ON PAGE 16. 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 32. INCOME OPTIONS Currently, this Contract offers five income options unless you chose to take income under the Income Protector feature (see below). 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 period of 10 years. For income payments based on joint lives, we pay according to Option 3 for a period of 10 years. We base our calculation of income payments on the life of the Annuitant and the annuity rates set forth in your contract. As the contract owner, you may change the Annuitant at any time prior to the Annuity Date. You must notify us if the Annuitant dies before the Annuity Date and designate a new Annuitant. OPTION 1 - LIFE INCOME ANNUITY This option provides income payments for the life of the Annuitant. Income payments stop when the Annuitant dies. OPTION 2 - JOINT AND SURVIVOR LIFE ANNUITY This option provides income payments for the life of the Annuitant and for the life of another designated person. Upon the death of either person, we will continue to make income payments during the lifetime of the survivor. Income payments stop when the survivor dies. OPTION 3 - JOINT AND SURVIVOR LIFE ANNUITY WITH 10 OR 20 YEARS GUARANTEED This option is similar to Option 2 above, with an additional guarantee of payments for at least 10 years. If the Annuitant and the survivor die before all of the guaranteed income 29 payments have been made, the remaining payments are made to the Beneficiary under your contract. OPTION 4 - LIFE ANNUITY WITH 10 OR 20 YEARS GUARANTEED This option is similar to Option 1 above. In addition, this option provides a guarantee that income payments will be made for at least 10 or 20 years. You select the number of years. If the Annuitant dies before all guaranteed income payments are made, the remaining income payments go to the Beneficiary under your contract. OPTION 5 - INCOME FOR A SPECIFIED PERIOD This option provides income payments for a guaranteed period ranging from 5 to 30 years. If the Annuitant dies before all the guaranteed income payments are made, the remaining income payments are made to the Beneficiary under your contract. Additionally, if variable income payments are elected under this option, you (or the Beneficiary under the contract if the Annuitant dies prior to all guaranteed income payments being made) may redeem any remaining guaranteed variable income payments after the Annuity Date. The amount available upon such redemption would be the discounted present value of any remaining guaranteed variable income payments. If provided for in your contract, any applicable withdrawal charge will be deducted from the discounted value as if you fully surrendered your contract. The value of an Annuity Unit, regardless of the option chosen, takes into account the mortality and expense risk charge. Since Option 5 does not contain an element of mortality risk, no benefit is derived from this charge. For information regarding Income Option's using the Income Protector feature, please see below. Please read the Statement of Additional Information ("SAI") for a more detailed discussion of the income options. FIXED OR VARIABLE INCOME PAYMENTS You can choose income payments that are fixed, variable or both. Unless otherwise elected, if at the date when income payments begin you are invested in the Variable Portfolios only, your income payments will be variable and 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, unless otherwise elected. If income payments are fixed, Anchor National guarantees the amount of each payment. If the income payments are variable the amount is not guaranteed. INCOME PAYMENTS We make income payments on a monthly, quarterly, semiannual or annual basis. You instruct us to send you a check or to have the payments directly deposited into your bank account. If state law allows, we distribute annuities with a contract value of $5,000 or less in a lump sum. Also, if the selected income option results in income payments of less than $50 per payment, we may decrease the frequency of payments, state law allowing. If you are invested in the Variable Portfolios after the Annuity date, your income payments vary depending on four things: - for life options, your age when payments begin; and - the value of your contract in the Variable Portfolios on the Annuity Date; and - the 3.5% assumed investment rate used in the annuity table for the contract; and - the performance of the Variable Portfolios in which you are invested during the time you receive income payments. If you are invested in both the fixed account options and the Variable Portfolios after the Annuity Date, the allocation of funds between the fixed and variable options also impacts the amount of your annuity payments. TRANSFERS DURING THE INCOME PHASE During the Income Phase, one transfer per month is permitted between the Variable Portfolios. No other transfers are allowed during the Income Phase. DEFERMENT OF PAYMENTS We may defer making fixed payments for up to six months, or less if required by law. Interest is credited to you during the deferral period. THE INCOME PROTECTOR FEATURE The Income Protector feature is a future "safety net" which can offer you the ability to receive a guaranteed fixed minimum retirement income when you switch to the Income Phase. If you elect the Income Protector feature you can know the level of minimum income that will be available to you upon annuitization, regardless of fluctuating market conditions. The minimum level of Income Protector benefit available is generally based upon the Purchase Payments remaining in your contract at the time you decide to begin taking income. If available and elected, a growth rate can provide increased levels of minimum guaranteed income. We charge a fee for the Income Protector benefit. The amount of the fee and levels of income protection available to you are described below. 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 FOR PROSPECTIVELY ISSUED CONTRACTS. 30 HOW WE DETERMINE THE AMOUNT OF YOUR MINIMUM GUARANTEED INCOME If you elect the Income Protector feature, we base the amount of minimum income available to you upon a calculation we call the Income Benefit Base. At the time your participation in the Income Protector program becomes effective, your Income Benefit Base is equal to your contract value. Participation in the Income Protector program is effective on either the date of issue of the contract (if elected) or at the contract anniversary following your election of the Income Protector. 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. Your Income Benefit Base may accumulate at the elected growth rate from the date your election becomes effective through your Income Benefit Date. However, any applicable Growth Rate will reduce to 0% on the Anniversary immediately after the annuitant's 90th birthday. LEVEL OF PROTECTION If you decide that you want the protection offered by the Income Protector feature, you must elect the feature by completing the Income Protector Election Form available through our Annuity Service Center. You may only elect one of the offered alternatives. Depending on the broker-dealer through which you purchase your contract, you may not have a choice of levels of protection. Your Income Benefit Base will begin accumulating at the applicable growth rate on the contract anniversary following our receipt of your completed election form. In order to obtain the benefit of the Income Protector you may not begin the Income Phase for at least ten years following your election. You may not elect this Program if the required waiting period before beginning the Income Phase would occur later than your latest annuity date. The current options offered are:
FEE AS A % OF YOUR INCOME WAITING OPTIONS GROWTH RATE* BENEFIT BASE PERIOD* - --------------------------------------------------------------- Income Protector Base 0% .10% 10 years - --------------------------------------------------------------- Income Protector Plus 6% .45% 10 years - ---------------------------------------------------------------
* If you elect the Base or Plus feature on a subsequent anniversary, the Growth Rates Fees, and/or waiting period may be different. RE-SET OR STEP-UP OF YOUR INCOME PROTECTOR BENEFIT STEP-UP You may also have the opportunity to "Re-Set" your Income Benefit Base. The Step-Up feature allows you to increase your Income Benefit Base to the amount of your contract value on your next contract anniversary. You can only Re-Set within the 30 days before your next contract anniversary. The waiting period before you can begin the Income Phase will be determined based on the offerings available for your elected level of protection at the time your make an election to Re-Set. In addition, the Income Protector fee will be charged as a percentage of your re-set Income Benefit Base. You may not elect to Re-Set if the required waiting period before beginning the Income Phase would occur later than your latest annuity date. STEP-UP If available, and you have elected the Base level of protection, you may have the opportunity to Step-Up to the Plus level of protection. The Step-Up feature can allow you to benefit from a higher growth rate, if available, at the time you decide to elect an Step-Up of your Income Protector Benefit. You can only Step-Up within the 30 days before your next contract anniversary. If you Step-Up, the growth rate, fee and waiting period prior to beginning the Income Phase will be determined based on the offerings available at the time you make your election. These factors may be greater than or less than those offered in this prospectus. You may not elect to Step-Up if the required waiting period before beginning the Income Phase would occur later than your latest Annuity Date. For more information on how to Re-Set or Step-Up your Income Protector benefit, please contact your financial advisor or our Annuity Service Center. ELECTING TO RECEIVE INCOME PAYMENTS You may elect to begin the Income Phase of your contract using the Income Protector Program ONLY within the 30 days after the 10th or later contract anniversary following the effective date of your Income Protector participation, Re-Set or Step-Up. 31 The contract anniversary of, or prior to, your election to begin receiving annuity 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. To arrive at the minimum guaranteed retirement income available to you we apply the annuity rates stated in your Income Protector Endorsement for the annuity option you select to your final Income Benefit Base. You then choose if you would like to receive that income annually, quarterly or monthly for the time guaranteed under your selected annuity option. Your final Income Benefit Base is equal to (a) minus (b) where: (a) is your Income Benefit Base as of your Income Benefit Date, and; (b) is 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 of the Income Benefit Date, and any applicable premium taxes. The annuity options available when using the Income Protector Program to receive your fixed retirement income are: - Life Annuity with 10 Year Period Certain, or - Joint and 100% Survivor Annuity with 20 Year Period Certain At the time you elect to begin receiving annuity payments, we will calculate your annual income using both your final 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 will be different. You will receive whichever provides a greater stream of income. If you annuitize using the Income Protector your income payments will be fixed in amount. You are not required to use the Income Protector to receive income payments. However, we will not refund fees paid for the Income Protector if you annuitize under the general provisions of your contract. In addition, if applicable, a surrender charge will apply if you take income under the Income Protector feature. YOU MAY NEVER NEED TO RELY UPON THE INCOME PROTECTOR, IF YOUR CONTRACT PERFORMS WITHIN A HISTORICALLY ANTICIPATED RANGE. HOWEVER, PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. FEES ASSOCIATED WITH THE INCOME PROTECTOR PROGRAM If you elect the Income Protector, we charge an annual fee, as follows:
FEE AS A % OF YOUR OPTIONS INCOME BENEFIT BASE - ------------------------------------------------------------- Income Protector Base .10% - ------------------------------------------------------------- Income Protector Plus .45% - -------------------------------------------------------------
* If you elect the Base or Plus feature on a subsequent anniversary, the Fees may be different. We deduct the annual fee from your actual contract value. If your contract is issued with the Income Protector program we begin deducting the annual fee on your first contract anniversary. If you elect the feature it at some later date, we begin deducting the annual fee on the contract anniversary following the date on which your participation in the program becomes effective. Upon a Re-Set of your Income Protector feature, the fee will be charged upon your Re-Set Income Benefit Base. Upon Re-Set of this feature you may be charged a higher fee depending upon the then-current offerings. It is important to note that once you elect the Income Protector feature you may not cancel your election. We will deduct the charge from your contract value on every contract anniversary up to and including your Income Benefit Date. Additionally, we deduct the full annual fee from any full surrender of your contract requested prior to your contract anniversary based on the Income Benefit Base at time of surrender. NOTE TO QUALIFIED CONTRACT HOLDERS Qualified contracts generally require that you select an income option that does not exceed your life expectancy. That restriction, if it applies to you, may limit the benefit of the Income Protector program. To utilize the Income Protector feature, you must take income payments under one of the two income options described above. If those income options exceed your life expectancy, you may be prohibited from receiving your guaranteed fixed income under the program. If you own a qualified contract to which this restriction applies and you elect the Income Protector program, you may pay for this minimum guarantee and not be able to realize the benefit. Generally, for qualified contracts: - for the Life Annuity with 10 years guaranteed, you must annuitize before age 79, and; - for the Joint and 100% Survivor Annuity with 20 years guaranteed, both annuitants must be 70 or younger or one of the annuitants must be 65 or younger upon annuitization. Other age combinations may be available. You may wish to consult your tax advisor for information concerning your particular circumstances. APPENDIX E PROVIDES EXAMPLES OF THE OPERATION OF THE INCOME PROTECTOR FEATURE. - ---------------------------------------------------------------- - ---------------------------------------------------------------- TAXES - ---------------------------------------------------------------- - ---------------------------------------------------------------- NOTE: WE PREPARED THE FOLLOWING INFORMATION ON TAXES AS A GENERAL DISCUSSION OF THE SUBJECT. THIS INFORMATION ADDRESSES GENERAL FEDERAL TAXATION MATTERS, AND GENERALLY 32 DOES NOT ADDRESS STATE TAXATION ISSUES OR QUESTIONS. IT IS NOT TAX ADVICE. WE CAUTION YOU TO SEEK COMPETENT TAX ADVICE ABOUT YOUR OWN CIRCUMSTANCES. WE DO NOT GUARANTEE THE TAX STATUS OF YOUR ANNUITY. TAX LAWS CONSTANTLY CHANGE, THEREFORE, WE CANNOT GUARANTEE THAT THE INFORMATION CONTAINED HEREIN IS COMPLETE AND/OR ACCURATE. ANNUITY CONTRACTS IN GENERAL The Internal Revenue Code ("IRC") provides for special rules regarding the tax treatment of annuity contracts Generally, taxes on the earnings in your annuity contract are deferred until you take the money out. Qualified retirement investments that satisfy specific tax and ERISA requirements automatically provide tax deferral regardless of whether the underlying contract is an annuity, a trust, or a custodial account. 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), plans of self-employed individuals (often referred to as H.R. 10 Plans or 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. However, you normally will have cost basis in a Roth IRA, and you may have cost basis in a traditional IRA or in another Qualified Contract. TAX TREATMENT OF DISTRIBUTIONS - NON-QUALIFIED CONTRACTS If you make a partial or total 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. Purchase payments made prior to August 14, 1982, however, are an important exception to this general rule, and for tax purposes are treated as being distributed before the earnings on those contributions. If you annuitize your contract, a portion of each income payment will be considered, for tax purposes, to be a return of a portion of your Purchase Payment(s). Any portion of each income 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 are attributable to 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. As a result, with certain limited exceptions, 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 taxable 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, that begins after separation from service with the employer sponsoring the plan; (5) to the extent such withdrawals do not exceed limitations set by the IRC for deductible amounts paid during the taxable year for medical care; (6) to fund higher education expenses (as defined in IRC; only from an IRA); (7) to fund certain first-time home purchase expenses (only from an IRA); 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 an employee's voluntary Purchase Payments to a Tax-Sheltered Annuity (TSA). Withdrawals can only be made when an owner: (1) reaches age 59 1/2; (2) severs employment with the employer; (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. Additional plan limitations may also apply. Amounts held in a TSA annuity contract as of December 31, 1988 are not subject to these restrictions. Qualifying transfers of amounts from one TSA contract to another TSA contract under section 403(b) or to a custodial account under section 403(b)(7), and qualifying transfers to a state defined benefit plan to purchase service credits, are not considered distributions, and thus are not subject to these withdrawal limitations. If amounts are transferred from a custodial account described in Code section 403(b)(7) to this contract the transferred amount will retain the custodial account withdrawal restrictions. 33 Withdrawals from other Qualified Contracts are often limited by the IRC and by the employer's plan. MINIMUM DISTRIBUTIONS Generally, the IRS requires that you begin taking annual distributions from qualified annuity contracts by April 1 of the calendar year following the later of (1) the calendar year in which you attain age 70 1/2 or (2) the calendar year in which you retire. If you own more than one TSA, you may be permitted to take your annual distributions in any combination from your TSAs. A similar rule applies if you own more than one IRA. However, you cannot satisfy this distribution requirement for your TSA contract by taking a distribution from an IRA, and you cannot satisfy the requirement for your IRA by taking a distribution from a TSA. You may be subject to a surrender charge on withdrawals taken to meet minimum distribution requirements, if the withdrawals exceed the contract's maximum penalty free amount. Failure to satisfy the minimum distribution requirements may result in a tax penalty. You should consult your tax advisor for more information. You may elect to have the required minimum distribution amount on your contract calculated and withdrawn each year under the automatic withdrawal option. You may select either monthly, quarterly, semiannual or annual withdrawals for this purpose. This service is provided as a courtesy and we do not guarantee the accuracy of our calculations. Accordingly, we recommend you consult your tax advisor concerning your required minimum distribution. You may terminate your election for automated minimum distribution at any time by sending a written request to our Annuity Service Center. We reserve the right to change or discontinue this service at any time. 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 includible in taxable income and subject to the 10% penalty if the owner is under 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. However, this treatment is not applied to a Contract held by a trust or other entity as an agent for a natural person nor to Contracts held by Qualified Plans. See the SAI 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 transfer ownership of your Non-Qualified contract to a person other than your spouse (or former spouse incident to divorce) as a gift you will pay federal income 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. See the SAI 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 the 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. 34 The diversification regulations do not provide guidance as to the circumstances under which you, and not Anchor National, would be considered the owner of the shares of the Variable Portfolios under your Nonqualified Contract, because of the degree of control you exercise over the underlying investments. This diversification requirement is sometimes referred to as "investor control." 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 Nonqualified 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. These investor control limitations generally do not apply to Qualified Contracts, which are referred to as "Pension Plan Contracts" for purposes of this rule, although the limitations could be applied to Qualified Contracts in the future. - ---------------------------------------------------------------- - ---------------------------------------------------------------- PERFORMANCE - ---------------------------------------------------------------- - ---------------------------------------------------------------- We advertise the Cash Management Portfolio's yield and effective yield. In addition, the other Variable Portfolios advertise total return, gross yield and yield-to-maturity. These figures represent past performance of the Variable Portfolios. These performance numbers do not indicate future results. When we advertise performance for periods prior to the date the contracts were first issued, we derive the figures from the performance of the corresponding portfolios for the Trusts, if available. We modify these numbers to reflect charges and expenses as if the contract was in existence during the period stated in the advertisement. Figures calculated in this manner do not represent actual historic performance of the particular Variable Portfolio. Consult the 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 Fitch IBCA 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. - ---------------------------------------------------------------- - ---------------------------------------------------------------- OTHER INFORMATION - ---------------------------------------------------------------- - ---------------------------------------------------------------- ANCHOR NATIONAL Anchor National is a stock life insurance company originally organized under the laws of the state of California in April 1965. On January 1, 1996, Anchor National redomesticated under the laws of the state of Arizona. Anchor National and its affiliates, SunAmerica Life Insurance Company, First SunAmerica Life Insurance Company, SunAmerica 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 established Variable Separate Account ("separate account"), under Arizona law on January 1, 1996 when it assumed the separate account, originally established under California law on June 25, 1981. The separate account is registered with the SEC as a unit investment trust under the Investment Company Act of 1940, as amended. Anchor National owns the assets in the separate account. However, the assets in the separate account are not chargeable with liabilities arising out of any other business conducted by Anchor National. Income gains and losses (realized and unrealized) resulting from assets in the separate account are credited to or charged against the separate account without regard to other income gains or losses of Anchor National. 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 35 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 8% of your Purchase Payments. Contracts sold with the Principal Rewards program may result in our paying different commission. We may also pay a bonus to representatives for contracts which stay active for a particular period of time, in addition to standard commissions. We do not deduct commissions paid to registered representatives directly from your Purchase Payments. From time to time, we may pay or allow additional promotional incentives in the form of cash or other compensation. We reserve the right to offer these additional incentives only to certain broker-dealers that sell or are expected to sell, certain minimum amounts of the contract, or other contracts offered by us. Promotional incentives may change at any time. SunAmerica Capital Services, Inc., 733 Third Avenue, 4th Floor, New York, New York 10017 distributes the contracts. SunAmerica Capital Services, an affiliate of Anchor National, is registered as a broker-dealer under the Exchange Act of 1934 and is a member of the National Association of Securities Dealers, Inc. No underwriting fees are paid in connection with the distribution of the contracts. ADMINISTRATION We are responsible for the administrative servicing of your contract. Please contact our Annuity Service Center at 1-800-445-SUN2, if you have any comment, question or service request. We send out transaction confirmations and quarterly statements. During the accumulation phase, you will receive confirmation of transactions within your contract. Transactions made pursuant to contractual or systematic agreements, such as deduction of the annual maintenance fee and dollar cost averaging, may be confirmed quarterly. Purchase payments received through the automatic payment plan or a salary reduction arrangement, may also be confirmed quarterly. For all other transactions, we send confirmations immediately. It is your responsibility to review these documents carefully and notify us of any inaccuracies immediately. We investigate all inquiries. To the extent that we believe we made an error, we retroactively adjust your contract, provided you notify us within 30 days of receiving the transaction confirmation or quarterly statement. Any other adjustments we deem warranted are made as of the time we receive notice of the error. LEGAL PROCEEDINGS There are no pending legal proceedings affecting the Separate Account. Anchor National and its subsidiaries engage in various kinds of routine litigation. In management's opinion these matters are not of material importance to the Company's total assets, with the potential exception of McMurdie, et al. v. SunAmerica Inc., et al, Case No. BC 194082, filed on July 10, 1998 in the Superior Court for the County of Los Angeles. This lawsuit is a representative action wherein the plaintiffs allege violations of California's Business and Professions Code Sections 17200 et seq. The Company is vigorously defending the lawsuit. The probability of any particular outcome is not reasonably estimable at this time. OWNERSHIP The Polaris Protector/Platinum 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 AIG SunAmerica Life Assurance Company (formerly Anchor National Life Insurance Company) at December 31, 2001 and 2000 and, for the years ended December 31, 2001, 2000 and 1999 and the audited financial statements of Variable Separate Account (Portion Relating to the Polaris Platinum/Protector Variable Annuity) at December 31, 2001 and for the period from July 9, 2001 (inception) to December 31, 2001 are incorporated by reference in this prospectus in reliance on the reports of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. 36 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. - ---------------------------------------------------------------- - ---------------------------------------------------------------- TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION - ---------------------------------------------------------------- - ---------------------------------------------------------------- Additional information concerning the operations of the separate account is contained in a Statement of Additional Information ("SAI"), which is available without charge upon written request addressed to us at our Annuity Service Center, P.O. Box 54299, Los Angeles, California 90054-0299 or by calling (800) 445-SUN2. The contents of the SAI are tabulated below. Separate Account.............................. 3 General Account............................... 3 Performance Data.............................. 4 Income Payments............................... 12 Annuity Unit Values........................... 12 Death Benefit Options for Contracts Issued Before October 24, 2001..................... 13 Taxes......................................... 19 Distribution of Contracts..................... 23 Financial Statements.......................... 23
37 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- POLARIS PLATINUM APPENDIX A - CONDENSED FINANCIAL INFORMATION - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
INCEPTION TO PORTFOLIOS 12/31/01 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Capital Appreciation (Inception Date - 07/09/01) Beginning AUV....................................... (a) $35.378 (b) $35.378 Ending AUV.......................................... (a) $33.909 (b) $33.891 Ending Number of AUs................................ (a) 216,908 (b) 60,960 - ------------------------------------------------------------------------------- Government and Quality Bond (Inception Date - 07/09/01) Beginning AUV....................................... (a) $14.915 (b) $14.915 Ending AUV.......................................... (a) $15.323 (b) $15.319 Ending Number of AUs................................ (a) 604,398 (b) 173,062 - ------------------------------------------------------------------------------- Growth (Inception Date - 07/09/01) Beginning AUV....................................... (a) $27.961 (b) $27.961 Ending AUV.......................................... (a) $27.233 (b) $27.215 Ending Number of AUs................................ (a) 114,458 (b) 33,079 - ------------------------------------------------------------------------------- Natural Resources (Inception Date - 07/09/01) Beginning AUV....................................... (a) $14.651 (b) $14.651 Ending AUV.......................................... (a) $14.352 (b) $14.309 Ending Number of AUs................................ (a) 25,385 (b) 11,922 - ------------------------------------------------------------------------------- Aggressive Growth B96 (Inception Date - 07/09/01) Beginning AUV....................................... (a) $15.970 (b) $15.970 Ending AUV.......................................... (a) $13.627 (b) $13.621 Ending Number of AUs................................ (a) 74,319 (b) 40,715 - ------------------------------------------------------------------------------- Alliance Growth (Inception Date - 07/09/01) Beginning AUV....................................... (a) $32.786 (b) $32.786 Ending AUV.......................................... (a) $32.462 (b) $32.395 Ending Number of AUs................................ (a) 229,450 (b) 59,000 - ------------------------------------------------------------------------------- Blue Chip Growth (Inception Date - 07/09/01) Beginning AUV....................................... (a) $7.199 (b) $7.199 Ending AUV.......................................... (a) $6.701 (b) $6.695 Ending Number of AUs................................ (a) 136,477 (b) 51,147 - ------------------------------------------------------------------------------- Cash Management (Inception Date - 07/09/01) Beginning AUV....................................... (a) $12.987 (b) $12.987 Ending AUV.......................................... (a) $13.058 (b) $13.065 Ending Number of AUs................................ (a) 473,064 (b) 244,174 - ------------------------------------------------------------------------------- Corporate Bond (Inception Date - 07/09/01) Beginning AUV....................................... (a) $13.663 (b) $13.663 Ending AUV.......................................... (a) $13.972 (b) $13.952 Ending Number of AUs................................ (a) 199,210 (b) 126,920 - -------------------------------------------------------------------------------
AU - Accumulation Unit AUV - Accumulation Unit Value (a) Without election of the optional EstatePlus feature (b) With election of the optional EstatePlus feature A-1
INCEPTION TO PORTFOLIOS 12/31/01 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Davis Venture Value (Inception Date - 07/09/01) Beginning AUV....................................... (a) $27.129 (b) $27.129 Ending AUV.......................................... (a) $26.207 (b) $26.174 Ending Number of AUs................................ (a) 385,797 (b) 103,212 - ------------------------------------------------------------------------------- "Dogs" of Wall Street (Inception Date - 07/09/01) Beginning AUV....................................... (a) $9.376 (b) $9.376 Ending AUV.......................................... (a) $9.703 (b) $9.680 Ending Number of AUs................................ (a) 79,435 (b) 26,944 - ------------------------------------------------------------------------------- Emerging Market (Inception Date - 07/09/01) Beginning AUV....................................... (a) $6.428 (b) $6.428 Ending AUV.......................................... (a) $6.535 (b) $6.530 Ending Number of AUs................................ (a) 20,649 (b) 10,799 - ------------------------------------------------------------------------------- Federated Value (Inception Date - 07/09/01) Beginning AUV....................................... (a) $16.876 (b) $16.876 Ending AUV.......................................... (a) $16.380 (b) $16.377 Ending Number of AUs................................ (a) 109,935 (b) 56,938 - ------------------------------------------------------------------------------- Global Bond (Inception Date - 07/09/01) Beginning AUV....................................... (a) $15.461 (b) $15.461 Ending AUV.......................................... (a) $15.662 (b) $15.648 Ending Number of AUs................................ (a) 42,811 (b) 32,980 - ------------------------------------------------------------------------------- Global Equities (Inception Date - 07/09/01) Beginning AUV....................................... (a) $17.986 (b) $17.986 Ending AUV.......................................... (a) $17.477 (b) $17.447 Ending Number of AUs................................ (a) 58,908 (b) 16,500 - ------------------------------------------------------------------------------- Goldman Sachs Research (Inception Date - 07/09/01) Beginning AUV....................................... (a) $8.100 (b) $8.100 Ending AUV.......................................... (a) $7.171 (b) $7.168 Ending Number of AUs................................ (a) 80,875 (b) 12,429 - ------------------------------------------------------------------------------- Growth-Income (Inception Date - 07/09/01) Beginning AUV....................................... (a) $28.878 (b) $28.878 Ending AUV.......................................... (a) $26.800 (b) $26.794 Ending Number of AUs................................ (a) 185,367 (b) 61,252 - ------------------------------------------------------------------------------- Growth Opportunities (Inception Date - 07/09/01) Beginning AUV....................................... (a) $6.256 (b) $6.256 Ending AUV.......................................... (a) $5.813 (b) $5.804 Ending Number of AUs................................ (a) 76,426 (b) 33,659 - -------------------------------------------------------------------------------
AU - Accumulation Unit AUV - Accumulation Unit Value (a) Without election of the optional EstatePlus feature (b) With election of the optional EstatePlus feature A-2
INCEPTION TO PORTFOLIOS 12/31/01 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- High-Yield Bond (Inception Date - 07/09/01) Beginning AUV....................................... (a) $13.172 (b) $13.172 Ending AUV.......................................... (a) $12.506 (b) $12.495 Ending Number of AUs................................ (a) 97,244 (b) 85,252 - ------------------------------------------------------------------------------- International Diversified Equities (Inception Date - 07/09/01) Beginning AUV....................................... (a) $11.125 (b) $11.125 Ending AUV.......................................... (a) $10.216 (b) $10.168 Ending Number of AUs................................ (a) 34,310 (b) 40,781 - ------------------------------------------------------------------------------- International Growth and Income (Inception Date - 07/09/01) Beginning AUV....................................... (a) $11.372 (b) $11.372 Ending AUV.......................................... (a) $10.751 (b) $10.746 Ending Number of AUs................................ (a) 105,112 (b) 59,493 - ------------------------------------------------------------------------------- Marsico Growth (Inception Date - 07/09/01) Beginning AUV....................................... (a) $8.889 (b) $8.889 Ending AUV.......................................... (a) $8.515 (b) $8.519 Ending Number of AUs................................ (a) 189,755 (b) 95,675 - ------------------------------------------------------------------------------- MFS Growth and Income (Inception Date - 07/09/01) Beginning AUV....................................... (a) $20.217 (b) $20.217 Ending AUV.......................................... (a) $19.217 (b) $19.204 Ending Number of AUs................................ (a) 80,414 (b) 36,242 - ------------------------------------------------------------------------------- MFS Mid-Cap Growth (Inception Date - 07/09/01) Beginning AUV....................................... (a) $15.227 (b) $15.227 Ending AUV.......................................... (a) $13.408 (b) $13.395 Ending Number of AUs................................ (a) 277,704 (b) 108,730 - ------------------------------------------------------------------------------- MFS Total Return (Inception Date - 07/09/01) Beginning AUV....................................... (a) $21.154 (b) $21.154 Ending AUV.......................................... (a) $21.220 (b) $21.203 Ending Number of AUs................................ (a) 332,143 (b) 113,416 - ------------------------------------------------------------------------------- Putnam Growth (Inception Date - 07/09/01) Beginning AUV....................................... (a) $21.065 (b) $21.065 Ending AUV.......................................... (a) $19.070 (b) $19.066 Ending Number of AUs................................ (a) 72,747 (b) 22,607 - ------------------------------------------------------------------------------- Real Estate (Inception Date - 07/09/01) Beginning AUV....................................... (a) $11.241 (b) $11.241 Ending AUV.......................................... (a) $11.340 (b) $11.318 Ending Number of AUs................................ (a) 58,962 (b) 31,283 - -------------------------------------------------------------------------------
AU - Accumulation Unit AUV - Accumulation Unit Value (a) Without election of the optional EstatePlus feature (b) With election of the optional EstatePlus feature A-3
INCEPTION TO PORTFOLIOS 12/31/01 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SunAmerica Balanced (Inception Date - 07/09/01) Beginning AUV....................................... (a) $15.626 (b) $15.626 Ending AUV.......................................... (a) $15.005 (b) $15.005 Ending Number of AUs................................ (a) 125,620 (b) 46,186 - ------------------------------------------------------------------------------- Technology (Inception Date - 07/09/01) Beginning AUV....................................... (a) $4.018 (b) $4.018 Ending AUV.......................................... (a) $3.450 (b) $3.451 Ending Number of AUs................................ (a) 173,009 (b) 86,449 - ------------------------------------------------------------------------------- Telecom Utility (Inception Date - 07/09/01) Beginning AUV....................................... (a) $12.848 (b) $12.848 Ending AUV.......................................... (a) $11.507 (b) $11.516 Ending Number of AUs................................ (a) 27,940 (b) 12,637 - ------------------------------------------------------------------------------- Worldwide High Income (Inception Date - 07/09/01) Beginning AUV....................................... (a) $14.490 (b) $14.490 Ending AUV.......................................... (a) $14.301 (b) $14.287 Ending Number of AUs................................ (a) 8,284 (b) 31,183 - ------------------------------------------------------------------------------- Strategic Growth (Inception Date - 07/09/01) Beginning AUV....................................... (a) $9.190 (b) $9.190 Ending AUV.......................................... (a) $8.784 (b) $8.783 Ending Number of AUs................................ (a) 18,868 (b) 36,506 - ------------------------------------------------------------------------------- Conservative Growth (Inception Date - 07/09/01) Beginning AUV....................................... (a) $8.163 (b) $8.163 Ending AUV.......................................... (a) $7.930 (b) $7.952 Ending Number of AUs................................ (a) 107,894 (b) 42,760 - ------------------------------------------------------------------------------- Balanced (Inception Date - 07/09/01) Beginning AUV....................................... (a) $7.576 (b) $7.576 Ending AUV.......................................... (a) $7.538 (b) $7.533 Ending Number of AUs................................ (a) 125,651 (b) 27,799 - ------------------------------------------------------------------------------- Van Kampen LIT Comstock, Class II Shares (Inception Date - 10/15/01) Beginning AUV....................................... (a) $10.000 (b) $10.000 Ending AUV.......................................... (a) $10.231 (b) $10.234 Ending Number of AUs................................ (a) 64,170 (b) 28,740 - ------------------------------------------------------------------------------- Van Kampen LIT Emerging Growth, Class II Shares (Inception Date - 10/15/01) Beginning AUV....................................... (a) $10.000 (b) $10.000 Ending AUV.......................................... (a) $10.426 (b) $10.437 Ending Number of AUs................................ (a) 19,408 (b) 5,379 - -------------------------------------------------------------------------------
AU - Accumulation Unit AUV - Accumulation Unit Value (a) Without election of the optional EstatePlus feature (b) With election of the optional EstatePlus feature A-4
INCEPTION TO PORTFOLIOS 12/31/01 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Van Kampen LIT Growth and Income, Class II Shares (Inception Date - 10/15/01) Beginning AUV....................................... (a) $10.000 (b) $10.000 Ending AUV.......................................... (a) $10.533 (b) $10.537 Ending Number of AUs................................ (a) 12,511 (b) 1,560 - -------------------------------------------------------------------------------
AU - Accumulation Unit AUV - Accumulation Unit Value (a) Without election of the optional EstatePlus feature (b) With election of the optional EstatePlus feature A-5 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- POLARIS PROTECTOR - APPENDIX A - CONDENSED FINANCIAL INFORMATION - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
INCEPTION TO PORTFOLIOS 12/31/01 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Capital Appreciation (Inception Date - 07/09/01) Beginning AUV....................................... (a) $35.378 (b) $35.378 Ending AUV.......................................... (a) $33.909 (b) $33.891 Ending Number of AUs................................ (a) 57,357 (b) 40,519 - ------------------------------------------------------------------------------- Government and Quality Bond (Inception Date - 07/09/01) Beginning AUV....................................... (a) $14.915 (b) $14.915 Ending AUV.......................................... (a) $15.323 (b) $15.319 Ending Number of AUs................................ (a) 182,387 (b) 55,393 - ------------------------------------------------------------------------------- Growth (Inception Date - 07/09/01) Beginning AUV....................................... (a) $27.961 (b) $27.961 Ending AUV.......................................... (a) $27.233 (b) $27.215 Ending Number of AUs................................ (a) 95,475 (b) 33,517 - ------------------------------------------------------------------------------- Natural Resources (Inception Date - 07/09/01) Beginning AUV....................................... (a) $14.651 (b) $14.651 Ending AUV.......................................... (a) $14.352 (b) $14.309 Ending Number of AUs................................ (a) 6,723 (b) 7,978 - ------------------------------------------------------------------------------- Aggressive Growth (Inception Date - 07/09/01) Beginning AUV....................................... (a) $15.970 (b) $15.970 Ending AUV.......................................... (a) $13.627 (b) $13.621 Ending Number of AUs................................ (a) 24,470 (b) 8,317 - ------------------------------------------------------------------------------- Alliance Growth (Inception Date - 07/09/01) Beginning AUV....................................... (a) $32.786 (b) $32.786 Ending AUV.......................................... (a) $32.462 (b) $32.395 Ending Number of AUs................................ (a) 69,203 (b) 41,761 - ------------------------------------------------------------------------------- Asset Allocation (Inception Date - 07/09/01) Beginning AUV....................................... (a) $18.647 (b) $18.647 Ending AUV.......................................... (a) $18.608 (b) $18.608 Ending Number of AUs................................ (a) 12,080 (b) 17,628 - ------------------------------------------------------------------------------- Blue Chip Growth (Inception Date - 07/09/01) Beginning AUV....................................... (a) $7.199 (b) $7.199 Ending AUV.......................................... (a) $6.701 (b) $6.695 Ending Number of AUs................................ (a) 45,266 (b) 10,628 - ------------------------------------------------------------------------------- Cash Management (Inception Date - 07/09/01) Beginning AUV....................................... (a) $12.987 (b) $12.987 Ending AUV.......................................... (a) $13.058 (b) $13.065 Ending Number of AUs................................ (a) 87,024 (b) 27,659 - -------------------------------------------------------------------------------
AU - Accumulation Unit AUV - Accumulation Unit Value (a) Without election of the optional EstatePlus feature (b) With election of the optional EstatePlus feature A-6
INCEPTION TO PORTFOLIOS 12/31/01 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Corporate Bond (Inception Date - 07/09/01) Beginning AUV....................................... (a) $13.663 (b) $13.663 Ending AUV.......................................... (a) $13.972 (b) $13.952 Ending Number of AUs................................ (a) 84,809 (b) 30,474 - ------------------------------------------------------------------------------- Davis Venture Value (Inception Date - 07/09/01) Beginning AUV....................................... (a) $27.129 (b) $27.129 Ending AUV.......................................... (a) $26.207 (b) $26.174 Ending Number of AUs................................ (a) 140,690 (b) 88,681 - ------------------------------------------------------------------------------- "Dogs" of Wall Street (Inception Date - 07/09/01) Beginning AUV....................................... (a) $9.376 (b) $9.376 Ending AUV.......................................... (a) $9.703 (b) $9.680 Ending Number of AUs................................ (a) 34,535 (b) 43,315 - ------------------------------------------------------------------------------- Emerging Market (Inception Date - 07/09/01) Beginning AUV....................................... (a) $6.428 (b) $6.428 Ending AUV.......................................... (a) $6.535 (b) $6.530 Ending Number of AUs................................ (a) 16,167 (b) 4,402 - ------------------------------------------------------------------------------- Federated Value (Inception Date - 07/09/01) Beginning AUV....................................... (a) $16.876 (b) $16.876 Ending AUV.......................................... (a) $16.380 (b) $16.377 Ending Number of AUs................................ (a) 42,438 (b) 27,106 - ------------------------------------------------------------------------------- Global Bond (Inception Date - 07/09/01) Beginning AUV....................................... (a) $15.461 (b) $15.461 Ending AUV.......................................... (a) $15.662 (b) $15.648 Ending Number of AUs................................ (a) 18,266 (b) 6,241 - ------------------------------------------------------------------------------- Global Equities (Inception Date - 07/09/01) Beginning AUV....................................... (a) $17.986 (b) $17.986 Ending AUV.......................................... (a) $17.477 (b) $17.447 Ending Number of AUs................................ (a) 17,274 (b) 17,126 - ------------------------------------------------------------------------------- Goldman Sachs Research (Inception Date - 07/09/01) Beginning AUV....................................... (a) $8.100 (b) $8.100 Ending AUV.......................................... (a) $7.171 (b) $7.168 Ending Number of AUs................................ (a) 56,741 (b) 18,651 - ------------------------------------------------------------------------------- Growth-Income (Inception Date - 07/09/01) Beginning AUV....................................... (a) $28.878 (b) $28.878 Ending AUV.......................................... (a) $26.800 (b) $26.794 Ending Number of AUs................................ (a) 58,446 (b) 22,034 - -------------------------------------------------------------------------------
AU - Accumulation Unit AUV - Accumulation Unit Value (a) Without election of the optional EstatePlus feature (b) With election of the optional EstatePlus feature A-7
INCEPTION TO PORTFOLIOS 12/31/01 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Growth Opportunities (Inception Date - 07/09/01) Beginning AUV....................................... (a) $6.256 (b) $6.256 Ending AUV.......................................... (a) $5.813 (b) $5.804 Ending Number of AUs................................ (a) 11,133 (b) 2,227 - ------------------------------------------------------------------------------- High-Yield Bond (Inception Date - 07/09/01) Beginning AUV....................................... (a) $13.172 (b) $13.172 Ending AUV.......................................... (a) $12.506 (b) $12.495 Ending Number of AUs................................ (a) 28,392 (b) 24,531 - ------------------------------------------------------------------------------- International Diversified Equities (Inception Date - 07/09/01) Beginning AUV....................................... (a) $11.125 (b) $11.125 Ending AUV.......................................... (a) $10.216 (b) $10.168 Ending Number of AUs................................ (a) 31,777 (b) 9,019 - ------------------------------------------------------------------------------- International Growth & Income (Inception Date - 07/09/01) Beginning AUV....................................... (a) $11.372 (b) $11.372 Ending AUV.......................................... (a) $10.751 (b) $10.746 Ending Number of AUs................................ (a) 55,380 (b) 13,292 - ------------------------------------------------------------------------------- Marsico Growth (Inception Date - 07/09/01) Beginning AUV....................................... (a) $8.889 (b) $8.889 Ending AUV.......................................... (a) $8.515 (b) $8.519 Ending Number of AUs................................ (a) 32,122 (b) 29,102 - ------------------------------------------------------------------------------- MFS Growth and Income (Inception Date - 07/09/01) Beginning AUV....................................... (a) $20.217 (b) $20.217 Ending AUV.......................................... (a) $19.217 (b) $19.204 Ending Number of AUs................................ (a) 44,800 (b) 18,861 - ------------------------------------------------------------------------------- MFS Mid-Cap Growth (Inception Date - 07/09/01) Beginning AUV....................................... (a) $15.227 (b) $15.227 Ending AUV.......................................... (a) $13.408 (b) $13.395 Ending Number of AUs................................ (a) 124,477 (b) 59,733 - ------------------------------------------------------------------------------- MFS Total Return (Inception Date - 07/09/01) Beginning AUV....................................... (a) $21.154 (b) $21.154 Ending AUV.......................................... (a) $21.220 (b) $21.203 Ending Number of AUs................................ (a) 176,345 (b) 60,404 - ------------------------------------------------------------------------------- Putnam Growth (Inception Date - 07/09/01) Beginning AUV....................................... (a) $21.065 (b) $21.065 Ending AUV.......................................... (a) $19.070 (b) $19.066 Ending Number of AUs................................ (a) 29,656 (b) 13,984 - -------------------------------------------------------------------------------
AU - Accumulation Unit AUV - Accumulation Unit Value (a) Without election of the optional EstatePlus feature (b) With election of the optional EstatePlus feature A-8
INCEPTION TO PORTFOLIOS 12/31/01 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Real Estate (Inception Date - 07/09/01) Beginning AUV....................................... (a) $11.241 (b) $11.241 Ending AUV.......................................... (a) $11.340 (b) $11.318 Ending Number of AUs................................ (a) 8,714 (b) 5,515 - ------------------------------------------------------------------------------- SunAmerica Balanced (Inception Date - 07/09/01) Beginning AUV....................................... (a) $15.626 (b) $15.626 Ending AUV.......................................... (a) $15.005 (b) $15.005 Ending Number of AUs................................ (a) 21,847 (b) 8,873 - ------------------------------------------------------------------------------- Technology (Inception Date - 07/09/01) Beginning AUV....................................... (a) $4.018 (b) $4.018 Ending AUV.......................................... (a) $3.450 (b) $3.451 Ending Number of AUs................................ (a) 96,029 (b) 26,355 - ------------------------------------------------------------------------------- Telecom Utility (Inception Date - 07/09/01) Beginning AUV....................................... (a) $12.848 (b) $12.848 Ending AUV.......................................... (a) $11.507 (b) $11.516 Ending Number of AUs................................ (a) 22,050 (b) 12,265 - ------------------------------------------------------------------------------- Worldwide High Income (Inception Date - 07/09/01) Beginning AUV....................................... (a) $14.490 (b) $14.490 Ending AUV.......................................... (a) $14.301 (b) $14.287 Ending Number of AUs................................ (a) 6,503 (b) 1,845 - ------------------------------------------------------------------------------- Van Kampen LIT Comstock, Class II Shares (Inception Date - 11/05/01) Beginning AUV....................................... (a) $10.00 (b) $10.00 Ending AUV.......................................... (a) $10.231 (b) $10.234 Ending Number of AUs................................ (a) -- (b) 6,865 - ------------------------------------------------------------------------------- Van Kampen LIT Emerging Growth, Class II Shares (Inception Date - 11/05/01) Beginning AUV....................................... (a) $10.00 (b) $10.00 Ending AUV.......................................... (a) $10.426 (b) $10.437 Ending Number of AUs................................ (a) -- (b) -- - ------------------------------------------------------------------------------- Van Kampen LIT Growth and Income, Class II Shares (Inception Date - 11/05/01) Beginning AUV....................................... (a) $10.00 (b) $10.00 Ending AUV.......................................... (a) $10.533 (b) $10.537 Ending Number of AUs................................ (a) -- (b) 6,616 - -------------------------------------------------------------------------------
AU - Accumulation Unit AUV - Accumulation Unit Value (a) Without election of the optional EstatePlus feature (b) With election of the optional EstatePlus feature A-9 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- APPENDIX B - PRINCIPAL REWARDS PROGRAM EXAMPLES - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- I. DEFERRED PAYMENT ENHANCEMENT If you elect to participate in the Principal Rewards Program at contract issue, we contribute at least 2% of each Purchase Payment to your contract for each Purchase Payment we receive as an Upfront Payment Enhancement. Any applicable Deferred Payment Enhancement is allocated to your contract on the corresponding Deferred Payment Enhancement Date and, if declared by the Company, is a percentage of your remaining Purchase Payment on the Deferred Payment Enhancement Date. Deferred Purchase Payment Enhancements are reduced proportionately by partial withdrawals of that Purchase Payment prior to the Deferred Payment Enhancement Date. The examples that follow assume an initial Purchase Payment of $125,000 and that the Deferred Payment Enhancement is 1%. For purposes of the example, the Deferred Payment Enhancement Date is the 9th anniversary of the Purchase Payment. EXAMPLE 1 -- NO WITHDRAWALS ARE MADE The Upfront Payment Enhancement allocated to your contract is $2,500 (2% of $125,000). On your 9th contract anniversary, the Deferred Payment Enhancement Date, your Deferred Payment Enhancement of $1,250 (1% of your remaining Purchase Payment or $125,000) will be allocated to your contract. EXAMPLE 2 -- WITHDRAWAL MADE PRIOR TO DEFERRED PAYMENT ENHANCEMENT DATE As in Example 1, your Upfront Payment Enhancement is $2,500. This example also assumes the following: 1. Your contract value on your 5th contract anniversary is $190,000. 2. You request a withdrawal of $75,000 on your 5th contract anniversary. 3. No subsequent Purchase Payments have been made. 4. No prior withdrawals have been taken. 5. Funds are not allocated to any of the MVA Fixed Accounts. On your 5th contract anniversary, your penalty-free earnings in the contract are $65,000 ($190,000 contract value less your $125,000 investment in the contract). Therefore, you are withdrawing $10,000 of your initial Purchase Payment. Your contract value will also be reduced by a $500 withdrawal charge on the $10,000 Purchase Payment (5% of $10,000). Your gross withdrawal is $75,500 of which $10,500 constitutes part of your Purchase Payment. The withdrawal of $10,500 of your $125,000 Purchase Payment is a withdrawal of 8.4% of your Purchase Payment. Therefore, only 91.6%, or $114,500, of your initial Purchase Payment remains in your contract. On your 9th contract anniversary, the Deferred Payment Enhancement Date, assuming no other transactions occur affecting the Purchase Payment, we allocate your Deferred Payment Enhancement of $1,145 (1% of your remaining Purchase Payment, $114,500) to your contract. II. 90 DAY WINDOW The following hypothetical examples assume that the Company is offering Upfront and Deferred Payment Enhancements in accordance with this chart at the time each Purchase Payment is received:
- ---------------------------------------------------------------------- UPFRONT DEFERRED DEFERRED PAYMENT PAYMENT PAYMENT ENHANCEMENT ENHANCEMENT ENHANCEMENT ENHANCEMENT LEVEL RATE RATE DATE - ---------------------------------------------------------------------- Under $40,000 2% 0% N/A - ---------------------------------------------------------------------- $40,000 - $99,999 4% 0% N/A - ---------------------------------------------------------------------- $100,000 - $499,999 4% 1% Nine years from the date we receive each Purchase Payment. - ---------------------------------------------------------------------- $500,000 - more 4% 2% Nine years from the date we receive each Purchase Payment. - ----------------------------------------------------------------------
Contracts issued with the Principal Rewards feature after April 3, 2000, may be eligible for a "Look-Back Adjustment." As of the 90th day after your contract was issued, we will total your Purchase Payments remaining in your contract at that time, without considering any investment gain or loss in contract value on those Purchase Payments. If your total Purchase Payments bring you to an Enhancement Level which, as of the date we issued your contract, would have provided for a higher Upfront and/or Deferred Payment Enhancement Rate on each Purchase Payment, you will get the benefit of the Enhancement Rate(s) that were applicable to that higher Enhancement Level at the time your contract was issued. This example assumes the following: 1. Above Enhancement Levels, Rates and Dates throughout the first 90 days. 2. No withdrawal in the first 90 days. 3. Initial Purchase Payment of $35,000 on December 1, 2000. B-1 4. Subsequent Purchase Payment of $40,000 on January 15, 2001. 5. Subsequent Purchase Payment of $25,000 on January 30, 2001. 6. Subsequent Purchase Payment of $7,500 on February 12, 2001. ENHANCEMENT AT THE TIME PURCHASE PAYMENTS ARE RECEIVED
- ---------------------------------------------------------------------------------- DEFERRED PURCHASE UPFRONT DEFERRED PAYMENT DATE OF PAYMENT PAYMENT PAYMENT ENHANCEMENT PURCHASE PAYMENT AMOUNT ENHANCEMENT ENHANCEMENT DATE - ---------------------------------------------------------------------------------- December 1, 2000 $35,000 2% 0% N/A - ---------------------------------------------------------------------------------- January 15, 2001 $40,000 4% 0% N/A - ---------------------------------------------------------------------------------- January 30, 2001 $25,000 4% 1% January 30, 2010 - ---------------------------------------------------------------------------------- February 12, 2001 $ 7,500 4% 1% February 12, 2010 - ----------------------------------------------------------------------------------
ENHANCEMENT ADJUSTMENTS ON THE 90TH DAY FOLLOWING CONTRACT ISSUE The sum of all Purchase Payments made in the first 90 days of the contract equals $107,500. According to the Enhancement Levels in effect at the time this contract was issued, a $107,500 Purchase Payment would have received a 4% Upfront Payment Enhancement and a 1% Deferred Payment Enhancement. Under the 90 Day Window provision all Purchase Payments made within those first 90 days would receive the benefit of the parameters in place at the time the contract was issued, as if all of the Purchase Payments were received on the date of issue. Thus, the first two Purchase Payments would be adjusted on the 90th day following contract issue, as follows:
- ---------------------------------------------------------------------------------- DEFERRED PURCHASE UPFRONT DEFERRED PAYMENT DATE OF PAYMENT PAYMENT PAYMENT ENHANCEMENT PURCHASE PAYMENT AMOUNT ENHANCEMENT ENHANCEMENT DATE - ---------------------------------------------------------------------------------- December 1, 2000 $35,000 4% 1% December 1, 2009 - ---------------------------------------------------------------------------------- January 15, 2001 $40,000 4% 1% January 15, 2010 - ---------------------------------------------------------------------------------- January 30, 2001 $25,000 4% 1% January 30, 2010 - ---------------------------------------------------------------------------------- February 12, 2001 $ 7,500 4% 1% February 12, 2010 - ----------------------------------------------------------------------------------
B-2 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- APPENDIX C - MARKET VALUE ADJUSTMENT ("MVA") - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The MVA reflects the impact that changing interest rates have on the value of money invested at a fixed interest rate. The longer the period of time remaining in the term you initially agreed to leave your money in the fixed account option, the greater the impact of changing interest rates. The impact of the MVA can be either positive or negative, and is computed by multiplying the amount withdrawn, transferred or switched to the Income Phase by the following factor: [(1+I/(1+J+0.005)](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 remaining in the term you initially agreed to leave your money in the fixed account option; and N is the number of full months remaining in the term you initially agreed to leave your money in the fixed account option. EXAMPLES OF THE MVA The examples below assume the following: (1) You made an initial Purchase Payment of $10,000 and allocated it to the 10-year fixed account option at a rate of 5%; (2) You make a partial withdrawal of $4,000 when 1 year (12 months) remains in the 10-year term you initially agreed to leave your money in the fixed account option (N=12); and (3) You have not made any other transfers, additional Purchase Payments, or withdrawals. No withdrawal charges are reflected because your Purchase Payment has been in the contract for nine full years. If a withdrawal charge applies, it is deducted before the MVA. The MVA is assessed on the amount withdrawn less any withdrawal charges. POSITIVE ADJUSTMENT Assume that on the date of withdrawal, the interest rate in effect for a new Purchase Payments in the 1-year fixed account option is 4%. The MVA factor is = [(1+I/(1+J+0.005)](N/12) - 1 = [(1.05)/(1.04+0.005)](12/12) - 1 = (1.004785)(1) - 1 = 1.004785 - 1 = + 0.004785 The requested withdrawal amount is multiplied by the MVA factor to determine the MVA: $4,000 X (+0.004785) = +$19.14 $19.14 represents the MVA that would be added to your withdrawal. NEGATIVE ADJUSTMENT Assume that on the date of withdrawal, the interest rate in effect for new Purchase Payments in the 1-year fixed account option is 6%. The MVA factor is = [(1+I)/(1+J+0.005)](N/12) - 1 = [(1.05)/(1.06+0.005)](1) - 1 = (0.985915)1 - 1 = 0.985915 - 1 = - 0.014085 The requested withdrawal amount is multiplied by the MVA factor to determine the MVA: $4,000 X (-0.014085) = -$56.34 $56.34 represents the MVA that will be deducted from the money remaining in the 10-year fixed account option. C-1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- APPENDIX D - DEATH BENEFITS FOLLOWING SPOUSAL CONTINUATION - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The term Continuation Net Purchase Payments is used frequently to describe the death benefits payable to the beneficiary of the Continuing Spouse for contracts issued on or after October 24, 2001. We define Continuation Net Purchase Payments as Net Purchase Payments made on and/or after 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 withdrawals, Continuation Net Purchase Payments equals the contract value on the Continuation Date, including the Continuation Contribution. The term "Gross Withdrawals" as used in describing the death benefit option below is defined as withdrawals and the fees and charges applicable to those withdrawals. The following describes the death benefit options following spousal continuation for contracts issued on or after October 24, 2001: 1. PURCHASE PAYMENT ACCUMULATION OPTION If a Continuation Contribution is added on the Continuation Date, the death benefit is the greatest 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 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 recorded after the date of death; and reduced by any Gross Withdrawals recorded after the date of death in the same proportion that the Gross Withdrawal reduced the contract value on the date of each withdrawal; or c.The contract value on the seventh contract anniversary following the original issue date of the contract, plus any Purchase Payments since the seventh contract anniversary and reduced for any Gross Withdrawals recorded after the seventh contract anniversary in the same proportion that the Gross Withdrawal reduced the contract value on the date of the Gross Withdrawal, all compounded at a 4% annual growth rate until the date of death (3% annual growth rate if the Continuing Spouse is age 70 or older on the Continuation Date) plus any Purchase Payments; and reduced for any withdrawals recorded after the date of death in the same proportion that each withdrawal reduced the contract value on the date of the withdrawal. 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 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 original contract issue date) plus any Purchase Payments recorded after the date of death; and reduced for any Gross Withdrawals recorded after the date of death in the same proportion that each Gross Withdrawal reduced the contract value on the date of the withdrawal; or c.The contract value on the seventh contract anniversary following the original issue date of the contract, plus any Purchase Payments since the seventh contract anniversary; and reduced for any Gross Withdrawals since the seventh contract anniversary in the same proportion that each Gross Withdrawal reduced the contract value on the date of the Gross Withdrawal, all compounded at a 4% annual growth rate until the date of death (3% annual growth rate if the Continuing Spouse is age 70 or older on the contract issue date) plus any Purchase Payments; and reduced for any Gross Withdrawals recorded after the date of death in the same proportion that each Gross Withdrawal reduced the contract value on the date of the Gross Withdrawal. 2.MAXIMUM ANNIVERSARY VALUE 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 greatest 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; or c.The maximum anniversary value on any contract anniversary occurring after the Continuation D-1 Date and prior to the Continuing Spouse's 81st birthday. The anniversary value equals the contract value on a contract anniversary plus any Purchase Payments made since that contract anniversary; and reduced for any Gross Withdrawals recorded since the contract anniversary in the same proportion that each Gross Withdrawal reduced the contract value on the date of the Gross 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 greatest 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 Gross Withdrawals since the contract anniversary in the same proportion that the Gross Withdrawal reduced each contract value on the date of the Gross Withdrawal. Contract anniversary is defined as 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. Please see the Statement of Additional Information for a description of the death benefit calculations following a Spousal Continuation for contracts issued before October 24, 2001. B. THE ESTATEPLUS BENEFIT PAYABLE UPON CONTINUING SPOUSE'S DEATH: The EstatePlus benefit may increase the death benefit amount. The EstatePlus benefit is only available if the original owner elected EstatePlus and it has not been terminated. If the Continuing Spouse had earnings in the contract at the time of his/her death, we will add a percentage of those earnings (the "EstatePlus Percentage"), subject to a maximum dollar amount (the "Maximum EstatePlus Percentage"), to the death benefit payable, based on the number of years the Continuing Spouse has held the contract since the Continuation Date. The EstatePlus benefit, if any, is added to the death benefit payable under the Purchase Payment Accumulation or the Maximum Anniversary option. The table below shows the EstatePlus benefit if the Continuing Spouse is 69 or younger on the Continuation Date
- ------------------------------------------------------------------- CONTRACT YEAR ESTATEPLUS MAXIMUM OF DEATH PERCENTAGE ESTATEPLUS AMOUNT - ------------------------------------------------------------------- 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 birthdays on the Continuation Date, the available EstatePlus benefit is:
- ------------------------------------------------------------------- CONTRACT YEAR ESTATEPLUS MAXIMUM OF DEATH PERCENTAGE ESTATEPLUS AMOUNT - ------------------------------------------------------------------- All Contract 25% of Earnings 40% of Continuation Net Years Purchase Payments* - -------------------------------------------------------------------
* Purchase Payments received after the 5th anniversary of the Continuation Date must remain in the contract for at least 6 full months to be included as part of the Continuation Net Purchase Payments for the purpose of the Maximum Estate Plus Percentage 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 WITH RESPECT TO PROSPECTIVELY ISSUED CONTRACTS. D-2 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- APPENDIX E - HYPOTHETICAL EXAMPLE OF THE OPERATION OF THE INCOME PROTECTOR FEATURE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- POLARIS PLATINUM BASE INCOME PROTECTOR This table assumes a $100,000 initial investment in a non-qualified contract with no further premiums, no withdrawals, no step-ups and not premium taxes; and the election of optional Base Income Protector at contract issue.
- ------------------------------------------------------------------- ANNUAL INCOME IF YOU ANNUITIZE ON CONTRACT ANNIVERSARY IF AT ISSUE 7 10 15 20 YOU ARE 1 - 6 (AGE 67) (AGE 70) (AGE 75) (AGE 80) - ------------------------------------------------------------------- Male N/A 6,108 6,672 7,716 8,832 age 60* - ------------------------------------------------------------------- Female N/A 5,388 5,880 6,900 8,112 age 60* - ------------------------------------------------------------------- Joint** Male -- 60 N/A 4,716 5,028 5,544 5,928 Female -- 60 - -------------------------------------------------------------------
* Life Annuity with 10 Year Period Certain ** Joint and 100% Survivor Annuity with 20 Year Period Certain The Income Protector may not be available in your state. Please consult your financial adviser for information regarding availability of this program in your state. POLARIS PROTECTOR BASE INCOME PROTECTOR This table assumes a $100,000 initial investment in a non-qualified contract with no further premiums, no withdrawals, no step-ups and not premium taxes; and the election of optional Base Income Protector at contract issue.
- -------------------------------------------------------------------------------------------- ANNUAL INCOME IF YOU ANNUITIZE ON THE FOLLOWING CONTRACT ANNIVERSARY IF AT ISSUE 10 11 12 15 19 20 YOU ARE 1 - 9 (AGE 70) (AGE 71) (AGE 72) (AGE 75) (AGE 79) (AGE 80) - -------------------------------------------------------------------------------------------- Male N/A 6,672 6,864 7,080 7,716 8,616 8,832 age 60* - -------------------------------------------------------------------------------------------- Female N/A 5,880 6,060 6,252 6,900 7,860 8,112 age 60* - -------------------------------------------------------------------------------------------- Joint** Male -- 60 N/A 5,028 5,136 5,244 5,544 5,868 5,928 Female -- 60 - --------------------------------------------------------------------------------------------
* Life Annuity with 10 Year Period Certain ** Joint and 100% Survivor Annuity with 20 Year Period Certain The Income Protector may not be available in your state. Please consult your financial adviser for information regarding availability of this program in your state. E-1 POLARIS PROTECTOR INCOME PROTECTOR PLUS This table assumes a $100,000 initial investment in a non-qualified contract with no further premiums, no withdrawals, no step-ups and no premium taxes; and the election of the optional 6% Income Protector Plus at contract issue.
- -------------------------------------------------------------------------------------------- ANNUAL INCOME IF YOU ANNUITIZE ON THE FOLLOWING CONTRACT ANNIVERSARY IF AT ISSUE 10 11 12 15 19 20 YOU ARE 1 - 9 (AGE 70) (AGE 71) (AGE 72) (AGE 75) (AGE 79) (AGE 80) - -------------------------------------------------------------------------------------------- Male N/A 12,529 13,645 14,874 19,240 26,976 29,288 age 60* - -------------------------------------------------------------------------------------------- Female N/A 11,110 12,119 13,232 17,284 24,725 26,978 age 60* - -------------------------------------------------------------------------------------------- Male, Age 60 N/A 9,563 10,342 11,156 14,005 18,626 19,936 Female, Age 60** - --------------------------------------------------------------------------------------------
* Life Annuity with 10 Year Period Certain ** Joint and 100% Survivor Annuity with 20 Year Period Certain The Income Protector may not be available in your state. Please consult your financial adviser for information regarding availability of this program in your state. E-2 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- APPENDIX F - 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 0.50% 2.35% - ---------------------------------------------------------------------------------------- Maine 0% 2.0% - ---------------------------------------------------------------------------------------- Nevada 0% 3.50% - ---------------------------------------------------------------------------------------- South Dakota 0% 1.25%* - ---------------------------------------------------------------------------------------- West Virginia 1.0% 1.0% - ---------------------------------------------------------------------------------------- Wyoming 0% 1.0% - ---------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------
* On the first $500,000 of premiums; 0.80% on the amount in excess of $500,000. F-1 - -------------------------------------------------------------------------------- Please forward a copy (without charge) of the Polaris Protector/Platinum 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 - -------------------------------------------------------------------------------- [POLARIS LOGO] PROSPECTUS MAY 1, 2002 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 Variable Annuity. VARIABLE SEPARATE ACCOUNT The annuity has 36 investment choices -5 fixed account To learn more about the annuity options and 31 Variable Portfolios listed below. The 5 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. The 31 Variable Portfolios are part of the Anchor Additional Information ("SAI") dated Series Trust or the SunAmerica Series Trust. May 1, 2002. The SAI has been filed with the Securities and Exchange STOCKS: Commission ("SEC") and is MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P. incorporated by reference into this - Alliance Growth Portfolio SST prospectus. The Table of Contents of - Global Equities Portfolio SST the SAI appears on page 20 of this - Growth-Income Portfolio SST prospectus. For a free copy of the MANAGED BY DAVIS ADVISERS SAI, call us at (800) 445-SUN2 or - Davis Venture Value Portfolio SST write to us at our Annuity Service - Real Estate Portfolio SST Center, P.O. Box 54299, Los Angeles, MANAGED BY FEDERATED INVESTORS L.P. California 90054-0299. - Federated Value Portfolio SST - Telecom Utility Portfolio SST In addition, the SEC maintains a MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT website (http://www.sec.gov) that - Goldman Sachs Research Portfolio SST contains the SAI, materials MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY incorporated by reference and other - MFS Growth and Income Portfolio SST information filed electronically with - MFS Mid-Cap Growth Portfolio SST the SEC by Anchor National. MANAGED BY VAN KAMPEN - International Diversified Equities Portfolio SST ANNUITIES INVOLVE RISKS, INCLUDING - Technology Portfolio SST POSSIBLE LOSS OF PRINCIPAL, AND ARE MANAGED BY PUTNAM INVESTMENT MANAGEMENT COMPANY, INC. NOT A DEPOSIT OR OBLIGATION OF, OR - Emerging Markets Portfolio SST GUARANTEED OR ENDORSED BY, ANY BANK. - International Growth and Income Portfolio SST THEY ARE NOT FEDERALLY INSURED BY THE - Putnam Growth Portfolio SST FEDERAL DEPOSIT INSURANCE MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP. CORPORATION, THE FEDERAL RESERVE - Aggressive Growth Portfolio SST BOARD OR ANY OTHER AGENCY. - "Dogs" of Wall Street Portfolio SST - Blue Chip Growth Portfolio SST - Growth Opportunities Portfolio SST MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP - Capital Appreciation Portfolio AST - Growth Portfolio AST - Natural Resources Portfolio AST BALANCED: MANAGED BY 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 INTERNATIONAL - Global Bond Portfolio SST MANAGED BY VAN KAMPEN - Worldwide High Income Portfolio SST MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP. - High-Yield Bond Portfolio SST MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP - Government & Quality 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. - ---------------------------------------------------------------- - ---------------------------------------------------------------- INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE - ---------------------------------------------------------------- - ---------------------------------------------------------------- Anchor National Life Insurance Company is in the process of changing its name to AIG SunAmerica Life Assurance Company. We anticipate this process will take some time to implement in all jurisdictions where we do business. We expect the name change to be completed during 2003. To begin this process we officially changed the name in our state of domicile, Arizona. However, we continue to do business, today, under the name Anchor National and will refer to the Company by that name throughout this prospectus. You will be notified when the name is changed to AIG SunAmerica Life Assurance Company and we are no longer doing business as Anchor National. Please keep in mind, this is a name change only and will not affect the substance of your contract. Anchor National's Annual Report on Form 10-K/A for the year ended April 4, 2002 is incorporated herein by reference. All documents or reports filed by Anchor National under Section 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") after the effective date of this prospectus shall also be incorporated by reference. Statements contained in this prospectus and subsequently filed documents which are incorporated by reference or deemed to be incorporated by reference are deemed to modify or supersede documents incorporated herein by reference. Anchor National files its Exchange Act documents and reports, including its annual and quarterly reports on Form 10-K and Form 10-Q, electronically pursuant to EDGAR under CIK No. 0000006342. Anchor National is subject to the informational requirements of the Securities and Exchange Act of 1934 (as amended). We file reports and other information with the SEC to meet those requirements. You can inspect and copy this information at SEC public facilities at the following locations: WASHINGTON, DISTRICT OF COLUMBIA 450 Fifth Street, N.W., Room 1024 Washington, D.C. 20549 CHICAGO, ILLINOIS 500 West Madison Street Chicago, IL 60661 NEW YORK, NEW YORK 233 Broadway New York, NY 10279 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 its exhibits. For further information regarding the separate account, Anchor National and its general account, the Variable Portfolios and the contract, please refer to the registration statement and its exhibits. The SEC also maintains a website (http://www.sec.gov) that contains the SAI, materials incorporated by reference and other information filed electronically with the SEC by Anchor National. 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 herein 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 - ---------------------------------------------------------------- - ---------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION POSITION ON INDEMNIFICATION - ---------------------------------------------------------------- - ---------------------------------------------------------------- If indemnification for liabilities arising under the Securities Act of 1933 (the "Act") is provided Anchor National's officers, directors and controlling persons, the SEC has advised Anchor National 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 need not submit the issue to a court for determination. 2 ------------------------------------------------------------------ ------------------------------------------------------------------ TABLE OF CONTENTS ------------------------------------------------------------------ ------------------------------------------------------------------ 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 Annual Separate Account Expenses...................... 5 Portfolio Expenses.................................... 5 EXAMPLES.................................................... 6 THE POLARIS VARIABLE ANNUITY................................ 7 PURCHASING A POLARIS VARIABLE ANNUITY....................... 7 Allocation of Purchase Payments....................... 8 Accumulation Units.................................... 8 Free Look............................................. 8 INVESTMENT OPTIONS.......................................... 9 Variable Portfolios................................... 9 Anchor Series Trust............................... 9 SunAmerica Series Trust........................... 9 Fixed Account Options................................. 10 Market Value Adjustment ("MVA")....................... 10 Transfers During the Accumulation Phase............... 10 Dollar Cost Averaging................................. 11 Asset Allocation Rebalancing.......................... 11 Principal Advantage Program........................... 11 Voting Rights......................................... 12 Substitution.......................................... 12 ACCESS TO YOUR MONEY........................................ 12 Systematic Withdrawal Program......................... 13 Nursing Home Waiver................................... 13 Minimum Contract Value................................ 13 DEATH BENEFIT............................................... 13 EXPENSES.................................................... 14 Insurance Charges..................................... 14 Withdrawal Charges.................................... 14 Investment Charges.................................... 14 Contract Maintenance Fee.............................. 15 Transfer Fee.......................................... 15 Premium Tax........................................... 15 Income Taxes.......................................... 15 Reduction or Elimination of Charges and Expenses, and Additional Amounts Credited........................... 15 INCOME OPTIONS.............................................. 15 Annuity Date.......................................... 15 Income Options........................................ 15 Fixed or Variable Income Payments..................... 16 Income Payments....................................... 16 Transfers During the Income Phase..................... 16 Deferment of Payments................................. 16 TAXES....................................................... 16 Annuity Contracts in General.......................... 16 Tax Treatment of Distributions - Non-Qualified Contracts........................... 17 Tax Treatment of Distributions - Qualified Contracts............................... 17 Minimum Distributions................................. 17 Tax Treatment of Death Benefits....................... 18 Diversification....................................... 18 PERFORMANCE................................................. 19 OTHER INFORMATION........................................... 19 Anchor National....................................... 19 The Separate Account.................................. 19 The General Account................................... 19 Distribution of the Contract.......................... 19 Administration........................................ 20 Legal Proceedings..................................... 20 Ownership............................................. 20 Custodian............................................. 20 Independent Accountants............................... 20 Legal Matters......................................... 20 Registration Statement................................ 20 TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.... 21 APPENDIX A -- CONDENSED FINANCIAL INFORMATION............... A-1 APPENDIX B -- MARKET VALUE ADJUSTMENT ("MVA")............... B-1 APPENDIX C -- PREMIUM TAXES................................. C-1 ------------------------------------------------------------------ ------------------------------------------------------------------ GLOSSARY ------------------------------------------------------------------ ------------------------------------------------------------------ We have capitalized some of the technical terms used in this prospectus. To help you understand these terms, we have defined them in this glossary. ACCUMULATION PHASE - The period during which you invest money in your contract. ACCUMULATION UNITS - A measurement we use to calculate the value of the variable portion of your contract during the Accumulation Phase. ANNUITANT(S) - The person(s) on whose life (lives) we base income payments. ANNUITY DATE - The date on which income payments are to begin, as selected by you. ANNUITY UNITS - A measurement we use to calculate the amount of income payments you receive from the variable portion of your contract during the Income Phase. BENEFICIARY - The person designated to receive any benefits under the contract if you or the Annuitant dies. COMPANY - Anchor National Life Insurance Company, We, Us, the insurer which issues this contract. INCOME PHASE - The period during which we make income payments to you. IRS - The Internal Revenue Service. NON-QUALIFIED (CONTRACT) - A contract purchased with after-tax dollars. In general, these contracts are not under any pension plan, specially sponsored program or individual retirement account ("IRA"). PURCHASE PAYMENTS - The money you give us to buy the contract, as well as any additional money you give us to invest in the contract after you own it. QUALIFIED (CONTRACT) - A contract purchased with pretax dollars. These contracts are generally purchased under a pension plan, specially sponsored program or IRA. TRUSTS - Refers to the Anchor Series Trust and the SunAmerica Series Trust collectively. VARIABLE PORTFOLIO(S) - The variable investment options available under the contract. Each Variable Portfolio has its own investment objective and is invested in the underlying investments of the Anchor Series Trust or the SunAmerica Series Trust.
ALL FINANCIAL REPRESENTATIVES OR AGENTS THAT SELL THE CONTRACTS OFFERED BY THIS PROSPECTUS ARE REQUIRED TO DELIVER A PROSPECTUS. 3 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- HIGHLIGHTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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. The Polaris 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. 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 VARIABLE ANNUITY in the prospectus. EXPENSES: There are fees and charges associated with the contract. Each year, we deduct a $35 contract maintenance fee from your contract, which may be waived for contracts of $50,000 or more. We also deduct insurance charges, which equal 1.52% 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 these features. A separate withdrawal charge schedule applies to each Purchase Payment. The amount of the withdrawal charge declines over time. After a Purchase Payment has been in the contract for seven complete years, withdrawal charges no longer apply to that portion of the Purchase Payments. Please see the FEE TABLE, PURCHASING A POLARIS 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. As noted above, a withdrawal charge may apply. 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. 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 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FEE TABLES - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- OWNER TRANSACTION EXPENSES WITHDRAWAL CHARGE (AS A PERCENTAGE OF EACH PURCHASE PAYMENT) Year 1...................... 7% Year 5.................... 3% Year 2...................... 6% Year 6.................... 2% Year 3...................... 5% Year 7.................... 1% Year 4...................... 4% Year 8+................... 0% TRANSFER FEE.................... No charge for first 15 transfers each contract year; thereafter, fee is $25 ($10 in Pennsylvania and Texas) per transfer
CONTRACT MAINTENANCE FEE*...... $35 ($30 in North Dakota) *waived if contract value is $50,000 or more
ANNUAL SEPARATE ACCOUNT EXPENSES (AS A PERCENTAGE OF YOUR DAILY NET ASSET VALUE) Mortality and Expense Risk Charge................ 1.37% Distribution Expense Charge...................... 0.15% ----- TOTAL SEPARATE ACCOUNT EXPENSES 1.52% =====
PORTFOLIO EXPENSES ANCHOR SERIES TRUST (AS A PERCENTAGE OF AVERAGE NET ASSETS FOR THE TRUST'S FISCAL YEAR ENDED DECEMBER 31, 2001)
MANAGEMENT OTHER TOTAL ANNUAL PORTFOLIO FEE EXPENSES EXPENSES - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- Capital Appreciation 0.70% 0.05% 0.75% - ----------------------------------------------------------------------------------------------------------- Gov't & Quality Bond 0.58% 0.06% 0.64% - ----------------------------------------------------------------------------------------------------------- Growth 0.67% 0.05% 0.72% - ----------------------------------------------------------------------------------------------------------- Natural Resources 0.75% 0.15% 0.90% - ----------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------
SUNAMERICA SERIES TRUST (AS A PERCENTAGE OF AVERAGE NET ASSETS FOR THE TRUST'S FISCAL YEAR ENDED JANUARY 31, 2002)
MANAGEMENT OTHER TOTAL ANNUAL PORTFOLIO FEE EXPENSES EXPENSES - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- Aggressive Growth 0.68% 0.07% 0.75% - ----------------------------------------------------------------------------------------------------------- Alliance Growth 0.60% 0.05% 0.65% - ----------------------------------------------------------------------------------------------------------- Asset Allocation 0.59% 0.07% 0.66% - ----------------------------------------------------------------------------------------------------------- Blue Chip Growth(1) 0.70% 0.15% 0.85% - ----------------------------------------------------------------------------------------------------------- Cash Management 0.48% 0.04% 0.52% - ----------------------------------------------------------------------------------------------------------- Corporate Bond 0.60% 0.07% 0.67% - ----------------------------------------------------------------------------------------------------------- Davis Venture Value 0.71% 0.05% 0.76% - ----------------------------------------------------------------------------------------------------------- Dogs of Wall Street 0.60% 0.11% 0.71% - ----------------------------------------------------------------------------------------------------------- Emerging Markets 1.25% 0.28% 1.53% - ----------------------------------------------------------------------------------------------------------- Federated Value 0.69% 0.07% 0.76% - ----------------------------------------------------------------------------------------------------------- Global Bond 0.68% 0.13% 0.81% - ----------------------------------------------------------------------------------------------------------- Global Equities 0.72% 0.15% 0.87% - ----------------------------------------------------------------------------------------------------------- Goldman Sachs Research(1) 1.20% 0.15% 1.35% - ----------------------------------------------------------------------------------------------------------- Growth Opportunities(1) 0.75% 0.25% 1.00% - ----------------------------------------------------------------------------------------------------------- Growth-Income 0.53% 0.05% 0.58% - ----------------------------------------------------------------------------------------------------------- High-Yield Bond 0.63% 0.08% 0.71% - ----------------------------------------------------------------------------------------------------------- International Diversified Equities 1.00% 0.23% 1.23% - ----------------------------------------------------------------------------------------------------------- International Growth and Income 0.95% 0.25% 1.20% - ----------------------------------------------------------------------------------------------------------- MFS Growth and Income 0.70% 0.08% 0.78% - ----------------------------------------------------------------------------------------------------------- MFS Mid-Cap Growth 0.75% 0.07% 0.82% - ----------------------------------------------------------------------------------------------------------- MFS Total Return 0.66% 0.07% 0.73% - ----------------------------------------------------------------------------------------------------------- Putnam Growth 0.77% 0.05% 0.82% - ----------------------------------------------------------------------------------------------------------- Real Estate 0.80% 0.12% 0.92% - ----------------------------------------------------------------------------------------------------------- SunAmerica Balanced 0.60% 0.06% 0.66% - ----------------------------------------------------------------------------------------------------------- Technology 1.20% 0.25% 1.45% - ----------------------------------------------------------------------------------------------------------- Telecom Utility(2) 0.75% 0.10% 0.85% - ----------------------------------------------------------------------------------------------------------- Worldwide High Income 1.00% 0.11% 1.11% - ----------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------
(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. Absent fee waivers or reimbursement of expenses by the adviser or custody credits, you would have incurred the following expenses during the last fiscal year: Goldman Sachs Research 1.49%; and Growth Opportunities 1.19%. (2)Gross of custody credits of 0.01%. THE ABOVE PORTFOLIO EXPENSES WERE PROVIDED BY THE TRUSTS. WE HAVE NOT INDEPENDENTLY VERIFIED THE ACCURACY OF THE INFORMATION. 5 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- EXAMPLES - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- You will pay the following expenses on a $1,000 investment in each Variable Portfolio, assuming a 5% annual return on assets, Portfolio Expenses after waiver, reimbursement or recoupment (assuming the waiver, reimbursement or recoupment will continue for the period shown), if applicable, and: (a) surrendered at the end of the stated time period; (b) if the contract is not surrendered*.
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ Capital Appreciation (a) $ 94 (a) $124 (a) $156 (a) $269 (b) $ 24 (b) $ 74 (b) $126 (b) $269 - ------------------------------------------------------------------------------------------------------------------------ Government and Quality Bond (a) $ 93 (a) $120 (a) $150 (a) $258 (b) $ 23 (b) $ 70 (b) $120 (b) $258 - ------------------------------------------------------------------------------------------------------------------------ Growth (a) $ 94 (a) $123 (a) $155 (a) $267 (b) $ 24 (b) $ 73 (b) $125 (b) $267 - ------------------------------------------------------------------------------------------------------------------------ Natural Resources (a) $ 95 (a) $128 (a) $163 (a) $284 (b) $ 25 (b) $ 78 (b) $133 (b) $284 - ------------------------------------------------------------------------------------------------------------------------ Aggressive Growth (a) $ 94 (a) $124 (a) $156 (a) $269 (b) $ 24 (b) $ 74 (b) $126 (b) $269 - ------------------------------------------------------------------------------------------------------------------------ Alliance Growth (a) $ 93 (a) $121 (a) $151 (a) $259 (b) $ 23 (b) $ 71 (b) $121 (b) $259 - ------------------------------------------------------------------------------------------------------------------------ Asset Allocation (a) $ 93 (a) $121 (a) $151 (a) $260 (b) $ 23 (b) $ 71 (b) $121 (b) $260 - ------------------------------------------------------------------------------------------------------------------------ Blue Chip Growth (a) $ 95 (a) $127 (a) $161 (a) $279 (b) $ 25 (b) $ 77 (b) $131 (b) $279 - ------------------------------------------------------------------------------------------------------------------------ Cash Management (a) $ 92 (a) $117 (a) $144 (a) $246 (b) $ 22 (b) $ 67 (b) $114 (b) $246 - ------------------------------------------------------------------------------------------------------------------------ Corporate Bond (a) $ 93 (a) $121 (a) $152 (a) $261 (b) $ 23 (b) $ 71 (b) $122 (b) $261 - ------------------------------------------------------------------------------------------------------------------------ Davis Venture Value (a) $ 94 (a) $124 (a) $156 (a) $270 (b) $ 24 (b) $ 74 (b) $126 (b) $270 - ------------------------------------------------------------------------------------------------------------------------ "Dogs" of Wall Street (a) $ 93 (a) $122 (a) $154 (a) $265 (b) $ 23 (b) $ 72 (b) $124 (b) $265 - ------------------------------------------------------------------------------------------------------------------------ Emerging Markets (a) $102 (a) $147 (a) $194 (a) $345 (b) $ 32 (b) $ 97 (b) $164 (b) $345 - ------------------------------------------------------------------------------------------------------------------------ Federated Value (a) $ 94 (a) $124 (a) $156 (a) $270 (b) $ 24 (b) $ 74 (b) $126 (b) $270 - ------------------------------------------------------------------------------------------------------------------------ Global Bond (a) $ 94 (a) $125 (a) $159 (a) $275 (b) $ 24 (b) $ 75 (b) $129 (b) $275 - ------------------------------------------------------------------------------------------------------------------------ Global Equities (a) $ 95 (a) $127 (a) $162 (a) $281 (b) $ 25 (b) $ 77 (b) $132 (b) $281 - ------------------------------------------------------------------------------------------------------------------------ Goldman Sachs Research (a) $100 (a) $141 (a) $186 (a) $328 (b) $ 30 (b) $ 91 (b) $156 (b) $328 - ------------------------------------------------------------------------------------------------------------------------ Growth-Income (a) $ 92 (a) $118 (a) $147 (a) $252 (b) $ 22 (b) $ 68 (b) $117 (b) $252 - ------------------------------------------------------------------------------------------------------------------------ Growth Opportunities (a) $ 96 (a) $131 (a) $168 (a) $294 (b) $ 26 (b) $ 81 (b) $138 (b) $294 - ------------------------------------------------------------------------------------------------------------------------ High-Yield Bond (a) $ 93 (a) $122 (a) $154 (a) $265 (b) $ 23 (b) $ 72 (b) $124 (b) $265 - ------------------------------------------------------------------------------------------------------------------------ International Diversified Equities (a) $ 99 (a) $138 (a) $180 (a) $316 (b) $ 29 (b) $ 88 (b) $150 (b) $316 - ------------------------------------------------------------------------------------------------------------------------ International Growth & Income (a) $ 98 (a) $137 (a) $178 (a) $314 (b) $ 28 (b) $ 87 (b) $148 (b) $314 - ------------------------------------------------------------------------------------------------------------------------ MFS Growth & Income (a) $ 94 (a) $124 (a) $157 (a) $272 (b) $ 24 (b) $ 74 (b) $127 (b) $272 - ------------------------------------------------------------------------------------------------------------------------ MFS Mid Cap Growth (a) $ 95 (a) $126 (a) $159 (a) $276 (b) $ 25 (b) $ 76 (b) $129 (b) $276 - ------------------------------------------------------------------------------------------------------------------------ MFS Total Return (a) $ 94 (a) $123 (a) $155 (a) $267 (b) $ 24 (b) $ 73 (b) $125 (b) $267 - ------------------------------------------------------------------------------------------------------------------------ Putnam Growth (a) $ 95 (a) $126 (a) $159 (a) $276 (b) $ 25 (b) $ 76 (b) $129 (b) $276 - ------------------------------------------------------------------------------------------------------------------------ Real Estate (a) $ 96 (a) $129 (a) $164 (a) $286 (b) $ 26 (b) $ 79 (b) $134 (b) $286 - ------------------------------------------------------------------------------------------------------------------------ SunAmerica Balanced (a) $ 93 (a) $121 (a) $151 (a) $260 (b) $ 23 (b) $ 71 (b) $121 (b) $260 - ------------------------------------------------------------------------------------------------------------------------ Technology (a) $101 (a) $144 (a) $190 (a) $337 (b) $ 31 (b) $ 94 (b) $160 (b) $337 - ------------------------------------------------------------------------------------------------------------------------ Telecom Utility (a) $ 95 (a) $127 (a) $161 (a) $279 (b) $ 25 (b) $ 77 (b) $131 (b) $279 - ------------------------------------------------------------------------------------------------------------------------ Worldwide High Income (a) $ 97 (a) $134 (a) $174 (a) $305 (b) $ 27 (b) $ 84 (b) $144 (b) $305 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------
* Anchor National does not impose any fees or charges when you begin the Income Phase of your contract. 6 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. 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 established maximum allowed by an applicable state expense limitations or the following percentages of Variable Portfolio's average net assets: Blue Chip Growth 0.85%, Goldman Sachs Research 1.35%, and Growth Opportunities 1.00%. 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 1.52% 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 UNIT VALUES ARE CONTAINED IN APPENDIX A -- CONDENSED FINANCIAL INFORMATION. - ---------------------------------------------------------------- - ---------------------------------------------------------------- THE POLARIS VARIABLE ANNUITY - ---------------------------------------------------------------- - ---------------------------------------------------------------- An annuity is a contract between you and an insurance company. You are the owner of the contract. The contract provides three main benefits: - Tax Deferral: This means that you do not pay taxes on your earnings from the annuity until you withdraw them. - Death Benefit: If you die during the Accumulation Phase, the insurance company pays a death benefit to your Beneficiary. - Guaranteed Income: If elected, you receive a stream of income for your lifetime, or another available period you select. Tax-qualified retirement plans (e.g., IRAs, 401(k) or 403(b) plans) defer payment of taxes on earnings until withdrawal. If you are considering funding a tax-qualified retirement plan with an annuity, you should know that an annuity does not provide any additional tax deferral treatment of earnings beyond the treatment provided by the tax-qualified retirement plan itself. However, annuities do provide other features and benefits which may be valuable to you. You should fully discuss this decision with your financial representative. This annuity was developed to help you contribute to your retirement savings. This annuity works in two stages, the Accumulation Phase and the Income Phase. Your contract is in the Accumulation Phase during the period when you make payments into the contract. The Income Phase begins when you request us to start making income payments to you out of the money accumulated in your contract. The contract is called a "variable" annuity because it allows you to invest in variable portfolios which, like mutual funds, have different investment objectives and performance which varies. You can gain or lose money if you invest in these Variable Portfolios. The amount of money you accumulate in your contract depends on the performance of the Variable Portfolios in which you invest. This contract currently offers 31 Variable Portfolios. The contract also offers several fixed account options for varying time periods. Fixed account options earn interest at a rate set and guaranteed by Anchor National. If you allocate money to the fixed account options, the amount of money that accumulates in the contract depends on the total interest credited to the particular fixed account option(s) in which you invest. For more information on investment options available under this contract SEE INVESTMENT OPTIONS ON PAGE 9. Anchor National Life Insurance Company (Anchor National, The Company, Us, We) issues the Polaris Variable Annuity. When you purchase a Polaris Variable Annuity, a contract exists between you and Anchor National. The Company is a stock life insurance company organized under the laws of the state of Arizona. Its principal place of business is 1 SunAmerica Center, Los Angeles, California 90067. The Company conducts life insurance and annuity business in the District of Columbia and all states except New York. Anchor National is an indirect, wholly owned subsidiary of American International Group, Inc. ("AIG"), a Delaware corporation. - ---------------------------------------------------------------- - ---------------------------------------------------------------- PURCHASING A POLARIS VARIABLE ANNUITY - ---------------------------------------------------------------- - ---------------------------------------------------------------- An initial Purchase Payment is the money you give us to buy a contract. Any additional money you give us to invest in the contract after purchase is a subsequent Purchase Payment. 7 This chart shows the minimum initial and subsequent Purchase Payments permitted under your contract. These amounts depend upon whether a contract is Qualified or Non-qualified for tax purposes. FOR FURTHER EXPLANATION, SEE TAXES ON PAGE 16. - ----------------------------------------------------------- Minimum Minimum Initial Subsequent Purchase Payment Purchase Payment - ----------------------------------------------------------- Qualified $2,000 $250 - ----------------------------------------------------------- Non-Qualified $5,000 $500 - -----------------------------------------------------------
Prior Company approval is required to accept Purchase Payments greater than $1,500,000. The Company reserves the right to refuse any Purchase Payment including, but not limited to, one which would cause total Purchase Payments in all Contracts issued by the Company to the same owner to exceed $1,500,000 at the time of the Purchase Payment. Also, the optional automatic payment plan allows you to make subsequent Purchase Payments of as little as $20. We may refuse any Purchase Payment. In general, we will not issue a Qualified contract to anyone who is age 70 1/2 or older, unless it is shown that the minimum distribution required by the IRS is being made. In addition we may not issue a contract to anyone over age 90. 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 We invest your Purchase Payments in the fixed and variable investment options according to your instructions. If we receive a Purchase Payment without allocation instructions, we will invest the money according to your last allocation instructions. SEE INVESTMENT OPTIONS ON PAGE 9. In order to issue your contract, we must receive your completed application, Purchase Payment allocation instructions and any other required paperwork at our principal place of business. We allocate your initial Purchase Payment within two days of receiving it. If we do not have complete information necessary to issue your contract, we will contact you. If we do not have the information necessary to issue your contract within 5 business days we will send your money back to you; or ask your permission to keep your money until we get the information necessary to issue the contract. ACCUMULATION UNITS When you allocate a Purchase Payment to the Variable Portfolios, we credit your contract with Accumulation Units of the separate account. We base the number of Accumulation Units you receive on the unit value of the Variable Portfolio as of the day we receive your money if we receive it before 1 p.m. Pacific Standard Time, or on the next business day's unit value if we receive your money after 1 p.m. Pacific Standard Time. The value of an Accumulation Unit goes up and down based on the performance of the Variable Portfolios. We calculate the value of an Accumulation Unit each day that the New York Stock Exchange ("NYSE") is open as follows: 1. We determine the total value of money invested in a particular Variable Portfolio; 2. We subtract from that amount all applicable contract charges; and 3. We divide this amount by the number of outstanding Accumulation Units. We determine the number of Accumulation Units credited to your contract by dividing the Purchase Payment by the Accumulation Unit value for the specific Variable Portfolio. EXAMPLE: We receive a $25,000 Purchase Payment from you on Wednesday. You allocate the money to the Global Bond Portfolio. We determine that the value of an Accumulation Unit for the Global Bond Portfolio is $11.10 when the NYSE closes on Wednesday. We then divide $25,000 by $11.10 and credit your contract on Wednesday night with 2252.52 Accumulation Units for the Global Bond Portfolio. Performance of the Variable Portfolios and expenses under your contract affect Accumulation Unit values. These factors cause the value of your contract to go up and down. FREE LOOK You may cancel your contract within ten days after receiving it (or longer if required by state law). We call this a "free look." To cancel, you must mail the contract along with your free look request to our Annuity Service Center at P.O. Box 54299, Los Angeles, California 90054-0299. We will refund to you the value of your contract on the day we receive your request. The amount refunded to you may be more or less than the amount you originally invested. Certain states require us to return your Purchase Payments upon a free look request. Additionally, all contracts issued as an IRA require the full return of Purchase Payments upon a free look. EXCHANGE OFFERS From time to time, we may offer to allow you to exchange an older variable annuity issued by the Company or one of its affiliates, for a newer product with more current features and 8 benefits, also issued by the Company or one of its affiliates. Such an Exchange Offer will be made in accordance with applicable state and federal securities and insurance rules and regulations. We will explain the specific terms and conditions of any such Exchange Offer at the time the offer is made. - ---------------------------------------------------------------- - ---------------------------------------------------------------- INVESTMENT OPTIONS - ---------------------------------------------------------------- - ---------------------------------------------------------------- VARIABLE PORTFOLIOS The contract currently offers 31 Variable Portfolios. These Variable Portfolios invest in shares of the Anchor Series Trust and the SunAmerica Series Trust (the "Trusts"). Additional 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 Trusts. The Trusts serve as the underlying investment vehicles for other variable annuity contracts issued by Anchor National, and other affiliated/unaffiliated insurance companies. Neither Anchor National nor the Trusts believe that offering shares of the Trusts in this manner disadvantages you. The adviser monitors the Trusts for potential conflicts. The Variable Portfolios, along with their respective subadvisers are listed below: ANCHOR SERIES TRUST Wellington Management Company, LLP serves as subadviser to the Anchor Series Trust portfolios. Anchor Series Trust has investment portfolios in addition to those listed below which are not available for investment under the contract. The 4 available investment portfolios are: MANAGED BY WELLINGTON MANAGEMENT COMPANY, LLP - Capital Appreciation Portfolio - Government and Quality Bond Portfolio - Growth Portfolio - Natural Resources Portfolio SUNAMERICA SERIES TRUST Various subadvisers provide investment advice for the SunAmerica Series Trust portfolios. SunAmerica Series Trust has investment portfolios in addition to those listed below which are not available for investment under the contract. The 27 investment portfolios and the subadvisers are: STOCKS: MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P. - Alliance Growth Portfolio SST - Global Equities Portfolio SST - Growth-Income Portfolio SST MANAGED BY DAVIS ADVISERS - 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 and Income Portfolio SST - MFS Mid-Cap Growth Portfolio SST MANAGED BY VAN KAMPEN - International Diversified Equities Portfolio SST - Technology Portfolio SST MANAGED BY PUTNAM INVESTMENT MANAGEMENT COMPANY, INC. - Emerging Markets Portfolio SST - International Growth and Income Portfolio SST - Putnam Growth Portfolio SST MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP. - Aggressive Growth Portfolio SST - "Dogs" of Wall Street Portfolio SST - Blue Chip Growth Portfolio SST - Growth Opportunities Portfolio SST MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP - Capital Appreciation Portfolio AST - Growth Portfolio AST - Natural Resources Portfolio AST BALANCED: MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT - Asset Allocation Portfolio SST MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY - MFS Total Return Portfolio SST MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP. - SunAmerica Balanced Portfolio SST BONDS: MANAGED BY FEDERATED INVESTORS L.P. - Corporate Bond Portfolio SST MANAGED BY WM ADVISORS, INC. - Global Bond Portfolio SST MANAGED BY VAN KAMPEN - Worldwide High Income Portfolio SST MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP. - High-Yield Bond Portfolio SST MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP - Government & Quality Portfolio AST CASH: MANAGED BY BANC OF AMERICA CAPITAL MANAGEMENT, LLC - Cash Management Portfolio SST YOU SHOULD READ THE ATTACHED PROSPECTUSES FOR THE TRUSTS CAREFULLY. THESE PROSPECTUSES CONTAIN DETAILED INFORMATION ABOUT THE VARIABLE PORTFOLIOS, INCLUDING EACH VARIABLE PORTFOLIO'S INVESTMENT OBJECTIVE AND RISK FACTORS. 9 FIXED ACCOUNT OPTIONS The contract also offers five 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. 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). 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 or to the Variable Portfolios. If you want to reallocate your money to a different fixed account option or a Variable Portfolio, you must contact us within 30 days after the end of the current interest guarantee period and instruct us how to reallocate the money. We do not contact you. If we do not hear from you, your money will remain in the same fixed account option, where it will earn interest at the renewal rate then in effect for the fixed account option. MARKET VALUE ADJUSTMENT ("MVA") NOTE: MARKET VALUE ADJUSTMENTS APPLY TO THE 1, 3, 5, 7 AND 10-YEAR FIXED ACCOUNT OPTIONS, ONLY. PLEASE CONTACT YOUR FINANCIAL ADVISOR FOR MORE INFORMATION. If you take money out of the multi-year fixed account options before the end of the guarantee period, we make a market value adjustment to your contract. We refer to the adjustment as a market value adjustment (the "MVA"). The MVA reflects any difference in the interest rate environment between the time you place your money in the fixed account option and the time when you withdraw 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 made within 30 days after the end of a guarantee period; - If a withdrawal is made to pay contract fees and charges; - To pay a death benefit; and - If annuitization occurs on the latest Annuity Date. The 1-year fixed account option does not impose a negative MVA. This fixed account option is not registered under the Securities Act of 1933 and is not subject to the provisions of the Investment Company Act of 1940. 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. You must transfer at least $100. If less than $100 will remain in any Variable Portfolio after a transfer, that amount must be transferred as well. You may request transfers of your account value between the Variable Portfolios and/or the fixed account options in writing or by telephone subject to our rules. 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. 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 or over the internet unless you tell us not to on your contract application. When receiving instructions over the telephone or 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 or internet. If we fail to follow our procedures in regards to internet transactions, 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. 10 MARKET TIMING This product is not designed for professional "market timing" organizations or other organizations or individuals engaged in trading strategies that seek to benefit from short term price fluctuations or price irregularities by making programmed transfers, frequent transfers or transfers that are large in relation to the total assets of the underlying portfolio in which the variable investment options invests. These market timing strategies are disruptive to the underlying portfolios in which the variable investment options invest and thereby potentially harmful to investors. If we determine, in our sole discretion, that your transfer patterns among the variable investment options reflect a market timing strategy, we reserve the right to take action to protect the other investors. Such action may include but would not limited to restricting the mechanisms you can use to request transfers among the variable investment options or imposing penalty fees on such trading activity and/or otherwise restricting transfer options in accordance with state and federal rules and regulations. For information regarding transfers during the Income Phase, SEE INCOME OPTIONS ON PAGE 15. We reserve the right to modify, suspend, waive or terminate these transfer provisions at any time. DOLLAR COST AVERAGING The Dollar Cost Averaging ("DCA") program allows you to invest gradually in the Variable Portfolios. Under the program you systematically transfer a set dollar amount or percentage of portfolio value from one Variable Portfolio or the 1-year fixed account option (source accounts) to any other Variable Portfolio. Transfers may be monthly or quarterly and do count against your 15 free transfers per contract year. You may change the frequency at any time by notifying us in writing. The minimum transfer amount under the DCA program is $100, regardless of the source account. The DCA program is designed to lessen the impact of market fluctuations on your investment. However, we cannot ensure that you will make a profit. When you elect the DCA program, you are continuously investing in securities regardless of fluctuating price levels. You should consider your tolerance for investing through periods of fluctuating price levels. We reserve the right to modify, suspend or terminate this program at any time. EXAMPLE: Assume that you want to gradually move $750 each quarter from the Cash Management Portfolio to the Aggressive Growth Portfolio over six quarters. You set up dollar cost averaging and purchase Accumulation Units at the following values:
- ------------------------------------------- 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 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 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 11 and Variable Portfolios. You decide how much you want to invest and approximately when you want a return of principal. We calculate how much of your Purchase Payment to allocate to the particular fixed account option to ensure that it grows to an amount equal to your total principal invested under this program. We invest the rest of your principal in the Variable Portfolio(s) of your choice. We reserve the right to modify, suspend or terminate this program at any time. EXAMPLE: Assume that you want to allocate a portion of your initial Purchase Payment of $100,000 to the fixed account option. You want the amount allocated to the fixed account option to grow to $100,000 in 7 years. If the 7-year fixed account option is offering a 5% interest rate, we will allocate $71,069 to the 7-year fixed account option to ensure that this amount will grow to $100,000 at the end of the 7-year period. The remaining $28,931 may be allocated among the Variable Portfolios, as determined by you, to provide opportunity for greater growth. VOTING RIGHTS Anchor National is the legal owner of the Trusts' shares. However, when a Variable Portfolio solicits proxies in conjunction with a vote of shareholders, we must obtain your instructions on how to vote those shares. We vote all of the shares we own in proportion to your instructions. This includes any shares we own on our own behalf. Should we determine that we are no longer required to comply with these rules, we will vote the shares in our own right. SUBSTITUTION We may amend your contract due to changes to the Variable Portfolios offered under your contract. For example, we may offer new Variable Portfolios, delete Variable Portfolios, or stop accepting allocations and/or investments in a particular Variable Portfolio. We may move assets and re-direct future premium allocations from one Variable Portfolio to another if we receive investor approval through a proxy vote or SEC approval for a fund substitution. This would occur if a Variable Portfolio is no longer an appropriate investment for the contract, for reasons such as continuing substandard performance, or for changes to the portfolio manager, investment objectives, risks and strategies, or federal or state laws. The new Variable Portfolio offered may have different fees and expenses. You will be notified of any upcoming proxies or substitutions that affect your Variable Portfolio choices. - ---------------------------------------------------------------- - ---------------------------------------------------------------- ACCESS TO YOUR MONEY - ---------------------------------------------------------------- - ---------------------------------------------------------------- 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 15. Generally, we deduct a withdrawal charge applicable to any total or partial withdrawal and a MVA against withdrawals from the 3, 5, 7 or 10 year fixed account options. If you withdraw your entire contract value, we also deduct premium taxes and a contract maintenance fee. SEE EXPENSES ON PAGE 14. Your contract provides for a free withdrawal amount. A free withdrawal amount is the portion of your account that we allow you to take out each year without being charged a withdrawal charge. Purchase Payments that are no longer subject to a withdrawal charge and not previously withdrawn, plus earnings, may be withdrawn free of a withdrawal charge at any time. After the first year, you may withdraw the greater of the following amounts free of a withdrawal charge (1) earnings in your contract as of the date you make the withdrawal; or (2) 10% of the Purchase Payments you invested for at least one year and not yet withdrawn, less any previous earnings withdrawals or Systematic Withdrawals that year. Only your first withdrawal of the year is free. If you do not take the entire free amount available to you at that first withdrawal, you will forfeit the opportunity to withdraw that money free of the withdrawal charge for that year. The portion of a free withdrawal which exceeds the sum of: (1) earnings in the contract and (2) Purchase Payments which are both no longer subject to the withdrawal charge schedule and not yet withdrawn is assumed to be a withdrawal against future earnings. Although amounts withdrawn free of a withdrawal charge under the 10% provision may reduce principal for purposes of calculating amounts available for future withdrawals of earnings, they do not reduce the amount you invested for purposes of calculating the withdrawal charge if you withdraw your entire contract value. However, upon a future full surrender of your contract, we will recoup any withdrawal charges which would have been applicable if your free withdrawal(s) had not been free. We calculate charges due on a total withdrawal on the day after we receive your request and your contract. We return to you your contract value less any applicable fees and charges. Under most circumstances, the partial withdrawal minimum is $1,000. We require that the value left in any investment option be at least $100, after the withdrawal. You must send 12 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 in account option in which your contract is invested. Under certain Qualified plans, access to the money in your contract may be restricted. Additionally, withdrawals made prior to age 59 1/2 may result in a 10% IRS penalty tax. SEE TAXES ON PAGE 16. We may be required to suspend or postpone the payment of a withdrawal for any period of time when: (1) the NYSE is closed (other than a customary weekend and holiday closings); (2) trading with the NYSE is restricted; (3) an emergency exists such that disposal of or determination of the value of shares of the Variable Portfolios is not reasonably practicable; (4) the SEC, by order, so permits for the protection of contract owners. Additionally, we reserve the right to defer payments for a withdrawal from a fixed account option. Such deferrals are limited to no longer than six months. SYSTEMATIC WITHDRAWAL PROGRAM During the Accumulation Phase, you may elect to receive periodic income payments under the systematic withdrawal program. Under the program, you may choose to take monthly, quarterly, semi-annual or annual payments from your contract. Electronic transfer of these funds to your bank account is also available. The minimum amount of each withdrawal is $250. There must be at least $500 remaining in your contract at all times. Withdrawals may be taxable and a 10% IRS penalty tax may apply if you are under age 59 1/2. There is no additional charge for participating in this program, although a withdrawal charge and/or MVA may apply. The program is not available to everyone. Please check with our Annuity Service Center, which can provide the necessary enrollment forms. We reserve the right to modify, suspend or terminate this program at any time. NURSING HOME WAIVER If you are confined to a nursing home for 60 days or longer, we may waive the withdrawal charge and/or market value adjustment on certain withdrawals prior to the Annuity Date (not available in Texas). The waiver applies only to withdrawals made while you are in a nursing home or within 90 days after you leave the nursing home. Your contract prohibits use of this waiver during the first 90 days after you purchase your contract. In addition, the confinement period for which you seek the waiver must begin after you purchase your contract. In order to use this waiver, you must submit with your withdrawal request, the following documents: (1) a doctor's note recommending admittance to a nursing home; (2) an admittance form which shows the type of facility you entered; and (3) a bill from the nursing home which shows that you met the 60 day confinement requirement. MINIMUM CONTRACT VALUE Where permitted by state law, we may terminate your contract if both of the following occur: (1) your contract is less than $500 as a result of withdrawals; and (2) you have not made any Purchase Payments during the past three years. We will provide you with sixty days written notice. At the end of the notice period, we will distribute the contract's remaining value to you. - ---------------------------------------------------------------- - ---------------------------------------------------------------- DEATH BENEFIT - ---------------------------------------------------------------- - ---------------------------------------------------------------- If you die during the Accumulation Phase of your contract, we pay a death benefit to your Beneficiary. The death benefit is the greater of: 1. the value of your contract at the time we receive satisfactory proof of death; or 2. total Purchase Payments less withdrawals (and any fees or charges applicable to such withdrawals), compounded at a 4% annual growth rate until the date of death (3% growth rate if 70 or older at the time of contract issue) plus any Purchase Payments less withdrawals recorded after the date of death (and any fees or charges applicable to such withdrawals); or 3. the value of your contract on the seventh contract anniversary, plus any Purchase Payments and less any withdrawals (and any fees or charges applicable to such withdrawals), since the seventh contract anniversary, all compounded at a 4% annual growth rate until the date of death (3% growth rate if age 70 or older at the time of contract issue) plus any Purchase Payments less withdrawals recorded after the date of death (and any fees or charges applicable to such withdrawals). 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 15. You name your Beneficiary. You may change the Beneficiary at any time, unless you previously made an irrevocable Beneficiary designation. 13 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. Payments must begin within one year of your death. If the Beneficiary is the spouse of a deceased owner, he or she can elect to continue the Contract at the then current value. If the Spousal Beneficiary continues the contract, we do not pay a death benefit to him or her. If a Beneficiary does not elect a specific form of pay out within 60 days of our receipt of all required paperwork and satisfactory proof of death, we pay a lump sum death benefit to the Beneficiary. - ---------------------------------------------------------------- - ---------------------------------------------------------------- EXPENSES - ---------------------------------------------------------------- - ---------------------------------------------------------------- There are charges and expenses associated with your contract. These charges and expenses reduce your investment return. We will not increase the contract maintenance fee or the insurance and withdrawal charges under your contract. However, the investment charges under your contract may increase or decrease. Some states may require that we charge less than the amounts described below. INSURANCE CHARGES The Company deducts a mortality and expense risk charge in the amount of 1.52% annually of the value of your contract invested in the Variable Portfolios. We deduct the charge daily. This charge compensates the Company for the mortality and expense risk and the costs of contract distribution assumed by the Company. Generally, the mortality risks assumed by the Company arise from its contractual obligations to make income payments after the Annuity Date and to provide a death benefit. The expense risk assumed by the Company is that the costs of administering the contracts and the Separate Account will exceed the amount received from the administrative fees and charges assessed under the contract. 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. The Insurance Charge is expected to result in a profit. Profit may be used for any legitimate cost/expense including distribution, depending upon market conditions. WITHDRAWAL CHARGES The contract provides a free withdrawal amount every year. SEE ACCESS TO YOUR MONEY ON PAGE 12. If you take money out in excess of the free withdrawal amount, or upon a full surrender, you may incur a withdrawal charge. We apply a withdrawal charge against each Purchase Payment you put into the contract. After a Purchase Payment has been in the contract for 7 complete years, no withdrawal charge applies. The withdrawal charge equals a percentage of the Purchase Payment you take out of the contract. The withdrawal charge percentage declines each year a Purchase Payment is in the contract, as follows:
- ------------------------------------------------------------------- YEAR 1 2 3 4 5 6 7 8 - ------------------------------------------------------------------- WITHDRAWAL CHARGE 7% 6% 5% 4% 3% 2% 1% 0% - -------------------------------------------------------------------
When calculating the withdrawal charge, we treat withdrawals as coming first from the Purchase Payments that have been in your contract the longest. However, for tax purposes, your withdrawals are considered earnings first, then Purchase Payments. Whenever possible, we deduct the withdrawal charge from the money remaining in your contract. If you withdraw all of your contract value, we deduct any applicable withdrawal charges from the amount withdrawn. We will not assess a withdrawal charge for money withdrawn to pay a death benefit or to pay contract fees or charges. Additionally, we will not assess a withdrawal charge when you switch to the Income Phase. Withdrawals made prior to age 59 1/2 may result in tax penalties. SEE TAXES ON PAGE 16. INVESTMENT CHARGES Charges are deducted from your Variable Portfolios for the advisory and other expenses of the Variable Portfolios. THE FEE TABLES LOCATED ON PAGE 5 illustrate these charges and expenses. For more detailed information on these investment charges, refer to the prospectuses for the Trusts, which are attached. 14 CONTRACT MAINTENANCE FEE During the Accumulation Phase, we subtract a contract maintenance fee from your account once per year. This charge compensates us for the cost of contract administration. We deduct the $35 contract maintenance fee ($30 in North Dakota and Utah) from your account value on your contract anniversary. If you withdraw your entire contract value, we deduct the fee from that withdrawal. If your contract value is $50,000 or more on your contract anniversary date, we will waive the charge. This waiver is subject to change without notice. TRANSFER FEE We currently permit 15 free transfers between investment options each contract year. We charge you $25 for each additional transfer that contract year ($10 in Pennsylvania and Texas). SEE INVESTMENT OPTIONS ON PAGE 9. 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 upon a full surrender or when you 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 C provides more information about premium taxes. INCOME TAXES We do not currently deduct income taxes from your contract. We reserve the right to do so in the future. REDUCTION OR ELIMINATION OF CHARGES AND EXPENSES, AND ADDITIONAL AMOUNTS CREDITED Sometimes sales of the contracts to groups of similarly situated individuals may lower our administrative and/or sales expenses. We reserve the right to reduce or waive certain charges and expenses when this type of sale occurs. In addition, we may also credit additional interest to policies sold to such groups. We determine which groups are eligible for such treatment. Some of the criteria we evaluate to make a determination are: size of the group; amount of expected Purchase Payments; relationship existing between us and prospective purchaser; nature of the purchase; length of time a group of contracts is expected to remain active; purpose of the purchase and whether that purpose increases the likelihood that our expenses will be reduced; and/or any other factors that we believe indicate that administrative and/or sales expenses may be reduced. Anchor National may make such a determination regarding sales to its employees, 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. - ---------------------------------------------------------------- - ---------------------------------------------------------------- INCOME OPTIONS - ---------------------------------------------------------------- - ---------------------------------------------------------------- ANNUITY DATE During the Income Phase, we use the money accumulated in your contract to make regular income payments to you. You may switch to the Income Phase any time after your second contract anniversary. You select the month and year you want income payments to begin. The first day of that month is the Annuity Date. You may change your Annuity Date, so long as you do so at least seven days before the income payments are scheduled to begin. Once you begin receiving income payments, you cannot change your income option. Except as indicated under Option 5 below, once you begin receiving income payments, you cannot otherwise access your money through a withdrawal or surrender. Income payments must begin on or before your 90th birthday or on your tenth contract anniversary, whichever occurs later. 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 16. 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 income payments based on joint lives, we pay according to Option 3. We base our calculation of income payments on the life of the Annuitant and the annuity rates set forth in your contract. As the contract owner, you may change the Annuitant at any time prior to the Annuity Date. You must notify us if the Annuitant dies before the Annuity Date and designate a new Annuitant. OPTION 1 - LIFE INCOME ANNUITY This option provides income payments for the life of the Annuitant. Income payments stop when the Annuitant dies. 15 OPTION 2 - JOINT AND SURVIVOR LIFE ANNUITY This option provides income payments for the life of the Annuitant and for the life of another designated person. Upon the death of either person, we will continue to make income payments during the lifetime of the survivor. Income payments stop when the survivor dies. OPTION 3 - JOINT AND SURVIVOR LIFE ANNUITY WITH 10 OR 20 YEARS GUARANTEED This option is similar to Option 2 above, with an additional guarantee of payments for at least 10 years. If the Annuitant and the survivor die before all of the guaranteed income payments have been made, the remaining payments are made to the Beneficiary under your contract. OPTION 4 - LIFE ANNUITY WITH 10 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 years. You select the number of years. If the Annuitant dies before all guaranteed income payments are made, the remaining income payments go to the Beneficiary under your contract. OPTION 5 - INCOME FOR A SPECIFIED PERIOD This option provides income payments for a guaranteed period ranging from 5 to 30 years. If the Annuitant dies before all the guaranteed income payments are made, the remaining income payments are made to the Beneficiary under your contract. Additionally, if variable income payments are elected under this option, you (or the Beneficiary under the contract if the Annuitant dies prior to all guaranteed payments being made) may redeem the contract value after the Annuity Date. The amount available upon such redemption would be the discounted present value of any remaining guaranteed payments. The value of an Annuity Unit, regardless of the option chosen, takes into account the mortality and expense risk charge. Since Option 5 does not contain an element of mortality risk, no benefit is derived from this charge. Please read the Statement of Additional Information ("SAI") for a more detailed discussion of the income options. FIXED OR VARIABLE INCOME PAYMENTS You can choose income payments that are fixed, variable or both. If at the date when income payments begin you are invested in the Variable Portfolios only, your income payments will be variable. If your money is only in fixed accounts at that time, your income payments will be fixed in amount. Further, if you are invested in both fixed and variable investment options when income payments begin, your payments will be fixed and variable. If income payments are fixed, Anchor National guarantees the amount of each payment. If the income payments are variable, the amount is not guaranteed. INCOME PAYMENTS We make income payments on a monthly, quarterly, semiannual or annual basis. You instruct us to send you a check or to have the payments directly deposited into your bank account. If state law allows, we distribute annuities with a contract value of $5,000 or less in a lump sum. Also, if the selected income option results in income payments of less than $50 per payment, we may decrease the frequency of payments, state law allowing. If you are invested in the Variable Portfolios after the Annuity date, your income payments vary depending on four things: - for life options, your age when payments begin; and - the value of your contract in the Variable Portfolios on the Annuity Date; and - the 3.5% assumed investment rate used in the annuity table for the contract; and - the performance of the Variable Portfolios in which you are invested during the time you receive income payments. If you are invested in both the fixed account options and the Variable Portfolios after the Annuity Date, the allocation of funds between the fixed and variable options also impacts the amount of your annuity payments. TRANSFERS DURING THE INCOME PHASE During the Income Phase, one transfer per month is permitted between the Variable Portfolios. No other transfers are allowed during the Income Phase. DEFERMENT OF PAYMENTS We may defer making fixed payments for up to six months, or less if required by law. Interest is credited to you during the deferral period. - ---------------------------------------------------------------- - ---------------------------------------------------------------- TAXES - ---------------------------------------------------------------- - ---------------------------------------------------------------- NOTE: WE PREPARED THE FOLLOWING INFORMATION ON TAXES AS A GENERAL DISCUSSION OF THE SUBJECT. THIS INFORMATION ADDRESSES GENERAL FEDERAL TAXATION MATTERS, AND GENERALLY DOES NOT ADDRESS STATE TAXATION ISSUES OR QUESTIONS. IT IS NOT TAX ADVICE. WE CAUTION YOU TO SEEK COMPETENT TAX ADVICE ABOUT YOUR OWN CIRCUMSTANCES. WE DO NOT GUARANTEE THE TAX STATUS OF YOUR ANNUITY. TAX LAWS CONSTANTLY CHANGE, THEREFORE, WE CANNOT GUARANTEE THAT THE INFORMATION CONTAINED HEREIN IS COMPLETE AND/OR ACCURATE. ANNUITY CONTRACTS IN GENERAL The Internal Revenue Code ("IRC") provides for special rules regarding the tax treatment of annuity contracts. Generally, taxes on the earnings in your annuity contract are deferred until you take the money out. Qualified retirement investments 16 that satisfy specific tax and ERISA requirements automatically provide tax deferral regardless of whether the underlying contract is an annuity, a trust, or a custodial account. 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), plans of self-employed individuals (often referred to as H.R. 10 Plans or 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. However, you normally will have cost basis in a Roth IRA, and you may have cost basis in a traditional IRA or in another Qualified Contract. TAX TREATMENT OF DISTRIBUTIONS - NON-QUALIFIED CONTRACTS If you make a partial or total 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. Purchase payments made prior to August 14, 1982, however, are an important exception to this general rule, and for tax purposes are treated as being distributed before the earnings on those contributions. If you annuitize your contract, a portion of each income payment will be considered, for tax purposes, to be a return of a portion of your Purchase Payment(s). Any portion of each income 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 are attributable to 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. As a result, with certain limited exceptions, 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 taxable 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, that begins after separation from service with the employer sponsoring the plan; (5) to the extent such withdrawals do not exceed limitations set by the IRC for deductible amounts paid during the taxable year for medical care; (6) to fund higher education expenses (as defined in IRC; only from an IRA); (7) to fund certain first-time home purchase expenses (only from an IRA); 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 an employee's voluntary Purchase Payments to a Tax-Sheltered Annuity (TSA). Withdrawals can only be made when an owner: (1) reaches age 59 1/2; (2) severs employment with the employer; (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. Additional plan limitations may also apply. Amounts held in a TSA annuity contract as of December 31, 1988 are not subject to these restrictions. Qualifying transfers of amounts from one TSA contract to another TSA contract under section 403(b) or to a custodial account under section 403(b)(7), and qualifying transfers to a state defined benefit plan to purchase service credits, are not considered distributions, and thus are not subject to these withdrawal limitations. If amounts are transferred from a custodial account described in Code section 403(b)(7) to this contract the transferred amount will retain the custodial account withdrawal restrictions. Withdrawals from other Qualified Contracts are often limited by the IRC and by the employer's plan. MINIMUM DISTRIBUTIONS Generally, the IRS requires that you begin taking annual distributions from qualified annuity contracts by April 1 of the calendar year following the later of (1) the calendar year in which you attain age 70 1/2 or (2) the calendar year in which you retire. If you own more than one TSA, you may be permitted to take your annual distributions in any combination from your TSAs. A similar rule applies if you own more than one IRA. However, you cannot satisfy this distribution requirement for your TSA contract by taking a distribution 17 from an IRA, and you cannot satisfy the requirement for your IRA by taking a distribution from a TSA. You may be subject to a surrender charge on withdrawals taken to meet minimum distribution requirements, if the withdrawals exceed the contract's maximum penalty free amount. Failure to satisfy the minimum distribution requirements may result in a tax penalty. You should consult your tax advisor for more information. You may elect to have the required minimum distribution amount on your contract calculated and withdrawn each year under the automatic withdrawal option. You may select either monthly, quarterly, semiannual or annual withdrawals for this purpose. This service is provided as a courtesy and we do not guarantee the accuracy of our calculations. Accordingly, we recommend you consult your tax advisor concerning your required minimum distribution. You may terminate your election for automated minimum distribution at any time by sending a written request to our Annuity Service Center. We reserve the right to change or discontinue this service at any time. 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 includible in taxable income and subject to the 10% penalty if the owner is under 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. However, this treatment is not applied to a Contract held by a trust or other entity as an agent for a natural person nor to Contracts held by Qualified Plans. See the SAI 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 transfer ownership of your Non-Qualified contract to a person other than your spouse (or former spouse incident to divorce) as a gift you will pay federal income 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. See the SAI 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 the 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, and not Anchor National, would be considered the owner of the shares of the Variable Portfolios under your Nonqualified Contract, because of the degree of control you exercise over the underlying investments. This diversification requirement is sometimes referred to as "investor control." 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 18 you, as the owner of the Nonqualified 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. These investor control limitations generally do not apply to Qualified Contracts, which are referred to as "Pension Plan Contracts" for purposes of this rule, although the limitations could be applied to Qualified Contracts in the future. - ---------------------------------------------------------------- - ---------------------------------------------------------------- PERFORMANCE - ---------------------------------------------------------------- - ---------------------------------------------------------------- We advertise the Cash Management Portfolio's yield and effective yield. In addition, the other Variable Portfolios advertise total return, gross yield and yield-to-maturity. These figures represent past performance of the Variable Portfolios. These performance numbers do not indicate future results. When we advertise performance for periods prior to the date the contracts were first issued, we derive the figures from the performance of the corresponding portfolios for the Trusts, if available. We modify these numbers to reflect charges and expenses as if the contract was in existence during the period stated in the advertisement. Figures calculated in this manner do not represent actual historic performance of the particular Variable Portfolio. Consult the 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. - ---------------------------------------------------------------- - ---------------------------------------------------------------- OTHER INFORMATION - ---------------------------------------------------------------- - ---------------------------------------------------------------- ANCHOR NATIONAL Anchor National is a stock life insurance company originally organized under the laws of the state of California in April 1965. On January 1, 1996, Anchor National redomesticated under the laws of the state of Arizona. Anchor National and its affiliates, SunAmerica Life Insurance Company, First SunAmerica Life Insurance Company, SunAmerica Asset Management Corp., and the SunAmerica Financial Network, Inc. (comprising six wholly-owned broker-dealers), specialize in retirement savings and investment products and services. Business focuses include fixed and variable annuities, mutual funds, broker-dealer services and trust administration services. THE SEPARATE ACCOUNT Anchor National originally established a separate account, Variable Separate Account ("separate account"), under Arizona law on January 1, 1996 when it assumed the separate account, originally established under California law on June 25, 1981. The separate account is registered with the SEC as a unit investment trust under the Investment Company Act of 1940, as amended. Anchor National owns the assets in the separate account. However, the assets in the separate account are not chargeable with liabilities arising out of any other business conducted by Anchor National. Income gains and losses (realized and unrealized) resulting from assets in the separate account are credited to or charged against the separate account without regard to other income gains or losses of Anchor National. 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 7% of your Purchase Payments. We may also pay a bonus to representatives for contracts which stay active for a particular period of time, in addition to standard commissions. We do not deduct commissions paid to registered representatives directly from your Purchase Payments. 19 From time to time, we may pay or allow additional promotional incentives in the form of cash or other compensation. We reserve the right to offer these additional incentives only to certain broker-dealers that sell or are expected to sell, certain minimum amounts of the contract, or other contracts offered by us. Promotional incentives may change at any time. SunAmerica Capital Services, Inc., 733 Third Avenue, 4th Floor, New York, New York 10017 distributes the contracts. SunAmerica Capital Services, an affiliate of Anchor National, is registered as a broker-dealer under the Exchange Act of 1934 and is a member of the National Association of Securities Dealers, Inc. No underwriting fees are paid in connection with the distribution of the contracts. ADMINISTRATION We are responsible for the administrative servicing of your contract. Please contact our Annuity Service Center at 1-800-445-SUN2, if you have any comment, question or service request. During the Accumulation Phase, you will receive confirmation of transactions within your contract. Transactions made pursuant to contractual or systematic agreements, such as deduction of the annual maintenance fee and dollar cost averaging, may be confirmed quarterly. Purchase Payments received through the automatic payment plan or a salary reduction arrangement, may also be confirmed quarterly. For all other transactions, we send confirmations immediately. During the Accumulation and Income Phases, you will receive a statement of your transactions over the past quarter and a summary of your account values. 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 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 the AIG SunAmerica Life Assurance Company (formerly, Anchor National Life Insurance Company) at December 31, 2001 and 2000, and for the years ended December 31, 2001, 2000 and 1999, and financial statements of the separate account at December 31, 2001, and for the years ended December 31, 2001 and 2000, are incorporated by reference in this prospectus have been so included on reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in accounting and auditing. LEGAL MATTERS 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 the Company's total assets, with the potential exception of McMurdie, et al. v. SunAmerica Inc., et al, Case No. BC 194082, filed on July 10, 1998 in the Superior Court for the County of Los Angeles. This lawsuit is a representative action wherein the plaintiffs allege violations of California's Business and Professions Code Sections 17200 et seq. The Company is vigorously defending the lawsuit. The probability of any particular outcome is not reasonably estimable at this time. 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. 20 - ---------------------------------------------------------------- - ---------------------------------------------------------------- TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION - ---------------------------------------------------------------- - ---------------------------------------------------------------- Additional information concerning the operations of the separate account is contained in a Statement of Additional Information ("SAI"), which is available without charge upon written request addressed to us at our Annuity Service Center, P.O. Box 54299, Los Angeles, California 90054-0299 or by calling (800)445-SUN2. The contents of the SAI are tabulated below. Separate Account.............................. 3 General Account............................... 3 Performance Data.............................. 4 Income Payments............................... 9 Annuity Unit Values........................... 10 Taxes......................................... 12 Distribution of Contracts..................... 16 Financial Statements.......................... 16
21 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- APPENDIX A -- CONDENSED FINANCIAL INFORMATION - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR 11/30/99- PORTFOLIOS 11/30/94 11/30/95 11/30/96 11/30/97 11/30/98 11/30/99 12/31/99 - ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- Capital Appreciation (Inception Date -- 2/12/93) Beginning AUV...... $ 11.14 $ 10.64 $ 14.19 $ 17.63 $ 21.26 $ 23.72 $ 36.39 Ending AUV......... $ 10.64 $ 14.19 $ 17.63 $ 21.26 $ 23.72 $ 36.39 $ 43.17 Ending Number of AUs.............. 8,462,152 13,247,155 20,470,395 24,889,133 24,068,557 21,898,142 21,764,629 - ----------------------------------------------------------------------------------------------------------------------- Government and Quality Bond (Inception Date -- 2/22/93) Beginning AUV...... $ 10.32 $ 9.81 $ 11.51 $ 11.94 $ 12.65 $ 13.66 $ 13.37 Ending AUV......... $ 9.81 $ 11.51 $ 11.94 $ 12.65 $ 13.66 $ 13.37 $ 13.28 Ending Number of AUs.............. 7,008,717 8,504,677 9,176,239 10,047,042 14,076,819 12,612,572 12,309,470 - ----------------------------------------------------------------------------------------------------------------------- Growth (Inception Date -- 2/19/93) Beginning AUV...... $ 10.78 $ 10.41 $ 12.95 $ 16.32 $ 20.31 $ 24.41 $ 29.74 Ending AUV......... $ 10.41 $ 12.95 $ 16.32 $ 20.31 $ 24.41 $ 29.74 $ 32.61 Ending Number of AUs.............. 3,950,678 5,968,263 7,557,844 9,747,428 9,838,138 8,941,621 8,878,474 - ----------------------------------------------------------------------------------------------------------------------- Natural Resources (Inception Date -- 10/31/94) Beginning AUV...... $ 10.00 $ 9.27 $ 10.78 $ 12.13 $ 11.14 $ 9.30 $ 11.40 Ending AUV......... $ 9.27 $ 10.78 $ 12.13 $ 11.14 $ 9.30 $ 11.40 $ 12.50 Ending Number of AUs.............. 51,412 848,159 2,171,050 2,937,198 2,605,274 2,283,074 2,218,703 - ----------------------------------------------------------------------------------------------------------------------- Aggressive Growth (Inception Date -- 6/3/96) Beginning AUV...... -- -- $ 10.00 $ 10.29 $ 11.51 $ 11.86 $ 19.02 Ending AUV......... -- -- $ 10.29 $ 11.51 $ 11.86 $ 19.02 $ 24.30 Ending Number of AUs.............. -- -- 3,165,900 7,215,024 7,059,502 7,354,489 7,476,506 - ----------------------------------------------------------------------------------------------------------------------- Alliance Growth (Inception Date -- 2/9/93) Beginning AUV...... $ 10.78 $ 10.53 $ 15.44 $ 19.46 $ 24.51 $ 32.81 $ 44.31 Ending AUV......... $ 10.53 $ 15.44 $ 19.46 $ 24.51 $ 32.81 $ 44.31 $ 48.56 Ending Number of AUs.............. 4,997,778 10,560,070 18,333,555 24,050,697 24,146,276 26,154,552 25,819,661 - ----------------------------------------------------------------------------------------------------------------------- Asset Allocation (Inception Date -- 7/1/93) Beginning AUV...... $ 10.30 $ 10.17 $ 12.64 $ 14.97 $ 17.98 $ 18.22 $ 19.10 Ending AUV......... $ 10.17 $ 12.64 $ 14.97 $ 17.98 $ 18.22 $ 19.10 $ 19.81 Ending Number of AUs.............. 10,372,954 15,418,350 19,940,733 25,272,776 26,043,996 21,080,060 20,767,631 - ----------------------------------------------------------------------------------------------------------------------- Blue Chip Growth (Inception Date -- 7/6/00) Beginning AUV...... -- -- -- -- -- -- -- Ending AUV......... -- -- -- -- -- -- -- Ending Number of AUs.............. -- -- -- -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------- Cash Management (Inception Date -- 4/1/99) Beginning AUV...... $ 10.07 $ 10.27 $ 10.67 $ 11.04 $ 4.43 $ 11.83 $ 12.20 Ending AUV......... $ 10.27 $ 10.67 $ 11.04 $ 11.43 $ 11.83 $ 12.20 $ 12.25 Ending Number of AUs.............. 8,623,034 8,372,979 8,005,908 11,224,451 11,160,200 15,616,078 16,598,506 - ----------------------------------------------------------------------------------------------------------------------- FISCAL YEAR FISCAL YEAR PORTFOLIOS 12/31/00 12/31/01 - ------------------------------------------------- Capital Appreciation (Inception Date -- 2/12/93) Beginning AUV...... $ 43.17 $ 39.336 Ending AUV......... $ 39.34 $ 33.864 Ending Number of AUs.............. 19,417,165 16,861,232 - -------------------------------------------------------------- Government and Quality Bond (Inception Date -- 2/22/93) Beginning AUV...... $ 13.28 $ 14.557 Ending AUV......... $ 14.56 $ 15.330 Ending Number of AUs.............. 11,021,940 11,075,554 - --------------------------------------------------------------------------- Growth (Inception Date -- 2/19/93) Beginning AUV...... $ 32.61 $ 31.785 Ending AUV......... $ 31.78 $ 27.208 Ending Number of AUs.............. 8,227,437 7,201,303 - ---------------------------------------------------------------------------------------- Natural Resources (Inception Date -- 10/31/94) Beginning AUV...... $ 12.50 $ 14.706 Ending AUV......... $ 14.71 $ 14.327 Ending Number of AUs.............. 1,957,242 1,779,774 - ----------------------------------------------------------------------------------------------------- Aggressive Growth (Inception Date -- 6/3/96) Beginning AUV...... $ 24.30 $ 20.283 Ending AUV......... $ 20.28 $ 13.648 Ending Number of AUs.............. 7,669,322 5,764,274 - ------------------------------------------------------------------------------------------------------------------ Alliance Growth (Inception Date -- 2/9/93) Beginning AUV...... $ 48.56 $ 38.509 Ending AUV......... $ 38.51 $ 32.621 Ending Number of AUs.............. 23,095,125 19,224,052 - ----------------------------------------------------------------------------------------------------------------------- Asset Allocation (Inception Date -- 7/1/93) Beginning AUV...... $ 19.81 $ 19.448 Ending AUV......... $ 19.45 $ 18.614 Ending Number of AUs.............. 17,268,857 14,847,409 - ----------------------------------------------------------------------------------------------------------------------- Blue Chip Growth (Inception Date -- 7/6/00) Beginning AUV...... $ 10.00 $ 8.569 Ending AUV......... $ 8.57 $ 6.692 Ending Number of AUs.............. 330,806 718,225 - ----------------------------------------------------------------------------------------------------------------------- Cash Management (Inception Date -- 4/1/99) Beginning AUV...... $ 12.25 $ 12.793 Ending AUV......... $ 12.79 $ 13.062 Ending Number of AUs.............. 12,837,919 10,749,535 - -----------------------------------------------------------------------------------------------------------------------
A-1
FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR 11/30/99- PORTFOLIOS 11/30/94 11/30/95 11/30/96 11/30/97 11/30/98 11/30/99 12/31/99 - ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- Corporate Bond (Inception Date -- 7/1/93) Beginning AUV...... $ 10.12 $ 9.63 $ 11.10 $ 11.65 $ 12.54 $ 13.15 $ 12.78 Ending AUV......... $ 9.63 $ 11.10 $ 11.65 $ 12.54 $ 13.15 $ 12.78 $ 12.76 Ending Number of AUs.............. 1,643,694 2,623,065 3,059,808 4,235,990 5,896,471 5,339,302 5,225,508 - ----------------------------------------------------------------------------------------------------------------------- "Dogs" of Wall Street (Inception Date -- 4/1/98) Beginning AUV...... -- -- -- -- $ 10.00 $ 9.71 $ 9.12 Ending AUV......... -- -- -- -- $ 9.71 $ 9.12 $ 8.99 Ending Number of AUs.............. -- -- -- -- 1,450,214 1,509,434 1,368,990 - ----------------------------------------------------------------------------------------------------------------------- Emerging Markets (Inception Date -- 6/2/97) Beginning AUV...... -- -- -- $ 10.00 $ 7.97 $ 6.14 $ 8.99 Ending AUV......... -- -- -- $ 7.97 $ 6.14 $ 8.99 $ 10.77 Ending Number of AUs.............. -- -- -- 1,751,922 1,352,484 1,956,342 2,341,461 - ----------------------------------------------------------------------------------------------------------------------- Federated Value (Inception Date -- 6/3/96) Beginning AUV...... -- -- $ 10.00 $ 11.00 $ 13.62 $ 15.86 $ 16.43 Ending AUV......... -- -- $ 11.00 $ 13.62 $ 15.86 $ 16.43 $ 16.89 Ending Number of AUs.............. -- -- 1,021,137 3,095,513 4,255,000 4,164,599 4,001,010 - ----------------------------------------------------------------------------------------------------------------------- Global Bond (Inception Date -- 7/1/93) Beginning AUV...... $ 10.25 $ 9.78 $ 11.20 $ 12.25 $ 13.08 $ 14.40 $ 14.11 Ending AUV......... $ 9.78 $ 11.20 $ 12.25 $ 13.08 $ 14.40 $ 14.11 $ 14.09 Ending Number of AUs.............. 4,532,386 5,288,158 5,413,149 6,164,455 5,906,756 5,199,731 4,972,504 - ----------------------------------------------------------------------------------------------------------------------- Global Equities (Inception Date -- 2/9/93) Beginning AUV...... $ 10.86 $ 11.43 $ 13.01 $ 15.15 $ 16.90 $ 19.21 $ 24.20 Ending AUV......... $ 11.43 $ 13.01 $ 15.15 $ 16.90 $ 19.21 $ 24.20 $ 26.57 Ending Number of AUs.............. 11,705,418 12,350,883 15,583,207 18,376,185 17,594,064 15,218,999 15,364,906 - ----------------------------------------------------------------------------------------------------------------------- Goldman Sachs Research (Inception Date -- 7/5/00) Beginning AUV...... -- -- -- -- -- -- -- Ending AUV......... -- -- -- -- -- -- -- Ending Number of AUs.............. -- -- -- -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------- Growth-Income (Inception Date -- 2/9/93) Beginning AUV...... $ 10.47 $ 10.09 $ 13.32 $ 16.70 $ 21.41 $ 25.71 $ 33.11 Ending AUV......... $ 10.09 $ 13.32 $ 16.70 $ 21.41 $ 25.71 $ 33.11 $ 35.91 Ending Number of AUs.............. 8,329,322 12,560,865 18,546,142 24,795,824 25,801,808 24,491,425 24,109,131 - ----------------------------------------------------------------------------------------------------------------------- Growth Opportunities (Inception Date -- 7/6/00) Beginning AUV...... -- -- -- -- -- -- -- Ending AUV......... -- -- -- -- -- -- -- Ending Number of AUs.............. -- -- -- -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------- FISCAL YEAR FISCAL YEAR PORTFOLIOS 12/31/00 12/31/01 - ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- Corporate Bond (Inception Date -- 7/1/93) Beginning AUV...... $ 12.76 $ 13.190 Ending AUV......... $ 13.19 $ 13.972 Ending Number of AUs.............. 4,344,051 5,023,156 - ----------------------------------------------------------------------------------------------------------------------- "Dogs" of Wall Street (Inception Date -- 4/1/98) Beginning AUV...... $ 8.99 $ 9.122 Ending AUV......... $ 9.12 $ 9.692 Ending Number of AUs.............. 968,656 1,372,946 - ----------------------------------------------------------------------------------------------------------------------- Emerging Markets (Inception Date -- 6/2/97) Beginning AUV...... $ 10.77 $ 6.755 Ending AUV......... $ 6.75 $ 6.539 Ending Number of AUs.............. 2,086,312 1,798,703 - ----------------------------------------------------------------------------------------------------------------------- Federated Value (Inception Date -- 6/3/96) Beginning AUV...... $ 16.89 $ 17.029 Ending AUV......... $ 17.03 $ 16.381 Ending Number of AUs.............. 3,255,076 4,065,034 - ----------------------------------------------------------------------------------------------------------------------- Global Equities (Inception Date -- 2/9/93) Beginning AUV...... $ 14.09 $ 15.158 Ending AUV......... $ 15.16 $ 15.678 Ending Number of AUs.............. 4,219,650 3,668,692 - ----------------------------------------------------------------------------------------------------------------------- Growth-Income (Inception Date -- 2/9/93) Beginning AUV...... $ 26.57 $ 21.653 Ending AUV......... $ 21.65 $ 17.472 Ending Number of AUs.............. 13,718,168 11,040,552 - ----------------------------------------------------------------------------------------------------------------------- Goldman Sachs Research (Inception Date -- 7/5/00) Beginning AUV...... $ 10.00 $ 9.735 Ending AUV......... $ 9.74 $ 7.173 Ending Number of AUs.............. 887,882 462,829 - ----------------------------------------------------------------------------------------------------------------------- Growth-Income (Inception Date -- 2/9/93) Beginning AUV...... $ 35.91 $ 32.417 Ending AUV......... $ 32.42 $ 26.847 Ending Number of AUs.............. 22,388,200 19,215,798 - ----------------------------------------------------------------------------------------------------------------------- Growth Opportunities (Inception Date -- 7/6/00) Beginning AUV...... $ 10.00 $ 8.829 Ending AUV......... $ 8.83 $ 5.807 Ending Number of AUs.............. 828,752 970,417 - -----------------------------------------------------------------------------------------------------------------------
A-2
FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR 11/30/99- PORTFOLIOS 11/30/94 11/30/95 11/30/96 11/30/97 11/30/98 11/30/99 12/31/99 - ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- High-Yield Bond (Inception Date -- 2/9/93) Beginning AUV...... $ 10.98 $ 10.35 $ 11.48 $ 12.99 $ 14.66 $ 14.25 $ 14.71 Ending AUV......... $ 10.35 $ 11.48 $ 12.99 $ 14.66 $ 14.25 $ 14.71 $ 14.87 Ending Number of AUs.............. 5,370,944 7,075,451 8,358,195 11,443,250 12,597,083 10,532,444 10,247,398 - ----------------------------------------------------------------------------------------------------------------------- International Diversified Equities (Inception Date -- 10/31/94) Beginning AUV...... $ 10.00 $ 9.77 $ 10.07 $ 11.39 $ 11.62 $ 13.53 $ 15.49 Ending AUV......... $ 9.77 $ 10.07 $ 11.39 $ 11.62 $ 13.53 $ 15.49 $ 16.92 Ending Number of AUs.............. 271,316 4,659,066 12,762,343 18,010,557 17,917,499 16,071,377 15,905,912 - ----------------------------------------------------------------------------------------------------------------------- International Growth and Income (Inception Date -- 6/2/97) Beginning AUV...... -- -- -- $ 10.00 $ 10.33 $ 11.16 $ 13.40 Ending AUV......... -- -- -- $ 10.33 $ 11.16 $ 13.40 $ 14.07 Ending Number of AUs.............. -- -- -- 2,721,228 3,306,665 4,307,535 4,319,856 - ----------------------------------------------------------------------------------------------------------------------- MFS Growth and Income (Inception Date -- 2/9/93) Beginning AUV...... $ 10.65 $ 9.79 $ 12.81 $ 14.94 $ 17.63 $ 20.46 $ 22.55 Ending AUV......... $ 9.79 $ 12.81 $ 14.94 $ 17.63 $ 20.46 $ 22.55 $ 23.67 Ending Number of AUs.............. 10,477,818 11,457,899 12,077,737 11,714,450 10,439,634 9,723,097 9,598,954 - ----------------------------------------------------------------------------------------------------------------------- MFS Mid-Cap Growth (Inception Date -- 4/1/99) Beginning AUV...... -- -- -- -- -- -- $ 14.23 Ending AUV......... -- -- -- -- -- $ 14.23 $ 16.31 Ending Number of AUs.............. -- -- -- -- -- 869,761 1,068,886 - ----------------------------------------------------------------------------------------------------------------------- MFS Total Return (Inception Date -- 10/31/94) Beginning AUV...... $ 10.00 $ 9.95 $ 12.33 $ 13.82 $ 15.45 $ 17.28 $ 18.50 Ending AUV......... $ 9.95 $ 12.33 $ 13.82 $ 15.45 $ 17.28 $ 18.50 $ 18.60 Ending Number of AUs.............. 51,759 2,441,901 4,583,234 5,415,312 5,465,650 5,719,070 5,709,183 - ----------------------------------------------------------------------------------------------------------------------- Putnam Growth (Inception Date -- 2/9/93) Beginning AUV...... $ 9.92 $ 9.79 $ 12.60 $ 14.88 $ 18.47 $ 22.29 $ 28.36 Ending AUV......... $ 9.79 $ 12.60 $ 14.88 $ 18.47 $ 22.29 $ 28.36 $ 31.67 Ending Number of AUs.............. 7,610,104 8,932,998 10,354,025 11,336,732 12,052,558 11,402,199 11,286,031 - ----------------------------------------------------------------------------------------------------------------------- Real Estate (Inception Date -- 6/2/97) Beginning AUV...... -- -- -- $ 10.00 $ 11.44 $ 9.80 $ 8.50 Ending AUV......... -- -- -- $ 11.44 $ 9.80 $ 8.50 $ 8.91 Ending Number of AUs.............. -- -- -- 1,632,804 2,521,169 2,159,442 1,934,426 - ----------------------------------------------------------------------------------------------------------------------- SunAmerica Balanced (Inception Date -- 6/3/96) Beginning AUV...... -- -- $ 10.00 $ 11.04 $ 13.22 $ 15.60 $ 18.23 Ending AUV......... -- -- $ 11.04 $ 13.22 $ 15.60 $ 18.23 $ 19.69 Ending Number of AUs.............. -- -- 817,039 2,447,948 4,179,545 5,352,344 5,364,585 - ----------------------------------------------------------------------------------------------------------------------- FISCAL YEAR FISCAL YEAR PORTFOLIOS 12/31/00 12/31/01 - ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- High-Yield Bond (Inception Date -- 2/9/93) Beginning AUV...... $ 14.87 $ 13.278 Ending AUV......... $ 13.28 $ 12.511 Ending Number of AUs.............. 8,339,613 7,529,500 - ----------------------------------------------------------------------------------------------------------------------- International Diversified Equities (Inception Date -- 10/31/94) Beginning AUV...... $ 16.92 $ 13.614 Ending AUV......... $ 13.61 $ 10.196 Ending Number of AUs.............. 14,143,933 11,775,969 - ----------------------------------------------------------------------------------------------------------------------- International Growth and Income (Inception Date -- 6/2/97) Beginning AUV...... $ 14.07 $ 14.023 Ending AUV......... $ 14.02 $ 10.743 Ending Number of AUs.............. 4,771,471 4,012,997 - ----------------------------------------------------------------------------------------------------------------------- MFS Growth and Income (Inception Date -- 2/9/93) Beginning AUV...... $ 23.67 $ 23.224 Ending AUV......... $ 23.22 $ 19.203 Ending Number of AUs.............. 8,247,309 7,261,760 - ----------------------------------------------------------------------------------------------------------------------- MFS Mid-Cap Growth (Inception Date -- 4/1/99) Beginning AUV...... $ 16.31 $ 17.607 Ending AUV......... $ 17.61 $ 13.420 Ending Number of AUs.............. 4,096,885 3,490,131 - ----------------------------------------------------------------------------------------------------------------------- MFS Total Return (Inception Date -- 10/31/94) Beginning AUV...... $ 18.60 $ 21.433 Ending AUV......... $ 21.43 $ 21.225 Ending Number of AUs.............. 5,030,406 6,081,406 - ----------------------------------------------------------------------------------------------------------------------- Putnam Growth (Inception Date -- 2/9/93) Beginning AUV...... $ 31.67 $ 25.556 Ending AUV......... $ 25.56 $ 19.097 Ending Number of AUs.............. 10,145,801 8,052,999 - ----------------------------------------------------------------------------------------------------------------------- Real Estate (Inception Date -- 6/2/97) Beginning AUV...... $ 8.91 $ 10.856 Ending AUV......... $ 10.86 $ 11.339 Ending Number of AUs.............. 2,146,190 2,089,006 - ----------------------------------------------------------------------------------------------------------------------- SunAmerica Balanced (Inception Date -- 6/3/96) Beginning AUV...... $ 19.69 $ 17.560 Ending AUV......... $ 17.56 $ 15.021 Ending Number of AUs.............. 5,126,272 4,210,209 - -----------------------------------------------------------------------------------------------------------------------
A-3
FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR 11/30/99- PORTFOLIOS 11/30/94 11/30/95 11/30/96 11/30/97 11/30/98 11/30/99 12/31/99 - ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- Technology (Inception Date -- 7/5/00) Beginning AUV...... -- -- -- -- -- -- -- Ending AUV......... -- -- -- -- -- -- -- Ending Number of AUs.............. -- -- -- -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------- Telecom Utility (Inception Date -- 6/3/96) Beginning AUV...... -- -- $ 10.00 $ 10.67 $ 12.74 $ 14.56 $ 15.16 Ending AUV......... -- -- $ 10.67 $ 12.74 $ 14.56 $ 15.16 $ 15.11 Ending Number of AUs.............. -- -- 543,461 1,541,346 2,120,487 2,046,427 2,024,299 - ----------------------------------------------------------------------------------------------------------------------- Davis Venture Value (Inception Date -- 10/31/94) Beginning AUV...... $ 10.00 $ 9.77 $ 13.29 $ 16.68 $ 21.30 $ 23.36 $ 26.57 Ending AUV......... $ 9.77 $ 13.29 $ 16.68 $ 21.30 $ 23.36 $ 26.57 $ 27.88 Ending Number of AUs.............. 355,083 11,270,792 29,247,554 44,892,446 46,069,429 42,175,145 41,825,421 - ----------------------------------------------------------------------------------------------------------------------- Worldwide High Income (Inception Date -- 10/31/94) Beginning AUV...... $ 10.00 $ 9.95 $ 11.36 $ 14.20 $ 15.98 $ 13.57 $ 15.23 Ending AUV......... $ 9.95 $ 11.36 $ 14.20 $ 15.98 $ 13.57 $ 15.23 $ 15.70 Ending Number of AUs.............. 53,315 1,040,828 3,196,739 6,368,247 5,463,589 4,234,687 4,110,589 - ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- FISCAL YEAR FISCAL YEAR PORTFOLIOS 12/31/00 12/31/01 - ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- Technology (Inception Date -- 7/5/00) Beginning AUV...... $ 10.00 $ 6.692 Ending AUV......... $ 6.69 $ 3.452 Ending Number of AUs.............. 1,818,833 1,792,428 - ----------------------------------------------------------------------------------------------------------------------- Telecom Utility (Inception Date -- 6/3/96) Beginning AUV...... $ 15.11 13.538 Ending AUV......... $ 13.54 11.504 Ending Number of AUs.............. 1,711,385 1,356,237 - ----------------------------------------------------------------------------------------------------------------------- Davis Venture Value (Inception Date -- 10/31/94) Beginning AUV...... $ 27.88 30.052 Ending AUV......... $ 30.05 26.245 Ending Number of AUs.............. 38,384,619 34,548,238 - ----------------------------------------------------------------------------------------------------------------------- Worldwide High Income (Inception Date -- 10/31/94) Beginning AUV...... $ 15.70 15.005 Ending AUV......... $ 15.00 14.299 Ending Number of AUs.............. 3,413,896 2,780,936 - ----------------------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------------------
AUV -- Accumulation Unit Value AU -- Accumulation Units 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+0.005)](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 remaining in the term you initially agreed to leave your money in the fixed account option; and N is the number of full months remaining in the term you initially agreed to leave your money in the fixed account option. EXAMPLES OF THE MVA The examples below assume the following: (1) You made an initial Purchase Payment of $10,000 and allocated it to the 10-year fixed account option at a rate of 5%; (2) You make a partial withdrawal of $4,000 when 1 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. No withdrawal charges are reflected because your Purchase Payment has been in the contract for seven full years. If a withdrawal charge applies, it is deducted before the MVA. The MVA is assessed on the amount withdrawn less any withdrawal charges. POSITIVE ADJUSTMENT Assume that on the date of withdrawal, the interest rate in effect for a new Purchase Payments in the 1-year fixed account option is 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+0.005)](N/12) - 1 = [(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+0.005)](N/12) - 1 = [(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 -- 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 0.50% 2.35% - ---------------------------------------------------------------------------------------- Maine 0% 2.0% - ---------------------------------------------------------------------------------------- Nevada 0% 3.5% - ---------------------------------------------------------------------------------------- South Dakota 0% 1.25%* - ---------------------------------------------------------------------------------------- West Virginia 1.0% 1.0% - ---------------------------------------------------------------------------------------- Wyoming 0% 1.0% - ---------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------
*On the first $500,000 of premiums; 0.80% on the amount in excess of $500,000. C-1 - -------------------------------------------------------------------------------- Please forward a copy (without charge) of the Polaris 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 - -------------------------------------------------------------------------------- PROSPECTUS July 9, 2001 FLEXIBLE PAYMENT DEFERRED ANNUITY CONTRACT issued by VARIABLE SEPARATE ACCOUNT and ANCHOR NATIONAL LIFE INSURANCE COMPANY The annuity contract has 29 investment choices - 7 available fixed investment options which offer interest rates guaranteed by Anchor National for different periods of time and 22 variable investment portfolios. The 22 variable portfolios are part of Anchor Series Trust ("AST"), the SunAmerica Series Trust ("SAST") or the WM Variable Trust ("WMVT"). STRATEGIC ASSET MANAGEMENT PORTFOLIOS STRATEGIC GROWTH WM ADVISORS, INC. WMVT CONSERVATIVE GROWTH WM ADVISORS, INC. WMVT BALANCED WM ADVISORS, INC. WMVT CONSERVATIVE BALANCED WM ADVISORS, INC. WMVT FLEXIBLE INCOME WM ADVISORS, INC. WMVT
EQUITY FUNDS EQUITY INCOME WM ADVISORS, INC. WMVT GROWTH & INCOME WM ADVISORS, INC. WMVT DAVIS VENTURE VALUE DAVIS SELECTED ADVISERS, LP SAST GROWTH FUND OF THE NORTHWEST WM ADVISORS, INC. WMVT ALLIANCE GROWTH ALLIANCE CAPITAL MGMT. L.P. SAST GROWTH JANUS CAPITAL CORPORATION WMVT CAPITAL APPRECIATION WELLINGTON MGMT. CO. LLP AST MFS MID CAP GROWTH MASSACHUSETTS FINANCIAL SERVICES CO. SAST MID CAP STOCK WM ADVISORS, INC. WMVT SMALL CAP STOCK WM ADVISORS, INC. WMVT GLOBAL EQUITIES ALLIANCE CAPITAL MGMT. L.P. SAST INTERNATIONAL GROWTH CAPITAL GUARDIAN TRUST COMPANY WMVT TECHNOLOGY MORGAN STANLEY INVESTMENT MGMT., INC. SAST
FIXED-INCOME FUNDS U.S. GOVERNMENT SECURITIES WM ADVISORS, INC. WMVT INCOME WM ADVISORS, INC. WMVT SHORT TERM INCOME WM ADVISORS, INC. WMVT MONEY MARKET WM ADVISORS, INC. WMVT
You can put your money into any one or all of the Variable Portfolios and/or fixed investment options. Please read this prospectus carefully before investing and keep it for your future reference. It contains important information you should know about the WM Diversified Strategies Variable Annuity. To learn more about the annuity offered by this prospectus, you can obtain a copy of the Statement of Additional Information ("SAI") dated July 9, 2001. The SAI has been filed with the Securities and Exchange Commission ("SEC") and can be considered part of this prospectus. The table of contents of the SAI appears on page 38 of this prospectus. For a free copy of the SAI, call us at 1-877-311-WMVA (9682) or write our Annuity Service Center at, P.O. Box 54299, Los Angeles, California 90054-0299. 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. In addition, the SEC maintains a website (http://www.sec.gov) that contains the SAI, materials incorporated by reference and other information filed electronically with the SEC. ANNUITIES INVOLVE RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL, AND ARE NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR ENDORSED BY, ANY BANK. THEY ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE Anchor National's Annual Report on Form 10-K/A for the year ended December 31, 2001 is incorporated herein by reference. All documents or reports filed by Anchor National under Section 13(a), 13(c), 14 or 15(a) 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 are deemed to modify or supercede documents incorporated herein by reference. Anchor National files its Exchange Act documents and reports, including its annual and quarterly reports on Form 10-K and Form 10-Q, electronically pursuant to EDGAR under CIK No. 0000006342. Anchor National is subject to the informational requirements of the Securities and Exchange Act of 1934 (as amended). We file reports and other information with the SEC to meet those requirements. You can inspect and copy this information at SEC public facilities at the following locations: WASHINGTON, DISTRICT OF COLUMBIA 450 Fifth Street, N.W., Room 1024 Washington, D.C. 20549 CHICAGO, ILLINOIS 500 West Madison Street Chicago, IL 60661 NEW YORK, NEW YORK 7 World Trade Center, 13th Fl. New York, NY 10048 To obtain copies by mail, contact the Washington, D.C. location. After you pay the fees as prescribed by the rules and regulations of the SEC, the required documents are mailed. Registration statements under the Securities Act of 1933, as amended, related to the contracts offered by this prospectus are on file with the SEC. This prospectus does not contain all of the information contained in the registration statements and exhibits. For further information regarding the separate account, Anchor National and its general account, the Variable Portfolios and the contract, please refer to the registration statements and exhibits. The SEC also maintains a website (http:// www.sec.gov) that contains the SAI, materials incorporated by reference and other information filed electronically with the SEC by Anchor National. Anchor National will provide without charge to each person to whom this prospectus is delivered, upon written or oral request, a copy of the 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 SECURITIES AND EXCHANGE COMMISSION POSITION ON INDEMNIFICATION 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 TABLE OF CONTENTS GLOSSARY.................................................... 4 HIGHLIGHTS.................................................. 5 FEE TABLES.................................................. 6 Owner Transaction Expenses............................... 6 Annual Separate Account Expenses......................... 6 The Optional Income Protector Fee........................ 6 The Optional Estate Rewards Death Benefit Fee............ 6 The Optional Earnings Advantage Fee...................... 6 Investment Portfolio Expenses of Variable Portfolios..... 7 EXAMPLES.................................................... 9 THE WM DIVERSIFIED STRATEGIES VARIABLE ANNUITY.............. 12 PURCHASING A WM DIVERSIFIED STRATEGIES VARIABLE ANNUITY..... 13 Allocation of Purchase Payments.......................... 13 Accumulation Units....................................... 13 Free Look................................................ 14 INVESTMENT OPTIONS.......................................... 14 Variable Portfolios...................................... 14 Market Value Adjustment.................................. 16 Transfers During the Accumulation Phase.................. 17 Dollar Cost Averaging.................................... 18 Asset Allocation Rebalancing Program..................... 19 Principal Advantage Program.............................. 19 Voting Rights............................................ 19 Substitution............................................. 19 ACCESS TO YOUR MONEY........................................ 19 Free Withdrawal Provision................................ 20 Systematic Withdrawal Program............................ 21 Nursing Home Waiver...................................... 21 Minimum Contract Value................................... 22 Qualified Contract Owners................................ 22 DEATH BENEFIT............................................... 22 Standard Death Benefit................................... 23 Estate Rewards Death Benefit............................. 23 Spousal Continuation..................................... 25 EXPENSES.................................................... 25 Insurance Charges........................................ 25 Withdrawal Charges....................................... 26 Investment Charges....................................... 26 Contract Maintenance Fee................................. 26 Transfer Fee............................................. 27 Option Death Benefit Fees................................ 27 Optional Income Protector Fee............................ 27 Premium Tax.............................................. 27 Income Taxes............................................. 27 Reduction or Elimination of Charges and Expenses, and Additional Amounts Credited............................ 27 INCOME OPTIONS.............................................. 28 Annuity Date............................................. 28 Income Options........................................... 28 Allocation of Annuity Payments........................... 29 Transfers During the Income Phase........................ 30 Deferment of Payments.................................... 30 The Income Protector..................................... 30 TAXES....................................................... 33 Annuity Contracts in General............................. 33 Tax Treatment of Distributions--Non-qualified Contracts.............................................. 33 Tax Treatment of Distributions--Qualified Contracts...... 33 Minimum Distributions.................................... 34 Tax Treatment of Death Benefits.......................... 34 Diversification.......................................... 35 PERFORMANCE................................................. 35 OTHER INFORMATION........................................... 36 Anchor National.......................................... 36 The Separate Account..................................... 36 Custodian................................................ 36 The General Account...................................... 36 Distribution of the Contract............................. 36 Administration........................................... 37 Legal Proceedings........................................ 37 INDEPENDENT ACCOUNTANTS..................................... 37 TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.... 38 APPENDIX A--MARKET VALUE ADJUSTMENT......................... A-1 APPENDIX B--DEATH BENEFITS FOLLOWING SPOUSAL CONTINUATION... B-1 APPENDIX C.................................................. C-1 APPENDIX D--PREMIUM TAXES................................... D-1
3 GLOSSARY We have capitalized some of the technical terms used in this prospectus. To help you understand these terms, we define 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 annuity payments. ANNUITY DATE--The date on which annuity payments are to begin, as selected by you. ANNUITY UNITS--A measurement we use to calculate the amount of annuity payments you receive from the variable portion of your contract during the Income Phase. BENEFICIARY(IES)--The person(s) designated to receive any benefits under the contract if you or the Annuitant dies. COMPANY--Anchor National Life Insurance Company ("Anchor National"), We, Us, the issuer of this annuity contract. INCOME PHASE--The period during which we make annuity 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"). VARIABLE PORTFOLIOS--A sub-account of Variable Separate Account which provides for the variable investment options available under the contract. Each has a distinct investment objective and is invested in the underlying investment portfolios of the Anchor Series Trust, SunAmerica Series Trust or the WM Variable Trust as applicable. PURCHASE PAYMENTS--The money you give us to buy the contract, as well as any additional money you give us to invest in the contract after you own it. QUALIFIED (CONTRACT)--A contract purchased with pretax dollars. These contracts are generally purchased under a pension plan, specially sponsored program or individual retirement account ("IRA"). 4 HIGHLIGHTS ANCHOR NATIONAL OFFERS SEVERAL DIFFERENT 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 INVESTMENT REPRESENTATIVE 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. The WM Diversified Strategies 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: If you cancel your contract within 10 days after receiving it (or whatever period is required in your state), we will cancel the contract without charging a withdrawal charge. You will receive whatever your contract is worth on the day that we receive your request. This amount 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 WM DIVERSIFIED STRATEGIES VARIABLE ANNUITY in the prospectus. EXPENSES: There are fees and charges associated with the contract. Each year, we deduct a $35 contract maintenance fee from your contract, which may be waived for contracts of $50,000 or more. We also deduct insurance charges, which equal 1.40% 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 these features. A separate withdrawal charge schedule applies to each Purchase Payment. The amount of the withdrawal charge declines over time. After a Purchase Payment has been in the contract for seven complete years, withdrawal charges no longer apply to that portion of the Purchase Payment. Please see the FEE TABLE, PURCHASING A WM DIVERSIFIED STRATEGIES 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. As noted above, a withdrawal charge may apply. 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. Optional enhanced death benefits are also available. 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. 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. INQUIRIES: If you have questions about your contract call your investment representative or contact us at Anchor National Life Insurance Company Annuity Service Center P.O. Box 54299 Los Angeles, California 90054-0299. Telephone Number: 1 (877) 311-WMVA (9682). 5 WM DIVERSIFIED STRATEGIES VARIABLE ANNUITY FEE TABLES - -------------------------------------------------------------------------------- OWNER TRANSACTION EXPENSES Withdrawal Charge as a percentage of Purchase Payments:
YEARS: 1 2 3 4 5 6 7 8 7% 6% 6% 5% 4% 3% 2% 0%
Contract Maintenance Charge................. $35 each year ($30 in North Dakota) (waived for contracts over $50,000) Transfer Fee........... No charge for first 15 transfers each contract year; thereafter, fee is $25 ($10 in Pennsylvania and Texas) per transfer
THE OPTIONAL ESTATE REWARDS DEATH BENEFIT FEE (The Estate Rewards Death Benefit offers a choice of one of two optional enhanced death benefits which are described more fully in the prospectus. If elected, the fee is an annualized charge that is deducted daily from your contract value.) Fee as a % of your daily net asset value........ .15%
THE OPTIONAL INCOME PROTECTOR FEE (The Income Protector which is described more fully in the prospectus is optional and if elected the fee is deducted annually from your contract value.)
GROWTH RATE ANNUAL FEE AS A % OF YOUR INCOME BENEFIT BASE* - ----------- ---------------------------------------------- 0%.... .10%
* The Income Benefit Base, which is described more fully in the prospectus is generally calculated by using your contract value on the date of your effective enrollment in the program and then each subsequent contract anniversary, adding purchase payments made since the prior contract anniversary, less proportionate withdrawals, and fees and charges applicable to those withdrawals. ANNUAL SEPARATE ACCOUNT EXPENSES (as a percentage of daily net asset value) Mortality Risk Charge..................... 0.90% Expense Risk Charge....................... 0.35% Distribution Expense Charge............... 0.15% ---- Total Separate Account Expenses...................... 1.40%
THE OPTIONAL EARNINGS ADVANTAGE FEE (Earnings Advantage, an enhanced death benefit feature, which is described more fully in the prospectus is optional and if elected, the fee is an annualized charge that is deducted daily from your contract value.) Fee as a % of your daily net asset value........ .25%
6 INVESTMENT PORTFOLIO EXPENSES OF VARIABLE PORTFOLIOS ANCHOR SERIES TRUST (as a percentage of average net assets for the Trust's fiscal year ended December 31, 2000)
MANAGEMENT SERVICE (12b-1) OTHER TOTAL ANNUAL PORTFOLIO FEE FEES(1) EXPENSES EXPENSES - ---------------------------------------------------------------------------------------------------- Capital Appreciation(2) 0.70% 0.15% 0.05% 0.90% - ---------------------------------------------------------------------------------------------------- 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) Alliance Growth 0.60% 0.15% 0.04% 0.79% Davis Venture Value 0.71% 0.15% 0.04% 0.90% Global Equities 0.70% 0.15% 0.14% 0.99% MFS Mid Cap Growth(3,4) 0.75% 0.15% 0.07% 0.97% Technology(5) 1.20% 0.15% 0.29% 1.64% - ----------------------------------------------------------------------------------------------------
(1) This Service Fee became effective pursuant to a 12b-1 Plan adopted by the Board of Trustees on May 21, 2001 (SunAmerica Series Trust) and May 30, 2001 (Anchor Series Trust). Although the Service Fee is reflected in the figures shown here, it was not in effect on December 31, 2000 or January 1, 2001 for the Anchor Series Trust or SunAmerica Series Trust, respectively. (2) 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 and shareholders. Actual management fees and total annual expenses incurred at fiscal year end 2000 were 0.65% and 0.70%, respectively. (3) For this portfolio the adviser, SunAmerica Asset Management Corp., has voluntarily agreed to waive fees or expenses as necessary to keep operating expenses at or below established maximum amounts. All waivers or reimbursments may be terminated at any time. Only certain portfolios relied on these waivers and/or reimbursements during this fiscal year as follows: MFS Mid-Cap Growth Portfolio, the adviser recouped prior year expense reimbursements that were mathematically insignificant resulting in the expense ration before and after recoupment remaining at 0.82%. (4) Gross of custody credits of 0.01%. (5) Annualized. THE ABOVE INVESTMENT PORTFOLIO EXPENSES WERE PROVIDED BY THE TRUSTS. WE HAVE NOT INDEPENDENTLY VERIFIED THE ACCURACY OF THE INFORMATION. 7 THE WM VARIABLE TRUST (as a percentage of daily net asset value of each investment portfolio as of the fiscal year end of the Trust ended December 31, 2000)
TOTAL MANAGEMENT OTHER ANNUAL FEE EXPENSES(1) EXPENSES(1, 2) - ------------------------------------------------------------------------------------------------------- Balanced Portfolio* 0.10% 0.19% 0.29% Conservative Balanced Portfolio 0.10% 0.34% 0.44% Conservative Growth Portfolio* 0.10% 0.18% 0.28% Equity Income Fund 0.63% 0.19% 0.82% Flexible Income Portfolio* 0.10% 0.21% 0.31% Growth & Income Fund 0.76% 0.03% 0.79% Growth Fund 0.88% 0.06% 0.94% Growth Fund of the Northwest 0.63% 0.10% 0.73% Income Fund 0.50% 0.08% 0.58% International Growth Fund 0.92% 0.21% 1.13% Mid Cap Stock Fund(3) 0.75% 0.11% 0.86% Money Market Fund 0.45% 0.15% 0.60% Short Term Income Fund 0.50% 0.14% 0.64% Small Cap Stock Fund 0.86% 0.07% 0.93% Strategic Growth Portfolio* 0.10% 0.20% 0.30% U.S. Government Securities Fund(4) 0.50% 0.08% 0.58% - -------------------------------------------------------------------------------------------------------
(1) The Other Expenses for the Portfolios and the Funds are based on 2000 operating experience adjusted to reflect the elimination of an administration fee that had been paid by the funds prior to January 1, 2001. (2) The Annual Expenses of the Portfolios, combined with the Annual Expenses of the underlying Funds are shown under "Annual Expenses of the Portfolios and Underlying Funds Combined," immediately following. (3) Other Expenses are estimated for the current fiscal year for the Mid Cap Stock Fund. * ANNUAL EXPENSES OF THE PORTFOLIOS AND UNDERLYING FUNDS COMBINED Each Portfolio will invest in Funds of the WM Trust and in the WM High Yield Fund (a series of WM Trust I) in keeping with certain allocations and investment objectives. You will bear certain expenses associated with those Funds in addition to those related to the Portfolios themselves. The chart below shows estimated combined annual expenses for each Portfolio and the Funds in which the Portfolio may invest. The expenses are based upon estimated expenses of each Portfolio and underlying Fund for the fiscal year ended December 31, 2000, restated to reflect current management fees. Please refer to the Trust prospectus for more details. The estimates assume a constant allocation of each Portfolio's assets among the Funds identical to such Portfolio's actual allocation at December 31, 2000.
COMBINED PORTFOLIOS ANNUAL EXPENSES - ----------------------------------------------------------------------------- Balanced Portfolio.......................................... 1.04% Conservative Balanced Portfolio............................. 1.15% Conservative Growth Portfolio............................... 1.10% Flexible Income Portfolio................................... 0.97% Strategic Growth Portfolio.................................. 1.17% - -----------------------------------------------------------------------------
THE ABOVE INVESTMENT PORTFOLIO EXPENSES WERE PROVIDED THE WM VARIABLE TRUST. WE HAVE NOT INDEPENDENTLY VERIFIED THE ACCURACY OF THE INFORMATION. 8 EXAMPLES You will pay the following expenses on a $1,000 investment, assuming a 5% annual return on assets, Investment Portfolio Expenses after any waiver, reimbursement or recoupment (assuming the waiver, reimbursement or recoupment will continue for the period shown), if applicable, and (a) If the contract is surrendered at the end of the stated time period and no optional features are elected. (b) If the contract is surrendered and you elect the Enhanced Death Benefit, Earnings Advantage and the Income Protector Program at the maximum charges offered of .15%, .25%, .10%, respectively. (c) If the contract is not surrendered or is annuitized and no optional features are elected.* (d) If the contract is not surrendered and you elect the Enhanced Death Benefit, Earnings Advantage and the Income Protector Program at the maximum charges offered of 15%, 25%, 10%, respectively.
TIME PERIODS - --------------------------------------------------------------------------------------------------------------------- ANCHOR SERIES TRUST 1 YEAR 3 YEARS 5 YEARS 10 YEARS - --------------------------------------------------------------------------------------------------------------------- Capital Appreciation Portfolio (a) $ 94 (a) $134 (a) $167 (a) $272 (b) $ 99 (b) $149 (b) $192 (b) $321 (c) $ 24 (c) $ 74 (c) $127 (c) $272 (d) $ 29 (d) $ 89 (d) $152 (d) $321 - ---------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------- SUNAMERICA SERIES TRUST 1 YEAR 3 YEARS 5 YEARS 10 YEARS - ------------------------------------------------------------------------------------------------------------------------------- Alliance Growth Portfolio (a) $ 93 (a) $131 (a) $162 (a) $261 (b) $ 98 (b) $146 (b) $187 (b) $311 (c) $ 23 (c) $ 71 (c) $122 (c) $261 (d) $ 28 (d) $ 86 (d) $147 (d) $311 Davis Venture Value Portfolio (a) $ 94 (a) $134 (a) $167 (a) $272 (b) $ 99 (b) $149 (b) $192 (b) $321 (c) $ 24 (c) $ 74 (c) $127 (c) $272 (d) $ 29 (d) $ 89 (d) $152 (d) $321 Global Equities Portfolio (a) $ 95 (a) $137 (a) $172 (a) $281 (b) $100 (b) $152 (b) $197 (b) $330 (c) $ 25 (c) $ 77 (c) $132 (c) $281 (d) $ 30 (d) $ 92 (d) $157 (d) $330 MFS Mid Cap Growth (a) $ 95 (a) $137 (a) $171 (a) $279 (b) $100 (b) $151 (b) $196 (b) $328 (c) $ 25 (c) $ 77 (c) $131 (c) $279 (d) $ 30 (d) $ 91 (d) $156 (d) $328 Technology Portfolio (a) $102 (a) $156 (a) $204 (a) $344 (b) $107 (b) $171 (b) $228 (b) $389 (c) $ 32 (c) $ 96 (c) $164 (c) $344 (d) $ 37 (d) $111 (d) $188 (d) $389 - -------------------------------------------------------------------------------------------------------------------------------
9
- ------------------------------------------------------------------------------------------------------------------------------- WM VARIABLE TRUST 1 YEAR 3 YEARS 5 YEARS 10 YEARS - ------------------------------------------------------------------------------------------------------------------------------- Balanced Portfolio (a) $ 96 (a) $139 (a) $174 (a) $286 (b) $101 (b) $154 (b) $199 (b) $334 (c) $ 26 (c) $ 79 (c) $134 (c) $286 (d) $ 31 (d) $ 94 (d) $159 (d) $334 Conservative Balanced Portfolio (a) $ 97 (a) $142 (a) $180 (a) $297 (b) $102 (b) $157 (b) $204 (b) $345 (c) $ 27 (c) $ 82 (c) $140 (c) $297 (d) $ 32 (d) $ 97 (d) $164 (d) $345 Conservative Growth Portfolio (a) $ 96 (a) $140 (a) $177 (a) $292 (b) $101 (b) $155 (b) $202 (b) $340 (c) $ 26 (c) $ 80 (c) $137 (c) $292 (d) $ 31 (d) $ 95 (d) $162 (d) $340 Equity Income Fund (a) $ 93 (a) $132 (a) $163 (a) $264 (b) $ 98 (b) $147 (b) $188 (b) $314 (c) $ 23 (c) $ 72 (c) $123 (c) $264 (d) $ 28 (d) $ 87 (d) $148 (d) $314 Flexible Income Portfolio (a) $ 95 (a) $137 (a) $171 (a) $279 (b) $100 (b) $151 (b) $196 (b) $328 (c) $ 25 (c) $ 77 (c) $131 (c) $279 (d) $ 30 (d) $ 91 (d) $156 (d) $328 Growth & Income Fund (a) $ 93 (a) $131 (a) $162 (a) $261 (b) $ 98 (b) $146 (b) $187 (b) $311 (c) $ 23 (c) $ 71 (c) $122 (c) $261 (d) $ 28 (d) $ 86 (d) $147 (d) $311 Growth Fund (a) $ 95 (a) $136 (a) $169 (a) $276 (b) $100 (b) $151 (b) $194 (b) $325 (c) $ 25 (c) $ 76 (c) $129 (c) $276 (d) $ 30 (d) $ 91 (d) $154 (d) $325 Growth Fund of the Northwest (a) $ 92 (a) $129 (a) $159 (a) $255 (b) $ 97 (b) $144 (b) $184 (b) $305 (c) $ 22 (c) $ 69 (c) $119 (c) $255 (d) $ 27 (d) $ 84 (d) $144 (d) $305 Income Fund (a) $ 91 (a) $125 (a) $151 (a) $240 (b) $ 96 (b) $140 (b) $176 (b) $290 (c) $ 21 (c) $ 65 (c) $111 (c) $240 (d) $ 26 (d) $ 80 (d) $136 (d) $290 International Growth Fund (a) $ 96 (a) $141 (a) $179 (a) $295 (b) $101 (b) $156 (b) $203 (b) $343 (c) $ 26 (c) $ 81 (c) $139 (c) $295 (d) $ 31 (d) $ 96 (d) $163 (d) $343 Mid Cap Stock Fund (a) $ 94 (a) $133 (a) $165 (a) $268 (b) $ 99 (b) $148 (b) $190 (b) $317 (c) $ 24 (c) $ 73 (c) $125 (c) $268 (d) $ 29 (d) $ 88 (d) $150 (d) $317 Money Market Fund (a) $ 91 (a) $125 (a) $152 (a) $242 (b) $ 96 (b) $140 (b) $177 (b) $292 (c) $ 21 (c) $ 65 (c) $112 (c) $242 (d) $ 26 (d) $ 80 (d) $137 (d) $292 Short Term Income Fund (a) $ 92 (a) $127 (a) $154 (a) $246 (b) $ 97 (b) $142 (b) $179 (b) $296 (c) $ 22 (c) $ 67 (c) $114 (c) $246 (d) $ 27 (d) $ 82 (d) $139 (d) $296 Small Cap Stock Fund (a) $ 94 (a) $135 (a) $169 (a) $275 (b) $ 99 (b) $150 (b) $194 (b) $324 (c) $ 24 (c) $ 75 (c) $129 (c) $275 (d) $ 29 (d) $ 90 (d) $154 (d) $324 Strategic Growth Portfolio (a) $ 97 (a) $143 (a) $181 (a) $299 (b) $102 (b) $157 (b) $205 (b) $346 (c) $ 27 (c) $ 83 (c) $141 (c) $299 (d) $ 32 (d) $ 97 (d) $165 (d) $346 U.S. Government Securities Fund (a) $ 91 (a) $125 (a) $151 (a) $240 (b) $ 96 (b) $140 (b) $176 (b) $290 (c) $ 21 (c) $ 65 (c) $111 (c) $240 (d) $ 26 (d) $ 80 (d) $136 (d) $290 - -------------------------------------------------------------------------------------------------------------------------------
* We do not currently charge a surrender charge upon annuitization, unless the contract is annuitized under the Income Protector Program. We will assess any applicable surrender charges upon annuitizations effected using the Income Protector Program as if you had fully surrendered your contract. 10 EXPLANATION OF FEE TABLES AND EXAMPLES 1. The purpose of the Fee Tables is to show you the various expenses you will incur directly and indirectly by investing in the contract. The example reflects owner transaction expenses, separate account expenses including optional benefit fees in some examples and variable portfolio expenses. We converted the contract administration charge to a percentage (0.09%) using an assumed contract size of $40,000. The actual impact of the administration charge may differ from this percentage and may be waived for contract values over $50,000. 2. The Examples assume that no transfer fees were imposed. Premium taxes are not reflected but may be applicable. 3. For certain underlying investment portfolios in which the Variable Portfolios invest, the adviser voluntarily agreed to waive fees or reimburse expenses, if necessary, to keep annual operating expenses at or below the following percentages of each of the following Portfolios' average net assets: MFS Mid Cap Growth 1.15% (recouping prior expense reimbursement); and Technology 1.55%. The adviser also may voluntarily waive or reimburse additional amounts to increase the investment return to a Portfolio's investors. The adviser may terminate all such waivers and/or reimbursements at any time. Further, any waivers or reimbursements made by the adviser with respect to a Portfolio are subject to recoupment from that Portfolio within the following two years, provided that the Portfolio is able to effect such payment to the adviser and remain in compliance with the foregoing expense limitations. 4. THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. As of the date of this Prospectus sales of WM Diversified Strategies Variable Annuity have not begun. Therefore no condensed financial information is shown in this prospectus. 11 THE WM DIVERSIFIED STRATEGIES VARIABLE ANNUITY - -------------------------------------------------------------------------------- An annuity is a contract between you and an insurance company. You are the owner of the contract. The contract provides three main benefits: - Tax Deferral: 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 withdrawn. If you are considering funding a tax-qualified retirement plan with an annuity, you should know that an annuity does not provide any additional tax deferral treatment of earnings beyond the treatment provided by the tax-qualified retirement plan itself. However, annuities do provide other features and benefits which may be valuable to you. You should fully discuss this decision with your financial advisor. 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 payments to you out of the money accumulated in your contract. The Contract is called a "variable" annuity because it allows you to invest in variable investment portfolios which we call Variable Portfolios. The Variable Portfolios, are similar to mutual funds, in that they have specific investment objectives and their performance varies. You can gain or lose money if you invest in these Variable Portfolios. The amount of money you accumulate in your contract depends on the performance of the Variable Portfolio(s) in which you invest. The Contract also offers several fixed account options for varying time periods. Fixed account options earn interest at a rate set and guaranteed by Anchor National. If you allocate money to the fixed account options, the amount of money that accumulates in your Contract depends on the total interest credited to the particular fixed account option(s) in which you are invested. For more information on the Variable Portfolios and fixed account options available under this contract, SEE INVESTMENT OPTIONS PAGE 14. Anchor National issues the WM Diversified Strategies Variable Annuity. When you purchase a WM Diversified Strategies 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., a Delaware corporation. WM Diversified Strategies may not currently be available in all states. Please check with your financial advisor regarding availability in your state. This annuity is designed for investors whose personal circumstances allow for a long-term investment time horizon, to assist in contributing to retirement savings. As a function of the federal tax code you may be assessed a 10% federal tax penalty on any withdrawal made prior to your reaching age 59 1/2. Additionally, this contract provides that you will be charged a withdrawal charge on each Purchase Payment withdrawn if that Purchase Payment has not been invested in this contract for at least 7 years. Because of these potential penalties, you should fully discuss all of the benefits and risks of this contract with your financial adviser prior to purchase. 12 PURCHASING A WM DIVERSIFIED STRATEGIES VARIABLE ANNUITY - -------------------------------------------------------------------------------- An initial Purchase Payment is the money you give us to buy a contract. Any additional money you give us to invest in the contract after purchase is a subsequent Purchase Payment. This chart shows the minimum initial and subsequent Purchase Payments permitted under your contract. These amounts depend upon whether a contract is Qualified or Non-qualified for tax purposes.
MINIMUM MINIMUM SUBSEQUENT MINIMUM INITIAL SUBSEQUENT PURCHASE PAYMENT-- PURCHASE PAYMENT PURCHASE PAYMENT AUTOMATIC PAYMENT PLAN ---------------- ---------------- ---------------------- Qualified $2,000 $100 $50 Non-qualified $5,000 $100 $50
Prior Company approval is required to accept Purchase Payments greater than $1,500,000. The Company reserves the right to refuse any Purchase Payment including one which would cause Total Purchase Payments to exceed $1,500,000 at the time of the Purchase Payment. Also, the optional Automatic Payment Plan allows you to make subsequent payments as small as $50. In general, we will not issue a Qualified contract to anyone who is age 70 1/2 or older, unless they certify to us that the minimum distribution required by the federal tax code is being made. In addition, we may not issue a contract to anyone age 91 or older (unless state law requires otherwise). Neither Estate Rewards nor Earnings Advantage is available to you 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 in contingent upon prior review and approval by the Company. ALLOCATION OF PURCHASE PAYMENTS We invest your Purchase Payments in the fixed accounts and/or Variable Portfolio(s) according to your instructions. If we receive a Purchase Payment without allocation instructions, we will invest the money according to your last allocation instructions. Purchase Payments are applied to your contract based upon the value of the variable investment option next determined after receipt of your money. SEE INVESTMENT OPTIONS PAGE 14. In order to issue your contract, we must receive your completed application, Purchase Payment allocation instructions and any other required paper work at our Annuity Service Center. 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 The value of the variable portion of your contract will go up or down depending upon the investment performance of the Variable Portfolio(s) you select. In order to keep track of the value of your contract, we use a unit of measure called an Accumulation Unit which works like a share of a mutual fund. During the Income Phase, we call them Annuity Units. 13 An Accumulation Unit value is determined each day that the New York Stock Exchange ("NYSE") is open. We base the number of Accumulation Units you receive on the unit value of the Variable Portfolio as of the day we receive your money if we receive it before 1:00 p.m. Pacific Standard Time ("PST") and on the next day's unit value if we receive your money after 1:00 p.m. PST. We calculate an Accumulation Unit for each Variable Portfolio after the NYSE closes each day. We do this by: 1. determining the total value of money invested in a particular Variable Portfolio; 2. subtracting from that amount any asset-based charges and any other charges such as taxes we have deducted; and 3. dividing this amount by the number of outstanding Accumulation Units. EXAMPLE: We receive a $25,000 Purchase Payment from you on Wednesday. You allocate the money to the Alliance Growth Portfolio. We determine that the value of an Accumulation Unit for the Alliance Growth Portfolio is $11.10 when the NYSE closes on Wednesday. We then divide $25,000 by $11.10 and credit your contract on Wednesday night with 2,252.2523 Accumulation Units for the Alliance Growth Portfolio. FREE LOOK You may cancel your contract within ten days after receiving it (or longer if required by state law). We call this a "free look." To cancel, you must mail the contract along with your free look request to our Annuity Service Center at P.O. Box 54299, Los Angeles, California 90054-0299. We will refund to you the value of your contract on the day we receive your request. The amount refunded to you may be more or less than your original investment. Certain states require us to return your Purchase Payments upon a free look request. Additionally, all contracts issued as an IRA require the full return of Purchase Payments upon a free look. With respect to those contracts, we reserve the right to put your money in the Money Market investment option during the free look period and will allocate your money according to your instructions at the end of the applicable free look period. Currently, we do not put your money in the Money Market investment option during the free look period unless you allocate your money to it. If your contract was issued in a state requiring return of Purchase Payments or as an IRA and you cancel your contract during the free look period, we return the greater of (1) your Purchase Payments; or (2) the value of your contract. At the end of the free look period, we allocate your money according to your instructions. INVESTMENT OPTIONS - -------------------------------------------------------------------------------- The contract offers variable investment options which we call Variable Portfolios, and fixed investment options. We designed the contract to meet your varying investment needs over time. You can achieve this by using the Variable Portfolios alone or in concert with the fixed investment options. The Variable Portfolios operate similar to a mutual fund but are only available through the purchase of certain variable annuities. A mixture of your investment in the Variable Portfolios and fixed account options may lower the risk associated with investing only in a variable investment option. VARIABLE PORTFOLIOS The contract currently offers 22 Variable Portfolios. These Variable Portfolios invest in shares of the Anchor Series Trust, SunAmerica Series Trust and the WM Variable Trust (the "Trusts"), Additional Variable Portfolios may be available in the future. The Variable Portfolios operate similar to a mutual fund but are only available through the purchase of certain insurance contracts. SunAmerica Asset Management Corp., an indirect wholly owned subsidiary of AIG, is the investment adviser to the AST and SAST Trusts. WM Advisors is the adviser to the WMVT. The Trusts serve as the underlying investment vehicles for other variable annuity contracts issued by Anchor National, and other affiliated/ unaffiliated insurance companies. Neither Anchor National nor the Trusts believe that offering shares of the Trusts in this manner disadvantages you. The adviser monitors the Trusts for potential conflicts. 14 ANCHOR SERIES TRUST Wellington Management Company, LLP serves as subadviser to the AST Portfolio. AST has Variable Portfolios in addition to those listed below which are not available for investment under the contract. SUNAMERICA SERIES TRUST Various subadvisers provide investment advice for the SAST Portfolios. SAST has Variable Portfolios in addition to those listed below which are not available for investment under the contract. WM VARIABLE TRUST WM Advisors, Inc. serves as adviser for the WMVT Funds and also hires subadvisers to manage the day-to-day operations of certain investment options. The 22 Variable Portfolios along with their respective subadvisers are listed below: STRATEGIC ASSET MANAGEMENT PORTFOLIOS Strategic Growth WM Advisors, Inc. WMVT Conservative Growth WM Advisors, Inc. WMVT Balanced WM Advisors, Inc. WMVT Conservative Balanced WM Advisors, Inc. WMVT Flexible Income WM Advisors, Inc. WMVT EQUITY FUNDS Equity Income WM Advisors, Inc. WMVT Growth & Income WM Advisors, Inc. WMVT Davis Venture Value Davis Selected Advisors, LP SAST Growth Fund of the Northwest WM Advisors, Inc. WMVT Alliance Growth Alliance Capital Mgmt, L.P. SAST Growth Janus Capital Corporation WMVT Capital Appreciation Wellington Mgmt. Co. LLP AST MFS Mid Cap Growth Massachusetts Financial Services Co. SAST Mid Cap Stock WM Advisors, Inc. WMVT Small Cap Stock WM Advisors, Inc. WMVT Global Equities Alliance Capital Mgmt. L.P. SAST International Growth Capital Guardian Trust Company WMVT Technology Morgan Stanley Investment Mgmt. Inc. SAST FIXED-INCOME FUNDS U.S. Government Securities WM Advisors, Inc. WMVT Income WM Advisors, Inc. WMVT Short Term Income WM Advisors, Inc. WMVT Money Market WM Advisors, Inc. WMVT
YOU SHOULD READ THE PROSPECTUSES FOR THE TRUSTS ATTACHED HERETO CAREFULLY. THESE PROSPECTUSES CONTAIN DETAILED INFORMATION ABOUT THE PORTFOLIOS, INCLUDING EACH VARIABLE PORTFOLIO'S INVESTMENT OBJECTIVE AND RISK FACTORS. FIXED INVESTMENT OPTIONS The contract also offers seven fixed investment options. Anchor National will guarantee the interest rate earned on money you allocate to any of these fixed investment options. We currently offer fixed investment options for periods of one, three, five, seven and ten years, which we call guarantee periods. In Maryland, Oregon and Washington only the one year fixed account option is available. 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 the Dollar Cost Averaging Program on page 26 for additional information about, including limitations on, the availability and operation of the DCA fixed accounts. The DCA fixed accounts are only available for new Purchase Payments. 15 All of these fixed account options pay interest at rates set and guaranteed by Anchor National. Interest rates may differ from time to time and are set at our sole discretion. We will never credit less than a 3% annual effective rate to any of the fixed account options. The interest rate offered for new Purchase Payments may differ from that offered for subsequent Purchase Payments and money already in the fixed account options. In addition, different guarantee periods offer different interest rates. Rates for specified payments are declared at the beginning of the guarantee period and do not change during the specified period. There are three scenarios in which you may put money into the 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 remaining in a fixed account after expiration of a guarantee period and money transferred from a fixed account or one of the Variable Portfolios into a fixed account. Each of these rates may differ from one another. Although once declared the applicable rate is guaranteed until your guarantee period expires. 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 Portfolio(s). The rates applicable to the DCA fixed accounts may differ from each other and/or the other fixed account options but will never be less than an effective rate of 3%. SEE DOLLAR COST AVERAGING ON PAGE 18 for more information. When a guarantee period ends, you may leave your money in the same guarantee period. You may also reallocate money to another fixed investment option (other than the DCA fixed accounts) or to any of the Variable Portfolio(s). If you want to reallocate your money, you must contact us within 30 days after the end of the current guarantee period and instruct us how to reallocate your money. If we do not hear from you, we will keep your money in the same guarantee period where it will earn the renewal interest rate applicable at that time. For Contracts issued in the state of Oregon withdrawal charge schedule applied to amounts withdrawn from the one year fixed account declines over seven years as follows: 6%, 5%, 4%, 3%, 2%, 1%, 0%. MARKET VALUE ADJUSTMENT NOTE: THE FOLLOWING DISCUSSION APPLIES TO THE 3, 5, 7 OR 10 YEAR FIXED INVESTMENT OPTIONS ONLY. THESE OPTIONS ARE NOT AVAILABLE IN MARYLAND, OREGON AND WASHINGTON AND MAY NOT BE AVAILABLE IN OTHER STATES. PLEASE CONTACT YOUR FINANCIAL ADVISOR FOR MORE INFORMATION. THIS DISCUSSION DOES NOT APPLY TO WITHDRAWALS TO PAY A DEATH BENEFIT OR CONTRACT FEES AND CHARGES. If you take money out of the 3, 5, 7 or 10 year fixed investment options before the end of the guarantee period, we make an adjustment to your contract (the "market value adjustment" or "MVA"). This market value adjustment reflects any difference in the interest rate environment between the time you place your money in the fixed investment 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 a market value adjustment. We will not assess a market value adjustment against withdrawals made (1) to pay a death benefit; (2) to pay contract fees and charges; or (3) to begin the Income Phase of your contract on the latest Annuity Date. We calculate the market value adjustment by doing a comparison between current rates and the rate being credited to you in the fixed investment 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 or transfer. 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. 16 Generally, if interest rates drop between the time you put your money into the fixed investment options and the time you take it out, we credit a positive adjustment to your contract. On the other hand, if interest rates increase during the same period, we post a negative adjustment to your contract. Where the market value adjustment is negative, we first deduct the adjustment from any money remaining in the fixed investment option. If there is not enough money in the fixed investment option to meet the negative deduction, we deduct the remainder from your withdrawal or transfer amount. Where the market value adjustments is positive, we add the adjustment to your withdrawal amount or transfer amount. For withdrawals under the systematic withdrawal program that result in a negative market value adjustment, the MVA amount will be deducted from your withdrawal. The 1-year fixed investment option and the DCA fixed accounts do not impose a market value adjustment. These fixed investment options are not registered under the Securities Act of 1933 and are not subject to the provisions of the Investment Company Act of 1940. Please see APPENDIX A for more information on how we calculate the market value adjustment. TRANSFERS DURING THE ACCUMULATION PHASE During the Accumulation Phase, you may transfer money among the Variable Portfolio(s) and the fixed investment options by written request or by telephone. Additionally, you may access your account and request transfers through our website, www.sunamerica.com. Funds already in your contract cannot be transferred into the DCA fixed accounts. Transfers out of a 3, 5, 7 or 10 year fixed investment option may be subject to a market value adjustment. The minimum amount you can transfer is $100, or a lesser amount if you transfer the entire balance from a Variable Portfolio or a fixed investment option. Any money remaining in a Variable Portfolio or fixed investment option after making a transfer must equal at least $100. Your request for transfer must clearly state which investment option(s) are involved and the amount you want to transfer. Please see the section on Dollar Cost Averaging on page 26 for specific rules regarding the DCA fixed accounts. We currently allow 15 free transfers per contract year. We charge $25 ($10 in Pennsylvania and Texas) for each additional transfer in a contract year. We will accept transfers by telephone and/or the internet unless you specify otherwise on your contract application. When receiving telephone and/or the internet account transfers, 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 or the internet. If we fail to follow our procedures we may be liable for any losses due to unauthorized or fraudulent transactions. For information regarding transfers during the Income Phase, SEE INCOME OPTIONS ON PAGE 28. 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 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 appointed, by you or for 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. 17 We reserve the right to modify, suspend or terminate the transfer privileges at any time. DOLLAR COST AVERAGING The Dollar Cost Averaging ("DCA") program allows you to invest gradually in the Variable Portfolios. Under the program you systematically transfer a set dollar amount or percentage from any Variable Portfolio or the 1-year fixed account option (source accounts) to any other Variable Portfolio. You may also systematically transfer the interest earned in the 1-year fixed account to any of the Variable Portfolios. Transfers may be monthly or quarterly. You may change the frequency at any time by notifying us in writing. We also offer the 6-month and a 1-year DCA fixed accounts exclusively to facilitate this program. The DCA fixed accounts only accept new Purchase Payments with a minimum of $600 in the 6-month DCA and $1200 in the 1-year DCA with monthly transfers and $400 in 1-year DCA with quarterly transfers. You can not transfer money already in your contract into these options. If you allocate a Purchase Payment into a DCA fixed account, we transfer all your money allocated to that account into the Variable Portfolio(s) you select over the selected 6-month or 1-year period. You cannot change the option or the frequency of transfers once selected. The minimum transfer amount if you use the 6-month or 1-year DCA fixed accounts to provide dollar cost averaging is $100. 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. In Oregon, the withdrawal schedule applicable to funds placed in the DCA fixed accounts is 6% for the period when those funds are in the DCA fixed accounts. Once those funds are moved into the target accounts they are subject to the standard withdrawal charge schedule. SEE EXPENSES ON PAGE 25. The DCA program is designed to lessen the impact of market fluctuations on your investment. However, we cannot ensure that you will make a profit. When you elect the DCA Program, you are continuously investing in securities regardless of fluctuating price levels. You should consider your tolerance for investing through periods of fluctuating price levels. We reserve the right to modify, suspend or terminate this program at any time. EXAMPLE: Assume that you want to gradually move $750 each quarter from the Money Market Portfolio to the Alliance Growth Portfolio over six quarters. You set up dollar cost averaging and purchase Accumulation Units at the following values:
QUARTER ACCUMULATION UNIT UNITS 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. 18 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, semi-annual or annual basis. We reserve the right to modify, suspend or terminate this program at any time. PRINCIPAL ADVANTAGE PROGRAM The Principal Advantage Program allows you to invest in one or more of the Variable Portfolios without putting your principal at direct risk. The program accomplishes this by allocating your investment strategically between the fixed investment options (other than the DCA fixed accounts) and the Variable Portfolio(s) you select. 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 needs to be allocated to the particular fixed investment option to ensure that it grows to an amount equal to your total principal invested under this program. EXAMPLE: Assume that you want to allocate a portion of your initial Purchase Payment of $100,000 to the fixed investment option. You want the amount allocated to the fixed investment option to grow to $100,000 in 7 years. If the 7-year fixed investment option is offering a 5% interest rate, we will allocate $71,069 to the 7-year fixed investment 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. We reserve the right to modify, suspend or terminate this program at any time. VOTING RIGHTS Anchor National is the legal owner of shares of the Trusts. However, when an underlying 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 any of the underlying portfolios become unavailable for investment, we may be required to substitute shares of another investment portfolio. We will seek prior approval of the SEC and give you notice before substituting shares. ACCESS TO YOUR MONEY - -------------------------------------------------------------------------------- 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 28. 19 Generally, we deduct a withdrawal charge applicable to any partial or total withdrawal and a market value adjustment if a withdrawal comes from the 3, 5, 7 or 10 year fixed investment options prior to the end of a guarantee period. If you withdraw your entire contract value, we also deduct any applicable premium taxes and a contract maintenance fee. SEE EXPENSES ON PAGE 25. We calculate charges due on a total withdrawal on the day after we receive your request and other required paper work. We return your contract value less any applicable fees and charges. The minimum partial withdrawal amount is $1,000. We require that the value left in any Variable Portfolio or fixed account be 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 in equal amounts from each Variable Portfolio and the fixed investment option in which your contract is invested. Withdrawals from fixed investment options prior to the end of the guarantee period may result in a market value adjustment. 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 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 investment option. Such deferrals are limited to no longer than six months. FREE WITHDRAWAL PROVISION Your contract provides for a free withdrawal amount each year. A free withdrawal amount is the portion of your account that we allow you to take out each year without being charged a surrender penalty. However, upon a future full surrender of your contract, any previous free withdrawals would be subject to a surrender charge, if any is applicable at the time of the full surrender (except in the state of Washington). To determine your free withdrawal amount and the amount, if any, on which we assess a withdrawal charge, we refer to two special terms. These are penalty-free earnings and the Total Invested Amount. The penalty-free earnings portion of your contract is your account value less your Total Invested Amount. The Total Invested Amount is the total of all Purchase Payments you have made into the contract less portions of some prior withdrawals you made. The portions of prior withdrawals that reduce your Total Invested Amount are as follows: 1. Any prior withdrawals on which you previously paid a withdrawal charge, plus the amount of the withdrawal charge. 2. Any prior free withdrawals in any year that were in excess of your penalty-free earnings and were free because the Purchase Payment withdrawn is no longer subject to surrender charges at the time of the withdrawal. When you make a withdrawal, we assume that it is taken from penalty-free earnings first, then from the Total Invested Amount on a first-in, first-out basis. This means that you can also access your Purchase Payments which are no longer subject to a surrender charge before those Purchase Payments which are still subject to the surrender charge. During your first contract year your free withdrawal amount is the greater of: 1. Your penalty-free earnings, or; 2. If you are participating in the Systematic Withdrawal program, a total of 10% of your Total Invested Amount less any prior withdrawals taken during the contract year. After the first contract year, you can take out the greater of the following amounts each year: 1. Your penalty free earnings and any portion of your Total Invested Amount no longer subject to surrender charges, or; 2. 10% of the portion of your Total Invested Amount that has been in your contract for at least one year less any withdrawals taken during the contract year. 20 Purchase Payments withdrawn, above and beyond the amount of your free withdrawal amount, which have been invested for less than 7 years will result in your paying a withdrawal charge. The amount of the charge and how it applies are discussed more fully below. You should consider, before purchasing this contract, the effect this charge will have on your investment if you need to withdraw more money than the free withdrawal amount. You should fully discuss this decision with your financial advisor. The withdrawal charge percentage applicable is determined by the age of the Purchase Payment being withdrawn. For purposes of calculating the surrender charge in the event of a full surrender, the charge is calculated based on the remaining Total Invested Amount still subject to surrender charge. For example, you make an initial Purchase Payment of $100,000. For purposes of this example, we will assume a 0% growth rate over the life of the contract, no Income Protector Program, Estate Rewards or Earnings Advantage and no subsequent Purchase Payments. In contract year 2 and year 3, you take out your maximum free withdrawal of $10,000 for each year. After those free withdrawals your contract value is $80,000. In contract year 5 you request a full surrender of your contract. We will apply the following calculation, A - (B X C) = D, where: A = Your contract value at the time of your request for surrender ($80,000) B = The amount of your Total Invested Amount still subject to surrender charge ($100,000) C = The withdrawal charge percentage applicable to the age of each Purchase Payment at the time of full surrender (4%) [B X C = $4,000] D = Your full surrender value ($76,000) SYSTEMATIC WITHDRAWAL PROGRAM If you elect, we use money in your contract to pay you monthly, quarterly, semi-annual or annual payments during the Accumulation Phase. Electronic transfer of these funds to your bank account is also available. The minimum amount of each withdrawal is $250. There must be at least $500 remaining in your contract at all times. Withdrawals may be taxable and a 10% IRS tax penalty may apply if you are under age 59 1/2. Any withdrawals you make using this program count against your free withdrawal amount as described above. Withdrawals in excess of that amount may incur a withdrawal charge. There is no additional charge for participating in this program. The program is not available to everyone. Please check with our Annuity Service Center, which can provide the necessary enrollment forms. We reserve the right to modify, suspend or terminate this program at any time. NURSING HOME WAIVER If you are confined to a nursing home for 60 days or longer, we may waive the withdrawal charge and/or market value adjustment on certain withdrawals prior to the Annuity Date (not available in Texas). The waiver applies only to withdrawals made while you are in a nursing home or within 90 days after you leave the nursing home. Your contract prohibits use of this waiver during the first 90 days after you purchase your contract. In addition, the confinement period for which you seek the waiver must begin after you purchase your contract. 21 In order to use this waiver, you must submit with your withdrawal request, the following documents: (1) a doctor's note recommending admittance to a nursing home; (2) an admittance form which shows the type of facility you entered; and (3) a bill from the nursing home which shows that you met the 60 day confinement requirement. MINIMUM CONTRACT VALUE Where permitted by state law, we may terminate your contract if both of the following occur: (1) your contract is less than $500 as a result of withdrawals; and (2) you have not made any Purchase Payments during the past three years. We will provide you with sixty days written notice. At the end of the notice period, we will distribute the contract's remaining value to you. QUALIFIED CONTRACT OWNERS Certain Qualified plans restrict and/or prohibit your ability to withdraw money from your contract. SEE TAXES ON PAGE 33 for a more detailed explanation. DEATH BENEFIT - -------------------------------------------------------------------------------- If you should die during the Accumulation Phase, your Beneficiary will receive a death benefit. The death benefit options are discussed in detail below. The death benefit is not paid after you are in the Income Phase. If you die during the Income Phase, your Beneficiary will receive any remaining guaranteed income payments in accordance with the income option you choose. SEE INCOME OPTIONS ON PAGE 28. You select the Beneficiary to receive any amounts payable on death. You may change the Beneficiary at any time, unless you previously made an irrevocable Beneficiary designation. A new Beneficiary designation is not effective until we record the change. The death benefit will be paid out when we receive adequate proof of death: (1) a certified copy of a death certificate; (2) a certified copy of a decree of court of competent jurisdiction as to the finding of death; (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 also require additional documentation or proof in order for the death benefit to be paid. The death benefit must be paid within 5 years of the date of death. The Beneficiary may, in the alternative, elect to have the death benefit payable in the form of an annuity. 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 payments must begin within one year of the owner's death. If the Beneficiary is the spouse of the owner, he or she can elect to continue the contract, rather than receive a death benefit. SEE SPOUSAL CONTINUATION ON PAGE 25. If the Beneficiary does not make a specific election as to how they want the death benefit distributed within sixty days of our receipt of adequate proof of death, it will be paid in a lump sum. If the Annuitant dies before annuity payments begin, you can name a new Annuitant. If no Annuitant is named within 30 days, you will become the Annuitant. However, if the owner is a non-natural person (for example, a trust), then the death of the Annuitant will be treated as the death of the owner, no new Annuitant may be named and the death benefit will be paid. This contract provides three death benefit options: The first is, the Standard Death Benefit which is automatically included in your contract for no additional fee. We also offer, for an additional fee, an optional 22 enhanced death benefit called "Estate Rewards" which offers you the selection of one of two options. If you choose the Estate Rewards death benefit you may also elect, for an additional fee, the Earnings Advantage feature. Your death benefit elections must be made at the time of contract application and the election cannot be terminated. 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. To calculate the adjustment amount for a withdrawal, you first determine the percentage by which the contract value is reduced by the withdrawal, on the date of the withdrawal. This percentage is calculated by dividing the amount of each withdrawal (including fees and charges applicable to the withdrawal) by the contract value immediately before taking that withdrawal. The percentage amount is then multiplied by the amount of Net Purchase Payments immediately before the withdrawal to get the adjustment amount. This amount is subtracted from the amount of Net Purchase Payment(s) immediately before the withdrawal. If you have not taken any withdrawals from your contract, Net Purchase Payments equals total Purchase Payments into your contract. STANDARD DEATH BENEFIT The standard death benefit on your contract is the greater of: 1. Net Purchase Payments compounded at a 3% annual growth rate from the date of issue until the earlier of age 75 or the date of death, plus any Purchase Payments recorded after the earlier of age 75 or the date of death; and reduced for any withdrawals (and fees and charges applicable to those withdrawals) recorded after the earlier of age 75 or date of death, in the same proportion that the withdrawal reduced the contract value on the date of the withdrawal. 2. the contract value at the time we receive satisfactory proof of death. ESTATE REWARDS DEATH BENEFIT(S) For an additional fee, you may elect one of the Estate Rewards Death Benefits which can provide greater protection for your beneficiaries. You must chose between Option 1 and Option 2 at the time you purchase your contract and you can not change your election at any time. The Estate Rewards Death Benefit is not available if you are age 81 or older at the time of contract issue. The fee for Estate Rewards death benefit is .15% of the average daily ending value of the assets you have allocated to the Variable Portfolios. OPTION 1 - 5% ACCUMULATION OPTION THE DEATH BENEFIT IS THE GREATER OF: a. the contract value at the time we receive satisfactory proof of death; or b. Net Purchase Payments compounded to the earlier of your 80th birthday or the date of death, at a 5% annual growth rate, plus any Purchase Payments recorded after the 80th birthday or the date of death; and reduced for any withdrawals (and fees and charges applicable to those withdrawals) recorded after the 80th birthday or the date of death, in the same proportion that the withdrawal reduced the contract value on the date of the withdrawal, up to a maximum benefit of two times the Net Purchase Payments made over the life of your contract. If you die after your latest Annuity Date, the 5% Accumulation Option death benefit reverts to the Standard Death Benefit. Thus, your beneficiaries may receive no benefit from Estate Rewards Death Benefit. This option may not be available in all states. Check with your investment representative regarding availability. 23 OPTION 2 - MAXIMUM ANNIVERSARY VALUE OPTION THE DEATH BENEFIT IS THE GREATEST OF: a. Net Purchase Payments; or b. the contract value at the time we receive satisfactory proof of death; or c. the maximum anniversary value on any contract anniversary prior to your 81st birthday. The anniversary value equals the contract value on a contract anniversary increased by any Purchase Payments recorded after that anniversary; and reduced for any withdrawals (and fees and charges applicable to those withdrawals) recorded after the anniversary, in the same proportion that the withdrawal reduced the contract value on the date of the withdrawal. If you are age 90 or older at the time of death and you had selected the Maximum Anniversary Value option, if payable, a death benefit will be equal to the contract value at the time we receive satisfactory proof of death. Thus, your beneficiaries may receive no benefit from your election of the Estate Rewards Death Benefit. This option may not be available in all states. Check with your Investment Representative regarding availability. EARNINGS ADVANTAGE The Earnings Advantage benefit may increase the Estate Rewards death benefit amount. In order to make an Earnings Advantage election you must have already elected one of the Estate Rewards Death Benefits described above. The Earnings Advantage is available for an additional charge of .25% of the average daily ending value of the assets you have allocated to the Variable Portfolios. You are not required to elect the Earnings Advantage feature if you select the Estate Rewards Death Benefit, but once elected, generally it can not be terminated. Further, if you elect both the Estate Rewards and Earnings Advantage the combined charge will be .40% of the average daily ending value of the assets you have allocated to the Variable Portfolios. If you have earnings in your contract at the time of death, we will add a percentage of those earnings (the "Earnings Advantage Percentage"), subject to a maximum dollar amount (the "Maximum Earnings Advantage Percentage"), to the death benefit payable. The Contract Year of Death will determine the Earnings Advantage Percentage and the Maximum Earnings Advantage amount, as set forth below: - ------------------------------------------------------------------------------------------------------------------ EARNINGS ADVANTAGE MAXIMUM CONTACT YEAR OF DEATH PERCENTAGE EARNINGS ADVANTAGE AMOUNT - ------------------------------------------------------------------------------------------------------------------ Years 0 - 4 25% of Earnings 25% of Net Purchase Payments - ------------------------------------------------------------------------------------------------------------------ Years 5 - 9 40% of Earnings 40% of Net Purchase Payments* - ------------------------------------------------------------------------------------------------------------------ Years 10+ 50% of Earnings 50% of Net Purchase Payments* - ------------------------------------------------------------------------------------------------------------------
* Purchase Payments received after the 5th contract anniversary must remain in the contract for at least 6 full months to be included as part of the Net Purchase Payments for the purpose of the Maximum Earnings Advantage Amount calculation. What is the Contract Year of Death? Contract Year of Death is the number of full 12 month periods beginning with the date your contract is issued and ending on the date of death. What is the Earnings Advantage Percentage Amount? We determine the amount of the Earnings Advantage based upon a percentage of earnings in your contract at the time of your death. For the purpose of this calculation, earnings are defined as (1) minus (2) where (1) equals the contract value on the date of death; and 24 (2) equals Net Purchase Payments. What is the Maximum Earnings Advantage? The Earnings Advantage amount is subject to a maximum. The maximum Earnings Advantage amount is equal to a percentage of your Net Purchase Payments. The Earnings Advantage benefit will only be paid if your date of death is prior to the latest Annuity Date. Thus, your beneficiaries may receive no benefit from your election of the Earnings Advantage Benefit if you die before your latest Annuity Date. This option may not be available in all states. Check with your Investment Representative regarding availability. WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THESE DEATH BENEFIT FEATURES (IN THEIR ENTIRETY OR ANY COMPONENT) 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"). 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. The Continuing Spouse can only elect to continue the contract upon the death of the original owner of the contract. Upon 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 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 B FOR FURTHER EXPLANATION OF THE DEATH BENEFIT CALCULATION FOLLOWING A SPOUSAL CONTINUATION. The Continuation Contribution is not considered a Purchase Payment for any other calculation except as noted in Appendix B. To the extent the Continuing Spouse invests in the Variable Portfolios or MVA fixed accounts, they will be subject to investment risk as was the original owner. Generally, the Continuing Spouse cannot change any contract provisions as the new owner. However, on the Continuation Date, the Continuing Spouse may terminate the original owner's election of Earnings Advantage. We will terminate Earnings Advantage if the Continuing Spouse is age 81 or older on the Continuation Date. If Earnings Advantage is not terminated or discontinued and the Continuing Spouse dies after the latest Annuity Date no Earnings Advantage benefit will be payable. EXPENSES - -------------------------------------------------------------------------------- There are charges and expenses associated with your contract. These charges and expenses reduce your investment return. We will not increase the contract maintenance fee or withdrawal charges under your contract. However the investment charges under your contract may increase or decrease. Some states may require that we charge less than the amounts described below. INSURANCE CHARGES The amount of this charge is 1.40% annually of the value of your contract invested in the Variable Portfolio(s). We deduct the charge daily, on a pro-rata basis, from the value of your contract allocated to the Variable 25 Portfolio(s). The insurance charge compensates us for the mortality and expense risks and the costs of contract distribution assumed by Anchor National. If these charges do not cover all of our expenses, we will pay the difference. Likewise, if these charges exceed our expenses, we will keep the difference. WITHDRAWAL CHARGES During the Accumulation Phase you may make withdrawals from your contract. However, a withdrawal charge may apply. We apply a withdrawal charge upon an early withdrawal against each Purchase Payment you put into the contract. The withdrawal charge equals a percentage of the Purchase Payment you take out of the contract. The contract does provide a free withdrawal amount every year. SEE ACCESS TO YOUR MONEY ON PAGE 19. The withdrawal charge percentage declines each year a Purchase Payment is in the contract, as follows:
YEAR 1 2 3 4 5 6 7 8 - ----------------- --- --- --- --- --- --- --- --- Withdrawal Charge 7% 6% 6% 5% 4% 3% 2% 0%
After a Purchase Payment has been in the contract for seven complete years the withdrawal charge no longer applies to that Purchase Payment. 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 from each of your investment options on a pro-rata basis. If you withdraw all of your contract value, we deduct any applicable withdrawal charges from the amount withdrawn. We will not assess a withdrawal charge for money withdrawn to pay a death benefit. We do not currently assess a withdrawal charge upon election to receive income payments from your contract. Withdrawals made prior to age 59 1/2 may result in tax penalties. SEE TAXES ON PAGE 33. INVESTMENT CHARGES Investment Management Fees Charges are deducted from the assets of the investment portfolios underlying the Variable Portfolio(s) for the advisory and other expenses of the portfolios. SEE FEE TABLES ON PAGE 6. Service Fees Portfolio shares of the Anchor Series Trust and SunAmerica Series Trust are all subject to fees imposed under a servicing plan adopted by the Boards of Trustees pursuant to Rule 12b-1 under the Investment Company Act of 1940. This service fee of 0.15%, which is also known as a 12b-1 fee, may be used to compensate financial intermediaries for service provided over the life of your contract. FOR MORE DETAILED INFORMATION ON THESE INVESTMENT CHARGES, REFER TO THE PROSPECTUSES FOR THE ANCHOR SERIES TRUST, SUNAMERICA SERIES TRUST AND/OR WM VARIABLE TRUST. CONTRACT MAINTENANCE FEE During the Accumulation Phase, we subtract a contract maintenance fee from your account once per year. This charge compensates us for the cost of contract administration. If your contract value is $50,000 or more on your contract anniversary date, we will waive the charge. This waiver is subject to change without notice. We will deduct the $35 ($30 in North Dakota) contract maintenance fee on a pro-rata basis from your account 26 value on your contract anniversary. In the states of Pennsylvania, Texas and Washington a contract maintenance fee will be deducted pro-rata from the Variable Portfolio(s) in which you are invested, only. If you withdraw your entire contract value, we deduct the fee from that withdrawal. TRANSFER FEE We currently allow 15 free transfers per contract year. We charge $25 ($10 in Pennsylvania and Texas) for each additional transfer in a contract year. OPTIONAL DEATH BENEFIT FEES Please see pages 23 and 24 of this prospectus for additional information regarding the Estate Rewards death benefit and Earnings Advantage fee. OPTIONAL INCOME PROTECTOR FEE Please see page 30 of this prospectus for additional information regarding the Income Protector 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 fully surrender or annuitize the contract. In the future, we may assess this deduction at the time you put Purchase Payment(s) into the contract or upon payment of a death benefit. APPENDIX D provides more information about premium taxes. INCOME TAXES We do not currently deduct income taxes from your contract. We reserve the right to do so in the future. REDUCTION OR ELIMINATION OF CHARGES AND EXPENSES, AND ADDITIONAL AMOUNTS CREDITED Sometimes sales of the contracts to groups of similarly situated individuals may lower our administrative and/or sales expenses. We reserve the right to reduce or waive certain charges and expenses when this type of sale occurs. In addition, we may also credit additional interest to policies sold to such groups. We determine which groups are eligible for such treatment. Some of the criteria we evaluate to make a determination are: size of the group; amount of expected Purchase Payments; relationship existing between us and prospective purchaser; nature of the purchase; length of time a group of contracts is expected to remain active; purpose of the purchase and whether that purpose increases the likelihood that our expenses will be reduced; and/or any other factors that we believe indicate that administrative and/or sales expenses may be reduced. Anchor National may make such a determination regarding sales to its employees, 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. 27 INCOME OPTIONS - -------------------------------------------------------------------------------- ANNUITY DATE During the Income Phase, the money in your Contract is used 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 discussed under Option 5, once you begin receiving income payments, you cannot otherwise access your money through a withdrawal or surrender. Other pay out options may be available. Contact Our Annuity Service Center for more information. Income payments must begin on or before your 95th birthday or on your tenth contract anniversary, whichever occurs later. If you do not choose an Annuity Date, your income payments will automatically begin on this date (latest Annuity 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, certain Qualified contracts require you to take minimum distributions after you reach age 70 1/2. SEE TAXES ON PAGE 33. INCOME OPTIONS Currently, this Contract offers five Income Options. If you elect to receive income payments but do not select an option, your income payments will be made in accordance with Option 4 for a period of 10 years. For income payments selected for joint lives, we pay according to Option 3. We base our calculation of income payments on the life of the Annuitant and the annuity rates set forth in your contract. As the contract owner, you may change the Annuitant at any time prior to the Annuity Date. You must notify us if the Annuitant dies before the Annuity Date and then 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 whenever the survivor dies. OPTION 3 - JOINT AND 100% SURVIVOR LIFE ANNUITY WITH 10 YEAR PERIOD CERTAIN This option is similar to Option 2 above, with an additional guarantee of payments for at least 10 years. If the Annuitant and the Survivor die before all of the payments have been made, the remaining payments are made to the Beneficiary under your Contract. 28 OPTION 4 - LIFE ANNUITY WITH 10 OR 20 YEAR PERIOD CERTAIN This option is similar to Option 1 above. In addition, this option provides a guarantee that income payments will be made for at least 10 or 20 years. You select the number of years. If the Annuitant dies before all guaranteed income payments are made, the remaining income payments go to the Beneficiary under your Contract. OPTION 5 - INCOME FOR A SPECIFIED PERIOD This option provides income payments for a guaranteed period ranging from 5 to 30 years. If the Annuitant dies before all the guaranteed income payments are made, the remaining income payments are made to the Beneficiary under your contract. Additionally, if variable income payments are elected under this option, you (or the Beneficiary under the contract if the Annuitant dies prior to all guaranteed payments being made) may redeem the contract value (in full or in part) after the Annuity Date. The amount available upon such redemption would be the discounted present value of any remaining guaranteed payments. The value of an Annuity Unit, regardless of the option chosen, takes into account the mortality and expense risk charge. Since Option 5 does not contain an element of mortality risk, no benefit is derived from this charge. 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 direct 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 annuity payments of less than $50 per payment, we may decrease the frequency of the payments, state law allowing. See the INCOME PROTECTOR section below for specifics relative to taking income under that feature. ALLOCATION OF ANNUITY PAYMENTS You can choose income payments that are fixed, variable or both. If payments are fixed, Anchor National guarantees the amounts of each payment. If the payments are variable, the amounts are not guaranteed. They will go up and/or down based upon the performance of the Variable Portfolio(s) in which you invest. FIXED OR VARIABLE INCOME PAYMENTS If at the date when income payments begin you are invested in the Variable Portfolio(s) 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. If you are invested in both fixed and variable options at the time you begin the Income Phase, a portion of your income payments will be fixed and a portion will be variable. INCOME PAYMENTS Your income payments will vary if you are invested in the Variable Portfolio(s) after the Annuity date depending on four factors: - for life options, your age when payments begin, - the value of your contract in the Variable Portfolio(s) on the Annuity Date, - the 3.5% assumed investment rate for variable income payments used in the annuity table for the contract, and; - the performance of the Variable Portfolio(s) in which you are invested during the time you receive income payments. 29 If you are invested in both the fixed account options and the Variable Portfolio(s) after the Annuity Date, the allocation of funds between the fixed accounts and Variable Portfolio(s) also impacts the amount of your annuity payments. TRANSFERS DURING THE INCOME PHASE During the Income Phase, one (1) 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. Please read the Statement of Additional Information, available upon request, for a more detailed discussion of the income options. INCOME PROTECTOR You may elect to enroll in the Income Protector Program. The Income Protector Program can provide a future "safety net" which can offer you the ability to receive a guaranteed fixed minimum retirement income when you choose to switch to the Income Phase. If you elect the Income Protector you can know the level of minimum income that will be available to you upon annuitization, regardless of fluctuating market conditions. In order to utilize the program, you must follow the provisions discussed below. The minimum level of Income Protector benefit available is generally based upon your Purchase Payments remaining in your contract at the time you decide to begin taking income. If available and elected, a growth rate can provide increased levels of minimum guaranteed income. We charge a fee for the Income Protector benefit. The amount of the fee and levels of income protection available to you are described below. This feature may not be available in your state. Once you have made an Income Protector election it can not be changed or terminated. Check with your financial advisor regarding availability. You are not required to use the Income Protector to receive income payments. The general provisions of your contract provide other income options. However, we will not refund fees paid for the Income Protector if you begin taking income payments under the general provisions of your contract. In addition, if applicable, surrender charges will be assessed upon your beginning the Income Phase, if you annuitize under the Income Protector Program. YOU MAY NEVER NEED TO RELY UPON INCOME PROTECTOR IF YOUR CONTRACT PERFORMS WITHIN A HISTORICALLY ANTICIPATED RANGE. HOWEVER, PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Certain federal tax code restrictions on the income options available to qualified retirement investors may have an impact on your ability to benefit from this feature. Qualified investors should read NOTE TO QUALIFIED CONTRACT HOLDERS, below. HOW DO WE DETERMINE THE AMOUNT OF YOUR MINIMUM GUARANTEED INCOME? If you elect the Income Protector Program, we base the amount of minimum retirement income available to you upon a calculation we call the Income Benefit Base. At the time your enrollment in the Income Protector program becomes effective, your Initial Income Benefit Base is equal to your contract value. If elected, your participation becomes effective on the date of issue of the contract. 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. 30 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 contract value on the date your participation became effective, and for each subsequent year of calculation, the Income Benefit Base of your prior contract anniversary, and; (b) is equal to the sum of all subsequent Purchase Payments made into the contract since the prior 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. Your Income Benefit Base may accumulate at the elected growth rate, if available, from the date your election becomes effective through your Income Benefit Date. Any applicable growth rate will reduce to 0% on the anniversary immediately after the annuitant's 90th birthday. LEVEL OF PROTECTION If you decide that you want the protection offered by the Income Protector Program, you must elect the Income Protector by completing the Income Protector Election Form available through our Annuity Service Center. You must elect the Income Protector feature at the time your contract is issued. You may only elect one of the offered alternatives, if more than one is available, and you can never change your election once made. Your Income Benefit Base will begin accumulating at the applicable growth rate on the contract anniversary following our receipt of your completed election form. In order to obtain the benefit of the Income Protector you may not begin the income Phase for at least nine years following your election. You may not elect the Income Protector Program if the required waiting period before beginning the income phase would occur later than your latest Annuity Date. The Income Protector option(s) currently available under this contract are:
FEE* AS A % OF YOUR INCOME WAITING PERIOD BEFORE THE OPTION GROWTH RATE BENEFIT BASE INCOME PHASE - ---------------------------- ---------------------------- ---------------------------- ---------------------------- Income Protector Base 0% .10% 9 years
ELECTING TO RECEIVE INCOME You may elect to begin the Income Phase of your contract using the Income Protector Program ONLY within the 30 days after the 9th or later contract anniversary following the effective date of your Income Protector participation. The contract anniversary of or prior to your election to begin receiving income payments is your Income Benefit Date. We calculate your Income Benefit Base as of that date to use in determining your guaranteed minimum fixed retirement income. To determine the minimum guaranteed retirement income available to you, we apply your final Income Benefit Base to the annuity rates stated in your Income Protector endorsement for the income option you select. You then choose if you would like to receive the income annually, semi-annually, quarterly or monthly for the time guaranteed under your selected income option. Your final Income Benefit Base is equal to (a) minus (b) where: (a) is your Income Benefit Base as of your Income Benefit Date, and; (b) is 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 of the Income Benefit Date, and any applicable premium taxes. 31 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 100% 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. FEES ASSOCIATED WITH THE INCOME PROTECTOR PROGRAM If you elect to participate in the Income Protector program we charge an annual fee, as follows:
OPTION FEE* AS A % OF YOUR INCOME BENEFIT BASE - ---------------------------- --------------------------------------- Income Protector Base .10%
We deduct the annual fee from your actual Contract Value. We begin deducting the annual fee on your first contract anniversary. Additionally, if you fully surrender your contract prior to your contract anniversary, we will deduct the fee at the time of surrender based on your Income Benefit Base as of the surrender date. Once elected, the Income Protector Program and its corresponding charges may not be terminated until full surrender or annuitization of the contract occurs. NOTE TO QUALIFIED CONTRACT HOLDERS Qualified contracts generally require that you select an income option that does not exceed your life expectancy. That restriction, if it applies to you, may limit the benefit of the Income Protector program. To utilize the Income Protector feature, you must take income payments under one of the two income options described above. If those income options exceed your life expectancy, you may be prohibited from receiving your guaranteed fixed income under the program. If you own a Qualified contract to which this restriction applies and you elect the Income Protector program, you may pay for this minimum guarantee and not be able to realize the benefit. Generally, for Qualified contracts: - for the Life Annuity with 10 years guaranteed, you must annuitize before age 79, and; - for the Joint and 100% Survivor Annuity with 20 years guaranteed, both annuitants must be 70 or younger or one of the annuitants must be 65 or younger upon annuitization. Other age combinations may be available. You may wish to consult your tax advisor for information concerning your particular circumstances. The Income Protector program may not be available in all states. Check with your financial advisor for availability in your state. We reserve the right to modify, suspend or terminate the Income Protector Program at any time. 32 TAXES - -------------------------------------------------------------------------------- NOTE: WE PREPARED THE FOLLOWING INFORMATION ON TAXES AS A GENERAL DISCUSSION OF THE SUBJECT. IT IS NOT TAX ADVICE. WE CAUTION YOU TO SEEK COMPETENT TAX ADVICE ABOUT YOUR OWN CIRCUMSTANCES. WE DO NOT GUARANTEE THE TAX STATUS OF YOUR ANNUITY. TAX LAWS CONSTANTLY CHANGE, THEREFORE WE CANNOT GUARANTEE THAT THE INFORMATION CONTAINED HEREIN IS COMPLETE AND/OR ACCURATE. ANNUITY CONTRACTS IN GENERAL The Internal Revenue Code ("federal tax code") 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 federal tax code treats such a withdrawal as first coming from the earnings and then as coming from your Purchase Payments. For annuity 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 federal tax code 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 federal tax code); (4) 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 federal tax code 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 federal tax code); (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 federal tax code for amounts paid during the taxable year for 33 medical care; (6) to fund higher education expenses (as defined in federal tax code); (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 federal tax code 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 federal tax code); or (5) in the case of hardship. In the case of hardship, the owner can only withdraw Purchase Payments. MINIMUM DISTRIBUTIONS Generally, the IRS requires that you begin taking annual distributions from Qualified 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. Minimum distributions are not required in a Roth IRA, during your lifetime. Failure to satisfy the minimum distribution requirements may result in a tax penalty. You should contact your tax advisor for more information. We currently waive surrender charges and MVA on withdrawals taken to meet minimum distribution requirements. Current operational practice is to provide a free withdrawal of the greater of the contract's maximum penalty free amount or the required minimum distribution amount for a particular contract (but not both). You may elect to have the required minimum distribution amount on your contract calculated and withdrawn each year under the automatic withdrawal option. You may select either monthly, quarterly, semi-annual or annual withdrawals for this purpose. This service is provided as a courtesy and we do not guarantee the accuracy of our calculations. Accordingly, we recommend you consult your tax advisor concerning your required minimum distribution. You may terminate your election for automated minimum distribution at any time by sending a written request to our Annuity Service Center. We reserve the right to change, modify or discontinue the 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 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. 34 DIVERSIFICATION The federal tax code imposes certain diversification requirements on the underlying investments for a variable annuity. We believe that the underlying 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 Portfolios. It is unknown to what extent owners are permitted to select investments, to make transfers among Portfolios or the number and type of 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 investment Portfolios. Due to the uncertainty in this area, we reserve the right to modify the contract in an attempt to maintain favorable tax treatment. PERFORMANCE - -------------------------------------------------------------------------------- From time to time we will advertise the performance of the Variable Portfolios. Any such performance results are based on historical earnings and are not intended to indicate future performance. We advertise the Cash Management Portfolio's yield and effective yield. In addition, the other Variable Portfolios advertise total return, gross yield and yield-to-maturity. These figures represent past performance of the Variable Portfolios. These performance numbers do not indicate future results. We may show performance of each Variable Portfolios in comparison to various appropriate indices and the performance of other similar variable annuity products with similar objectives as reported by such independent reporting services as Morningstar, Inc., Lipper Analytical Services, Inc. and the Variable Annuity Research Data Service ("VARDS"). Please see the Statement of Additional Information, available upon request, for more information regarding the methods used to calculate performance data. 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 Fitch, IBA Duff & Phelps A.M. Best's and Moody's ratings reflect their current opinion of our financial strength and performance in comparison to others in the life and health insurance industry. S&P's and Duff & Phelps' ratings measure the ability of an insurance company to meet its obligations under insurance policies it issues. These two ratings do not measure the insurer's ability to meet non-policy obligations. Ratings in general do not relate to the performance of the variable Portfolios. 35 OTHER INFORMATION - -------------------------------------------------------------------------------- ANCHOR NATIONAL Anchor National is a stock life insurance company originally organized under the laws of the state of California in April, 1965. On January 1, 1996, Anchor National redomesticated under the laws of the state of Arizona. Anchor National and its affiliates, SunAmerica Life Insurance Company, First SunAmerica Life Insurance Company, SunAmerica Asset Management Corporation, SunAmerica Trust Company, and the SunAmerica Financial Network, Inc. (comprising six wholly owned broker-dealers), specialize in retirement savings and investment products and services. Business focuses include fixed and variable annuities, mutual funds, broker-dealer services and trust administration services. THE SEPARATE ACCOUNT Anchor National originally established a separate account, Variable Separate Account (the "Separate Account"), under Arizona law on January 1, 1996 when it assumed the separate account, originally established under California law on June 25, 1981. The Separate Account is registered with the SEC as a unit investment trust under the Investment Company Act of 1940, as amended. Anchor National owns the assets in the Separate Account. However, the assets in the Separate Account are not chargeable with liabilities arising out of any other business conducted by Anchor National. Income gains and losses (realized and unrealized) resulting from assets in the Separate Account are credited to or charged against the Separate Account without regard to other income, gains or losses of Anchor National. Amounts deposited to the Separate Account are not guaranteed by Anchor National. 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. 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 8.0% of your Purchase Payments. We may also pay a bonus to representatives for contracts which stay active for a particular period of time, in addition to standard commissions. We do not deduct commissions paid to registered representatives directly from your Purchase Payments. 36 From time to time, we may pay or allow additional promotional incentives in the form of cash or other compensation. We reserve the right to offer these additional incentives only to certain broker-dealers that sell or are expected to sell, certain minimum amounts of the contract, or other contracts offered by us. Promotional incentives may change at any time. WM Funds Distributor, 12009 Foundation Place, Suite 350, Gold River, California 95670 distributes the contracts. WM Funds Distributor is a registered as a broker-dealer under the Exchange Act of 1934 and a member of the National Association of Securities Dealers, Inc. No underwriting fees are paid in connection with the distribution of the contracts. ADMINISTRATION We are responsible for the administrative servicing of your contract. During the Accumulation Phase, you will receive confirmation of transactions within your contract. Transactions made pursuant to contractual or systematic agreements, such as deduction of the annual maintenance fee and dollar cost averaging, may be confirmed quarterly. Purchase payments received through the Automatic Payment Plan or a salary reduction arrangement, may also be confirmed quarterly. For all other transactions, we send confirmations immediately. During the Accumulation and Income Phases, you will receive a statement of your transactions over the past quarter and a summary of your account values. Please contact our Annuity Service Center at 1-877-311-WMVA (9682), if you have any comment, question or service request. We send out transaction confirmations and quarterly statements. It is your responsibility to review these documents carefully and notify us of any inaccuracies immediately. We investigate all inquiries. To the extent that we believe we made an error, we retroactively adjust your contract, provided you notify us within 30 days of receiving the transaction confirmation or quarterly statement. Any other adjustments we deem warranted are made as of the time we receive notice of the error. 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. INDEPENDENT ACCOUNTANTS - -------------------------------------------------------------------------------- The audited consolidated financial statements of Anchor National Life Insurance Company 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, 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. As of the date of this Prospectus, sale of these contracts have not begun. Therefore, financial statements for Variable Separate Account (portion related to the WM Diversified Strategies Variable Annuity) are not contained herein. 37 TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION Separate Account............................................ General Account............................................. Performance Data............................................ Income Payments............................................. Annuity Unit Values......................................... Taxes....................................................... Distribution of Contracts................................... Financial Statements........................................
38 APPENDIX A - MARKET VALUE ADJUSTMENT - -------------------------------------------------------------------------------- The market value adjustment reflects the impact that changing interest rates have on the value of money invested at a fixed interest rate. The longer the period of time remaining in the term you initially agreed to leave your money in the fixed investment option, the greater the impact of changing interest rates. The impact of the market value adjustment can be either positive or negative, and is computed by multiplying the amount withdrawn, transferred or annuitized by the following factor: [(1+I/(1+J+L)](N/12) - 1 The market value adjustment formula may differ in certain states where: I is the interest rate you are earning on the money invested in the fixed investment option; J is the interest rate then currently available for the period of time equal to the number of years remaining in the term you initially agreed to leave your money in the fixed investment option; and L is equal to 0.005, except in Florida where it is equal to .0025. N is the number of full months remaining in the term you initially agreed to leave your money in the fixed investment option. EXAMPLES OF THE MARKET VALUE ADJUSTMENT The examples below assume the following: (1) You made an initial Purchase Payment of $10,000 and allocated it to the 10-year fixed investment option at a rate of 5%; (2) You make a partial withdrawal of $4,000 when 1 year (12 months) remain in the 10-year term you initially agreed to leave your money in the fixed investment option (N=12); and (3) You have not made any other transfers, additional Purchase Payments, or withdrawals. No withdrawal charges are reflected because your Purchase Payment has been in the contract for nine full years. If a withdrawal charge applies, it is deducted before the market value adjustment. The market value adjustment 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 investment option is 4%. The market value adjustment factor is = [(1+I/(1+J+0.005)](N/12) - 1 = [(1.05)/(1.04+0.005)](12/12) - 1 = (1.004785)(1) 1) - 1 = 1.004785 - 1 = +0.004785 The requested withdrawal amount is multiplied by the market value adjustment factor to determine the market value adjustment: $4,000 X (+0.004785) = +$19.14 $19.14 represents the market value adjustment that would be added to your withdrawal. A-1 NEGATIVE ADJUSTMENT Assume that on the date of withdrawal, the interest rate in effect for new Purchase Payments in the 1-year fixed investment option is 6%. The market value adjustment factor is = [(1+I)/(1+J+0.005)](N/12) - 1 = [(1.05)/(1.06+0.005)](12/12) - 1 = (0.985915)(1) - 1 = 0.985915 - 1 = -0.014085 The requested withdrawal amount is multiplied by the market value adjustment factor to determine the market value adjustment: $4,000 X (-0.014085) = -$56.34 $56.34 represents the market value adjustment that will be deducted from the money remaining in the 10-year fixed investment option. A-2 APPENDIX B - DEATH BENEFITS FOLLOWING SPOUSAL CONTINUATION - -------------------------------------------------------------------------------- Capitalized terms used in the Appendix have the same meaning as they have in the Death Benefit section starting on page 22 of the prospectus. The term "Continuation Net Purchase Payment" is used frequently to describe the death benefit options payable to the beneficiary of a Continuing Spouse. We define Continuation Net Purchase Payment as Net Purchase Payments made as of the Continuation Date. For the purposes 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 withdrawals, Continuation Net Purchase Payments equal the contract value on the Continuation Date, including the Continuation Contribution. STANDARD DEATH BENEFIT PAYABLE UPON CONTINUING SPOUSE'S DEATH If the Standard Death Benefit is applicable upon the Continuing Spouse's death we will pay the beneficiary the greater of: 1. Continuation Net Purchase Payments compounded at a 3% annual growth rate until the earlier of Continuing Spouses age 75 or the date of death of the Continuing Spouse, plus any Purchase Payments recorded after the date of death of the Continuing Spouse; and reduced for any withdrawals (and fees and charges applicable to those withdrawals) recorded after the earlier of age 75 or the date of death, in the same proportion that the withdrawal reduced the contract value on the date of the withdrawal. 2. The contract value at the time we receive satisfactory proof of death. ENHANCED DEATH BENEFIT PAYABLE UPON CONTINUING SPOUSE'S DEATH If the Enhanced Death Benefit is applicable upon the Continuing Spouse's death, we will pay the Beneficiary the applicable death benefit under Option 1 or Option 2. OPTION 1 - 5% ACCUMULATION: The death benefit is the greater of: a. The contract value on the date we receive satisfactory proof of the Continuing Spouse's death; or b. Net Purchase Payments made from the original contract issue date including the Continuation Contribution, compounded to the earlier of the Continuing Spouse's 80th birthday or the date of death at a 5% annual growth rate, plus any Purchase Payments recorded after the 80th birthday or the date of death; and reduced for any withdrawals (and fees and charges applicable to those withdrawals) recorded after the 80th birthday or the date of death, in the same proportion that the withdrawal reduced the contract value on the date of the withdrawal, up to a maximum benefit of two times the Net Purchase Payments. If the Continuing Spouse dies after the latest Annuity Date and the [5%] Accumulation option applied, any death benefit payable under the contract will be the Standard Death Benefit as described above. The Continuing Spouse's beneficiary will not receive any benefit from the Enhanced Death Benefit. OPTION 2 - MAXIMUM ANNIVERSARY VALUE: If the continuing Spouse is younger than age 90 at the time of death, the death benefit is the greatest of: a. Continuation Net Purchase Payments; or b. The contract value at the time we receive satisfactory proof of the Continuing Spouse's death; or c. The maximum anniversary value on any contract anniversary (of the original issue date) occurring after the Continuation Date prior to the Continuing Spouse's 81st birthday. The anniversary value equals the value on the contract anniversary plus any Purchase Payments recorded after that B-1 anniversary; and reduced for any withdrawals (and fees and charges applicable to those withdrawals) recorded after that anniversary, in the same proportion that the withdrawal reduced the contract value on the date of the withdrawal. If the Continuing Spouse is age 90 or older at the time of death and the Maximum Anniversary Value option applied, the death benefit will be equal to the contract value at the time we receive satisfactory proof of death. EARNINGS ADVANTAGE BENEFIT FOR SPOUSAL CONTINUATION: If the original owner's Earnings Advantage remained in effect upon continuation, the Earnings Advantage benefit may increase the death benefit amount. The Earnings Advantage benefit is only available if the original owner elected the feature 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 "Earnings Advantage Percentage"), subject to a maximum dollar amount (the "Maximum Earnings Advantage Percentage"), to the death benefit payable. The Contract Year of Death (from Continuation Date forward) will determine the Earnings Advantage Percentage and the Maximum Earnings Advantage amount, as set forth below:
- ---------------------------------------------------------------------------------------------- EARNINGS ADVANTAGE CONTACT YEAR OF DEATH PERCENTAGE MAXIMUM EARNINGS ADVANTAGE PERCENTAGE - ---------------------------------------------------------------------------------------------- Years 0 - 4 25% of Earnings 25% of Continuation Net Purchase Payments - ---------------------------------------------------------------------------------------------- Years 5 - 9 40% of Earnings 40% of Continuation Net Purchase Payments* - ---------------------------------------------------------------------------------------------- Years 10+ 50% of Earnings 50% of Continuation Net Purchase Payments* - ----------------------------------------------------------------------------------------------
* PURCHASE PAYMENTS RECEIVED AFTER THE 5TH ANNIVERSARY FOLLOWING THE CONTINUATION DATE MUST REMAIN IN THE CONTRACT FOR AT LAST 6 FULL MONTHS TO BE INCLUDED AS PART OF THE NET PURCHASE PAYMENTS FOR THE PURPOSE OF THE MAXIMUM EARNINGS ADVANTAGE PERCENTAGE 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 Earnings Advantage Amount? We determine the Earnings Advantage 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 Earnings Advantage amount? The Earnings Advantage amount is subject to a maximum. The Maximum Earnings Advantage amount is a percentage of the Continuation Net Purchase Payments. The Earnings Advantage benefit will only be paid if the Continuing Spouse's date of death is prior to the latest Annuity Date. WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE SPOUSAL CONTINUATION PROVISION (IN ITS ENTIRETY OR ANY COMPONENT) AT ANY TIME. B-2 APPENDIX C - -------------------------------------------------------------------------------- HYPOTHETICAL EXAMPLE OF THE OPERATION OF THE INCOME PROTECTOR PROGRAM: This table assumes a $100,000 initial investment in a non qualified contract with no further premiums, no withdrawals and no premium taxes; and the election of the optional Base Income Protector at contract issue. - ----------------------------------------------------------------------------------------------------------------------------- ANNUAL INCOME IF YOU ANNUITIZE ON THE FOLLOWING CONTRACT ANNIVERSARY IF AT ISSUE YOU 9 10 11 15 19 20 ARE... 1-8 (AGE 69) (AGE 70) (AGE 71) (AGE 75) (AGE 79) (AGE 80) - ----------------------------------------------------------------------------------------------------------------------------- MALE N/A 6,480 6,672 6,864 7,716 8,616 8,832 AGE 60* - ----------------------------------------------------------------------------------------------------------------------------- FEMALE N/A 5,700 5,880 6,060 6,900 7,860 8,112 AGE 60* - ----------------------------------------------------------------------------------------------------------------------------- MALE, AGE 60 N/A 4,920 5,028 5,136 5,544 5,868 5,928 FEMALE, AGE 60** - -----------------------------------------------------------------------------------------------------------------------------
* Life Annuity with 10 Year Period Certain ** Joint and 100% Survivor Annuity with 20 Year Period Certain The Income Protector may not be available in your state. Please consult your financial adviser for information regarding availability of this program in your state. C-1 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.................................................. 0.50% 2.35% Maine....................................................... 0% 2.00% Nevada...................................................... 0% 3.50% South Dakota................................................ 0% 1.25% West Virginia............................................... 1.00% 1.00% Wyoming..................................................... 0% 1.00%
D-1 PART II ------- Information Not Required in Prospectus Item 14. Other Expenses of Issuance and Distribution. ------------------------------------------- The following table sets forth the expenses in connection with the issuance and distribution of the securities being registered, other than underwriting discounts and commissions. All of the amounts shown are estimates, except the SEC registration fee. SEC registration fee ................................. $ 24,338.10 Printing and engraving ............................... $ 50,000 Legal fees and expenses .............................. $ 10,000 Rating agency fees ................................... $ 7,500 Miscellaneous ........................................ $ 10,000 ----------- Total ............................................ $101,338.10
Item 15. Indemnification of Directors and Officers. ------------------------------------------ Section 10-851 of the Arizona Corporations and Associations law permits the indemnification of directors, officers, employees and agents of Arizona corporations. Article Eight of the Company's Restated Articles of Incorporation, as amended and restated (the "Articles") and Article Five of the Company's By-Laws ("By-Laws") authorize the indemnification of directors and officers to the full extent required or permitted by the Laws of the State of Arizona, now or hereafter in force, whether such persons are serving the Company, or, at its request, any other entity, which indemnification shall include the advance of expenses under the procedures and to the full extent permitted by law. In addition, the Company's officers and directors are covered by certain directors' and officers' liability insurance policies maintained by the Company's parent. Reference is made to section 10-851 of the Arizona Corporations and Associations Law, Article Eight of the Articles, and Article Five of the By-Laws, which are incorporated herein by reference. Item 16. Exhibits and Financial Statement Schedules. ------------------------------------------- Exhibit No. Description (1) Underwriting Agreement*** (2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession** (3) (a) Articles of Incorporation* (b) By-Laws* (4) (a) Vista Capital Advantage Fixed and Variable Contract*** (b) Application for Contract*** (5) Opinion of Counsel re: Legality*** (6) Opinion re Discount on Capital Shares** (7) Opinion re Liquidation Preference** (8) Opinion re Tax Matters** (9) Voting Trust Agreement** (10) Material Contracts** (11) Statement re Computation of Per Share Earnings** (12) Statement re Computation of Ratios** (14) Material Foreign Patents** (15) Letter re Unaudited Financial Information** (16) Letter re Change in Certifying Accountant** (21) Subsidiaries of Registrant*** (23) (a) Consent of Independent Accountants* (b) Consent of Attorney*** (24) Powers of Attorney***** (25) Statement of Eligibility of Trustee** (26) Invitation for Competitive Bids** (27) Financial Data Schedule**** (28) Information Reports Furnished to State Insurance Regulatory Authority** (29) Other Exhibits** * Filed Herewith ** Not Applicable *** Incorporated by Reference to Post-Effective Amendment No. 3 to Registration Statement No. 33-81476 on Form S-1 filed on 12-24-97. **** Incorporated by Reference to Post-Effective Amendment No. 5 to Registration Statement No. 33-81476 on Form S-1 filed on 12-24-98. ***** Incorporated by Reference to Post- Effective Amendment 9 to Registration Statement No. 33-81476 on Form S-3 filed on December 19, 2000. Item 17. Undertakings. ------------ The undersigned registrant, Anchor National, hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (2) That, for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) That, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Los Angeles, State of California on this 12th day of April, 2002. By: ANCHOR NATIONAL LIFE INSURANCE COMPANY By: /s/ JAY S. WINTROB ----------------------------------------- Jay S. Wintrob President Pursuant to the Securities Act of 1933, this Post-Effective Amendment to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- JAY S. WINTROB* Chief Executive Officer, - --------------------- President & Director April 12, 2002 Jay S. Wintrob (Principal Executive Officer) N. SCOTT GILLIS* Senior Vice President & April 12, 2002 - --------------------- Director N. Scott Gillis (Principal Financial Officer) JAMES R. BELARDI* Senior Vice President & April 12, 2002 - --------------------- Director James R. Belardi JANA W. GREER* Senior Vice President & April 12, 2002 - --------------------- Director Jana W. Greer MAURICE S. HEBERT* Vice President & Controller April 12, 2002 - --------------------- (Principal Accounting Officer) Maurice S. Hebert MARC H. GAMSIN* Senior Vice President & April 12, 2002 - ---------------------- Director Marc H. Gamsin By: /s/ CHRISTINE A. NIXON April 12, 2002 ----------------------- Christine A. Nixon Attorney-in-Fact Date:
EXHIBIT INDEX Number Description - ------ ----------- 23(a) Consent of Independent Accountants 3(a) Articles of Incorporation 3(b) By-Laws EX-3.(A) 3 v78641paex3-a.txt EX-3.(A) AMENDED AND RESTATED ARTICLES OF INCORPORATION OF SUNAMERICA NATIONAL LIFE INSURANCE COMPANY We the undersigned, acting as incorporators for the purpose of amending and restating the Articles of Incorporation of SunAmerica National Life Insurance Company, an Arizona corporation, do hereby adopt the following Amended and Restated Articles of Incorporation for said corporation. ARTICLE I The name of the corporation shall be AIG SUNAMERICA LIFE ASSURANCE COMPANY. ARTICLE II The corporation was incorporated in the State of California on April 12, 1965 and was given recognition as domestic corporation in the State of Arizona from and after April 12, 1965, and authorization to transact insurance business as a domestic insurer, effective January 1, 1996. Upon the approval of the Amended and Restated Articles of Incorporation of Anchor National Life Insurance Company by the Arizona Department of Insurance and the State of Arizona, Corporation Commission, effective October 4, 2001 and October 5, 2001, respectively, the name of the corporation was changed to "SunAmerica National Life Insurance Company." ARTICLE III The existence of the corporation shall be perpetual. ARTICLE IV Upon the approval of the Amended and Restated Articles of Incorporation by the necessary regulatory authorities, AIG SunAmerica Life Assurance Company shall be and continue to be possessed of all privileges, franchises and powers to the same extent as if it had been originally incorporated under the laws of the State of Arizona; and all privileges, franchises and powers belonging to said corporation, and all property, real, personal and mixed, and all debts due on whatever account, all Certificates of Authority, agent appointments, and all choses in action, shall be and the same are hereby ratified1 approved, confirmed and assured to SunAmerica National Life Insurance Company with like effect and to all intents and purposes as if it had been originally incorporated under the laws of the State of Arizona. ARTICLE V The nature of the business to be transacted and the objects and purposes for which this corporation is organized include the transaction of any and all lawful business for which insurance corporations may be incorporated under the laws of the State of Arizona without limitation, and as said laws may be amended from time to time, and specifically said corporation shall be authorized to transact life insurance, disability insurance and annuities, as defined under Arizona Revised Statutes, Section 20-254, 20-253 and 20-254.01 respectively, together with such other kinds of insurance as the corporation may from time to time be authorized to transact, and to act as a reinsurer of business for which it is duly authorized. Consistent with the applicable federal and state requirements, the Company may issue funding agreements and guaranteed investment contracts as defined under Arizona Revised Statutes, Section 20-208. ARTICLE VI The authorized capital of the corporation shall be $4,000,000, and shall consist of 4,000 shares of voting common stock with a par value of $1,000.00 per share. No holders of stock of the corporation shall have any preferential right to subscription to any shares or securities convertible into shares of stock of the corporation, nor any right of subscription to any thereof other than such, if any, as the Board of Directors in its discretion may determine, and at such price as the Board of Directors in its discretion may fix; and any shares or convertible securities which the Board of Directors may determine to offer for subscription to the holders of stock at the time existing. Nothing herein contained shall be construed as prohibiting the corporation from issuing any shares of authorized but unissued common stock for such consideration as the Board of Directors may determine, provided such issuance is approved by the shareholders of the corporation by a majority of the votes entitled to be cast at any annual or special meeting of shareholders called for that purpose. No such authorized but unissued stock may, however, be issued to the shareholders of the corporation by way of a stock dividend, split-up or in any other manner of distribution unless the same ratable stock dividend, stock split-up or other distribution be declared or made in voting common stock to the holder of such voting common stock at the time outstanding. Each holder of common stock shall be entitled to participate share for share in any cash dividends which may be declared from time to time on the common stock of the corporation by the Board of Directors and to receive pro rata the net assets of the corporation on liquidation. ARTICLE VII The affairs of the corporation shall be conducted by a Board of Directors consisting of not less than five (5) nor more than fifteen (15) directors as fixed by the bylaws, and such officers as said directors may at any time elect or appoint. No officer or director need be a shareholder of this corporation. Five (5) directors shall constitute the initial Board of Directors. The names and addresses of the persons who are to serve as directors until the next annual meeting of shareholders or until their successors are 2 elected and qualified, and of the persons who are to serve as officers until the next annual meeting of the directors or until their successors are elected and qualify, are: Board of Directors James R. Belardi 1 SunAmerica Center, Century City Los Angeles, California 90067-6022 Marc H. Gamsin 1 SunAmerica Center, Century City Los Angeles, California 90067-6022 N. Scott Gillis 1 SunAmerica Center, Century City Los Angeles, California, 90067-6022 Jana W. Greer 1 SunAmerica Center, Century City Los Angeles, California 90067-6022 Jay S. Wintrob 1 SunAmerica Center, Century City Los Angeles, California 90067-6022 The directors shall have the power to adopt, amend, alter and repeal the Bylaws, to manage the corporate affairs and make all rules and regulations expedient for the management of the affairs of the corporation, to remove any officer and to fill all vacancies occurring in the Board of Directors and offices for any cause, and to appoint from their own number an executive committee and other committees and vest said committees with all the powers permitted by the Bylaws. ARTICLE VIII Subject to the further provisions hereof, the corporation shall indemnify any and all of its existing and former directors and officers and their spouses against all expenses incurred by them and each of them, including but not confined to legal fees, judgments and penalties which may be incurred, rendered or levied in any legal or administrative action brought against any of them, for or on account of any action or omission alleged to have been committed while acting within the scope of employment as a director or officer of the corporation to the fullest extent allowable pursuant to A.R.S. Section 10-120, et al. as my be amended from time to time. Whenever any such person has grounds to believe that he may incur any such aforementioned expense, he shall promptly make a full report of the matter to the President and the Secretary of the Corporation. Thereafter, the Board of Directors of the corporation shall, within a reasonable time, determine if such person acted, or failed to act, in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the corporation, and, 3 with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. If the Board of Directors determines that such person acted, or failed to act, in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful, then indemnification shall be mandatory and shall be automatically extended as specified herein, provided, however, that the corporation shall have the right to refuse indemnification, wholly or partially, in any instance in which the person to whom indemnification would otherwise have been applicable shall have unreasonably refused to permit the corporation, at its own expense and through counsel of its own choosing, to defend him in the action, or shall have unreasonably refused to cooperate in the defense of such action. ARTICLE IX All directors of the corporation shall be elected at the annual meeting of the shareholders, which shall be held on the third Thursday of March of each year or such other date and time as may be determined by the Board of Directors, unless such day falls on a holiday, in which event the regular annual meeting shall be held on the next succeeding business day. ARTICLE X The principal place of business of the corporation shall be located in the City of Phoenix, Maricopa County, Arizona, but it may have other places of business and transact business, and its Board of Directors or shareholders may meet for the transaction of business, at such other place or places within or without the State of Arizona which its Board of Directors may designate. ARTICLE XI The fiscal year of the corporation shall be the calendar year. ARTICLE XII In no event shall the corporation incur indebtedness in excess of the amount authorized by law. ARTICLE XIII The shares of the corporation, when issued, shall be non-assessable, except to the extent required by the Constitution, specifically, but not in limitation thereof, as provided by Article XIV, Section 11 of the Constitution of the State of Arizona and the laws of the State of Arizona. 4 ARTICLE XIV The private property of the shareholders, directors and officers of the corporation shall be forever exempt from debts and obligations of the corporation. ARTICLE XV The Bylaws of the corporation may be repealed, altered amended, or substitute Bylaws may be adopted, by the directors or the shareholders, in accordance with the provisions contained in said Bylaws. ARTICLE XVI J. Michael Low of 2999 North 44th Street, Suite 250, Phoenix, Arizona, 85018, having been a bona fide resident of Arizona for at least three (3) years, is hereby appointed the statutory agent of this corporation in the State of Arizona, upon whom notices and processes, including service of summons, may be served, and which, when so served shall have lawful personal service on the corporation. The Board of Directors may revoke this appointment at any time, and shall fill the vacancy in such position whenever one exists. ARTICLE XVII Shareholder action was not required to amend and restate the Articles. IN WITNESS WHEREOF, we hereunto affix our signatures as of the 19th day of December, 2001. DIRECTORS: /s/ JAMES R. BELARDI --------------------------- James R. Belardi /s/ MARC H. GAMSIN --------------------------- Marc H. Gamsin /s/ N. SCOTT GILLIS --------------------------- N. Scott Gillis /s/ JANA W. GREER --------------------------- Jana W. Greer /s/ JAY S. WINTROB --------------------------- Jay S. Wintrob 5 APPOINTMENT OF STATUTORY AGENT I, J. Michael Low, being a resident of the State of Arizona for at least three (3) years preceding this appointment, do hereby accept appointment as Statutory Agent for AIG SunAmerica Life Assurance Company in accordance with the Arizona Revised Statutes until appointment of a successor Statutory Agent and removal Dated this 21st day of January, 2002. /s/ J. MICHAEL LOW --------------------------- J. Michael Low Low & Childers, P.C. 6 EX-3.(B) 4 v78641paex3-b.txt EXHIBIT 3(B) AMENDED AND RESTATED BYLAWS OF AIG SUNAMERICA LIFE ASSURANCE COMPANY EFFECTIVE DECEMBER 19, 2001 ARTICLE I. SHAREHOLDERS. Section 1. Annual Meetings. The annual meeting of the shareholders of the Corporation shall be held on the third Thursday in March of each year or such other dates and times as may be determined. Not less than ten (10) nor more than fifty (50) days' written or printed notice stating the place, day and hour of each annual meeting shall be given in the manner provided in Section 1 of Article IX hereof. The business to be transacted at the annual meeting shall include the election of directors, consideration and action upon the reports of officers and directors and any other business within the power of the Corporation. All annual meetings shall be general meetings. Section 2. Special Meetings Called by President or Board of Directors At any time in the interval between annual meetings, special meetings of shareholders may be called by the President, the Secretary or by two (2) or more directors, upon ten (10) days' written or printed notice, stating the place, day and hour of such meeting and the business proposed to be transacted thereat. Such notice shall be given in the manner provided in Section 1 of Article IX. No business shall be transacted at any special meeting except that named in the notice. Section 3. Special Meeting Called by Shareholders Upon the request in writing delivered to the President or Secretary of the Corporation by the holders of ten percent (10%) or more of all shares outstanding and entitled to vote, it shall be the duty of the President or Secretary of the Corporation to call forthwith a special meeting of the shareholders. Such request shall state the purpose or purposes of such meeting and the matters proposed to be acted on thereat. The Secretary of the Corporation shall inform such shareholders of the reasonably estimated cost of preparing and mailing the notice of the meeting. If upon payment of such costs to the corporation, the person to whom such request in writing shall have been delivered shall fail to issue a call for such meeting within ten (10) days after the receipt of such request and payment of costs, then the shareholders owning ten percent (10%) or more of the voting shares may do so upon giving fifteen (15) days' notice of the time, place and object of the meeting in the manner provided in Section 1 of Article IX. Section 4. Removal of Directors. At any special meeting of the shareholders called in the manner provided for by this Article, the shareholders, by a vote of a majority of all shares of stock outstanding and entitled to vote, may remove any director or the entire Board of Directors from office and may elect a successor or successors to fill any resulting vacancies for the remainder of his or their terms. Section 5. Voting Proxies; Record Date. At all meetings of shareholders any shareholder entitled to vote may vote by proxy. Such proxy shall be in writing and signed by the shareholder or by his duly authorized attorney in fact. It shall be dated, but need not be sealed, witnessed or acknowledged. The Board of Directors may fix the record date for the determination of shareholders entitled to vote in the manner provided in Section 4 of Article IX hereof Section 6. Quorum. The presence in person or by proxy of the persons entitled to vote a majority of the voting shares of any meeting shall constitute a quorum for the transaction of business. If at any annual or special meeting of shareholders a quorum shall fail to attend in person or by proxy, a majority in interest attending in person or by proxy may adjourn the meeting from time to time, not exceeding thirty (30) days in all, and thereupon any business may be transacted which might have been transacted at the meeting originally called had the same been held at the time so called. Section 7. Filing Proxies. At all meetings of shareholders, the proxies shall be filed with and be verified by the Secretary of the Corporation or, if the meeting shall so decide, by the Secretary of the meeting. Section 8. Place of Meetings. All meetings of shareholders shall be held at such place, either within or without the State of Arizona, on such date and at such time as may be determined from time to time by the Board of Directors. Section 9. Order of Business. The order of business at all meetings of shareholders shall be as determined by the Board of Directors. Section 10. Action Without Meeting. Directors may be elected without a shareholders' meeting by a consent in writing, setting forth the action so taken, signed by all persons entitled to vote for the election of directors; provided, however, that the foregoing shall not limit the power of directors to fill vacancies in the Board of Directors, and that a director may be elected to fill a vacancy not filled by the directors by written consent in the manner provided by the General Corporation Law. Any other action, which under any provision of the General Corporation Law, may be taken at a meeting of the shareholders, may be taken without a meeting, and without notice except as hereinafter set forth, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. All written consents shall be filed with the Secretary of the Corporation. 2 Any shareholder giving a written consent, or the shareholder's proxyholders, or a transferee of the shares of a personal representative of the shareholder or their respective proxyholders, may revoke the consent by a writing receiving by the Corporation prior to the time that written consents of the number of shares required to authorize the proposed action have been filed with the Secretary of the Corporation, but may not do so thereafter. Such revocation is effective upon its receipt by the Secretary of the Corporation. ARTICLE II. DIRECTORS. Section 1. Powers. The Board of Directors shall have the control and management of the affairs, business and properties of the Corporation. They shall have and exercise in the name of the Corporation and on behalf of the Corporation all the rights and privileges legally exercisable by the Corporation, except as otherwise provided by law, by the Charter or by these Bylaws. A director need not be a shareholder or a resident of Arizona. Section 2. Number; Term of Office; Removal. The number of directors of the Corporation shall be not less than five (5) nor more than fifteen (15). The number to be elected at each annual meeting shall be fixed by resolution of the directors and stated in the notice of the meeting, subject, however, to approval by the shareholders voting at the meeting. The directors shall hold office for the term of one year, or until their successors are elected and qualify. A director may be removed from office as provided in Section 4 of Article I hereof. Section 3. Vacancies. If the office of a director becomes vacant, or if the number of directors is increased, such vacancy may be filled by the Board by a vote of a majority of directors then in office though not less than a quorum. The shareholders may, however, at any time during the term of such director, elect some other person to fill said vacancy and thereupon the election by the Board shall be superseded and such election by the shareholders shall be deemed a filling of the vacancy and not a removal and may be made at any special meeting called for that purpose. Section 4. Organization Meetings; Regular Meetings. The Board of Directors shall meet for the election of officers and any other business as soon as practicable after the adjournment of the annual meeting of the shareholders. No notice of the organization meeting shall be required if it is held at the same place and immediately following the annual meeting of the shareholders. Other regular meetings of the Board of Directors may be held at such intervals as the Board may from time to time prescribe. Any action required or permitted to be taken at a meeting of the Board of Directors or of a committee of the Board may be taken without a meeting, if a unanimous written consent which sets forth the action is signed by each member of the 3 Board or committee and filed with the minutes of proceedings of the Board or committee. Unless otherwise restricted by the Articles of Incorporation or these Bylaws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or such committee, as the case may be, by means of telephone conference or similar communications equipment by means of which are persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. Section 5. Special Meetings. Special meetings of the Board may be called by the President or by a majority of the directors. At least twenty-four (24) hours' notice shall be given of all special meetings; with the consent of the majority of the directors, a shorter notice may be given. Section 6. Quorum. A majority of the Board of Directors shall constitute a quorum for the transaction of business, but such number may be decreased and/or increased at any time or from time to time by vote of a majority of the entire Board to any number not less than two (2) directors or not less than one-third of the directors, whichever is greater. Section 7. Place of Meetings. The Board of Directors shall hold its meetings at such place, either within or without the State of Arizona, and at such time as may be determined from time to time by the Board of Directors Section 8. Rules and Regulations. The Board of Directors may adopt such rules and regulations for the conduct of its meetings and the management of the affairs of the Corporation as the Board may deem proper and not inconsistent with the laws of the State of Arizona or these Bylaws or the Charter. Section 9. Compensation. The directors, as such, may receive a stated salary for their services and/or a fixed sum and expenses of attendance may be allowed for attendance at each regular or special meeting of the Board of Directors. Such stated salary and/or attendance fee shall be determined by resolution of the Board unless the shareholders have adopted a resolution relating thereto, provided that nothing herein contained shall be construed to preclude a director from serving in any other capacity and receiving compensation therefor. Section 10. Investment Committee There shall be an Investment Committee consisting of the President of the Corporation ex officio and such members of the Board of Directors and/or officers and employees as the Board may by resolution prescribe. No investments or loans (other than policy loans or annuity contract loans) shall be made unless the same be authorized or approved by the Board of Directors or the Investment Committee. The Investment Committee shall maintain minutes of its meetings and shall submit regular reports to the Board of Directors. 4 Section 11 Executive Committee. The Board of Directors may appoint from among its members an executive Committee composed of three (3) or more directors, and may delegate to such Committee, in the interval between the meetings of the Board of Directors, any and all of the powers of the Board of Directors in the management of the business and affairs of the Corporation, except the power to declare dividends, issue stock, select directors to fill vacancies in the membership of the Board of Directors or any committee of the Board of Directors, amend or repeal the bylaws, or adopt new Bylaws, fix the compensation of directors for serving on the Board of Directors, or any committee of the board of Directors, or recommend to shareholders any action requiring shareholders' approval. The members of such Committee shall constitute a quorum for the transaction of business at any meeting and the act of a majority of the members present at any meeting at which the quorum requirement is satisfied shall be the act of the Board of Directors. In the absence of any member of the Executive Committee necessary to constitute a quorum, the members thereof present at any meeting, whether or not they constitute a quorum, may, with telephonic approval of one of the absent members of the Executive Committee, appoint a member of the Board of Directors to act in place of such absent member. Section 12 Other Committees The Board of Directors may appoint from its own members and, where permitted by law, from the Corporation's officers and/or employees, such standing, temporary, special or adhoc committee as the Board may determine, investing such committees with such powers, duties and functions as the Board may prescribe. All such committees shall include the President, ex officio Section 13 Advisory Board. The Board of Directors may elect an Advisory Board to serve until the next annual meeting of the Board of Directors or until their successors are elected and qualified. Such Board shall consist of a number as determined from time to time by the Board of Directors, and they shall be advised of the meetings of the Board of Directors and authorized to attend the meetings and counsel with them, but shall have no vote. The Board of Directors (and between meetings of the Board of Directors, the Executive Committee) shall have the authority to increase or decrease the number of members to the Advisory Board and to elect one or more members to the Advisory Board to serve until the next meeting of the Board of Directors and until their successors are elected and qualified, and may provide for the compensation and other rules and regulations with respect to such Board. Section 14 Procedures; Meetings. The Committees shall keep minutes of their proceedings and shall report the same to the Board of Directors at the meeting next succeeding, and any action by the Committees shall be subject to revision and alteration by the Board of Directors, provided that no rights of third persons shall be affected by any such revision or alteration. 5 ARTICLE III OFFICERS Section 1. In General. The officers of the Corporation shall consist of a President, one or more Vice Presidents, a Secretary, a Treasurer, and one or more Assistant Secretaries and as may be fixed pursuant to these Bylaws. The President, Vice Presidents, Secretary, and Treasurer shall be chosen by the Board of Directors and, except those persons holding contracts for fixed terms, shall hold office only at the pleasure of the Board or until their successors are chosen and qualified. The President may from time to time appoint Assistant Vice Presidents, Assistant Secretaries, Assistant Treasurers, and other officers bearing such titles and exercising such authority as he may from time to time deem appropriate, and except those persons holdings contracts for fixed terms, those officers appointed by the President shall hold office only at his pleasure or until their successors are appointed and qualify. Any two (2) officers, except those of President, Executive Vice President and Secretary, may be held by the same persons, but no officer shall execute, acknowledge or verify any instrument in more than one capacity when such instrument is required to be executed, acknowledged, or verified by any two (2) or more officers. The Board of Directors or the President may from time to time appoint other agents and employees, with such powers and duties as they may deem proper. Section 2. President. The President shall be Chief Executive Officer of the Corporation and shall have the general management of the Corporation's business in all departments. The President shall preside at all meetings of the Board of Directors and shall call to order all meetings of shareholders. The President shall perform such other duties as the Board of Directors may direct. Section 3. Vice Presidents In the absence or disability of the President, the Vice Presidents, if any, in order of their rank as designated by the Board of Directors or, if not ranked, the Vice President designated by the Board of Directors, shall perform all the duties of the President, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the President. The Vice Presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board of Directors or the Bylaws. Section 4. Treasurer. Unless there shall be a financial Vice President designated by the Board of Directors as the chief financial officer of the Corporation, having general supervision over its finances, the Treasurer shall be the chief financial officer with such authority. He shall also have authority to attest to the seal of the Corporation and shall perform such other duties as may be assigned to him by the Board of Directors. Section 5. Secretary of the Corporation. The Secretary of the Corporation shall keep the minutes of the meetings of the shareholders and of the Board of Directors, and shall attend to the giving and serving of all notices of the Corporation 6 required by law or these Bylaws. The Secretary shall maintain at all times in the principal office of the Corporation at least one copy of the Bylaws with all amendments to date, and shall make the same, together with the minutes of the meetings of the shareholders, the annual statement of the affairs of the Corporation and any voting trust agreement on file at the office of the Corporation, available for inspection by any officer, director, or shareholder during reasonable business hours. The Secretary shall have authority to attest to the seal of the Corporation and shall perform such other duties as may be assigned to the Secretary by the Board of Directors. Section 6. Other Secretaries, Assistant Treasurers and Assistant Secretaries. Secretaries other than the Secretary of the Corporation, the Assistant Treasurers and the Assistant Secretaries shall have authority to attest to the seal of the Corporation and shall perform such other duties as may from time to time be assigned to them by the Board of Directors or the President. Section 7. Substitutes. The Board of Directors may from time to time in the absence of any one of said officers or, at any other time, designate any other person or persons on behalf of the Corporation, to sign any contracts, deeds, notes, or other instruments in the place or stead of any of said officers, and designate any person to fill any one of said offices, temporarily or for any particular purpose; and any instruments so signed in accordance with a resolution of the Board shall be the valid act of this Corporation as fully as if executed by any regular officer. ARTICLE IV. RESIGNATION. Any director or officer may resign his office at any time. Such resignation shall be made in writing and shall take effect from the time of its receipt by the Corporation, unless some time be fixed in the resignation, and then from that date. The acceptance of a resignation shall not be required to make it effective. ARTICLE V. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Corporation shall indemnify any and all of its existing and former directors and officers and their spouses against all expenses incurred by them and each of them, including but not confined to legal fees, judgments and penalties which may be incurred, rendered or levied in any legal or administrative action brought against any of then, for or on account of any action or omission alleged to have been committed while acting within the scope of employment as director of officer of the Corporation to the fullest extent allowable pursuant to the Arizona General Corporation Law as may be amended from time to time. Whenever any such person has grounds to believe that he may incur any such aforementioned expense, he shall promptly make a full report of the matter to the president and the Secretary of the Corporation. Thereafter, the Board of 7 Directors of the Corporation shall, within a reasonable time, determine if such person acted, or failed to act, in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. If the Board of Directors determines that such person acted, or failed to act, in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful, then indemnification shall be mandatory and shall be automatically extended as specified herein, provided, however, that the Corporation shall have the right to refuse indemnification, wholly or partially, in any instance in which the person to whom indemnification would. otherwise have been applicable shall have unreasonably refused to permit the Corporation, at its own expense and through counsel of its own choosing, to defend him in the action, or shall have unreasonably refused to cooperate in the defense of such action. ARTICLE VI. FISCAL YEAR. The fiscal year of the Corporation shall be the calendar year. ARTICLE VII. SEAL. The seal of the Corporation shall be a circular disc inscribed with the name of the Corporation, "AIG SunAmerica Life Assurance Company," and the year the Corporation was incorporated. ARTICLE VIII. MISCELLANEOUS PROVISIONS - STOCK. Section 1. Issue. All certificates of shares of the Corporation shall be signed by the manual or facsimile signatures of the President or any Vice President, and countersigned by the Treasurer or Secretary of the Corporation and sealed with the seal or facsimile seal of the Corporation. Any stock certificates bearing the facsimile signatures of the officers above named shall be manually signed by an authorized representative of the Corporation's duly constituted transfer agent. If an officer whose signature appears on a certificate ceases to be an officer before the certificate is issued, it may, nevertheless, be issued with the same effect as if such officer were still in office. Section 2. Transfers. No transfers of shares shall be recognized or binding upon the Corporation until recorded on the transfer books of the Corporation 8 upon surrender and cancellation of certificates for a like number of shares. All transfers shall be effected only by the holder of record of such shares or by his legal representative, or by his attorney thereunto authorized by power of attorney duly executed. The person in whose name shares shall stand on the books of the Corporation may be deemed by the Corporation the owner thereof for all purposes. The Corporation's transfer agent shall maintain a stock transfer book, shall record therein all stock transfers and shall forward copies of all transfer sheets at regular prompt intervals to the Corporation's registrar, if there be one, or, if not, then to the Corporation's principal office for transcription on the stock registry books. Section 3. Form of Certificates; Procedure. The Board of Directors shall have power and authority to determine the form of stock certificates (except insofar as prescribed by law), and to make all such rules and regulations as the Board may deem expedient concerning the issue; transfer and registration of said certificates, and to appoint one or more transfer agents and/or registrars to countersign and register the same. The transfer agent and registrar may be the same party. Section 4. Record Dates for Dividends and Shareholders' Meetings. The Board of Directors may fix the time, not exceeding twenty (20) days preceding the date of any meeting of shareholders, any dividend payment date or any date for the allotment of rights, during which the books of the Corporation shall be closed against transfers of stock, or the Board of Directors may fix a date not exceeding forty (40) days preceding the date of any meeting of shareholders, any dividend payment date or any date for the allotment of rights, as a record date for the determination of the shareholders entitled to notice of and to vote at such meeting, or entitled to receive such dividends or rights, as the case may be, and only shareholders of record on such date shall be entitled to notice of and to vote at such meeting or to receive such dividends or rights, as the case may be. In the case of a meeting of shareholders, the record date shall be fixed not less than ten (10) days prior to the date of the meeting. Section 5. Lost Certificates. In case any certificate of shares is lost, mutilated or destroyed, the Board of Directors may issue a new certificate in place thereof, upon indemnity to the Corporation against loss and upon such other terms and conditions as the Board of Directors may deem advisable. ARTICLE IX. NOTICE. Section 1. Notice to Shareholders. Whenever by law or these Bylaws notice is required to be given to any shareholder, such notice may be given to each shareholder, whether or not such shareholder is entitled to vote, by leaving the same with him or at his residence or usual place of business, or by mailing it, postage prepaid, and addressed to him at his address as it appears on the books of the Corporation. Such leaving or mailing of notice shall be deemed the time of giving such notice. 9 Section 2. Notice to Directors and Officers. Whenever by law of these Bylaws notice is required to be given to any director or officer, such notice may be given in any one of the following ways: by personal notice to such director or officer; by telephone communication with such director or officer personally; by wire, addressed to such director or officer at his then address or at his address as it appears on the books of the Corporation; or by depositing the same in writing in the post office or in a letter box in a postage paid, sealed wrapper addressed to such director or officer at his then address or at his address as it appears on the books of the Corporation; and the time when such notice shall be mailed or consigned to a telegraph company for delivery shall be deemed to be the time of the giving of such notice. ARTICLE X. VOTING OF SECURITIES IN OTHER CORPORATIONS. Any stock or other voting securities in other corporations, which may from time to time be held by the Corporation, may be represented and voted at any meeting of shareholders of such other corporation by the President, any Vice President, or the Treasurer, or by proxy or proxies appointed by the President, any Vice President, or the Treasurer, or otherwise pursuant to authorization thereunto given by a resolution of the Board of Directors. ARTICLE XI. AMENDMENTS. These Bylaws may be added to, altered, amended or repealed by a majority vote of the entire Board of Directors at any regular meeting of the Board or at any special meeting called for that purpose. Any action of the Board of Directors in adding to, altering, amending or repealing these Bylaws shall be reported to the shareholders at the next annual meeting and may be changed or rescinded by majority vote of all of the stock then outstanding and entitled to vote, without, however, affecting the validity of any action taken in the meanwhile in reliance on these Bylaws so added to, altered, amended or repealed as aforesaid by the Board of Directors. In no event shall the Board of Directors have any power to amend this Article. 10 BYLAWS CERTIFICATION I, the undersigned, do hereby certify that I am the duly elected and qualified Assistant Secretary and keeper of the records and corporate seal of AIG SunAmerica Life Assurance Company, a corporation organized under the laws of the State of Arizona, and that the foregoing is a full, true and correct copy of the Amended and Restated Bylaws, duly adopted by unanimous written consent of the Board of Directors of the Corporation, effective as of the 19th day of December 2001, and that said Amended and Restated Bylaws supersede all Bylaws previously adopted for the purpose stated and are in full force and effect. Dated: January 16, 2002 /s/ LAWRENCE M. GOLDMAN --------------------------- Lawrence M. Goldman Assistant Secretary State of California ) ) ss. County of Los Angeles ) On this 16th day of January, 2002, before me personally came Lawrence M. Goldman, known to me to be the person described in and who executed the foregoing certificate, who being duly sworn, did say that he is the assistant Secretary of AIG SunAmerica Life Assurance Company, the corporation named in and on behalf of which the foregoing certificate was made; that the statements contained in the foregoing certificate are true in substance and in fact; that said certificate was executed on behalf of said corporation by authority of its Board of Directors; and the said Lawrence M. Goldman acknowledged that she executed the same as her free ct and deed and acknowledge the same to be the free act and deed of said corporation. /s/ VIRGINIA N. PUZON -------------------------------- Notary Public (Notary Seal) 11 EX-23.(A) 5 v78641paex23-a.txt EXHIBIT 23(A) CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectuses constituting part of this Registration Statement on Form S-3 of our report dated January 31, 2002 appearing on page F-2 of AIG SunAmerica Life Assurance Company's (formerly, Anchor National Life Insurance Company) Annual Report on Form 10-K/A for the year ended December 31, 2001. We consent to the incorporation by reference in the Variable Separate Account (Portion Relating to the Polaris Protector / Polaris Platinum Variable Annuities) Prospectus of our reports dated March 8, 2002 relating to the financial statements of Variable Separate Account (Portion Relating to the Polaris Platinum Variable Annuity) and to the financial statements of Variable Separate Account (Portion Relating to the Polaris Protector Variable Annuity). We consent to the incorporation by reference in the Variable Separate Account (Portion Relating to the Polaris Variable Annuity) Prospectus of our report dated March 8, 2002 relating to the financial statements of Variable Separate Account (Portion Relating to the Polaris Variable Annuity). We also consent to the reference to us under the heading "Independent Accountants" in such Prospectuses. PricewaterhouseCoopers LLP Los Angeles, California April 12, 2002 -----END PRIVACY-ENHANCED MESSAGE-----