-----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, Pl9ZmyIrrW0RUZguzPJ34SBgCHDTpqAhLprkypov46nW8qAY9ULFsJxD1/IzzrPs Y8Aa2U0ck9l+pjIyNQvtow== 0000950148-02-001740.txt : 20020723 0000950148-02-001740.hdr.sgml : 20020723 20020722184413 ACCESSION NUMBER: 0000950148-02-001740 CONFORMED SUBMISSION TYPE: POS AM PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20020723 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: 033-81476 FILM NUMBER: 02708076 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 v82566amposam.txt POS AM As filed with the Securities and Exchange Commission on July 22, 2002 Registration No. 33-81476 - ------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------- Post-Effective Amendment No. 16 on Form S-3 under The Securities Act of 1933 -------------------- AIG SunAmerica Life Assurance 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 Life Insurance Company 1 SunAmerica Center Los Angeles, California 90067-6022 (310) 772-6000 (Name, address, including zip code, and telephone number, including area code of agent for service) ---------------------- 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. 14 to make certain changes to the Registration Statement. Pursuant to oral permission to do so provided by Mr. William Kotapish to Anchor National, this Registration Statement contains multiple prospectuses with the substantially similar MVA feature. The Registrant does not intend for this Post-Effective Amendment No. 14 to delete from the Registration Statement, any document included in the Registration Statement but not filed herein, including any currently effective Prospectus or supplement thereto. [Seasons Triple Elite Logo] PROSPECTUS July 29, 2002 ALLOCATED FIXED AND VARIABLE GROUP ANNUITY issued by VARIABLE ANNUITY ACCOUNT FIVE and ANCHOR NATIONAL LIFE INSURANCE COMPANY The annuity contract has 20 investment choices - 3 fixed investment options which offer interest rates guaranteed by Anchor National for different periods of time, 9 variable investment SELECT PORTFOLIOS, 4 variable investment FOCUSED PORTFOLIOS and 4 variable investment SEASONS STRATEGIES: SELECT PORTFOLIOS FOCUSED PORTFOLIOS SEASONS STRATEGIES LARGE CAP GROWTH FOCUS GROWTH GROWTH LARGE CAP COMPOSITE FOCUS GROWTH AND INCOME MODERATE GROWTH LARGE CAP VALUE FOCUS VALUE BALANCED GROWTH MID CAP GROWTH FOCUS TECHNET CONSERVATIVE GROWTH MID CAP VALUE SMALL CAP INTERNATIONAL EQUITY DIVERSIFIED FIXED INCOME CASH MANAGEMENT
all of which invest in the underlying portfolios of SEASONS SERIES TRUST which is managed by: SELECT PORTFOLIOS FOCUSED PORTFOLIOS SEASONS STRATEGIES AIG GLOBAL INVESTMENT CORP. AMERICAN CENTURY INVESTMENT JANUS CAPITAL CORPORATION GOLDMAN SACHS ASSET MANAGEMENT MANAGEMENT, INC. PUTNAM INVESTMENT MANAGEMENT, L.L.C. GOLDMAN SACHS ASSET MANAGEMENT INT'L DRESDNER RCM GLOBAL SUNAMERICA ASSET MANAGEMENT CORP. JANUS CAPITAL CORPORATION INVESTORS LLC T. ROWE PRICE ASSOCIATES, INC. LORD ABBETT & CO. FRED ALGER MANAGEMENT, INC. WELLINGTON MANAGEMENT COMPANY, LLP SUNAMERICA ASSET MANAGEMENT CORP. HARRIS ASSOCIATES L.P. T. ROWE PRICE ASSOCIATES, INC. JENNISON ASSOCIATES LLC. WELLINGTON MANAGEMENT COMPANY, LLP MARSICO CAPITAL MANAGEMENT, LLC SUNAMERICA ASSET MANAGEMENT CORP. THIRD AVENUE FUNDS THORNBURG INVESTMENT MANAGEMENT, INC. VANWAGONER CAPITAL MANAGEMENT INC.
You can put your money into any one or all of the SELECT PORTFOLIOS, FOCUSED PORTFOLIOS, SEASONS STRATEGIES and/or fixed investment options. Please read this prospectus carefully before investing and keep it for your future reference. It contains important information you should know about the Seasons Triple Elite 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 29, 2002. 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 39 of this prospectus. For a free copy of the SAI, call us at 800/445-SUN2 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. 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 of 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, and its quarterly report on Form 10-Q for the quarter ended March 31, 2002 are 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 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 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 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 Optional Seasons Estate Advantage Death Benefit Fee..... 6 Optional Earnings Advantage Fee......................... 6 Optional Income Protector Fee........................... 6 Investment Portfolio Expenses of Variable Portfolios.... 7 EXAMPLES.................................................... 8 THE SEASONS TRIPLE ELITE VARIABLE ANNUITY................... 10 PURCHASING A SEASONS TRIPLE ELITE VARIABLE ANNUITY.......... 11 Allocation of Purchase Payments......................... 11 Accumulation Units...................................... 11 Free Look............................................... 12 INVESTMENT OPTIONS.......................................... 12 Variable Investment Options............................. 13 The PORTFOLIOS........................................ 13 The SEASONS STRATEGIES................................ 14 Market Value Adjustment................................. 16 Transfers During the Accumulation Phase................. 17 Dollar Cost Averaging Program........................... 18 Asset Allocation Rebalancing Program.................... 19 Principal Advantage Program............................. 19 Voting Rights........................................... 20 Substitution............................................ 20 ACCESS TO YOUR MONEY........................................ 20 Free Withdrawal Provision............................... 20 Systematic Withdrawal Program........................... 22 Minimum Contract Value.................................. 22 Qualified Contract Owners............................... 22 DEATH BENEFIT............................................... 22 Standard Death Benefit.................................. 23 Seasons Estate Advantage Death Benefit(s)............... 23 Spousal Continuation.................................... 25 EXPENSES.................................................... 26 Insurance Charges....................................... 26 Withdrawal Charges...................................... 26 Investment Charges...................................... 27 Contract Maintenance Fee................................ 27 Transfer Fee............................................ 27 Optional Seasons Estate Advantage Fee................... 27 Optional Income Protector Fee........................... 27 Premium Tax............................................. 27 Income Taxes............................................ 28 Reduction or Elimination of Charges and Expenses, and Additional Amounts Credited............................ 28 INCOME OPTIONS.............................................. 28 Annuity Date............................................ 28 Income Options.......................................... 28 Allocation of Annuity Payments.......................... 29 Transfers During the Income Phase....................... 30 Deferment of Payments................................... 30 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......................... 35 Diversification......................................... 35 PERFORMANCE................................................. 35 OTHER INFORMATION........................................... 37 Anchor National......................................... 37 The Separate Account.................................... 37 Custodian............................................... 37 The General Account..................................... 37 Distribution of the Contract............................ 37 Administration.......................................... 38 Legal Proceedings....................................... 38 Ownership............................................... 38 Independent Accountants................................. 38 Registration Statement.................................. 38 TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.... 39 APPENDIX A--MARKET VALUE ADJUSTMENT ("MVA")................. A-1 APPENDIX B--DEATH BENEFITS FOLLOWING SPOUSAL CONTINUATION... B-1 APPENDIX C--PREMIUM TAXES................................... C-1 APPENDIX D--HYPOTHETICAL EXAMPLE OF THE OPERATION OF THE INCOME PROTECTOR.......................................... 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, 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"). SELECT OR FOCUSED PORTFOLIO(S)--A sub-account of Variable Annuity Account Five which provides for the variable investment options available under the contract. Each SELECT and FOCUSED PORTFOLIO has a distinct investment objective and is invested in the underlying investment portfolios of the Seasons Series Trust. This investment option allocates assets to an underlying fund in which a portion of the assets is managed by three different advisors. 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"). SEASONS STRATEGY(IES)--A sub-account of Variable Annuity Account Five which provides for the variable investment options available under the contract. Each SEASONS STRATEGY has its own investment objective and is invested in the underlying investment portfolios of the Seasons Series Trust. This investment option allocates assets to three out of six available portfolios, each of which is managed by a different investment advisor. 4 HIGHLIGHTS - -------------------------------------------------------------------------------- The Seasons Triple Elite Variable Annuity is a contract between you and 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 the SELECT PORTFOLIOS, FOCUSED PORTFOLIOS and/or pre-allocated SEASONS STRATEGIES ("Variable Portfolios") 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), 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. 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 SEASONS TRIPLE ELITE 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 1.55% annually of the average daily value of your contract allocated to the Variable Portfolios. These 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 made in the contract for three complete years, withdrawal charges no longer apply to that portion of the Purchase Payment. Please see the FEE TABLE, PURCHASING A SEASONS TRIPLE ELITE 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 tax on earnings and untaxed, contributions when you withdraw them. Payment 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 BENEFITS: 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 choose from five different 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 financial representative or contact us at Anchor National 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. 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 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. 5 FEE TABLES - -------------------------------------------------------------------------------- OWNER TRANSACTION EXPENSES Withdrawal Charge as a percentage of Purchase Payments: Year 1........................................... 7% Year 2........................................... 6% Year 3........................................... 6% Year 4........................................... 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 in any contract year.
OPTIONAL SEASONS ESTATE ADVANTAGE DEATH BENEFIT FEE (The Seasons Estate Advantage 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 daily net asset value.) Fee as a percentage of your daily net asset value......... 0.15%
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% 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.......................... 1.05% Expense Risk Charge............................ 0.35% Distribution Expense Charge.................... 0.15% ---- Total Separate Account Expenses....... 1.55%
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 percentage of your daily net asset value......... 0.25%
6 INVESTMENT PORTFOLIO EXPENSES OF VARIABLE PORTFOLIOS SEASONS SERIES TRUST (as a percentage of daily net asset value after any applicable reimbursement or waiver of expenses, as of the fiscal year end of the Trust ending March 31, 2001)
MANAGEMENT 12b-1 SERVICE OTHER TOTAL ANNUAL FEES FEES EXPENSES EXPENSES - ------------------------------------------------------------------------------------------------- SELECT PORTFOLIOS Large Cap Growth(1,3) 0.80% 0.15% 0.30% 1.25% Large Cap Composite(1,3) 0.80% 0.15% 0.30% 1.25% Large Cap Value(1,3) 0.80% 0.15% 0.30% 1.25% Mid Cap Growth(1,3) 0.85% 0.15% 0.30% 1.30% Mid Cap Value(1,3) 0.85% 0.15% 0.30% 1.30% Small Cap(1,3) 0.85% 0.15% 0.30% 1.30% International Equity(1,3) 1.00% 0.15% 0.30% 1.45% Diversified Fixed Income(1,3) 0.70% 0.15% 0.30% 1.15% Cash Management(4) 0.55% 0.15% 0.30% 1.00% - ------------------------------------------------------------------------------------------------- FOCUSED PORTFOLIOS Focus Growth(1,3) 1.00% 0.15% 0.30% 1.45% Focus Growth and Income(1,2,3) 1.00% 0.15% 0.31% 1.46% Focus Value(1,2,3,5) 1.00% 0.15% 0.31% 1.46% Focus TechNet(1,2,3) 1.20% 0.15% 0.31% 1.66% - -------------------------------------------------------------------------------------------------
INVESTMENT PORTFOLIO EXPENSES BY SEASONS STRATEGY (based on the total annual expenses of the underlying investment portfolios reflected below after any applicable reimbursement or waiver of expenses, as of the fiscal year end of the Trust ending March 31, 2001)
MANAGEMENT 12b-1 SERVICE OTHER TOTAL ANNUAL FEES FEES EXPENSES EXPENSES - ------------------------------------------------------------------------------------------------- SEASONS STRATEGY Growth 0.87% 0.15% 0.13% 1.15% Moderate Growth 0.85% 0.15% 0.12% 1.12% Balanced Growth 0.83% 0.15% 0.15% 1.13% Conservative Growth(6) 0.80% 0.15% 0.22% 1.17% - -------------------------------------------------------------------------------------------------
IMPORTANT INFORMATION ABOUT PORTFOLIO EXPENSES IF INVESTED IN SEASONS STRATEGIES: The Investment Portfolio Expenses table set forth below identifies the total investment expenses charged by the underlying investment portfolios of Seasons Series Trust. Each contractholder invested in a SEASONS STRATEGY will incur only a portion of the investment expense of those portfolios in which the SEASONS STRATEGY invests. The table above entitled "Investment Portfolio Expenses by SEASONS STRATEGY" shows an approximation of the total investment expenses a contractholder may incur if invested in each respective SEASONS STRATEGY, after the automatic quarterly rebalancing of such SEASONS STRATEGY as described on page 14. The actual investment expenses incurred by contractholders within a SEASONS STRATEGY will vary depending upon the daily net asset value of each investment portfolio in which such SEASONS STRATEGY is invested. INVESTMENT PORTFOLIO EXPENSES FOR SEASONS STRATEGY UNDERLYING PORTFOLIOS (as a percentage of daily net asset value of each investment portfolio as of the fiscal year end of the Trust ending March 31, 2001)
MANAGEMENT 12b-1 SERVICE OTHER TOTAL ANNUAL FEES FEES EXPENSES EXPENSES - ------------------------------------------------------------------------------------------------- SEASONS STRATEGY UNDERLYING PORTFOLIOS Stock 0.85% 0.15% 0.10% 1.10% Asset Allocation: Diversified Growth 0.85% 0.15% 0.11% 1.11% Multi-Managed Growth 0.89% 0.15% 0.16% 1.20% Multi-Managed Moderate Growth 0.85% 0.15% 0.14% 1.14% Multi-Managed Income/Equity 0.81% 0.15% 0.18% 1.14% Multi-Managed Income(4) 0.77% 0.15% 0.28% 1.20% - -------------------------------------------------------------------------------------------------
(1) For this portfolio, the adviser, SunAmerica Asset Management 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 expenses by the adviser or custody credits, you would have incurred the following expenses during the last fiscal year: Focus Growth 1.66%, Focus TechNet 2.97%, Focus Growth & Income 2.47% , Focus Value 2.54% (annualized), Large Cap Growth 1.29%, Large Cap Composite 1.68%, Large Cap Value 1.31%, Mid Cap Growth 1.42%, Mid Cap Value 1.42%, Small Cap 1.56%, International Equity 2.20%, and Diversified Fixed Income 1.25%. (2) Gross of custody credits of 0.01% (3) The ratio reflects an expense cap of 1.45% 1.65%, 1.45%, 1.45%, 1.25%, 1.25%, 1.25%, 1.30%, 1.30% , 1.30%, 1.45%, and 1.15% for Focus Growth, Focus TechNet, Focus Growth & Income, Focus Value, Large Cap Growth, Large Cap Composite, Large Cap Value, Mid Cap Growth, Mid Cap Value, Small Cap, International Equity and Diversified Fixed Income, respectively. (4) For Multi-Managed Income and Cash Management, the adviser recouped prior year expense reimbursements, resulting in expense ratios before recoupment of 1.15% and 0.97% , respectively. (5) Annualized (6) For Conservative Growth Strategy, the advisor recouped prior year expense reimbursements, resulting in an expense ratio before recoupment of 1.13%. THE ABOVE INVESTMENT PORTFOLIO EXPENSES WERE PROVIDED BY SEASONS SERIES TRUST. WE HAVE NOT INDEPENDENTLY VERIFIED THE ACCURACY OF THE INFORMATION. 7 EXAMPLES You will pay the following expenses on a $1,000 investment in each Select Portfolio, Focused Portfolio or Seasons Strategy, 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 Seasons Estate Advantage, Earnings Advantage and the Income Protector features with the highest charge offered [0.15%, 0.25% and 0.10%, 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 Seasons Estate Advantage, Earnings Advantage and the Income Protector features with the highest charge [0.15%, 0.25% and 0.10%, respectively], and you do not surrender the contract.
TIME PERIODS - ---------------------------------------------------------------------------------------- SELECT PORTFOLIOS 1 YEAR 3 YEARS 5 YEARS 10 YEARS - ---------------------------------------------------------------------------------------- Large Cap Growth (a) $ 99 (a) $149 (a) $152 (a) $321 (b) $104 (b) $164 (b) $176 (b) $367 (c) $ 29 (c) $ 89 (c) $152 (c) $321 (d) $ 34 (d) $104 (d) $176 (d) $367 Large Cap Composite (a) $ 99 (a) $149 (a) $152 (a) $321 (b) $104 (b) $164 (b) $176 (b) $367 (c) $ 29 (c) $ 89 (c) $152 (c) $321 (d) $ 34 (d) $104 (d) $176 (d) $367 Large Cap Value (a) $ 99 (a) $149 (a) $152 (a) $321 (b) $104 (b) $164 (b) $176 (b) $367 (c) $ 29 (c) $ 89 (c) $152 (c) $321 (d) $ 34 (d) $104 (d) $176 (d) $367 Mid Cap Growth (a) $100 (a) $151 (a) $155 (a) $326 (b) $105 (b) $166 (b) $179 (b) $372 (c) $ 30 (c) $ 91 (c) $155 (c) $326 (d) $ 35 (d) $106 (d) $179 (d) $372 Mid Cap Value (a) $100 (a) $151 (a) $155 (a) $326 (b) $105 (b) $166 (b) $179 (b) $372 (c) $ 30 (c) $ 91 (c) $155 (c) $326 (d) $ 35 (d) $106 (d) $179 (d) $372 Small Cap (a) $100 (a) $151 (a) $155 (a) $326 (b) $105 (b) $166 (b) $179 (b) $372 (c) $ 30 (c) $ 91 (c) $156 (c) $326 (d) $ 35 (d) $106 (d) $179 (d) $372 International Equity (a) $101 (a) $155 (a) $162 (a) $340 (b) $106 (b) $170 (b) $186 (b) $385 (c) $ 31 (c) $ 95 (c) $162 (c) $340 (d) $ 36 (d) $110 (d) $186 (d) $385 Diversified Fixed Income (a) $ 98 (a) $146 (a) $147 (a) $312 (b) $103 (b) $161 (b) $172 (b) $358 (c) $ 28 (c) $ 86 (c) $147 (c) $312 (d) $ 33 (d) $101 (d) $172 (d) $358 Cash Management (a) $ 97 (a) $142 (a) $140 (a) $297 (b) $102 (b) $157 (b) $164 (b) $345 (c) $ 27 (c) $ 82 (c) $140 (c) $297 (d) $ 32 (d) $ 97 (d) $164 (d) $345 - ------------------------------------------------------------------------------------------
* 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. 8
- ---------------------------------------------------------------------------------------- FOCUSED PORTFOLIOS 1 YEAR 3 YEARS 5 YEARS 10 YEARS - ---------------------------------------------------------------------------------------- Focus Growth (a) $101 (a) $155 (a) $162 (a) $340 (b) $106 (b) $170 (b) $186 (b) $385 (c) $ 31 (c) $ 95 (c) $162 (c) $340 (d) $ 36 (d) $110 (d) $186 (d) $385 Focus Growth and Income (a) $101 (a) $156 (a) $162 (a) $341 (b) $106 (b) $170 (b) $186 (b) $386 (c) $ 31 (c) $ 96 (c) $162 (c) $341 (d) $ 36 (d) $110 (d) $186 (d) $386 Focus Value (a) $101 (a) $156 (a) $162 (a) $341 (b) $106 (b) $170 (b) $186 (b) $386 (c) $ 31 (c) $ 96 (c) $162 (c) $341 (d) $ 36 (d) $110 (d) $186 (d) $386 Focus TechNet (a) $103 (a) $161 (a) $172 (a) $359 (b) $108 (b) $176 (b) $196 (b) $403 (c) $ 33 (c) $101 (c) $172 (c) $359 (d) $ 38 (d) $116 (d) $196 (d) $403 - ----------------------------------
- ---------------------------------------------------------------------------------------- SEASONS STRATEGIES 1 YEAR 3 YEARS 5 YEARS 10 YEARS - ---------------------------------------------------------------------------------------- Growth (a) $ 98 (a) $146 (a) $147 (a) $312 (b) $103 (b) $161 (b) $172 (b) $358 (c) $ 28 (c) $ 86 (c) $147 (c) $312 (d) $ 33 (d) $101 (d) $172 (d) $358 Moderate Growth (a) $ 98 (a) $146 (a) $146 (a) $309 (b) $103 (b) $160 (b) $170 (b) $356 (c) $ 28 (c) $ 86 (c) $146 (c) $309 (d) $ 33 (d) $100 (d) $170 (d) $356 Balanced Growth (a) $ 98 (a) $146 (a) $146 (a) $310 (b) $103 (b) $161 (b) $171 (b) $356 (c) $ 28 (c) $ 86 (c) $146 (c) $310 (d) $ 33 (d) $101 (d) $171 (d) $356 Conservative Growth (a) $ 98 (a) $147 (a) $148 (a) $314 (b) $103 (b) $162 (b) $173 (b) $360 (c) $ 28 (c) $ 87 (c) $148 (c) $314 (d) $ 33 (d) $102 (d) $173 (d) $360 - ----------------------------------------------------------------------------------------
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 investment portfolio expenses by SELECT PORTFOLIO, FOCUSED PORTFOLIO and SEASONS STRATEGY. 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 prospectus located behind this prospectus. 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 SELECT PORTFOLIOS, FOCUSED PORTFOLIOS and SEASONS STRATEGIES invest, the adviser voluntarily agreed to wave 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: Focus Growth 1.66%, Focus TechNet 2.97%, Focus Growth & Income 2.47%, Focus Value 2.54% (annualized), Large Cap Growth 1.29%, Large Cap Composite 1.68%, Large Cap Value 1.31%, Mid Cap Growth 1.42%, Mid Cap Value 1.42%, Small Cap 1.56%, International Equity 2.20%, and Diversified Fixed Income 1.25%. 4. THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. 9 THE SEASONS TRIPLE ELITE 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 SELECT PORTFOLIOS, FOCUSED PORTFOLIOS and SEASONS STRATEGIES. The SELECT PORTFOLIOS, FOCUSED PORTFOLIOS and SEASONS STRATEGIES, 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 SELECT PORTFOLIOS, FOCUSED PORTFOLIOS or SEASONS STRATEGIES. The amount of money you accumulate in your contract depends on the performance of the SELECT PORTFOLIO(S), FOCUSED PORTFOLIO(S) or SEASONS STRATEGY(IES) 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 SELECT PORTFOLIOS, FOCUSED PORTFOLIOS, SEASONS STRATEGIES and fixed account options available under this contract, SEE INVESTMENT OPTIONS PAGE 12. Anchor National issues the Seasons Triple Elite Variable Annuity. When you purchase a Seasons Triple Elite 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. Seasons Triple Elite Variable Annuity 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 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 3 years. Because of the potential penalty, you should fully discuss all of the benefits and risks of this contract with your financial adviser prior to purchase. 10 PURCHASING A SEASONS TRIPLE ELITE 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 SUBSEQUENT MINIMUM SUBSEQUENT MINIMUM INITIAL PURCHASE PURCHASE PAYMENT-- PURCHASE PAYMENT PAYMENT-- AUTOMATIC PAYMENT PLAN ---------------- ---------------- ---------------------- Qualified $ 2,000 $ 250 $100 Non-qualified $ 10,000 $ 500 $100
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 in all contracts issued by the Company to the same owner to exceed $1,500,000 at the time of the Purchase Payment. Further, we reserve the right to aggregate all contracts having the same owners' and/or annuitants' social security or federal tax identification number for purposes of determining which contracts and/or purchase payments require Company pre-approval. Also, the optional Automatic Payment Plan allows you to make subsequent payments as small as $100. 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. Neither Seasons Estate Advantage 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, SELECT PORTFOLIO(S), FOCUSED PORTFOLIO(S) and/or SEASONS STRATEGY(IES) 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 12. 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 SELECT PORTFOLIO(S), FOCUSED PORTFOLIO(S) or SEASONS STRATEGY(IES) you select. In order to keep track of the value of your contract, we use a unit of measure called an Accumulation Unit which works like a share of a mutual fund. During the Income Phase, we call them Annuity Units. An Accumulation Unit value is determined each day that the New York Stock Exchange ("NYSE") is open. We base the number of units you receive on the unit value of the variable investment option as of the date we receive 11 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 SEASONS STRATEGY, SELECT PORTFOLIO or FOCUSED PORTFOLIO after the NYSE closes each day. We do this by: 1. determining the total value of money invested in a particular SEASONS STRATEGY, SELECT PORTFOLIO or FOCUSED 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 Focus Growth Portfolio. We determine that the value of an Accumulation Unit for the Focus 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 Focus 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. 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. 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 Cash Management 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 Cash Management 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. 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 the 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 - -------------------------------------------------------------------------------- The contract offers variable investment options which we call SELECT PORTFOLIOS, FOCUSED PORTFOLIOS and SEASONS STRATEGIES, and fixed investment options. We designed the contract to meet your varying investment needs over time. You can achieve this by using the SELECT PORTFOLIOS, FOCUSED PORTFOLIOS and/or SEASONS STRATEGIES alone or in concert with the fixed investment options. The SELECT PORTFOLIOS, FOCUSED PORTFOLIOS and SEASONS STRATEGIES operate similar to a mutual fund but are only available through the purchase of certain variable annuities. A mixture of your investment in the SELECT PORTFOLIOS, FOCUSED PORTFOLIOS and/or SEASONS STRATEGIES and fixed account options may lower the risk associated with investing only in a variable investment option. 12 VARIABLE INVESTMENT OPTIONS Each of the variable investment options of the contract invests in underlying portfolios of Seasons Series Trust. SAAMCo, an affiliate of Anchor National, manages Seasons Series Trust. SAAMCo has engaged sub-advisers to provide investment advice for certain of the underlying investment portfolios. YOU SHOULD READ THE PROSPECTUS FOR THE SEASONS SERIES TRUST CAREFULLY BEFORE INVESTING. THE TRUST PROSPECTUS WHICH IS ATTACHED HERETO CONTAINS DETAILED INFORMATION ABOUT THE UNDERLYING INVESTMENT PORTFOLIOS INCLUDING INVESTMENT OBJECTIVE AND RISK FACTORS. THE PORTFOLIOS The contract offers nine SELECT PORTFOLIOS, each with a distinct investment objective, utilizing a disciplined investing style to achieve its objective. Each SELECT PORTFOLIO invests in an underlying investment portfolio of the Seasons Series Trust. Except for the Cash Management portfolio, each underlying portfolio is multi-managed by a team of three money managers, one component of the underlying portfolios is an unmanaged component that tracks a particular target index or subset of an index. The other two components are actively managed. The unmanaged component of each underlying portfolio is intended to balance some of the risks associated with an actively traded portfolio. The contract also currently offers four FOCUSED PORTFOLIOS. Each multi-managed FOCUSED PORTFOLIO offers you at least three different professional managers, one of which may be SAAMCo, and each of which advises a separate portion of the FOCUSED PORTFOLIO. Each manager actively selects a limited number of stocks that represent their best stock selections. This approach to investing results in a more concentrated portfolio, which will be less diversified than the SELECT PORTFOLIOS, and may be subject to greater market risks. Each underlying PORTFOLIO and the respective managers are: SELECT PORTFOLIOS FOCUSED PORTFOLIOS LARGE CAP GROWTH MID CAP GROWTH INTERNATIONAL EQUITY FOCUS GROWTH AIG Global AIGGIC AIGGIC Fred Alger Management, Investment Corp. T. Rowe Price GSAM-Int'l Inc. ("Alger") ("AIGGIC") Wellington Lord Abbett Jennison Associates LLC. Goldman Sachs Asset Management ("Jennison") Management ("GSAM") DIVERSIFIED FIXED INCOME Marsico Capital Janus Capital MID CAP VALUE AIGGIC Management, LLC Corporation AIGGIC SAAMCo ("Marsico") ("Janus") GSAM Wellington Management Lord Abbett & FOCUS GROWTH & INCOME LARGE CAP COMPOSITE Co. CASH MANAGEMENT Harris Associates L.P. AIGGIC ("Lord Abbett") SAAMCo ("Harris") SunAmerica Asset Marsico Management SMALL CAP SAAMCo Corporation AIGGIC ("SAAMCo") Lord Abbett FOCUS VALUE T. Rowe Price SAAMCo Third Avenue Associates, Inc. Thornburg Investment ("T. Rowe Price") Management, Inc. ("Thornburg") LARGE CAP VALUE American Century AIGGIC Investment Management, T. Rowe Price Inc. ("American Century") Wellington Management Company, FOCUS TECHNET LLP. ("Wellington Dresdner RCM Global Management") Investors LLC ("Dresdner") SAAMCo Van Wagoner Capital Management, Inc. ("Van Wagoner")
13 PORTFOLIO OPERATION Each PORTFOLIO is designed to meet a distinct investment objective facilitated by the management philosophy of three different money managers (except for the Cash Management portfolio). Generally, the Purchase Payments received for allocation to each PORTFOLIO will be allocated equally among the three managers for that PORTFOLIO. Each quarter SAAMCo will evaluate the asset allocation between the three managers of each PORTFOLIO. If SAAMCo determines that the assets have become significantly unequal in allocation among the managers, then the incoming cash flows may be redirected in an attempt to stabilize the allocations. Generally, existing PORTFOLIO assets will not be rebalanced. However, we reserve the right to do so in the event that it is deemed necessary and not adverse to the interests of contract owners invested in the PORTFOLIO. THE SEASONS STRATEGIES The contract offers four multi-manager variable investment SEASONS STRATEGIES, each with a different investment objective. We designed the SEASONS STRATEGIES utilizing an asset allocation approach to meet your investment needs over time, considering factors such as your age, goals and risk tolerance. However, each SEASONS STRATEGY is designed to achieve different levels of growth over time. Each SEASONS STRATEGY invests in three underlying investment portfolios of the Seasons Series Trust. The allocation of money among these investment portfolios varies depending on the objective of the SEASONS STRATEGY. The underlying investment portfolios of Seasons Series Trust in which the SEASONS STRATEGIES invest include the Asset Allocation: Diversified Growth Portfolio, the Stock Portfolio and the Multi-Managed Growth, Multi-Managed Moderate Growth, Multi-Managed Income/Equity and Multi-Managed Income Portfolios (the "Multi-Managed Portfolios"). The Asset Allocation: Diversified Growth Portfolio is managed by Putnam. The Stock Portfolio is managed by T. Rowe Price. All of the Multi-Managed Portfolios include the same three basic investment components: a growth component managed by Janus, a balanced component managed by SAAMCo and a fixed income component managed by Wellington, LLP. The Growth SEASONS STRATEGY and the Moderate Growth SEASONS STRATEGY also have an aggressive growth component which SAAMCo manages. The percentage that any one of these components represents in each Multi-Managed Portfolio varies in accordance with the investment objective. Each SEASONS STRATEGY uses an investment approach based on asset allocation. This approach is achieved by each SEASONS STRATEGY investing in distinct percentages in three specific underlying funds of the Seasons Series Trust. In turn, the underlying funds invest in a combination of domestic and international stocks, bonds and cash. Based on the percentage allocation to each specific underlying fund and each underlying fund's investment approach, each SEASONS STRATEGY initially has a neutral asset allocation mix of stocks, bonds and cash. SEASONS STRATEGY REBALANCING Each SEASONS STRATEGY is designed to meet its investment objective by allocating a portion of your money to three different investment portfolios. At the beginning of each quarter a rebalancing occurs among the underlying funds to realign each SEASONS STRATEGY with its distinct percentage investment in the three underlying funds. This rebalancing is designed to help maintain the neutral asset allocation mix for each SEASONS STRATEGY. The pie charts on the following pages demonstrate: - the neutral asset allocation mix for each SEASONS STRATEGY; and - the percentage allocation in which each SEASONS STRATEGY invests. On the first business day of each quarter (or as close to such date as is administratively practicable) your money will be allocated among the various investment portfolios according to the percentages set forth on the prior pages. Additionally, within each Multi-Managed Portfolio, your money will be rebalanced among the various components. We also reserve the right to rebalance any SEASONS STRATEGY more frequently if rebalancing is deemed necessary and not adverse to the interests of contract owners invested in such SEASONS STRATEGY. Rebalancing a SEASONS STRATEGY may involve shifting a portion of assets out of underlying investment portfolios with higher returns into underlying investment portfolios with relatively lower returns. 14 GROWTH BALANCED GROWTH GOAL: Long-term growth of capital, allocating its GOAL: Focuses on conservation of principal by investing assets primarily to stocks. This SEASONS STRATEGY may be in a more balanced weighting of stocks and bonds, with a best suited for those with longer periods to invest. secondary objective of seeking a high total return. This SEASONS STRATEGY may be best suited for those approaching [GROWTH CHART] retirement and with less tolerance for investment risk. Bonds 15% Cash 5% Stocks 80% [BALANCED GROWTH CHART] UNDERLYING INVESTMENT Bonds 40% Cash 5% Stocks 55% PORTFOLIOS & MANAGERS UNDERLYING INVESTMENT PORTFOLIOS & MANAGERS MULTI-MANAGED GROWTH PORTFOLIO 50% Managed by: MULTI-MANAGED INCOME/EQUITY PORTFOLIO 55% Janus Capital Corporation Managed by: SunAmerica Asset Management Corp. Janus Capital Corporation Wellington Management Company, LLP SunAmerica Asset Management Corp. Wellington Management Company, LLP STOCK PORTFOLIO 25% Managed by T. Rowe Price Associates, Inc. STOCK PORTFOLIO 20% Managed by T. Rowe Price Associates, Inc. ASSET ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO 25% Managed by Putnam Investment Management, Inc. ASSET ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO 25% Managed by Putnam Investment Management, Inc.
MODERATE GROWTH CONSERVATIVE GROWTH GOAL: Growth of capital through investments in GOAL: Capital preservation while maintaining some equities, with a secondary objective of conservation of potential for growth over the long term. This SEASONS principal by allocating more of its assets to bonds than STRATEGY may be best suited for those with lower investment the Growth SEASONS STRATEGY. This SEASONS STRATEGY may be risk tolerance. best suited for those nearing retirement years but still earning income. [CONSERVATIVE GROWTH CHART] [MODERATE GROWTH CHART] Bonds 53% Cash 5% Stocks 42% Bonds 25% Cash 5% Stocks 70% UNDERLYING INVESTMENT UNDERLYING INVESTMENT PORTFOLIOS & MANAGERS PORTFOLIOS & MANAGERS MULTI-MANAGED INCOME PORTFOLIO 60% MULTI-MANAGED MODERATE GROWTH PORTFOLIO 55% Managed by: Managed by: Janus Capital Corporation Janus Capital Corporation SunAmerica Asset Management Corp. SunAmerica Asset Management Corp. Wellington Management Company, LLP Wellington Management Company, LLP STOCK PORTFOLIO 15% STOCK PORTFOLIO 20% Managed by T. Rowe Price Associates, Inc. Managed by T. Rowe Price Associates, Inc. ASSET ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO 25% ASSET ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO 25% Managed by Putnam Investment Management, Inc. Managed by Putnam Investment Management, Inc.
15 FIXED INVESTMENT OPTIONS The contract also offers three 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 a fixed investment option for a period of three years, which we call a guarantee period. Additionally, you have the option of allocating your money to the 6-month and/or 1-year DCA fixed account. The 6-month DCA fixed account and/or the 1-year DCA fixed account (the "DCA fixed accounts") are available only in conjunction with the Dollar Cost Averaging Program. The 3-year fixed investment option may not be available in all states. PLEASE SEE THE SECTION ON THE DOLLAR COST AVERAGING PROGRAM ON PAGE 18 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. 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. 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. 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 SELECT PORTFOLIO(S), FOCUSED PORTFOLIO(S) and/or SEASONS STRATEGY(IES). 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 any of the SELECT PORTFOLIO(S), FOCUSED PORTFOLIO(S) or SEASONS STRATEGY(IES). 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. MARKET VALUE ADJUSTMENT NOTE: MARKET VALUE ADJUSTMENTS APPLY TO THE 3-YEAR FIXED INVESTMENT OPTION ONLY. THIS OPTION IS NOT AVAILABLE IN ALL STATES. PLEASE CONTACT YOUR INVESTMENT REPRESENTATIVE FOR MORE INFORMATION. THE MARKET VALUE ADJUSTMENT DOES NOT APPLY TO WITHDRAWALS TO PAY A DEATH BENEFIT OR CONTRACT FEES AND CHARGES. If you take money out of the 3-year fixed investment option 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 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 any MVA. We calculate the MVA 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 the guarantee period that is equal to the guarantee period from which you seek withdrawals or transfers. 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. 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 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 MVA 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 MVA, the MVA amount will be deducted from your withdrawal. We will not assess a MVA against withdrawals made under the following circumstances (1) to pay a death benefit; (2) for amounts withdrawn or transferred from the fixed account within 30 days after the end of a guarantee period; (3) to pay contract fees and charges; or (4) to begin the Income Phase of your contract on the latest Annuity Date. The DCA fixed accounts do not impose a MVA. 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 MVA. TRANSFERS DURING THE ACCUMULATION PHASE During the Accumulation Phase, you may transfer money among the SELECT PORTFOLIO(S), FOCUSED PORTFOLIO(S), SEASONS STRATEGY(IES). Funds already in your contract cannot be transferred into the DCA fixed accounts. Transfers out of the 3-year fixed investment option may be subject to a MVA. The minimum amount you can transfer is $100, or a lesser amount if you transfer the entire balance from a SELECT PORTFOLIO, FOCUSED PORTFOLIO, SEASONS STRATEGY or a fixed investment option. Any money remaining in a SELECT PORTFOLIO, FOCUSED PORTFOLIO, SEASONS STRATEGY or fixed investment option after making a transfer must equal at least $100. You may request transfers of your account value among the SELECT PORTFOLIOS(S), FOCUSED PORTFOLIO(S), SEASONS STRATEGY(IES) and/or the Fixed account options in writing or by telephone subject to our rules. Additionally, you may access your account and request transfers through SunAmerica's website (http://www.sunamerica.com). We currently allow 15 free transfers per contract 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 or internet. If we fail to follow our procedures, we may be liable for any losses due to unauthorized or fraudulent instructions. 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. 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 programming transfers, frequent transfers or transfers that are large in relation to the total assets of the underlying 17 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. We reserve the right to modify, suspend or terminate the transfer privileges at any time. DOLLAR COST AVERAGING PROGRAM The Dollar Cost Averaging ("DCA") program allows you to invest gradually in the variable investment options. Under the program you systematically transfer a set dollar amount, a percentage or number of transfers from any SELECT PORTFOLIO, FOCUSED PORTFOLIO and/or SEASONS STRATEGY or from the 3-year fixed account option (source accounts) to any other SELECT PORTFOLIO, FOCUSED PORTFOLIO or SEASONS STRATEGY. Fixed account options are not available as target accounts for Dollar Cost Averaging. Transfers may be monthly or quarterly. You may change the frequency at any time by notifying us in writing. The minimum transfer amount under the DCA program is $100, regardless of source account. Fixed account options are not available as target accounts for the DCA program. 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. 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 SELECT PORTFOLIO(S), FOCUSED PORTFOLIO(S) or SEASONS STRATEGY(IES) you select 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 account and you select monthly transfers, we completely transfer all of your money to the selected investment options over a period of ten months. You may terminate your DCA program at any time. Upon termination of the DCA program, if money remains in the DCA fixed account, we transfer the remaining money to the same target accounts as previously designated, 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. 18 EXAMPLE: Assume that you want to gradually move $750 each quarter from the Cash Management Portfolio to the Mid-Cap Value 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. 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 SEASONS STRATEGIES, SELECT PORTFOLIOS and/or FOCUSED 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. 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. PRINCIPAL ADVANTAGE PROGRAM The Principal Advantage Program allows you to invest in one or more of the SELECT PORTFOLIOS, FOCUSED PORTFOLIOS or SEASONS STRATEGIES 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 SELECT PORTFOLIO(S), FOCUSED PORTFOLIO(S) or SEASONS STRATEGY(IES) 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 to allocate to the particular fixed investment 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 SELECT PORTFOLIO(S), FOCUSED PORTFOLIO(S) or SEASONS STRATEGY(IES) of your choice. 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 3 years. If the 3-year fixed investment option is offering a 3% interest rate, we will allocate $91,514 to the 3-year fixed investment option to ensure that this amount will grow to $100,000 at the end of the 3-year period. The remaining $8,486 may be allocated among the SELECT PORTFOLIOS, FOCUSED PORTFOLIOS or SEASONS STRATEGIES, as determined by you, to provide opportunity for greater growth. We reserve the right to modify, suspend or terminate this program at any time. 19 VOTING RIGHTS Anchor National is the legal owner of the Seasons Series Trust shares. However, when an underlying 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 PORTFOLIOS offered under your contract. For example, we may offer new PORTFOLIOS, delete PORTFOLIOS, or stop accepting allocations and/or investments in a particular PORTFOLIO. We may move assets and or re-direct future premium allocations from one PORTFOLIO to another if we receive investor approval through a proxy vote or SEC approval for a fund substitution. This would occur if a PORTFOLIO is no longer an appropriate investment for the contract, for reason such as continuing substandard performance, or for changes to the portfolio manager, investment objectives, risks and strategies, or federal or state laws. The new PORTFOLIO offered may have different fees and expenses. You will be notified of any upcoming proxies or substitutions that affect your 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 28. Generally, we deduct a withdrawal charge applicable to any total or partial withdrawal and a MVA if a partial withdrawal comes from the 3-year fixed investment option 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 26. 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 total account balance left in any SELECT PORTFOLIO, FOCUSED PORTFOLIO, SEASONS STRATEGY 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 SELECT PORTFOLIO, FOCUSED PORTFOLIO, SEASONS STRATEGY 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 MVA. 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). Purchase payments, above and beyond the amount of your free withdrawal amount, that are withdrawn prior to the end of the third year 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 26. 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. 20 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 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. 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 election of Seasons Estate Advantage, Earnings Advantage or Income Protector options and no subsequent Purchase Payments. 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 3 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 (6%)[B x C=$6,000] D=Your full surrender value ($84,000) 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% federal penalty tax. SEE TAXES ON PAGE 33. 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; 21 (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. Withdrawals may be taxable and a 10% federal 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. 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. 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 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 proof before we pay the death benefit. 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 income payment. 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 deceased 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 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. 22 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 Standard Death Benefit which is automatically included in your contract for no additional fee, an optional enhanced death benefit called "Seasons Estate Advantage" which offers you the selection of one of two options. If you choose the Seasons Estate Advantage 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. Net Purchase Payment 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 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 (including fees and charges applicable to the withdrawal) by the contract value immediately before taking that withdrawal. The resulting percentage is then multiplied by the amount of total Purchase Payments and subtracted from the amount of total Purchase Payments on deposit at the time of the withdrawal. The resulting amount is the initial Net Purchase Payment calculation. 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. 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 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 on the date we receive all required paperwork and satisfactory proof of death. SEASONS ESTATE ADVANTAGE DEATH BENEFIT(S) For an additional fee, you may elect one of the Seasons Estate Advantage 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 cannot change your election at any time. The Seasons Estate Advantage death benefit is not available if you are age 81 or older at the time of contract issue. The fee for Seasons Estate Advantage death benefit is 0.15% 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 on the date we receive all required paperwork and 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 23 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 and you selected the 5% Accumulation Option, any death benefit payable under the contract will be the Standard Death Benefit as described above. Therefore, your beneficiary will not receive any benefit from Seasons Estate Advantage. This option may not be available in your state. Check with your investment representative regarding availability. OPTION 2 - MAXIMUM ANNIVERSARY VALUE OPTION -- THE DEATH BENEFIT IS THE GREATEST OF: a. Net Purchase Payments; or b. the contract value on the date we receive all required paperwork and 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, the death benefit will be equal to the contract value on the date we receive all required paperwork and satisfactory proof of death. Thus, you will not receive the advantage of the Maximum Anniversary Value option if you are over age 80 at the time of contract issue or if you are 90 or older at the time of your death. This option may not be available in your state. Check with your investment representative regarding availability. B. EARNINGS ADVANTAGE The Earnings Advantage benefit may increase the Seasons Estate Advantage death benefit amount. In order to elect Earnings Advantage, you must also elect Seasons Estate Advantage described above. The Earnings Advantage is available for an additional charge of 0.25% 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 Seasons Estate Advantage but, once elected, generally it cannot be terminated. Further, if you elect both Seasons Estate Advantage and Earnings Advantage the combined charge will be 0.40% of the average daily ending value of the assets you have allocated to the Variable Portfolios. With the Earnings Advantage benefit, 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 Amount"), 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 CONTRACT 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. 24 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 (2) equals Net Purchase Payments. What is the Maximum Earnings Advantage? The Earnings Advantage benefit is subject to a maximum dollar amount. The Maximum Earnings Advantage Amount is equal to a percentage of your Net Purchase Payments. Earning Advantage is not available if you are age 81 or older at the time we issue your contract. Furthermore, a Continuing Spouse may not benefit from Earnings Advantage if he/she is age 81 or older on the Continuation Date. SEE SPOUSAL CONTINUATION BELOW. The Earnings Advantage benefit is not payable after the latest Annuity Date. SEE INCOME OPTIONS ON PAGE 28. Earnings Advantage 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 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"). Generally, the contract and its elected features, if any, remain the same. The Continuing Spouse is subject to the same fees, charges and expenses applicable to the original owner of the contract. A spousal continuation can only take place upon the death of the original owner of the contract. Upon a spouse's continuation of the contract, we will contribute to the contract value an amount by which the death benefit that would have been paid to the beneficiary upon the death of the original owner, exceeds the contract value ("Continuation Contribution"), if any. We calculate the Continuation Contribution as of the date of the original owner's death. We will add the Continuation Contribution as of the date we receive both the Continuing Spouse's written request to continue the contract and proof of death of the original owner in a form satisfactory to us ("Continuation Date"). If a Continuation Contribution is added to the contract value, 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. The Continuation Contribution is not considered a Purchase Payment for the purposes of any other calculations except as explained in Appendix B. SEE APPENDIX B FOR FURTHER EXPLANATION OF THE DEATH BENEFIT CALCULATIONS FOLLOWING A SPOUSAL CONTINUATION. To the extent that the Continuing Spouse invests in the Variable Portfolios or MVA fixed account 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 the Seasons Estate Advantage and the available death benefit will be the Standard Death Benefit. The Continuing Spouse cannot elect to continue Earnings Advantage without also continuing the Seasons Estate Advantage. We will terminate the Seasons Estate Advantage if the Continuing Spouse is age 81 or older on the Continuation Date if a Continuation Contribution is added to the contract value, and the available death benefit will be the Standard Death Benefit. If Seasons Estate Advantage is continued and the Continuing Spouse dies after the latest Annuity Date, and the 5% Accumulation option was selected, the death benefit will be the Standard Death Benefit. If the Maximum 25 Anniversary value option was selected and the Continuing Spouse lives to age 90 or older, the death benefit will be the contract value. However, if death occurs before the latest annuity date, the Continuing Spouse will still benefit from the Earnings Advantage. Generally, the age of the Continuing Spouse on the Continuation Date (if any Continuation Contribution has been made) and on the date of the Continuing Spouse's death will be used in determining any future death benefits under the Contract. If no Continuation Contribution has been made to the contract on the Continuation Date, the age of the spouse on the date of the original contract issue will be used to determine any age-driven benefits. SEE APPENDIX B 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 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 1.55%, annually of the value of your contract invested in the Select Portfolio(s), Focused Portfolio(s) and/or Seasons Strategy(ies). 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. 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 20. The withdrawal charge percentage declines each year a Purchase Payment is in the contract, as follows: WITHDRAWAL CHARGE
YEAR 1 2 3 4 - ----------------- --- --- --- --- Withdrawal Charge 7% 6% 6% 0%
After a Purchase Payment has been in the contract for three 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 26 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 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 SELECT PORTFOLIO(S), FOCUSED PORTFOLIO(S) or SEASONS STRATEGY(IES) for the advisory and other expenses of the portfolios. SEE FEE TABLES ON PAGE 6. Service Fees Portfolio shares are all subject to fees imposed under a servicing plan adopted by the Seasons Series Trust 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 is used generally to pay financial intermediaries for services provided over the life of the contract. SEE FEE TABLES ON PAGE 6. FOR MORE DETAILED INFORMATION ON THESE INVESTMENT CHARGES, REFER TO THE PROSPECTUS FOR THE SEASONS SERIES TRUST, ATTACHED. 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 value on your contract anniversary. In the states of Pennsylvania, Texas and Washington a contract maintenance fee will be deducted pro-rata from the SELECT PORTFOLIO(S), FOCUSED PORTFOLIO(S) and/or SEASONS STRATEGY(IES) 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 between investment options, without incurring a transfer charge per contract year. We charge you $25 for each additional transfer in any contract year ($10 in Pennsylvania and Texas). OPTIONAL SEASONS ESTATE ADVANTAGE FEE Please see page 23 of this prospectus for additional information regarding the Seasons Estate Advantage fee. OPTIONAL EARNINGS ADVANTAGE FEE Please see page 24 of this prospectus for additional information regarding the Optional 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 C provides more information about premium taxes. 27 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, 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. Other income options may be available. Please check with the Annuity Service Center for details. 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. 28 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 OR 20 YEAR PERIOD CERTAIN This option is similar to Option 2 above, with an additional guarantee of payments for at least 10 or 20 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. 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. 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 SELECT PORTFOLIO(S), FOCUSED PORTFOLIO(S) or SEASONS STRATEGY(IES) in which you invest. FIXED OR VARIABLE INCOME PAYMENTS If at the date when income payments begin you are invested in the SELECT PORTFOLIO(S), FOCUSED PORTFOLIO(S) and/or SEASONS STRATEGY(IES) 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. 29 INCOME PAYMENTS Your income payments will vary if you are invested in the SELECT PORTFOLIO(S), FOCUSED PORTFOLIO(S) and/or SEASONS STRATEGY(IES) after the Annuity date depending on four factors: - for life options, your age when payments begin, - the value of your contract in the SELECT PORTFOLIO(S), FOCUSED PORTFOLIO(S) and/or SEASONS STRATEGY(IES) 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 SELECT PORTFOLIO(S), FOCUSED PORTFOLIO(S) and/or SEASONS STRATEGY(IES) in which you are invested during the time you receive income payments. If you are invested in both the fixed account options and the SELECT PORTFOLIO(S), FOCUSED PORTFOLIO(S) and/or SEASONS STRATEGY(IES) after the Annuity Date, the allocation of funds between the fixed accounts and SELECT PORTFOLIO(S), FOCUSED PORTFOLIO(S) and/or SEASONS STRATEGY(IES) 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 SELECT PORTFOLIO(S), FOCUSED PORTFOLIO(S) and SEASONS STRATEGY(IES). 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 offers you the ability to receive a guaranteed fixed minimum retirement income when you choose to switch to the Income Phase. Income Protector should be regarded only as a "safety net". 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. 30 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 either the date of issue of the contract (if the feature is elected at the time of application) or on the contract anniversary following your enrollment in the program. The Income Benefit Base is only a calculation. It does not represent a contract value, nor does it guarantee performance of the SELECT PORTFOLIO(S), FOCUSED PORTFOLIO(S) or SEASONS STRATEGY(IES) 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 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, charges and any negative MVA (but excluding administration fees, mortality and expense charges and the fee for enrollment into the program) since the prior contract anniversary, including premium taxes, 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 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 ten 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 OF % OF YOUR INCOME WAITING PERIOD BEFORE THE OPTION GROWTH RATE BENEFIT BASE INCOME PHASE - ---------------------------------------------------------------------------------------------------------------------------------- Income Protector Base 0% 0.10% 10 years - ----------------------------------------------------------------------------------------------------------------------------------
31 ENROLLING IN THE PROGRAM If you decide that you want the protection offered by the Income Protector program, you must elect the Program by completing the Income Protector Election Form. You can not terminate your enrollment once elected. 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 10th or later contract anniversary following the effective date of your Income Protector participation. The contract anniversary 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 (including any negative MVA) 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 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. 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. SEE APPENDIX D FOR AN EXAMPLE OF THE OPERATION OF THE INCOME PROTECTOR FEATURE. 32 FEES ASSOCIATED WITH THE INCOME PROTECTOR PROGRAM If you elect to participate in the Income Protector program we deduct an annual fee equal to 10% of your Income Benefit Base from your contract value on each contract anniversary beginning with the contract anniversary following the anniversary on which your enrollment in the program becomes effective. We deduct this charge from your contract value on every contract anniversary up to and including your Income Benefit Date. 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. 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" or "IRC") provides for special rules regarding the tax treatment of annuity contracts. Generally, taxes on the earnings in your annuity contract are deferred until you take the money out. Qualified retirement investments automatically provide tax deferral regardless of whether the underlying contract is an annuity. Different rules apply depending on how you take the money out and whether your contract is Qualified or Non-qualified. If you do not purchase your contract under a pension plan, a specially sponsored employer program or an individual retirement account, your contract is referred to as a Non-qualified contract. A Non-qualified contract receives different tax treatment than a Qualified contract. In general, your cost basis in a Non-qualified contract is equal to the Purchase Payments you put into the contract. You have already been taxed on the cost basis in your contract. If you purchase your contract under a pension plan, a specially sponsored employer program or as an individual retirement account, your contract is referred to as a Qualified contract. Examples of Qualified plans are: Individual Retirement Accounts ("IRAs"), Roth IRAs, Tax-Sheltered Annuities (referred to as 403(b) contracts), H.R. 10 Plans (referred to as Keogh Plans) and pension and profit sharing plans, including 401(k) plans. Typically you have not paid any tax on the Purchase Payments used to buy your contract and therefore, you have no cost basis in your contract. TAX TREATMENT OF DISTRIBUTIONS--NON-QUALIFIED CONTRACTS If you make a withdrawal from a Non-qualified contract, the 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 33 limitations set by the federal tax code for amounts paid during the taxable year for 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. These restrictions do not apply to amounts transferred to another TSA contract under section 403(b) or to a custodial account under section 403(b)(7). TAX TREATMENT OF NON-QUALIFIED CONTRACTS OWNED BY A TRUST OR CORPORATION A Trust or Corporation ("Non-Natural Owner") that is considering purchasing this contract should consult a tax advisor. Generally, the IRC does not treat a Non-qualified contract owned by a non-natural owner as an annuity contract for Federal income tax purposes. The non-natural owner pays tax currently on the contract's value in excess of the owner's cost basis. SEE THE STATEMENT OF ADDITIONAL INFORMATION FOR A MORE DETAILED DISCUSSION OF THE POTENTIAL ADVERSE TAX CONSEQUENCES ASSOCIATED WITH NON-NATURAL OWNERSHIP OF A NON-QUALIFIED ANNUITY CONTRACT. TAX TREATMENT OF GIFTS, PLEDGES AND/OR ASSIGNMENTS OF A NON-QUALIFIED CONTRACT If you gift your Non-qualified contract to a person other than your spouse (or former spouse incident to divorce) you will pay federal tax on the contract's cash value to the extent it exceeds your cost basis. The recipient's cost basis will be increased by the amount on which you will pay federal taxes. Also, the IRC treats any assignment or pledge (or agreement to assign or pledge) of any portion of a Non-qualified contract as a withdrawal. PLEASE SEE THE STATEMENT OF ADDITIONAL INFORMATION FOR A MORE DETAILED DISCUSSION REGARDING POTENTIAL TAX CONSEQUENCES OF GIFTING, ASSIGNING OR PLEDGING A NON-QUALIFIED CONTRACT. 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. The IRS has issued new proposed regulations regarding required minimum distributions from Qualified contracts. These new rules are to be effective January 1, 2002. However, these new rules may be used in determining required minimum distributions for 2001 by owners of IRAs, Tax-Sheltered Annuities and pension and profit sharing plans. You should consult your Qualified plan sponsor and your tax advisor to determine if these new rules are available for your benefit. 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. 34 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. DIVERSIFICATION The IRC 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 SELECT PORTFOLIOS, FOCUSED PORTFOLIOS and/or SEASONS STRATEGIES. 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 SELECT PORTFOLIOS, FOCUSED PORTFOLIOS and SEASONS STRATEGIES advertise total return, gross yield and yield-to-maturity. These figures represent past performance of the SELECT PORTFOLIOS, FOCUSED PORTFOLIOS and SEASONS STRATEGIES. 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. 35 Figures calculated in this manner do not represent actual historic performance of the particular SELECT PORTFOLIO(S), FOCUSED PORTFOLIO(S) and SEASONS STRATEGY(IES). We may show performance of each SELECT PORTFOLIO, FOCUSED PORTFOLIO and/or SEASONS STRATEGY 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 ("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 SELECT PORTFOLIOS, FOCUSED PORTFOLIOS or the SEASONS STRATEGIES. 36 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 and the SunAmerica Financial Network, Inc. (comprising six wholly owned broker-dealers), specialize in retirement savings and investment products and services. Business focuses include fixed and variable annuities, mutual funds and broker-dealer services. THE SEPARATE ACCOUNT Anchor National originally established a separate account, Variable Annuity Account Five (the "Separate Account"), under Arizona law on July 8, 1996. 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. 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 7.5% of your Purchase Payments. We may also pay a bonus to representatives for contracts which stay active for a particular period of time, in addition to standard commissions. We do not deduct commissions paid to registered representatives directly from your Purchase Payments. From time to time, we may pay or allow additional promotional incentives in the form of cash or other compensation. We reserve the right to offer these additional incentives only to certain broker-dealers that sell or are expected to sell, certain minimum amounts of the contract, or other contracts offered by us. Promotional incentives may change at any time. SunAmerica Capital Services, Inc., 733 Third Avenue, 4th Floor, New York, New York 10017 distributes the contracts. SunAmerica Capital Services is an affiliate of Anchor National, and 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. 37 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 1-800-445-SUN2, if you have any comment, question or service request. We send out transaction confirmations and quarterly statements. It is your responsibility to review these documents carefully and notify us of any inaccuracies immediately. We investigate all inquiries. To the extent that we believe we made an error, we retroactively adjust your contract, provided you notify us within 30 days of receiving the transaction confirmation or quarterly statement. Any other adjustments we deem warranted are made as of the time we receive notice of the error. 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 Seasons Triple Elite 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. INDEPENDENT ACCOUNTANTS The audited consolidated financial statements of Anchor National at December 31, 2001 and 2000, for the years ended December 31, 2001, 2000 and 1999 and the audited financial statements of Variable Annuity Account Five at April 30, 2002, and for the years ended April 30, 2002 and 2001 are incorporated herein 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. 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. 38 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............................................. 4 Performance Data............................................ 4 Income Payments............................................. 9 Annuity Unit Values......................................... 10 Taxes....................................................... 13 Distribution of Contracts................................... 18 Financial Statements........................................ 18
39 APPENDIX A - 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 investment 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 annuitized by the following factor: [(1+I/(1+J+L)](N/12) - 1 The MVA formula may differ in certain states where: I is the interest rate you are earning on the money invested in the fixed investment option; J is the interest rate then currently available for the period of time equal to 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 0.0025. 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 MVA The examples below assume the following: (1) You made an initial Purchase Payment of $10,000 and in year 4 allocated it to the 3-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 3-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 three 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 3-year fixed investment 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. A-1 NEGATIVE ADJUSTMENT Assume that on the date of withdrawal, the interest rate in effect for new Purchase Payments in the 3-year fixed investment option is 6%. The MVA 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 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 3-year fixed investment option. A-2 APPENDIX B - DEATH BENEFITS FOLLOWING SPOUSAL CONTINUATION - -------------------------------------------------------------------------------- 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 plus any Purchase Payments recorded after the Continuation Date; and reduced for any withdrawals recorded after the Continuation Date, in the same proportion that the withdrawal reduced the contract value on the date of the withdrawal. 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. All other capitalized terms have the meanings defined in the glossary and/or prospectus. STANDARD DEATH BENEFIT PAYABLE UPON CONTINUING SPOUSE'S DEATH I. If the Standard Death Benefit is applicable upon the Continuing Spouse's death and a Continuation Contribution was made we will pay the beneficiary the greater of: 1. Continuation Net Purchase Payments compounded at a 3% annual growth rate from the Continuation Date until the earlier of age 75 or the date of death of the Continuing Spouse, plus any Purchase Payments recorded after the earlier of age 75 or the date of death of the Continuing Spouse; and reduced for any 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 on the date we receive all required paperwork and satisfactory proof of death. II. If the Standard Death Benefit is applicable upon the Continuing Spouse's death and no Continuation Contributions was made we will pay the beneficiary 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 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 withdrawal. 2. The contract value on the date we receive all required paperwork and satisfactory proof of death. SEASONS ESTATE ADVANTAGE DEATH BENEFIT PAYABLE UPON CONTINUING SPOUSE'S DEATH If Seasons Estate Advantage is applicable upon the Continuing Spouse's death, we will pay the Beneficiary the applicable death benefit under Option 1 or 2. OPTION 1 - 5% ACCUMULATION: I. If the 5% Accumulation Option is selected and a Continuation Contribution was made the death benefit is the greater of: a. The contract value on the date we receive all required paperwork and satisfactory proof of the Continuing Spouse's death; or b. Continuation Net Purchase Payments made from the Continuation 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 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 Continuation Net Purchase Payments. B-1 II. If 5% Accumulation Option is selected and no Continuation Contribution was made: a. The contract value on the date we receive all required paperwork and satisfactory proof of Continuing Spouse's death; or b. Net Purchase Payments made from the date of issue 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 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 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 Seasons Estate Advantage. OPTION 2 - MAXIMUM ANNIVERSARY VALUE: III. If the Maximum Anniversary Value option is selected and if the Continuing Spouse is younger than age 90 at the time of death and a Continuation Contribution was made, the death benefit is the greatest of: a. Continuation Net Purchase Payments; or b. The contract value on the date we receive all required paperwork and 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 but 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 anniversary; and reduced for any withdrawals recorded after that anniversary, in the same proportion that the withdrawal reduced the contract value on the date of the withdrawal. IV. If the Maximum Anniversary Value option is selected and no Continuation Contribution was made the death benefit is the greatest of: a. Net Purchase Payments; or b. The contract value on the date we receive all required paperwork and 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 issue date but before the Continuing Spouse's 81st birthday. The anniversary value equals the value on the contract anniversary plus any Purchase Payments recorded after that anniversary; and reduced for any 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 all required paperwork and satisfactory proof of death. The Continuing Spouse's beneficiary will not receive any benefit from Seasons Estate Advantage. However, the Continuing Spouse's beneficiary may still receive a benefit from Earnings Advantage if the date of death is prior to the latest annuity date. EARNINGS ADVANTAGE BENEFIT FOR SPOUSAL CONTINUATION: The Earnings Advantage benefit may increase the death benefit amount. The Earnings Advantage benefit is only available if the original owner elected Earnings Advantage 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. B-2 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 CONTRACT 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 CONTRACT ANNIVERSARY MUST REMAIN IN THE CONTRACT FOR AT LEAST SIX FULL MONTHS AT THE TIME OF YOUR DEATH TO BE INCLUDED AS PART OF CONTINUATION NET PURCHASE PAYMENTS FOR PURPOSES OF THE MAXIMUM EARNINGS ADVANTAGE 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-3 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% 2.00% Nevada...................................................... 0% 3.50% South Dakota................................................ 0% 1.25%* West Virginia............................................... 1.00% 1.00% Wyoming..................................................... 0% 1.00%
- --------------- * on the 1st $500,000 of premiums, 0.80% on amount in excess of $500,000. C-1 APPENDIX D - HYPOTHETICAL EXAMPLE OF THE OPERATION OF THE INCOME PROTECTOR - -------------------------------------------------------------------------------- This table assumes a $100,000 initial investment in a Non-qualified contract the election of the optional Income Protector program at contract issue, with no withdrawals, additional payments or premium taxes, no election of Seasons Estate Advantage or Earnings Advantage. - ------------------------------------------------------------------------------------------------ ANNUAL INCOME IF YOU ANNUITIZE ON THE FOLLOWING CONTRACT ANNIVERSARIES: IF AT ISSUE YOU 10 11 12 15 19 20 ARE . . . 1-9 (AGE 70) (AGE 71) (AGE 72) (AGE 75) (AGE 79) (AGE 80) - ------------------------------------------------------------------------------------------------ Male (M), Age 60* N/A 6,672 6,864 7,080 7,716 8,616 8,832 - ------------------------------------------------------------------------------------------------ Female (F), Age 60* N/A 5,880 6,060 6,252 6,900 7,860 8,112 - ------------------------------------------------------------------------------------------------ M and F, Age 60** N/A 5,028 5,136 5,244 5,544 5,868 5,928 - ------------------------------------------------------------------------------------------------
* Life Annuity with 10 Year Period Certain ** Joint and 100% Survivor Annuity with 20 Year Period Certain 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 program at any time. D-1 APPENDIX E - CONDENSED FINANCIAL INFORMATION - --------------------------------------------------------------------------------
STRATEGIES INCEPTION TO 4/30/02 - ------------------------------------------------------------ -------------------- - ------------------------------------------------------------------------------------ Growth (Inception Date: 12/10/01) Beginning AUV............................................. (a) 15.202 (b) 15.202 Ending AUV................................................ (a) 14.480 (b) 14.469 Ending Number of AUs...................................... (a) 34,143 (b) 19,273 - ------------------------------------------------------------------------------------ Moderate Growth (Inception Date: 12/10/01) Beginning AUV............................................. (a) 14.827 (b) 14.827 Ending AUV................................................ (a) 14.158 (b) 14.125 Ending Number of AUs...................................... (a) 83,099 (b) 68,214 - ------------------------------------------------------------------------------------ Balanced Growth (Inception Date: 12/10/01) Beginning AUV............................................. (a) 14.159 (b) 14.159 Ending AUV................................................ (a) 13.679 (b) 13.699 Ending Number of AUs...................................... (a) 91,728 (b) 64,966 - ------------------------------------------------------------------------------------ Conservative Growth (Inception Date: 12/10/01) Beginning AUV............................................. (a) 13.662 (b) 13.662 Ending AUV................................................ (a) 13.528 (b) 13.515 Ending Number of AUs...................................... (a) 22,358 (b) 25,766 - ------------------------------------------------------------------------------------
AUV-Accumulation Unit Value AU-Accumulation Units (a) Without election of Estate Advantage (b) With election of Estate Advantage E-1
FOCUSED PORTFOLIOS INCEPTION TO 4/30/02 - ------------------------------------------------------------ -------------------- - ------------------------------------------------------------------------------------ Focus Growth (Inception Date: 12/10/01) Beginning AUV............................................. (a) 6.898 (b) 6.898 Ending AUV................................................ (a) 6.590 (b) 6.571 Ending Number of AUs...................................... (a) 12,042 (b) 16,100 - ------------------------------------------------------------------------------------ Focus Growth & Income (Inception Date: 12/10/01) Beginning AUV............................................. (a) 8.377 (b) 8.377 Ending AUV................................................ (a) 8.546 (b) 8.515 Ending Number of AUs...................................... (a) 3,960 (b) 10,118 - ------------------------------------------------------------------------------------ Focus Value (Inception Date: 12/10/01) Beginning AUV............................................. (a) 11.042 (b) 11.042 Ending AUV................................................ (a) 10.687 (b) 10.654 Ending Number of AUs...................................... (a) 1,916 (b) 15,685 - ------------------------------------------------------------------------------------ Focus TechNet (Inception Date: 12/10/01) Beginning AUV............................................. (a) 4.447 (b) 4.447 Ending AUV................................................ (a) 3.305 (b) 3.295 Ending Number of AUs...................................... (a) 18,283 (b) 13,502 - ------------------------------------------------------------------------------------
AUV-Accumulation Unit Value AU-Accumulation Units (a) Without election of Estate Advantage (b) With election of Estate Advantage E-2
SELECT PORTFOLIOS INCEPTION TO 4/30/02 - ------------------------------------------------------------ -------------------- - ------------------------------------------------------------------------------------ Large-Cap Growth (Inception Date: 12/10/01) Beginning AUV............................................. (a) 8.809 (b) 8.809 Ending AUV................................................ (a) 7.945 (b) 7.928 Ending Number of AUs...................................... (a) 13,659 (b) 9,172 - ------------------------------------------------------------------------------------ Large-Cap Composite (Inception Date: 12/10/01) Beginning AUV............................................. (a) 9.427 (b) 9.427 Ending AUV................................................ (a) 8.878 (b) 8.881 Ending Number of AUs...................................... (a) 1,625 (b) 4,540 - ------------------------------------------------------------------------------------ Large-Cap Value (Inception Date: 12/10/01) Beginning AUV............................................. (a) 11.667 (b) 11.667 Ending AUV................................................ (a) 11.035 (b) 10.998 Ending Number of AUs...................................... (a) 11,012 (b) 7,302 - ------------------------------------------------------------------------------------ Mid-Cap Growth (Inception Date: 12/10/01) Beginning AUV............................................. (a) 12.464 (b) 12.464 Ending AUV................................................ (a) 12.246 (b) 12.243 Ending Number of AUs...................................... (a) 6,322 (b) 5,370 - ------------------------------------------------------------------------------------ Mid-Cap Value (Inception Date: 12/10/01) Beginning AUV............................................. (a) 14.322 (b) 14.322 Ending AUV................................................ (a) 14.768 (b) 14.735 Ending Number of AUs...................................... (a) 3,389 (b) 5,208 - ------------------------------------------------------------------------------------ Small-Cap (Inception Date: 12/10/01) Beginning AUV............................................. (a) 10.301 (b) 10.301 Ending AUV................................................ (a) 10.507 (b) 10.477 Ending Number of AUs...................................... (a) 5,767 (b) 5,097 - ------------------------------------------------------------------------------------
AUV-Accumulation Unit Value AU-Accumulation Units (a) Without election of Estate Advantage (b) With election of Estate Advantage E-3
SELECT PORTFOLIOS INCEPTION TO 4/30/02 - ------------------------------------------------------------ -------------------- - ------------------------------------------------------------------------------------ International Equity (Inception Date: 12/10/01) Beginning AUV............................................. (a) 7.896 (b) 7.896 Ending AUV................................................ (a) 7.764 (b) 7.786 Ending Number of AUs...................................... (a) 3,862 (b) 261 - ------------------------------------------------------------------------------------ Diversified Fixed Income (Inception Date: 12/10/01) Beginning AUV............................................. (a) 10.767 (b) 10.767 Ending AUV................................................ (a) 10.648 (b) 10.621 Ending Number of AUs...................................... (a) 6,446 (b) 1,259 - ------------------------------------------------------------------------------------ Cash Management (Inception Date: 12/10/01) Beginning AUV............................................. (a) 10.855 (b) 10.855 Ending AUV................................................ (a) 10.856 (b) 10.829 Ending Number of AUs...................................... (a) 1,727 (b) 456 - ------------------------------------------------------------------------------------
AUV-Accumulation Unit Value AU-Accumulation Units (a) Without election of Estate Advantage (b) With election of Estate Advantage E-4 - -------------------------------------------------------------------------------- Please forward a copy (without charge) to the Seasons Triple Elite 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 CHOICE LOGO] PROSPECTUS AUGUST 1, 2002 Please read this prospectus FLEXIBLE PAYMENT DEFERRED ANNUITY CONTRACTS carefully before investing and issued by keep it for future reference. ANCHOR NATIONAL LIFE INSURANCE COMPANY It contains important in connection with information about the Polaris VARIABLE SEPARATE ACCOUNT Choice Variable Annuity. The annuity has 41 investment choices - 3 available fixed account options and 38 Variable Portfolios listed below. The 3 fixed account options include one To learn more about the account for a period of 3 years and DCA accounts for 6-month and 1-year periods. annuity offered by this The 38 Variable Portfolios are part of the Anchor Series Trust ("AST"), prospectus, you can obtain a SunAmerica Series Trust ("SST"), Lord Abbett Series Fund, Inc. ("LASF"), Nations copy of the Statement of Separate Account Trust ("NSAT") and Van Kampen Life Investment Trust ("VKT"). Additional Information ("SAI") dated August 1, 2002. The SAI STOCKS: has been filed with the MANAGED BY ALLIANCEBERNSTEIN Securities and Exchange - Small & Mid Cap Value Portfolio SST Commission ("SEC") and is MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P. incorporated by reference into - Alliance Growth Portfolio SST this prospectus. The Table of - Global Equities Portfolio SST Contents of the SAI appears on - Growth & Income Portfolio SST page 28 of this prospectus. MANAGED BY BRANDES INVESTMENT PARTNERS, L.P. For a free copy of the SAI, - Nations International Value Portfolio NSAT call us at (800) 445-SUN2 or MANAGED BY DAVIS ADVISERS write to us at our Annuity - Davis Venture Value Portfolio SST Service Center, P.O. Box - Real Estate Portfolio SST 54299, Los Angeles, California MANAGED BY FEDERATED INVESTORS L.P. 90054-0299. - Federated Value Portfolio SST MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT In addition, the SEC maintains - Goldman Sachs Research Portfolio SST a website (http://www.sec.gov) MANAGED BY LORD, ABBETT & CO. that contains the SAI, - Growth and Income Portfolio LASF materials incorporated by MANAGED BY MARSICO CAPITAL MANAGEMENT, LLC reference and other - Nations Marsico Focused Equities Portfolio NSAT information filed MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY electronically with the SEC by - MFS Growth & Income Portfolio SST Anchor National. - MFS Mid-Cap Growth Portfolio SST MANAGED BY PUTNAM INVESTMENT MANAGEMENT INC. ANNUITIES INVOLVE RISKS, - Emerging Markets Portfolio SST INCLUDING POSSIBLE LOSS OF - International Growth & Income Portfolio SST PRINCIPAL, AND ARE NOT A - Putnam Growth Portfolio SST DEPOSIT OR OBLIGATION OF, OR MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION GUARANTEED OR ENDORSED BY, ANY - Aggressive Growth Portfolio SST BANK. THEY ARE NOT FEDERALLY - Blue Chip Growth Portfolio SST INSURED BY THE FEDERAL DEPOSIT - "Dogs" of Wall Street Portfolio SST INSURANCE CORPORATION, THE - Growth Opportunities Portfolio SST FEDERAL RESERVE BOARD OR ANY MANAGED BY TEMPLETON INVESTMENT COUNSEL, LLC OTHER AGENCY. - Foreign Value Portfolio SST MANAGED BY VAN KAMPEN/VAN KAMPEN ASSET MANAGEMENT INC. - International Diversified Equities Portfolio SST - Technology Portfolio SST - 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 SST MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION - SunAmerica Balanced Portfolio SST MANAGED BY WM ADVISORS, INC. - Asset Allocation 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 MACKAY SHIELDS LLC - Nations High Yield Bond Portfolio NSAT MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION - High-Yield Bond Portfolio SST MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP - Government & Quality Bond Portfolio AST CASH: MANAGED BY BANC OF AMERICA CAPITAL MANAGEMENT, LLC - Cash Management Portfolio SST
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 Enhanced Death Benefit Fee......................... 5 Optional EstatePlus Fee..................................... 5 Portfolio Expenses.......................................... 5 EXAMPLES.......................................................... 7 THE POLARIS CHOICE VARIABLE ANNUITY............................... 9 PURCHASING A POLARIS CHOICE VARIABLE ANNUITY...................... 10 Allocation of Purchase Payments............................. 10 Accumulation Units.......................................... 10 Free Look................................................... 11 INVESTMENT OPTIONS................................................ 11 Variable Portfolios......................................... 11 Anchor Series Trust..................................... 11 SunAmerica Series Trust................................. 11 Lord Abbett Series Fund, Inc. .......................... 11 Nations Separate Account Trust.......................... 11 Van Kampen Life Investment Trust........................ 12 Fixed Account Options....................................... 12 Market Value Adjustment ("MVA")............................. 13 Transfers During the Accumulation Phase..................... 13 Dollar Cost Averaging....................................... 14 Asset Allocation Rebalancing Program........................ 15 Principal Advantage Program................................. 15 Voting Rights............................................... 15 Substitution................................................ 15 ACCESS TO YOUR MONEY.............................................. 15 Systematic Withdrawal Program............................... 16 Minimum Contract Value...................................... 17 DEATH BENEFIT..................................................... 17 Standard Death Benefit...................................... 17 Optional Enhanced Death Benefit............................. 17 Purchase Payment Accumulation Option........................ 18 Maximum Anniversary Option.................................. 18 EstatePlus.................................................. 18 Spousal Continuation........................................ 19 EXPENSES.......................................................... 19 Insurance Charges........................................... 19 Withdrawal Charges.......................................... 20 Investment Charges.......................................... 20 Contract Maintenance Fee.................................... 20 Transfer Fee................................................ 20 Optional Enhanced Death Benefit and EstatePlus Fee.......... 20 Optional Income Protector Fee............................... 21 Premium Tax................................................. 21 Income Taxes................................................ 21 Reduction or Elimination of Charges and Expenses, and Additional Amounts Credited........................... 21 INCOME OPTIONS.................................................... 21 Annuity Date................................................ 21 Income Options.............................................. 21 Fixed or Variable Income Payments........................... 22 Income Payments............................................. 22 Transfers During the Income Phase........................... 22 Deferment of Payments....................................... 22 The Income Protector Feature................................ 22 Note to Qualified Contract Holders.......................... 24 TAXES............................................................. 24 Annuity Contracts in General................................ 24 Tax Treatment of Distributions - Non-Qualified Contracts.... 25 Tax Treatment of Distributions - Qualified Contracts........ 25 Minimum Distributions....................................... 25 Tax Treatment of Death Benefits............................. 26 Contracts Owned by a Trust or Corporation................... 26 Gifts, Pledges and/or Assignments of a Non-Qualified Contract.................................................... 26 Diversification............................................. 26 PERFORMANCE....................................................... 26 OTHER INFORMATION................................................. 27 Anchor National............................................. 27 The Separate Account........................................ 27 The General Account......................................... 27 Distribution of the Contract................................ 27 Administration.............................................. 27 Legal Proceedings........................................... 28 Ownership................................................... 28 Custodian................................................... 28 Independent Accountants..................................... 28 Registration Statement...................................... 28 TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.................................................... 28 APPENDIX A - CONDENSED FINANCIALS................................. A-1 APPENDIX B - MARKET VALUE ADJUSTMENT ("MVA")...................... B-1 APPENDIX C - DEATH BENEFITS FOLLOWING SPOUSAL CONTINUATION................................................... C-1 APPENDIX D - HYPOTHETICAL EXAMPLE OF THE OPERATION OF THE INCOME PROTECTOR FEATURE................................... D-1 APPENDIX E - PREMIUM TAXES........................................ E-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, the SunAmerica Series Trust, Lord Abbett Series Fund, Inc., Nations Separate Account Trust and Van Kampen Life Investment Trust collectively. VARIABLE PORTFOLIO(S) - The variable investment options available under the contract. Each Variable Portfolio has its own investment objective and is invested in the underlying investments of the Anchor Series Trust the SunAmerica Series Trust, Lord Abbett Series Fund, Inc., the Nations Separate Account Trust or the Van Kampen Life Investment Trust.
ALL FINANCIAL REPRESENTATIVES OR AGENTS THAT SELL THE CONTRACTS OFFERED BY THIS PROSPECTUS ARE REQUIRED TO DELIVER A PROSPECTUS. 3 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. 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. - ---------------------------------------------------------------- - ---------------------------------------------------------------- HIGHLIGHTS - ---------------------------------------------------------------- - ---------------------------------------------------------------- The Polaris Choice 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 CHOICE 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 those 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 three complete years, withdrawal charges no longer apply to that portion of the Purchase Payment. Please see the FEE TABLE, PURCHASING A POLARIS CHOICE 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 choose 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) YEARS:............................................. 1 2 3 4 7% 6% 5% 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% 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 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 VALUE) Mortality and Expense Risk Charge..................... 1.37% Distribution Expense Charge........................... 0.15% ----- TOTAL SEPARATE ACCOUNT EXPENSES 1.52% =====
OPTIONAL ENHANCED DEATH BENEFIT FEE (THIS FEATURE OFFERS A CHOICE OF TWO OPTIONAL ENHANCED DEATH BENEFITS WHICH ARE MORE FULLY DESCRIBED IN THE PROSPECTUS. 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......... 0.20%
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......... 0.25%
PORTFOLIO EXPENSES ANCHOR SERIES TRUST CLASS B (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% - ---------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------
LORD ABBETT SERIES FUND CLASS VC (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 - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- Growth and Income Portfolio 0.50% 0.47% 0.97% - -----------------------------------------------------------------------------------------------------------
NATIONS SEPARATE ACCOUNT 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 OTHER TOTAL ANNUAL PORTFOLIO FEE EXPENSES EXPENSES - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- Nations High Yield Bond(1) 0.00% 1.00% 1.00% - ----------------------------------------------------------------------------------------------------------- Nations International Value(1,2) 0.00% 1.25% 1.25% - ----------------------------------------------------------------------------------------------------------- Nations Marsico Focused Equities(1) 0.75% 0.38% 1.13% - ----------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------
(1) The figures shown are based on amounts incurred during the Portfolios' most recent fiscal year and have been adjusted, as necessary, to reflect current service provider fees. Each Nations Separate Account Trust Portfolio is subject to fees up to 0.25% of its average daily net assets pursuant to a shareholder servicing and distribution plan. The shareholder servicing and distribution plan provides that a Portfolio may pay banks, broker/dealers, insurance companies, or other financial institutions that have entered into sales support agreements with Stephens Inc., the distributor of the Portfolio, or a shareholder servicing agreement with the Portfolio for certain expenses that are incurred in connection with sales support and shareholder services. Currently, shareholder servicing and distribution fees are being waived for each Nations Portfolio by Stephens Inc. The investment adviser and/or other service providers to these Nations Separate Account Trust Portfolios (excluding Nations Marsico Focused Equities portfolio) have agreed to waive a portion of their fees and/or reimburse expenses, including the 12b-1 distribution and shareholder servicing plan fees of 0.25%, through April 30, 2003 in order to maintain total Portfolio operating expenses at the levels shown. There is no assurance that these waivers and/or reimbursements, will continue after this date. Absent these waivers and/or reimbursements total Portfolio operating expenses would be: Nations High Yield Bond 2.13%; and Nations International Value 3.03%. (2) The Nations International Value portfolio will no longer be available for investment after September 30, 2002. 5 SUNAMERICA SERIES TRUST CLASS B (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(2) FEE(2) EXPENSES(2) EXPENSES(2) - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------ 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% - ------------------------------------------------------------------------------------------------------------------ Foreign Value(3) 1.03% 0.15% 0.62% 1.80% - ------------------------------------------------------------------------------------------------------------------ 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% - ------------------------------------------------------------------------------------------------------------------ International Diversified Equities 1.00% 0.15% 0.27% 1.42% - ------------------------------------------------------------------------------------------------------------------ International Growth and Income 0.95% 0.15% 0.27% 1.37% - ------------------------------------------------------------------------------------------------------------------ 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% - ------------------------------------------------------------------------------------------------------------------ Small & Mid Cap Value(3) 1.00% 0.15% 0.35% 1.50% - ------------------------------------------------------------------------------------------------------------------ SunAmerica Balanced 0.60% 0.15% 0.07% 0.82% - ------------------------------------------------------------------------------------------------------------------ Technology 1.20% 0.15% 0.25% 1.60% - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------
(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%; and Growth Opportunities 1.31%. (2) Annualized. (3) This portfolio was not available for sale during fiscal year 2002. The figures are based on estimated amounts for the current fiscal year. VAN KAMPEN LIFE INVESTMENT TRUST CLASS II SHARES (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 0.60% 0.25% 0.21% 1.06% - ---------------------------------------------------------------------------------------------------------------- Van Kampen LIT Emerging Growth 0.70% 0.25% 0.06% 1.01% - ---------------------------------------------------------------------------------------------------------------- Van Kampen LIT Growth and Income 0.60% 0.25% 0.15% 1.00% - ---------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------
THE ABOVE PORTFOLIO EXPENSES WERE PROVIDED BY THE TRUSTS. WE HAVE NOT INDEPENDENTLY VERIFIED THE ACCURACY OF THE INFORMATION. 6 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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) you surrender the contract at the end of the stated time period and no optional features are elected. (b) you elect the optional Enhanced Death Benefit, EstatePlus and the Income Protector benefits at the maximum charges offered (.20%, .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 Enhanced Death Benefit, EstatePlus and Income Protector benefits at the maximum charges offered (.20%, .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) $135 (a) $287 (b) $101 (b) $145 (b) $162 (b) $340 (c) $ 26 (c) $ 79 (c) $135 (c) $287 (d) $ 31 (d) $ 95 (d) $162 (d) $340 - ----------------------------------------------------------------------------------------------------------- Government and Quality Bond (a) $ 94 (a) $125 (a) $128 (a) $273 (b) $100 (b) $141 (b) $155 (b) $327 (c) $ 24 (c) $ 75 (c) $128 (c) $273 (d) $ 30 (d) $ 91 (d) $155 (d) $327 - ----------------------------------------------------------------------------------------------------------- Growth (a) $ 95 (a) $127 (a) $132 (a) $282 (b) $101 (b) $144 (b) $160 (b) $335 (c) $ 25 (c) $ 77 (c) $132 (c) $282 (d) $ 31 (d) $ 94 (d) $160 (d) $335 - ----------------------------------------------------------------------------------------------------------- Natural Resources (a) $ 97 (a) $133 (a) $141 (a) $300 (b) $102 (b) $149 (b) $168 (b) $352 (c) $ 27 (c) $ 83 (c) $141 (c) $300 (d) $ 32 (d) $ 99 (d) $168 (d) $352 - ----------------------------------------------------------------------------------------------------------- Aggressive Growth (a) $ 96 (a) $129 (a) $134 (a) $286 (b) $101 (b) $145 (b) $161 (b) $339 (c) $ 26 (c) $ 79 (c) $134 (c) $286 (d) $ 31 (d) $ 95 (d) $161 (d) $339 - ----------------------------------------------------------------------------------------------------------- Alliance Growth (a) $ 94 (a) $125 (a) $129 (a) $275 (b) $100 (b) $142 (b) $156 (b) $329 (c) $ 24 (c) $ 75 (c) $129 (c) $275 (d) $ 30 (d) $ 92 (d) $156 (d) $329 - ----------------------------------------------------------------------------------------------------------- Asset Allocation (a) $ 95 (a) $126 (a) $130 (a) $277 (b) $100 (b) $142 (b) $157 (b) $331 (c) $ 25 (c) $ 76 (c) $130 (c) $277 (d) $ 30 (d) $ 92 (d) $157 (d) $331 - ----------------------------------------------------------------------------------------------------------- Blue Chip Growth (a) $ 96 (a) $131 (a) $138 (a) $294 (b) $102 (b) $147 (b) $165 (b) $346 (c) $ 26 (c) $ 81 (c) $138 (c) $294 (d) $ 32 (d) $ 97 (d) $165 (d) $346 - ----------------------------------------------------------------------------------------------------------- Cash Management (a) $ 93 (a) $121 (a) $122 (a) $262 (b) $ 99 (b) $138 (b) $150 (b) $316 (c) $ 23 (c) $ 71 (c) $122 (c) $262 (d) $ 29 (d) $ 88 (d) $150 (d) $316 - ----------------------------------------------------------------------------------------------------------- Corporate Bond (a) $ 95 (a) $126 (a) $129 (a) $276 (b) $100 (b) $142 (b) $157 (b) $330 (c) $ 25 (c) $ 76 (c) $129 (c) $276 (d) $ 30 (d) $ 92 (d) $157 (d) $330 - ----------------------------------------------------------------------------------------------------------- Davis Venture Value (a) $ 96 (a) $129 (a) $134 (a) $286 (b) $101 (b) $145 (b) $161 (b) $339 (c) $ 26 (c) $ 79 (c) $134 (c) $286 (d) $ 31 (d) $ 95 (d) $161 (d) $339 - ----------------------------------------------------------------------------------------------------------- "Dogs" of Wall Street (a) $ 95 (a) $127 (a) $131 (a) $280 (b) $100 (b) $143 (b) $159 (b) $333 (c) $ 25 (c) $ 77 (c) $131 (c) $280 (d) $ 30 (d) $ 93 (d) $159 (d) $333 - ----------------------------------------------------------------------------------------------------------- Emerging Markets (a) $103 (a) $152 (a) $173 (a) $360 (b) $109 (b) $168 (b) $198 (b) $409 (c) $ 33 (c) $102 (c) $173 (c) $360 (d) $ 39 (d) $118 (d) $198 (d) $409 - ----------------------------------------------------------------------------------------------------------- Federated Value (a) $ 95 (a) $128 (a) $134 (a) $285 (b) $101 (b) $145 (b) $161 (b) $338 (c) $ 25 (c) $ 78 (c) $134 (c) $285 (d) $ 31 (d) $ 95 (d) $161 (d) $338 - ----------------------------------------------------------------------------------------------------------- Foreign Value (a) $104 (a) $155 (a) $177 (a) $369 (b) $110 (b) $171 (b) $203 (b) $417 (c) $ 34 (c) $105 (c) $177 (c) $369 (d) $ 40 (d) $121 (d) $203 (d) $417 - ----------------------------------------------------------------------------------------------------------- Global Bond (a) $ 96 (a) $130 (a) $137 (a) $291 (b) $102 (b) $146 (b) $164 (b) $344 (c) $ 26 (c) $ 80 (c) $137 (c) $291 (d) $ 32 (d) $ 96 (d) $164 (d) $344 - ----------------------------------------------------------------------------------------------------------- * 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.
7
1 3 5 10 PORTFOLIO YEAR YEARS YEARS YEARS - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- Global Equities (a) $ 97 (a) $133 (a) $141 (a) $299 (b) $102 (b) $149 (b) $168 (b) $351 (c) $ 27 (c) $ 83 (c) $141 (c) $299 (d) $ 32 (d) $ 99 (d) $168 (d) $351 - ----------------------------------------------------------------------------------------------------------- Goldman Sachs Research (a) $101 (a) $146 (a) $163 (a) $342 (b) $107 (b) $162 (b) $189 (b) $391 (c) $ 31 (c) $ 96 (c) $163 (c) $342 (d) $ 37 (d) $112 (d) $189 (d) $391 - ----------------------------------------------------------------------------------------------------------- Growth-Income (a) $ 94 (a) $123 (a) $125 (a) $268 (b) $ 99 (b) $140 (b) $153 (b) $322 (c) $ 24 (c) $ 73 (c) $125 (c) $268 (d) $ 29 (d) $ 90 (d) $153 (d) $322 - ----------------------------------------------------------------------------------------------------------- Growth Opportunities (a) $ 98 (a) $136 (a) $146 (a) $309 (b) $103 (b) $152 (b) $173 (b) $360 (c) $ 28 (c) $ 86 (c) $146 (c) $309 (d) $ 33 (d) $102 (d) $173 (d) $360 - ----------------------------------------------------------------------------------------------------------- High-Yield Bond (a) $ 95 (a) $127 (a) $132 (a) $282 (b) $101 (b) $144 (b) $160 (b) $335 (c) $ 25 (c) $ 77 (c) $132 (c) $282 (d) $ 31 (d) $ 94 (d) $160 (d) $335 - ----------------------------------------------------------------------------------------------------------- International Diversified Equities (a) $101 (a) $144 (a) $159 (a) $334 (b) $106 (b) $160 (b) $185 (b) $384 (c) $ 31 (c) $ 94 (c) $159 (c) $334 (d) $ 36 (d) $110 (d) $185 (d) $384 - ----------------------------------------------------------------------------------------------------------- International Growth and Income (a) $100 (a) $142 (a) $157 (a) $330 (b) $106 (b) $158 (b) $183 (b) $380 (c) $ 30 (c) $ 92 (c) $157 (c) $330 (d) $ 36 (d) $108 (d) $183 (d) $380 - ----------------------------------------------------------------------------------------------------------- MFS Growth and Income (a) $ 96 (a) $129 (a) $135 (a) $287 (b) $101 (b) $145 (b) $162 (b) $340 (c) $ 26 (c) $ 79 (c) $135 (c) $287 (d) $ 31 (d) $ 95 (d) $162 (d) $340 - ----------------------------------------------------------------------------------------------------------- MFS Mid Cap Growth (a) $ 96 (a) $130 (a) $137 (a) $292 (b) $102 (b) $147 (b) $164 (b) $345 (c) $ 26 (c) $ 80 (c) $137 (c) $292 (d) $ 32 (d) $ 97 (d) $164 (d) $345 - ----------------------------------------------------------------------------------------------------------- MFS Total Return (a) $ 95 (a) $127 (a) $132 (a) $282 (b) $101 (b) $144 (b) $160 (b) $335 (c) $ 25 (c) $ 77 (c) $132 (c) $282 (d) $ 31 (d) $ 94 (d) $160 (d) $335 - ----------------------------------------------------------------------------------------------------------- Putnam Growth (a) $ 96 (a) $131 (a) $138 (a) $293 (b) $102 (b) $147 (b) $165 (b) $345 (c) $ 26 (c) $ 81 (c) $138 (c) $293 (d) $ 32 (d) $ 97 (d) $165 (d) $345 - ----------------------------------------------------------------------------------------------------------- Real Estate (a) $ 97 (a) $133 (a) $142 (a) $301 (b) $103 (b) $149 (b) $169 (b) $353 (c) $ 27 (c) $ 83 (c) $142 (c) $301 (d) $ 33 (d) $ 99 (d) $169 (d) $353 - ----------------------------------------------------------------------------------------------------------- Small & Mid Cap Value (a) $101 (a) $146 (a) $163 (a) $342 (b) $107 (b) $162 (b) $189 (b) $391 (c) $ 31 (c) $ 96 (c) $163 (c) $342 (d) $ 37 (d) $112 (d) $189 (d) $391 - ----------------------------------------------------------------------------------------------------------- SunAmerica Balanced (a) $ 95 (a) $126 (a) $129 (a) $276 (b) $100 (b) $142 (b) $157 (b) $330 (c) $ 25 (c) $ 76 (c) $129 (c) $276 (d) $ 30 (d) $ 92 (d) $157 (d) $330 - ----------------------------------------------------------------------------------------------------------- Technology (a) $102 (a) $149 (a) $168 (a) $351 (b) $108 (b) $165 (b) $194 (b) $400 (c) $ 32 (c) $ 99 (c) $168 (c) $351 (d) $ 38 (d) $115 (d) $194 (d) $400 - ----------------------------------------------------------------------------------------------------------- LASF Growth and Income (a) $ 96 (a) $130 (a) $137 (a) $291 (b) $102 (b) $146 (b) $164 (b) $344 (c) $ 26 (c) $ 80 (c) $137 (c) $291 (d) $ 32 (d) $ 96 (d) $164 (d) $344 - ----------------------------------------------------------------------------------------------------------- Nations High Yield Bond (a) $ 96 (a) $131 (a) $138 (a) $294 (b) $102 (b) $147 (b) $165 (b) $346 (c) $ 26 (c) $ 81 (c) $138 (c) $294 (d) $ 32 (d) $ 97 (d) $165 (d) $346 - ----------------------------------------------------------------------------------------------------------- Nations International Value (a) $ 99 (a) $139 (a) $151 (a) $318 (b) $104 (b) $155 (b) $177 (b) $369 (c) $ 29 (c) $ 89 (c) $151 (c) $318 (d) $ 34 (d) $105 (d) $177 (d) $369 - ----------------------------------------------------------------------------------------------------------- Nations Marsico Focused Equities (a) $ 98 (a) $135 (a) $145 (a) $307 (b) $103 (b) $151 (b) $172 (b) $358 (c) $ 28 (c) $ 85 (c) $145 (c) $307 (d) $ 33 (d) $101 (d) $172 (d) $358 - ----------------------------------------------------------------------------------------------------------- Van Kampen LIT Comstock, Class II Shares (a) $ 97 (a) $133 (a) $141 (a) $300 (b) $102 (b) $149 (b) $168 (b) $352 (c) $ 27 (c) $ 83 (c) $141 (c) $300 (d) $ 32 (d) $ 99 (d) $168 (d) $352 - ----------------------------------------------------------------------------------------------------------- Van Kampen LIT Emerging Growth, Class II Shares (a) $ 96 (a) $131 (a) $139 (a) $295 (b) $102 (b) $148 (b) $166 (b) $347 (c) $ 26 (c) $ 81 (c) $139 (c) $295 (d) $ 32 (d) $ 98 (d) $166 (d) $347 - ----------------------------------------------------------------------------------------------------------- Van Kampen LIT Growth and Income, Class II Shares (a) $ 96 (a) $131 (a) $138 (a) $294 (b) $102 (b) $147 (b) $165 (b) $346 (c) $ 26 (c) $ 81 (c) $138 (c) $294 (d) $ 32 (d) $ 97 (d) $165 (d) $346 - ----------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------
8 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%. 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. Each Nations Separate Account Trust Portfolio is subject to fees up to 0.25% of its average daily net assets pursuant to a 12b-1 distribution and shareholder servicing plan. The 12b-1 distribution and shareholder servicing plan provides that a Nations Separate Account Trust Portfolio may pay banks, broker/dealers, insurance companies, or other financial institutions that have entered into sales support agreements with Stephens Inc., the distributor of the Portfolio, or shareholder servicing agreement with the Portfolio for certain expenses that are incurred in connection with sales support and shareholder services. Currently, all 12b-1 distribution and shareholder servicing fees are being waived for each Nations Separate Account Trust Portfolio by Stephens Inc. through April 30, 2003. There is no assurance that these waivers will continue after this date. Absent these waivers, total portfolio operating expenses for Nations Marsico Focused Equities would be 1.38%. The investment adviser and/or other service providers to these Nations Separate Account Trust Portfolios (excluding Nations Marsico Focused Equities Portfolio) have agreed to waive a portion of their fees and/or reimburse expenses, including the 12b-1 distribution and shareholder servicing plan fees of 0.25%, through April 30, 2003 in order to maintain total Portfolio operating expenses at the levels shown. There is no assurance that these waivers and/or reimbursements, will continue after this date. Absent these waivers and/or reimbursements total Portfolio operating expenses would be: Nations High Yield Bond 2.13%; and Nations International Value 3.03%. 4. The Nations International Value portfolio will no longer be available for investment after September 30, 2002. 5. In addition to the stated assumptions, the Examples also assume Insurance Charges 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. 6. Examples reflecting application of optional features and benefits use the highest fees and charges being offered for those features. 7. 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 CHOICE 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. 9 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 11. 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 3 years. Because of these potential penalties, you should fully discuss 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 Choice Variable Annuity. When you purchase a Polaris Choice 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 CHOICE 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 24.
- ----------------------------------------------------------- Minimum Minimum Initial Subsequent Purchase Payment Purchase Payment - ----------------------------------------------------------- Qualified $ 2,000 $250 - ----------------------------------------------------------- Non-Qualified $10,000 $500 - -----------------------------------------------------------
Prior Company approval is required to accept Purchase Payments greater than $1,500,000. Subsequent Purchase Payments which would cause total Purchase Payments in all Anchor National contracts owned by you to exceed this limit is also subject to prior Company approval. If EstatePlus is elected, prior Company approval is required to accept Purchase Payments greater than $1,330,000 or any Purchase Payment which would cause the total of all Purchase Payments in any and all Anchor National contracts owned by you (or the annuitant if the owner is a non-natural person) to exceed $1,330,000. Also, the optional automatic payment plan allows you to make subsequent Purchase Payments of as little as $100.00. 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 EstatePlus benefit if you are age 81 or older at the time of contract issue. We allow spouses to jointly own this contract. However, the age of the older spouse is used to determine the availability of any age driven benefits. The addition of a joint owner after the contract has been issued is contingent upon prior review and approval by the Company. ALLOCATION OF PURCHASE PAYMENTS 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 11. 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. 10 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 2,252.2523 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. 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. 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 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 Trusts listed below. 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. 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 advisers monitor 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 here which are not available for investment under the contract. SUNAMERICA SERIES TRUST Various subadvisers provide investment advice for the SunAmerica Series Trust Portfolios. SunAmerica Series Trust ("SST") has investment portfolios in addition to those listed here which are not available for investment under the contract. LORD ABBETT SERIES FUND, INC. Lord, Abbett & Co. manages over 40 mutual fund portfolios and other advisory accounts. Lord Abbett Series Fund ("LASF") has investment portfolios in addition to those listed here which are not available for investment under the contract. NATIONS SEPARATE ACCOUNT TRUST Various subadvisers provide investment advice for the Nations Separate Account Trust Portfolios. Nations Separate Account Trust ("NSAT") has investment portfolios in addition to those listed here which are not available for investment under the contract. 11 VAN KAMPEN LIFE INVESTMENT TRUST Van Kampen Asset Management Inc. provides investment advice for the Van Kampen Life Investment Trust ("VKT") Portfolios. Van Kampen Life Investment Trust has investment portfolios in addition to those listed here which are not available for investment under the contract. STOCKS: MANAGED BY ALLIANCEBERNSTEIN - Small & Mid Cap Value Portfolio SST MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P. - Alliance Growth Portfolio SST - Global Equities Portfolio SST - Growth & Income Portfolio SST MANAGED BY BRANDES INVESTMENT PARTNERS, L.P. - Nations International Value Portfolio(1) NSAT MANAGED BY DAVIS ADVISERS - Davis Venture Value Portfolio SST - Real Estate Portfolio SST MANAGED BY FEDERATED INVESTORS L.P. - Federated Value Portfolio SST MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT - Goldman Sachs Research Portfolio SST MANAGED BY LORD, ABBETT & CO. - Growth and Income Portfolio LASF MANAGED BY MARSICO CAPITAL MANAGEMENT, LLC - Nations Marsico Focused Equities Portfolio NSAT MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY - MFS Growth & Income Portfolio SST - MFS Mid-Cap Growth Portfolio SST MANAGED BY PUTNAM INVESTMENT MANAGEMENT INC. - Emerging Markets Portfolio SST - International Growth & Income Portfolio SST - Putnam Growth Portfolio SST MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION - Aggressive Growth Portfolio SST - Blue Chip Growth Portfolio SST - "Dogs" of Wall Street Portfolio SST - Growth Opportunities Portfolio SST MANAGED BY TEMPLETON INVESTMENT COUNSEL, LLC - Foreign Value Portfolio SST MANAGED BY VAN KAMPEN/VAN KAMPEN ASSET MANAGEMENT, INC. - International Diversified Equities Portfolio SST - Technology Portfolio SST - 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 SST MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION - SunAmerica Balanced Portfolio SST MANAGED BY WM ADVISORS, INC. - Asset Allocation Portfolio SST BONDS: MANAGED BY FEDERATED INVESTORS L.P. - Corporate Bond Portfolio SST MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT INT'L. - Global Bond Portfolio SST MANAGED BY MACKAY SHIELDS LLC - Nations High Yield Bond Portfolio NSAT MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION - High-Yield Bond Portfolio SST MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP - Government & Quality Bond Portfolio AST CASH: MANAGED BY BANC OF AMERICA CAPITAL MANAGEMENT, LLC - Cash Management Portfolio SST (1) The Nations International Value Portfolio ("Portfolio") will not accept Purchase Payments from current or prospective policy owners after September 30, 2002 ("Closing Date"). Policy owners who are invested in the Portfolio prior to Closing Date can remain invested. Dividends and capital gains with respect to investments prior to Closing Date will be reinvested. Policy Owners will be unable to make new Purchase Payments to the Portfolio, including through programs such as Dollar Cost Averaging or automatic asset rebalancing after September 30, 2002. 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 three 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 a period of three years, which we call guarantee periods. 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. In Maryland, Oregon and Washington, only the DCA fixed account options are available. Please see the section on DOLLAR COST AVERAGING ON PAGE 14 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. 12 The interest rate for any guarantee period 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 (three years). There are three scenarios in which you may put money into the fixed account options other than the DCA fixed accounts 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 account options.) You may also reallocate your money to the Variable Portfolios. If you want to reallocate your money to 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 option but will never be less than an annual effective rate of 3%. See DOLLAR COST AVERAGING ON PAGE 14 for more information. MARKET VALUE ADJUSTMENT ("MVA") NOTE: MARKET VALUE ADJUSTMENTS APPLY TO THE 3-YEAR FIXED ACCOUNT OPTION ONLY. THIS OPTION IS NOT AVAILABLE IN ALL STATES. PLEASE CONTACT YOUR FINANCIAL ADVISOR FOR MORE INFORMATION. If you take money out of the 3-year fixed account option 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 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 rate 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 closest periods available. Generally, if interest rates drop between the time you put your money into the fixed account options and the time you take it out, we credit a positive adjustment to your contract. Conversely, if interest rates increase during the same period, we post a negative adjustment to your contract. Where the MVA is negative, we first deduct the adjustment from any money remaining in the fixed account option. If there is not enough money in the fixed account option to meet the negative deduction, we deduct the remainder from your withdrawal. Where the MVA is positive, we add the adjustment to your withdrawal amount. Anchor National does not assess an MVA against withdrawals under the following circumstances: - If a withdrawal is made within 30 days after the end of a guarantee period; - If a withdrawal is made to pay contract 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 option. 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. 13 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 21. 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 (source accounts) to any other Variable Portfolio that is not designated as a source account (target account). 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 accounts for the DCA program. We also offer the 6-month and 1-year DCA fixed accounts exclusively to facilitate this program. The DCA fixed accounts only accept new Purchase Payments. You cannot transfer money already in your contract into these options. If you allocate new Purchase Payments into a DCA fixed account, we transfer all your 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, if you allocate $1,000 to the 1-year DCA fixed account and you select monthly transfers, we completely transfer all of your money to the selected investment options over a period of ten months. You may terminate your DCA program at any time. Upon termination of the DCA program, if money remains in the DCA fixed accounts, we transfer the remaining money to the same target account(s) as previously designated, 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 14 more Accumulation Units when the market price is low and fewer Accumulation Units when the market price is high. This example is for illustrative purposes only. ASSET ALLOCATION REBALANCING PROGRAM Earnings in your contract may cause the percentage of your investment in each investment option to differ from your original allocations. The Automatic Asset Rebalancing Program addresses this situation. At your election, we periodically rebalance your investments in the Variable Portfolios to return your allocations to their original percentages. Asset rebalancing typically involves shifting a portion of your money out of an investment option with a higher return into an investment option with a lower return. At your request, rebalancing occurs on a quarterly, semiannual or annual basis. Transfers made as a result of rebalancing do not count against your 15 free transfers for the contract year. We reserve the right to modify, suspend or terminate this program at any time. EXAMPLE: Assume that you want your initial Purchase Payment split between two Variable Portfolios. You want 50% in the Corporate Bond Portfolio and 50% in the Growth Portfolio. Over the next calendar quarter, the bond market does very well while the stock market performs poorly. At the end of the calendar quarter, the Corporate Bond Portfolio now represents 60% of your holdings because it has increased in value and the Growth Portfolio represents 40% of your holdings. If you had chosen quarterly rebalancing, on the last day of that quarter, we would sell some of your units in the Corporate Bond Portfolio to bring its holdings back to 50% and use the money to buy more units in the Growth Portfolio to increase those holdings to 50%. PRINCIPAL ADVANTAGE PROGRAM The Principal Advantage Program allows you to invest in one or more Variable Portfolios without putting your principal at direct risk. The program accomplishes this by allocating your investment strategically between the fixed account options and Variable Portfolios. You decide how much you want to invest and approximately when you want a return of principal. We calculate how much of your Purchase Payment to allocate to the particular fixed account option to ensure that it grows to an amount equal to your total principal invested under this program. We invest the rest of your principal in the Variable Portfolio(s) of your choice. We reserve the right to modify, suspend or terminate this program at any time. EXAMPLE: Assume that you want to allocate a portion of your initial Purchase Payment of $100,000 to the fixed account option. You want the amount allocated to the fixed account option to grow to $100,000 in 3 years. If the 3-year fixed account option is offering a 3% interest rate, we will allocate $91,514 to the 3-year fixed account option to ensure that this amount will grow to $100,000 at the end of the 3-year period. The remaining $8,486 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 21. Generally, we deduct a withdrawal charge applicable to any total or partial withdrawal and a MVA if a partial withdrawal comes from the 3 year fixed account option. If you withdraw your entire contract value, we also deduct premium taxes and a contract maintenance fee. SEE EXPENSES ON PAGE 19. 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). Purchase payments, above and beyond the amount of your free withdrawal amount, that are withdrawn prior to the end of the third year 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 19. You should consider, before 15 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 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. 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 and no subsequent Purchase Payments. 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 3 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 (5%)[B x C=$5,000] D=Your full surrender value ($85,000) 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% federal penalty tax. SEE TAXES ON PAGE 24. 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 purchase your contract in Oregon, the minimum withdrawal amount is $250 per withdrawal or an amount equal to your free withdrawal amount, as described on above. There must be at least $500 remaining in your contract at all times. Withdrawals may be taxable and a 10% federal 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 16 enrollment forms. We reserve the right to modify, suspend or terminate this program at any time. MINIMUM CONTRACT VALUE Where permitted by state law, we may terminate your contract if both of the following occur: (1) your contract is less than $500 as a result of withdrawals; and (2) you have not made any Purchase Payments during the past three years. We will provide you with sixty days written notice. At the end of the notice period, we will distribute the contract's remaining value to you. - ---------------------------------------------------------------- - ---------------------------------------------------------------- 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 a death benefit option. 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, the selection of one of two enhanced death benefit options. If you choose one of the enhanced death benefit options, you may also elect, for an additional fee, the EstatePlus feature. Your death benefit elections must be made at the time of contract application and the election cannot be terminated. You should discuss the available options with your financial representative to determine which option is best for you. We do not pay the death benefit if you die after you switch to the Income Phase. However, if you die during the Income Phase, your Beneficiary receives any remaining guaranteed income payments in accordance with the income option you selected. SEE INCOME OPTIONS ON PAGE 21. 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 19. 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 the death benefit options. Net Purchase Payment 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 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 (including fees and charges applicable to the withdrawal) by the contract value immediately before taking that withdrawal. The resulting percentage is then multiplied by the amount of total Purchase Payments and subtracted from the amount of total Purchase Payments on deposit at the time of the withdrawal. The resulting amount is the initial Net Purchase Payment calculation. 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. STANDARD DEATH BENEFIT The standard death benefit on your contract is the greater of: 1. Net Purchase Payments; or 2. the contract value on the date we receive all required paperwork and satisfactory proof of death. OPTIONAL ENHANCED DEATH BENEFITS For an additional fee, you may elect one of the enhanced death benefits below which can provide greater protection for your beneficiaries. You must choose either Option 1 or Option 2 at the time you purchase your contract and you cannot change your election at any time. The enhanced death 17 benefit options are not available if you are age 91 or older at the time of contract issue. The fee for the enhanced death benefit is 0.20% of the average daily ending value of the assets you have allocated to the Variable Portfolios. OPTION 1 - PURCHASE PAYMENT ACCUMULATION OPTION The death benefit is the greatest of: 1. the contract value on the date 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 withdrawals recorded after the date of death in the same proportion that the withdrawal reduced the contract value on the date of the withdrawal; or 3. the contract value on the seventh contract anniversary, plus Purchase Payments, since the seventh contract anniversary; and reduced for withdrawals since the seventh contract anniversary in the same proportion that the contract value was reduced on the date of such 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 any withdrawals recorded after the date of death in the same proportion that the withdrawal reduced the contract value on the date of the withdrawal. OPTION 2 - MAXIMUM ANNIVERSARY OPTION The death benefit is the greatest of: 1. the contract value on the date 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 anniversary; and reduced for any withdrawals since that contract 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 selected the Maximum Anniversary death benefit, the death benefit will be equal to the contract value at the time we receive all required paperwork and satisfactory proof of death. Accordingly, you do not get the advantage of this option if: - you are age 81 or older at the time of contract issue; or - you are age 90 or older at the time of your death. The Death Benefit 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. In order to elect EstatePlus, you must have also elected one of the optional enhanced death benefits described above. 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 selected 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 18 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. Therefore, electing both the enhanced death benefit and EstatePlus result in a combined fee of .45%. On a daily basis we deduct this annualized charge from the average daily ending value of the assets you have allocated to the Variable Portfolios. EstatePlus is not available if you are age 81 or older at the time we issue your contract. Furthermore, a Continuing Spouse cannot benefit from EstatePlus if he/she is age 81 or older on the Continuation Date. SEE SPOUSAL CONTINUATION ON PAGE 19. 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 21. 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 C. Generally, the age of the Continuing Spouse on the Continuation Date (if any Continuation Contribution has been made) and on the date of the Continuing Spouse's death will be used in determining any future death benefits under the Contract. If no Continuation Contribution has been made to the contract on the Continuation Date, the age of the spouse on the date of the original contract issue will be used to determine any age-driven benefits. The Continuing Spouse, generally, 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 the optional enhanced death benefit and, if elected, EstatePlus. The Continuing Spouse cannot elect to continue EstatePlus without also continuing the enhanced death benefit. If a Continuation Contribution is made, we will terminate the enhanced death benefit if the Continuing Spouse is age 91 or older on the Continuation Date. We will terminate EstatePlus if the Continuing Spouse is age 81 or older on the Continuation Date. If the enhanced death benefit and/or EstatePlus is terminated or if the Continuing Spouse dies after the latest Annuity Date, no benefit will be payable under the Estate Plus feature. SEE APPENDIX C FOR A DISCUSSION OF THE DEATH BENEFIT CALCULATIONS AFTER A SPOUSAL CONTINUATION. WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE SPOUSAL CONTINUATION PROVISION (IN ITS ENTIRETY OR ANY COMPONENT) AT ANY TIME 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. 19 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 15. 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. We apply a withdrawal charge against each Purchase Payment you put into the contract. After a Purchase Payment has been in the contract for 3 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 - ---------------------------------------------------------------- WITHDRAWAL CHARGE 7% 6% 5% 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 15. 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 BELOW. Withdrawals made prior to age 59 1/2 may result in tax penalties. SEE TAXES ON PAGE 24. 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) of the Investment Company Act of 1940. This service fee of 0.15% for the Anchor and SunAmerica Series Trust portfolios, 0.25% for the Van Kampen Life Investment Trust portfolios and the Nations Separate Account Trust portfolios is also known as a 12(b)(1) fee. Generally, this fee may be paid to financial intermediaries for services provided over the life of the contract. SEE FEE 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 11. OPTIONAL ENHANCED DEATH BENEFIT AND ESTATEPLUS FEE Please see page 18-19 for more information on the enhanced death benefit and EstatePlus fee. 20 OPTIONAL INCOME PROTECTOR FEE Please see page 22 for more information of 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 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. 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. 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 24. INCOME OPTIONS Currently, this Contract offers five income options unless you chose to take income under the Income Protector feature (see below). Other income 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 payments have been made, the remaining payments are made to the Beneficiary under your contract. 21 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 Options 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. 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 22 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. 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 option offered is:
FEE AS A % OF YOUR INCOME OPTION GROWTH RATE BENEFIT BASE WAITING PERIOD - ---------------------------------------------------------------- Income Protector Base 0% .10% 10 years - ----------------------------------------------------------------
If you elect the Base feature on a subsequent anniversary, the Growth Rate(s), Fee(s), and/or waiting period may be different. RE-SET OF YOUR INCOME PROTECTOR BENEFIT If available, you may also have the opportunity to "re-set" your Income Benefit Base. The Re-Set 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 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. 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 or Re-Set. 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 taken after the income benefit date 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 23 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 If you elect the Income Protector, we charge an annual fee, as follows:
FEE AS A % OF YOUR OPTION INCOME BENEFIT BASE* - ------------------------------------------------------------- Income Protector Base .10% - -------------------------------------------------------------
* If you elect the Base 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 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. 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 C 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 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, 24 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 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. 25 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 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 26 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 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. 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 27 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 Choice 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 audited financial statements of Variable Separate Account (Portion Relating to Polaris Choice Variable Annuity) at December 31, 2001 and for the period from November 5, 2001 (inception) to December 31, 2001 are incorporated herein by reference in this prospectus in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. REGISTRATION STATEMENT A registration statement has been filed with the SEC under the Securities Act of 1933 relating to the contract. This prospectus does not contain all the information in the registration statement as permitted by SEC regulations. The omitted information can be obtained from the SEC's principal office in Washington, D.C., upon payment of a prescribed fee. - ---------------------------------------------------------------- - ---------------------------------------------------------------- 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............................... 11 Annuity Unit Values........................... 11 Death Benefit Options for Contracts Issued Before October 24, 2001..................... 14 Taxes......................................... 17 Distribution of Contracts..................... 21 Financial Statements.......................... 21
28 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- APPENDIX A - CONDENSED FINANCIALS - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
INCEPTION TO 12/31/01 ------------ Capital Appreciation (Inception Date -- 11/5/01) Beginning AUV....................................... (a) $31.600 (b) $31.600 Ending AUV.......................................... (a) $34.208 (b) $34.332 Ending Number of AUs................................ (a) 1,400 (b) 270 - ------------------------------------------------------------------------------ Government and Quality Bond (Inception Date -- 11/5/01) Beginning AUV....................................... (a) $15.667 (b) $15.667 Ending AUV.......................................... (a) $15.350 (b) $15.353 Ending Number of AUs................................ (a) 158 (b) 1 - ------------------------------------------------------------------------------ Growth (Inception Date -- 11/5/01) Beginning AUV....................................... (a) $25.903 (b) $25.903 Ending AUV.......................................... (a) $27.236 (b) $27.273 Ending Number of AUs................................ (a) 1,182 (b) 1 - ------------------------------------------------------------------------------ Natural Resources (Inception Date -- 11/5/01) Beginning AUV....................................... (a) $13.286 (b) $13.286 Ending AUV.......................................... (a) $14.375 (b) $14.375 Ending Number of AUs................................ (a) 1 (b) 1 - ------------------------------------------------------------------------------ Aggressive Growth (Inception Date -- 11/5/01) Beginning AUV....................................... (a) $12.957 (b) $12.957 Ending AUV.......................................... (a) $13.627 (b) $13.656 Ending Number of AUs................................ (a) 1 (b) 1 - ------------------------------------------------------------------------------ Alliance Growth (Inception Date -- 11/5/01) Beginning AUV....................................... (a) $30.572 (b) $30.572 Ending AUV.......................................... (a) $32.462 (b) $32.559 Ending Number of AUs................................ (a) 1,372 (b) 1 - ------------------------------------------------------------------------------ Asset Allocation (Inception Date -- 11/5/01) Beginning AUV....................................... (a) $18.216 (b) $18.216 Ending AUV.......................................... (a) $18.608 (b) $18.608 Ending Number of AUs................................ (a) 1 (b) 526 - ------------------------------------------------------------------------------ Blue Chip Growth (Inception Date -- 11/5/01) Beginning AUV....................................... (a) $6.378 (b) $6.378 Ending AUV.......................................... (a) $6.701 (b) $6.716 Ending Number of AUs................................ (a) 1 (b) 2 - ------------------------------------------------------------------------------ Cash Management (Inception Date -- 11/5/01) Beginning AUV....................................... (a) $13.073 (b) $13.073 Ending AUV.......................................... (a) $13.058 (b) $13.085 Ending Number of AUs................................ (a) 7,142 (b) 3,386 - ------------------------------------------------------------------------------ AUV -- Accumulation Unit Value AU -- Accumulation Units (a) Without election of the enhanced death benefit and EstatePlus. (b) With election of the enhanced death benefit and EstatePlus.
A-1
INCEPTION TO 12/31/01 ------------ Corporate Bond (Inception Date -- 11/5/01) Beginning AUV....................................... (a) $14.184 (b) $14.184 Ending AUV.......................................... (a) $13.972 (b) $13.986 Ending Number of AUs................................ (a) 8,147 (b) 1 - ------------------------------------------------------------------------------ Davis Venture Value (Inception Date -- 11/5/01) Beginning AUV....................................... (a) $24.549 (b) $24.549 Ending AUV.......................................... (a) $26.207 (b) $26.231 Ending Number of AUs................................ (a) 3,140 (b) 351 - ------------------------------------------------------------------------------ "Dogs" of Wall Street (Inception Date -- 11/5/01) Beginning AUV....................................... (a) $9.223 (b) $9.223 Ending AUV.......................................... (a) $9.703 (b) $9.731 Ending Number of AUs................................ (a) 528 (b) 1 - ------------------------------------------------------------------------------ Emerging Markets (Inception Date -- 11/5/01) Beginning AUV....................................... (a) $5.752 (b) $5.752 Ending AUV.......................................... (a) $6.535 (b) $6.545 Ending Number of AUs................................ (a) 1 (b) 2 - ------------------------------------------------------------------------------ Federated Value (Inception Date -- 11/5/01) Beginning AUV....................................... (a) $15.445 (b) $15.445 Ending AUV.......................................... (a) $16.380 (b) $16.393 Ending Number of AUs................................ (a) 4,275 (b) 599 - ------------------------------------------------------------------------------ Foreign Value* Beginning AUV....................................... (a) N/A (b) N/A Ending AUV.......................................... (a) N/A (b) N/A Ending Number of AUVs............................... (a) N/A (b) N/A - ------------------------------------------------------------------------------ Global Bond (Inception Date -- 11/5/01) Beginning AUV....................................... (a) $16.050 (b) $16.050 Ending AUV.......................................... (a) $15.662 (b) $15.714 Ending Number of AUs................................ (a) 2,885 (b) 1 - ------------------------------------------------------------------------------ Global Equities (Inception Date -- 11/5/01) Beginning AUV....................................... (a) $16.611 (b) $16.611 Ending AUV.......................................... (a) $17.477 (b) $17.542 Ending Number of AUs................................ (a) 1 (b) 1 - ------------------------------------------------------------------------------ Goldman Sachs Research (Inception Date -- 11/5/01) Beginning AUV....................................... (a) $6.809 (b) $6.809 Ending AUV.......................................... (a) $7.171 (b) $7.191 Ending Number of AUs................................ (a) 11,942 (b) 1 - ------------------------------------------------------------------------------ Growth-Income (Inception Date -- 11/5/01) Beginning AUV....................................... (a) $25.859 (b) $25.859 Ending AUV.......................................... (a) $26.800 (b) $26.801 Ending Number of AUs................................ (a) 1 (b) 699 - ------------------------------------------------------------------------------ AUV -- Accumulation Unit Value AU -- Accumulation Units (a) Without election of the enhanced death benefit and EstatePlus. (b) With election of the enhanced death benefit and EstatePlus. * This portfolio did not become available for sale in this separate account until August 1, 2002.
A-2
INCEPTION TO 12/31/01 ------------ Growth Opportunities (Inception Date -- 11/5/01) Beginning AUV....................................... (a) $5.634 (b) $5.634 Ending AUV.......................................... (a) $5.813 (b) $5.826 Ending Number of AUs................................ (a) 2 (b) 2 - ------------------------------------------------------------------------------ High-Yield Bond (Inception Date -- 11/5/01) Beginning AUV....................................... (a) $12.273 (b) $12.273 Ending AUV.......................................... (a) $12.506 (b) $12.531 Ending Number of AUs................................ (a) 1 (b) 1 - ------------------------------------------------------------------------------ International Diversified Equities (Inception Date -- 11/5/01) Beginning AUV....................................... (a) $10.302 (b) $10.302 Ending AUV.......................................... (a) $10.216 (b) $10.219 Ending Number of AUs................................ (a) 703 (b) 1 - ------------------------------------------------------------------------------ International Growth and Income (Inception Date -- 11/5/01) Beginning AUV....................................... (a) $10.485 (b) $10.485 Ending AUV.......................................... (a) $10.751 (b) $10.778 Ending Number of AUs................................ (a) 8,558 (b) 1 - ------------------------------------------------------------------------------ MFS Growth and Income (Inception Date -- 11/5/01) Beginning AUV....................................... (a) $18.720 (b) $18.720 Ending AUV.......................................... (a) $19.217 (b) $19.262 Ending Number of AUs................................ (a) 1 (b) 1 - ------------------------------------------------------------------------------ MFS Mid-Cap Growth (Inception Date -- 11/5/01) Beginning AUV....................................... (a) $11.997 (b) $11.997 Ending AUV.......................................... (a) $13.408 (b) $13.425 Ending Number of AUs................................ (a) 3,308 (b) 686 - ------------------------------------------------------------------------------ MFS Total Return (Inception Date -- 11/5/01) Beginning AUV....................................... (a) $20.760 (b) $20.760 Ending AUV.......................................... (a) $21.220 (b) $21.258 Ending Number of AUs................................ (a) 1,168 (b) 1 - ------------------------------------------------------------------------------ Putnam Growth (Inception Date -- 11/5/01) Beginning AUV....................................... (a) $18.388 (b) $18.388 Ending AUV.......................................... (a) $19.070 (b) $19.081 Ending Number of AUs................................ (a) 1 (b) 502 - ------------------------------------------------------------------------------ Real Estate (Inception Date -- 11/5/01) Beginning AUV....................................... (a) $10.404 (b) $10.404 Ending AUV.......................................... (a) $11.340 (b) $11.371 Ending Number of AUs................................ (a) 513 (b) 1 - ------------------------------------------------------------------------------ Small & Mid Cap Value* Beginning AUV....................................... (a) N/A (b) N/A Ending AUV.......................................... (a) N/A (b) N/A Ending Number of AUVs............................... (a) N/A (b) N/A - ------------------------------------------------------------------------------ AUV -- Accumulation Unit Value AU -- Accumulation Units (a) Without election of the enhanced death benefit and EstatePlus. (b) With election of the enhanced death benefit and EstatePlus. * This portfolio did not become available for sale in this separate account until August 1, 2002.
A-3
INCEPTION TO 12/31/01 ------------ SunAmerica Balanced (Inception Date -- 11/5/01) Beginning AUV....................................... (a) $14.916 (b) $14.916 Ending AUV.......................................... (a) $15.005 (b) $15.036 Ending Number of AUs................................ (a) 1 (b) 1 - ------------------------------------------------------------------------------ Technology (Inception Date -- 11/5/01) Beginning AUV....................................... (a) $3.220 (b) $3.220 Ending AUV.......................................... (a) $3.450 (b) $3.455 Ending Number of AUs................................ (a) 11,120 (b) 3 - ------------------------------------------------------------------------------ Lord Abbett Growth and Income* Beginning AUV....................................... (a) N/A (b) N/A Ending AUV.......................................... (a) N/A (b) N/A Ending Number of AUVs............................... (a) N/A (b) N/A - ------------------------------------------------------------------------------ Nations High Yield Bond (Inception Date -- 11/5/01) Beginning AUV....................................... (a) $9.828 (b) $9.828 Ending AUV.......................................... (a) $10.096 (b) $10.108 Ending Number of AUs................................ (a) 9,500 (b) 1 - ------------------------------------------------------------------------------ Nations International Value (Inception Date -- 11/5/01) Beginning AUV....................................... (a) $8.618 (b) $8.618 Ending AUV.......................................... (a) $8.866 (b) $8.835 Ending Number of AUs................................ (a) 2,009 (b) 1 - ------------------------------------------------------------------------------ Nations Marsico Focused Equities (Inception Date -- 11/5/01) Beginning AUV....................................... (a) $8.222 (b) $8.222 Ending AUV.......................................... (a) $8.586 (b) $8.602 Ending Number of AUs................................ (a) 5,551 (b) 1 - ------------------------------------------------------------------------------ Van Kampen LIT Comstock, Class II Shares (Inception Date -- 11/5/01) Beginning AUV....................................... (a) $9.992 (b) $9.992 Ending AUV.......................................... (a) $10.344 (b) $10.260 Ending Number of AUs................................ (a) 1,687 (b) 1 - ------------------------------------------------------------------------------ Van Kampen LIT Emerging Growth, Class II Shares (Inception Date -- 11/5/01) Beginning AUV....................................... (a) $10.091 (b) $10.091 Ending AUV.......................................... (a) $10.549 (b) $10.565 Ending Number of AUs................................ (a) 836 (b) 1 - ------------------------------------------------------------------------------ Van Kampen LIT Growth and Income, Class II Shares (Inception Date -- 11/5/01) Beginning AUV....................................... (a) $10.082 (b) $10.082 Ending AUV.......................................... (a) $10.470 (b) $10.565 Ending Number of AUs................................ (a) 1 (b) 1 - ------------------------------------------------------------------------------ AUV -- Accumulation Unit Value AU -- Accumulation Units (a) Without election of the enhanced death benefit and EstatePlus. (b) With election of the enhanced death benefit and EstatePlus. * This portfolio did not become available for sale in this separate account until August 1, 2002.
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 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 3-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 3-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 three 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 3-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 3-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)](12/12) - 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 3-year fixed account option. B-1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- APPENDIX C - DEATH BENEFITS FOLLOWING SPOUSAL CONTINUATION - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Capitalized terms used in this Appendix have the same meaning as they have in prospectus. The term "Continuation Net Purchase Payment" is used frequently to describe the death benefit options payable to the beneficiary of the Continuing Spouse. We define Continuation Net Purchase Payment as Net Purchase Payments made as of the Continuation Date. For the purpose of calculating Continuation Net Purchase Payments, the amount that equals the contract value on the Continuation Date, including the Continuation Contribution is considered a Purchase Payment. If the Continuing Spouse makes no additional Purchase Payments or withdrawal, Continuation Net Purchase Payments equals the contract value on the Continuation Date, including the Continuation Contribution. The term "withdrawals" as used in describing the death benefit options below is defined as withdrawals and any fees and charges applicable to those withdrawals. The following details the death benefit options and EstatePlus benefit upon the Continuing Spouse's death: A. DEATH BENEFIT PAYABLE UPON CONTINUING SPOUSE'S DEATH: 1. Standard Death Benefit: If a Continuation Contribution is added on the Continuation Date, the death benefit is the greater of: a. Continuation Net Purchase Payments; or b. contract value on the date we receive all required paperwork and satisfactory proof of death. If a Continuation Contribution is not added on the Continuation Date, the death benefit is the greater of: a. Net Purchase Payments; or b. contract value on the date we receive all required paperwork and satisfactory proof of death. 2. Purchase Payment Accumulation Option If a Continuation Contribution is added on the Continuation Date, the death benefit is the greater of: a. The contract value on the date we receive all required paperwork and satisfactory proof of the Continuing Spouse's death; or b. The contract value on the Continuation Date (including the Continuation Contribution) plus any Purchase Payments; and reduced for any withdrawals made since the Continuation Date all 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 for withdrawals recorded after the date of death in the same proportion that the 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 withdrawals since the seventh contract anniversary in the same proportion that the contract value was reduced on the date of such withdrawal, all compounded at a 4% annual growth rate until the date of death (3% growth rate if the Continuing Spouse is age 70 or older on the Continuation Date) plus any Purchase Payments recorded after the date of death; and reduced for any withdrawals recorded after the date of death in the same proportion that the withdrawal reduced the contract value on the date of the withdrawal. The Continuation Contribution is considered a Purchase Payment received on the Continuation Date. If a Continuation Contribution is not added on the Continuation Date, the death benefit is the greater of: a. The contract value on the date we receive all required paperwork and satisfactory proof of the Continuing Spouse's death; or b. 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 Contract Issue Date) plus any Purchase Payments recorded after the date of death; and reduced for any withdrawals recorded after the date of death in the same proportion that the withdrawal reduced the contract value on the date of such 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 withdrawals since the seventh contract anniversary in the same proportion that the contract value was reduced on the date of such withdrawal, all compounded at a 4% annual growth rate until the date of death (3% growth rate if the Continuing Spouse was age 70 or older on the Contract Issue Date) plus any Purchase Payments since the date of death; and reduced for any withdrawals recorded after the date of death in the same proportion that the contract value was reduced on the date of such withdrawal. C-1 3. Maximum Anniversary Option - if the Continuing Spouse is below age 90 at the time of death, and: If a Continuation Contribution is added on the Continuation Date, the death benefit is the greater of: a. The contract value on the date we receive all required paperwork and satisfactory proof of the Continuing Spouse's death; or b. Continuation Net Purchase Payments plus Purchase Payments made since the Continuation Date; and reduced for withdrawals in the same proportion that the contract value was reduced on the date of such withdrawal; or c. The maximum anniversary value on any contract anniversary occurring after the Continuation Date but prior to the Continuing Spouse's 81st birthday. The anniversary value equals the contract value on a contract anniversary plus any Purchase Payments since that contract anniversary; and reduced for any withdrawals recorded since that contract anniversary in the same proportion that the withdrawal reduced the contract value on the date of the withdrawal. Contract anniversary is defined as any anniversary following the full 12 month period after the original contract issue date. If a Continuation Contribution is not added on the Continuation Date, the death benefit is the greater of: a. The contract value on the date we receive all required paperwork and satisfactory proof of the Continuing Spouse's death; or b. Net Purchase Payments received since the original issue date; or c. The maximum anniversary value on any contract anniversary from the original contract issue date prior to the Continuing Spouse's 81st birthday. The anniversary value equals the contract value on a contract anniversary plus any Purchase Payments since that contract anniversary; and reduced for any withdrawals recorded since that contract anniversary in the same proportion that the withdrawal reduced the contract value on the date of the withdrawal. Contract anniversary is defined as any anniversary following the full 12 month period after the original contract issue date. If the Continuing Spouse is age 90 or older at the time of death, under the Maximum Anniversary death benefit, their beneficiary will receive only the contract value at the time we receive all required paperwork and satisfactory proof of death. B. THE ESTATEPLUS BENEFIT PAYABLE UPON CONTINUING SPOUSE'S DEATH: The EstatePlus benefit may increase the death benefit amount. The EstatePlus benefit is only available if the original owner elected EstatePlus and it has not been 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. On the Continuation Date, if the Continuing Spouse is 69 or younger and a Continuation Contribution is added, the table below shows the available EstatePlus benefit:
- ------------------------------------------------------------------- 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* - -------------------------------------------------------------------
On the Continuation Date, if the Continuing Spouse is between your 70th and 81st birthdays and a Continuation Contribution is added, table below shows the available EstatePlus benefit:
- ------------------------------------------------------------------- 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. If a Continuation Contribution is not added on the Continuation Date, the Continuing Spouse's age as of the original contract issue date is used to calculate the EstatePlus benefit, if any. 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. C-2 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- APPENDIX D - HYPOTHETICAL EXAMPLE OF THE OPERATION OF THE INCOME PROTECTOR FEATURE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- POLARIS CHOICE INCOME PROTECTOR BASE This table assumes a $100,000 initial investment in a non qualified contract with no further premiums, no withdrawals, no Re-sets, no Step-ups and no 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. D-1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- APPENDIX E - PREMIUM TAXES - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Premium taxes vary according to the state and are subject to change without notice. In many states, there is no tax at all. Listed below are the current premium tax rates in those states that assess a premium tax. For current information, you should consult your tax adviser.
QUALIFIED NON-QUALIFIED STATE CONTRACT CONTRACT - ---------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------- California .50% 2.35% - ---------------------------------------------------------------------------------------- Maine 0% 2% - ---------------------------------------------------------------------------------------- Nevada 0% 3.5% - ---------------------------------------------------------------------------------------- South Dakota 0% 1.25%* - ---------------------------------------------------------------------------------------- West Virginia 1% 1% - ---------------------------------------------------------------------------------------- Wyoming 0% 1% - ---------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------
* On the first $500,000 of premiums; 0.80% on the amount in excess of $500,000. E-1 - -------------------------------------------------------------------------------- Please forward a copy (without charge) of the Polaris Choice 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 - -------------------------------------------------------------------------------- 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 ............................................ $101,838.10
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 + Incorporated by Reference to Post-Effective Amendment 10 to this Registration Statement on April 10, 2001. Item 17. Undertakings. ------------ The undersigned registrant, Anchor National Life Insurance Company, hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement 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 22nd day of July, 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 July 22, 2002 Jay S. Wintrob (Principal Executive Officer) N. SCOTT GILLIS* Senior Vice President & July 22, 2002 - --------------------- Director N. Scott Gillis (Principal Financial Officer) JAMES R. BELARDI* Senior Vice President & July 22, 2002 - --------------------- Director James R. Belardi JANA W. GREER* Senior Vice President & July 22, 2002 - --------------------- Director Jana W. Greer MAURICE S. HEBERT* Vice President & Controller July 22, 2002 - --------------------- (Principal Accounting Officer) Maurice S. Hebert MARC H. GAMSIN* Senior Vice President & July 22, 2002 - ---------------------- Director Marc H. Gamsin By: /s/ CHRISTINE A. NIXON July 22, 2002 ----------------------- Christine A. Nixon Attorney-in-Fact Date: July 22, 2002
EX-23 3 v82566amexv23.txt EXHIBIT 23 Exhibit 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus 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-KA for the year ended December 31, 2001 and of our report dated June 14, 2002, relating to the financial statements of Variable Annuity Account Five. We consent to the incorporation by reference in the Variable Separate Account (Portion Relating to the Polaris Choice Variable Annuity) Prospectus of our report dated March 8, 2002, relating to the financial statements of Variable Separate Account (Portion Relating to the Polaris Choice Variable Annuity). We also consent to the reference to us under the heading "Independent Accountants" in such Prospectuses. PricewaterhouseCoopers LLP Los Angeles, California July 22, 2002 -----END PRIVACY-ENHANCED MESSAGE-----