As filed with the Securities and Exchange Commission on April 12, 2002
Registration No. 33-87864
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
Post-Effective Amendment
No. 13 on Form S-3
under
The Securities Act of 1933
--------------------
AIG SUNAMERICA INSURANCE COMPANY
(DOING BUSINESS AS ANCHOR NATIONAL LIFE INSURANCE COMPANY)
("ANCHOR NATIONAL")
(Exact name of registrant as specified in its charter)
California 6311 86-0198983
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification No.)
incorporation or Number)
organization)
1 SunAmerica Center
Los Angeles, California 90067-6022
(310) 772-6000
(Address, including zip code, and telephone number,
including area code, or registrant's
principal executive offices)
Christine A. Nixon, Esquire
Anchor National
1 SunAmerica Center
Los Angeles, California 90067-6022
(310) 772-6000
(Name, address, including zip code, and telephone number, including area code
of agent for service)
----------------------
Approximate date of commencement of proposed dale to the public: As
soon after the effective date of this Registration Statement as is practicable.
If the only securities being registered on this form are to be offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ______________
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ______________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
----------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
shall determine.
Registrant is filing this Post-Effective Amendment No. 13 for the sole
purpose of adding to the Registration Statement certain Prospectuses pursuant to
oral permission to do so provided by Mr. William Kotapish to Anchor National.
The Registrant does not intend for this Post-Effective Amendment No. 13 to
delete from the Registration Statement, any document included in the
Registration Statement but not filed here, including any currently effective
Prospectus or supplement thereto.
[POLARIS PROTECTOR/PLATINUM LOGO]
PROSPECTUS
MAY 1, 2002
<Table>
Please read this prospectus carefully FLEXIBLE PAYMENT DEFERRED ANNUITY CONTRACTS
before investing and keep it for issued by
future reference. It contains ANCHOR NATIONAL LIFE INSURANCE COMPANY
important information about the in connection with
Variable Annuity. VARIABLE SEPARATE ACCOUNT
The annuity has 45 investment choices -7 available fixed
To learn more about the annuity account options and 38 Variable Portfolios listed below. The
offered by this prospectus, you can 7 fixed account options include specified periods of 1, 3,
obtain a copy of the Statement of 5, 7 and 10 years and DCA accounts for 6-month and 1-year
Additional Information ("SAI") dated periods. The 38 Variable Portfolios are part of the Anchor
May 1, 2002. The SAI has been filed Series Trust ("AST"), SunAmerica Series Trust ("SAST"), Van
with the Securities and Exchange Kampen Life Investment Trust ("VKT") and the WM Variable
Commission ("SEC") and is Trust ("WMT").
incorporated by reference into this
prospectus. The Table of Contents of STOCKS:
the SAI appears on page 37 of this MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
prospectus. For a free copy of the - Alliance Growth Portfolio SAST
SAI, call us at (800) 445-SUN2 or - Global Equities Portfolio SAST
write to us at our Annuity Service - Growth & Income Portfolio SAST
Center, P.O. Box 54299, Los Angeles, MANAGED BY DAVIS ADVISERS
California 90054-0299. - Davis Venture Value Portfolio SAST
- Real Estate Portfolio SAST
In addition, the SEC maintains a MANAGED BY FEDERATED INVESTORS L.P.
website (http://www.sec.gov) that - Federated Value Portfolio SAST
contains the SAI, materials - Telecom Utility Portfolio SAST
incorporated by reference and other MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
information filed electronically with - Goldman Sachs Research Portfolio SAST
the SEC by Anchor National. MANAGED BY MARSICO CAPITAL MANAGEMENT, LLC
- Marsico Growth Portfolio SAST
ANNUITIES INVOLVE RISKS, INCLUDING MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
POSSIBLE LOSS OF PRINCIPAL, AND ARE - MFS Growth & Income Portfolio SAST
NOT A DEPOSIT OR OBLIGATION OF, OR - MFS Mid-Cap Growth Portfolio SAST
GUARANTEED OR ENDORSED BY, ANY BANK. MANAGED BY PUTNAM INVESTMENT MANAGEMENT INC.
THEY ARE NOT FEDERALLY INSURED BY THE - Emerging Markets Portfolio SAST
FEDERAL DEPOSIT INSURANCE - International Growth & Income Portfolio SAST
CORPORATION, THE FEDERAL RESERVE - Putnam Growth Portfolio SAST
BOARD OR ANY OTHER AGENCY. MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION
- Aggressive Growth Portfolio SAST
This variable annuity provides an - Blue Chip Growth Portfolio SAST
optional bonus feature called - "Dogs" of Wall Street Portfolio SAST
"Principal Rewards". If you elect - Growth Opportunities Portfolio SAST
this feature, in exchange for bonuses MANAGED BY VAN KAMPEN/VAN KAMPEN ASSET MANAGEMENT INC.
credited to your contract, your - International Diversified Equities Portfolio SAST
surrender charge schedule will be - Technology Portfolio SAST
longer and greater than if you chose - Van Kampen LIT Comstock Portfolio, Class II
not to elect this feature. These Shares VKT
withdrawal charges may offset the - Van Kampen LIT Emerging Growth Portfolio, Class II
value of any bonus, if you make an Shares VKT
early withdrawal. - Van Kampen LIT Growth and Income Portfolio, Class II
Shares VKT
MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP
- Capital Appreciation Portfolio AST
- Growth Portfolio AST
- Natural Resources Portfolio AST
BALANCED:
MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
- MFS Total Return Portfolio SAST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION
- SunAmerica Balanced Portfolio SAST
MANAGED BY WM ADVISORS, INC.
- Asset Allocation Portfolio SAST
- Balanced Portfolio WMT
- Conservative Growth WMT
- Strategic Growth WMT
BONDS:
MANAGED BY FEDERATED INVESTORS L.P.
- Corporate Bond Portfolio SAST
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL
- Global Bond Portfolio SAST
MANAGED BY VAN KAMPEN
- Worldwide High Income Portfolio SAST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION
- High-Yield Bond Portfolio SAST
MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP
- Government & Quality Bond Portfolio AST
CASH:
MANAGED BY BANC OF AMERICA CAPITAL MANAGEMENT, LLC
- Cash Management Portfolio SAST
</Table>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR
HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
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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
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SECURITIES AND EXCHANGE COMMISSION POSITION ON INDEMNIFICATION
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Indemnification for liabilities arising under the Securities Act of 1933 (the
"Act") is provided to Anchor National's officers, directors and controlling
persons. The SEC has advised that it believes such indemnification is against
public policy under the Act and unenforceable. If a claim for indemnification
against such liabilities (other than for Anchor National's payment of expenses
incurred or paid by its directors, officers or controlling persons in the
successful defense of any legal action) is asserted by a director, officer or
controlling person of Anchor National in connection with the securities
registered under this prospectus, Anchor National will submit to a court with
jurisdiction to determine whether the indemnification is against public policy
under the Act. Anchor National will be governed by final judgment of the issue.
However, if in the opinion of Anchor National's counsel, this issue has been
determined by controlling precedent, Anchor National will not submit the issue
to a court for determination.
2
<Table>
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TABLE OF CONTENTS
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE................... 2
SECURITIES AND EXCHANGE COMMISSION POSITION ON INDEMNIFICATION....
2
GLOSSARY.......................................................... 3
HIGHLIGHTS........................................................ 4
FEE TABLES........................................................ 5
Owner Transaction Expenses.................................. 5
Optional Income Protector Fee............................... 5
Contract Maintenance Fee.................................... 5
Annual Separate Account Expenses............................ 5
Optional EstatePlus Fee..................................... 5
Portfolio Expenses.......................................... 5
EXAMPLES.......................................................... 7
THE POLARIS PROTECTOR/PLATINUM VARIABLE ANNUITY................... 15
PURCHASING A POLARIS PROTECTOR/PLATINUM VARIABLE ANNUITY..........
16
Allocation of Purchase Payments............................. 16
Principal Rewards Program................................... 16
Current Enhancement Levels.................................. 17
Accumulation Units.......................................... 18
Free Look................................................... 18
INVESTMENT OPTIONS................................................ 19
Variable Portfolios......................................... 19
Anchor Series Trust..................................... 19
SunAmerica Series Trust................................. 19
Van Kampen Life Investment Trust........................ 19
WM Variable Trust....................................... 19
Fixed Account Options....................................... 20
Market Value Adjustment ("MVA")............................. 20
Transfers During the Accumulation Phase..................... 21
Dollar Cost Averaging....................................... 21
Asset Allocation Rebalancing Program........................ 22
Principal Advantage Program................................. 22
Voting Rights............................................... 23
Substitution................................................ 23
ACCESS TO YOUR MONEY.............................................. 23
Systematic Withdrawal Program............................... 24
Nursing Home Waiver......................................... 24
Minimum Contract Value...................................... 25
DEATH BENEFIT..................................................... 25
Purchase Payment Accumulation Option........................ 25
Maximum Anniversary Option.................................. 26
EstatePlus.................................................. 26
Spousal Continuation........................................ 27
EXPENSES.......................................................... 27
Insurance Charges........................................... 27
Withdrawal Charges.......................................... 27
Investment Charges.......................................... 28
Contract Maintenance Fee.................................... 28
Transfer Fee................................................ 28
Optional EstatePlus Fee..................................... 28
Optional Income Protector Fee............................... 28
Premium Tax................................................. 29
Income Taxes................................................ 29
Reduction or Elimination of Charges and Expenses, and
Additional Amounts Credited................................ 29
INCOME OPTIONS.................................................... 29
Annuity Date................................................ 29
Income Options.............................................. 29
Fixed or Variable Income Payments........................... 30
Income Payments............................................. 30
Transfers During the Income Phase........................... 30
Deferment of Payments....................................... 30
The Income Protector Feature................................ 30
Note to Qualified Contract Holders.......................... 32
TAXES............................................................. 32
Annuity Contracts in General................................ 33
Tax Treatment of Distributions - Non-qualified Contracts.... 33
Tax Treatment of Distributions - Qualified Contracts........ 33
Minimum Distributions....................................... 34
Tax Treatment of Death Benefits............................. 34
Contracts Owned by a Trust or Corporation................... 34
Gifts, Pledges and/or Assignments of a Non-Qualified
Contract................................................... 34
Diversification............................................. 34
PERFORMANCE....................................................... 35
OTHER INFORMATION................................................. 35
Anchor National............................................. 35
The Separate Account........................................ 35
The General Account......................................... 35
Distribution of the Contract................................ 36
Administration.............................................. 36
Legal Proceedings........................................... 36
Ownership................................................... 36
Custodian................................................... 36
Independent Accountants..................................... 36
Registration Statement...................................... 36
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION..........
37
APPENDIX A - CONDENSED FINANCIAL INFORMATION...................... A-1
APPENDIX B - PRINCIPAL REWARDS PROGRAM EXAMPLES................... B-1
APPENDIX C - MARKET VALUE ADJUSTMENT ("MVA")...................... C-1
APPENDIX D - DEATH BENEFITS FOLLOWING SPOUSAL CONTINUATION........
D-1
APPENDIX E - HYPOTHETICAL EXAMPLE OF THE OPERATION OF THE INCOME
PROTECTOR FEATURE................................................ E-1
APPENDIX F - PREMIUM TAXES........................................ F-1
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GLOSSARY
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We have capitalized some of the technical terms used in this prospectus.
To help you understand these terms, we have defined them in this
glossary.
ACCUMULATION PHASE - The period during which you invest money in your
contract.
ACCUMULATION UNITS - A measurement we use to calculate the value of the
variable portion of your contract during the Accumulation Phase.
ANNUITANT(S) - The person(s) on whose life (lives) we base income
payments.
ANNUITY DATE - The date on which income payments are to begin, as
selected by you.
ANNUITY UNITS - A measurement we use to calculate the amount of income
payments you receive from the variable portion of your contract during
the Income Phase.
BENEFICIARY - The person designated to receive any benefits under the
contract if you or the Annuitant dies.
COMPANY - Anchor National Life Insurance Company, We, Us, the insurer
which issues this contract.
INCOME PHASE - The period during which we make income payments to you.
IRS - The Internal Revenue Service.
NON-QUALIFIED (CONTRACT) - A contract purchased with after-tax dollars.
In general, these contracts are not under any pension plan, specially
sponsored program or individual retirement account ("IRA").
PAYMENT ENHANCEMENT(S) - The amount(s) allocated to your contract by us
under the Principal Rewards Program. Payment Enhancements are calculated
as a percentage of your Purchase Payments and are considered earnings.
PURCHASE PAYMENTS - The money you give us to buy the contract, as well as
any additional money you give us to invest in the contract after you own
it.
QUALIFIED (CONTRACT) - A contract purchased with pretax dollars. These
contracts are generally purchased under a pension plan, specially
sponsored program or IRA.
TRUSTS - Refers to the Anchor Series Trust, the SunAmerica Series Trust,
Van Kampen Life Investment Trust and WM Variable Trust collectively.
VARIABLE PORTFOLIO(S) - The variable investment options available under
the contract. Each Variable Portfolio has its own investment objective
and is invested in the underlying investments of the Anchor Series Trust,
the SunAmerica Series Trust, Van Kampen Life Investment Trust or the WM
Variable Trust.
</Table>
ALL FINANCIAL REPRESENTATIVES OR AGENTS THAT SELL THE CONTRACTS OFFERED BY THIS
PROSPECTUS ARE REQUIRED TO DELIVER A PROSPECTUS.
3
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HIGHLIGHTS
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The Polaris Protector/Platinum Variable Annuity is a contract between you and
Anchor National Life Insurance Company ("Anchor National"). It is designed to
help you invest on a tax-deferred basis and meet long-term financial goals.
There are minimum Purchase Payment amounts required to purchase a contract.
Purchase Payments may be invested in a variety of variable and fixed account
options. You may also elect to participate in the Rewards Program of the
contract that can provide you with Payment Enhancements to invest in your
contract. If you elect participation in this feature, your contract will be
subject to a longer surrender charge schedule. Like all deferred annuities, the
contract has an Accumulation Phase and an Income Phase. During the Accumulation
Phase, you invest money in your contract. The Income Phase begins when you start
receiving income payments from your annuity to provide for your retirement.
FREE LOOK: If you cancel your contract within 10 days after receiving it (or
whatever period is required in your state), we will cancel the contract without
charging a withdrawal charge. You will receive whatever your contract is worth
on the day that we receive your request. This amount may be more or less than
your original Purchase Payment. We will return your original Purchase Payment if
required by law. If you elected to participate in the Rewards Program, you
receive any gain and we bear any loss on any Payment Enhancement(s) if you
decide to cancel your contract during the free look period. Please see
PURCHASING A POLARIS PROTECTOR/PLATINUM VARIABLE ANNUITY in the prospectus.
EXPENSES: There are fees and charges associated with the contract. Each year, we
deduct a $35 contract maintenance fee from your contract, which may be waived
for contracts of $50,000 or more. We also deduct insurance charges, which equal
1.52% annually of the average daily value of your contract allocated to the
Variable Portfolios. There are investment charges on amounts invested in the
Variable Portfolios. If you elect optional features available under the contract
we may charge additional fees for these features. A separate withdrawal charge
schedule applies to each Purchase Payment. The amount of the withdrawal charge
declines over time. After a Purchase Payment has been in the contract for seven
complete years, or nine complete years if you participate in the Rewards
Program, withdrawal charges no longer apply to that portion of the Purchase
Payment. Please see the FEE TABLE, PURCHASING A POLARIS PROTECTOR/ PLATINUM
VARIABLE ANNUITY and EXPENSES IN THE PROSPECTUS.
ACCESS TO YOUR MONEY: You may withdraw money from your contract during the
Accumulation Phase. If you do so, earnings are deemed to be withdrawn first. You
will pay income taxes on earnings and untaxed contributions when you withdraw
them. Payments received during the Income Phase are considered partly a return
of your original investment. A federal tax penalty may apply if you make
withdrawals before age 59 1/2. As noted above, a withdrawal charge may apply.
Please see ACCESS TO YOUR MONEY and TAXES in the prospectus.
DEATH BENEFIT: A death benefit feature is available under the contract to
protect your Beneficiaries in the event of your death during the Accumulation
Phase. Please see DEATH BENEFITS in the prospectus.
INCOME OPTIONS: When you are ready to begin taking income, you can choose to
receive income payments on a variable basis, fixed basis or a combination of
both. You may also chose from five different income options, including an option
for income that you cannot outlive. Please see INCOME OPTIONS in the prospectus.
INQUIRIES: If you have questions about your contract call your financial advisor
or contact us at Anchor National Life Insurance Company Annuity Service Center
P.O. Box 54299 Los Angeles, California 90054-0299. Telephone Number: (800)
445-SUN2.
ANCHOR NATIONAL OFFERS SEVERAL DIFFERENT VARIABLE ANNUITY PRODUCTS TO MEET THE
DIVERSE NEEDS OF OUR INVESTORS. EACH PRODUCT MAY PROVIDE DIFFERENT FEATURES AND
BENEFITS OFFERED AT DIFFERENT FEES, CHARGES AND EXPENSES. WE ALSO OFFER PRODUCTS
THAT DO NOT OFFER THE PRINCIPAL REWARDS FEATURE. PRODUCTS WITHOUT THE PRINCIPAL
REWARDS PROGRAM HAVE THE SAME MORTALITY AND EXPENSE RISK CHARGES AS THE SAME
CONTRACT WITH THE PRINCIPAL REWARDS PROGRAM. HOWEVER, CONTRACTS WITHOUT THE
PRINCIPAL REWARDS PROGRAM HAVE A SHORTER AND LOWER SURRENDER CHARGE SCHEDULE.
WHEN WORKING WITH YOUR FINANCIAL ADVISOR TO DETERMINE THE BEST PRODUCT TO MEET
YOUR NEEDS YOU SHOULD CONSIDER, AMONG OTHER THINGS, WHETHER THE FEATURES OF THIS
CONTRACT AND THE RELATED FEES PROVIDE THE MOST APPROPRIATE PACKAGE TO HELP YOU
MEET YOUR LONG-TERM RETIREMENT SAVINGS GOALS.
PLEASE READ THE PROSPECTUS CAREFULLY FOR MORE DETAILED INFORMATION REGARDING
THESE AND OTHER FEATURES AND BENEFITS OF THE CONTRACT,
AS WELL AS THE RISKS OF INVESTING.
4
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FEE TABLES
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OWNER TRANSACTION EXPENSES
WITHDRAWAL CHARGE (AS A PERCENTAGE OF EACH PURCHASE PAYMENT)
<Table>
YEARS:....................... 1 2 3 4 5 6 7 8 9 10
Non-Principal Rewards........ 7% 6% 5% 4% 3% 2% 1% 0% 0% 0%
Principal Rewards............ 9% 9% 8% 7% 6% 5% 4% 3% 2% 0%
</Table>
<Table>
TRANSFER FEE.......... No charge for first 15 transfers each
contract year; thereafter, fee is $25 ($10 in
Pennsylvania and Texas) per transfer
</Table>
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.)
<Table>
<Caption>
ANNUAL FEE AS A % OF
GROWTH RATE YOUR INCOME BENEFIT BASE*
----------- -------------------------
Base 0% .10%
Plus 6% .45%
</Table>
* 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)
<Table>
Mortality and Expense Risk Charge..................... 1.37%
Distribution Expense Charge........................... 0.15%
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TOTAL SEPARATE ACCOUNT EXPENSES 1.52%
=====
</Table>
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.)
<Table>
Fee as a percentage of your daily net asset value......... .25%
</Table>
PORTFOLIO EXPENSES
ANCHOR SERIES TRUST
(AS A PERCENTAGE OF AVERAGE NET ASSETS FOR THE TRUST'S FISCAL YEAR ENDED
DECEMBER 31, 2001)
<Table>
<Caption>
MANAGEMENT SERVICE(12B-1) OTHER TOTAL ANNUAL
PORTFOLIO FEE FEE EXPENSES EXPENSES
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Capital Appreciation 0.70% 0.15% 0.08% 0.93%
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Government and Quality Bond 0.57% 0.15% 0.07% 0.79%
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Growth 0.67% 0.15% 0.06% 0.88%
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Natural Resources 0.75% 0.15% 0.16% 1.06%
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</Table>
SUNAMERICA SERIES TRUST
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER REIMBURSEMENT OR WAIVER OF EXPENSES
FOR THE TRUST'S FISCAL YEAR ENDED JANUARY 31, 2002)
<Table>
<Caption>
MANAGEMENT SERVICE(12B-1) OTHER TOTAL ANNUAL
PORTFOLIO FEE(4) FEE(4) EXPENSES(4) EXPENSES(4)
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Aggressive Growth 0.69% 0.15% 0.08% 0.92%
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Alliance Growth 0.60% 0.15% 0.06% 0.81%
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Asset Allocation 0.59% 0.15% 0.09% 0.83%
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Blue Chip Growth(1) 0.70% 0.15% 0.15% 1.00%
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Cash Management 0.48% 0.15% 0.05% 0.68%
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Corporate Bond 0.59% 0.15% 0.08% 0.82%
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Davis Venture Value 0.71% 0.15% 0.06% 0.92%
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Dogs of Wall Street 0.60% 0.15% 0.11% 0.86%
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Emerging Markets 1.25% 0.15% 0.30% 1.70%
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Federated Value 0.68% 0.15% 0.08% 0.91%
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Global Bond 0.68% 0.15% 0.14% 0.97%
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Global Equities 0.73% 0.15% 0.17% 1.05%
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Goldman Sachs Research(1) 1.20% 0.15% 0.15% 1.50%
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Growth-Income 0.53% 0.15% 0.06% 0.74%
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Growth Opportunities(1) 0.75% 0.15% 0.25% 1.15%
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High-Yield Bond 0.64% 0.15% 0.09% 0.88%
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Int'l Diversified Equities 1.00% 0.15% 0.27% 1.42%
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Int'l Growth and Income 0.95% 0.15% 0.27% 1.37%
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Marsico Growth(1,2) 0.85% 0.15% 0.16% 1.16%
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MFS Growth and Income 0.70% 0.15% 0.08% 0.93%
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MFS Mid-Cap Growth 0.75% 0.15% 0.08% 0.98%
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MFS Total Return 0.66% 0.15% 0.07% 0.88%
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Putnam Growth 0.78% 0.15% 0.06% 0.99%
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Real Estate 0.80% 0.15% 0.12% 1.07%
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SunAmerica Balanced 0.60% 0.15% 0.07% 0.82%
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Technology 1.20% 0.15% 0.25% 1.60%
- ---------------------------------------------------------------------------------------------------------------------------------
Telecom Utility(3) 0.75% 0.15% 0.11% 1.01%
- ---------------------------------------------------------------------------------------------------------------------------------
Worldwide High Income(3) 1.00% 0.15% 0.12% 1.27%
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
(1)For this portfolio, the advisor, SunAmerica Asset Management Corp., has
voluntarily agreed to waive fees or expenses, if necessary, to keep
operating expenses at or below established maximum amounts. All waivers or
reimbursements may be terminated at any time. Only certain portfolios
relied on these waivers and/or reimbursements during this fiscal year.
Absent fee waivers or reimbursement of expenses by the adviser or custody
credits, you would have incurred the following expenses during the last
fiscal year: Blue Chip Growth 1.25%; Goldman Sachs Research 1.70%; Growth
Opportunities 1.31%; and Marsico Growth 1.73%.
(2)The expense ratio is gross of custody credits of 0.01%. The actual expense
ratio is capped at 1.15%.
(3)Gross of custody credits of 0.01%.
(4)Annualized.
5
VAN KAMPEN LIFE INVESTMENT TRUST
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER REIMBURSEMENT OR WAIVER OF EXPENSES
FOR THE TRUST'S FISCAL YEAR ENDED DECEMBER 31, 2001)
<Table>
<Caption>
MANAGEMENT SERVICE(12B-1) OTHER TOTAL ANNUAL
PORTFOLIO FEE FEE EXPENSES EXPENSES
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
Van Kampen LIT Comstock(1) 0.60% 0.25% 0.21% 1.06%
- -------------------------------------------------------------------------------------------------------------------------------
Van Kampen LIT Emerging Growth(2) 0.70% 0.25% 0.06% 1.01%
- -------------------------------------------------------------------------------------------------------------------------------
Van Kampen LIT Growth and Income(3) 0.60% 0.25% 0.15% 1.00%
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
(1)Van Kampen Life Investment Trust Comstock Portfolio, Class II Shares.
(2)Van Kampen Life Investment Trust Emerging Growth Portfolio, Class II
Shares.
(3)Van Kampen Life Investment Trust Growth and Income Portfolio, Class II
Shares.
WM VARIABLE TRUST*
(AS A PERCENTAGE OF DAILY NET ASSET VALUE OF EACH INVESTMENT PORTFOLIO AS OF THE
FISCAL YEAR END OF THE TRUST ENDING DECEMBER 31, 2001)
<Table>
<Caption>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEE EXPENSES EXPENSES(1)
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
STRATEGIC GROWTH 0.10% 0.21% 0.31%
- -----------------------------------------------------------------------------------------------------------
CONSERVATIVE GROWTH 0.10% 0.18% 0.28%
- -----------------------------------------------------------------------------------------------------------
BALANCED 0.10% 0.18% 0.28%
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
</Table>
(1)The Annual Expenses of the portfolios, combined with the Annual Expenses
of the underlying funds are shown under "Annual Expenses of the Portfolios
and Underlying Funds Combined" below.
THE ABOVE PORTFOLIO EXPENSES WERE PROVIDED BY THE TRUSTS. WE HAVE NOT
INDEPENDENTLY VERIFIED THE ACCURACY OF THE INFORMATION.
6
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXAMPLES -- IF YOU DO NOT PARTICIPATE IN THE PRINCIPAL REWARDS PROGRAM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
You will pay the following expenses on a $1,000 investment in each Variable
Portfolio, assuming a 5% annual return on assets, Portfolio Expenses after
waiver, reimbursement or recoupment, (assuming the waiver, reimbursement or
recoupment will continue for the period shown) if applicable and:
(a) you surrender the contract at the end of the stated time period and
no optional features are elected.
(b) you elect the optional EstatePlus and the Income Protector Plus
features with the following charges (.25% and .45%, respectively),
and you surrender the contract at the end of the stated period.
(c) you do not surrender the contract and no optional features are
elected.*
(d) you elect the optional EstatePlus and Income Protector Plus features
with the following charges (.25% and .45%, respectively), and you do
not surrender the contract.
<Table>
<Caption>
1 3 5 10
PORTFOLIO YEAR YEARS YEARS YEARS
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Capital Appreciation (a) $ 96 (a) $129 (a) $165 (a) $287
(b) $103 (b) $150 (b) $199 (b) $354
(c) $ 26 (c) $ 79 (c) $135 (c) $287
(d) $ 33 (d) $100 (d) $169 (d) $354
- -----------------------------------------------------------------------------------------------------------
Government and Quality Bond (a) $ 94 (a) $125 (a) $158 (a) $273
(b) $101 (b) $146 (b) $192 (b) $341
(c) $ 24 (c) $ 75 (c) $128 (c) $273
(d) $ 31 (d) $ 96 (d) $162 (d) $341
- -----------------------------------------------------------------------------------------------------------
Growth (a) $ 95 (a) $127 (a) $162 (a) $282
(b) $102 (b) $148 (b) $197 (b) $349
(c) $ 25 (c) $ 77 (c) $132 (c) $282
(d) $ 32 (d) $ 98 (d) $167 (d) $349
- -----------------------------------------------------------------------------------------------------------
Natural Resources (a) $ 97 (a) $133 (a) $171 (a) $300
(b) $104 (b) $154 (b) $205 (b) $366
(c) $ 27 (c) $ 83 (c) $141 (c) $300
(d) $ 34 (d) $104 (d) $175 (d) $366
- -----------------------------------------------------------------------------------------------------------
Aggressive Growth (a) $ 96 (a) $129 (a) $164 (a) $286
(b) $103 (b) $149 (b) $199 (b) $353
(c) $ 26 (c) $ 79 (c) $134 (c) $286
(d) $ 33 (d) $ 99 (d) $169 (d) $353
- -----------------------------------------------------------------------------------------------------------
Alliance Growth (a) $ 94 (a) $125 (a) $159 (a) $275
(b) $101 (b) $146 (b) $193 (b) $343
(c) $ 24 (c) $ 75 (c) $129 (c) $275
(d) $ 31 (d) $ 96 (d) $163 (d) $343
- -----------------------------------------------------------------------------------------------------------
Asset Allocation (a) $ 95 (a) $126 (a) $160 (a) $277
(b) $102 (b) $147 (b) $194 (b) $345
(c) $ 25 (c) $ 76 (c) $130 (c) $277
(d) $ 32 (d) $ 97 (d) $164 (d) $345
- -----------------------------------------------------------------------------------------------------------
Blue Chip Growth (a) $ 96 (a) $131 (a) $168 (a) $294
(b) $103 (b) $152 (b) $203 (b) $360
(c) $ 26 (c) $ 81 (c) $138 (c) $294
(d) $ 33 (d) $102 (d) $173 (d) $360
- -----------------------------------------------------------------------------------------------------------
Cash Management (a) $ 93 (a) $121 (a) $152 (a) $262
(b) $100 (b) $142 (b) $187 (b) $331
(c) $ 23 (c) $ 71 (c) $122 (c) $262
(d) $ 30 (d) $ 92 (d) $157 (d) $331
- -----------------------------------------------------------------------------------------------------------
Corporate Bond (a) $ 95 (a) $126 (a) $159 (a) $276
(b) $102 (b) $146 (b) $194 (b) $344
(c) $ 25 (c) $ 76 (c) $129 (c) $276
(d) $ 32 (d) $ 96 (d) $164 (d) $344
- -----------------------------------------------------------------------------------------------------------
Davis Venture Value (a) $ 96 (a) $129 (a) $164 (a) $286
(b) $103 (b) $149 (b) $199 (b) $353
(c) $ 26 (c) $ 79 (c) $134 (c) $286
(d) $ 33 (d) $ 99 (d) $169 (d) $353
- -----------------------------------------------------------------------------------------------------------
"Dogs" of Wall Street (a) $ 95 (a) $127 (a) $161 (a) $280
(b) $102 (b) $148 (b) $196 (b) $347
(c) $ 25 (c) $ 77 (c) $131 (c) $280
(d) $ 32 (d) $ 98 (d) $166 (d) $347
- -----------------------------------------------------------------------------------------------------------
Emerging Markets (a) $103 (a) $152 (a) $203 (a) $360
(b) $110 (b) $172 (b) $235 (b) $421
(c) $ 33 (c) $102 (c) $173 (c) $360
(d) $ 40 (d) $122 (d) $205 (d) $421
- -----------------------------------------------------------------------------------------------------------
Federated Value (a) $ 95 (a) $128 (a) $164 (a) $285
(b) $102 (b) $149 (b) $198 (b) $352
(c) $ 25 (c) $ 78 (c) $134 (c) $285
(d) $ 32 (d) $ 99 (d) $168 (d) $352
- -----------------------------------------------------------------------------------------------------------
Global Bond (a) $ 96 (a) $130 (a) $167 (a) $291
(b) $103 (b) $151 (b) $201 (b) $357
(c) $ 26 (c) $ 80 (c) $137 (c) $291
(d) $ 33 (d) $101 (d) $171 (d) $357
- -----------------------------------------------------------------------------------------------------------
* We do not currently charge a surrender charge upon annuitization unless the contract is annuitized using
the Income Protector feature. We assess the applicable surrender charge upon annuitization under the
Income Protector feature assuming a full surrender of your contract.
</Table>
7
<Table>
<Caption>
1 3 5 10
PORTFOLIO YEAR YEARS YEARS YEARS
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Global Equities (a) $ 97 (a) $133 (a) $171 (a) $299
(b) $104 (b) $153 (b) $205 (b) $365
(c) $ 27 (c) $ 83 (c) $141 (c) $299
(d) $ 34 (d) $103 (d) $175 (d) $365
- -----------------------------------------------------------------------------------------------------------
Goldman Sachs Research (a) $101 (a) $146 (a) $193 (a) $342
(b) $108 (b) $166 (b) $226 (b) $404
(c) $ 31 (c) $ 96 (c) $163 (c) $342
(d) $ 38 (d) $116 (d) $196 (d) $404
- -----------------------------------------------------------------------------------------------------------
Growth-Income (a) $ 94 (a) $123 (a) $155 (a) $268
(b) $101 (b) $144 (b) $190 (b) $336
(c) $ 24 (c) $ 73 (c) $125 (c) $268
(d) $ 31 (d) $ 94 (d) $160 (d) $336
- -----------------------------------------------------------------------------------------------------------
Growth Opportunities (a) $ 98 (a) $136 (a) $176 (a) $309
(b) $105 (b) $156 (b) $210 (b) $374
(c) $ 28 (c) $ 86 (c) $146 (c) $309
(d) $ 35 (d) $106 (d) $180 (d) $374
- -----------------------------------------------------------------------------------------------------------
High-Yield Bond (a) $ 95 (a) $127 (a) $162 (a) $282
(b) $102 (b) $148 (b) $197 (b) $349
(c) $ 25 (c) $ 77 (c) $132 (c) $282
(d) $ 32 (d) $ 98 (d) $167 (d) $349
- -----------------------------------------------------------------------------------------------------------
International Diversified Equities (a) $101 (a) $144 (a) $189 (a) $334
(b) $108 (b) $164 (b) $222 (b) $397
(c) $ 31 (c) $ 94 (c) $159 (c) $334
(d) $ 38 (d) $114 (d) $192 (d) $397
- -----------------------------------------------------------------------------------------------------------
International Growth and Income (a) $100 (a) $142 (a) $187 (a) $330
(b) $107 (b) $163 (b) $220 (b) $393
(c) $ 30 (c) $ 92 (c) $157 (c) $330
(d) $ 37 (d) $113 (d) $190 (d) $393
- -----------------------------------------------------------------------------------------------------------
Marsico Growth (a) $ 98 (a) $136 (a) $176 (a) $310
(b) $105 (b) $156 (b) $210 (b) $375
(c) $ 28 (c) $ 86 (c) $146 (c) $310
(d) $ 35 (d) $106 (d) $180 (d) $375
- -----------------------------------------------------------------------------------------------------------
MFS Growth and Income (a) $ 96 (a) $129 (a) $166 (a) $287
(b) $103 (b) $150 (b) $199 (b) $354
(c) $ 26 (c) $ 79 (c) $135 (c) $287
(d) $ 33 (d) $100 (d) $169 (d) $354
- -----------------------------------------------------------------------------------------------------------
MFS Mid-Cap Growth (a) $ 96 (a) $130 (a) $167 (a) $292
(b) $103 (b) $151 (b) $202 (b) $358
(c) $ 26 (c) $ 80 (c) $137 (c) $292
(d) $ 33 (d) $101 (d) $172 (d) $358
- -----------------------------------------------------------------------------------------------------------
MFS Total Return (a) $ 95 (a) $127 (a) $162 (a) $282
(b) $102 (b) $148 (b) $197 (b) $349
(c) $ 25 (c) $ 77 (c) $132 (c) $282
(d) $ 32 (d) $ 98 (d) $167 (d) $349
- -----------------------------------------------------------------------------------------------------------
Putnam Growth (a) $ 96 (a) $131 (a) $168 (a) $293
(b) $103 (b) $151 (b) $202 (b) $359
(c) $ 26 (c) $ 81 (c) $138 (c) $293
(d) $ 33 (d) $101 (d) $172 (d) $359
- -----------------------------------------------------------------------------------------------------------
Real Estate (a) $ 97 (a) $133 (a) $172 (a) $301
(b) $104 (b) $154 (b) $206 (b) $366
(c) $ 27 (c) $ 83 (c) $142 (c) $301
(d) $ 34 (d) $104 (d) $176 (d) $366
- -----------------------------------------------------------------------------------------------------------
SunAmerica Balanced (a) $ 95 (a) $126 (a) $159 (a) $276
(b) $102 (b) $146 (b) $194 (b) $344
(c) $ 25 (c) $ 76 (c) $129 (c) $276
(d) $ 32 (d) $ 96 (d) $164 (d) $344
- -----------------------------------------------------------------------------------------------------------
Technology (a) $102 (a) $149 (a) $198 (a) $351
(b) $109 (b) $169 (b) $231 (b) $413
(c) $ 32 (c) $ 99 (c) $168 (c) $351
(d) $ 39 (d) $119 (d) $201 (d) $413
- -----------------------------------------------------------------------------------------------------------
Telecom Utility (a) $ 96 (a) $131 (a) $169 (a) $295
(b) $103 (b) $152 (b) $203 (b) $361
(c) $ 26 (c) $ 81 (c) $139 (c) $295
(d) $ 33 (d) $102 (d) $173 (d) $361
- -----------------------------------------------------------------------------------------------------------
Worldwide High Income (a) $ 99 (a) $139 (a) $182 (a) $320
(b) $106 (b) $160 (b) $215 (b) $384
(c) $ 29 (c) $ 89 (c) $152 (c) $320
(d) $ 36 (d) $110 (d) $185 (d) $384
- -----------------------------------------------------------------------------------------------------------
Van Kampen LIT Comstock, Class II Shares (a) $ 97 (a) $133 (a) $171 (a) $300
(b) $104 (b) $154 (b) $205 (b) $366
(c) $ 27 (c) $ 83 (c) $141 (c) $300
(d) $ 34 (d) $104 (d) $175 (d) $366
- -----------------------------------------------------------------------------------------------------------
Van Kampen LIT Emerging Growth, Class II Shares (a) $ 96 (a) $131 (a) $169 (a) $295
(b) $103 (b) $152 (b) $203 (b) $361
(c) $ 26 (c) $ 81 (c) $139 (c) $295
(d) $ 33 (d) $102 (d) $173 (d) $361
- -----------------------------------------------------------------------------------------------------------
Van Kampen LIT Growth and Income, Class II Shares (a) $ 96 (a) $131 (a) $168 (a) $294
(b) $103 (b) $152 (b) $203 (b) $360
(c) $ 26 (c) $ 81 (c) $138 (c) $294
(d) $ 33 (d) $102 (d) $173 (d) $360
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
</Table>
8
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXAMPLES -- IF YOU PARTICIPATE IN THE PRINCIPAL REWARDS PROGRAM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
You will pay the following expenses on a $1,000 investment in each Variable
Portfolio, assuming a 5% annual return on assets, Portfolio Expenses after
waiver, reimbursement or recoupment (assuming the waiver, reimbursement or
recoupment will continue for the period shown), if applicable and:
(a) you surrender the contract at the end of the stated time period and
no optional features are elected.
(b) you elect the optional EstatePlus and the Income Protector Plus
features with the following charges (.25% and .45%, respectively),
benefit (maximum charge) and you surrender the contract at the end
of the stated period.
(c) you do not surrender the contract and no optional features are
elected.*
(d) you elect the optional EstatePlus and Income Protector Plus features
at the following charges (.25% and .45% respectively), and you do
not surrender the contract.
<Table>
<Caption>
1 3 5 10
PORTFOLIO YEAR YEARS YEARS YEARS
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Capital Appreciation (a) $116 (a) $161 (a) $198 (a) $293
(b) $123 (b) $182 (b) $233 (b) $361
(c) $ 26 (c) $ 81 (c) $138 (c) $293
(d) $ 33 (d) $102 (d) $173 (d) $361
- -----------------------------------------------------------------------------------------------------------
Government and Quality Bond (a) $115 (a) $156 (a) $190 (a) $279
(b) $122 (b) $178 (b) $226 (b) $348
(c) $ 25 (c) $ 76 (c) $130 (c) $279
(d) $ 32 (d) $ 98 (d) $166 (d) $348
- -----------------------------------------------------------------------------------------------------------
Growth (a) $116 (a) $159 (a) $195 (a) $288
(b) $123 (b) $180 (b) $230 (b) $356
(c) $ 26 (c) $ 79 (c) $135 (c) $288
(d) $ 33 (d) $100 (d) $170 (d) $356
- -----------------------------------------------------------------------------------------------------------
Natural Resources (a) $118 (a) $165 (a) $204 (a) $306
(b) $125 (b) $186 (b) $239 (b) $373
(c) $ 28 (c) $ 85 (c) $144 (c) $306
(d) $ 35 (d) $106 (d) $179 (d) $373
- -----------------------------------------------------------------------------------------------------------
Aggressive Growth (a) $116 (a) $160 (a) $197 (a) $292
(b) $123 (b) $181 (b) $232 (b) $360
(c) $ 26 (c) $ 80 (c) $137 (c) $292
(d) $ 33 (d) $101 (d) $172 (d) $360
- -----------------------------------------------------------------------------------------------------------
Alliance Growth (a) $115 (a) $157 (a) $192 (a) $281
(b) $122 (b) $178 (b) $227 (b) $350
(c) $ 25 (c) $ 77 (c) $132 (c) $281
(d) $ 32 (d) $ 98 (d) $167 (d) $350
- -----------------------------------------------------------------------------------------------------------
Asset Allocation (a) $115 (a) $157 (a) $193 (a) $283
(b) $122 (b) $179 (b) $228 (b) $351
(c) $ 25 (c) $ 77 (c) $133 (c) $283
(d) $ 32 (d) $ 99 (d) $168 (d) $351
- -----------------------------------------------------------------------------------------------------------
Blue Chip Growth (a) $117 (a) $163 (a) $201 (a) $300
(b) $124 (b) $184 (b) $236 (b) $367
(c) $ 27 (c) $ 83 (c) $141 (c) $300
(d) $ 34 (d) $104 (d) $176 (d) $367
- -----------------------------------------------------------------------------------------------------------
Cash Management (a) $114 (a) $153 (a) $185 (a) $268
(b) $121 (b) $174 (b) $220 (b) $337
(c) $ 24 (c) $ 73 (c) $125 (c) $268
(d) $ 31 (d) $ 94 (d) $160 (d) $337
- -----------------------------------------------------------------------------------------------------------
Corporate Bond (a) $115 (a) $157 (a) $192 (a) $282
(b) $122 (b) $178 (b) $227 (b) $351
(c) $ 25 (c) $ 77 (c) $132 (c) $282
(d) $ 32 (d) $ 98 (d) $167 (d) $351
- -----------------------------------------------------------------------------------------------------------
Davis Venture Value (a) $116 (a) $160 (a) $197 (a) $292
(b) $123 (b) $181 (b) $232 (b) $360
(c) $ 26 (c) $ 80 (c) $137 (c) $292
(d) $ 33 (d) $101 (d) $172 (d) $360
- -----------------------------------------------------------------------------------------------------------
"Dogs" of Wall Street (a) $115 (a) $158 (a) $194 (a) $286
(b) $123 (b) $180 (b) $229 (b) $354
(c) $ 25 (c) $ 78 (c) $134 (c) $286
(d) $ 33 (d) $100 (d) $169 (d) $354
- -----------------------------------------------------------------------------------------------------------
Emerging Markets (a) $124 (a) $184 (a) $236 (a) $367
(b) $131 (b) $204 (b) $270 (b) $430
(c) $ 34 (c) $104 (c) $176 (c) $367
(d) $ 41 (d) $124 (d) $210 (d) $430
- -----------------------------------------------------------------------------------------------------------
Federated Value (a) $116 (a) $160 (a) $197 (a) $291
(b) $123 (b) $181 (b) $232 (b) $359
(c) $ 26 (c) $ 80 (c) $137 (c) $291
(d) $ 33 (d) $101 (d) $172 (d) $359
- -----------------------------------------------------------------------------------------------------------
Global Bond (a) $117 (a) $162 (a) $200 (a) $297
(b) $124 (b) $183 (b) $235 (b) $365
(c) $ 27 (c) $ 82 (c) $140 (c) $297
(d) $ 34 (d) $103 (d) $175 (d) $365
- -----------------------------------------------------------------------------------------------------------
* We do not currently charge a surrender charge upon annuitization unless the contract is annuitized using
the Income Protector feature. We assess the applicable surrender charge upon annuitization under the
Income Protector feature assuming a full surrender of your contract.
</Table>
9
<Table>
<Caption>
1 3 5 10
PORTFOLIO YEAR YEARS YEARS YEARS
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Global Equities (a) $117 (a) $164 (a) $204 (a) $305
(b) $125 (b) $185 (b) $238 (b) $372
(c) $ 27 (c) $ 84 (c) $144 (c) $305
(d) $ 35 (d) $105 (d) $178 (d) $372
- -----------------------------------------------------------------------------------------------------------
Goldman Sachs Research (a) $122 (a) $178 (a) $226 (a) $349
(b) $129 (b) $199 (b) $260 (b) $412
(c) $ 32 (c) $ 98 (c) $166 (c) $349
(d) $ 39 (d) $119 (d) $200 (d) $412
- -----------------------------------------------------------------------------------------------------------
Growth-Income (a) $114 (a) $155 (a) $188 (a) $274
(b) $121 (b) $176 (b) $223 (b) $343
(c) $ 24 (c) $ 75 (c) $128 (c) $274
(d) $ 31 (d) $ 96 (d) $163 (d) $343
- -----------------------------------------------------------------------------------------------------------
Growth Opportunities (a) $118 (a) $167 (a) $209 (a) $315
(b) $126 (b) $188 (b) $243 (b) $381
(c) $ 28 (c) $ 87 (c) $149 (c) $315
(d) $ 36 (d) $108 (d) $183 (d) $381
- -----------------------------------------------------------------------------------------------------------
High-Yield Bond (a) $116 (a) $159 (a) $195 (a) $288
(b) $123 (b) $180 (b) $230 (b) $356
(c) $ 26 (c) $ 79 (c) $135 (c) $288
(d) $ 33 (d) $100 (d) $170 (d) $356
- -----------------------------------------------------------------------------------------------------------
International Diversified Equities (a) $121 (a) $175 (a) $222 (a) $341
(b) $128 (b) $196 (b) $256 (b) $405
(c) $ 31 (c) $ 95 (c) $162 (c) $341
(d) $ 38 (d) $116 (d) $196 (d) $405
- -----------------------------------------------------------------------------------------------------------
International Growth and Income (a) $121 (a) $174 (a) $220 (a) $336
(b) $128 (b) $195 (b) $254 (b) $401
(c) $ 31 (c) $ 94 (c) $160 (c) $336
(d) $ 38 (d) $115 (d) $194 (d) $401
- -----------------------------------------------------------------------------------------------------------
Marsico Growth (a) $119 (a) $168 (a) $209 (a) $316
(b) $126 (b) $189 (b) $244 (b) $382
(c) $ 29 (c) $ 88 (c) $149 (c) $316
(d) $ 36 (d) $109 (d) $184 (d) $382
- -----------------------------------------------------------------------------------------------------------
MFS Growth and Income (a) $116 (a) $161 (a) $198 (a) $293
(b) $123 (b) $182 (b) $233 (b) $361
(c) $ 26 (c) $ 81 (c) $138 (c) $293
(d) $ 33 (d) $102 (d) $173 (d) $361
- -----------------------------------------------------------------------------------------------------------
MFS Mid-Cap Growth (a) $117 (a) $162 (a) $200 (a) $298
(b) $124 (b) $183 (b) $235 (b) $365
(c) $ 27 (c) $ 82 (c) $140 (c) $298
(d) $ 34 (d) $103 (d) $175 (d) $365
- -----------------------------------------------------------------------------------------------------------
MFS Total Return (a) $116 (a) $159 (a) $195 (a) $288
(b) $123 (b) $180 (b) $230 (b) $356
(c) $ 26 (c) $ 79 (c) $135 (c) $288
(d) $ 33 (d) $100 (d) $170 (d) $356
- -----------------------------------------------------------------------------------------------------------
Putnam Growth (a) $117 (a) $162 (a) $201 (a) $299
(b) $124 (b) $184 (b) $235 (b) $366
(c) $ 27 (c) $ 82 (c) $141 (c) $299
(d) $ 34 (d) $104 (d) $175 (d) $366
- -----------------------------------------------------------------------------------------------------------
Real Estate (a) $118 (a) $165 (a) $205 (a) $307
(b) $125 (b) $186 (b) $239 (b) $374
(c) $ 28 (c) $ 85 (c) $145 (c) $307
(d) $ 35 (d) $106 (d) $179 (d) $374
- -----------------------------------------------------------------------------------------------------------
SunAmerica Balanced (a) $115 (a) $157 (a) $192 (a) $282
(b) $122 (b) $178 (b) $227 (b) $351
(c) $ 25 (c) $ 77 (c) $132 (c) $282
(d) $ 32 (d) $ 98 (d) $167 (d) $351
- -----------------------------------------------------------------------------------------------------------
Technology (a) $123 (a) $181 (a) $231 (a) $358
(b) $130 (b) $202 (b) $265 (b) $421
(c) $ 33 (c) $101 (c) $171 (c) $358
(d) $ 40 (d) $122 (d) $205 (d) $421
- -----------------------------------------------------------------------------------------------------------
Telecom Utility (a) $117 (a) $163 (a) $202 (a) $301
(b) $124 (b) $184 (b) $236 (b) $368
(c) $ 27 (c) $ 83 (c) $142 (c) $301
(d) $ 34 (d) $104 (d) $176 (d) $368
- -----------------------------------------------------------------------------------------------------------
Worldwide High Income (a) $120 (a) $171 (a) $215 (a) $327
(b) $127 (b) $192 (b) $249 (b) $392
(c) $ 30 (c) $ 91 (c) $155 (c) $327
(d) $ 37 (d) $112 (d) $189 (d) $392
- -----------------------------------------------------------------------------------------------------------
Van Kampen LIT Comstock, Class II Shares (a) $118 (a) $165 (a) $204 (a) $306
(b) $125 (b) $186 (b) $239 (b) $373
(c) $ 28 (c) $ 85 (c) $144 (c) $306
(d) $ 35 (d) $106 (d) $179 (d) $373
- -----------------------------------------------------------------------------------------------------------
Van Kampen LIT Emerging Growth, Class II Shares (a) $117 (a) $163 (a) $202 (a) $301
(b) $124 (b) $184 (b) $236 (b) $368
(c) $ 27 (c) $ 83 (c) $142 (c) $301
(d) $ 34 (d) $104 (d) $176 (d) $368
- -----------------------------------------------------------------------------------------------------------
Van Kampen LIT Growth and Income, Class II Shares (a) $117 (a) $163 (a) $201 (a) $300
(b) $124 (b) $184 (b) $236 (b) $367
(c) $ 27 (c) $ 83 (c) $141 (c) $300
(d) $ 34 (d) $104 (d) $176 (d) $367
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
</Table>
10
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXAMPLES -- IF YOU DO NOT PARTICIPATE IN THE PRINCIPAL REWARDS PROGRAM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
You will pay the following expenses on a $1,000 investment in each Variable
Portfolio, assuming a 5% annual return on assets, Portfolio Expenses after
waiver, reimbursement or recoupment, (assuming the waiver, reimbursement or
recoupment will continue for the period shown) if applicable and:
(a) you surrender the contract at the end of the stated time period and
no optional features are elected.
(b) you elect the optional EstatePlus and the Income Protector Base
features with the following charges (.25% and .10%, respectively),
and you surrender the contract at the end of the stated period.
(c) you do not surrender the contract and no optional features are
elected.*
(d) you elect the optional EstatePlus and Income Protector Base features
with the following charges (.25% and .10%, respectively, and you do
not surrender the contract.
<Table>
<Caption>
1 3 5 10
PORTFOLIO YEAR YEARS YEARS YEARS
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Capital Appreciation (a) $ 96 (a) $129 (a) $165 (a) $287
(b) $ 99 (b) $139 (b) $182 (b) $321
(c) $ 26 (c) $ 79 (c) $135 (c) $287
(d) $ 29 (d) $ 89 (d) $152 (d) $321
- -----------------------------------------------------------------------------------------------------------
Government and Quality Bond (a) $ 94 (a) $125 (a) $158 (a) $273
(b) $ 98 (b) $135 (b) $175 (b) $308
(c) $ 24 (c) $ 75 (c) $128 (c) $273
(d) $ 28 (d) $ 85 (d) $145 (d) $308
- -----------------------------------------------------------------------------------------------------------
Growth (a) $ 95 (a) $127 (a) $162 (a) $282
(b) $ 99 (b) $138 (b) $180 (b) $316
(c) $ 25 (c) $ 77 (c) $132 (c) $282
(d) $ 29 (d) $ 88 (d) $150 (d) $316
- -----------------------------------------------------------------------------------------------------------
Natural Resources (a) $ 97 (a) $133 (a) $171 (a) $300
(b) $100 (b) $143 (b) $189 (b) $333
(c) $ 27 (c) $ 83 (c) $141 (c) $300
(d) $ 30 (d) $ 93 (d) $159 (d) $333
- -----------------------------------------------------------------------------------------------------------
Aggressive Growth (a) $ 96 (a) $129 (a) $164 (a) $286
(b) $ 99 (b) $139 (b) $182 (b) $320
(c) $ 26 (c) $ 79 (c) $134 (c) $286
(d) $ 29 (d) $ 89 (d) $152 (d) $320
- -----------------------------------------------------------------------------------------------------------
Alliance Growth (a) $ 94 (a) $125 (a) $159 (a) $275
(b) $ 98 (b) $136 (b) $176 (b) $310
(c) $ 24 (c) $ 75 (c) $129 (c) $275
(d) $ 28 (d) $ 86 (d) $146 (d) $310
- -----------------------------------------------------------------------------------------------------------
Blue Chip Growth (a) $ 96 (a) $131 (a) $168 (a) $294
(b) $100 (b) $141 (b) $186 (b) $328
(c) $ 26 (c) $ 81 (c) $138 (c) $294
(d) $ 30 (d) $ 91 (d) $156 (d) $328
- -----------------------------------------------------------------------------------------------------------
Cash Management (a) $ 93 (a) $121 (a) $152 (a) $262
(b) $ 97 (b) $132 (b) $170 (b) $297
(c) $ 23 (c) $ 71 (c) $122 (c) $262
(d) $ 27 (d) $ 82 (d) $140 (d) $297
- -----------------------------------------------------------------------------------------------------------
Corporate Bond (a) $ 95 (a) $126 (a) $159 (a) $276
(b) $ 98 (b) $136 (b) $177 (b) $311
(c) $ 25 (c) $ 76 (c) $129 (c) $276
(d) $ 28 (d) $ 86 (d) $147 (d) $311
- -----------------------------------------------------------------------------------------------------------
Davis Venture Value (a) $ 96 (a) $129 (a) $164 (a) $286
(b) $ 99 (b) $139 (b) $182 (b) $320
(c) $ 26 (c) $ 79 (c) $134 (c) $286
(d) $ 29 (d) $ 89 (d) $152 (d) $320
- -----------------------------------------------------------------------------------------------------------
"Dogs" of Wall Street (a) $ 95 (a) $127 (a) $161 (a) $280
(b) $ 98 (b) $137 (b) $179 (b) $314
(c) $ 25 (c) $ 77 (c) $131 (c) $280
(d) $ 28 (d) $ 87 (d) $149 (d) $314
- -----------------------------------------------------------------------------------------------------------
Emerging Market (a) $103 (a) $152 (a) $203 (a) $360
(b) $107 (b) $162 (b) $219 (b) $391
(c) $ 33 (c) $102 (c) $173 (c) $360
(d) $ 37 (d) $112 (d) $189 (d) $391
- -----------------------------------------------------------------------------------------------------------
Federated Value (a) $ 95 (a) $128 (a) $164 (a) $285
(b) $ 99 (b) $139 (b) $181 (b) $319
(c) $ 25 (c) $ 78 (c) $134 (c) $285
(d) $ 29 (d) $ 89 (d) $151 (d) $319
- -----------------------------------------------------------------------------------------------------------
Global Bond (a) $ 96 (a) $130 (a) $167 (a) $291
(b) $100 (b) $141 (b) $184 (b) $325
(c) $ 26 (c) $ 80 (c) $137 (c) $291
(d) $ 30 (d) $ 91 (d) $154 (d) $325
- -----------------------------------------------------------------------------------------------------------
Global Equities (a) $ 97 (a) $133 (a) $171 (a) $299
(b) $100 (b) $143 (b) $188 (b) $332
(c) $ 27 (c) $ 83 (c) $141 (c) $299
(d) $ 30 (d) $ 93 (d) $158 (d) $332
- -----------------------------------------------------------------------------------------------------------
Goldman Sachs Research (a) $101 (a) $146 (a) $193 (a) $342
(b) $105 (b) $156 (b) $210 (b) $374
(c) $ 31 (c) $ 96 (c) $163 (c) $342
(d) $ 35 (d) $106 (d) $180 (d) $374
- -----------------------------------------------------------------------------------------------------------
Growth-Income (a) $ 94 (a) $123 (a) $155 (a) $268
(b) $ 97 (b) $134 (b) $173 (b) $303
(c) $ 24 (c) $ 73 (c) $125 (c) $268
(d) $ 27 (d) $ 84 (d) $143 (d) $303
- -----------------------------------------------------------------------------------------------------------
* We do not currently charge a surrender charge upon annuitization unless the contract is annuitized using
the Income Protector feature. We assess the applicable surrender charge upon annuitization under the
Income Protector feature assuming a full surrender of your contract.
</Table>
11
<Table>
<Caption>
1 3 5 10
PORTFOLIO YEAR YEARS YEARS YEARS
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Growth Opportunities (a) $ 98 (a) $136 (a) $176 (a) $309
(b) $101 (b) $146 (b) $193 (b) $342
(c) $ 28 (c) $ 86 (c) $146 (c) $309
(d) $ 31 (d) $ 96 (d) $163 (d) $342
- -----------------------------------------------------------------------------------------------------------
High-Yield Bond (a) $ 95 (a) $127 (a) $162 (a) $282
(b) $ 99 (b) $138 (b) $180 (b) $316
(c) $ 25 (c) $ 77 (c) $132 (c) $282
(d) $ 29 (d) $ 88 (d) $150 (d) $316
- -----------------------------------------------------------------------------------------------------------
International Diversified Equities (a) $101 (a) $144 (a) $189 (a) $334
(b) $104 (b) $154 (b) $206 (b) $366
(c) $ 31 (c) $ 94 (c) $159 (c) $334
(d) $ 34 (d) $104 (d) $176 (d) $366
- -----------------------------------------------------------------------------------------------------------
International Growth & Income (a) $100 (a) $142 (a) $187 (a) $330
(b) $104 (b) $152 (b) $203 (b) $362
(c) $ 30 (c) $ 92 (c) $157 (c) $330
(d) $ 34 (d) $102 (d) $173 (d) $362
- -----------------------------------------------------------------------------------------------------------
Marsico Growth (a) $ 98 (a) $136 (a) $176 (a) $310
(b) $101 (b) $146 (b) $193 (b) $343
(c) $ 28 (c) $ 86 (c) $146 (c) $310
(d) $ 31 (d) $ 96 (d) $163 (d) $343
- -----------------------------------------------------------------------------------------------------------
MFS Growth & Income (a) $ 96 (a) $129 (a) $165 (a) $287
(b) $ 99 (b) $139 (b) $182 (b) $321
(c) $ 26 (c) $ 79 (c) $135 (c) $287
(d) $ 29 (d) $ 89 (d) $152 (d) $321
- -----------------------------------------------------------------------------------------------------------
MFS Mid Cap Growth (a) $ 96 (a) $130 (a) $167 (a) $292
(b) $100 (b) $141 (b) $185 (b) $326
(c) $ 26 (c) $ 80 (c) $137 (c) $292
(d) $ 30 (d) $ 91 (d) $155 (d) $326
- -----------------------------------------------------------------------------------------------------------
MFS Total Return (a) $ 95 (a) $127 (a) $162 (a) $282
(b) $ 99 (b) $138 (b) $180 (b) $316
(c) $ 25 (c) $ 77 (c) $132 (c) $282
(d) $ 29 (d) $ 88 (d) $150 (d) $316
- -----------------------------------------------------------------------------------------------------------
Putnam Growth (a) $ 96 (a) $131 (a) $168 (a) $293
(b) $100 (b) $141 (b) $185 (b) $327
(c) $ 26 (c) $ 81 (c) $138 (c) $293
(d) $ 30 (d) $ 91 (d) $155 (d) $327
- -----------------------------------------------------------------------------------------------------------
Real Estate (a) $ 97 (a) $133 (a) $172 (a) $301
(b) $101 (b) $144 (b) $189 (b) $334
(c) $ 27 (c) $ 83 (c) $142 (c) $301
(d) $ 31 (d) $ 94 (d) $159 (d) $334
- -----------------------------------------------------------------------------------------------------------
SunAmerica Balanced (a) $ 95 (a) $126 (a) $159 (a) $276
(b) $ 98 (b) $136 (b) $177 (b) $311
(c) $ 25 (c) $ 76 (c) $129 (c) $276
(d) $ 28 (d) $ 86 (d) $147 (d) $311
- -----------------------------------------------------------------------------------------------------------
Technology (a) $102 (a) $149 (a) $198 (a) $351
(b) $106 (b) $159 (b) $214 (b) $382
(c) $ 32 (c) $ 99 (c) $168 (c) $351
(d) $ 36 (d) $109 (d) $184 (d) $382
- -----------------------------------------------------------------------------------------------------------
Telecom Utility (a) $ 96 (a) $131 (a) $169 (a) $295
(b) $100 (b) $142 (b) $186 (b) $329
(c) $ 26 (c) $ 81 (c) $139 (c) $295
(d) $ 30 (d) $ 92 (d) $156 (d) $329
- -----------------------------------------------------------------------------------------------------------
Worldwide High Income (a) $ 99 (a) $139 (a) $182 (a) $320
(b) $103 (b) $149 (b) $199 (b) $353
(c) $ 29 (c) $ 89 (c) $152 (c) $320
(d) $ 33 (d) $ 99 (d) $169 (d) $353
- -----------------------------------------------------------------------------------------------------------
Balanced (a) $ 98 (a) $136 (a) $176 (a) $309
(b) $101 (b) $146 (b) $193 (b) $342
(c) $ 28 (c) $ 86 (c) $146 (c) $309
(d) $ 31 (d) $ 96 (d) $163 (d) $342
- -----------------------------------------------------------------------------------------------------------
Conservative Growth (a) $ 97 (a) $133 (a) $171 (a) $300
(b) $100 (b) $143 (b) $189 (b) $333
(c) $ 27 (c) $ 83 (c) $141 (c) $300
(d) $ 30 (d) $ 93 (d) $159 (d) $333
- -----------------------------------------------------------------------------------------------------------
Strategic Growth (a) $ 96 (a) $131 (a) $169 (a) $295
(b) $100 (b) $142 (b) $186 (b) $329
(c) $ 26 (c) $ 81 (c) $139 (c) $295
(d) $ 30 (d) $ 92 (d) $156 (d) $329
- -----------------------------------------------------------------------------------------------------------
Van Kampen LIT Comstock, Class II Shares (a) $ 97 (a) $133 (a) $171 (a) $300
(b) $100 (b) $143 (b) $189 (b) $333
(c) $ 27 (c) $ 83 (c) $141 (c) $300
(d) $ 30 (d) $ 93 (d) $159 (d) $333
- -----------------------------------------------------------------------------------------------------------
Van Kampen LIT Emerging Growth, Class II Shares (a) $ 96 (a) $131 (a) $169 (a) $295
(b) $100 (b) $142 (b) $186 (b) $329
(c) $ 26 (c) $ 81 (c) $139 (c) $295
(d) $ 30 (d) $ 92 (d) $156 (d) $329
- -----------------------------------------------------------------------------------------------------------
Van Kampen LIT Growth and Income, Class II Shares (a) $ 96 (a) $131 (a) $168 (a) $294
(b) $100 (b) $141 (b) $186 (b) $328
(c) $ 26 (c) $ 81 (c) $138 (c) $294
(d) $ 30 (d) $ 91 (d) $156 (d) $328
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
</Table>
12
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXAMPLES -- IF YOU PARTICIPATE IN THE PRINCIPAL REWARDS PROGRAM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
You will pay the following expenses on a $1,000 investment in each Variable
Portfolio, assuming a 5% annual return on assets, Portfolio Expenses after
waiver, reimbursement or recoupment (assuming the waiver, reimbursement or
recoupment will continue for the period shown), if applicable and:
(a) you surrender the contract at the end of the stated time period and
no optional features are elected.
(b) you elect the optional EstatePlus and the Income Protector Base
features with the following charges (.25% and .10%, respectively),
benefit (maximum charge) and you surrender the contract at the end of
the stated period.
(c) you do not surrender the contract and no optional features are
elected.*
(d) you elect the optional EstatePlus and Income Protector Base benefits
at the following charges (.25% and .10% respectively), and you do not
surrender the contract.
<Table>
<Caption>
1 3 5 10
PORTFOLIO YEAR YEARS YEARS YEARS
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Capital Appreciation (a) $116 (a) $161 (a) $198 (a) $293
(b) $120 (b) $171 (b) $215 (b) $328
(c) $ 26 (c) $ 81 (c) $138 (c) $293
(d) $ 30 (d) $ 91 (d) $155 (d) $328
- -----------------------------------------------------------------------------------------------------------
Government and Quality Bond (a) $115 (a) $156 (a) $190 (a) $279
(b) $118 (b) $167 (b) $208 (b) $314
(c) $ 25 (c) $ 76 (c) $130 (c) $279
(d) $ 28 (d) $ 87 (d) $148 (d) $314
- -----------------------------------------------------------------------------------------------------------
Growth (a) $116 (a) $159 (a) $195 (a) $288
(b) $119 (b) $170 (b) $213 (b) $323
(c) $ 26 (c) $ 79 (c) $135 (c) $288
(d) $ 29 (d) $ 90 (d) $153 (d) $323
- -----------------------------------------------------------------------------------------------------------
Natural Resources (a) $118 (a) $165 (a) $204 (a) $306
(b) $121 (b) $175 (b) $222 (b) $340
(c) $ 28 (c) $ 85 (c) $144 (c) $306
(d) $ 31 (d) $ 95 (d) $162 (d) $340
- -----------------------------------------------------------------------------------------------------------
Aggressive Growth (a) $116 (a) $160 (a) $197 (a) $292
(b) $120 (b) $171 (b) $215 (b) $327
(c) $ 26 (c) $ 80 (c) $137 (c) $292
(d) $ 30 (d) $ 91 (d) $155 (d) $327
- -----------------------------------------------------------------------------------------------------------
Alliance Growth (a) $115 (a) $157 (a) $192 (a) $281
(b) $119 (b) $168 (b) $209 (b) $316
(c) $ 25 (c) $ 77 (c) $132 (c) $281
(d) $ 29 (d) $ 88 (d) $149 (d) $316
- -----------------------------------------------------------------------------------------------------------
Blue Chip Growth (a) $117 (a) $163 (a) $201 (a) $300
(b) $120 (b) $173 (b) $219 (b) $334
(c) $ 27 (c) $ 83 (c) $141 (c) $300
(d) $ 30 (d) $ 93 (d) $159 (d) $334
- -----------------------------------------------------------------------------------------------------------
Cash Management (a) $114 (a) $153 (a) $185 (a) $268
(b) $117 (b) $164 (b) $203 (b) $303
(c) $ 24 (c) $ 73 (c) $125 (c) $268
(d) $ 27 (d) $ 84 (d) $143 (d) $303
- -----------------------------------------------------------------------------------------------------------
Corporate Bond (a) $115 (a) $157 (a) $192 (a) $282
(b) $119 (b) $168 (b) $210 (b) $317
(c) $ 25 (c) $ 77 (c) $132 (c) $282
(d) $ 29 (d) $ 88 (d) $150 (d) $317
- -----------------------------------------------------------------------------------------------------------
Davis Venture Value (a) $116 (a) $160 (a) $197 (a) $292
(b) $120 (b) $171 (b) $215 (b) $327
(c) $ 26 (c) $ 80 (c) $137 (c) $292
(d) $ 30 (d) $ 91 (d) $155 (d) $327
- -----------------------------------------------------------------------------------------------------------
"Dogs" of Wall Street (a) $115 (a) $158 (a) $194 (a) $286
(b) $119 (b) $169 (b) $212 (b) $321
(c) $ 25 (c) $ 78 (c) $134 (c) $286
(d) $ 29 (d) $ 89 (d) $152 (d) $321
- -----------------------------------------------------------------------------------------------------------
Emerging Market (a) $124 (a) $184 (a) $236 (a) $367
(b) $128 (b) $194 (b) $253 (b) $399
(c) $ 34 (c) $104 (c) $176 (c) $367
(d) $ 38 (d) $114 (d) $193 (d) $399
- -----------------------------------------------------------------------------------------------------------
Federated Value (a) $116 (a) $160 (a) $197 (a) $291
(b) $120 (b) $171 (b) $214 (b) $326
(c) $ 26 (c) $ 80 (c) $137 (c) $291
(d) $ 30 (d) $ 91 (d) $154 (d) $326
- -----------------------------------------------------------------------------------------------------------
Global Bond (a) $117 (a) $162 (a) $200 (a) $297
(b) $120 (b) $172 (b) $217 (b) $331
(c) $ 27 (c) $ 82 (c) $140 (c) $297
(d) $ 30 (d) $ 92 (d) $157 (d) $331
- -----------------------------------------------------------------------------------------------------------
Global Equities (a) $117 (a) $164 (a) $204 (a) $305
(b) $121 (b) $175 (b) $221 (b) $339
(c) $ 27 (c) $ 84 (c) $144 (c) $305
(d) $ 31 (d) $ 95 (d) $161 (d) $339
- -----------------------------------------------------------------------------------------------------------
Goldman Sachs Research (a) $122 (a) $178 (a) $226 (a) $349
(b) $126 (b) $188 (b) $243 (b) $381
(c) $ 32 (c) $ 98 (c) $166 (c) $349
(d) $ 36 (d) $108 (d) $183 (d) $381
- -----------------------------------------------------------------------------------------------------------
Growth-Income (a) $114 (a) $155 (a) $188 (a) $274
(b) $118 (b) $165 (b) $206 (b) $309
(c) $ 24 (c) $ 75 (c) $128 (c) $274
(d) $ 28 (d) $ 85 (d) $146 (d) $309
- -----------------------------------------------------------------------------------------------------------
* We do not currently charge a surrender charge upon annuitization unless the contract is annuitized using
the Income Protector feature. We assess the applicable surrender charge upon annuitization under the
Income Protector feature assuming a full surrender of your contract.
</Table>
13
<Table>
<Caption>
1 3 5 10
PORTFOLIO YEAR YEARS YEARS YEARS
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Growth Opportunities (a) $118 (a) $167 (a) $209 (a) $315
(b) $122 (b) $178 (b) $226 (b) $349
(c) $ 28 (c) $ 87 (c) $149 (c) $315
(d) $ 32 (d) $ 98 (d) $166 (d) $349
- -----------------------------------------------------------------------------------------------------------
High-Yield Bond (a) $116 (a) $159 (a) $195 (a) $288
(b) $119 (b) $170 (b) $213 (b) $323
(c) $ 26 (c) $ 79 (c) $135 (c) $288
(d) $ 29 (d) $ 90 (d) $153 (d) $323
- -----------------------------------------------------------------------------------------------------------
International Diversified Equities (a) $121 (a) $175 (a) $222 (a) $341
(b) $125 (b) $186 (b) $239 (b) $374
(c) $ 31 (c) $ 95 (c) $162 (c) $341
(d) $ 35 (d) $106 (d) $179 (d) $374
- -----------------------------------------------------------------------------------------------------------
International Growth & Income (a) $121 (a) $174 (a) $220 (a) $336
(b) $124 (b) $184 (b) $237 (b) $369
(c) $ 31 (c) $ 94 (c) $160 (c) $336
(d) $ 34 (d) $104 (d) $177 (d) $369
- -----------------------------------------------------------------------------------------------------------
Marsico Growth (a) $119 (a) $168 (a) $209 (a) $316
(b) $122 (b) $178 (b) $227 (b) $350
(c) $ 29 (c) $ 88 (c) $149 (c) $316
(d) $ 32 (d) $ 98 (d) $167 (d) $350
- -----------------------------------------------------------------------------------------------------------
MFS Growth and Income (a) $116 (a) $161 (a) $198 (a) $293
(b) $120 (b) $171 (b) $215 (b) $328
(c) $ 26 (c) $ 81 (c) $138 (c) $293
(d) $ 30 (d) $ 91 (d) $155 (d) $328
- -----------------------------------------------------------------------------------------------------------
MFS Mid Cap Growth (a) $117 (a) $162 (a) $200 (a) $298
(b) $120 (b) $173 (b) $218 (b) $332
(c) $ 27 (c) $ 82 (c) $140 (c) $298
(d) $ 30 (d) $ 93 (d) $158 (d) $332
- -----------------------------------------------------------------------------------------------------------
MFS Total Return (a) $116 (a) $159 (a) $195 (a) $288
(b) $119 (b) $170 (b) $213 (b) $323
(c) $ 26 (c) $ 79 (c) $135 (c) $288
(d) $ 29 (d) $ 90 (d) $153 (d) $323
- -----------------------------------------------------------------------------------------------------------
Putnam Growth (a) $117 (a) $162 (a) $201 (a) $299
(b) $120 (b) $173 (b) $218 (b) $333
(c) $ 27 (c) $ 82 (c) $141 (c) $299
(d) $ 30 (d) $ 93 (d) $158 (d) $333
- -----------------------------------------------------------------------------------------------------------
Real Estate (a) $118 (a) $165 (a) $205 (a) $307
(b) $121 (b) $175 (b) $222 (b) $341
(c) $ 28 (c) $ 85 (c) $145 (c) $307
(d) $ 31 (d) $ 95 (d) $162 (d) $341
- -----------------------------------------------------------------------------------------------------------
SunAmerica Balanced (a) $115 (a) $157 (a) $192 (a) $282
(b) $119 (b) $168 (b) $210 (b) $317
(c) $ 25 (c) $ 77 (c) $132 (c) $282
(d) $29 (d) $ 88 (d) $150 (d) $317
- -----------------------------------------------------------------------------------------------------------
Technology (a) $123 (a) $181 (a) $231 (a) $358
(b) $127 (b) $191 (b) $248 (b) $390
(c) $ 33 (c) $101 (c) $171 (c) $358
(d) $ 37 (d) $111 (d) $188 (d) $390
- -----------------------------------------------------------------------------------------------------------
Telecom Utility (a) $117 (a) $163 (a) $202 (a) $301
(b) $121 (b) $174 (b) $219 (b) $335
(c) $ 27 (c) $ 83 (c) $142 (c) $301
(d) $ 31 (d) $ 94 (d) $159 (d) $335
- -----------------------------------------------------------------------------------------------------------
Worldwide High Income (a) $120 (a) $171 (a) $215 (a) $327
(b) $123 (b) $181 (b) $232 (b) $360
(c) $ 30 (c) $ 91 (c) $155 (c) $327
(d) $ 33 (d) $101 (d) $172 (d) $360
- -----------------------------------------------------------------------------------------------------------
Balanced (a) $118 (a) $167 (a) $209 (a) $315
(b) $122 (b) $178 (b) $226 (b) $349
(c) $ 28 (c) $ 87 (c) $149 (c) $315
(d) $ 32 (d) $ 98 (d) $166 (d) $349
- -----------------------------------------------------------------------------------------------------------
Conservative Growth (a) $118 (a) $165 (a) $204 (a) $306
(b) $121 (b) $175 (b) $222 (b) $340
(c) $ 28 (c) $ 85 (c) $144 (c) $306
(d) $ 31 (d) $ 95 (d) $162 (d) $340
- -----------------------------------------------------------------------------------------------------------
Strategic Growth (a) $117 (a) $163 (a) $202 (a) $301
(b) $121 (b) $174 (b) $219 (b) $335
(c) $ 27 (c) $ 83 (c) $142 (c) $301
(d) $ 31 (d) $ 94 (d) $159 (d) $335
- -----------------------------------------------------------------------------------------------------------
Van Kampen LIT Comstock, Class II Shares (a) $118 (a) $165 (a) $204 (a) $306
(b) $121 (b) $175 (b) $222 (b) $340
(c) $ 28 (c) $ 85 (c) $144 (c) $306
(d) $ 31 (d) $95 (d) $162 (d) $340
- -----------------------------------------------------------------------------------------------------------
Van Kampen LIT Emerging Growth, Class II Shares (a) $117 (a) $163 (a) $202 (a) $301
(b) $121 (b) $174 (b) $219 (b) $335
(c) $ 27 (c) $ 83 (c) $142 (c) $301
(d) $ 31 (d) $ 94 (d) $159 (d) $335
- -----------------------------------------------------------------------------------------------------------
Van Kampen LIT Growth and Income, Class II Shares (a) $117 (a) $163 (a) $201 (a) $300
(b) $120 (b) $173 (b) $219 (b) $334
(c) $ 27 (c) $ 83 (c) $141 (c) $300
(d) $ 30 (d) $ 93 (d) $159 (d) $334
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
</Table>
14
EXPLANATION OF FEE TABLES AND EXAMPLES
1. The purpose of the Fee Tables is to show you the various expenses you would
incur directly and indirectly by investing in the contract. The tables
represent both fees at the separate account (contract level) as well as
portfolio company investment management expenses. We converted the contract
administration charge to a percentage (0.09%) using an assumed contract size
of $40,000. The actual impact of the administration charge may differ from
this percentage and may be waived for contract values over $50,000.
Additional information on the portfolio company fees can be found in the
Trust prospectuses located behind this prospectus.
2. For certain Variable Portfolios, the adviser, SunAmerica Asset Management
Corp., has voluntarily agreed to waive fees or reimburse certain expenses,
if necessary, to keep annual operating expenses at or below the lesser of
the maximum allowed by any applicable state expense limitations or the
following percentages of each Variable Portfolio's average net assets: Blue
Chip Growth 1.00%; Goldman Sachs Research 1.50%; Growth Opportunities 1.15%;
Marsico Growth 1.15%. The adviser also may voluntarily waive or reimburse
additional amounts to increase a Variable Portfolio's investment return. All
waivers and/or reimbursements may be terminated at any time. Furthermore,
the adviser may recoup any waivers or reimbursements within two years after
such waivers or reimbursements are granted, provided that the Variable
Portfolio is able to make such payment and remain in compliance with the
foregoing expense limitations.
3. In addition to the stated assumptions, the Examples also assume an insurance
charge of 1.52% and that no transfer fees were imposed. Although premium
taxes may apply in certain states, they are not reflected in the Examples.
4. Examples reflecting participation in the Principal Rewards program reflect
the Principal Rewards surrender charge schedule, and a 2% upfront payment
enhancement.
5. Examples reflecting application of optional features and benefits use the
highest fees and charges being offered for those feature.
6. THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
CONDENSED FINANCIAL INFORMATION APPEARS IN APPENDIX A OF THIS PROSPECTUS.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
THE POLARIS PLATINUM/PROTECTOR
VARIABLE ANNUITY
- ----------------------------------------------------------------
- ----------------------------------------------------------------
An annuity is a contract between you and an insurance company. You are the owner
of the contract. The contract provides three main benefits:
- Tax Deferral: This means that you do not pay taxes on your earnings from
the annuity until you withdraw them.
- Death Benefit: If you die during the Accumulation Phase, the insurance
company pays a death benefit to your Beneficiary.
- Guaranteed Income: If elected, you receive a stream of income for your
lifetime, or another available period you select.
Tax-qualified retirement plans (e.g., IRAs, 401(k) or 403(b) plans) defer
payment of taxes on earnings until withdrawal. If you are considering funding a
tax-qualified retirement plan with an annuity, you should know that an annuity
does not provide any additional tax deferral treatment of earnings beyond the
treatment provided by the tax-qualified retirement plan itself. However,
annuities do provide other features and benefits which may be valuable to you.
You should fully discuss this decision with your financial representative.
This annuity was developed to help you contribute to your retirement savings.
This annuity works in two stages, the Accumulation Phase and the Income Phase.
Your contract is in the Accumulation Phase during the period when you make
payments into the contract. The Income Phase begins when you request us to start
making income payments to you out of the money accumulated in your contract.
The contract is called a "variable" annuity because it allows you to invest in
variable portfolios which, like mutual funds, have different investment
objectives and performance which varies. You can gain or lose money if you
invest in these Variable Portfolios. The amount of money you accumulate in your
contract depends on the performance of the Variable Portfolios in which you
invest. This contract currently offers 38 Variable Portfolios.
The contract also offers several fixed account options for varying time periods.
Fixed account options earn interest at a rate set and guaranteed by Anchor
National. If you allocate money to the fixed account options, the amount of
money that accumulates in the contract depends on the total interest credited to
the particular fixed account option(s) in which you invest.
For more information on investment options available under this contract SEE
INVESTMENT OPTIONS ON PAGE 19.
This annuity is designed to assist in contributing to retirement savings of
investors whose personal circumstances allow for a long-term investment time
horizon. As a function of the Internal Revenue Code ("IRC"), you may be assessed
a 10% federal tax penalty on any withdrawal made prior to your reaching age
59 1/2. Additionally, this contract provides that you will be charged a
withdrawal charge on each purchase payment withdrawn if that purchase payment
has not been invested in this contract for at least 7 years, or 9 years if you
elect to participate in the Principal Rewards Program. Because of these
potential penalties, you should fully discuss
15
all of the benefits and risks of this contract with your financial
representative prior to purchase.
Anchor National Life Insurance Company (Anchor National, The Company, Us, We)
issues the Polaris Platinum/Protector Variable Annuity. When you purchase a
Polaris Platinum/ Protector Variable Annuity, a contract exists between you and
Anchor National. The Company is a stock life insurance company organized under
the laws of the state of Arizona. Its principal place of business is 1
SunAmerica Center, Los Angeles, California 90067. The Company conducts life
insurance and annuity business in the District of Columbia and all states except
New York. Anchor National is an indirect, wholly owned subsidiary of American
International Group, Inc. ("AIG"), a Delaware corporation.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
PURCHASING A POLARIS PROTECTOR/PLATINUM
VARIABLE ANNUITY
- ----------------------------------------------------------------
- ----------------------------------------------------------------
An initial Purchase Payment is the money you give us to buy a contract. Any
additional money you give us to invest in the contract after purchase is a
subsequent Purchase Payment.
The following chart shows the minimum initial and subsequent Purchase Payments
permitted under your contract. These amounts depend upon whether a contract is
Qualified or Non-qualified for tax purposes. FOR FURTHER EXPLANATION, SEE TAXES
ON PAGE 32.
<Table>
<Caption>
- -----------------------------------------------------------
Minimum
Minimum Initial Subsequent
Purchase Payment Purchase Payment
- -----------------------------------------------------------
Qualified $2,000 $250
- -----------------------------------------------------------
Non-Qualified $5,000 $500
- -----------------------------------------------------------
</Table>
Prior Company approval is required to accept Purchase Payments greater than
$1,500,000 or $1,333,000 (if Estate Plus is elected). Subsequent Purchase
Payments which would cause total Purchase Payments in all contracts issued by
Anchor National to the same owner to exceed these limits are also subject to
prior company approval. Also, the optional automatic payment plan allows you to
make subsequent Purchase Payments of as little as $20.00.
In general, we will not issue a Qualified contract to anyone who is age 70 1/2
or older, unless it is shown that the minimum distribution required by the IRS
is being made. In addition, we may not issue a contract to anyone age 91 or
older on the contract issue date. You may not elect to participate in the
Principal Rewards Program or elect the EstatePlus benefit if you are age 81 or
older at the time of contract issue.
ALLOCATION OF PURCHASE PAYMENTS
We invest your Purchase Payments in the fixed and variable investment options
according to your instructions. If we receive a Purchase Payment without
allocation instructions, we will invest the money according to your last
allocation instructions. SEE INVESTMENT OPTIONS ON PAGE 19.
In order to issue your contract, we must receive your completed application,
Purchase Payment allocation instructions and any other required paperwork at our
principal place of business. We allocate your initial Purchase Payment within
two days of receiving it. If we do not have complete information necessary to
issue your contract, we will contact you. If we do not have the information
necessary to issue your contract within 5 business days we will:
- Send your money back to you; or
- Ask your permission to keep your money until we get the information
necessary to issue the contract.
PRINCIPAL REWARDS PROGRAM
If you elect to participate in the Principal Rewards program at contract issue,
we contribute an Upfront Payment Enhancement and, if applicable, a Deferred
Payment Enhancement to your contract in conjunction with each Purchase Payment
you invest during the life of your contract. If you elect to participate in this
program, all Purchase Payments are subject to a nine year withdrawal charge
schedule. SEE WITHDRAWAL CHARGES ON PAGE 27. These withdrawal charges may offset
the value of any bonus, if you make an early withdrawal. SEE EXPENSES ON PAGE
27. You may not elect to participate in this program if you are age 81 or older
at the time of contract issue. Amounts we contribute to your contract under this
program are considered earnings and are allocated to your contract as described
below.
Purchase Payments may not be invested in the 6-month or the 1-year Dollar Cost
Averaging fixed accounts if you participate in the Principal Rewards Program.
However, you may use the 1-year fixed account option as a Dollar Cost Averaging
source account.
There may be scenarios in which due to negative market conditions and your
inability to remain invested over the long-term, a contract with the Principal
Rewards program may not perform as well as the contract without the feature.
ENHANCEMENT LEVELS
The Upfront Payment Enhancement Rate, Deferred Payment Enhancement Rate and
Deferred Payment Enhancement Date may be determined based on stated
Enhancement Levels. Each Enhancement Level is a range of dollar amounts
which may correspond to different enhancement rates and dates. Enhancement
Levels may change from time to time, at our sole discretion. The
Enhancement Level applicable to your initial Purchase Payment is determined
by the amount of that initial Purchase Payment. With respect to any
subsequent Purchase Payments we determine your Enhancement Level by adding
your contract value on the
16
date we receive each subsequent Purchase Payment plus the amount of the
subsequent Purchase Payment.
UPFRONT PAYMENT ENHANCEMENT
An Upfront Payment Enhancement is an amount we add to your contract on the
day we receive a Purchase Payment. We calculate an Upfront Payment
Enhancement amount as a percentage (the "Upfront Payment Enhancement Rate")
of each Purchase Payment. The Upfront Payment Enhancement Rate will always
be at least 2%. We periodically review and establish the Upfront Payment
Enhancement Rate, which may increase or decrease at any time, but will
never be less than 2%. The applicable Upfront Payment Enhancement Rate is
that which is in effect for any applicable Enhancement Level, when we
receive each Purchase Payment under your contract. The Upfront Payment
Enhancement amounts are allocated among the fixed and variable investment
options according to the current allocation instructions in effect when we
receive each Purchase Payment.
DEFERRED PAYMENT ENHANCEMENT
A Deferred Payment Enhancement is an amount we may add to your contract on
a stated future date (the "Deferred Payment Enhancement Date") as a
percentage of Purchase Payments received. We refer to this percentage
amount as the Deferred Payment Enhancement Rate. We periodically review and
establish the Deferred Payment Enhancement Rates and Deferred Payment
Enhancement Dates. The Deferred Payment Enhancement Rate being offered may
increase, decrease or be eliminated by us, at any time. The Deferred
Payment Enhancement Date, if applicable, may change at any time. The
applicable Deferred Payment Enhancement Date and Deferred Payment
Enhancement Rate are those which may be in effect for any applicable
Enhancement Level, when we receive each Purchase Payment under your
contract. Any applicable Deferred Payment Enhancement, when credited, is
allocated to the Cash Management Variable Portfolio.
If you withdraw any portion of a Purchase Payment, to which a Deferred
Payment Enhancement applies, prior to the Deferred Payment Enhancement
Date, we reduce the amount of the corresponding Deferred Payment
Enhancement in the same proportion that your withdrawal (and any fees and
charges associated with such withdrawals) reduces that Purchase Payment.
For purposes of the Deferred Payment Enhancement, withdrawals are assumed
to be taken from earnings first, then from Purchase Payments, on a
first-in-first-out basis.
CURRENT ENHANCEMENT LEVELS
The Enhancement Levels, Upfront Payment Enhancement Rate, Deferred Payment
Enhancement Rate and Deferred Payment Enhancement Date applicable to all
Purchase Payments currently are as follows:
<Table>
<Caption>
- ----------------------------------------------------------------------
UPFRONT DEFERRED DEFERRED
PAYMENT PAYMENT PAYMENT
ENHANCEMENT ENHANCEMENT ENHANCEMENT ENHANCEMENT
LEVEL RATE RATE DATE
- ----------------------------------------------------------------------
Under $40,000 2% 0% N/A
- ----------------------------------------------------------------------
$40,000 - $99,999 4% 0% N/A
- ----------------------------------------------------------------------
$100,000 - $499,999 4% 1% Nine years from the
date we receive each
Purchase Payment.
- ----------------------------------------------------------------------
$500,000 - more 5% 1% Nine years from the
date we receive each
Purchase Payment.
- ----------------------------------------------------------------------
</Table>
APPENDIX A shows how we calculate any applicable Deferred Payment Enhancement
amount.
We will not allocate any applicable Deferred Payment Enhancement to your
contract if any of the following circumstances occurs prior to the Deferred
Payment Enhancement Date:
- You surrender your contract;
- A death benefit is paid on your contract;
- You switch to the Income Phase of your contract; or
- You fully withdraw the corresponding Purchase Payment.
See your financial advisor for information on the current Enhancement Levels and
Payment Enhancements rates.
90 DAY WINDOW
As of the 90th day after your contract was issued, we will total your
Purchase Payments made over those 90 days, without considering any
investment gain or loss in contract value on those Purchase Payments. If
your total Purchase Payments bring you to an Enhancement Level which, as of
the date we issued your contract, would have provided for a higher Upfront
and/or Deferred Payment Enhancement Rate on each Purchase Payment, you will
get the benefit of the Enhancement Rate(s) that were applicable to that
higher Enhancement Level at the time your contract was issued ("Look Back
Adjustment"). We will add any applicable Upfront Look Back Adjustment to
your contract on the 90th day following the date of contract issue. We will
send you a confirmation indicating any applicable Upfront and/or Deferred
Look Back Adjustment, on or about the 90th day following the date of
contract issuance. We will allocate any applicable Upfront Look Back
Adjustment according to your then-current
17
allocation instructions on file for subsequent Purchase Payments at the
time we make the contribution and if applicable, to the Cash Management
Portfolio, for a Deferred Look Back Adjustment.
APPENDIX B PROVIDES AN EXAMPLE OF THE 90 DAY WINDOW PROVISION.
The Principal Rewards Program may not be available in your state or through the
broker-dealer with which your financial advisor is affiliated. Please check with
your financial advisor regarding the availability of this program.
WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE PRINCIPAL REWARDS
PROGRAM (IN ITS ENTIRETY OR ANY COMPONENT) AT ANY TIME.
ACCUMULATION UNITS
When you allocate a Purchase Payment to the Variable Portfolios, we credit your
contract with Accumulation Units of the separate account. We base the number of
Accumulation Units you receive on the unit value of the Variable Portfolio as of
the day we receive your money if we receive it before 1 p.m. Pacific Standard
Time, or on the next business day's unit value if we receive your money after 1
p.m. Pacific Standard Time. The value of an Accumulation Unit goes up and down
based on the performance of the Variable Portfolios.
We calculate the value of an Accumulation Unit each day that the New York Stock
Exchange ("NYSE") is open as follows:
1. We determine the total value of money invested in a particular Variable
Portfolio;
2. We subtract from that amount all applicable contract charges; and
3. We divide this amount by the number of outstanding Accumulation Units.
We determine the number of Accumulation Units credited to your contract by
dividing the Purchase Payment and Payment Enhancement, if applicable, by the
Accumulation Unit value for the specific Variable Portfolio.
EXAMPLE (CONTRACTS WITHOUT PRINCIPAL REWARDS):
We receive a $25,000 Purchase Payment from you on Wednesday. You allocate
the money to the Global Bond Portfolio. We determine that the value of an
Accumulation Unit for the Global Bond Portfolio is $11.10 when the NYSE
closes on Wednesday. We then divide $25,000 by $11.10 and credit your
contract on Wednesday night with 2252.2523 Accumulation Units for the
Global Bond Portfolio.
EXAMPLE (CONTRACTS WITH PRINCIPAL REWARDS):
We receive a $25,000 Purchase Payment from you on Wednesday. You allocate
the money to the Global Bond Portfolio. If the Upfront Payment Enhancement
is 2.00% of your Purchase Payment, we would add an Upfront Payment
Enhancement of $500 to your contract. We determine that the value of an
Accumulation Unit for the Global Bond Portfolio is $11.10 when the NYSE
closes on Wednesday. We then divide $25,500 by $11.10 and credit your
contract on Wednesday with 2,297.2973 Accumulation Units for the Global
Bond Portfolio.
Performance of the Variable Portfolios and expenses under your contract affect
Accumulation Unit values. These factors cause the value of your contract to go
up and down.
FREE LOOK
You may cancel your contract within ten days after receiving it (or longer if
required by state law). We call this a "free look." To cancel, you must mail the
contract along with your free look request to our Annuity Service Center at P.O.
Box 54299, Los Angeles, California 90054-0299.
If you decide to cancel your contract during the free look period, we will
refund to you the value of your contract on the day we receive your request
minus the Free Look Payment Enhancement Deduction, if applicable. The Free Look
Payment Enhancement Deduction is equal to the lesser of (1) the value of any
Payment Enhancement(s) on the day we receive your free look request; or (2) the
Payment Enhancement amount(s), if any, which we allocated to your contract.
Thus, you receive any gain and we bear any loss on any Payment Enhancement(s) if
you decide to cancel your contract during the free look period.
Certain states require us to return your Purchase Payments upon a free look
request. Additionally, all contracts issued as an IRA require the full return of
Purchase Payments upon a free look. With respect to those contracts, we reserve
the right to put your money in the Cash Management Portfolio during the free
look period and will allocate your money according to your instructions at the
end of the applicable free look period. Currently, we do not put your money in
the Cash Management Portfolio during the free look period unless you allocate
your money to it. If your contract was issued in a state requiring return of
Purchase Payments or as an IRA and you cancel your contract during the free look
period, we return the greater of (1) your Purchase Payments; or (2) the value of
your contract minus the Free Look Payment Enhancement Deduction, if applicable.
At the end of the free look period, we allocate your money according to your
instructions.
EXCHANGE OFFERS
From time to time, we may offer to allow you to exchange an older variable
annuity issued by Anchor National or one of its affiliates, for a newer product
with more current features and benefits, also issued by Anchor National or one
of its affiliates. Such an exchange offer will be made in accordance with
applicable state and federal securities and insurance rules and
18
regulations. We will explain the specific terms and conditions of any such
exchange offer at the time the offer is made.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
INVESTMENT OPTIONS
- ----------------------------------------------------------------
- ----------------------------------------------------------------
VARIABLE PORTFOLIOS
The contract currently offers 38 Variable Portfolios. These Variable Portfolios
invest in shares of the following trusts: Anchor Series Trust, the SunAmerica
Series Trust, Van Kampen Life Investment Trust and the WM Variable Trust (the
"Trusts"). Additional Trusts and/or Variable Portfolios may be available in the
future. The Variable Portfolios operate similar to a mutual fund but are only
available through the purchase of certain insurance contracts.
SunAmerica Asset Management Corp., an indirect wholly owned subsidiary of AIG,
is the investment adviser to the Anchor and SunAmerica Series Trusts. Van Kampen
Asset Management Inc. is the investment adviser to the Van Kampen Life
Investment Trust. WM Advisors is the investment adviser to the WM Variable
Trust. The Trusts serve as the underlying investment vehicles for other variable
annuity contracts issued by Anchor National, and other affiliated/unaffiliated
insurance companies. Neither Anchor National nor the Trusts believe that
offering shares of the Trusts in this manner disadvantages you. The adviser
monitors the Trusts for potential conflicts.
The Variable Portfolios along with their respective subadvisers are listed
below:
ANCHOR SERIES TRUST
Wellington Management Company, LLP serves as subadviser to the Anchor Series
Trust Portfolios. Anchor Series Trust ("AST") has investment portfolios in
addition to those listed below which are not available for investment under the
contract.
SUNAMERICA SERIES TRUST
Various subadvisers provide investment advice for the SunAmerica Series Trust
Portfolios. SunAmerica Series Trust ("SAST") has investment portfolios in
addition to those listed below which are not available for investment under the
contract.
VAN KAMPEN LIFE INVESTMENT TRUST
Van Kampen Asset Management Inc. provides investment advice for the Van Kampen
Life Investment Trust ("VKT") portfolios. Van Kampen Life Investment Trust has
investment portfolios in addition to those listed here which are not available
for investment under the contract.
WM VARIABLE TRUST
Washington Mutual Advisors is the investment advisor to the WM Variable Trust
("WMT"). WMT has other investment portfolios in addition to those listed below
which are not available for investment under the contract.
STOCKS:
MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
- Alliance Growth Portfolio SAST
- Global Equities Portfolio SAST
- Growth & Income Portfolio SAST
MANAGED BY DAVIS ADVISERS L.P.
- Davis Venture Value Portfolio SAST
- Real Estate Portfolio SAST
MANAGED BY FEDERATED INVESTORS L.P.
- Federated Value Portfolio SAST
- Telecom Utility Portfolio SAST
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
- Goldman Sachs Research Portfolio SAST
MANAGED BY MARSICO CAPITAL MANAGEMENT, LLC
- Marsico Growth Portfolio SAST
MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
- MFS Growth & Income Portfolio SAST
- MFS Mid-Cap Growth Portfolio SAST
MANAGED BY PUTNAM INVESTMENT MANAGEMENT INC
- Emerging Markets Portfolio SAST
- International Growth & Income Portfolio SAST
- Putnam Growth Portfolio SAST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION
- Aggressive Growth Portfolio SAST
- Blue Chip Growth Portfolio SAST
- "Dogs" of Wall Street Portfolio SAST
- Growth Opportunities Portfolio SAST
MANAGED BY VAN KAMPEN/VAN KAMPEN ASSET MANAGEMENT INC.
- International Diversified Equities Portfolio SAST
- Technology Portfolio SAST
- Van Kampen LIT Comstock Portfolio, Class II Shares VKT
- Van Kampen LIT Emerging Growth Portfolio, Class II Shares VKT
- Van Kampen LIT Growth and Income Portfolio, Class II Shares VKT
MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP
- Capital Appreciation Portfolio AST
- Growth Portfolio AST
- Natural Resources Portfolio AST
BALANCED:
MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
- MFS Total Return Portfolio SAST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION
- SunAmerica Balanced Portfolio SAST
MANAGED BY WM ADVISORS, INC
- Asset Allocation Portfolio SAST
- Balanced Portfolio WMT
- Conservative Growth Portfolio WMT
- Strategic Growth Portfolio WMT
BONDS:
MANAGED BY FEDERATED INVESTORS L.P.
- Corporate Bond Portfolio SAST
19
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT INT'L
- Global Bond Portfolio SAST
MANAGED BY VAN KAMPEN
- Worldwide High Income Portfolio SAST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORPORATION
- High-Yield Bond Portfolio SAST
MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP
- Government & Quality Bond Portfolio AST
CASH:
MANAGED BY BANC OF AMERICA CAPITAL MANAGEMENT, LLC
- Cash Management Portfolio SAST
YOU SHOULD READ THE ATTACHED PROSPECTUSES FOR THE TRUSTS CAREFULLY. THESE
PROSPECTUSES CONTAIN DETAILED INFORMATION ABOUT THE VARIABLE PORTFOLIOS,
INCLUDING EACH VARIABLE PORTFOLIO'S INVESTMENT OBJECTIVE AND RISK FACTORS.
FIXED ACCOUNT OPTIONS
The contract also offers seven fixed account options. Anchor National will
guarantee the interest rate earned on money you allocate to any of these fixed
account options. We currently offer fixed account options for periods of one,
three, five, seven and ten years, which we call guarantee periods. All guarantee
periods may not be available in all states. If you do not elect to participate
in the Principal Rewards Program, you also have the option of allocating your
money to the 6-month DCA fixed account and/or the 1-year DCA fixed account (the
"DCA fixed accounts") which are available in conjunction with the Dollar Cost
Averaging Program. Please see the section on DOLLAR COST AVERAGING ON PAGE 21
for additional information about, including limitations on, and the availability
and operation of the DCA fixed accounts. The DCA fixed accounts are only
available for new Purchase Payments.
Each guarantee period may offer a different interest rate but will never be less
than an annual effective rate of 3%. Once established the rates for specified
payments do not change during the guarantee period. The guarantee period is that
period for which we credit the applicable rate (one, three, five, seven or ten
years).
There are three scenarios in which you may put money into the fixed account
options. In each scenario your money may be credited a different rate of
interest as follows:
- Initial Rate: Rate credited to amounts allocated to the fixed account
when you purchase your contract.
- Current Rate: Rate credited to subsequent amounts allocated to the fixed
account.
- Renewal Rate: Rate credited to money transferred from a fixed account or
a Variable Portfolio into a fixed account and to money remaining in a
fixed account after expiration of a guarantee period. (The Renewal Rate
does not apply to the DCA fixed account options.)
Each of these rates may differ from one another. Once declared, the applicable
rate is guaranteed until the corresponding guarantee period expires.
When a guarantee period ends, you may leave your money in the same fixed
investment option (other than the DCA fixed accounts). You may also reallocate
your money to another fixed investment option (other than the DCA fixed
accounts) or to the Variable Portfolios. If you want to reallocate your money to
a different fixed account option or a Variable Portfolio, you must contact us
within 30 days after the end of the current interest guarantee period and
instruct us how to reallocate the money. We do not contact you. If we do not
hear from you, your money will remain in the same fixed account option, where it
will earn interest at the renewal rate then in effect for the fixed account
option.
The DCA fixed accounts also credit a fixed rate of interest. Interest is
credited to amounts allocated to the 6-month or 1-year DCA fixed account while
your investment is systematically transferred to the Variable Portfolios. The
rates applicable to the DCA fixed accounts may differ from each other and/or the
other fixed account options but will never be less than an annual effective rate
of 3%. See DOLLAR COST AVERAGING ON PAGE 21 for more information.
MARKET VALUE ADJUSTMENT ("MVA")
NOTE: MARKET VALUE ADJUSTMENTS APPLY TO THE 3, 5, 7 AND 10-YEAR FIXED ACCOUNT
OPTIONS ONLY. THESE OPTIONS ARE NOT AVAILABLE IN ALL STATES. PLEASE CONTACT YOUR
FINANCIAL ADVISOR FOR MORE INFORMATION.
If you take money out of the multi-year fixed account options before the end of
the guarantee period, we make an adjustment to your contract. We refer to the
adjustment as a market value adjustment (the "MVA"). The MVA reflects any
difference in the interest rate environment between the time you place your
money in the fixed account option and the time when you withdraw or transfer
that money. This adjustment can increase or decrease your contract value. You
have 30 days after the end of each guarantee period to reallocate your funds
without incurring any MVA.
We calculate the MVA by doing a comparison between current rates and the rate
being credited to you in the fixed account option. For the current rate we use a
rate being offered by us for a guarantee period that is equal to the time
remaining in the guarantee period from which you seek withdrawal. If we are not
currently offering a guarantee period for that period of time, we determine an
applicable rate by using a formula to arrive at a number between the interest
rates currently offered for the two closest periods available.
Generally, if interest rates drop between the time you put your money into the
fixed account options and the time you take it out, we credit a positive
adjustment to your contract. Conversely, if interest rates increase during the
same period, we post a negative adjustment to your contract.
20
Where the MVA is negative, we first deduct the adjustment from any money
remaining in the fixed account option. If there is not enough money in the fixed
account option to meet the negative deduction, we deduct the remainder from your
withdrawal. Where the MVA is positive, we add the adjustment to your withdrawal
amount.
The multi-year MVA fixed accounts are not available to Maryland and Washington
state policyholders.
Anchor National does not assess an MVA against withdrawals under the following
circumstances:
- If a withdrawal is made within 30 days after the end of a guarantee
period;
- If a withdrawal is made to pay contract fees and charges;
- To pay a death benefit; and
- Upon annuitization, if occurring on the latest Annuity Date.
APPENDIX B SHOWS HOW WE CALCULATE THE MVA.
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase you may transfer funds between the Variable
Portfolios and/or the fixed account options. Funds already in your contract
cannot be transferred into the DCA fixed accounts. You must transfer at least
$100. If less than $100 will remain in any Variable Portfolio after a transfer,
that amount must be transferred as well.
You may request transfers of your account value between the Variable Portfolios
and/or the fixed account options in writing or by telephone subject to our
rules. Additionally, you may access your account and request transfers between
Variable Portfolios and/or the fixed account options through SunAmerica's
website (http://www.sunamerica.com). We currently allow 15 free transfers per
contract per year. We charge $25 ($10 in Pennsylvania and Texas) for each
additional transfer in any contract year. Transfers resulting from your
participation in the DCA program count against your 15 free transfers per
contract year. However, transfers resulting from your participation in the
automatic asset rebalancing program do not count against your 15 free transfers.
We may accept transfer requests by telephone unless you tell us not to on your
contract application. Additionally, you may request transfers over the internet
unless you indicate you do not wish your account to be traded over the internet.
When receiving instructions over the telephone or the internet, we follow
appropriate procedures to provide reasonable assurance that the transactions
executed are genuine. Thus, we are not responsible for any claim, loss or
expense from any error resulting from instructions received over the telephone.
If we fail to follow our procedures, we may be liable for any losses due to
unauthorized or fraudulent instructions.
We may limit the number of transfers in any contract year or refuse any transfer
request for you or others invested in the contract if we believe that excessive
trading or a specific transfer request or group transfer requests may have a
detrimental effect on unit values or the share prices of the underlying Variable
Portfolios.
This product is not designed for professional "market timing" organizations or
other organizations or individuals engaged in trading strategies that seek to
benefit from short term price fluctuations or price irregularities by making
programming transfers, frequent transfers or transfers that are large in
relation to the total assets of the underlying portfolio in which the Variable
Portfolios invest. These marketing timing strategies are disruptive to the
underlying portfolios in which the Variable Portfolios invest and thereby
potentially harmful to investors. If we determine, in our sole discretion, that
your transfer patterns among the Variable Portfolios reflect a market timing
strategy, we reserve the right to take action to protect the other investors.
Such action may include but would not be limited to restricting the mechanisms
you can use to request transfers among the Variable Portfolios or imposing
penalty fees on such trading activity and/or otherwise restricting transfer
options in accordance with state and federal rules and regulations.
For information regarding transfers during the Income Phase, SEE INCOME OPTIONS
ON PAGE 29.
We reserve the right to modify, suspend, waive or terminate these transfer
provisions at any time.
DOLLAR COST AVERAGING
The Dollar Cost Averaging ("DCA") program allows you to invest gradually in the
Variable Portfolios. Under the program you systematically transfer a set dollar
amount or percentage of portfolio value from one Variable Portfolio or the
1-year fixed account option (source accounts) to any other Variable Portfolio.
Transfers may be monthly or quarterly and count against your 15 free transfers
per contract year. You may change the frequency at any time by notifying us in
writing. The minimum transfer amount under the DCA program is $100, regardless
of the source account. Fixed account options are not available as target account
for the DCA program.
We also offer the 6-month and 1-year DCA fixed accounts exclusively to
facilitate this program. If you elected to participate in the Principal Rewards
Program, the 6-month and 1-year DCA fixed accounts are not available under your
contract. The DCA fixed accounts only accept new Purchase Payments. You cannot
transfer money already in your contract into these options. If you allocate new
Purchase Payments into a DCA fixed account, we transfer all your
21
money allocated to that account into the Variable Portfolios over the selected
6-month or 1-year period. You cannot change the option or the frequency of
transfers once selected.
If allocated to the 6-month DCA fixed account, we transfer your money over a
maximum of 6 monthly transfers. We base the actual number of transfers on the
total amount allocated to the account. For example, if you allocate $500 to the
6-month DCA fixed account, we transfer your money over a period of five months,
so that each payment complies with the $100 per transfer minimum.
We determine the amount of the transfers from the 1-year DCA fixed account based
on
- the total amount of money allocated to the account, and
- the frequency of transfers selected.
For example, let's say you allocate $1,000 to the 1-year DCA fixed account. You
select monthly transfers. We completely transfer all of your money to the
selected investment options over a period of ten months.
You may terminate your DCA program at any time. If money remains in the DCA
fixed accounts, we transfer the remaining money to the 1-year fixed account
option, unless we receive different instructions from you. Transfers resulting
from a termination of this program do not count towards your 15 free transfers.
The DCA program is designed to lessen the impact of market fluctuations on your
investment. However, we cannot ensure that you will make a profit. When you
elect the DCA program, you are continuously investing in securities regardless
of fluctuating price levels. You should consider your tolerance for investing
through periods of fluctuating price levels.
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want to gradually move $750 each quarter from the Cash
Management Portfolio to the Aggressive Growth Portfolio over six quarters.
You set up dollar cost averaging and purchase Accumulation Units at the
following values:
<Table>
<Caption>
---------------------------------------------
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
---------------------------------------------
</Table>
You paid an average price of only $6.67 per Accumulation Unit over six
quarters, while the average market price actually was $7.08. By investing
an equal amount of money each month, you automatically buy more
Accumulation Units when the market price is low and fewer Accumulation
Units when the market price is high. This example is for illustrative
purposes only.
ASSET ALLOCATION REBALANCING PROGRAM
Earnings in your contract may cause the percentage of your investment in each
investment option to differ from your original allocations. The Automatic Asset
Rebalancing Program addresses this situation. At your election, we periodically
rebalance your investments in the Variable Portfolios to return your allocations
to their original percentages. Asset rebalancing typically involves shifting a
portion of your money out of an investment option with a higher return into an
investment option with a lower return.
At your request, rebalancing occurs on a quarterly, semiannual or annual basis.
Transfers made as a result of rebalancing do not count against your 15 free
transfers for the contract year.
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want your initial Purchase Payment split between two
Variable Portfolios. You want 50% in the Corporate Bond Portfolio and 50%
in the Growth Portfolio. Over the next calendar quarter, the bond market
does very well while the stock market performs poorly. At the end of the
calendar quarter, the Corporate Bond Portfolio now represents 60% of your
holdings because it has increased in value and the Growth Portfolio
represents 40% of your holdings. If you had chosen quarterly rebalancing,
on the last day of that quarter, we would sell some of your units in the
Corporate Bond Portfolio to bring its holdings back to 50% and use the
money to buy more units in the Growth Portfolio to increase those holdings
to 50%.
PRINCIPAL ADVANTAGE PROGRAM
The Principal Advantage Program allows you to invest in one or more Variable
Portfolios without putting your principal at direct risk. The program
accomplishes this by allocating your investment strategically between the fixed
account options and Variable Portfolios. You decide how much you want to invest
and approximately when you want a return of principal. We calculate how much of
your Purchase Payment to allocate to the particular fixed account option to
ensure that it grows to an amount equal to your total principal invested under
this program. We invest the rest of your principal in the Variable Portfolio(s)
of your choice.
22
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want to allocate a portion of your initial Purchase Payment
of $100,000 to the fixed account option. You want the amount allocated to
the fixed account option to grow to $100,000 in 7 years. If the 7-year
fixed account option is offering a 5% interest rate, we will allocate
$71,069 to the 7-year fixed account option to ensure that this amount will
grow to $100,000 at the end of the 7-year period. The remaining $28,931 may
be allocated among the Variable Portfolios, as determined by you, to
provide opportunity for greater growth.
VOTING RIGHTS
Anchor National is the legal owner of the Trusts' shares. However, when a
Variable Portfolio solicits proxies in conjunction with a vote of shareholders,
we must obtain your instructions on how to vote those shares. We vote all of the
shares we own in proportion to your instructions. This includes any shares we
own on our own behalf. Should we determine that we are no longer required to
comply with these rules, we will vote the shares in our own right.
SUBSTITUTION
We may amend your contract due to changes to the Variable Portfolios offered
under your contract. For example, we may offer new Variable Portfolios, delete
Variable Portfolios, or stop accepting allocations and/or investments in a
particular Variable Portfolio. We may move assets and re-direct future premium
allocations from one Variable Portfolio to another if we receive investor
approval through a proxy vote or SEC approval for a fund substitution. This
would occur if a Variable Portfolio is no longer an appropriate investment for
the contract, for reasons such as continuing substandard performance, or for
changes to the portfolio manager, investment objectives, risks and strategies,
or federal or state laws. The new Variable Portfolio offered may have different
fees and expenses. You will be notified of any upcoming proxies or substitutions
that affect your Variable Portfolio choices.
- ----------------------------------------------------------------
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ACCESS TO YOUR MONEY
- ----------------------------------------------------------------
- ----------------------------------------------------------------
You can access money in your contract in two ways:
- by making a partial or total withdrawal, and/or;
- by receiving income payments during the Income Phase. SEE INCOME OPTIONS
ON PAGE 29.
Generally, we deduct a withdrawal charge applicable to any total or partial
withdrawal and a MVA if a partial withdrawal comes from the 3, 5, 7 or 10 year
fixed account options. If you withdraw your entire contract value, we also
deduct premium taxes and a contract maintenance fee. SEE EXPENSES ON PAGE 27.
Your contract provides for a free withdrawal amount each year. A free withdrawal
amount is the portion of your account that we allow you to take out each year
without being charged a surrender penalty. However, upon a future full surrender
of your contract any previous free withdrawals would be subject to a surrender
charge, if any is applicable at the time of the full surrender (except in the
state of Washington). Additionally, if you participate in the Principal Rewards
Program you will not receive your Deferred Payment Enhancement if you fully
withdraw a Purchase Payment or your contract value prior to the corresponding
Deferred Payment Enhancement Date. SEE PRINCIPAL REWARDS PROGRAM ON PAGE 16.
Purchase payments, above and beyond the amount of your free withdrawal amount,
that are withdrawn prior to the end of the seventh or ninth year if you elect to
participate in the Principal Rewards Program will result in your paying a
penalty in the form of a surrender charge. The amount of the charge and how it
applies are discussed more fully below. SEE EXPENSES ON PAGE 27. You should
consider, before purchasing this contract, the effect this charge will have on
your investment if you need to withdraw more money than the free withdrawal
amount. You should fully discuss this decision with your financial
representative.
To determine your free withdrawal amount and your withdrawal charge, we refer to
two special terms. These are penalty free earnings and the total invested
amount.
The penalty-free earnings portion of your contract is simply your account value
less your total invested amount. The total invested amount is the total of all
Purchase Payments you have made into the contract less portions of some prior
withdrawals you made. The portions of prior withdrawals that reduce your total
invested amount are as follows:
- Free withdrawals in any year that were in excess of your penalty-free
earnings and were based on the part of the total invested amount that was
no longer subject to withdrawal charges at the time of the withdrawal,
and
- Any prior withdrawals (including withdrawal charges on those withdrawals)
of the total invested amount on which you already paid a surrender
penalty.
When you make a withdrawal, we assume that it is taken from penalty-free
earnings first, then from the total invested amount on a first-in, first-out
basis. This means that you can also access your Purchase Payments which are no
longer subject to a withdrawal charge before those Purchase Payments which are
still subject to the withdrawal charge.
During the first year after we issue your contract your free withdrawal amount
is the greater of (1) your penalty-free earnings; and (2) if you are
participating in the Systematic
23
Withdrawal program, a total of 10% of your total invested amount. If you are a
Washington resident, you may withdraw during the first contract year, the
greater of (1); (2); or (3) interest earnings from the amounts allocated to the
fixed account options, not previously withdrawn.
After the first contract year, you can take out the greater of the following
amounts each year (1) your penalty-free earnings and any portion of your total
invested amount no longer subject to withdrawal charge or (2) 10% of the portion
of your total invested amount that has been in your contract for at least one
year. If you are a Washington resident, your maximum free withdrawal amount,
after the first contract year, is the greater of (1); (2); or (3) interest
earnings from amounts allocated to the fixed account options, not previously
withdrawn.
Although we do not assess a withdrawal charge when you take a 10% penalty-free
withdrawal, we will proportionally reduce the amount of any corresponding
Deferred Payment Enhancement.
We calculate charges due on a total withdrawal on the day after we receive your
request and your contract. We return to you your contract value less any
applicable fees and charges.
The withdrawal charge percentage is determined by the age of the Purchase
Payment remaining in the contract at the time of the withdrawal. For the purpose
of calculating the withdrawal charge, any prior Free Withdrawal is not
subtracted from the total Purchase Payments still subject to withdrawal charges.
For example, you make an initial Purchase Payment of $100,000. For purposes of
this example we will assume a 0% growth rate over the life of the contract, no
subsequent Purchase Payments, and no Principal Rewards election. In contract
year 2, you take out your maximum free withdrawal of $10,000. After that free
withdrawal your contract value is $90,000. In contract year 5 you request a full
surrender of your contract. We will apply the following calculation,
A-(B x C)=D, where:
A=Your contract value at the time of your request for surrender ($90,000)
B=The amount of your Purchase Payments still subject to withdrawal charge
($100,000)
C=The withdrawal charge percentage applicable to the age of each Purchase
Payment (3%)[B x C=$3,000]
D=Your full surrender value ($87,000)
Under most circumstances, the partial withdrawal minimum is $1,000. We require
that the value left in any investment option be at least $100, after the
withdrawal. You must send a written withdrawal request. Unless you provide us
with different instructions, partial withdrawals will be made pro rata from each
Variable Portfolio and the fixed account option in which your contract is
invested.
Under certain Qualified plans, access to the money in your contract may be
restricted. Additionally, withdrawals made prior to age 59 1/2 may result in a
10% IRS penalty tax. SEE TAXES ON PAGE 32.
We may be required to suspend or postpone the payment of a withdrawal for any
period of time when: (1) the NYSE is closed (other than a customary weekend and
holiday closings); (2) trading with the NYSE is restricted; (3) an emergency
exists such that disposal of or determination of the value of shares of the
Variable Portfolios is not reasonably practicable; (4) the SEC, by order, so
permits for the protection of contract owners.
Additionally, we reserve the right to defer payments for a withdrawal from a
fixed account option. Such deferrals are limited to no longer than six months.
SYSTEMATIC WITHDRAWAL PROGRAM
During the Accumulation Phase, you may elect to receive periodic income payments
under the systematic withdrawal program. Under the program, you may choose to
take monthly, quarterly, semi-annual or annual payments from your contract.
Electronic transfer of these funds to your bank account is also available. The
minimum amount of each withdrawal is $100. If you are an Oregon resident, the
minimum withdrawal amount is $250 per withdrawal or an amount equal to your free
withdrawal amount, as described on page 10. There must be at least $500
remaining in your contract at all times. Withdrawals may be taxable and a 10%
IRS penalty tax may apply if you are under age 59 1/2. There is no additional
charge for participating in this program, although a withdrawal charge and/or
MVA may apply.
The program is not available to everyone. Please check with our Annuity Service
Center, which can provide the necessary enrollment forms. We reserve the right
to modify, suspend or terminate this program at any time.
NURSING HOME WAIVER
If you are confined to a nursing home for 60 days or longer, we may waive the
withdrawal charge and/or market value adjustment on certain withdrawals prior to
the Annuity Date (not available in Texas). The waiver applies only to
withdrawals made while you are in a nursing home or within 90 days after you
leave the nursing home. Your contract prohibits use of this waiver during the
first 90 days after you purchase your contract. In addition, the confinement
period for which you seek the waiver must begin after you purchase your
contract.
In order to use this waiver, you must submit with your withdrawal request, the
following documents: (1) a doctor's note recommending admittance to a nursing
home; (2) an admittance form which shows the type of facility you entered; and
(3) a bill from the nursing home which shows that you met the 60 day confinement
requirement.
24
MINIMUM CONTRACT VALUE
Where permitted by state law, we may terminate your contract if both of the
following occur: (1) your contract is less than $500 as a result of withdrawals;
and (2) you have not made any Purchase Payments during the past three years. We
will provide you with sixty days written notice. At the end of the notice
period, we will distribute the contract's remaining value to you.
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DEATH BENEFIT
- ----------------------------------------------------------------
- ----------------------------------------------------------------
If you die during the Accumulation Phase of your contract, we pay a death
benefit to your Beneficiary. At the time you purchase your contract, you must
select one of the two death benefit options described below. Once selected, you
can not change your death benefit option. You should discuss the available
options with your financial advisor to determine which option is best for you.
We will not pay a Deferred Payment Enhancement on a Purchase Payment if you die
before the corresponding Deferred Payment Enhancement Date. SEE PRINCIPAL
REWARDS PROGRAM ON PAGE 16.
We do not pay the death benefit if you die after you switch to the Income Phase.
However, if you die during the Income Phase, your Beneficiary receives any
remaining guaranteed income payments in accordance with the income option you
selected. SEE INCOME OPTIONS ON PAGE 29.
You name your Beneficiary. You may change the Beneficiary at any time, unless
you previously made an irrevocable Beneficiary designation.
We calculate and pay the death benefit when we receive all required paperwork
and satisfactory proof of death. We consider the following satisfactory proof of
death:
1. a certified copy of the death certificate; or
2. a certified copy of a decree of a court of competent jurisdiction as to
the finding of death; or
3. a written statement by a medical doctor who attended the deceased at
the time of death; or
4. any other proof satisfactory to us.
We may require additional proof before we pay the death benefit.
The death benefit must be paid within 5 years of the date of death unless the
Beneficiary elects to have it payable in the form of an income option. If the
Beneficiary elects an income option, it must be paid over the Beneficiary's
lifetime or for a period not extending beyond the Beneficiary's life expectancy.
Payments must begin within one year of your death.
If the Beneficiary is the spouse of a deceased owner, he or she can elect to
continue the Contract. SEE SPOUSAL CONTINUATION ON PAGE 27.
If a Beneficiary does not elect a specific form of pay out within 60 days of our
receipt of all required paperwork and satisfactory proof of death, we pay a lump
sum death benefit to the Beneficiary.
The term Net Purchase Payment is used frequently in explaining these death
benefit options. Net Purchase Payments is an on-going calculation. It does not
represent a contract value.
We define Net Purchase Payments as Purchase Payments less an Adjustment for each
withdrawal. If you have not taken any withdrawals from your contract, Net
Purchase Payments equals total purchase payments into your contract. To
calculate the Adjustment amount for the first withdrawal made under the
contract, we determine the percentage by which the withdrawal reduced the
contract value. For example, a $10,000 withdrawal from a $100,000 contract is a
10% reduction in value. This percentage is calculated by dividing the amount of
each withdrawal (and any applicable fees and charges) by the contract value
immediately before taking the withdrawal. The resulting percentage is then
multiplied by the amount of the total Purchase Payments and subtracted from the
amount of the total Purchase Payments on deposit at the time of the withdrawal.
The resulting amount is the initial Net Purchase Payment.
To arrive at the Net Purchase Payment calculation for subsequent withdrawals, we
determine the percentage by which the contract value is reduced by taking the
amount of the withdrawal in relation to the contract value immediately before
taking the withdrawal. We then multiply the Net Purchase Payment calculation as
determined prior to the withdrawal, by this percentage. We subtract that result
from the Net Purchase Payment calculation as determined prior to the withdrawal
to arrive at all subsequent Net Purchase Payment calculations.
The term "Gross Withdrawals" as used in describing the death benefit option
below is defined as withdrawals and the fees and charges applicable to those
withdrawals.
The information below describes the death benefits on contracts issued on or
after October 24, 2001:
OPTION 1 -- PURCHASE PAYMENT ACCUMULATION OPTION
The death benefit is the greatest of:
1.the contract value at the time we receive all required paperwork and
satisfactory proof of death; or
2.Net Purchase Payments compounded at a 4% annual growth rate until the
date of death (3% growth rate if age 70 or older at the time of contract
issue) plus any Purchase Payments recorded after the date of death; and
reduced for any Gross Withdrawals in the same proportion that the Gross
Withdrawal reduced
25
contract value on the date of the Gross Withdrawal; or
3.the contract value on the seventh contract anniversary, plus any Purchase
Payments since the seventh contract anniversary; and reduced for any
Gross Withdrawals since the seventh contract anniversary in the same
proportion that each Gross Withdrawal reduced the contract value on the
date of the Gross Withdrawal, all compounded at a 4% annual growth rate
until the date of death (3% growth rate if age 70 or older at the time of
contract issue) plus any purchase payments recorded after the date of
death; and reduced for each Gross Withdrawal recorded after the date of
death in the same proportion that each Gross Withdrawal reduced the
contract value on the date of the Gross Withdrawal.
OPTION 2 -- MAXIMUM ANNIVERSARY OPTION
The death benefit is the greatest of:
1.the contract value at the time we receive all required paperwork and
satisfactory proof of death; or
2.Net Purchase Payments; or
3.the maximum anniversary value on any contract anniversary prior to your
81st birthday. The anniversary value equals the contract value on a
contract anniversary plus any Purchase Payments since that contract
anniversary; and reduced for any Gross Withdrawals since the contract
anniversary in the same proportion that each Gross Withdrawal reduced the
contract value on the date of the Gross Withdrawal.
If you are age 90 or older at the time of death and selected the Option 2 death
benefit, the death benefit will be equal to contract value at the time we
receive all required paperwork and satisfactory proof of death. Accordingly, you
do not get the advantage of Option 2 if:
- you are age 81 or older at the time of contract issue; or
- you are age 90 or older at the time of your death.
The death benefit options on contracts issued before October 24, 2001 would be
subject to a different calculation. Please see the Statement of Additional
Information for details.
ESTATEPLUS
The EstatePlus benefit if elected may increase the death benefit amount. If you
have earnings in your contract at the time of death, we will add a percentage of
those earnings (the "EstatePlus Percentage"), subject to a maximum dollar amount
(the "Maximum EstatePlus Amount"), to the death benefit payable. The EstatePlus
benefit, if any, is added to the death benefit payable under the Purchase
Payment Accumulation or Maximum Anniversary options. The contract year of your
death will determine the EstatePlus percentage and the Maximum EstatePlus
percentage.
The table below provides the details if you are age 69 or younger at the time we
issue your contract:
<Table>
<Caption>
- -------------------------------------------------------------
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*
- -------------------------------------------------------------
</Table>
If you are between your 70th and 81st birthdays at the time we issue your
contract the table below shows the available EstatePlus benefit:
<Table>
<Caption>
- -------------------------------------------------------------
CONTRACT YEAR ESTATEPLUS MAXIMUM
OF DEATH PERCENTAGE ESTATEPLUS AMOUNT
- -------------------------------------------------------------
All Contract 25% of Earnings 40% of Net Purchase
Years Payments*
- -------------------------------------------------------------
</Table>
* Purchase Payments received after the 5th contract anniversary must remain in
the contract for at least 6 full months to be included as part of Net Purchase
Payments for the purpose of the Maximum EstatePlus Amount calculations.
We may offer different levels of this benefit based on the number of years you
hold your contract and/or your age at the time of issue.
What is the Contract Year of Death?
Contract Year of Death is the number of full 12 month periods beginning with the
date your contract is issued and ending on the date of death.
What is the EstatePlus Percentage Amount?
We determine the amount of the EstatePlus benefit, based on a percentage of the
earnings in your contract at the time of your death. For the purpose of this
calculation, earnings equals contract value minus Net Purchase Payments as of
the date of death. If the earnings amount is negative, no EstatePlus amount will
be added.
What is the Maximum EstatePlus Amount?
The EstatePlus benefit is subject to a maximum dollar amount. The maximum
EstatePlus amount is equal to a percentage of your Net Purchase Payments.
You must elect EstatePlus at the time of contract application. Once elected, you
may not terminate or change this election.
We assess a .25% fee for EstatePlus. On a daily basis we deduct this annual
charge from the average daily ending value of the assets you have allocated to
the Variable Portfolios.
EstatePlus is not available if you are age 81 or older at the time we issue your
contract. Furthermore, a Continuing
26
Spouse cannot benefit from EstatePlus if he/she is age 81 or older on the
Continuation Date. SEE SPOUSAL CONTINUATION BELOW. The EstatePlus benefit is not
payable after the latest Annuity Date. You may pay for the EstatePlus benefit
and your beneficiary may never receive the benefit if you live past the latest
Annuity Date. SEE INCOME OPTIONS ON PAGE 29.
EstatePlus may not be available in your state or through the broker-dealer with
which your financial advisor is affiliated. See your financial advisor for
information regarding availability.
WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE ESTATEPLUS BENEFIT (IN
ITS ENTIRETY OR ANY COMPONENT AT ANY TIME) AT ANY TIME FOR PROSPECTIVELY ISSUED
CONTRACTS.
SPOUSAL CONTINUATION
If you are the original owner of the contract and the Beneficiary is your
spouse, your spouse may elect to continue the contract after your death. The
spouse becomes the new owner ("Continuing Spouse"). Generally, the contract and
its elected features, if any, remain the same. The Continuing Spouse is subject
to the same fees, charges and expenses applicable to the original owner of the
contract. A spousal continuation can only take place upon the death of the
original owner of the contract.
To the extent that the Continuing Spouse invests in the Variable Portfolios or
MVA fixed accounts, they will be subject to investment risk as was the original
owner.
Upon a spouse's continuation of the contract, we will contribute to the contract
value an amount by which the death benefit that would have been paid to the
beneficiary upon the death of the original owner exceeds the contract value
("Continuation Contribution"), if any. We calculate the Continuation
Contribution as of the date of the original owner's death. We will add the
Continuation Contribution as of the date we receive both the Continuing Spouse's
written request to continue the contract and proof of death of the original
owner in a form satisfactory to us ("Continuation Date"). The Continuation
Contribution is not considered a Purchase Payment for the purposes of any other
calculations except as explained in Appendix D. SEE APPENDIX D FOR FURTHER
EXPLANATION OF THE DEATH BENEFIT CALCULATIONS FOLLOWING A SPOUSAL CONTINUATION.
Generally, the Continuing Spouse cannot change any contract provisions as the
new owner. However, on the Continuation Date, the Continuing Spouse may
terminate the original owner's election of EstatePlus. We will terminate
EstatePlus if the Continuing Spouse is age 81 or older on the Continuation Date.
If EstatePlus is terminated or if the Continuing Spouse dies after the latest
Annuity Date, no EstatePlus benefit will be payable. Generally, the age of the
Continuing Spouse on the Continuation Date and on the date of the Continuing
Spouse's death will be used in determining any future death benefits under the
Contract. SEE APPENDIX D FOR A DISCUSSION OF THE DEATH BENEFIT CALCULATIONS
AFTER A SPOUSAL CONTINUATION.
WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE SPOUSAL CONTINUATION
PROVISION (IN ITS ENTIRETY OR ANY COMPONENT) AT ANY TIME FOR PROSPECTIVELY
ISSUED CONTRACTS.
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EXPENSES
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There are charges and expenses associated with your contract. These charges and
expenses reduce your investment return. We will not increase the contract
maintenance fee or the insurance and withdrawal charges under your contract.
However, the investment charges under your contract may increase or decrease.
Some states may require that we charge less than the amounts described below.
INSURANCE CHARGES
The Company deducts a mortality and expense risk charge in the amount of 1.52%,
annually of the value of your contract invested in the Variable Portfolios. We
deduct the charge daily. This charge compensates the Company for the mortality
and expense risk and the costs of contract distribution assumed by the Company.
Generally, the mortality risks assumed by the Company arise from its contractual
obligations to make income payments after the Annuity Date and to provide a
death benefit. The expense risk assumed by the Company is that the costs of
administering the contracts and the Separate Account will exceed the amount
received from the administrative fees and charges assessed under the contract.
If these charges do not cover all of our expenses, we will pay the difference.
Likewise, if these charges exceed our expenses, we will keep the difference. The
insurance charge is expected to result in a profit. Profit may be used for any
legitimate cost/expense including distribution, depending upon market
conditions.
OTHER REVENUE
We may receive compensation of up to 0.25% from the investment advisers of
certain of the Underlying Funds for services related to the availability of
those Underlying Funds in the Contract.
WITHDRAWAL CHARGES
The contract provides a free withdrawal amount every year. SEE ACCESS TO YOUR
MONEY ON PAGE 23. If you take money out in excess of the free withdrawal amount,
you may incur a withdrawal charge. You may also incur a withdrawal charge upon a
full surrender.
27
We apply a withdrawal charge against each Purchase Payment you put into the
contract. After a Purchase Payment has been in the contract for 7 complete
years, or 9 years if you elected to participate in the Principal Rewards
Program, no withdrawal charge applies. The withdrawal charge equals a percentage
of the Purchase Payment you take out of the contract. The withdrawal charge
percentage declines each year a Purchase Payment is in the contract. The two
withdrawal charge schedules are as follows:
WITHDRAWAL CHARGE WITHOUT THE PRINCIPAL REWARDS PROGRAM (SCHEDULE A)
<Table>
<Caption>
- -----------------------------------------------------------------------------------------
YEAR 1 2 3 4 5 6 7 8
- -----------------------------------------------------------------------------------------
WITHDRAWAL
CHARGE 7% 6% 5% 4% 3% 2% 1% 0%
- -----------------------------------------------------------------------------------------
</Table>
WITHDRAWAL CHARGE WITH THE PRINCIPAL REWARDS PROGRAM (SCHEDULE B)
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------
YEAR 1 2 3 4 5 6 7 8 9 10
- -----------------------------------------------------------------------------------------------------------
WITHDRAWAL
CHARGE 9% 9% 8% 7% 6% 5% 4% 3% 2% 0%
- -----------------------------------------------------------------------------------------------------------
</Table>
When calculating the withdrawal charge, we treat withdrawals as coming first
from the Purchase Payments that have been in your contract the longest. However,
for tax purposes, your withdrawals are considered earnings first, then Purchase
Payments. SEE ACCESS TO YOUR MONEY ON PAGE 23.
These higher potential withdrawal charges may compensate us for the expenses
associated with the Principal Rewards Program.
The Principal Rewards feature of this contract is designed to reward long term
investing. We expect that if you remain committed to this investment over the
long term, we will profit as a result of fees charged over the life of your
contract. However, neither the mortality and expense fees, distribution
expenses, contract administration fee nor the investment management fees are
higher on the Principal Rewards version, than the contract without an election
of the bonus feature.
Whenever possible, we deduct the withdrawal charge from the money remaining in
your contract. If you withdraw all of your contract value, we deduct any
applicable withdrawal charges from the amount withdrawn.
We will not assess a withdrawal charge for money withdrawn to pay a death
benefit or to pay contract fees or charges. We will not assess a withdrawal
charge when you switch to the Income Phase, except when you elect to receive
income payments using the Income Protector feature. If you elect to receive
income payments using the Income Protector feature, we assess the entire
withdrawal charge applicable to Purchase Payments remaining in your contract
when calculating your income benefit base. SEE INCOME OPTIONS ON PAGE 29.
Withdrawals made prior to age 59 1/2 may result in tax penalties. SEE TAXES ON
PAGE 32.
INVESTMENT CHARGES
INVESTMENT MANAGEMENT FEES
Charges are deducted from your Variable Portfolios for the advisory and other
expenses of the Variable Portfolios. THE FEE TABLES LOCATED AT PAGE 5 illustrate
these charges and expenses. For more detailed information on these investment
charges, refer to the prospectuses for the Trusts, enclosed or attached.
SERVICE FEES
Shares of certain Trusts may be subject to fees imposed under a servicing plan
adopted by that Trust pursuant to Rule 12(b)(1) under the Investment Company Act
of 1940. This service fee of .15% for the Anchor and SunAmerica Series Trust
portfolios and .25% for the Van Kampen Life Investment Trust is also known as a
12(b)(1) fee. Generally, this fee may be paid to financial intermediaries for
services provided over the life of the contract. SEE FEE TABLE ON PAGE 5.
CONTRACT MAINTENANCE FEE
During the Accumulation Phase, we subtract a contract maintenance fee from your
account once per year. This charge compensates us for the cost of contract
administration. We deduct the $35 contract maintenance fee ($30 in North Dakota)
from your account value on your contract anniversary. If you withdraw your
entire contract value, we deduct the fee from that withdrawal.
If your contract value is $50,000 or more on your contract anniversary date, we
will waive the charge. This waiver is subject to change without notice.
TRANSFER FEE
We currently permit 15 free transfers between investment options each contract
year. We charge you $25 for each additional transfer that contract year ($10 in
Pennsylvania and Texas). SEE INVESTMENT OPTIONS ON PAGE 19.
OPTIONAL ESTATEPLUS FEE
Please see page 26 for more information on the EstatePlus fee.
OPTIONAL INCOME PROTECTOR FEE
Please see page 30 for more information of the income protector fee.
28
PREMIUM TAX
Certain states charge the Company a tax on the premiums you pay into the
contract. We deduct from your contract these premium tax charges. Currently we
deduct the charge for premium taxes when you take a full withdrawal or begin the
Income Phase of the contract. In the future, we may assess this deduction at the
time you put Purchase Payment(s) into the contract or upon payment of a death
benefit.
APPENDIX E provides more information about premium taxes.
INCOME TAXES
We do not currently deduct income taxes from your contract. We reserve the right
to do so in the future.
REDUCTION OR ELIMINATION OF CHARGES AND EXPENSES, AND ADDITIONAL AMOUNTS
CREDITED
Sometimes sales of the contracts to groups of similarly situated individuals may
lower our administrative and/or sales expenses. We reserve the right to reduce
or waive certain charges and expenses when this type of sale occurs. In
addition, we may also credit additional interest to policies sold to such
groups. We determine which groups are eligible for such treatment. Some of the
criteria we evaluate to make a determination are: size of the group; amount of
expected Purchase Payments; relationship existing between us and prospective
purchaser; nature of the purchase; length of time a group of contracts is
expected to remain active; purpose of the purchase and whether that purpose
increases the likelihood that our expenses will be reduced; and/or any other
factors that we believe indicate that administrative and/or sales expenses may
be reduced.
Anchor National may make such a determination regarding sales to its employees,
it affiliates' employees and employees of currently contracted broker-dealers;
its registered representatives and immediate family members of all of those
described.
We reserve the right to change or modify any such determination or the treatment
applied to a particular group, at any time.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
INCOME OPTIONS
- ----------------------------------------------------------------
- ----------------------------------------------------------------
ANNUITY DATE
During the Income Phase, we use the money accumulated in your contract to make
regular income payments to you. You may switch to the Income Phase any time
after your second contract anniversary. You select the month and year you want
income payments to begin. The first day of that month is the Annuity Date. You
may change your Annuity Date, so long as you do so at least seven days before
the income payments are scheduled to begin. Once you begin receiving income
payments, you cannot change your income option. Except as indicated under Option
5 below, once you begin receiving income payments, you cannot otherwise access
your money through a withdrawal or surrender.
If you switch to the Income Phase prior to a Deferred Payment Enhancement Date,
we will not allocate the corresponding Deferred Payment Enhancement to your
contract. SEE PRINCIPAL REWARDS PROGRAM ON PAGE 16.
Income payments must begin on or before your 95th birthday or on your tenth
contract anniversary, whichever occurs later (latest Annuity Date). If you do
not choose an Annuity Date, your income payments will automatically begin on
this date. Certain states may require your income payments to start earlier.
If the Annuity Date is past your 85th birthday, your contract could lose its
status as an annuity under Federal tax laws. This may cause you to incur adverse
tax consequences.
In addition, most Qualified contracts require you to take minimum distributions
after you reach age 70 1/2. SEE TAXES ON PAGE 32.
INCOME OPTIONS
Currently, this Contract offers five income options unless you chose to take
income under the Income Protector feature (see below). Other payout options may
be available. Contact the Annuity Service Center for more information. If you
elect to receive income payments but do not select an option, your income
payments will be made in accordance with Option 4 for a period of 10 years. For
income payments based on joint lives, we pay according to Option 3 for a period
of 10 years.
We base our calculation of income payments on the life of the Annuitant and the
annuity rates set forth in your contract. As the contract owner, you may change
the Annuitant at any time prior to the Annuity Date. You must notify us if the
Annuitant dies before the Annuity Date and designate a new Annuitant.
OPTION 1 - LIFE INCOME ANNUITY
This option provides income payments for the life of the Annuitant. Income
payments stop when the Annuitant dies.
OPTION 2 - JOINT AND SURVIVOR LIFE ANNUITY
This option provides income payments for the life of the Annuitant and for the
life of another designated person. Upon the death of either person, we will
continue to make income payments during the lifetime of the survivor. Income
payments stop when the survivor dies.
OPTION 3 - JOINT AND SURVIVOR LIFE ANNUITY WITH 10 OR 20 YEARS GUARANTEED
This option is similar to Option 2 above, with an additional guarantee of
payments for at least 10 years. If the Annuitant and the survivor die before all
of the guaranteed income
29
payments have been made, the remaining payments are made to the Beneficiary
under your contract.
OPTION 4 - LIFE ANNUITY WITH 10 OR 20 YEARS GUARANTEED
This option is similar to Option 1 above. In addition, this option provides a
guarantee that income payments will be made for at least 10 or 20 years. You
select the number of years. If the Annuitant dies before all guaranteed income
payments are made, the remaining income payments go to the Beneficiary under
your contract.
OPTION 5 - INCOME FOR A SPECIFIED PERIOD
This option provides income payments for a guaranteed period ranging from 5 to
30 years. If the Annuitant dies before all the guaranteed income payments are
made, the remaining income payments are made to the Beneficiary under your
contract. Additionally, if variable income payments are elected under this
option, you (or the Beneficiary under the contract if the Annuitant dies prior
to all guaranteed income payments being made) may redeem any remaining
guaranteed variable income payments after the Annuity Date. The amount available
upon such redemption would be the discounted present value of any remaining
guaranteed variable income payments. If provided for in your contract, any
applicable withdrawal charge will be deducted from the discounted value as if
you fully surrendered your contract.
The value of an Annuity Unit, regardless of the option chosen, takes into
account the mortality and expense risk charge. Since Option 5 does not contain
an element of mortality risk, no benefit is derived from this charge.
For information regarding Income Option's using the Income Protector feature,
please see below. Please read the Statement of Additional Information ("SAI")
for a more detailed discussion of the income options.
FIXED OR VARIABLE INCOME PAYMENTS
You can choose income payments that are fixed, variable or both. Unless
otherwise elected, if at the date when income payments begin you are invested in
the Variable Portfolios only, your income payments will be variable and if your
money is only in fixed accounts at that time, your income payments will be fixed
in amount. Further, if you are invested in both fixed and variable investment
options when income payments begin, your payments will be fixed and variable,
unless otherwise elected. If income payments are fixed, Anchor National
guarantees the amount of each payment. If the income payments are variable the
amount is not guaranteed.
INCOME PAYMENTS
We make income payments on a monthly, quarterly, semiannual or annual basis. You
instruct us to send you a check or to have the payments directly deposited into
your bank account. If state law allows, we distribute annuities with a contract
value of $5,000 or less in a lump sum. Also, if the selected income option
results in income payments of less than $50 per payment, we may decrease the
frequency of payments, state law allowing.
If you are invested in the Variable Portfolios after the Annuity date, your
income payments vary depending on four things:
- for life options, your age when payments begin; and
- the value of your contract in the Variable Portfolios on the Annuity
Date; and
- the 3.5% assumed investment rate used in the annuity table for the
contract; and
- the performance of the Variable Portfolios in which you are invested
during the time you receive income payments.
If you are invested in both the fixed account options and the Variable
Portfolios after the Annuity Date, the allocation of funds between the fixed and
variable options also impacts the amount of your annuity payments.
TRANSFERS DURING THE INCOME PHASE
During the Income Phase, one transfer per month is permitted between the
Variable Portfolios. No other transfers are allowed during the Income Phase.
DEFERMENT OF PAYMENTS
We may defer making fixed payments for up to six months, or less if required by
law. Interest is credited to you during the deferral period.
THE INCOME PROTECTOR FEATURE
The Income Protector feature is a future "safety net" which can offer you the
ability to receive a guaranteed fixed minimum retirement income when you switch
to the Income Phase. If you elect the Income Protector feature you can know the
level of minimum income that will be available to you upon annuitization,
regardless of fluctuating market conditions.
The minimum level of Income Protector benefit available is generally based upon
the Purchase Payments remaining in your contract at the time you decide to begin
taking income. If available and elected, a growth rate can provide increased
levels of minimum guaranteed income. We charge a fee for the Income Protector
benefit. The amount of the fee and levels of income protection available to you
are described below. This feature may not be available in your state. Check with
your financial advisor regarding availability.
WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE INCOME PROTECTOR
FEATURE AT ANY TIME FOR PROSPECTIVELY ISSUED CONTRACTS.
30
HOW WE DETERMINE THE AMOUNT OF YOUR MINIMUM GUARANTEED INCOME
If you elect the Income Protector feature, we base the amount of minimum income
available to you upon a calculation we call the Income Benefit Base. At the time
your participation in the Income Protector program becomes effective, your
Income Benefit Base is equal to your contract value. Participation in the Income
Protector program is effective on either the date of issue of the contract (if
elected) or at the contract anniversary following your election of the Income
Protector.
The income benefit base is only a calculation. It does not represent a contract
value, nor does it guarantee performance of the Variable Portfolios in which you
invest.
Your income benefit base increases if you make subsequent Purchase Payments and
decreases if you withdraw money from your contract. The exact income benefit
base calculation is equal to (a) plus (b) minus (c) where:
(a) is equal to, for the first year of calculation, your initial Purchase
Payment, or for each subsequent year of calculation, the income benefit
base on the prior contract anniversary, and;
(b) is equal to the sum of all subsequent Purchase Payments made into the
contract since the last contract anniversary, and;
(c) is equal to all withdrawals and applicable fees and charges since the
last contract anniversary, in an amount proportionate to the amount by
which such withdrawals decreased your contract value.
Your Income Benefit Base may accumulate at the elected growth rate from the date
your election becomes effective through your Income Benefit Date. However, any
applicable Growth Rate will reduce to 0% on the Anniversary immediately after
the annuitant's 90th birthday.
LEVEL OF PROTECTION
If you decide that you want the protection offered by the Income Protector
feature, you must elect the feature by completing the Income Protector Election
Form available through our Annuity Service Center. You may only elect one of the
offered alternatives. Depending on the broker-dealer through which you purchase
your contract, you may not have a choice of levels of protection.
Your Income Benefit Base will begin accumulating at the applicable growth rate
on the contract anniversary following our receipt of your completed election
form. In order to obtain the benefit of the Income Protector you may not begin
the Income Phase for at least ten years following your election. You may not
elect this Program if the required waiting period before beginning the Income
Phase would occur later than your latest annuity date.
The current options offered are:
<Table>
<Caption>
FEE AS A % OF
YOUR INCOME WAITING
OPTIONS GROWTH RATE* BENEFIT BASE PERIOD*
- ---------------------------------------------------------------
Income Protector Base 0% .10% 10 years
- ---------------------------------------------------------------
Income Protector Plus 6% .45% 10 years
- ---------------------------------------------------------------
</Table>
* If you elect the Base or Plus feature on a subsequent anniversary, the Growth
Rates Fees, and/or waiting period may be different.
RE-SET OR STEP-UP OF YOUR INCOME PROTECTOR BENEFIT
STEP-UP
You may also have the opportunity to "Re-Set" your Income Benefit Base. The
Step-Up feature allows you to increase your Income Benefit Base to the amount of
your contract value on your next contract anniversary. You can only Re-Set
within the 30 days before your next contract anniversary. The waiting period
before you can begin the Income Phase will be determined based on the offerings
available for your elected level of protection at the time your make an election
to Re-Set. In addition, the Income Protector fee will be charged as a percentage
of your re-set Income Benefit Base. You may not elect to Re-Set if the required
waiting period before beginning the Income Phase would occur later than your
latest annuity date.
STEP-UP
If available, and you have elected the Base level of protection, you may have
the opportunity to Step-Up to the Plus level of protection. The Step-Up feature
can allow you to benefit from a higher growth rate, if available, at the time
you decide to elect an Step-Up of your Income Protector Benefit. You can only
Step-Up within the 30 days before your next contract anniversary. If you
Step-Up, the growth rate, fee and waiting period prior to beginning the Income
Phase will be determined based on the offerings available at the time you make
your election. These factors may be greater than or less than those offered in
this prospectus. You may not elect to Step-Up if the required waiting period
before beginning the Income Phase would occur later than your latest Annuity
Date.
For more information on how to Re-Set or Step-Up your Income Protector benefit,
please contact your financial advisor or our Annuity Service Center.
ELECTING TO RECEIVE INCOME PAYMENTS
You may elect to begin the Income Phase of your contract using the Income
Protector Program ONLY within the 30 days after the 10th or later contract
anniversary following the effective date of your Income Protector participation,
Re-Set or Step-Up.
31
The contract anniversary of, or prior to, your election to begin receiving
annuity payments is your Income Benefit Date. This is the date as of which we
calculate your Income Benefit Base to use in determining your guaranteed minimum
fixed retirement income. To arrive at the minimum guaranteed retirement income
available to you we apply the annuity rates stated in your Income Protector
Endorsement for the annuity option you select to your final Income Benefit Base.
You then choose if you would like to receive that income annually, quarterly or
monthly for the time guaranteed under your selected annuity option. Your final
Income Benefit Base is equal to (a) minus (b) where:
(a) is your Income Benefit Base as of your Income Benefit Date, and;
(b) is any partial withdrawals of contract value and any charges applicable
to those withdrawals and any withdrawal charges otherwise applicable,
calculated as if you fully surrender your contract as of the Income
Benefit Date, and any applicable premium taxes.
The annuity options available when using the Income Protector Program to receive
your fixed retirement income are:
- Life Annuity with 10 Year Period Certain, or
- Joint and 100% Survivor Annuity with 20 Year Period Certain
At the time you elect to begin receiving annuity payments, we will calculate
your annual income using both your final Income Benefit Base and your contract
value. We will use the same income option for each calculation, however, the
annuity factors used to calculate your income under the Income Protector will be
different. You will receive whichever provides a greater stream of income. If
you annuitize using the Income Protector your income payments will be fixed in
amount. You are not required to use the Income Protector to receive income
payments. However, we will not refund fees paid for the Income Protector if you
annuitize under the general provisions of your contract. In addition, if
applicable, a surrender charge will apply if you take income under the Income
Protector feature. YOU MAY NEVER NEED TO RELY UPON THE INCOME PROTECTOR, IF YOUR
CONTRACT PERFORMS WITHIN A HISTORICALLY ANTICIPATED RANGE. HOWEVER, PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
FEES ASSOCIATED WITH THE INCOME PROTECTOR PROGRAM
If you elect the Income Protector, we charge an annual fee, as follows:
<Table>
<Caption>
FEE AS A % OF YOUR
OPTIONS INCOME BENEFIT BASE
- -------------------------------------------------------------
Income Protector Base .10%
- -------------------------------------------------------------
Income Protector Plus .45%
- -------------------------------------------------------------
</Table>
* If you elect the Base or Plus feature on a subsequent anniversary, the Fees
may be different.
We deduct the annual fee from your actual contract value. If your contract is
issued with the Income Protector program we begin deducting the annual fee on
your first contract anniversary. If you elect the feature it at some later date,
we begin deducting the annual fee on the contract anniversary following the date
on which your participation in the program becomes effective. Upon a Re-Set of
your Income Protector feature, the fee will be charged upon your Re-Set Income
Benefit Base. Upon Re-Set of this feature you may be charged a higher fee
depending upon the then-current offerings.
It is important to note that once you elect the Income Protector feature you may
not cancel your election. We will deduct the charge from your contract value on
every contract anniversary up to and including your Income Benefit Date.
Additionally, we deduct the full annual fee from any full surrender of your
contract requested prior to your contract anniversary based on the Income
Benefit Base at time of surrender.
NOTE TO QUALIFIED CONTRACT HOLDERS
Qualified contracts generally require that you select an income option that does
not exceed your life expectancy. That restriction, if it applies to you, may
limit the benefit of the Income Protector program. To utilize the Income
Protector feature, you must take income payments under one of the two income
options described above. If those income options exceed your life expectancy,
you may be prohibited from receiving your guaranteed fixed income under the
program. If you own a qualified contract to which this restriction applies and
you elect the Income Protector program, you may pay for this minimum guarantee
and not be able to realize the benefit.
Generally, for qualified contracts:
- for the Life Annuity with 10 years guaranteed, you must annuitize before
age 79, and;
- for the Joint and 100% Survivor Annuity with 20 years guaranteed, both
annuitants must be 70 or younger or one of the annuitants must be 65 or
younger upon annuitization. Other age combinations may be available.
You may wish to consult your tax advisor for information concerning your
particular circumstances. APPENDIX E PROVIDES EXAMPLES OF THE OPERATION OF THE
INCOME PROTECTOR FEATURE.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
TAXES
- ----------------------------------------------------------------
- ----------------------------------------------------------------
NOTE: WE PREPARED THE FOLLOWING INFORMATION ON TAXES AS A GENERAL DISCUSSION OF
THE SUBJECT. THIS INFORMATION ADDRESSES GENERAL FEDERAL TAXATION MATTERS, AND
GENERALLY
32
DOES NOT ADDRESS STATE TAXATION ISSUES OR QUESTIONS. IT IS NOT TAX ADVICE. WE
CAUTION YOU TO SEEK COMPETENT TAX ADVICE ABOUT YOUR OWN CIRCUMSTANCES. WE DO NOT
GUARANTEE THE TAX STATUS OF YOUR ANNUITY. TAX LAWS CONSTANTLY CHANGE, THEREFORE,
WE CANNOT GUARANTEE THAT THE INFORMATION CONTAINED HEREIN IS COMPLETE AND/OR
ACCURATE.
ANNUITY CONTRACTS IN GENERAL
The Internal Revenue Code ("IRC") provides for special rules regarding the tax
treatment of annuity contracts Generally, taxes on the earnings in your annuity
contract are deferred until you take the money out. Qualified retirement
investments that satisfy specific tax and ERISA requirements automatically
provide tax deferral regardless of whether the underlying contract is an
annuity, a trust, or a custodial account. Different rules apply depending on how
you take the money out and whether your contract is Qualified or Non-Qualified.
If you do not purchase your contract under a pension plan, a specially sponsored
employer program or an individual retirement account, your contract is referred
to as a Non-Qualified contract. A Non-Qualified contract receives different tax
treatment than a Qualified contract. In general, your cost basis in a
Non-Qualified contract is equal to the Purchase Payments you put into the
contract. You have already been taxed on the cost basis in your contract.
If you purchase your contract under a pension plan, a specially sponsored
employer program or as an individual retirement account, your contract is
referred to as a Qualified contract. Examples of qualified plans are: Individual
Retirement Accounts ("IRAs"), Roth IRAs, Tax-Sheltered Annuities (referred to as
403(b) contracts), plans of self-employed individuals (often referred to as H.R.
10 Plans or Keogh Plans) and pension and profit sharing plans, including 401(k)
plans. Typically you have not paid any tax on the Purchase Payments used to buy
your contract and therefore, you have no cost basis in your contract. However,
you normally will have cost basis in a Roth IRA, and you may have cost basis in
a traditional IRA or in another Qualified Contract.
TAX TREATMENT OF DISTRIBUTIONS - NON-QUALIFIED CONTRACTS
If you make a partial or total withdrawal from a Non-Qualified contract, the IRC
treats such a withdrawal as first coming from the earnings and then as coming
from your Purchase Payments. Purchase payments made prior to August 14, 1982,
however, are an important exception to this general rule, and for tax purposes
are treated as being distributed before the earnings on those contributions. If
you annuitize your contract, a portion of each income payment will be
considered, for tax purposes, to be a return of a portion of your Purchase
Payment(s). Any portion of each income payment that is considered a return of
your Purchase Payment will not be taxed. Withdrawn earnings are treated as
income to you and are taxable. The IRC provides for a 10% penalty tax on any
earnings that are withdrawn other than in conjunction with the following
circumstances: (1) after reaching age 59 1/2; (2) when paid to your Beneficiary
after you die; (3) after you become disabled (as defined in the IRC); (4) when
paid in a series of substantially equal installments made for your life or for
the joint lives of you and you Beneficiary; (5) under an immediate annuity; or
(6) which are attributable to Purchase Payments made prior to August 14, 1982.
TAX TREATMENT OF DISTRIBUTIONS - QUALIFIED CONTRACTS
Generally, you have not paid any taxes on the Purchase Payments used to buy a
Qualified contract. As a result, with certain limited exceptions, any amount of
money you take out as a withdrawal or as income payments is taxable income. The
IRC further provides for a 10% penalty tax on any taxable withdrawal or income
payment paid to you other than in conjunction with the following circumstances:
(1) after reaching age 59 1/2; (2) when paid to your Beneficiary after you die;
(3) after you become disabled (as defined in the IRC); (4) in a series of
substantially equal installments, made for your life or for the joint lives of
you and your Beneficiary, that begins after separation from service with the
employer sponsoring the plan; (5) to the extent such withdrawals do not exceed
limitations set by the IRC for deductible amounts paid during the taxable year
for medical care; (6) to fund higher education expenses (as defined in IRC; only
from an IRA); (7) to fund certain first-time home purchase expenses (only from
an IRA); and, except in the case of an IRA; (8) when you separate from service
after attaining age 55; and (9) when paid to an alternate payee pursuant to a
qualified domestic relations order.
The IRC limits the withdrawal of an employee's voluntary Purchase Payments to a
Tax-Sheltered Annuity (TSA). Withdrawals can only be made when an owner: (1)
reaches age 59 1/2; (2) severs employment with the employer; (3) dies; (4)
becomes disabled (as defined in the IRC); or (5) experiences a hardship (as
defined in the IRC). In the case of hardship, the owner can only withdraw
Purchase Payments. Additional plan limitations may also apply. Amounts held in a
TSA annuity contract as of December 31, 1988 are not subject to these
restrictions. Qualifying transfers of amounts from one TSA contract to another
TSA contract under section 403(b) or to a custodial account under section
403(b)(7), and qualifying transfers to a state defined benefit plan to purchase
service credits, are not considered distributions, and thus are not subject to
these withdrawal limitations. If amounts are transferred from a custodial
account described in Code section 403(b)(7) to this contract the transferred
amount will retain the custodial account withdrawal restrictions.
33
Withdrawals from other Qualified Contracts are often limited by the IRC and by
the employer's plan.
MINIMUM DISTRIBUTIONS
Generally, the IRS requires that you begin taking annual distributions from
qualified annuity contracts by April 1 of the calendar year following the later
of (1) the calendar year in which you attain age 70 1/2 or (2) the calendar year
in which you retire. If you own more than one TSA, you may be permitted to take
your annual distributions in any combination from your TSAs. A similar rule
applies if you own more than one IRA. However, you cannot satisfy this
distribution requirement for your TSA contract by taking a distribution from an
IRA, and you cannot satisfy the requirement for your IRA by taking a
distribution from a TSA.
You may be subject to a surrender charge on withdrawals taken to meet minimum
distribution requirements, if the withdrawals exceed the contract's maximum
penalty free amount.
Failure to satisfy the minimum distribution requirements may result in a tax
penalty. You should consult your tax advisor for more information.
You may elect to have the required minimum distribution amount on your contract
calculated and withdrawn each year under the automatic withdrawal option. You
may select either monthly, quarterly, semiannual or annual withdrawals for this
purpose. This service is provided as a courtesy and we do not guarantee the
accuracy of our calculations. Accordingly, we recommend you consult your tax
advisor concerning your required minimum distribution. You may terminate your
election for automated minimum distribution at any time by sending a written
request to our Annuity Service Center. We reserve the right to change or
discontinue this service at any time.
TAX TREATMENT OF DEATH BENEFITS
Any death benefits paid under the contract are taxable to the Beneficiary. The
rules governing the taxation of payments from an annuity contract, as discussed
above, generally apply whether the death benefits are paid as lump sum or
annuity payments. Estate taxes may also apply.
Certain enhanced death benefits may be purchased under your contract. Although
these types of benefits are used as investment protection and should not give
rise to any adverse tax effects, the IRS could take the position that some or
all of the charges for these death benefits should be treated as a partial
withdrawal from the contract. In such case, the amount of the partial withdrawal
may be includible in taxable income and subject to the 10% penalty if the owner
is under 59 1/2.
If you own a Qualified contract and purchase these enhanced death benefits, the
IRS may consider these benefits "incidental death benefits." The IRC imposes
limits on the amount of the incidental death benefits allowable for Qualified
contracts. If the death benefit(s) selected by you are considered to exceed
these limits, the benefit(s) could result in taxable income to the owner of the
Qualified contract. Furthermore, the IRC provides that the assets of an IRA
(including a Roth IRA) may not be invested in life insurance, but may provide,
in the case of death during the Accumulation Phase, for a death benefit payment
equal to the greater of Purchase Payments or Contract Value. This Contract
offers death benefits, which may exceed the greater of Purchase Payments or
Contract Value. If the IRS determines that these benefits are providing life
insurance, the contract may not qualify as an IRA (including Roth IRAs). You
should consult your tax adviser regarding these features and benefits prior to
purchasing a contract.
CONTRACTS OWNED BY A TRUST OR CORPORATION
A Trust or Corporation ("Non-Natural Owner") that is considering purchasing this
contract should consult a tax advisor. Generally, the IRC does not treat a
Non-Qualified contract owned by a non-natural owner as an annuity contract for
Federal income tax purposes. The non-natural owner pays tax currently on the
contract's value in excess of the owner's cost basis. However, this treatment is
not applied to a Contract held by a trust or other entity as an agent for a
natural person nor to Contracts held by Qualified Plans. See the SAI for a more
detailed discussion of the potential adverse tax consequences associated with
non-natural ownership of a non-qualified annuity contract.
GIFTS, PLEDGES AND/OR ASSIGNMENTS OF A NON-QUALIFIED CONTRACT
If you transfer ownership of your Non-Qualified contract to a person other than
your spouse (or former spouse incident to divorce) as a gift you will pay
federal income tax on the contract's cash value to the extent it exceeds your
cost basis. The recipient's cost basis will be increased by the amount on which
you will pay federal taxes. Also, the IRC treats any assignment or pledge (or
agreement to assign or pledge) of any portion of a Non-Qualified contract as a
withdrawal. See the SAI for a more detailed discussion regarding potential tax
consequences of gifting, assigning or pledging a non-qualified contract.
DIVERSIFICATION
The IRC imposes certain diversification requirements on the underlying
investments for a variable annuity. We believe that the underlying Variable
Portfolios' management monitors the Variable Portfolios so as to comply with
these requirements. To be treated as a variable annuity for tax purposes, the
underlying investments must meet these requirements.
34
The diversification regulations do not provide guidance as to the circumstances
under which you, and not Anchor National, would be considered the owner of the
shares of the Variable Portfolios under your Nonqualified Contract, because of
the degree of control you exercise over the underlying investments. This
diversification requirement is sometimes referred to as "investor control." It
is unknown to what extent owners are permitted to select investments, to make
transfers among Variable Portfolios or the number and type of Variable
Portfolios owners may select from. If any guidance is provided which is
considered a new position, then the guidance would generally be applied
prospectively. However, if such guidance is considered not to be a new position,
it may be applied retroactively. This would mean you, as the owner of the
Nonqualified Contract , could be treated as the owner of the underlying Variable
Portfolios. Due to the uncertainty in this area, we reserve the right to modify
the contract in an attempt to maintain favorable tax treatment.
These investor control limitations generally do not apply to Qualified
Contracts, which are referred to as "Pension Plan Contracts" for purposes of
this rule, although the limitations could be applied to Qualified Contracts in
the future.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
PERFORMANCE
- ----------------------------------------------------------------
- ----------------------------------------------------------------
We advertise the Cash Management Portfolio's yield and effective yield. In
addition, the other Variable Portfolios advertise total return, gross yield and
yield-to-maturity. These figures represent past performance of the Variable
Portfolios. These performance numbers do not indicate future results.
When we advertise performance for periods prior to the date the contracts were
first issued, we derive the figures from the performance of the corresponding
portfolios for the Trusts, if available. We modify these numbers to reflect
charges and expenses as if the contract was in existence during the period
stated in the advertisement. Figures calculated in this manner do not represent
actual historic performance of the particular Variable Portfolio.
Consult the Statement of Additional Information for more detailed information
regarding the calculation of performance data. The performance of each Variable
Portfolio may also be measured against unmanaged market indices. The indices we
use include but are not limited to the Dow Jones Industrial Average, the
Standard & Poor's 500, the Russell 1000 Growth Index, the Morgan Stanley Capital
International Europe, Australia and Far East Index ("EAFE") and the Morgan
Stanley Capital International World Index. We may compare the Variable
Portfolios' performance to that of other variable annuities with similar
objectives and policies as reported by independent ranking agencies such as
Morningstar, Inc., Lipper Analytical Services, Inc. or Variable Annuity Research
& Data Service ("VARDS").
Anchor National may also advertise the rating and other information assigned to
it by independent industry ratings organizations. Some of those organizations
are A.M. Best Company ("A.M. Best"), Moody's Investor's Service ("Moody's"),
Standard & Poor's Insurance Rating Services ("S&P"), and Fitch IBCA Duff &
Phelps. A.M. Best's and Moody's ratings reflect their current opinion of our
financial strength and performance in comparison to others in the life and
health insurance industry. S&P's and Fitch IBCA, Duff & Phelps' ratings measure
the ability of an insurance company to meet its obligations under insurance
policies it issues. These two ratings do not measure the insurer's ability to
meet non-policy obligations. Ratings in general do not relate to the performance
of the Variable Portfolios.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
OTHER INFORMATION
- ----------------------------------------------------------------
- ----------------------------------------------------------------
ANCHOR NATIONAL
Anchor National is a stock life insurance company originally organized under the
laws of the state of California in April 1965. On January 1, 1996, Anchor
National redomesticated under the laws of the state of Arizona.
Anchor National and its affiliates, SunAmerica Life Insurance Company, First
SunAmerica Life Insurance Company, SunAmerica Asset Management Corp., and the
SunAmerica Financial Network, Inc. (comprising six-wholly owned broker-dealers),
specialize in retirement savings and investment products and services. Business
focuses include fixed and variable annuities, mutual funds and broker-dealer
services.
THE SEPARATE ACCOUNT
Anchor National established Variable Separate Account ("separate account"),
under Arizona law on January 1, 1996 when it assumed the separate account,
originally established under California law on June 25, 1981. The separate
account is registered with the SEC as a unit investment trust under the
Investment Company Act of 1940, as amended.
Anchor National owns the assets in the separate account. However, the assets in
the separate account are not chargeable with liabilities arising out of any
other business conducted by Anchor National. Income gains and losses (realized
and unrealized) resulting from assets in the separate account are credited to or
charged against the separate account without regard to other income gains or
losses of Anchor National. Assets in the separate account are not guaranteed by
Anchor National.
THE GENERAL ACCOUNT
Money allocated to the fixed account options goes into Anchor National's general
account. The general account consists of all of Anchor National's assets other
than assets attributable
35
to a separate account. All of the assets in the general account are chargeable
with the claims of any Anchor National contract holders as well as all of its
creditors. The general account funds are invested as permitted under state
insurance laws.
DISTRIBUTION OF THE CONTRACT
Registered representatives of broker-dealers sell the contract. We pay
commissions to these representatives for the sale of the contracts. We do not
expect the total commissions to exceed 8% of your Purchase Payments. Contracts
sold with the Principal Rewards program may result in our paying different
commission. We may also pay a bonus to representatives for contracts which stay
active for a particular period of time, in addition to standard commissions. We
do not deduct commissions paid to registered representatives directly from your
Purchase Payments.
From time to time, we may pay or allow additional promotional incentives in the
form of cash or other compensation. We reserve the right to offer these
additional incentives only to certain broker-dealers that sell or are expected
to sell, certain minimum amounts of the contract, or other contracts offered by
us. Promotional incentives may change at any time.
SunAmerica Capital Services, Inc., 733 Third Avenue, 4th Floor, New York, New
York 10017 distributes the contracts. SunAmerica Capital Services, an affiliate
of Anchor National, is registered as a broker-dealer under the Exchange Act of
1934 and is a member of the National Association of Securities Dealers, Inc. No
underwriting fees are paid in connection with the distribution of the contracts.
ADMINISTRATION
We are responsible for the administrative servicing of your contract. Please
contact our Annuity Service Center at 1-800-445-SUN2, if you have any comment,
question or service request.
We send out transaction confirmations and quarterly statements. During the
accumulation phase, you will receive confirmation of transactions within your
contract. Transactions made pursuant to contractual or systematic agreements,
such as deduction of the annual maintenance fee and dollar cost averaging, may
be confirmed quarterly. Purchase payments received through the automatic payment
plan or a salary reduction arrangement, may also be confirmed quarterly. For all
other transactions, we send confirmations immediately. It is your responsibility
to review these documents carefully and notify us of any inaccuracies
immediately. We investigate all inquiries. To the extent that we believe we made
an error, we retroactively adjust your contract, provided you notify us within
30 days of receiving the transaction confirmation or quarterly statement. Any
other adjustments we deem warranted are made as of the time we receive notice of
the error.
LEGAL PROCEEDINGS
There are no pending legal proceedings affecting the Separate Account. Anchor
National and its subsidiaries engage in various kinds of routine litigation. In
management's opinion these matters are not of material importance to the
Company's total assets, with the potential exception of McMurdie, et al. v.
SunAmerica Inc., et al, Case No. BC 194082, filed on July 10, 1998 in the
Superior Court for the County of Los Angeles. This lawsuit is a representative
action wherein the plaintiffs allege violations of California's Business and
Professions Code Sections 17200 et seq. The Company is vigorously defending the
lawsuit. The probability of any particular outcome is not reasonably estimable
at this time.
OWNERSHIP
The Polaris Protector/Platinum Variable Annuity is a Flexible Payment Group
Deferred Annuity contract. We issue a group contract to a contract holder for
the benefit of the participants in the group. As a participant in the group, you
will receive a certificate which evidences your ownership. As used in this
prospectus, the term contract refers to your certificate. In some states, a
Flexible Payment Individual Modified Guaranteed and Variable Deferred Annuity
contract is available instead. Such a contract is identical to the contract
described in this prospectus, with the exception that we issue it directly to
the owner.
CUSTODIAN
State Street Bank and Trust Company, 255 Franklin Street, Boston, Massachusetts
02110, serves as the custodian of the assets of the separate account. Anchor
National pays State Street Bank for services provided, based on a schedule of
fees.
INDEPENDENT ACCOUNTANTS
The audited consolidated financial statements of AIG SunAmerica Life Assurance
Company (formerly Anchor National Life Insurance Company) at December 31, 2001
and 2000 and, for the years ended December 31, 2001, 2000 and 1999 and the
audited financial statements of Variable Separate Account (Portion Relating to
the Polaris Platinum/Protector Variable Annuity) at December 31, 2001 and for
the period from July 9, 2001 (inception) to December 31, 2001 are incorporated
by reference in this prospectus in reliance on the reports of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
36
REGISTRATION STATEMENT
A registration statement has been filed with the SEC under the Securities Act of
1933 relating to the contract. This prospectus does not contain all the
information in the registration statement as permitted by SEC regulations. The
omitted information can be obtained from the SEC's principal office in
Washington, D.C., upon payment of a prescribed fee.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
TABLE OF CONTENTS OF
STATEMENT OF ADDITIONAL INFORMATION
- ----------------------------------------------------------------
- ----------------------------------------------------------------
Additional information concerning the operations of the separate account is
contained in a Statement of Additional Information ("SAI"), which is available
without charge upon written request addressed to us at our Annuity Service
Center, P.O. Box 54299, Los Angeles, California 90054-0299 or by calling (800)
445-SUN2. The contents of the SAI are tabulated below.
<Table>
Separate Account.............................. 3
General Account............................... 3
Performance Data.............................. 4
Income Payments............................... 12
Annuity Unit Values........................... 12
Death Benefit Options for Contracts Issued
Before October 24, 2001..................... 13
Taxes......................................... 19
Distribution of Contracts..................... 23
Financial Statements.......................... 23
</Table>
37
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
POLARIS PLATINUM APPENDIX A - CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<Table>
<Caption>
INCEPTION TO
PORTFOLIOS 12/31/01
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Capital Appreciation (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $35.378
(b) $35.378
Ending AUV.......................................... (a) $33.909
(b) $33.891
Ending Number of AUs................................ (a) 216,908
(b) 60,960
- -------------------------------------------------------------------------------
Government and Quality Bond (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $14.915
(b) $14.915
Ending AUV.......................................... (a) $15.323
(b) $15.319
Ending Number of AUs................................ (a) 604,398
(b) 173,062
- -------------------------------------------------------------------------------
Growth (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $27.961
(b) $27.961
Ending AUV.......................................... (a) $27.233
(b) $27.215
Ending Number of AUs................................ (a) 114,458
(b) 33,079
- -------------------------------------------------------------------------------
Natural Resources (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $14.651
(b) $14.651
Ending AUV.......................................... (a) $14.352
(b) $14.309
Ending Number of AUs................................ (a) 25,385
(b) 11,922
- -------------------------------------------------------------------------------
Aggressive Growth B96 (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $15.970
(b) $15.970
Ending AUV.......................................... (a) $13.627
(b) $13.621
Ending Number of AUs................................ (a) 74,319
(b) 40,715
- -------------------------------------------------------------------------------
Alliance Growth (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $32.786
(b) $32.786
Ending AUV.......................................... (a) $32.462
(b) $32.395
Ending Number of AUs................................ (a) 229,450
(b) 59,000
- -------------------------------------------------------------------------------
Blue Chip Growth (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $7.199
(b) $7.199
Ending AUV.......................................... (a) $6.701
(b) $6.695
Ending Number of AUs................................ (a) 136,477
(b) 51,147
- -------------------------------------------------------------------------------
Cash Management (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $12.987
(b) $12.987
Ending AUV.......................................... (a) $13.058
(b) $13.065
Ending Number of AUs................................ (a) 473,064
(b) 244,174
- -------------------------------------------------------------------------------
Corporate Bond (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $13.663
(b) $13.663
Ending AUV.......................................... (a) $13.972
(b) $13.952
Ending Number of AUs................................ (a) 199,210
(b) 126,920
- -------------------------------------------------------------------------------
</Table>
AU - Accumulation Unit
AUV - Accumulation Unit Value
(a) Without election of the optional EstatePlus feature
(b) With election of the optional EstatePlus feature
A-1
<Table>
<Caption>
INCEPTION TO
PORTFOLIOS 12/31/01
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Davis Venture Value (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $27.129
(b) $27.129
Ending AUV.......................................... (a) $26.207
(b) $26.174
Ending Number of AUs................................ (a) 385,797
(b) 103,212
- -------------------------------------------------------------------------------
"Dogs" of Wall Street (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $9.376
(b) $9.376
Ending AUV.......................................... (a) $9.703
(b) $9.680
Ending Number of AUs................................ (a) 79,435
(b) 26,944
- -------------------------------------------------------------------------------
Emerging Market (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $6.428
(b) $6.428
Ending AUV.......................................... (a) $6.535
(b) $6.530
Ending Number of AUs................................ (a) 20,649
(b) 10,799
- -------------------------------------------------------------------------------
Federated Value (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $16.876
(b) $16.876
Ending AUV.......................................... (a) $16.380
(b) $16.377
Ending Number of AUs................................ (a) 109,935
(b) 56,938
- -------------------------------------------------------------------------------
Global Bond (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $15.461
(b) $15.461
Ending AUV.......................................... (a) $15.662
(b) $15.648
Ending Number of AUs................................ (a) 42,811
(b) 32,980
- -------------------------------------------------------------------------------
Global Equities (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $17.986
(b) $17.986
Ending AUV.......................................... (a) $17.477
(b) $17.447
Ending Number of AUs................................ (a) 58,908
(b) 16,500
- -------------------------------------------------------------------------------
Goldman Sachs Research (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $8.100
(b) $8.100
Ending AUV.......................................... (a) $7.171
(b) $7.168
Ending Number of AUs................................ (a) 80,875
(b) 12,429
- -------------------------------------------------------------------------------
Growth-Income (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $28.878
(b) $28.878
Ending AUV.......................................... (a) $26.800
(b) $26.794
Ending Number of AUs................................ (a) 185,367
(b) 61,252
- -------------------------------------------------------------------------------
Growth Opportunities (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $6.256
(b) $6.256
Ending AUV.......................................... (a) $5.813
(b) $5.804
Ending Number of AUs................................ (a) 76,426
(b) 33,659
- -------------------------------------------------------------------------------
</Table>
AU - Accumulation Unit
AUV - Accumulation Unit Value
(a) Without election of the optional EstatePlus feature
(b) With election of the optional EstatePlus feature
A-2
<Table>
<Caption>
INCEPTION TO
PORTFOLIOS 12/31/01
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
High-Yield Bond (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $13.172
(b) $13.172
Ending AUV.......................................... (a) $12.506
(b) $12.495
Ending Number of AUs................................ (a) 97,244
(b) 85,252
- -------------------------------------------------------------------------------
International Diversified Equities (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $11.125
(b) $11.125
Ending AUV.......................................... (a) $10.216
(b) $10.168
Ending Number of AUs................................ (a) 34,310
(b) 40,781
- -------------------------------------------------------------------------------
International Growth and Income (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $11.372
(b) $11.372
Ending AUV.......................................... (a) $10.751
(b) $10.746
Ending Number of AUs................................ (a) 105,112
(b) 59,493
- -------------------------------------------------------------------------------
Marsico Growth (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $8.889
(b) $8.889
Ending AUV.......................................... (a) $8.515
(b) $8.519
Ending Number of AUs................................ (a) 189,755
(b) 95,675
- -------------------------------------------------------------------------------
MFS Growth and Income (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $20.217
(b) $20.217
Ending AUV.......................................... (a) $19.217
(b) $19.204
Ending Number of AUs................................ (a) 80,414
(b) 36,242
- -------------------------------------------------------------------------------
MFS Mid-Cap Growth (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $15.227
(b) $15.227
Ending AUV.......................................... (a) $13.408
(b) $13.395
Ending Number of AUs................................ (a) 277,704
(b) 108,730
- -------------------------------------------------------------------------------
MFS Total Return (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $21.154
(b) $21.154
Ending AUV.......................................... (a) $21.220
(b) $21.203
Ending Number of AUs................................ (a) 332,143
(b) 113,416
- -------------------------------------------------------------------------------
Putnam Growth (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $21.065
(b) $21.065
Ending AUV.......................................... (a) $19.070
(b) $19.066
Ending Number of AUs................................ (a) 72,747
(b) 22,607
- -------------------------------------------------------------------------------
Real Estate (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $11.241
(b) $11.241
Ending AUV.......................................... (a) $11.340
(b) $11.318
Ending Number of AUs................................ (a) 58,962
(b) 31,283
- -------------------------------------------------------------------------------
</Table>
AU - Accumulation Unit
AUV - Accumulation Unit Value
(a) Without election of the optional EstatePlus feature
(b) With election of the optional EstatePlus feature
A-3
<Table>
<Caption>
INCEPTION TO
PORTFOLIOS 12/31/01
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SunAmerica Balanced (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $15.626
(b) $15.626
Ending AUV.......................................... (a) $15.005
(b) $15.005
Ending Number of AUs................................ (a) 125,620
(b) 46,186
- -------------------------------------------------------------------------------
Technology (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $4.018
(b) $4.018
Ending AUV.......................................... (a) $3.450
(b) $3.451
Ending Number of AUs................................ (a) 173,009
(b) 86,449
- -------------------------------------------------------------------------------
Telecom Utility (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $12.848
(b) $12.848
Ending AUV.......................................... (a) $11.507
(b) $11.516
Ending Number of AUs................................ (a) 27,940
(b) 12,637
- -------------------------------------------------------------------------------
Worldwide High Income (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $14.490
(b) $14.490
Ending AUV.......................................... (a) $14.301
(b) $14.287
Ending Number of AUs................................ (a) 8,284
(b) 31,183
- -------------------------------------------------------------------------------
Strategic Growth (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $9.190
(b) $9.190
Ending AUV.......................................... (a) $8.784
(b) $8.783
Ending Number of AUs................................ (a) 18,868
(b) 36,506
- -------------------------------------------------------------------------------
Conservative Growth (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $8.163
(b) $8.163
Ending AUV.......................................... (a) $7.930
(b) $7.952
Ending Number of AUs................................ (a) 107,894
(b) 42,760
- -------------------------------------------------------------------------------
Balanced (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $7.576
(b) $7.576
Ending AUV.......................................... (a) $7.538
(b) $7.533
Ending Number of AUs................................ (a) 125,651
(b) 27,799
- -------------------------------------------------------------------------------
Van Kampen LIT Comstock, Class II Shares (Inception
Date - 10/15/01)
Beginning AUV....................................... (a) $10.000
(b) $10.000
Ending AUV.......................................... (a) $10.231
(b) $10.234
Ending Number of AUs................................ (a) 64,170
(b) 28,740
- -------------------------------------------------------------------------------
Van Kampen LIT Emerging Growth, Class II Shares (Inception
Date - 10/15/01)
Beginning AUV....................................... (a) $10.000
(b) $10.000
Ending AUV.......................................... (a) $10.426
(b) $10.437
Ending Number of AUs................................ (a) 19,408
(b) 5,379
- -------------------------------------------------------------------------------
</Table>
AU - Accumulation Unit
AUV - Accumulation Unit Value
(a) Without election of the optional EstatePlus feature
(b) With election of the optional EstatePlus feature
A-4
<Table>
<Caption>
INCEPTION TO
PORTFOLIOS 12/31/01
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Van Kampen LIT Growth and Income, Class II Shares (Inception
Date - 10/15/01)
Beginning AUV....................................... (a) $10.000
(b) $10.000
Ending AUV.......................................... (a) $10.533
(b) $10.537
Ending Number of AUs................................ (a) 12,511
(b) 1,560
- -------------------------------------------------------------------------------
</Table>
AU - Accumulation Unit
AUV - Accumulation Unit Value
(a) Without election of the optional EstatePlus feature
(b) With election of the optional EstatePlus feature
A-5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
POLARIS PROTECTOR - APPENDIX A - CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<Table>
<Caption>
INCEPTION TO
PORTFOLIOS 12/31/01
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Capital Appreciation (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $35.378
(b) $35.378
Ending AUV.......................................... (a) $33.909
(b) $33.891
Ending Number of AUs................................ (a) 57,357
(b) 40,519
- -------------------------------------------------------------------------------
Government and Quality Bond (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $14.915
(b) $14.915
Ending AUV.......................................... (a) $15.323
(b) $15.319
Ending Number of AUs................................ (a) 182,387
(b) 55,393
- -------------------------------------------------------------------------------
Growth (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $27.961
(b) $27.961
Ending AUV.......................................... (a) $27.233
(b) $27.215
Ending Number of AUs................................ (a) 95,475
(b) 33,517
- -------------------------------------------------------------------------------
Natural Resources (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $14.651
(b) $14.651
Ending AUV.......................................... (a) $14.352
(b) $14.309
Ending Number of AUs................................ (a) 6,723
(b) 7,978
- -------------------------------------------------------------------------------
Aggressive Growth (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $15.970
(b) $15.970
Ending AUV.......................................... (a) $13.627
(b) $13.621
Ending Number of AUs................................ (a) 24,470
(b) 8,317
- -------------------------------------------------------------------------------
Alliance Growth (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $32.786
(b) $32.786
Ending AUV.......................................... (a) $32.462
(b) $32.395
Ending Number of AUs................................ (a) 69,203
(b) 41,761
- -------------------------------------------------------------------------------
Asset Allocation (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $18.647
(b) $18.647
Ending AUV.......................................... (a) $18.608
(b) $18.608
Ending Number of AUs................................ (a) 12,080
(b) 17,628
- -------------------------------------------------------------------------------
Blue Chip Growth (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $7.199
(b) $7.199
Ending AUV.......................................... (a) $6.701
(b) $6.695
Ending Number of AUs................................ (a) 45,266
(b) 10,628
- -------------------------------------------------------------------------------
Cash Management (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $12.987
(b) $12.987
Ending AUV.......................................... (a) $13.058
(b) $13.065
Ending Number of AUs................................ (a) 87,024
(b) 27,659
- -------------------------------------------------------------------------------
</Table>
AU - Accumulation Unit
AUV - Accumulation Unit Value
(a) Without election of the optional EstatePlus feature
(b) With election of the optional EstatePlus feature
A-6
<Table>
<Caption>
INCEPTION TO
PORTFOLIOS 12/31/01
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Corporate Bond (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $13.663
(b) $13.663
Ending AUV.......................................... (a) $13.972
(b) $13.952
Ending Number of AUs................................ (a) 84,809
(b) 30,474
- -------------------------------------------------------------------------------
Davis Venture Value (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $27.129
(b) $27.129
Ending AUV.......................................... (a) $26.207
(b) $26.174
Ending Number of AUs................................ (a) 140,690
(b) 88,681
- -------------------------------------------------------------------------------
"Dogs" of Wall Street (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $9.376
(b) $9.376
Ending AUV.......................................... (a) $9.703
(b) $9.680
Ending Number of AUs................................ (a) 34,535
(b) 43,315
- -------------------------------------------------------------------------------
Emerging Market (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $6.428
(b) $6.428
Ending AUV.......................................... (a) $6.535
(b) $6.530
Ending Number of AUs................................ (a) 16,167
(b) 4,402
- -------------------------------------------------------------------------------
Federated Value (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $16.876
(b) $16.876
Ending AUV.......................................... (a) $16.380
(b) $16.377
Ending Number of AUs................................ (a) 42,438
(b) 27,106
- -------------------------------------------------------------------------------
Global Bond (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $15.461
(b) $15.461
Ending AUV.......................................... (a) $15.662
(b) $15.648
Ending Number of AUs................................ (a) 18,266
(b) 6,241
- -------------------------------------------------------------------------------
Global Equities (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $17.986
(b) $17.986
Ending AUV.......................................... (a) $17.477
(b) $17.447
Ending Number of AUs................................ (a) 17,274
(b) 17,126
- -------------------------------------------------------------------------------
Goldman Sachs Research (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $8.100
(b) $8.100
Ending AUV.......................................... (a) $7.171
(b) $7.168
Ending Number of AUs................................ (a) 56,741
(b) 18,651
- -------------------------------------------------------------------------------
Growth-Income (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $28.878
(b) $28.878
Ending AUV.......................................... (a) $26.800
(b) $26.794
Ending Number of AUs................................ (a) 58,446
(b) 22,034
- -------------------------------------------------------------------------------
</Table>
AU - Accumulation Unit
AUV - Accumulation Unit Value
(a) Without election of the optional EstatePlus feature
(b) With election of the optional EstatePlus feature
A-7
<Table>
<Caption>
INCEPTION TO
PORTFOLIOS 12/31/01
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Growth Opportunities (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $6.256
(b) $6.256
Ending AUV.......................................... (a) $5.813
(b) $5.804
Ending Number of AUs................................ (a) 11,133
(b) 2,227
- -------------------------------------------------------------------------------
High-Yield Bond (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $13.172
(b) $13.172
Ending AUV.......................................... (a) $12.506
(b) $12.495
Ending Number of AUs................................ (a) 28,392
(b) 24,531
- -------------------------------------------------------------------------------
International Diversified Equities (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $11.125
(b) $11.125
Ending AUV.......................................... (a) $10.216
(b) $10.168
Ending Number of AUs................................ (a) 31,777
(b) 9,019
- -------------------------------------------------------------------------------
International Growth & Income (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $11.372
(b) $11.372
Ending AUV.......................................... (a) $10.751
(b) $10.746
Ending Number of AUs................................ (a) 55,380
(b) 13,292
- -------------------------------------------------------------------------------
Marsico Growth (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $8.889
(b) $8.889
Ending AUV.......................................... (a) $8.515
(b) $8.519
Ending Number of AUs................................ (a) 32,122
(b) 29,102
- -------------------------------------------------------------------------------
MFS Growth and Income (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $20.217
(b) $20.217
Ending AUV.......................................... (a) $19.217
(b) $19.204
Ending Number of AUs................................ (a) 44,800
(b) 18,861
- -------------------------------------------------------------------------------
MFS Mid-Cap Growth (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $15.227
(b) $15.227
Ending AUV.......................................... (a) $13.408
(b) $13.395
Ending Number of AUs................................ (a) 124,477
(b) 59,733
- -------------------------------------------------------------------------------
MFS Total Return (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $21.154
(b) $21.154
Ending AUV.......................................... (a) $21.220
(b) $21.203
Ending Number of AUs................................ (a) 176,345
(b) 60,404
- -------------------------------------------------------------------------------
Putnam Growth (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $21.065
(b) $21.065
Ending AUV.......................................... (a) $19.070
(b) $19.066
Ending Number of AUs................................ (a) 29,656
(b) 13,984
- -------------------------------------------------------------------------------
</Table>
AU - Accumulation Unit
AUV - Accumulation Unit Value
(a) Without election of the optional EstatePlus feature
(b) With election of the optional EstatePlus feature
A-8
<Table>
<Caption>
INCEPTION TO
PORTFOLIOS 12/31/01
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Real Estate (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $11.241
(b) $11.241
Ending AUV.......................................... (a) $11.340
(b) $11.318
Ending Number of AUs................................ (a) 8,714
(b) 5,515
- -------------------------------------------------------------------------------
SunAmerica Balanced (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $15.626
(b) $15.626
Ending AUV.......................................... (a) $15.005
(b) $15.005
Ending Number of AUs................................ (a) 21,847
(b) 8,873
- -------------------------------------------------------------------------------
Technology (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $4.018
(b) $4.018
Ending AUV.......................................... (a) $3.450
(b) $3.451
Ending Number of AUs................................ (a) 96,029
(b) 26,355
- -------------------------------------------------------------------------------
Telecom Utility (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $12.848
(b) $12.848
Ending AUV.......................................... (a) $11.507
(b) $11.516
Ending Number of AUs................................ (a) 22,050
(b) 12,265
- -------------------------------------------------------------------------------
Worldwide High Income (Inception Date - 07/09/01)
Beginning AUV....................................... (a) $14.490
(b) $14.490
Ending AUV.......................................... (a) $14.301
(b) $14.287
Ending Number of AUs................................ (a) 6,503
(b) 1,845
- -------------------------------------------------------------------------------
Van Kampen LIT Comstock, Class II Shares (Inception
Date - 11/05/01)
Beginning AUV....................................... (a) $10.00
(b) $10.00
Ending AUV.......................................... (a) $10.231
(b) $10.234
Ending Number of AUs................................ (a) --
(b) 6,865
- -------------------------------------------------------------------------------
Van Kampen LIT Emerging Growth, Class II Shares (Inception
Date - 11/05/01)
Beginning AUV....................................... (a) $10.00
(b) $10.00
Ending AUV.......................................... (a) $10.426
(b) $10.437
Ending Number of AUs................................ (a) --
(b) --
- -------------------------------------------------------------------------------
Van Kampen LIT Growth and Income, Class II Shares (Inception
Date - 11/05/01)
Beginning AUV....................................... (a) $10.00
(b) $10.00
Ending AUV.......................................... (a) $10.533
(b) $10.537
Ending Number of AUs................................ (a) --
(b) 6,616
- -------------------------------------------------------------------------------
</Table>
AU - Accumulation Unit
AUV - Accumulation Unit Value
(a) Without election of the optional EstatePlus feature
(b) With election of the optional EstatePlus feature
A-9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
APPENDIX B - PRINCIPAL REWARDS PROGRAM EXAMPLES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
I. DEFERRED PAYMENT ENHANCEMENT
If you elect to participate in the Principal Rewards Program at contract issue,
we contribute at least 2% of each Purchase Payment to your contract for each
Purchase Payment we receive as an Upfront Payment Enhancement. Any applicable
Deferred Payment Enhancement is allocated to your contract on the corresponding
Deferred Payment Enhancement Date and, if declared by the Company, is a
percentage of your remaining Purchase Payment on the Deferred Payment
Enhancement Date. Deferred Purchase Payment Enhancements are reduced
proportionately by partial withdrawals of that Purchase Payment prior to the
Deferred Payment Enhancement Date.
The examples that follow assume an initial Purchase Payment of $125,000 and that
the Deferred Payment Enhancement is 1%.
For purposes of the example, the Deferred Payment Enhancement Date is the 9th
anniversary of the Purchase Payment.
EXAMPLE 1 -- NO WITHDRAWALS ARE MADE
The Upfront Payment Enhancement allocated to your contract is $2,500 (2% of
$125,000).
On your 9th contract anniversary, the Deferred Payment Enhancement Date, your
Deferred Payment Enhancement of $1,250 (1% of your remaining Purchase Payment or
$125,000) will be allocated to your contract.
EXAMPLE 2 -- WITHDRAWAL MADE PRIOR TO DEFERRED PAYMENT ENHANCEMENT DATE
As in Example 1, your Upfront Payment Enhancement is $2,500.
This example also assumes the following:
1. Your contract value on your 5th contract anniversary is $190,000.
2. You request a withdrawal of $75,000 on your 5th contract anniversary.
3. No subsequent Purchase Payments have been made.
4. No prior withdrawals have been taken.
5. Funds are not allocated to any of the MVA Fixed Accounts.
On your 5th contract anniversary, your penalty-free earnings in the contract are
$65,000 ($190,000 contract value less your $125,000 investment in the contract).
Therefore, you are withdrawing $10,000 of your initial Purchase Payment. Your
contract value will also be reduced by a $500 withdrawal charge on the $10,000
Purchase Payment (5% of $10,000). Your gross withdrawal is $75,500 of which
$10,500 constitutes part of your Purchase Payment.
The withdrawal of $10,500 of your $125,000 Purchase Payment is a withdrawal of
8.4% of your Purchase Payment. Therefore, only 91.6%, or $114,500, of your
initial Purchase Payment remains in your contract.
On your 9th contract anniversary, the Deferred Payment Enhancement Date,
assuming no other transactions occur affecting the Purchase Payment, we allocate
your Deferred Payment Enhancement of $1,145 (1% of your remaining Purchase
Payment, $114,500) to your contract.
II. 90 DAY WINDOW
The following hypothetical examples assume that the Company is offering Upfront
and Deferred Payment Enhancements in accordance with this chart at the time each
Purchase Payment is received:
<Table>
<Caption>
- ----------------------------------------------------------------------
UPFRONT DEFERRED DEFERRED
PAYMENT PAYMENT PAYMENT
ENHANCEMENT ENHANCEMENT ENHANCEMENT
ENHANCEMENT LEVEL RATE RATE DATE
- ----------------------------------------------------------------------
Under $40,000 2% 0% N/A
- ----------------------------------------------------------------------
$40,000 - $99,999 4% 0% N/A
- ----------------------------------------------------------------------
$100,000 - $499,999 4% 1% Nine years from the
date we receive each
Purchase Payment.
- ----------------------------------------------------------------------
$500,000 - more 4% 2% Nine years from the
date we receive each
Purchase Payment.
- ----------------------------------------------------------------------
</Table>
Contracts issued with the Principal Rewards feature after April 3, 2000, may be
eligible for a "Look-Back Adjustment." As of the 90th day after your contract
was issued, we will total your Purchase Payments remaining in your contract at
that time, without considering any investment gain or loss in contract value on
those Purchase Payments. If your total Purchase Payments bring you to an
Enhancement Level which, as of the date we issued your contract, would have
provided for a higher Upfront and/or Deferred Payment Enhancement Rate on each
Purchase Payment, you will get the benefit of the Enhancement Rate(s) that were
applicable to that higher Enhancement Level at the time your contract was
issued.
This example assumes the following:
1. Above Enhancement Levels, Rates and Dates throughout the first 90 days.
2. No withdrawal in the first 90 days.
3. Initial Purchase Payment of $35,000 on December 1, 2000.
B-1
4. Subsequent Purchase Payment of $40,000 on January 15, 2001.
5. Subsequent Purchase Payment of $25,000 on January 30, 2001.
6. Subsequent Purchase Payment of $7,500 on February 12, 2001.
ENHANCEMENT AT THE TIME PURCHASE PAYMENTS ARE RECEIVED
<Table>
<Caption>
- ----------------------------------------------------------------------------------
DEFERRED
PURCHASE UPFRONT DEFERRED PAYMENT
DATE OF PAYMENT PAYMENT PAYMENT ENHANCEMENT
PURCHASE PAYMENT AMOUNT ENHANCEMENT ENHANCEMENT DATE
- ----------------------------------------------------------------------------------
December 1, 2000 $35,000 2% 0% N/A
- ----------------------------------------------------------------------------------
January 15, 2001 $40,000 4% 0% N/A
- ----------------------------------------------------------------------------------
January 30, 2001 $25,000 4% 1% January 30, 2010
- ----------------------------------------------------------------------------------
February 12, 2001 $ 7,500 4% 1% February 12, 2010
- ----------------------------------------------------------------------------------
</Table>
ENHANCEMENT ADJUSTMENTS ON THE 90TH DAY FOLLOWING CONTRACT ISSUE
The sum of all Purchase Payments made in the first 90 days of the contract
equals $107,500. According to the Enhancement Levels in effect at the time this
contract was issued, a $107,500 Purchase Payment would have received a 4%
Upfront Payment Enhancement and a 1% Deferred Payment Enhancement. Under the 90
Day Window provision all Purchase Payments made within those first 90 days would
receive the benefit of the parameters in place at the time the contract was
issued, as if all of the Purchase Payments were received on the date of issue.
Thus, the first two Purchase Payments would be adjusted on the 90th day
following contract issue, as follows:
<Table>
<Caption>
- ----------------------------------------------------------------------------------
DEFERRED
PURCHASE UPFRONT DEFERRED PAYMENT
DATE OF PAYMENT PAYMENT PAYMENT ENHANCEMENT
PURCHASE PAYMENT AMOUNT ENHANCEMENT ENHANCEMENT DATE
- ----------------------------------------------------------------------------------
December 1, 2000 $35,000 4% 1% December 1, 2009
- ----------------------------------------------------------------------------------
January 15, 2001 $40,000 4% 1% January 15, 2010
- ----------------------------------------------------------------------------------
January 30, 2001 $25,000 4% 1% January 30, 2010
- ----------------------------------------------------------------------------------
February 12, 2001 $ 7,500 4% 1% February 12, 2010
- ----------------------------------------------------------------------------------
</Table>
B-2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
APPENDIX C - MARKET VALUE ADJUSTMENT ("MVA")
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The MVA reflects the impact that changing interest rates have on the value of
money invested at a fixed interest rate. The longer the period of time remaining
in the term you initially agreed to leave your money in the fixed account
option, the greater the impact of changing interest rates. The impact of the MVA
can be either positive or negative, and is computed by multiplying the amount
withdrawn, transferred or switched to the Income Phase by the following factor:
[(1+I/(1+J+0.005)](N/12) - 1
The MVA formula may differ in certain states
where:
I is the interest rate you are earning on the money invested in the
fixed account option;
J is the interest rate then currently available for the period of time
equal to the number of years remaining in the term you initially agreed
to leave your money in the fixed account option; and
N is the number of full months remaining in the term you initially
agreed to leave your money in the fixed account option.
EXAMPLES OF THE MVA
The examples below assume the following:
(1) You made an initial Purchase Payment of $10,000 and allocated it to the
10-year fixed account option at a rate of 5%;
(2) You make a partial withdrawal of $4,000 when 1 year (12 months) remains
in the 10-year term you initially agreed to leave your money in the
fixed account option (N=12); and
(3) You have not made any other transfers, additional Purchase Payments, or
withdrawals.
No withdrawal charges are reflected because your Purchase Payment has been in
the contract for nine full years. If a withdrawal charge applies, it is deducted
before the MVA. The MVA is assessed on the amount withdrawn less any withdrawal
charges.
POSITIVE ADJUSTMENT
Assume that on the date of withdrawal, the interest rate in effect for a new
Purchase Payments in the 1-year fixed account option is 4%.
The MVA factor is = [(1+I/(1+J+0.005)](N/12) - 1
= [(1.05)/(1.04+0.005)](12/12) - 1
= (1.004785)(1) - 1
= 1.004785 - 1
= + 0.004785
The requested withdrawal amount is multiplied by the MVA factor to determine the
MVA:
$4,000 X (+0.004785) = +$19.14
$19.14 represents the MVA that would be added to your withdrawal.
NEGATIVE ADJUSTMENT
Assume that on the date of withdrawal, the interest rate in effect for new
Purchase Payments in the 1-year fixed account option is 6%.
The MVA factor is = [(1+I)/(1+J+0.005)](N/12) - 1
= [(1.05)/(1.06+0.005)](1) - 1
= (0.985915)1 - 1
= 0.985915 - 1
= - 0.014085
The requested withdrawal amount is multiplied by the MVA factor to determine the
MVA:
$4,000 X (-0.014085) = -$56.34
$56.34 represents the MVA that will be deducted from the money remaining in the
10-year fixed account option.
C-1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
APPENDIX D - DEATH BENEFITS FOLLOWING SPOUSAL CONTINUATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The term Continuation Net Purchase Payments is used frequently to describe the
death benefits payable to the beneficiary of the Continuing Spouse for contracts
issued on or after October 24, 2001. We define Continuation Net Purchase
Payments as Net Purchase Payments made on and/or after the Continuation Date.
For the purpose of calculating Continuation Net Purchase Payments, the amount
that equals the contract value on the Continuation Date, including the
Continuation Contribution is considered a Purchase Payment. If the Continuing
Spouse makes no additional Purchase Payments or withdrawals, Continuation Net
Purchase Payments equals the contract value on the Continuation Date, including
the Continuation Contribution.
The term "Gross Withdrawals" as used in describing the death benefit option
below is defined as withdrawals and the fees and charges applicable to those
withdrawals.
The following describes the death benefit options following spousal continuation
for contracts issued on or after October 24, 2001:
1. PURCHASE PAYMENT ACCUMULATION OPTION
If a Continuation Contribution is added on the Continuation Date, the
death benefit is the greatest of:
a.The contract value on the date we receive all required paperwork and
satisfactory proof of the Continuing Spouse's death; or
b.Continuation Net Purchase Payments compounded to the date of death
at a 4% annual growth rate, (3% growth rate if the Continuing Spouse
was age 70 or older on the Continuation Date) plus any Purchase
Payments recorded after the date of death; and reduced by any Gross
Withdrawals recorded after the date of death in the same proportion
that the Gross Withdrawal reduced the contract value on the date of
each withdrawal; or
c.The contract value on the seventh contract anniversary following the
original issue date of the contract, plus any Purchase Payments
since the seventh contract anniversary and reduced for any Gross
Withdrawals recorded after the seventh contract anniversary in the
same proportion that the Gross Withdrawal reduced the contract value
on the date of the Gross Withdrawal, all compounded at a 4% annual
growth rate until the date of death (3% annual growth rate if the
Continuing Spouse is age 70 or older on the Continuation Date) plus
any Purchase Payments; and reduced for any withdrawals recorded
after the date of death in the same proportion that each withdrawal
reduced the contract value on the date of the withdrawal.
If a Continuation Contribution is not added on the Continuation Date,
the death benefit is the greater of:
a.The contract value on the date we receive all required paperwork and
satisfactory proof of the Continuing Spouse's death; or
b.Net Purchase Payments made from the original contract issue date
compounded to the date of death at a 4% annual growth rate, (3%
growth rate if the Continuing Spouse was age 70 or older on the
original contract issue date) plus any Purchase Payments recorded
after the date of death; and reduced for any Gross Withdrawals
recorded after the date of death in the same proportion that each
Gross Withdrawal reduced the contract value on the date of the
withdrawal; or
c.The contract value on the seventh contract anniversary following the
original issue date of the contract, plus any Purchase Payments
since the seventh contract anniversary; and reduced for any Gross
Withdrawals since the seventh contract anniversary in the same
proportion that each Gross Withdrawal reduced the contract value on
the date of the Gross Withdrawal, all compounded at a 4% annual
growth rate until the date of death (3% annual growth rate if the
Continuing Spouse is age 70 or older on the contract issue date)
plus any Purchase Payments; and reduced for any Gross Withdrawals
recorded after the date of death in the same proportion that each
Gross Withdrawal reduced the contract value on the date of the Gross
Withdrawal.
2.MAXIMUM ANNIVERSARY VALUE OPTION -- if the continuing spouse is below age
90 at the time of death, and:
If a Continuation Contribution is added on the Continuation Date, the
death benefit is the greatest of:
a.The contract value on the date we receive all required paperwork and
satisfactory proof of the Continuing Spouse's death; or
b.Continuation Net Purchase Payments; or
c.The maximum anniversary value on any contract anniversary occurring
after the Continuation
D-1
Date and prior to the Continuing Spouse's 81st birthday. The
anniversary value equals the contract value on a contract
anniversary plus any Purchase Payments made since that contract
anniversary; and reduced for any Gross Withdrawals recorded since
the contract anniversary in the same proportion that each Gross
Withdrawal reduced the contract value on the date of the Gross
Withdrawal. Contract anniversary is defined as any anniversary
following the full 12 month period after the original contract issue
date.
If a Continuation Contribution is not added on the Continuation Date,
the death benefit is the greatest of:
a.The contract value on the date we receive all required paperwork and
satisfactory proof of the Continuing Spouse's death; or
b.Net Purchase Payments received since the original issue date; or
c.The maximum anniversary value on any contract anniversary from the
original contract issue date prior to the Continuing Spouse's 81st
birthday. The anniversary value equals the contract value on a
contract anniversary plus any Purchase Payments since that contract
anniversary; and reduced for any Gross Withdrawals since the
contract anniversary in the same proportion that the Gross
Withdrawal reduced each contract value on the date of the Gross
Withdrawal. Contract anniversary is defined as the full 12 month
period after the original contract issue date.
If the Continuing Spouse is age 90 or older at the time of death,
under the Maximum Anniversary death benefit, their beneficiary will
receive only the contract value at the time we receive all required
paperwork and satisfactory proof of death.
Please see the Statement of Additional Information for a description
of the death benefit calculations following a Spousal Continuation for
contracts issued before October 24, 2001.
B. THE ESTATEPLUS BENEFIT PAYABLE UPON CONTINUING SPOUSE'S DEATH:
The EstatePlus benefit may increase the death benefit amount. The EstatePlus
benefit is only available if the original owner elected EstatePlus and it has
not been terminated. If the Continuing Spouse had earnings in the contract at
the time of his/her death, we will add a percentage of those earnings (the
"EstatePlus Percentage"), subject to a maximum dollar amount (the "Maximum
EstatePlus Percentage"), to the death benefit payable, based on the number of
years the Continuing Spouse has held the contract since the Continuation Date.
The EstatePlus benefit, if any, is added to the death benefit payable under the
Purchase Payment Accumulation or the Maximum Anniversary option.
The table below shows the EstatePlus benefit if the Continuing Spouse is 69 or
younger on the Continuation Date
<Table>
<Caption>
- -------------------------------------------------------------------
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*
- -------------------------------------------------------------------
</Table>
If the Continuing Spouse is between their 70th and 81st birthdays on the
Continuation Date, the available EstatePlus benefit is:
<Table>
<Caption>
- -------------------------------------------------------------------
CONTRACT YEAR ESTATEPLUS MAXIMUM
OF DEATH PERCENTAGE ESTATEPLUS AMOUNT
- -------------------------------------------------------------------
All Contract 25% of Earnings 40% of Continuation Net
Years Purchase Payments*
- -------------------------------------------------------------------
</Table>
* Purchase Payments received after the 5th anniversary of the Continuation Date
must remain in the contract for at least 6 full months to be included as part
of the Continuation Net Purchase Payments for the purpose of the Maximum
Estate Plus Percentage calculation.
What is the Contract Year of Death?
Contract Year of Death is the number of full 12 month periods starting on the
Continuation Date and ending on the Continuing Spouse's date of death.
What is the EstatePlus amount?
We determine the EstatePlus amount based upon a percentage of earnings in the
contract at the time of the Continuing Spouse's death. For the purpose of this
calculation, earnings are defined as (1) minus (2) where
(1) equals the contract value on the Continuing Spouse's date of
death;
(2) equals the Continuation Net Purchase Payment(s).
What is the Maximum EstatePlus amount?
The EstatePlus benefit is subject to a maximum dollar amount. The Maximum
EstatePlus amount is a percentage of the Continuation Net Purchase Payments.
WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE SPOUSAL CONTINUATION
PROVISION (IN ITS ENTIRETY OR ANY COMPONENT) AT ANY TIME WITH RESPECT TO
PROSPECTIVELY ISSUED CONTRACTS.
D-2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
APPENDIX E - HYPOTHETICAL EXAMPLE OF THE OPERATION OF THE INCOME PROTECTOR
FEATURE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
POLARIS PLATINUM BASE INCOME PROTECTOR
This table assumes a $100,000 initial investment in a non-qualified contract
with no further premiums, no withdrawals, no step-ups and not premium taxes; and
the election of optional Base Income Protector at contract issue.
<Table>
<Caption>
- -------------------------------------------------------------------
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
- -------------------------------------------------------------------
</Table>
* Life Annuity with 10 Year Period Certain
** Joint and 100% Survivor Annuity with 20 Year Period Certain
The Income Protector may not be available in your state. Please consult your
financial adviser for information regarding availability of this program in your
state.
POLARIS PROTECTOR BASE INCOME PROTECTOR
This table assumes a $100,000 initial investment in a non-qualified contract
with no further premiums, no withdrawals, no step-ups and not premium taxes; and
the election of optional Base Income Protector at contract issue.
<Table>
<Caption>
- --------------------------------------------------------------------------------------------
ANNUAL INCOME IF YOU ANNUITIZE ON THE FOLLOWING CONTRACT ANNIVERSARY
IF AT ISSUE 10 11 12 15 19 20
YOU ARE 1 - 9 (AGE 70) (AGE 71) (AGE 72) (AGE 75) (AGE 79) (AGE 80)
- --------------------------------------------------------------------------------------------
Male N/A 6,672 6,864 7,080 7,716 8,616 8,832
age 60*
- --------------------------------------------------------------------------------------------
Female N/A 5,880 6,060 6,252 6,900 7,860 8,112
age 60*
- --------------------------------------------------------------------------------------------
Joint**
Male -- 60 N/A 5,028 5,136 5,244 5,544 5,868 5,928
Female -- 60
- --------------------------------------------------------------------------------------------
</Table>
* Life Annuity with 10 Year Period Certain
** Joint and 100% Survivor Annuity with 20 Year Period Certain
The Income Protector may not be available in your state. Please consult your
financial adviser for information regarding availability of this program in your
state.
E-1
POLARIS PROTECTOR INCOME PROTECTOR PLUS
This table assumes a $100,000 initial investment in a non-qualified contract
with no further premiums, no withdrawals, no step-ups and no premium taxes; and
the election of the optional 6% Income Protector Plus at contract issue.
<Table>
<Caption>
- --------------------------------------------------------------------------------------------
ANNUAL INCOME IF YOU ANNUITIZE ON THE FOLLOWING CONTRACT ANNIVERSARY
IF AT ISSUE 10 11 12 15 19 20
YOU ARE 1 - 9 (AGE 70) (AGE 71) (AGE 72) (AGE 75) (AGE 79) (AGE 80)
- --------------------------------------------------------------------------------------------
Male N/A 12,529 13,645 14,874 19,240 26,976 29,288
age 60*
- --------------------------------------------------------------------------------------------
Female N/A 11,110 12,119 13,232 17,284 24,725 26,978
age 60*
- --------------------------------------------------------------------------------------------
Male, Age 60 N/A 9,563 10,342 11,156 14,005 18,626 19,936
Female, Age 60**
- --------------------------------------------------------------------------------------------
</Table>
* Life Annuity with 10 Year Period Certain
** Joint and 100% Survivor Annuity with 20 Year Period Certain
The Income Protector may not be available in your state. Please consult your
financial adviser for information regarding availability of this program in your
state.
E-2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
APPENDIX F - PREMIUM TAXES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Premium taxes vary according to the state and are subject to change without
notice. In many states, there is no tax at all. Listed below are the current
premium tax rates in those states that assess a premium tax. For current
information, you should consult your tax adviser.
<Table>
<Caption>
QUALIFIED NON-QUALIFIED
STATE CONTRACT CONTRACT
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
California 0.50% 2.35%
- ----------------------------------------------------------------------------------------
Maine 0% 2.0%
- ----------------------------------------------------------------------------------------
Nevada 0% 3.50%
- ----------------------------------------------------------------------------------------
South Dakota 0% 1.25%*
- ----------------------------------------------------------------------------------------
West Virginia 1.0% 1.0%
- ----------------------------------------------------------------------------------------
Wyoming 0% 1.0%
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
</Table>
* On the first $500,000 of premiums; 0.80% on the amount in excess of $500,000.
F-1
- --------------------------------------------------------------------------------
Please forward a copy (without charge) of the Polaris Protector/Platinum
Variable Annuity Statement of Additional Information to:
(Please print or type and fill in all information.)
------------------------------------------------------------------------
Name
------------------------------------------------------------------------
Address
------------------------------------------------------------------------
City/State/Zip
Date: ------------------------------ Signed: ------------------------------
Return to: Anchor National Life Insurance Company, Annuity Service Center,
P.O. Box 52499, Los Angeles, California 90054-0299
- --------------------------------------------------------------------------------
[POLARIS LOGO]
PROSPECTUS
MAY 1, 2002
<Table>
Please read this prospectus carefully FLEXIBLE PAYMENT DEFERRED ANNUITY CONTRACTS
before investing and keep it for issued by
future reference. It contains ANCHOR NATIONAL LIFE INSURANCE COMPANY
important information about the in connection with
Polaris Variable Annuity. VARIABLE SEPARATE ACCOUNT
The annuity has 36 investment choices -5 fixed account
To learn more about the annuity options and 31 Variable Portfolios listed below. The 5 fixed
offered by this prospectus, you can account options include specified periods of 1, 3, 5, 7 and
obtain a copy of the Statement of 10 years. The 31 Variable Portfolios are part of the Anchor
Additional Information ("SAI") dated Series Trust or the SunAmerica Series Trust.
May 1, 2002. The SAI has been filed
with the Securities and Exchange STOCKS:
Commission ("SEC") and is MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
incorporated by reference into this - Alliance Growth Portfolio SST
prospectus. The Table of Contents of - Global Equities Portfolio SST
the SAI appears on page 20 of this - Growth-Income Portfolio SST
prospectus. For a free copy of the MANAGED BY DAVIS ADVISERS
SAI, call us at (800) 445-SUN2 or - Davis Venture Value Portfolio SST
write to us at our Annuity Service - Real Estate Portfolio SST
Center, P.O. Box 54299, Los Angeles, MANAGED BY FEDERATED INVESTORS L.P.
California 90054-0299. - Federated Value Portfolio SST
- Telecom Utility Portfolio SST
In addition, the SEC maintains a MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
website (http://www.sec.gov) that - Goldman Sachs Research Portfolio SST
contains the SAI, materials MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
incorporated by reference and other - MFS Growth and Income Portfolio SST
information filed electronically with - MFS Mid-Cap Growth Portfolio SST
the SEC by Anchor National. MANAGED BY VAN KAMPEN
- International Diversified Equities Portfolio SST
ANNUITIES INVOLVE RISKS, INCLUDING - Technology Portfolio SST
POSSIBLE LOSS OF PRINCIPAL, AND ARE MANAGED BY PUTNAM INVESTMENT MANAGEMENT COMPANY, INC.
NOT A DEPOSIT OR OBLIGATION OF, OR - Emerging Markets Portfolio SST
GUARANTEED OR ENDORSED BY, ANY BANK. - International Growth and Income Portfolio SST
THEY ARE NOT FEDERALLY INSURED BY THE - Putnam Growth Portfolio SST
FEDERAL DEPOSIT INSURANCE MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP.
CORPORATION, THE FEDERAL RESERVE - Aggressive Growth Portfolio SST
BOARD OR ANY OTHER AGENCY. - "Dogs" of Wall Street Portfolio SST
- Blue Chip Growth Portfolio SST
- Growth Opportunities Portfolio SST
MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP
- Capital Appreciation Portfolio AST
- Growth Portfolio AST
- Natural Resources Portfolio AST
BALANCED:
MANAGED BY WM ADVISORS, INC.
- Asset Allocation Portfolio SST
MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
- MFS Total Return Portfolio SST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP.
- SunAmerica Balanced Portfolio SST
BONDS:
MANAGED BY FEDERATED INVESTORS L.P.
- Corporate Bond Portfolio SST
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL
- Global Bond Portfolio SST
MANAGED BY VAN KAMPEN
- Worldwide High Income Portfolio SST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP.
- High-Yield Bond Portfolio SST
MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP
- Government & Quality Portfolio AST
CASH:
MANAGED BY BANC OF AMERICA CAPITAL MANAGEMENT, LLC
- Cash Management Portfolio SST
</Table>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
- ----------------------------------------------------------------
- ----------------------------------------------------------------
Anchor National Life Insurance Company is in the process of changing its name to
AIG SunAmerica Life Assurance Company. We anticipate this process will take some
time to implement in all jurisdictions where we do business. We expect the name
change to be completed during 2003. To begin this process we officially changed
the name in our state of domicile, Arizona. However, we continue to do business,
today, under the name Anchor National and will refer to the Company by that name
throughout this prospectus. You will be notified when the name is changed to AIG
SunAmerica Life Assurance Company and we are no longer doing business as Anchor
National. Please keep in mind, this is a name change only and will not affect
the substance of your contract.
Anchor National's Annual Report on Form 10-K/A for the year ended April 4, 2002
is incorporated herein by reference.
All documents or reports filed by Anchor National under Section 13(a), 13(c),
14, or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") after the effective date of this prospectus shall also be incorporated by
reference. Statements contained in this prospectus and subsequently filed
documents which are incorporated by reference or deemed to be incorporated by
reference are deemed to modify or supersede documents incorporated herein by
reference.
Anchor National files its Exchange Act documents and reports, including its
annual and quarterly reports on Form 10-K and Form 10-Q, electronically pursuant
to EDGAR under CIK No. 0000006342.
Anchor National is subject to the informational requirements of the Securities
and Exchange Act of 1934 (as amended). We file reports and other information
with the SEC to meet those requirements. You can inspect and copy this
information at SEC public facilities at the following locations:
WASHINGTON, DISTRICT OF COLUMBIA
450 Fifth Street, N.W., Room 1024
Washington, D.C. 20549
CHICAGO, ILLINOIS
500 West Madison Street
Chicago, IL 60661
NEW YORK, NEW YORK
233 Broadway
New York, NY 10279
To obtain copies by mail contact the Washington, D.C. location. After you pay
the fees as prescribed by the rules and regulations of the SEC, the required
documents are mailed.
Registration statements under the Securities Act of 1933, as amended, related to
the contracts offered by this prospectus are on file with the SEC. This
prospectus does not contain all of the information contained in the registration
statements and its exhibits. For further information regarding the separate
account, Anchor National and its general account, the Variable Portfolios and
the contract, please refer to the registration statement and its exhibits.
The SEC also maintains a website (http://www.sec.gov) that contains the SAI,
materials incorporated by reference and other information filed electronically
with the SEC by Anchor National.
Anchor National will provide without charge to each person to whom this
prospectus is delivered, upon written or oral request, a copy of the above
documents incorporated herein by reference. Requests for these documents should
be directed to Anchor National's Annuity Service Center, as follows:
Anchor National Life Insurance Company
Annuity Service Center
P.O. Box 54299
Los Angeles, California 90054-0299
Telephone Number: (800) 445-SUN2
- ----------------------------------------------------------------
- ----------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION POSITION ON INDEMNIFICATION
- ----------------------------------------------------------------
- ----------------------------------------------------------------
If indemnification for liabilities arising under the Securities Act of 1933 (the
"Act") is provided Anchor National's officers, directors and controlling
persons, the SEC has advised Anchor National that it believes such
indemnification is against public policy under the Act and unenforceable. If a
claim for indemnification against such liabilities (other than for Anchor
National's payment of expenses incurred or paid by its directors, officers or
controlling persons in the successful defense of any legal action) is asserted
by a director, officer or controlling person of Anchor National in connection
with the securities registered under this prospectus, Anchor National will
submit to a court with jurisdiction to determine whether the indemnification is
against public policy under the Act. Anchor National will be governed by final
judgment of the issue. However, if in the opinion of Anchor National's counsel,
this issue has been determined by controlling precedent, Anchor National need
not submit the issue to a court for determination.
2
<Table>
------------------------------------------------------------------
------------------------------------------------------------------
TABLE OF CONTENTS
------------------------------------------------------------------
------------------------------------------------------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 2
SECURITIES AND EXCHANGE COMMISSION POSITION ON
INDEMNIFICATION........................................... 2
GLOSSARY.................................................... 3
HIGHLIGHTS.................................................. 4
FEE TABLES.................................................. 5
Owner Transaction Expenses............................ 5
Annual Separate Account Expenses...................... 5
Portfolio Expenses.................................... 5
EXAMPLES.................................................... 6
THE POLARIS VARIABLE ANNUITY................................ 7
PURCHASING A POLARIS VARIABLE ANNUITY....................... 7
Allocation of Purchase Payments....................... 8
Accumulation Units.................................... 8
Free Look............................................. 8
INVESTMENT OPTIONS.......................................... 9
Variable Portfolios................................... 9
Anchor Series Trust............................... 9
SunAmerica Series Trust........................... 9
Fixed Account Options................................. 10
Market Value Adjustment ("MVA")....................... 10
Transfers During the Accumulation Phase............... 10
Dollar Cost Averaging................................. 11
Asset Allocation Rebalancing.......................... 11
Principal Advantage Program........................... 11
Voting Rights......................................... 12
Substitution.......................................... 12
ACCESS TO YOUR MONEY........................................ 12
Systematic Withdrawal Program......................... 13
Nursing Home Waiver................................... 13
Minimum Contract Value................................ 13
DEATH BENEFIT............................................... 13
EXPENSES.................................................... 14
Insurance Charges..................................... 14
Withdrawal Charges.................................... 14
Investment Charges.................................... 14
Contract Maintenance Fee.............................. 15
Transfer Fee.......................................... 15
Premium Tax........................................... 15
Income Taxes.......................................... 15
Reduction or Elimination of Charges and Expenses, and
Additional Amounts Credited........................... 15
INCOME OPTIONS.............................................. 15
Annuity Date.......................................... 15
Income Options........................................ 15
Fixed or Variable Income Payments..................... 16
Income Payments....................................... 16
Transfers During the Income Phase..................... 16
Deferment of Payments................................. 16
TAXES....................................................... 16
Annuity Contracts in General.......................... 16
Tax Treatment of Distributions -
Non-Qualified Contracts........................... 17
Tax Treatment of Distributions -
Qualified Contracts............................... 17
Minimum Distributions................................. 17
Tax Treatment of Death Benefits....................... 18
Diversification....................................... 18
PERFORMANCE................................................. 19
OTHER INFORMATION........................................... 19
Anchor National....................................... 19
The Separate Account.................................. 19
The General Account................................... 19
Distribution of the Contract.......................... 19
Administration........................................ 20
Legal Proceedings..................................... 20
Ownership............................................. 20
Custodian............................................. 20
Independent Accountants............................... 20
Legal Matters......................................... 20
Registration Statement................................ 20
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION....
21
APPENDIX A -- CONDENSED FINANCIAL INFORMATION............... A-1
APPENDIX B -- MARKET VALUE ADJUSTMENT ("MVA")............... B-1
APPENDIX C -- PREMIUM TAXES................................. C-1
------------------------------------------------------------------
------------------------------------------------------------------
GLOSSARY
------------------------------------------------------------------
------------------------------------------------------------------
We have capitalized some of the technical terms used in this
prospectus. To help you understand these terms, we have defined
them in this glossary.
ACCUMULATION PHASE - The period during which you invest money in
your contract.
ACCUMULATION UNITS - A measurement we use to calculate the value
of the variable portion of your contract during the Accumulation
Phase.
ANNUITANT(S) - The person(s) on whose life (lives) we base income
payments.
ANNUITY DATE - The date on which income payments are to begin, as
selected by you.
ANNUITY UNITS - A measurement we use to calculate the amount of
income payments you receive from the variable portion of your
contract during the Income Phase.
BENEFICIARY - The person designated to receive any benefits under
the contract if you or the Annuitant dies.
COMPANY - Anchor National Life Insurance Company, We, Us, the
insurer which issues this contract.
INCOME PHASE - The period during which we make income payments to
you.
IRS - The Internal Revenue Service.
NON-QUALIFIED (CONTRACT) - A contract purchased with after-tax
dollars. In general, these contracts are not under any pension
plan, specially sponsored program or individual retirement account
("IRA").
PURCHASE PAYMENTS - The money you give us to buy the contract, as
well as any additional money you give us to invest in the contract
after you own it.
QUALIFIED (CONTRACT) - A contract purchased with pretax dollars.
These contracts are generally purchased under a pension plan,
specially sponsored program or IRA.
TRUSTS - Refers to the Anchor Series Trust and the SunAmerica
Series Trust collectively.
VARIABLE PORTFOLIO(S) - The variable investment options available
under the contract. Each Variable Portfolio has its own investment
objective and is invested in the underlying investments of the
Anchor Series Trust or the SunAmerica Series Trust.
</Table>
ALL FINANCIAL REPRESENTATIVES OR AGENTS THAT SELL THE CONTRACTS OFFERED BY THIS
PROSPECTUS ARE REQUIRED TO DELIVER A PROSPECTUS.
3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HIGHLIGHTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ANCHOR NATIONAL OFFERS SEVERAL VARIABLE ANNUITY PRODUCTS TO MEET THE DIVERSE
NEEDS OF OUR INVESTORS. EACH PRODUCT MAY OFFER DIFFERENT FEATURES AND BENEFITS
AND CORRESPONDINGLY DIFFERENT FEES AND CHARGES. WHEN WORKING WITH YOUR FINANCIAL
ADVISOR TO DETERMINE THE BEST PRODUCT TO MEET YOUR NEEDS, YOU SHOULD CONSIDER
AMONG OTHER THINGS, WHETHER THE FEATURES OF THIS CONTRACT AND THE RELATED FEES
PROVIDE THE MOST APPROPRIATE PACKAGE TO HELP YOU MEET YOUR LONG-TERM RETIREMENT
SAVINGS GOALS.
The Polaris Variable Annuity is a contract between you and Anchor National Life
Insurance Company ("Anchor National"). It is designed to help you invest on a
tax-deferred basis and meet long-term financial goals. There are minimum
Purchase Payment amounts required to purchase a contract. Purchase payments may
be invested in a variety of variable and fixed account options. Like all
deferred annuities, the contract has an Accumulation Phase and an Income Phase.
During the Accumulation Phase, you invest money in your contract. The Income
Phase begins when you start receiving income payments from your annuity to
provide for your retirement.
FREE LOOK: You may cancel your contract within 10 days after receiving it (or
whatever period is required in your state). You will receive whatever your
contract is worth on the day that we receive your request. The amount refunded
may be more or less than your original Purchase Payment. We will return your
original Purchase Payment if required by law. Please see PURCHASING A POLARIS
VARIABLE ANNUITY in the prospectus.
EXPENSES: There are fees and charges associated with the contract. Each year, we
deduct a $35 contract maintenance fee from your contract, which may be waived
for contracts of $50,000 or more. We also deduct insurance charges, which equal
1.52% annually of the average daily value of your contract allocated to the
Variable Portfolios. There are investment charges on amounts invested in the
Variable Portfolios. If you elect optional features available under the contract
we may charge additional fees for these features. A separate withdrawal charge
schedule applies to each Purchase Payment. The amount of the withdrawal charge
declines over time. After a Purchase Payment has been in the contract for seven
complete years, withdrawal charges no longer apply to that portion of the
Purchase Payments. Please see the FEE TABLE, PURCHASING A POLARIS VARIABLE
ANNUITY and EXPENSES in the prospectus.
ACCESS TO YOUR MONEY: You may withdraw money from your contract during the
Accumulation Phase. If you do so, earnings are deemed to be withdrawn first. You
will pay income taxes on earnings and untaxed contributions when you withdraw
them. Payments received during the Income Phase are considered partly a return
of your original investment. A federal tax penalty may apply if you make
withdrawals before age 59 1/2. As noted above, a withdrawal charge may apply.
Please see ACCESS TO YOUR MONEY and TAXES in the prospectus.
DEATH BENEFIT: A death benefit feature is available under the contract to
protect your Beneficiaries in the event of your death during the Accumulation
Phase. Please see DEATH BENEFITS in the prospectus.
INCOME OPTIONS: When you are ready to begin taking income, you can choose to
receive income payments on a variable basis, fixed basis or a combination of
both. You may also chose from five different income options, including an option
for income that you cannot outlive. Please see INCOME OPTIONS in the prospectus.
INQUIRIES: If you have questions about your contract call your financial advisor
or contact us at Anchor National Life Insurance Company Annuity Service Center
P.O. Box 54299 Los Angeles, California 90054-0299. Telephone Number: (800)
445-SUN2.
PLEASE READ THE PROSPECTUS CAREFULLY FOR MORE DETAILED INFORMATION REGARDING
THESE AND OTHER FEATURES AND BENEFITS OF THE CONTRACT, AS WELL AS THE RISKS OF
INVESTING.
4
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FEE TABLES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OWNER TRANSACTION EXPENSES
WITHDRAWAL CHARGE (AS A PERCENTAGE OF EACH PURCHASE PAYMENT)
<Table>
Year 1...................... 7% Year 5.................... 3%
Year 2...................... 6% Year 6.................... 2%
Year 3...................... 5% Year 7.................... 1%
Year 4...................... 4% Year 8+................... 0%
TRANSFER FEE.................... No charge for first 15 transfers
each contract year; thereafter,
fee is $25 ($10 in Pennsylvania
and Texas) per transfer
</Table>
<Table>
CONTRACT MAINTENANCE FEE*...... $35 ($30 in North Dakota)
*waived if contract value is $50,000 or more
</Table>
ANNUAL SEPARATE ACCOUNT EXPENSES
(AS A PERCENTAGE OF YOUR DAILY NET ASSET VALUE)
<Table>
Mortality and Expense Risk Charge................ 1.37%
Distribution Expense Charge...................... 0.15%
-----
TOTAL SEPARATE ACCOUNT EXPENSES 1.52%
=====
</Table>
PORTFOLIO EXPENSES
ANCHOR SERIES TRUST
(AS A PERCENTAGE OF AVERAGE NET ASSETS FOR THE TRUST'S FISCAL YEAR ENDED
DECEMBER 31, 2001)
<Table>
<Caption>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEE EXPENSES EXPENSES
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Capital Appreciation 0.70% 0.05% 0.75%
- -----------------------------------------------------------------------------------------------------------
Gov't & Quality Bond 0.58% 0.06% 0.64%
- -----------------------------------------------------------------------------------------------------------
Growth 0.67% 0.05% 0.72%
- -----------------------------------------------------------------------------------------------------------
Natural Resources 0.75% 0.15% 0.90%
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
</Table>
SUNAMERICA SERIES TRUST
(AS A PERCENTAGE OF AVERAGE NET ASSETS FOR THE TRUST'S FISCAL YEAR ENDED JANUARY
31, 2002)
<Table>
<Caption>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEE EXPENSES EXPENSES
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Aggressive Growth 0.68% 0.07% 0.75%
- -----------------------------------------------------------------------------------------------------------
Alliance Growth 0.60% 0.05% 0.65%
- -----------------------------------------------------------------------------------------------------------
Asset Allocation 0.59% 0.07% 0.66%
- -----------------------------------------------------------------------------------------------------------
Blue Chip Growth(1) 0.70% 0.15% 0.85%
- -----------------------------------------------------------------------------------------------------------
Cash Management 0.48% 0.04% 0.52%
- -----------------------------------------------------------------------------------------------------------
Corporate Bond 0.60% 0.07% 0.67%
- -----------------------------------------------------------------------------------------------------------
Davis Venture Value 0.71% 0.05% 0.76%
- -----------------------------------------------------------------------------------------------------------
Dogs of Wall Street 0.60% 0.11% 0.71%
- -----------------------------------------------------------------------------------------------------------
Emerging Markets 1.25% 0.28% 1.53%
- -----------------------------------------------------------------------------------------------------------
Federated Value 0.69% 0.07% 0.76%
- -----------------------------------------------------------------------------------------------------------
Global Bond 0.68% 0.13% 0.81%
- -----------------------------------------------------------------------------------------------------------
Global Equities 0.72% 0.15% 0.87%
- -----------------------------------------------------------------------------------------------------------
Goldman Sachs Research(1) 1.20% 0.15% 1.35%
- -----------------------------------------------------------------------------------------------------------
Growth Opportunities(1) 0.75% 0.25% 1.00%
- -----------------------------------------------------------------------------------------------------------
Growth-Income 0.53% 0.05% 0.58%
- -----------------------------------------------------------------------------------------------------------
High-Yield Bond 0.63% 0.08% 0.71%
- -----------------------------------------------------------------------------------------------------------
International Diversified Equities 1.00% 0.23% 1.23%
- -----------------------------------------------------------------------------------------------------------
International Growth and Income 0.95% 0.25% 1.20%
- -----------------------------------------------------------------------------------------------------------
MFS Growth and Income 0.70% 0.08% 0.78%
- -----------------------------------------------------------------------------------------------------------
MFS Mid-Cap Growth 0.75% 0.07% 0.82%
- -----------------------------------------------------------------------------------------------------------
MFS Total Return 0.66% 0.07% 0.73%
- -----------------------------------------------------------------------------------------------------------
Putnam Growth 0.77% 0.05% 0.82%
- -----------------------------------------------------------------------------------------------------------
Real Estate 0.80% 0.12% 0.92%
- -----------------------------------------------------------------------------------------------------------
SunAmerica Balanced 0.60% 0.06% 0.66%
- -----------------------------------------------------------------------------------------------------------
Technology 1.20% 0.25% 1.45%
- -----------------------------------------------------------------------------------------------------------
Telecom Utility(2) 0.75% 0.10% 0.85%
- -----------------------------------------------------------------------------------------------------------
Worldwide High Income 1.00% 0.11% 1.11%
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
</Table>
(1) For this portfolio, the advisor, SunAmerica Asset Management Corp., has
voluntarily agreed to waive fees or expenses, if necessary, to keep
operating expenses at or below established maximum amounts. All waivers or
reimbursements may be terminated at any time. Only certain portfolios relied
on these waivers and/or reimbursements during this fiscal year. Absent fee
waivers or reimbursement of expenses by the adviser or custody credits, you
would have incurred the following expenses during the last fiscal year:
Goldman Sachs Research 1.49%; and Growth Opportunities 1.19%.
(2)Gross of custody credits of 0.01%.
THE ABOVE PORTFOLIO EXPENSES WERE PROVIDED BY THE TRUSTS. WE HAVE NOT
INDEPENDENTLY VERIFIED THE ACCURACY OF THE INFORMATION.
5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXAMPLES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
You will pay the following expenses on a $1,000 investment in each Variable
Portfolio, assuming a 5% annual return on assets, Portfolio Expenses after
waiver, reimbursement or recoupment (assuming the waiver, reimbursement or
recoupment will continue for the period shown), if applicable, and:
(a) surrendered at the end of the stated time period;
(b) if the contract is not surrendered*.
<Table>
<Caption>
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Capital Appreciation (a) $ 94 (a) $124 (a) $156 (a) $269
(b) $ 24 (b) $ 74 (b) $126 (b) $269
- ------------------------------------------------------------------------------------------------------------------------
Government and Quality Bond (a) $ 93 (a) $120 (a) $150 (a) $258
(b) $ 23 (b) $ 70 (b) $120 (b) $258
- ------------------------------------------------------------------------------------------------------------------------
Growth (a) $ 94 (a) $123 (a) $155 (a) $267
(b) $ 24 (b) $ 73 (b) $125 (b) $267
- ------------------------------------------------------------------------------------------------------------------------
Natural Resources (a) $ 95 (a) $128 (a) $163 (a) $284
(b) $ 25 (b) $ 78 (b) $133 (b) $284
- ------------------------------------------------------------------------------------------------------------------------
Aggressive Growth (a) $ 94 (a) $124 (a) $156 (a) $269
(b) $ 24 (b) $ 74 (b) $126 (b) $269
- ------------------------------------------------------------------------------------------------------------------------
Alliance Growth (a) $ 93 (a) $121 (a) $151 (a) $259
(b) $ 23 (b) $ 71 (b) $121 (b) $259
- ------------------------------------------------------------------------------------------------------------------------
Asset Allocation (a) $ 93 (a) $121 (a) $151 (a) $260
(b) $ 23 (b) $ 71 (b) $121 (b) $260
- ------------------------------------------------------------------------------------------------------------------------
Blue Chip Growth (a) $ 95 (a) $127 (a) $161 (a) $279
(b) $ 25 (b) $ 77 (b) $131 (b) $279
- ------------------------------------------------------------------------------------------------------------------------
Cash Management (a) $ 92 (a) $117 (a) $144 (a) $246
(b) $ 22 (b) $ 67 (b) $114 (b) $246
- ------------------------------------------------------------------------------------------------------------------------
Corporate Bond (a) $ 93 (a) $121 (a) $152 (a) $261
(b) $ 23 (b) $ 71 (b) $122 (b) $261
- ------------------------------------------------------------------------------------------------------------------------
Davis Venture Value (a) $ 94 (a) $124 (a) $156 (a) $270
(b) $ 24 (b) $ 74 (b) $126 (b) $270
- ------------------------------------------------------------------------------------------------------------------------
"Dogs" of Wall Street (a) $ 93 (a) $122 (a) $154 (a) $265
(b) $ 23 (b) $ 72 (b) $124 (b) $265
- ------------------------------------------------------------------------------------------------------------------------
Emerging Markets (a) $102 (a) $147 (a) $194 (a) $345
(b) $ 32 (b) $ 97 (b) $164 (b) $345
- ------------------------------------------------------------------------------------------------------------------------
Federated Value (a) $ 94 (a) $124 (a) $156 (a) $270
(b) $ 24 (b) $ 74 (b) $126 (b) $270
- ------------------------------------------------------------------------------------------------------------------------
Global Bond (a) $ 94 (a) $125 (a) $159 (a) $275
(b) $ 24 (b) $ 75 (b) $129 (b) $275
- ------------------------------------------------------------------------------------------------------------------------
Global Equities (a) $ 95 (a) $127 (a) $162 (a) $281
(b) $ 25 (b) $ 77 (b) $132 (b) $281
- ------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Research (a) $100 (a) $141 (a) $186 (a) $328
(b) $ 30 (b) $ 91 (b) $156 (b) $328
- ------------------------------------------------------------------------------------------------------------------------
Growth-Income (a) $ 92 (a) $118 (a) $147 (a) $252
(b) $ 22 (b) $ 68 (b) $117 (b) $252
- ------------------------------------------------------------------------------------------------------------------------
Growth Opportunities (a) $ 96 (a) $131 (a) $168 (a) $294
(b) $ 26 (b) $ 81 (b) $138 (b) $294
- ------------------------------------------------------------------------------------------------------------------------
High-Yield Bond (a) $ 93 (a) $122 (a) $154 (a) $265
(b) $ 23 (b) $ 72 (b) $124 (b) $265
- ------------------------------------------------------------------------------------------------------------------------
International Diversified Equities (a) $ 99 (a) $138 (a) $180 (a) $316
(b) $ 29 (b) $ 88 (b) $150 (b) $316
- ------------------------------------------------------------------------------------------------------------------------
International Growth & Income (a) $ 98 (a) $137 (a) $178 (a) $314
(b) $ 28 (b) $ 87 (b) $148 (b) $314
- ------------------------------------------------------------------------------------------------------------------------
MFS Growth & Income (a) $ 94 (a) $124 (a) $157 (a) $272
(b) $ 24 (b) $ 74 (b) $127 (b) $272
- ------------------------------------------------------------------------------------------------------------------------
MFS Mid Cap Growth (a) $ 95 (a) $126 (a) $159 (a) $276
(b) $ 25 (b) $ 76 (b) $129 (b) $276
- ------------------------------------------------------------------------------------------------------------------------
MFS Total Return (a) $ 94 (a) $123 (a) $155 (a) $267
(b) $ 24 (b) $ 73 (b) $125 (b) $267
- ------------------------------------------------------------------------------------------------------------------------
Putnam Growth (a) $ 95 (a) $126 (a) $159 (a) $276
(b) $ 25 (b) $ 76 (b) $129 (b) $276
- ------------------------------------------------------------------------------------------------------------------------
Real Estate (a) $ 96 (a) $129 (a) $164 (a) $286
(b) $ 26 (b) $ 79 (b) $134 (b) $286
- ------------------------------------------------------------------------------------------------------------------------
SunAmerica Balanced (a) $ 93 (a) $121 (a) $151 (a) $260
(b) $ 23 (b) $ 71 (b) $121 (b) $260
- ------------------------------------------------------------------------------------------------------------------------
Technology (a) $101 (a) $144 (a) $190 (a) $337
(b) $ 31 (b) $ 94 (b) $160 (b) $337
- ------------------------------------------------------------------------------------------------------------------------
Telecom Utility (a) $ 95 (a) $127 (a) $161 (a) $279
(b) $ 25 (b) $ 77 (b) $131 (b) $279
- ------------------------------------------------------------------------------------------------------------------------
Worldwide High Income (a) $ 97 (a) $134 (a) $174 (a) $305
(b) $ 27 (b) $ 84 (b) $144 (b) $305
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</Table>
* Anchor National does not impose any fees or charges when you begin the
Income Phase of your contract.
6
EXPLANATION OF FEE TABLES AND EXAMPLES
1. The purpose of the Fee Tables is to show you the various expenses you would
incur directly and indirectly by investing in the contract.
2. For certain Variable Portfolios, the adviser, SunAmerica Asset Management
Corp., has voluntarily agreed to waive fees or reimburse certain expenses,
if necessary, to keep annual operating expenses at or below established
maximum allowed by an applicable state expense limitations or the following
percentages of Variable Portfolio's average net assets: Blue Chip Growth
0.85%, Goldman Sachs Research 1.35%, and Growth Opportunities 1.00%. The
adviser also may voluntarily waive or reimburse additional amounts to
increase a Variable Portfolio's investment return. All waivers and/or
reimbursements may be terminated at any time. Furthermore, the adviser may
recoup any waivers or reimbursements within two years after such waivers or
reimbursements are granted, provided that the Variable Portfolio is able to
make such payment and remain in compliance with the foregoing expense
limitations.
3. In addition to the stated assumptions, the Examples also assume an Insurance
Charge of 1.52% and that no transfer fees were imposed. Although premium
taxes may apply in certain states, they are not reflected in the Examples.
4. THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
THE HISTORICAL ACCUMULATION UNIT VALUES ARE CONTAINED IN APPENDIX A -- CONDENSED
FINANCIAL INFORMATION.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
THE POLARIS VARIABLE ANNUITY
- ----------------------------------------------------------------
- ----------------------------------------------------------------
An annuity is a contract between you and an insurance company. You are the owner
of the contract. The contract provides three main benefits:
- Tax Deferral: This means that you do not pay taxes on your earnings from
the annuity until you withdraw them.
- Death Benefit: If you die during the Accumulation Phase, the insurance
company pays a death benefit to your Beneficiary.
- Guaranteed Income: If elected, you receive a stream of income for your
lifetime, or another available period you select.
Tax-qualified retirement plans (e.g., IRAs, 401(k) or 403(b) plans) defer
payment of taxes on earnings until withdrawal. If you are considering funding a
tax-qualified retirement plan with an annuity, you should know that an annuity
does not provide any additional tax deferral treatment of earnings beyond the
treatment provided by the tax-qualified retirement plan itself. However,
annuities do provide other features and benefits which may be valuable to you.
You should fully discuss this decision with your financial representative.
This annuity was developed to help you contribute to your retirement savings.
This annuity works in two stages, the Accumulation Phase and the Income Phase.
Your contract is in the Accumulation Phase during the period when you make
payments into the contract. The Income Phase begins when you request us to start
making income payments to you out of the money accumulated in your contract.
The contract is called a "variable" annuity because it allows you to invest in
variable portfolios which, like mutual funds, have different investment
objectives and performance which varies. You can gain or lose money if you
invest in these Variable Portfolios. The amount of money you accumulate in your
contract depends on the performance of the Variable Portfolios in which you
invest. This contract currently offers 31 Variable Portfolios.
The contract also offers several fixed account options for varying time periods.
Fixed account options earn interest at a rate set and guaranteed by Anchor
National. If you allocate money to the fixed account options, the amount of
money that accumulates in the contract depends on the total interest credited to
the particular fixed account option(s) in which you invest.
For more information on investment options available under this contract SEE
INVESTMENT OPTIONS ON PAGE 9.
Anchor National Life Insurance Company (Anchor National, The Company, Us, We)
issues the Polaris Variable Annuity. When you purchase a Polaris Variable
Annuity, a contract exists between you and Anchor National. The Company is a
stock life insurance company organized under the laws of the state of Arizona.
Its principal place of business is 1 SunAmerica Center, Los Angeles, California
90067. The Company conducts life insurance and annuity business in the District
of Columbia and all states except New York. Anchor National is an indirect,
wholly owned subsidiary of American International Group, Inc. ("AIG"), a
Delaware corporation.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
PURCHASING A POLARIS VARIABLE ANNUITY
- ----------------------------------------------------------------
- ----------------------------------------------------------------
An initial Purchase Payment is the money you give us to buy a contract. Any
additional money you give us to invest in the contract after purchase is a
subsequent Purchase Payment.
7
This chart shows the minimum initial and subsequent Purchase Payments permitted
under your contract. These amounts depend upon whether a contract is Qualified
or Non-qualified for tax purposes. FOR FURTHER EXPLANATION, SEE TAXES ON PAGE
16.
<Table>
- -----------------------------------------------------------
Minimum
Minimum Initial Subsequent
Purchase Payment Purchase Payment
- -----------------------------------------------------------
Qualified $2,000 $250
- -----------------------------------------------------------
Non-Qualified $5,000 $500
- -----------------------------------------------------------
</Table>
Prior Company approval is required to accept Purchase Payments greater than
$1,500,000. The Company reserves the right to refuse any Purchase Payment
including, but not limited to, one which would cause total Purchase Payments in
all Contracts issued by the Company to the same owner to exceed $1,500,000 at
the time of the Purchase Payment. Also, the optional automatic payment plan
allows you to make subsequent Purchase Payments of as little as $20.
We may refuse any Purchase Payment. In general, we will not issue a Qualified
contract to anyone who is age 70 1/2 or older, unless it is shown that the
minimum distribution required by the IRS is being made. In addition we may not
issue a contract to anyone over age 90.
We allow spouses to jointly own this contract. However, the age of the older
spouse is used to determine the availability of any age driven benefits. The
addition of a joint owner after the contract has been issued is contingent upon
prior review and approval by the Company.
ALLOCATION OF PURCHASE PAYMENTS
We invest your Purchase Payments in the fixed and variable investment options
according to your instructions. If we receive a Purchase Payment without
allocation instructions, we will invest the money according to your last
allocation instructions. SEE INVESTMENT OPTIONS ON PAGE 9.
In order to issue your contract, we must receive your completed application,
Purchase Payment allocation instructions and any other required paperwork at our
principal place of business. We allocate your initial Purchase Payment within
two days of receiving it. If we do not have complete information necessary to
issue your contract, we will contact you. If we do not have the information
necessary to issue your contract within 5 business days we will send your money
back to you; or ask your permission to keep your money until we get the
information necessary to issue the contract.
ACCUMULATION UNITS
When you allocate a Purchase Payment to the Variable Portfolios, we credit your
contract with Accumulation Units of the separate account. We base the number of
Accumulation Units you receive on the unit value of the Variable Portfolio as of
the day we receive your money if we receive it before 1 p.m. Pacific Standard
Time, or on the next business day's unit value if we receive your money after 1
p.m. Pacific Standard Time. The value of an Accumulation Unit goes up and down
based on the performance of the Variable Portfolios.
We calculate the value of an Accumulation Unit each day that the New York Stock
Exchange ("NYSE") is open as follows:
1. We determine the total value of money invested in a particular Variable
Portfolio;
2. We subtract from that amount all applicable contract charges; and
3. We divide this amount by the number of outstanding Accumulation Units.
We determine the number of Accumulation Units credited to your contract by
dividing the Purchase Payment by the Accumulation Unit value for the specific
Variable Portfolio.
EXAMPLE:
We receive a $25,000 Purchase Payment from you on Wednesday. You allocate
the money to the Global Bond Portfolio. We determine that the value of an
Accumulation Unit for the Global Bond Portfolio is $11.10 when the NYSE
closes on Wednesday. We then divide $25,000 by $11.10 and credit your
contract on Wednesday night with 2252.52 Accumulation Units for the Global
Bond Portfolio.
Performance of the Variable Portfolios and expenses under your contract affect
Accumulation Unit values. These factors cause the value of your contract to go
up and down.
FREE LOOK
You may cancel your contract within ten days after receiving it (or longer if
required by state law). We call this a "free look." To cancel, you must mail the
contract along with your free look request to our Annuity Service Center at P.O.
Box 54299, Los Angeles, California 90054-0299. We will refund to you the value
of your contract on the day we receive your request. The amount refunded to you
may be more or less than the amount you originally invested.
Certain states require us to return your Purchase Payments upon a free look
request. Additionally, all contracts issued as an IRA require the full return of
Purchase Payments upon a free look.
EXCHANGE OFFERS
From time to time, we may offer to allow you to exchange an older variable
annuity issued by the Company or one of its affiliates, for a newer product with
more current features and
8
benefits, also issued by the Company or one of its affiliates. Such an Exchange
Offer will be made in accordance with applicable state and federal securities
and insurance rules and regulations. We will explain the specific terms and
conditions of any such Exchange Offer at the time the offer is made.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
INVESTMENT OPTIONS
- ----------------------------------------------------------------
- ----------------------------------------------------------------
VARIABLE PORTFOLIOS
The contract currently offers 31 Variable Portfolios. These Variable Portfolios
invest in shares of the Anchor Series Trust and the SunAmerica Series Trust (the
"Trusts"). Additional portfolios may be available in the future. The Variable
Portfolios operate similarly to a mutual fund but are only available through the
purchase of certain insurance contracts.
SunAmerica Asset Management Corp., an indirect wholly owned subsidiary of AIG,
is the investment adviser to the Trusts. The Trusts serve as the underlying
investment vehicles for other variable annuity contracts issued by Anchor
National, and other affiliated/unaffiliated insurance companies. Neither Anchor
National nor the Trusts believe that offering shares of the Trusts in this
manner disadvantages you. The adviser monitors the Trusts for potential
conflicts.
The Variable Portfolios, along with their respective subadvisers are listed
below:
ANCHOR SERIES TRUST
Wellington Management Company, LLP serves as subadviser to the Anchor Series
Trust portfolios. Anchor Series Trust has investment portfolios in addition to
those listed below which are not available for investment under the contract.
The 4 available investment portfolios are:
MANAGED BY WELLINGTON MANAGEMENT COMPANY, LLP
- Capital Appreciation Portfolio
- Government and Quality Bond Portfolio
- Growth Portfolio
- Natural Resources Portfolio
SUNAMERICA SERIES TRUST
Various subadvisers provide investment advice for the SunAmerica Series Trust
portfolios. SunAmerica Series Trust has investment portfolios in addition to
those listed below which are not available for investment under the contract.
The 27 investment portfolios and the subadvisers are:
STOCKS:
MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
- Alliance Growth Portfolio SST
- Global Equities Portfolio SST
- Growth-Income Portfolio SST
MANAGED BY DAVIS ADVISERS
- Davis Venture Value Portfolio SST
- Real Estate Portfolio SST
MANAGED BY FEDERATED INVESTORS L.P.
- Federated Value Portfolio SST
- Telecom Utility Portfolio SST
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
- Goldman Sachs Research Portfolio SST
MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
- MFS Growth and Income Portfolio SST
- MFS Mid-Cap Growth Portfolio SST
MANAGED BY VAN KAMPEN
- International Diversified Equities Portfolio SST
- Technology Portfolio SST
MANAGED BY PUTNAM INVESTMENT MANAGEMENT COMPANY, INC.
- Emerging Markets Portfolio SST
- International Growth and Income Portfolio SST
- Putnam Growth Portfolio SST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP.
- Aggressive Growth Portfolio SST
- "Dogs" of Wall Street Portfolio SST
- Blue Chip Growth Portfolio SST
- Growth Opportunities Portfolio SST
MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP
- Capital Appreciation Portfolio AST
- Growth Portfolio AST
- Natural Resources Portfolio AST
BALANCED:
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
- Asset Allocation Portfolio SST
MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
- MFS Total Return Portfolio SST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP.
- SunAmerica Balanced Portfolio SST
BONDS:
MANAGED BY FEDERATED INVESTORS L.P.
- Corporate Bond Portfolio SST
MANAGED BY WM ADVISORS, INC.
- Global Bond Portfolio SST
MANAGED BY VAN KAMPEN
- Worldwide High Income Portfolio SST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP.
- High-Yield Bond Portfolio SST
MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP
- Government & Quality Portfolio AST
CASH:
MANAGED BY BANC OF AMERICA CAPITAL MANAGEMENT, LLC
- Cash Management Portfolio SST
YOU SHOULD READ THE ATTACHED PROSPECTUSES FOR THE TRUSTS CAREFULLY. THESE
PROSPECTUSES CONTAIN DETAILED INFORMATION ABOUT THE VARIABLE PORTFOLIOS,
INCLUDING EACH VARIABLE PORTFOLIO'S INVESTMENT OBJECTIVE AND RISK FACTORS.
9
FIXED ACCOUNT OPTIONS
The contract also offers five fixed account options. Anchor National will
guarantee the interest rate earned on money you allocate to any of these fixed
account options. We currently offer fixed account options for periods of one,
three, five, seven and ten years, which we call guarantee periods.
Each guarantee period may offer a different interest rate but will never be less
than an annual effective rate of 3%. Once established the rates for specified
payments do not change during the guarantee period. The guarantee period is that
period for which we credit the applicable rate (one, three, five, seven or ten
years).
When a guarantee period ends, you may leave your money in the same fixed
investment option. You may also reallocate your money to another fixed
investment option or to the Variable Portfolios. If you want to reallocate your
money to a different fixed account option or a Variable Portfolio, you must
contact us within 30 days after the end of the current interest guarantee period
and instruct us how to reallocate the money. We do not contact you. If we do not
hear from you, your money will remain in the same fixed account option, where it
will earn interest at the renewal rate then in effect for the fixed account
option.
MARKET VALUE ADJUSTMENT ("MVA")
NOTE: MARKET VALUE ADJUSTMENTS APPLY TO THE 1, 3, 5, 7 AND 10-YEAR FIXED ACCOUNT
OPTIONS, ONLY. PLEASE CONTACT YOUR FINANCIAL ADVISOR FOR MORE INFORMATION.
If you take money out of the multi-year fixed account options before the end of
the guarantee period, we make a market value adjustment to your contract. We
refer to the adjustment as a market value adjustment (the "MVA"). The MVA
reflects any difference in the interest rate environment between the time you
place your money in the fixed account option and the time when you withdraw that
money. This adjustment can increase or decrease your contract value. You have 30
days after the end of each guarantee period to reallocate your funds without
incurring any MVA.
We calculate the MVA by doing a comparison between current rates and the rate
being credited to you in the fixed account option. For the current rate we use a
rate being offered by us for a guarantee period that is equal to the time
remaining in the guarantee period from which you seek withdrawal. If we are not
currently offering a guarantee period for that period of time, we determine an
applicable rate by using a formula to arrive at a number between the interest
rates currently offered for the two closest periods available.
Generally, if interest rates drop between the time you put your money into the
fixed account options and the time you take it out, we credit a positive
adjustment to your contract. Conversely, if interest rates increase during the
same period, we post a negative adjustment to your contract.
Where the MVA is negative, we first deduct the adjustment from any money
remaining in the fixed account option. If there is not enough money in the fixed
account option to meet the negative deduction, we deduct the remainder from your
withdrawal. Where the MVA is positive, we add the adjustment to your withdrawal
amount.
Anchor National does not assess an MVA against withdrawals under the following
circumstances:
- If made within 30 days after the end of a guarantee period;
- If a withdrawal is made to pay contract fees and charges;
- To pay a death benefit; and
- If annuitization occurs on the latest Annuity Date.
The 1-year fixed account option does not impose a negative MVA. This fixed
account option is not registered under the Securities Act of 1933 and is not
subject to the provisions of the Investment Company Act of 1940.
APPENDIX B shows how we calculate the MVA.
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase you may transfer funds between the Variable
Portfolios and/or the fixed account options. You must transfer at least $100. If
less than $100 will remain in any Variable Portfolio after a transfer, that
amount must be transferred as well.
You may request transfers of your account value between the Variable Portfolios
and/or the fixed account options in writing or by telephone subject to our
rules. We currently allow 15 free transfers per contract per year. We charge $25
($10 in Pennsylvania and Texas) for each additional transfer in any contract
year. However, transfers resulting from your participation in the automatic
asset rebalancing program do not count against your 15 free transfers.
We accept transfer requests by telephone or over the internet unless you tell us
not to on your contract application. When receiving instructions over the
telephone or internet, we follow appropriate procedures to provide reasonable
assurance that the transactions executed are genuine. Thus, we are not
responsible for any claim, loss or expense from any error resulting from
instructions received over the telephone or internet.
If we fail to follow our procedures in regards to internet transactions, we may
be liable for any losses due to unauthorized or fraudulent instructions.
We may limit the number of transfers in any contract year or refuse any transfer
request for you or others invested in the contract if we believe that excessive
trading or a specific transfer request or group transfer requests may have a
detrimental effect on unit values or the share prices of the underlying Variable
Portfolios.
10
MARKET TIMING
This product is not designed for professional "market timing" organizations or
other organizations or individuals engaged in trading strategies that seek to
benefit from short term price fluctuations or price irregularities by making
programmed transfers, frequent transfers or transfers that are large in relation
to the total assets of the underlying portfolio in which the variable investment
options invests. These market timing strategies are disruptive to the underlying
portfolios in which the variable investment options invest and thereby
potentially harmful to investors. If we determine, in our sole discretion, that
your transfer patterns among the variable investment options reflect a market
timing strategy, we reserve the right to take action to protect the other
investors. Such action may include but would not limited to restricting the
mechanisms you can use to request transfers among the variable investment
options or imposing penalty fees on such trading activity and/or otherwise
restricting transfer options in accordance with state and federal rules and
regulations.
For information regarding transfers during the Income Phase, SEE INCOME OPTIONS
ON PAGE 15.
We reserve the right to modify, suspend, waive or terminate these transfer
provisions at any time.
DOLLAR COST AVERAGING
The Dollar Cost Averaging ("DCA") program allows you to invest gradually in the
Variable Portfolios. Under the program you systematically transfer a set dollar
amount or percentage of portfolio value from one Variable Portfolio or the
1-year fixed account option (source accounts) to any other Variable Portfolio.
Transfers may be monthly or quarterly and do count against your 15 free
transfers per contract year. You may change the frequency at any time by
notifying us in writing. The minimum transfer amount under the DCA program is
$100, regardless of the source account.
The DCA program is designed to lessen the impact of market fluctuations on your
investment. However, we cannot ensure that you will make a profit. When you
elect the DCA program, you are continuously investing in securities regardless
of fluctuating price levels. You should consider your tolerance for investing
through periods of fluctuating price levels.
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want to gradually move $750 each quarter from the Cash
Management Portfolio to the Aggressive Growth Portfolio over six quarters.
You set up dollar cost averaging and purchase Accumulation Units at the
following values:
<Table>
<Caption>
- -------------------------------------------
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
- -------------------------------------------
</Table>
You paid an average price of only $6.67 per Accumulation Unit over six
quarters, while the average market price actually was $7.08. By investing
an equal amount of money each month, you automatically buy more
Accumulation Units when the market price is low and fewer Accumulation
Units when the market price is high. This example is for illustrative
purposes only.
ASSET ALLOCATION REBALANCING
Earnings in your contract may cause the percentage of your investment in each
investment option to differ from your original allocations. The automatic asset
rebalancing program addresses this situation. At your election, we periodically
rebalance your investments to return your allocations to their original
percentages. Asset rebalancing typically involves shifting a portion of your
money out of an investment option with a higher return into an investment option
with a lower return.
At your request, rebalancing occurs on a quarterly, semiannual or annual basis.
Transfers made as a result of rebalancing do not count against your 15 free
transfers for the contract year.
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want your initial Purchase Payment split between two
Variable Portfolios. You want 50% in the Corporate Bond Portfolio and 50%
in the Growth Portfolio. Over the next calendar quarter, the bond market
does very well while the stock market performs poorly. At the end of the
calendar quarter, the Corporate Bond Portfolio now represents 60% of your
holdings because it has increased in value and the Growth Portfolio
represents 40% of your holdings. If you had chosen quarterly rebalancing,
on the last day of that quarter, we would sell some of your units in the
Corporate Bond Portfolio to bring its holdings back to 50% and use the
money to buy more units in the Growth Portfolio to increase those holdings
to 50%.
PRINCIPAL ADVANTAGE PROGRAM
The Principal Advantage Program allows you to invest in one or more Variable
Portfolios without putting your principal at direct risk. The program
accomplishes this by allocating your investment strategically between the fixed
account options
11
and Variable Portfolios. You decide how much you want to invest and
approximately when you want a return of principal. We calculate how much of your
Purchase Payment to allocate to the particular fixed account option to ensure
that it grows to an amount equal to your total principal invested under this
program. We invest the rest of your principal in the Variable Portfolio(s) of
your choice.
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want to allocate a portion of your initial Purchase Payment
of $100,000 to the fixed account option. You want the amount allocated to
the fixed account option to grow to $100,000 in 7 years. If the 7-year
fixed account option is offering a 5% interest rate, we will allocate
$71,069 to the 7-year fixed account option to ensure that this amount will
grow to $100,000 at the end of the 7-year period. The remaining $28,931 may
be allocated among the Variable Portfolios, as determined by you, to
provide opportunity for greater growth.
VOTING RIGHTS
Anchor National is the legal owner of the Trusts' shares. However, when a
Variable Portfolio solicits proxies in conjunction with a vote of shareholders,
we must obtain your instructions on how to vote those shares. We vote all of the
shares we own in proportion to your instructions. This includes any shares we
own on our own behalf. Should we determine that we are no longer required to
comply with these rules, we will vote the shares in our own right.
SUBSTITUTION
We may amend your contract due to changes to the Variable Portfolios offered
under your contract. For example, we may offer new Variable Portfolios, delete
Variable Portfolios, or stop accepting allocations and/or investments in a
particular Variable Portfolio. We may move assets and re-direct future premium
allocations from one Variable Portfolio to another if we receive investor
approval through a proxy vote or SEC approval for a fund substitution. This
would occur if a Variable Portfolio is no longer an appropriate investment for
the contract, for reasons such as continuing substandard performance, or for
changes to the portfolio manager, investment objectives, risks and strategies,
or federal or state laws. The new Variable Portfolio offered may have different
fees and expenses. You will be notified of any upcoming proxies or substitutions
that affect your Variable Portfolio choices.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
ACCESS TO YOUR MONEY
- ----------------------------------------------------------------
- ----------------------------------------------------------------
You can access money in your contract in two ways:
- by making a partial or total withdrawal; and/or
- by receiving income payments during the Income Phase. SEE INCOME OPTIONS
ON PAGE 15.
Generally, we deduct a withdrawal charge applicable to any total or partial
withdrawal and a MVA against withdrawals from the 3, 5, 7 or 10 year fixed
account options. If you withdraw your entire contract value, we also deduct
premium taxes and a contract maintenance fee. SEE EXPENSES ON PAGE 14.
Your contract provides for a free withdrawal amount. A free withdrawal amount is
the portion of your account that we allow you to take out each year without
being charged a withdrawal charge.
Purchase Payments that are no longer subject to a withdrawal charge and not
previously withdrawn, plus earnings, may be withdrawn free of a withdrawal
charge at any time.
After the first year, you may withdraw the greater of the following amounts free
of a withdrawal charge (1) earnings in your contract as of the date you make the
withdrawal; or (2) 10% of the Purchase Payments you invested for at least one
year and not yet withdrawn, less any previous earnings withdrawals or Systematic
Withdrawals that year.
Only your first withdrawal of the year is free. If you do not take the entire
free amount available to you at that first withdrawal, you will forfeit the
opportunity to withdraw that money free of the withdrawal charge for that year.
The portion of a free withdrawal which exceeds the sum of: (1) earnings in the
contract and (2) Purchase Payments which are both no longer subject to the
withdrawal charge schedule and not yet withdrawn is assumed to be a withdrawal
against future earnings. Although amounts withdrawn free of a withdrawal charge
under the 10% provision may reduce principal for purposes of calculating amounts
available for future withdrawals of earnings, they do not reduce the amount you
invested for purposes of calculating the withdrawal charge if you withdraw your
entire contract value.
However, upon a future full surrender of your contract, we will recoup any
withdrawal charges which would have been applicable if your free withdrawal(s)
had not been free.
We calculate charges due on a total withdrawal on the day after we receive your
request and your contract. We return to you your contract value less any
applicable fees and charges.
Under most circumstances, the partial withdrawal minimum is $1,000. We require
that the value left in any investment option be at least $100, after the
withdrawal. You must send
12
a written withdrawal request. Unless you provide us with different instructions,
partial withdrawals will be made pro rata from each Variable Portfolio and the
fixed in account option in which your contract is invested.
Under certain Qualified plans, access to the money in your contract may be
restricted. Additionally, withdrawals made prior to age 59 1/2 may result in a
10% IRS penalty tax. SEE TAXES ON PAGE 16.
We may be required to suspend or postpone the payment of a withdrawal for any
period of time when: (1) the NYSE is closed (other than a customary weekend and
holiday closings); (2) trading with the NYSE is restricted; (3) an emergency
exists such that disposal of or determination of the value of shares of the
Variable Portfolios is not reasonably practicable; (4) the SEC, by order, so
permits for the protection of contract owners.
Additionally, we reserve the right to defer payments for a withdrawal from a
fixed account option. Such deferrals are limited to no longer than six months.
SYSTEMATIC WITHDRAWAL PROGRAM
During the Accumulation Phase, you may elect to receive periodic income payments
under the systematic withdrawal program. Under the program, you may choose to
take monthly, quarterly, semi-annual or annual payments from your contract.
Electronic transfer of these funds to your bank account is also available. The
minimum amount of each withdrawal is $250. There must be at least $500 remaining
in your contract at all times. Withdrawals may be taxable and a 10% IRS penalty
tax may apply if you are under age 59 1/2. There is no additional charge for
participating in this program, although a withdrawal charge and/or MVA may
apply.
The program is not available to everyone. Please check with our Annuity Service
Center, which can provide the necessary enrollment forms. We reserve the right
to modify, suspend or terminate this program at any time.
NURSING HOME WAIVER
If you are confined to a nursing home for 60 days or longer, we may waive the
withdrawal charge and/or market value adjustment on certain withdrawals prior to
the Annuity Date (not available in Texas). The waiver applies only to
withdrawals made while you are in a nursing home or within 90 days after you
leave the nursing home. Your contract prohibits use of this waiver during the
first 90 days after you purchase your contract. In addition, the confinement
period for which you seek the waiver must begin after you purchase your
contract.
In order to use this waiver, you must submit with your withdrawal request, the
following documents: (1) a doctor's note recommending admittance to a nursing
home; (2) an admittance form which shows the type of facility you entered; and
(3) a bill from the nursing home which shows that you met the 60 day confinement
requirement.
MINIMUM CONTRACT VALUE
Where permitted by state law, we may terminate your contract if both of the
following occur: (1) your contract is less than $500 as a result of withdrawals;
and (2) you have not made any Purchase Payments during the past three years. We
will provide you with sixty days written notice. At the end of the notice
period, we will distribute the contract's remaining value to you.
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DEATH BENEFIT
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If you die during the Accumulation Phase of your contract, we pay a death
benefit to your Beneficiary.
The death benefit is the greater of:
1. the value of your contract at the time we receive satisfactory proof of
death; or
2. total Purchase Payments less withdrawals (and any fees or charges
applicable to such withdrawals), compounded at a 4% annual growth rate
until the date of death (3% growth rate if 70 or older at the time of
contract issue) plus any Purchase Payments less withdrawals recorded
after the date of death (and any fees or charges applicable to such
withdrawals); or
3. the value of your contract on the seventh contract anniversary, plus any
Purchase Payments and less any withdrawals (and any fees or charges
applicable to such withdrawals), since the seventh contract anniversary,
all compounded at a 4% annual growth rate until the date of death (3%
growth rate if age 70 or older at the time of contract issue) plus any
Purchase Payments less withdrawals recorded after the date of death (and
any fees or charges applicable to such withdrawals).
We do not pay the death benefit if you die after you switch to the Income Phase.
However, if you die during the Income Phase, your Beneficiary receives any
remaining guaranteed income payments in accordance with the income option you
selected. SEE INCOME OPTIONS ON PAGE 15.
You name your Beneficiary. You may change the Beneficiary at any time, unless
you previously made an irrevocable Beneficiary designation.
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We calculate and pay the death benefit when we receive all required paperwork
and satisfactory proof of death. We consider the following satisfactory proof of
death:
1. a certified copy of the death certificate; or
2. a certified copy of a decree of a court of competent jurisdiction as to
the finding of death; or
3. a written statement by a medical doctor who attended the deceased at the
time of death; or
4. any other proof satisfactory to us.
We may require additional proof before we pay the death benefit.
The death benefit must be paid within 5 years of the date of death unless the
Beneficiary elects to have it payable in the form of an income option. If the
Beneficiary elects an income option, it must be paid over the Beneficiary's
lifetime or for a period not extending beyond the Beneficiary's life expectancy.
Payments must begin within one year of your death.
If the Beneficiary is the spouse of a deceased owner, he or she can elect to
continue the Contract at the then current value. If the Spousal Beneficiary
continues the contract, we do not pay a death benefit to him or her.
If a Beneficiary does not elect a specific form of pay out within 60 days of our
receipt of all required paperwork and satisfactory proof of death, we pay a lump
sum death benefit to the Beneficiary.
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EXPENSES
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There are charges and expenses associated with your contract. These charges and
expenses reduce your investment return. We will not increase the contract
maintenance fee or the insurance and withdrawal charges under your contract.
However, the investment charges under your contract may increase or decrease.
Some states may require that we charge less than the amounts described below.
INSURANCE CHARGES
The Company deducts a mortality and expense risk charge in the amount of 1.52%
annually of the value of your contract invested in the Variable Portfolios. We
deduct the charge daily. This charge compensates the Company for the mortality
and expense risk and the costs of contract distribution assumed by the Company.
Generally, the mortality risks assumed by the Company arise from its contractual
obligations to make income payments after the Annuity Date and to provide a
death benefit. The expense risk assumed by the Company is that the costs of
administering the contracts and the Separate Account will exceed the amount
received from the administrative fees and charges assessed under the contract.
If these charges do not cover all of our expenses, we will pay the difference.
Likewise, if these charges exceed our expenses, we will keep the difference. The
Insurance Charge is expected to result in a profit. Profit may be used for any
legitimate cost/expense including distribution, depending upon market
conditions.
WITHDRAWAL CHARGES
The contract provides a free withdrawal amount every year. SEE ACCESS TO YOUR
MONEY ON PAGE 12. If you take money out in excess of the free withdrawal amount,
or upon a full surrender, you may incur a withdrawal charge.
We apply a withdrawal charge against each Purchase Payment you put into the
contract. After a Purchase Payment has been in the contract for 7 complete
years, no withdrawal charge applies. The withdrawal charge equals a percentage
of the Purchase Payment you take out of the contract. The withdrawal charge
percentage declines each year a Purchase Payment is in the contract, as follows:
<Table>
<Caption>
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YEAR 1 2 3 4 5 6 7 8
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WITHDRAWAL CHARGE 7% 6% 5% 4% 3% 2% 1% 0%
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</Table>
When calculating the withdrawal charge, we treat withdrawals as coming first
from the Purchase Payments that have been in your contract the longest. However,
for tax purposes, your withdrawals are considered earnings first, then Purchase
Payments.
Whenever possible, we deduct the withdrawal charge from the money remaining in
your contract. If you withdraw all of your contract value, we deduct any
applicable withdrawal charges from the amount withdrawn.
We will not assess a withdrawal charge for money withdrawn to pay a death
benefit or to pay contract fees or charges. Additionally, we will not assess a
withdrawal charge when you switch to the Income Phase.
Withdrawals made prior to age 59 1/2 may result in tax penalties. SEE TAXES ON
PAGE 16.
INVESTMENT CHARGES
Charges are deducted from your Variable Portfolios for the advisory and other
expenses of the Variable Portfolios. THE FEE TABLES LOCATED ON PAGE 5 illustrate
these charges and expenses. For more detailed information on these investment
charges, refer to the prospectuses for the Trusts, which are attached.
14
CONTRACT MAINTENANCE FEE
During the Accumulation Phase, we subtract a contract maintenance fee from your
account once per year. This charge compensates us for the cost of contract
administration. We deduct the $35 contract maintenance fee ($30 in North Dakota
and Utah) from your account value on your contract anniversary. If you withdraw
your entire contract value, we deduct the fee from that withdrawal.
If your contract value is $50,000 or more on your contract anniversary date, we
will waive the charge. This waiver is subject to change without notice.
TRANSFER FEE
We currently permit 15 free transfers between investment options each contract
year. We charge you $25 for each additional transfer that contract year ($10 in
Pennsylvania and Texas). SEE INVESTMENT OPTIONS ON PAGE 9.
PREMIUM TAX
Certain states charge the Company a tax on the premiums you pay into the
contract. We deduct from your contract these premium tax charges. Currently we
deduct the charge for premium taxes upon a full surrender or when you begin the
Income Phase of the contract. In the future, we may assess this deduction at the
time you put Purchase Payment(s) into the contract or upon payment of a death
benefit.
APPENDIX C provides more information about premium taxes.
INCOME TAXES
We do not currently deduct income taxes from your contract. We reserve the right
to do so in the future.
REDUCTION OR ELIMINATION OF CHARGES AND EXPENSES, AND ADDITIONAL AMOUNTS
CREDITED
Sometimes sales of the contracts to groups of similarly situated individuals may
lower our administrative and/or sales expenses. We reserve the right to reduce
or waive certain charges and expenses when this type of sale occurs. In
addition, we may also credit additional interest to policies sold to such
groups. We determine which groups are eligible for such treatment. Some of the
criteria we evaluate to make a determination are: size of the group; amount of
expected Purchase Payments; relationship existing between us and prospective
purchaser; nature of the purchase; length of time a group of contracts is
expected to remain active; purpose of the purchase and whether that purpose
increases the likelihood that our expenses will be reduced; and/or any other
factors that we believe indicate that administrative and/or sales expenses may
be reduced.
Anchor National may make such a determination regarding sales to its employees,
it affiliates' employees and employees of currently contracted broker-dealers;
its registered representatives and immediate family members of all of those
described.
We reserve the right to change or modify any such determination or the treatment
applied to a particular group, at any time.
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INCOME OPTIONS
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ANNUITY DATE
During the Income Phase, we use the money accumulated in your contract to make
regular income payments to you. You may switch to the Income Phase any time
after your second contract anniversary. You select the month and year you want
income payments to begin. The first day of that month is the Annuity Date. You
may change your Annuity Date, so long as you do so at least seven days before
the income payments are scheduled to begin. Once you begin receiving income
payments, you cannot change your income option. Except as indicated under Option
5 below, once you begin receiving income payments, you cannot otherwise access
your money through a withdrawal or surrender.
Income payments must begin on or before your 90th birthday or on your tenth
contract anniversary, whichever occurs later. If you do not choose an Annuity
Date, your income payments will automatically begin on this date. Certain states
may require your income payments to start earlier.
If the Annuity Date is past your 85th birthday, your contract could lose its
status as an annuity under Federal tax laws. This may cause you to incur adverse
tax consequences.
In addition, most Qualified contracts require you to take minimum distributions
after you reach age 70 1/2. SEE TAXES ON PAGE 16.
INCOME OPTIONS
Currently, this Contract offers five standard income options. Other payout
options may be available. Contact the Annuity Service Center for more
information. If you elect to receive income payments but do not select an
option, your income payments will be made in accordance with Option 4. For
income payments based on joint lives, we pay according to Option 3.
We base our calculation of income payments on the life of the Annuitant and the
annuity rates set forth in your contract. As the contract owner, you may change
the Annuitant at any time prior to the Annuity Date. You must notify us if the
Annuitant dies before the Annuity Date and designate a new Annuitant.
OPTION 1 - LIFE INCOME ANNUITY
This option provides income payments for the life of the Annuitant. Income
payments stop when the Annuitant dies.
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OPTION 2 - JOINT AND SURVIVOR LIFE ANNUITY
This option provides income payments for the life of the Annuitant and for the
life of another designated person. Upon the death of either person, we will
continue to make income payments during the lifetime of the survivor. Income
payments stop when the survivor dies.
OPTION 3 - JOINT AND SURVIVOR LIFE ANNUITY WITH 10 OR 20 YEARS GUARANTEED
This option is similar to Option 2 above, with an additional guarantee of
payments for at least 10 years. If the Annuitant and the survivor die before all
of the guaranteed income payments have been made, the remaining payments are
made to the Beneficiary under your contract.
OPTION 4 - LIFE ANNUITY WITH 10 YEARS GUARANTEED
This option is similar to Option 1 above. In addition, this option provides a
guarantee that income payments will be made for at least 10 years. You select
the number of years. If the Annuitant dies before all guaranteed income payments
are made, the remaining income payments go to the Beneficiary under your
contract.
OPTION 5 - INCOME FOR A SPECIFIED PERIOD
This option provides income payments for a guaranteed period ranging from 5 to
30 years. If the Annuitant dies before all the guaranteed income payments are
made, the remaining income payments are made to the Beneficiary under your
contract. Additionally, if variable income payments are elected under this
option, you (or the Beneficiary under the contract if the Annuitant dies prior
to all guaranteed payments being made) may redeem the contract value after the
Annuity Date. The amount available upon such redemption would be the discounted
present value of any remaining guaranteed payments.
The value of an Annuity Unit, regardless of the option chosen, takes into
account the mortality and expense risk charge. Since Option 5 does not contain
an element of mortality risk, no benefit is derived from this charge.
Please read the Statement of Additional Information ("SAI") for a more detailed
discussion of the income options.
FIXED OR VARIABLE INCOME PAYMENTS
You can choose income payments that are fixed, variable or both. If at the date
when income payments begin you are invested in the Variable Portfolios only,
your income payments will be variable. If your money is only in fixed accounts
at that time, your income payments will be fixed in amount. Further, if you are
invested in both fixed and variable investment options when income payments
begin, your payments will be fixed and variable. If income payments are fixed,
Anchor National guarantees the amount of each payment. If the income payments
are variable, the amount is not guaranteed.
INCOME PAYMENTS
We make income payments on a monthly, quarterly, semiannual or annual basis. You
instruct us to send you a check or to have the payments directly deposited into
your bank account. If state law allows, we distribute annuities with a contract
value of $5,000 or less in a lump sum. Also, if the selected income option
results in income payments of less than $50 per payment, we may decrease the
frequency of payments, state law allowing.
If you are invested in the Variable Portfolios after the Annuity date, your
income payments vary depending on four things:
- for life options, your age when payments begin; and
- the value of your contract in the Variable Portfolios on the Annuity
Date; and
- the 3.5% assumed investment rate used in the annuity table for the
contract; and
- the performance of the Variable Portfolios in which you are invested
during the time you receive income payments.
If you are invested in both the fixed account options and the Variable
Portfolios after the Annuity Date, the allocation of funds between the fixed and
variable options also impacts the amount of your annuity payments.
TRANSFERS DURING THE INCOME PHASE
During the Income Phase, one transfer per month is permitted between the
Variable Portfolios. No other transfers are allowed during the Income Phase.
DEFERMENT OF PAYMENTS
We may defer making fixed payments for up to six months, or less if required by
law. Interest is credited to you during the deferral period.
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TAXES
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NOTE: WE PREPARED THE FOLLOWING INFORMATION ON TAXES AS A GENERAL DISCUSSION OF
THE SUBJECT. THIS INFORMATION ADDRESSES GENERAL FEDERAL TAXATION MATTERS, AND
GENERALLY DOES NOT ADDRESS STATE TAXATION ISSUES OR QUESTIONS. IT IS NOT TAX
ADVICE. WE CAUTION YOU TO SEEK COMPETENT TAX ADVICE ABOUT YOUR OWN
CIRCUMSTANCES. WE DO NOT GUARANTEE THE TAX STATUS OF YOUR ANNUITY. TAX LAWS
CONSTANTLY CHANGE, THEREFORE, WE CANNOT GUARANTEE THAT THE INFORMATION CONTAINED
HEREIN IS COMPLETE AND/OR ACCURATE.
ANNUITY CONTRACTS IN GENERAL
The Internal Revenue Code ("IRC") provides for special rules regarding the tax
treatment of annuity contracts. Generally, taxes on the earnings in your annuity
contract are deferred until you take the money out. Qualified retirement
investments
16
that satisfy specific tax and ERISA requirements automatically provide tax
deferral regardless of whether the underlying contract is an annuity, a trust,
or a custodial account. Different rules apply depending on how you take the
money out and whether your contract is Qualified or Non-Qualified.
If you do not purchase your contract under a pension plan, a specially sponsored
employer program or an individual retirement account, your contract is referred
to as a Non-Qualified contract. A Non-Qualified contract receives different tax
treatment than a Qualified contract. In general, your cost basis in a
Non-Qualified contract is equal to the Purchase Payments you put into the
contract. You have already been taxed on the cost basis in your contract.
If you purchase your contract under a pension plan, a specially sponsored
employer program or as an individual retirement account, your contract is
referred to as a Qualified contract. Examples of qualified plans are: Individual
Retirement Accounts ("IRAs"), Roth IRAs, Tax-Sheltered Annuities (referred to as
403(b) contracts), plans of self-employed individuals (often referred to as H.R.
10 Plans or Keogh Plans) and pension and profit sharing plans, including 401(k)
plans. Typically you have not paid any tax on the Purchase Payments used to buy
your contract and therefore, you have no cost basis in your contract. However,
you normally will have cost basis in a Roth IRA, and you may have cost basis in
a traditional IRA or in another Qualified Contract.
TAX TREATMENT OF DISTRIBUTIONS -
NON-QUALIFIED CONTRACTS
If you make a partial or total withdrawal from a Non-Qualified contract, the IRC
treats such a withdrawal as first coming from the earnings and then as coming
from your Purchase Payments. Purchase payments made prior to August 14, 1982,
however, are an important exception to this general rule, and for tax purposes
are treated as being distributed before the earnings on those contributions. If
you annuitize your contract, a portion of each income payment will be
considered, for tax purposes, to be a return of a portion of your Purchase
Payment(s). Any portion of each income payment that is considered a return of
your Purchase Payment will not be taxed. Withdrawn earnings are treated as
income to you and are taxable. The IRC provides for a 10% penalty tax on any
earnings that are withdrawn other than in conjunction with the following
circumstances: (1) after reaching age 59 1/2; (2) when paid to your Beneficiary
after you die; (3) after you become disabled (as defined in the IRC); (4) when
paid in a series of substantially equal installments made for your life or for
the joint lives of you and you Beneficiary; (5) under an immediate annuity; or
(6) which are attributable to Purchase Payments made prior to August 14, 1982.
TAX TREATMENT OF DISTRIBUTIONS - QUALIFIED CONTRACTS
Generally, you have not paid any taxes on the Purchase Payments used to buy a
Qualified contract. As a result, with certain limited exceptions, any amount of
money you take out as a withdrawal or as income payments is taxable income. The
IRC further provides for a 10% penalty tax on any taxable withdrawal or income
payment paid to you other than in conjunction with the following circumstances:
(1) after reaching age 59 1/2; (2) when paid to your Beneficiary after you die;
(3) after you become disabled (as defined in the IRC); (4) in a series of
substantially equal installments, made for your life or for the joint lives of
you and your Beneficiary, that begins after separation from service with the
employer sponsoring the plan; (5) to the extent such withdrawals do not exceed
limitations set by the IRC for deductible amounts paid during the taxable year
for medical care; (6) to fund higher education expenses (as defined in IRC; only
from an IRA); (7) to fund certain first-time home purchase expenses (only from
an IRA); and, except in the case of an IRA; (8) when you separate from service
after attaining age 55; and (9) when paid to an alternate payee pursuant to a
qualified domestic relations order.
The IRC limits the withdrawal of an employee's voluntary Purchase Payments to a
Tax-Sheltered Annuity (TSA). Withdrawals can only be made when an owner: (1)
reaches age 59 1/2; (2) severs employment with the employer; (3) dies; (4)
becomes disabled (as defined in the IRC); or (5) experiences a hardship (as
defined in the IRC). In the case of hardship, the owner can only withdraw
Purchase Payments. Additional plan limitations may also apply. Amounts held in a
TSA annuity contract as of December 31, 1988 are not subject to these
restrictions. Qualifying transfers of amounts from one TSA contract to another
TSA contract under section 403(b) or to a custodial account under section
403(b)(7), and qualifying transfers to a state defined benefit plan to purchase
service credits, are not considered distributions, and thus are not subject to
these withdrawal limitations. If amounts are transferred from a custodial
account described in Code section 403(b)(7) to this contract the transferred
amount will retain the custodial account withdrawal restrictions.
Withdrawals from other Qualified Contracts are often limited by the IRC and by
the employer's plan.
MINIMUM DISTRIBUTIONS
Generally, the IRS requires that you begin taking annual distributions from
qualified annuity contracts by April 1 of the calendar year following the later
of (1) the calendar year in which you attain age 70 1/2 or (2) the calendar year
in which you retire. If you own more than one TSA, you may be permitted to take
your annual distributions in any combination from your TSAs. A similar rule
applies if you own more than one IRA. However, you cannot satisfy this
distribution requirement for your TSA contract by taking a distribution
17
from an IRA, and you cannot satisfy the requirement for your IRA by taking a
distribution from a TSA.
You may be subject to a surrender charge on withdrawals taken to meet minimum
distribution requirements, if the withdrawals exceed the contract's maximum
penalty free amount.
Failure to satisfy the minimum distribution requirements may result in a tax
penalty. You should consult your tax advisor for more information.
You may elect to have the required minimum distribution amount on your contract
calculated and withdrawn each year under the automatic withdrawal option. You
may select either monthly, quarterly, semiannual or annual withdrawals for this
purpose. This service is provided as a courtesy and we do not guarantee the
accuracy of our calculations. Accordingly, we recommend you consult your tax
advisor concerning your required minimum distribution. You may terminate your
election for automated minimum distribution at any time by sending a written
request to our Annuity Service Center. We reserve the right to change or
discontinue this service at any time.
TAX TREATMENT OF DEATH BENEFITS
Any death benefits paid under the contract are taxable to the Beneficiary. The
rules governing the taxation of payments from an annuity contract, as discussed
above, generally apply whether the death benefits are paid as lump sum or
annuity payments. Estate taxes may also apply.
Certain enhanced death benefits may be purchased under your contract. Although
these types of benefits are used as investment protection and should not give
rise to any adverse tax effects, the IRS could take the position that some or
all of the charges for these death benefits should be treated as a partial
withdrawal from the contract. In such case, the amount of the partial withdrawal
may be includible in taxable income and subject to the 10% penalty if the owner
is under 59 1/2.
If you own a Qualified contract and purchase these enhanced death benefits, the
IRS may consider these benefits "incidental death benefits." The IRC imposes
limits on the amount of the incidental death benefits allowable for Qualified
contracts. If the death benefit(s) selected by you are considered to exceed
these limits, the benefit(s) could result in taxable income to the owner of the
Qualified contract. Furthermore, the IRC provides that the assets of an IRA
(including a Roth IRA) may not be invested in life insurance, but may provide,
in the case of death during the Accumulation Phase, for a death benefit payment
equal to the greater of Purchase Payments or Contract Value. This Contract
offers death benefits, which may exceed the greater of Purchase Payments or
Contract Value. If the IRS determines that these benefits are providing life
insurance, the contract may not qualify as an IRA (including Roth IRAs). You
should consult your tax adviser regarding these features and benefits prior to
purchasing a contract.
CONTRACTS OWNED BY A TRUST OR CORPORATION
A Trust or Corporation ("Non-Natural Owner") that is considering purchasing this
contract should consult a tax advisor. Generally, the IRC does not treat a
Non-Qualified contract owned by a non-natural owner as an annuity contract for
Federal income tax purposes. The non-natural owner pays tax currently on the
contract's value in excess of the owner's cost basis. However, this treatment is
not applied to a Contract held by a trust or other entity as an agent for a
natural person nor to Contracts held by Qualified Plans. See the SAI for a more
detailed discussion of the potential adverse tax consequences associated with
non-natural ownership of a non-qualified annuity contract.
GIFTS, PLEDGES AND/OR ASSIGNMENTS OF A NON-QUALIFIED CONTRACT
If you transfer ownership of your Non-Qualified contract to a person other than
your spouse (or former spouse incident to divorce) as a gift you will pay
federal income tax on the contract's cash value to the extent it exceeds your
cost basis. The recipient's cost basis will be increased by the amount on which
you will pay federal taxes. Also, the IRC treats any assignment or pledge (or
agreement to assign or pledge) of any portion of a Non-Qualified contract as a
withdrawal. See the SAI for a more detailed discussion regarding potential tax
consequences of gifting, assigning or pledging a non-qualified contract.
DIVERSIFICATION
The IRC imposes certain diversification requirements on the underlying
investments for a variable annuity. We believe that the underlying Variable
Portfolios' management monitors the Variable Portfolios so as to comply with
these requirements. To be treated as a variable annuity for tax purposes, the
underlying investments must meet these requirements.
The diversification regulations do not provide guidance as to the circumstances
under which you, and not Anchor National, would be considered the owner of the
shares of the Variable Portfolios under your Nonqualified Contract, because of
the degree of control you exercise over the underlying investments. This
diversification requirement is sometimes referred to as "investor control." It
is unknown to what extent owners are permitted to select investments, to make
transfers among Variable Portfolios or the number and type of Variable
Portfolios owners may select from. If any guidance is provided which is
considered a new position, then the guidance would generally be applied
prospectively. However, if such guidance is considered not to be a new position,
it may be applied retroactively. This would mean
18
you, as the owner of the Nonqualified Contract, could be treated as the owner of
the underlying Variable Portfolios. Due to the uncertainty in this area, we
reserve the right to modify the contract in an attempt to maintain favorable tax
treatment.
These investor control limitations generally do not apply to Qualified
Contracts, which are referred to as "Pension Plan Contracts" for purposes of
this rule, although the limitations could be applied to Qualified Contracts in
the future.
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PERFORMANCE
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We advertise the Cash Management Portfolio's yield and effective yield. In
addition, the other Variable Portfolios advertise total return, gross yield and
yield-to-maturity. These figures represent past performance of the Variable
Portfolios. These performance numbers do not indicate future results.
When we advertise performance for periods prior to the date the contracts were
first issued, we derive the figures from the performance of the corresponding
portfolios for the Trusts, if available. We modify these numbers to reflect
charges and expenses as if the contract was in existence during the period
stated in the advertisement. Figures calculated in this manner do not represent
actual historic performance of the particular Variable Portfolio.
Consult the Statement of Additional Information for more detailed information
regarding the calculation of performance data. The performance of each Variable
Portfolio may also be measured against unmanaged market indices. The indices we
use include but are not limited to the Dow Jones Industrial Average, the
Standard & Poor's 500, the Russell 1000 Growth Index, the Morgan Stanley Capital
International Europe, Australia and Far East Index ("EAFE") and the Morgan
Stanley Capital International World Index. We may compare the Variable
Portfolios' performance to that of other variable annuities with similar
objectives and policies as reported by independent ranking agencies such as
Morningstar, Inc., Lipper Analytical Services, Inc. or Variable Annuity Research
& Data Service ("VARDS").
Anchor National may also advertise the rating and other information assigned to
it by independent industry ratings organizations. Some of those organizations
are A.M. Best Company ("A.M. Best"), Moody's Investor's Service ("Moody's"),
Standard & Poor's Insurance Rating Services ("S&P"), and Duff & Phelps. A.M.
Best's and Moody's ratings reflect their current opinion of our financial
strength and performance in comparison to others in the life and health
insurance industry. S&P's and Fitch IBCA Duff & Phelps' ratings measure the
ability of an insurance company to meet its obligations under insurance policies
it issues. These two ratings do not measure the insurer's ability to meet
non-policy obligations. Ratings in general do not relate to the performance of
the Variable Portfolios.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
OTHER INFORMATION
- ----------------------------------------------------------------
- ----------------------------------------------------------------
ANCHOR NATIONAL
Anchor National is a stock life insurance company originally organized under the
laws of the state of California in April 1965. On January 1, 1996, Anchor
National redomesticated under the laws of the state of Arizona.
Anchor National and its affiliates, SunAmerica Life Insurance Company, First
SunAmerica Life Insurance Company, SunAmerica Asset Management Corp., and the
SunAmerica Financial Network, Inc. (comprising six wholly-owned broker-dealers),
specialize in retirement savings and investment products and services. Business
focuses include fixed and variable annuities, mutual funds, broker-dealer
services and trust administration services.
THE SEPARATE ACCOUNT
Anchor National originally established a separate account, Variable Separate
Account ("separate account"), under Arizona law on January 1, 1996 when it
assumed the separate account, originally established under California law on
June 25, 1981. The separate account is registered with the SEC as a unit
investment trust under the Investment Company Act of 1940, as amended.
Anchor National owns the assets in the separate account. However, the assets in
the separate account are not chargeable with liabilities arising out of any
other business conducted by Anchor National. Income gains and losses (realized
and unrealized) resulting from assets in the separate account are credited to or
charged against the separate account without regard to other income gains or
losses of Anchor National. Assets in the separate account are not guaranteed by
Anchor National.
THE GENERAL ACCOUNT
Money allocated to the fixed account options goes into Anchor National's general
account. The general account consists of all of Anchor National's assets other
than assets attributable to a separate account. All of the assets in the general
account are chargeable with the claims of any Anchor National contract holders
as well as all of its creditors. The general account funds are invested as
permitted under state insurance laws.
DISTRIBUTION OF THE CONTRACT
Registered representatives of broker-dealers sell the contract. We pay
commissions to these representatives for the sale of the contracts. We do not
expect the total commissions to exceed 7% of your Purchase Payments. We may also
pay a bonus to representatives for contracts which stay active for a particular
period of time, in addition to standard commissions. We do not deduct
commissions paid to registered representatives directly from your Purchase
Payments.
19
From time to time, we may pay or allow additional promotional incentives in the
form of cash or other compensation. We reserve the right to offer these
additional incentives only to certain broker-dealers that sell or are expected
to sell, certain minimum amounts of the contract, or other contracts offered by
us. Promotional incentives may change at any time.
SunAmerica Capital Services, Inc., 733 Third Avenue, 4th Floor, New York, New
York 10017 distributes the contracts. SunAmerica Capital Services, an affiliate
of Anchor National, is registered as a broker-dealer under the Exchange Act of
1934 and is a member of the National Association of Securities Dealers, Inc. No
underwriting fees are paid in connection with the distribution of the contracts.
ADMINISTRATION
We are responsible for the administrative servicing of your contract. Please
contact our Annuity Service Center at 1-800-445-SUN2, if you have any comment,
question or service request.
During the Accumulation Phase, you will receive confirmation of transactions
within your contract. Transactions made pursuant to contractual or systematic
agreements, such as deduction of the annual maintenance fee and dollar cost
averaging, may be confirmed quarterly. Purchase Payments received through the
automatic payment plan or a salary reduction arrangement, may also be confirmed
quarterly. For all other transactions, we send confirmations immediately.
During the Accumulation and Income Phases, you will receive a statement of your
transactions over the past quarter and a summary of your account values.
It is your responsibility to review these documents carefully and notify us of
any inaccuracies immediately. We investigate all inquiries. To the extent that
we believe we made an error, we retroactively adjust your contract, provided you
notify us within 30 days of receiving the transaction confirmation or quarterly
statement. Any other adjustments we deem warranted are made as of the time we
receive notice of the error.
LEGAL PROCEEDINGS
There are no pending legal proceedings affecting the separate account. Anchor
National and its subsidiaries engage in various kinds of routine litigation. In
management's opinion, these matters are not of material importance to their
respective total assets nor are they material with respect to the separate
account.
OWNERSHIP
The Polaris Variable Annuity is a Flexible Payment Group Deferred Annuity
contract. We issue a group contract to a contract holder for the benefit of the
participants in the group. As a participant in the group, you will receive a
certificate which evidences your ownership. As used in this prospectus, the term
contract refers to your certificate. In some states, a Flexible Payment
Individual Modified Guaranteed and Variable Deferred Annuity contract is
available instead. Such a contract is identical to the contract described in
this prospectus, with the exception that we issue it directly to the owner.
CUSTODIAN
State Street Bank and Trust Company, 255 Franklin Street, Boston, Massachusetts
02110, serves as the custodian of the assets of the separate account. Anchor
National pays State Street Bank for services provided, based on a schedule of
fees.
INDEPENDENT ACCOUNTANTS
The audited consolidated financial statements of the AIG SunAmerica Life
Assurance Company (formerly, Anchor National Life Insurance Company) at December
31, 2001 and 2000, and for the years ended December 31, 2001, 2000 and 1999, and
financial statements of the separate account at December 31, 2001, and for the
years ended December 31, 2001 and 2000, are incorporated by reference in this
prospectus have been so included on reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in accounting and auditing.
LEGAL MATTERS
There are no pending legal proceedings affecting the Separate Account. Anchor
National and its subsidiaries engage in various kinds of routine litigation. In
management's opinion these matters are not of material importance to the
Company's total assets, with the potential exception of McMurdie, et al. v.
SunAmerica Inc., et al, Case No. BC 194082, filed on July 10, 1998 in the
Superior Court for the County of Los Angeles. This lawsuit is a representative
action wherein the plaintiffs allege violations of California's Business and
Professions Code Sections 17200 et seq. The Company is vigorously defending the
lawsuit. The probability of any particular outcome is not reasonably estimable
at this time.
REGISTRATION STATEMENT
A registration statement has been filed with the SEC under the Securities Act of
1933 relating to the contract. This prospectus does not contain all the
information in the registration statement as permitted by SEC regulations. The
omitted information can be obtained from the SEC's principal office in
Washington, D.C., upon payment of a prescribed fee.
20
- ----------------------------------------------------------------
- ----------------------------------------------------------------
TABLE OF CONTENTS OF
STATEMENT OF ADDITIONAL INFORMATION
- ----------------------------------------------------------------
- ----------------------------------------------------------------
Additional information concerning the operations of the separate account is
contained in a Statement of Additional Information ("SAI"), which is available
without charge upon written request addressed to us at our Annuity Service
Center, P.O. Box 54299, Los Angeles, California 90054-0299 or by calling
(800)445-SUN2. The contents of the SAI are tabulated below.
<Table>
Separate Account.............................. 3
General Account............................... 3
Performance Data.............................. 4
Income Payments............................... 9
Annuity Unit Values........................... 10
Taxes......................................... 12
Distribution of Contracts..................... 16
Financial Statements.......................... 16
</Table>
21
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
APPENDIX A -- CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<Table>
<Caption>
FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR 11/30/99-
PORTFOLIOS 11/30/94 11/30/95 11/30/96 11/30/97 11/30/98 11/30/99 12/31/99
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Capital Appreciation (Inception Date -- 2/12/93)
Beginning AUV...... $ 11.14 $ 10.64 $ 14.19 $ 17.63 $ 21.26 $ 23.72 $ 36.39
Ending AUV......... $ 10.64 $ 14.19 $ 17.63 $ 21.26 $ 23.72 $ 36.39 $ 43.17
Ending Number of
AUs.............. 8,462,152 13,247,155 20,470,395 24,889,133 24,068,557 21,898,142 21,764,629
- -----------------------------------------------------------------------------------------------------------------------
Government and Quality Bond (Inception Date -- 2/22/93)
Beginning AUV...... $ 10.32 $ 9.81 $ 11.51 $ 11.94 $ 12.65 $ 13.66 $ 13.37
Ending AUV......... $ 9.81 $ 11.51 $ 11.94 $ 12.65 $ 13.66 $ 13.37 $ 13.28
Ending Number of
AUs.............. 7,008,717 8,504,677 9,176,239 10,047,042 14,076,819 12,612,572 12,309,470
- -----------------------------------------------------------------------------------------------------------------------
Growth (Inception Date -- 2/19/93)
Beginning AUV...... $ 10.78 $ 10.41 $ 12.95 $ 16.32 $ 20.31 $ 24.41 $ 29.74
Ending AUV......... $ 10.41 $ 12.95 $ 16.32 $ 20.31 $ 24.41 $ 29.74 $ 32.61
Ending Number of
AUs.............. 3,950,678 5,968,263 7,557,844 9,747,428 9,838,138 8,941,621 8,878,474
- -----------------------------------------------------------------------------------------------------------------------
Natural Resources (Inception Date -- 10/31/94)
Beginning AUV...... $ 10.00 $ 9.27 $ 10.78 $ 12.13 $ 11.14 $ 9.30 $ 11.40
Ending AUV......... $ 9.27 $ 10.78 $ 12.13 $ 11.14 $ 9.30 $ 11.40 $ 12.50
Ending Number of
AUs.............. 51,412 848,159 2,171,050 2,937,198 2,605,274 2,283,074 2,218,703
- -----------------------------------------------------------------------------------------------------------------------
Aggressive Growth (Inception Date -- 6/3/96)
Beginning AUV...... -- -- $ 10.00 $ 10.29 $ 11.51 $ 11.86 $ 19.02
Ending AUV......... -- -- $ 10.29 $ 11.51 $ 11.86 $ 19.02 $ 24.30
Ending Number of
AUs.............. -- -- 3,165,900 7,215,024 7,059,502 7,354,489 7,476,506
- -----------------------------------------------------------------------------------------------------------------------
Alliance Growth (Inception Date -- 2/9/93)
Beginning AUV...... $ 10.78 $ 10.53 $ 15.44 $ 19.46 $ 24.51 $ 32.81 $ 44.31
Ending AUV......... $ 10.53 $ 15.44 $ 19.46 $ 24.51 $ 32.81 $ 44.31 $ 48.56
Ending Number of
AUs.............. 4,997,778 10,560,070 18,333,555 24,050,697 24,146,276 26,154,552 25,819,661
- -----------------------------------------------------------------------------------------------------------------------
Asset Allocation (Inception Date -- 7/1/93)
Beginning AUV...... $ 10.30 $ 10.17 $ 12.64 $ 14.97 $ 17.98 $ 18.22 $ 19.10
Ending AUV......... $ 10.17 $ 12.64 $ 14.97 $ 17.98 $ 18.22 $ 19.10 $ 19.81
Ending Number of
AUs.............. 10,372,954 15,418,350 19,940,733 25,272,776 26,043,996 21,080,060 20,767,631
- -----------------------------------------------------------------------------------------------------------------------
Blue Chip Growth (Inception Date -- 7/6/00)
Beginning AUV...... -- -- -- -- -- -- --
Ending AUV......... -- -- -- -- -- -- --
Ending Number of
AUs.............. -- -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Cash Management (Inception Date -- 4/1/99)
Beginning AUV...... $ 10.07 $ 10.27 $ 10.67 $ 11.04 $ 4.43 $ 11.83 $ 12.20
Ending AUV......... $ 10.27 $ 10.67 $ 11.04 $ 11.43 $ 11.83 $ 12.20 $ 12.25
Ending Number of
AUs.............. 8,623,034 8,372,979 8,005,908 11,224,451 11,160,200 15,616,078 16,598,506
- -----------------------------------------------------------------------------------------------------------------------
<Caption>
FISCAL YEAR FISCAL YEAR
PORTFOLIOS 12/31/00 12/31/01
- -------------------------------------------------
Capital Appreciation (Inception Date -- 2/12/93)
Beginning AUV...... $ 43.17 $ 39.336
Ending AUV......... $ 39.34 $ 33.864
Ending Number of
AUs.............. 19,417,165 16,861,232
- --------------------------------------------------------------
Government and Quality Bond (Inception Date -- 2/22/93)
Beginning AUV...... $ 13.28 $ 14.557
Ending AUV......... $ 14.56 $ 15.330
Ending Number of
AUs.............. 11,021,940 11,075,554
- ---------------------------------------------------------------------------
Growth (Inception Date -- 2/19/93)
Beginning AUV...... $ 32.61 $ 31.785
Ending AUV......... $ 31.78 $ 27.208
Ending Number of
AUs.............. 8,227,437 7,201,303
- ----------------------------------------------------------------------------------------
Natural Resources (Inception Date -- 10/31/94)
Beginning AUV...... $ 12.50 $ 14.706
Ending AUV......... $ 14.71 $ 14.327
Ending Number of
AUs.............. 1,957,242 1,779,774
- -----------------------------------------------------------------------------------------------------
Aggressive Growth (Inception Date -- 6/3/96)
Beginning AUV...... $ 24.30 $ 20.283
Ending AUV......... $ 20.28 $ 13.648
Ending Number of
AUs.............. 7,669,322 5,764,274
- ------------------------------------------------------------------------------------------------------------------
Alliance Growth (Inception Date -- 2/9/93)
Beginning AUV...... $ 48.56 $ 38.509
Ending AUV......... $ 38.51 $ 32.621
Ending Number of
AUs.............. 23,095,125 19,224,052
- -----------------------------------------------------------------------------------------------------------------------
Asset Allocation (Inception Date -- 7/1/93)
Beginning AUV...... $ 19.81 $ 19.448
Ending AUV......... $ 19.45 $ 18.614
Ending Number of
AUs.............. 17,268,857 14,847,409
- -----------------------------------------------------------------------------------------------------------------------
Blue Chip Growth (Inception Date -- 7/6/00)
Beginning AUV...... $ 10.00 $ 8.569
Ending AUV......... $ 8.57 $ 6.692
Ending Number of
AUs.............. 330,806 718,225
- -----------------------------------------------------------------------------------------------------------------------
Cash Management (Inception Date -- 4/1/99)
Beginning AUV...... $ 12.25 $ 12.793
Ending AUV......... $ 12.79 $ 13.062
Ending Number of
AUs.............. 12,837,919 10,749,535
- -----------------------------------------------------------------------------------------------------------------------
</Table>
A-1
<Table>
<Caption>
FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR 11/30/99-
PORTFOLIOS 11/30/94 11/30/95 11/30/96 11/30/97 11/30/98 11/30/99 12/31/99
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Corporate Bond (Inception Date -- 7/1/93)
Beginning AUV...... $ 10.12 $ 9.63 $ 11.10 $ 11.65 $ 12.54 $ 13.15 $ 12.78
Ending AUV......... $ 9.63 $ 11.10 $ 11.65 $ 12.54 $ 13.15 $ 12.78 $ 12.76
Ending Number of
AUs.............. 1,643,694 2,623,065 3,059,808 4,235,990 5,896,471 5,339,302 5,225,508
- -----------------------------------------------------------------------------------------------------------------------
"Dogs" of Wall Street (Inception Date -- 4/1/98)
Beginning AUV...... -- -- -- -- $ 10.00 $ 9.71 $ 9.12
Ending AUV......... -- -- -- -- $ 9.71 $ 9.12 $ 8.99
Ending Number of
AUs.............. -- -- -- -- 1,450,214 1,509,434 1,368,990
- -----------------------------------------------------------------------------------------------------------------------
Emerging Markets (Inception Date -- 6/2/97)
Beginning AUV...... -- -- -- $ 10.00 $ 7.97 $ 6.14 $ 8.99
Ending AUV......... -- -- -- $ 7.97 $ 6.14 $ 8.99 $ 10.77
Ending Number of
AUs.............. -- -- -- 1,751,922 1,352,484 1,956,342 2,341,461
- -----------------------------------------------------------------------------------------------------------------------
Federated Value (Inception Date -- 6/3/96)
Beginning AUV...... -- -- $ 10.00 $ 11.00 $ 13.62 $ 15.86 $ 16.43
Ending AUV......... -- -- $ 11.00 $ 13.62 $ 15.86 $ 16.43 $ 16.89
Ending Number of
AUs.............. -- -- 1,021,137 3,095,513 4,255,000 4,164,599 4,001,010
- -----------------------------------------------------------------------------------------------------------------------
Global Bond (Inception Date -- 7/1/93)
Beginning AUV...... $ 10.25 $ 9.78 $ 11.20 $ 12.25 $ 13.08 $ 14.40 $ 14.11
Ending AUV......... $ 9.78 $ 11.20 $ 12.25 $ 13.08 $ 14.40 $ 14.11 $ 14.09
Ending Number of
AUs.............. 4,532,386 5,288,158 5,413,149 6,164,455 5,906,756 5,199,731 4,972,504
- -----------------------------------------------------------------------------------------------------------------------
Global Equities (Inception Date -- 2/9/93)
Beginning AUV...... $ 10.86 $ 11.43 $ 13.01 $ 15.15 $ 16.90 $ 19.21 $ 24.20
Ending AUV......... $ 11.43 $ 13.01 $ 15.15 $ 16.90 $ 19.21 $ 24.20 $ 26.57
Ending Number of
AUs.............. 11,705,418 12,350,883 15,583,207 18,376,185 17,594,064 15,218,999 15,364,906
- -----------------------------------------------------------------------------------------------------------------------
Goldman Sachs Research (Inception Date -- 7/5/00)
Beginning AUV...... -- -- -- -- -- -- --
Ending AUV......... -- -- -- -- -- -- --
Ending Number of
AUs.............. -- -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Growth-Income (Inception Date -- 2/9/93)
Beginning AUV...... $ 10.47 $ 10.09 $ 13.32 $ 16.70 $ 21.41 $ 25.71 $ 33.11
Ending AUV......... $ 10.09 $ 13.32 $ 16.70 $ 21.41 $ 25.71 $ 33.11 $ 35.91
Ending Number of
AUs.............. 8,329,322 12,560,865 18,546,142 24,795,824 25,801,808 24,491,425 24,109,131
- -----------------------------------------------------------------------------------------------------------------------
Growth Opportunities (Inception Date -- 7/6/00)
Beginning AUV...... -- -- -- -- -- -- --
Ending AUV......... -- -- -- -- -- -- --
Ending Number of
AUs.............. -- -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
<Caption>
FISCAL YEAR FISCAL YEAR
PORTFOLIOS 12/31/00 12/31/01
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Corporate Bond (Inception Date -- 7/1/93)
Beginning AUV...... $ 12.76 $ 13.190
Ending AUV......... $ 13.19 $ 13.972
Ending Number of
AUs.............. 4,344,051 5,023,156
- -----------------------------------------------------------------------------------------------------------------------
"Dogs" of Wall Street (Inception Date -- 4/1/98)
Beginning AUV...... $ 8.99 $ 9.122
Ending AUV......... $ 9.12 $ 9.692
Ending Number of
AUs.............. 968,656 1,372,946
- -----------------------------------------------------------------------------------------------------------------------
Emerging Markets (Inception Date -- 6/2/97)
Beginning AUV...... $ 10.77 $ 6.755
Ending AUV......... $ 6.75 $ 6.539
Ending Number of
AUs.............. 2,086,312 1,798,703
- -----------------------------------------------------------------------------------------------------------------------
Federated Value (Inception Date -- 6/3/96)
Beginning AUV...... $ 16.89 $ 17.029
Ending AUV......... $ 17.03 $ 16.381
Ending Number of
AUs.............. 3,255,076 4,065,034
- -----------------------------------------------------------------------------------------------------------------------
Global Equities (Inception Date -- 2/9/93)
Beginning AUV...... $ 14.09 $ 15.158
Ending AUV......... $ 15.16 $ 15.678
Ending Number of
AUs.............. 4,219,650 3,668,692
- -----------------------------------------------------------------------------------------------------------------------
Growth-Income (Inception Date -- 2/9/93)
Beginning AUV...... $ 26.57 $ 21.653
Ending AUV......... $ 21.65 $ 17.472
Ending Number of
AUs.............. 13,718,168 11,040,552
- -----------------------------------------------------------------------------------------------------------------------
Goldman Sachs Research (Inception Date -- 7/5/00)
Beginning AUV...... $ 10.00 $ 9.735
Ending AUV......... $ 9.74 $ 7.173
Ending Number of
AUs.............. 887,882 462,829
- -----------------------------------------------------------------------------------------------------------------------
Growth-Income (Inception Date -- 2/9/93)
Beginning AUV...... $ 35.91 $ 32.417
Ending AUV......... $ 32.42 $ 26.847
Ending Number of
AUs.............. 22,388,200 19,215,798
- -----------------------------------------------------------------------------------------------------------------------
Growth Opportunities (Inception Date -- 7/6/00)
Beginning AUV...... $ 10.00 $ 8.829
Ending AUV......... $ 8.83 $ 5.807
Ending Number of
AUs.............. 828,752 970,417
- -----------------------------------------------------------------------------------------------------------------------
</Table>
A-2
<Table>
<Caption>
FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR 11/30/99-
PORTFOLIOS 11/30/94 11/30/95 11/30/96 11/30/97 11/30/98 11/30/99 12/31/99
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
High-Yield Bond (Inception Date -- 2/9/93)
Beginning AUV...... $ 10.98 $ 10.35 $ 11.48 $ 12.99 $ 14.66 $ 14.25 $ 14.71
Ending AUV......... $ 10.35 $ 11.48 $ 12.99 $ 14.66 $ 14.25 $ 14.71 $ 14.87
Ending Number of
AUs.............. 5,370,944 7,075,451 8,358,195 11,443,250 12,597,083 10,532,444 10,247,398
- -----------------------------------------------------------------------------------------------------------------------
International Diversified Equities (Inception Date -- 10/31/94)
Beginning AUV...... $ 10.00 $ 9.77 $ 10.07 $ 11.39 $ 11.62 $ 13.53 $ 15.49
Ending AUV......... $ 9.77 $ 10.07 $ 11.39 $ 11.62 $ 13.53 $ 15.49 $ 16.92
Ending Number of
AUs.............. 271,316 4,659,066 12,762,343 18,010,557 17,917,499 16,071,377 15,905,912
- -----------------------------------------------------------------------------------------------------------------------
International Growth and Income (Inception Date -- 6/2/97)
Beginning AUV...... -- -- -- $ 10.00 $ 10.33 $ 11.16 $ 13.40
Ending AUV......... -- -- -- $ 10.33 $ 11.16 $ 13.40 $ 14.07
Ending Number of
AUs.............. -- -- -- 2,721,228 3,306,665 4,307,535 4,319,856
- -----------------------------------------------------------------------------------------------------------------------
MFS Growth and Income (Inception Date -- 2/9/93)
Beginning AUV...... $ 10.65 $ 9.79 $ 12.81 $ 14.94 $ 17.63 $ 20.46 $ 22.55
Ending AUV......... $ 9.79 $ 12.81 $ 14.94 $ 17.63 $ 20.46 $ 22.55 $ 23.67
Ending Number of
AUs.............. 10,477,818 11,457,899 12,077,737 11,714,450 10,439,634 9,723,097 9,598,954
- -----------------------------------------------------------------------------------------------------------------------
MFS Mid-Cap Growth (Inception Date -- 4/1/99)
Beginning AUV...... -- -- -- -- -- -- $ 14.23
Ending AUV......... -- -- -- -- -- $ 14.23 $ 16.31
Ending Number of
AUs.............. -- -- -- -- -- 869,761 1,068,886
- -----------------------------------------------------------------------------------------------------------------------
MFS Total Return (Inception Date -- 10/31/94)
Beginning AUV...... $ 10.00 $ 9.95 $ 12.33 $ 13.82 $ 15.45 $ 17.28 $ 18.50
Ending AUV......... $ 9.95 $ 12.33 $ 13.82 $ 15.45 $ 17.28 $ 18.50 $ 18.60
Ending Number of
AUs.............. 51,759 2,441,901 4,583,234 5,415,312 5,465,650 5,719,070 5,709,183
- -----------------------------------------------------------------------------------------------------------------------
Putnam Growth (Inception Date -- 2/9/93)
Beginning AUV...... $ 9.92 $ 9.79 $ 12.60 $ 14.88 $ 18.47 $ 22.29 $ 28.36
Ending AUV......... $ 9.79 $ 12.60 $ 14.88 $ 18.47 $ 22.29 $ 28.36 $ 31.67
Ending Number of
AUs.............. 7,610,104 8,932,998 10,354,025 11,336,732 12,052,558 11,402,199 11,286,031
- -----------------------------------------------------------------------------------------------------------------------
Real Estate (Inception Date -- 6/2/97)
Beginning AUV...... -- -- -- $ 10.00 $ 11.44 $ 9.80 $ 8.50
Ending AUV......... -- -- -- $ 11.44 $ 9.80 $ 8.50 $ 8.91
Ending Number of
AUs.............. -- -- -- 1,632,804 2,521,169 2,159,442 1,934,426
- -----------------------------------------------------------------------------------------------------------------------
SunAmerica Balanced (Inception Date -- 6/3/96)
Beginning AUV...... -- -- $ 10.00 $ 11.04 $ 13.22 $ 15.60 $ 18.23
Ending AUV......... -- -- $ 11.04 $ 13.22 $ 15.60 $ 18.23 $ 19.69
Ending Number of
AUs.............. -- -- 817,039 2,447,948 4,179,545 5,352,344 5,364,585
- -----------------------------------------------------------------------------------------------------------------------
<Caption>
FISCAL YEAR FISCAL YEAR
PORTFOLIOS 12/31/00 12/31/01
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
High-Yield Bond (Inception Date -- 2/9/93)
Beginning AUV...... $ 14.87 $ 13.278
Ending AUV......... $ 13.28 $ 12.511
Ending Number of
AUs.............. 8,339,613 7,529,500
- -----------------------------------------------------------------------------------------------------------------------
International Diversified Equities (Inception Date -- 10/31/94)
Beginning AUV...... $ 16.92 $ 13.614
Ending AUV......... $ 13.61 $ 10.196
Ending Number of
AUs.............. 14,143,933 11,775,969
- -----------------------------------------------------------------------------------------------------------------------
International Growth and Income (Inception Date -- 6/2/97)
Beginning AUV...... $ 14.07 $ 14.023
Ending AUV......... $ 14.02 $ 10.743
Ending Number of
AUs.............. 4,771,471 4,012,997
- -----------------------------------------------------------------------------------------------------------------------
MFS Growth and Income (Inception Date -- 2/9/93)
Beginning AUV...... $ 23.67 $ 23.224
Ending AUV......... $ 23.22 $ 19.203
Ending Number of
AUs.............. 8,247,309 7,261,760
- -----------------------------------------------------------------------------------------------------------------------
MFS Mid-Cap Growth (Inception Date -- 4/1/99)
Beginning AUV...... $ 16.31 $ 17.607
Ending AUV......... $ 17.61 $ 13.420
Ending Number of
AUs.............. 4,096,885 3,490,131
- -----------------------------------------------------------------------------------------------------------------------
MFS Total Return (Inception Date -- 10/31/94)
Beginning AUV...... $ 18.60 $ 21.433
Ending AUV......... $ 21.43 $ 21.225
Ending Number of
AUs.............. 5,030,406 6,081,406
- -----------------------------------------------------------------------------------------------------------------------
Putnam Growth (Inception Date -- 2/9/93)
Beginning AUV...... $ 31.67 $ 25.556
Ending AUV......... $ 25.56 $ 19.097
Ending Number of
AUs.............. 10,145,801 8,052,999
- -----------------------------------------------------------------------------------------------------------------------
Real Estate (Inception Date -- 6/2/97)
Beginning AUV...... $ 8.91 $ 10.856
Ending AUV......... $ 10.86 $ 11.339
Ending Number of
AUs.............. 2,146,190 2,089,006
- -----------------------------------------------------------------------------------------------------------------------
SunAmerica Balanced (Inception Date -- 6/3/96)
Beginning AUV...... $ 19.69 $ 17.560
Ending AUV......... $ 17.56 $ 15.021
Ending Number of
AUs.............. 5,126,272 4,210,209
- -----------------------------------------------------------------------------------------------------------------------
</Table>
A-3
<Table>
<Caption>
FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR 11/30/99-
PORTFOLIOS 11/30/94 11/30/95 11/30/96 11/30/97 11/30/98 11/30/99 12/31/99
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Technology (Inception Date -- 7/5/00)
Beginning AUV...... -- -- -- -- -- -- --
Ending AUV......... -- -- -- -- -- -- --
Ending Number of
AUs.............. -- -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Telecom Utility (Inception Date -- 6/3/96)
Beginning AUV...... -- -- $ 10.00 $ 10.67 $ 12.74 $ 14.56 $ 15.16
Ending AUV......... -- -- $ 10.67 $ 12.74 $ 14.56 $ 15.16 $ 15.11
Ending Number of
AUs.............. -- -- 543,461 1,541,346 2,120,487 2,046,427 2,024,299
- -----------------------------------------------------------------------------------------------------------------------
Davis Venture Value (Inception Date -- 10/31/94)
Beginning AUV...... $ 10.00 $ 9.77 $ 13.29 $ 16.68 $ 21.30 $ 23.36 $ 26.57
Ending AUV......... $ 9.77 $ 13.29 $ 16.68 $ 21.30 $ 23.36 $ 26.57 $ 27.88
Ending Number of
AUs.............. 355,083 11,270,792 29,247,554 44,892,446 46,069,429 42,175,145 41,825,421
- -----------------------------------------------------------------------------------------------------------------------
Worldwide High Income (Inception Date -- 10/31/94)
Beginning AUV...... $ 10.00 $ 9.95 $ 11.36 $ 14.20 $ 15.98 $ 13.57 $ 15.23
Ending AUV......... $ 9.95 $ 11.36 $ 14.20 $ 15.98 $ 13.57 $ 15.23 $ 15.70
Ending Number of
AUs.............. 53,315 1,040,828 3,196,739 6,368,247 5,463,589 4,234,687 4,110,589
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
<Caption>
FISCAL YEAR FISCAL YEAR
PORTFOLIOS 12/31/00 12/31/01
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Technology (Inception Date -- 7/5/00)
Beginning AUV...... $ 10.00 $ 6.692
Ending AUV......... $ 6.69 $ 3.452
Ending Number of
AUs.............. 1,818,833 1,792,428
- -----------------------------------------------------------------------------------------------------------------------
Telecom Utility (Inception Date -- 6/3/96)
Beginning AUV...... $ 15.11 13.538
Ending AUV......... $ 13.54 11.504
Ending Number of
AUs.............. 1,711,385 1,356,237
- -----------------------------------------------------------------------------------------------------------------------
Davis Venture Value (Inception Date -- 10/31/94)
Beginning AUV...... $ 27.88 30.052
Ending AUV......... $ 30.05 26.245
Ending Number of
AUs.............. 38,384,619 34,548,238
- -----------------------------------------------------------------------------------------------------------------------
Worldwide High Income (Inception Date -- 10/31/94)
Beginning AUV...... $ 15.70 15.005
Ending AUV......... $ 15.00 14.299
Ending Number of
AUs.............. 3,413,896 2,780,936
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</Table>
AUV -- Accumulation Unit Value
AU -- Accumulation Units
A-4
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
APPENDIX B -- MARKET VALUE ADJUSTMENT ("MVA")
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The MVA reflects the impact that changing interest rates have on the value of
money invested at a fixed interest rate. The longer the period of time remaining
in the term you initially agreed to leave your money in the fixed account
option, the greater the impact of changing interest rates. The impact of the MVA
can be either positive or negative, and is computed by multiplying the amount
withdrawn, transferred or switched to the Income Phase by the following factor:
[(1+I/(1+J+0.005)](N/12) - 1
The MVA formula may differ in certain states
where:
I is the interest rate you are earning on the money invested in the
fixed account option;
J is the interest rate then currently available for the period of time
equal to the number of years remaining in the term you initially agreed
to leave your money in the fixed account option; and
N is the number of full months remaining in the term you initially
agreed to leave your money in the fixed account option.
EXAMPLES OF THE MVA
The examples below assume the following:
(1) You made an initial Purchase Payment of $10,000 and allocated it to the
10-year fixed account option at a rate of 5%;
(2) You make a partial withdrawal of $4,000 when 1 1/2 years (18 months)
remain in the 10-year term you initially agreed to leave your money in
the fixed account option (N=18); and
(3) You have not made any other transfers, additional Purchase Payments, or
withdrawals.
No withdrawal charges are reflected because your Purchase Payment has been in
the contract for seven full years. If a withdrawal charge applies, it is
deducted before the MVA. The MVA is assessed on the amount withdrawn less any
withdrawal charges.
POSITIVE ADJUSTMENT
Assume that on the date of withdrawal, the interest rate in effect for a new
Purchase Payments in the 1-year fixed account option is 3.5% and the 3-year
fixed account option is 4.5%. By linear interpolation, the interest rate for the
remaining 2 years (1 1/2 years rounded up to the next full year) in the contract
is calculated to be 4%.
The MVA factor is = [(1+I/(1+J+0.005)](N/12) - 1
= [(1.05)/(1.04+0.005)](18/12) - 1
= (1.004785)(1.5) - 1
= 1.007186 - 1
= + 0.007186
The requested withdrawal amount is multiplied by the MVA factor to determine the
MVA:
$4,000 x (+0.007186) = +$28.74
$28.74 represents the MVA that would be added to your withdrawal.
NEGATIVE ADJUSTMENT
Assume that on the date of withdrawal, the interest rate in effect for new
Purchase Payments in the 1-year fixed account option is 5.5% and the 3-year
fixed account option is 6.5%. By linear interpolation, the interest rate for the
remaining 2 years (1 1/2 years rounded up to the next full year) in the contract
is calculated to be 6%.
The MVA factor is = [(1+I)/(1+J+0.005)](N/12) - 1
= [(1.05)/(1.06+0.005)](18/12) - 1
= (0.985915)(1.5) - 1
= 0.978948 - 1
= - 0.021052
The requested withdrawal amount is multiplied by the MVA factor to determine the
MVA:
$4,000 X (- 0.021052) = -$84.21
$84.21 represents the MVA that will be deducted from the money remaining in the
10-year fixed account option.
B-1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
APPENDIX C -- PREMIUM TAXES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Premium taxes vary according to the state and are subject to change without
notice. In many states, there is no tax at all. Listed below are the current
premium tax rates in those states that assess a premium tax. For current
information, you should consult your tax adviser.
<Table>
<Caption>
QUALIFIED NON-QUALIFIED
STATE CONTRACT CONTRACT
========================================================================================
California 0.50% 2.35%
- ----------------------------------------------------------------------------------------
Maine 0% 2.0%
- ----------------------------------------------------------------------------------------
Nevada 0% 3.5%
- ----------------------------------------------------------------------------------------
South Dakota 0% 1.25%*
- ----------------------------------------------------------------------------------------
West Virginia 1.0% 1.0%
- ----------------------------------------------------------------------------------------
Wyoming 0% 1.0%
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
</Table>
*On the first $500,000 of premiums; 0.80% on the amount in excess of
$500,000.
C-1
- --------------------------------------------------------------------------------
Please forward a copy (without charge) of the Polaris Variable Annuity
Statement of Additional Information to:
(Please print or type and fill in all information.)
------------------------------------------------------------------------
Name
------------------------------------------------------------------------
Address
------------------------------------------------------------------------
City/State/Zip
<Table>
Date: ------------------------------------ Signed: ---------------------------------------
</Table>
Return to: Anchor National Life Insurance Company, Annuity Service Center,
P.O. Box 52499, Los Angeles, California 90054-0299
- --------------------------------------------------------------------------------
PROSPECTUS
July 9, 2001
FLEXIBLE PAYMENT DEFERRED ANNUITY CONTRACT
issued by
VARIABLE SEPARATE ACCOUNT
and
ANCHOR NATIONAL LIFE INSURANCE COMPANY
The annuity contract has 29 investment choices - 7 available fixed investment
options which offer interest rates guaranteed by Anchor National for different
periods of time and 22 variable investment portfolios. The 22 variable
portfolios are part of Anchor Series Trust ("AST"), the SunAmerica Series Trust
("SAST") or the WM Variable Trust ("WMVT").
STRATEGIC ASSET MANAGEMENT PORTFOLIOS
<Table>
STRATEGIC GROWTH WM ADVISORS, INC. WMVT
CONSERVATIVE GROWTH WM ADVISORS, INC. WMVT
BALANCED WM ADVISORS, INC. WMVT
CONSERVATIVE BALANCED WM ADVISORS, INC. WMVT
FLEXIBLE INCOME WM ADVISORS, INC. WMVT
</Table>
EQUITY FUNDS
<Table>
EQUITY INCOME WM ADVISORS, INC. WMVT
GROWTH & INCOME WM ADVISORS, INC. WMVT
DAVIS VENTURE VALUE DAVIS SELECTED ADVISERS, LP SAST
GROWTH FUND OF THE NORTHWEST WM ADVISORS, INC. WMVT
ALLIANCE GROWTH ALLIANCE CAPITAL MGMT. L.P. SAST
GROWTH JANUS CAPITAL CORPORATION WMVT
CAPITAL APPRECIATION WELLINGTON MGMT. CO. LLP AST
MFS MID CAP GROWTH MASSACHUSETTS FINANCIAL SERVICES CO. SAST
MID CAP STOCK WM ADVISORS, INC. WMVT
SMALL CAP STOCK WM ADVISORS, INC. WMVT
GLOBAL EQUITIES ALLIANCE CAPITAL MGMT. L.P. SAST
INTERNATIONAL GROWTH CAPITAL GUARDIAN TRUST COMPANY WMVT
TECHNOLOGY MORGAN STANLEY INVESTMENT MGMT., INC. SAST
</Table>
FIXED-INCOME FUNDS
<Table>
U.S. GOVERNMENT SECURITIES WM ADVISORS, INC. WMVT
INCOME WM ADVISORS, INC. WMVT
SHORT TERM INCOME WM ADVISORS, INC. WMVT
MONEY MARKET WM ADVISORS, INC. WMVT
</Table>
You can put your money into any one or all of the Variable Portfolios and/or
fixed investment options.
Please read this prospectus carefully before investing and keep it for your
future reference. It contains important information you should know about the WM
Diversified Strategies Variable Annuity.
To learn more about the annuity offered by this prospectus, you can obtain a
copy of the Statement of Additional Information ("SAI") dated July 9, 2001. The
SAI has been filed with the Securities and Exchange Commission ("SEC") and can
be considered part of this prospectus.
The table of contents of the SAI appears on page 38 of this prospectus. For a
free copy of the SAI, call us at 1-877-311-WMVA (9682) or write our Annuity
Service Center at, P.O. Box 54299, Los Angeles, California 90054-0299.
A registration statement has been filed with the SEC under the Securities Act of
1933 relating to the contract. This prospectus does not contain all the
information in the registration statement as permitted by SEC regulations. The
omitted information can be obtained from the SEC's principal office in
Washington, D.C., upon payment of a prescribed fee.
In addition, the SEC maintains a website (http://www.sec.gov) that contains the
SAI, materials incorporated by reference and other information filed
electronically with the SEC.
ANNUITIES INVOLVE RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL, AND ARE NOT A
DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR ENDORSED BY, ANY BANK. THEY ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Anchor National's Annual Report on Form 10-K/A for the year ended December 31,
2001 is incorporated herein by reference.
All documents or reports filed by Anchor National under Section 13(a), 13(c), 14
or 15(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
after the effective date of this prospectus are also incorporated by reference.
Statements contained in this prospectus and subsequently filed documents which
are incorporated by reference are deemed to modify or supercede documents
incorporated herein by reference.
Anchor National files its Exchange Act documents and reports, including its
annual and quarterly reports on Form 10-K and Form 10-Q, electronically pursuant
to EDGAR under CIK No. 0000006342.
Anchor National is subject to the informational requirements of the Securities
and Exchange Act of 1934 (as amended). We file reports and other information
with the SEC to meet those requirements. You can inspect and copy this
information at SEC public facilities at the following locations:
WASHINGTON, DISTRICT OF COLUMBIA
450 Fifth Street, N.W., Room 1024
Washington, D.C. 20549
CHICAGO, ILLINOIS
500 West Madison Street
Chicago, IL 60661
NEW YORK, NEW YORK
7 World Trade Center, 13th Fl.
New York, NY 10048
To obtain copies by mail, contact the Washington, D.C. location. After you pay
the fees as prescribed by the rules and regulations of the SEC, the required
documents are mailed.
Registration statements under the Securities Act of 1933, as amended, related to
the contracts offered by this prospectus are on file with the SEC. This
prospectus does not contain all of the information contained in the registration
statements and exhibits. For further information regarding the separate account,
Anchor National and its general account, the Variable Portfolios and the
contract, please refer to the registration statements and exhibits.
The SEC also maintains a website (http:// www.sec.gov) that contains the SAI,
materials incorporated by reference and other information filed electronically
with the SEC by Anchor National.
Anchor National will provide without charge to each person to whom this
prospectus is delivered, upon written or oral request, a copy of the documents
incorporated by reference. Requests for these documents should be directed to
Anchor National's Annuity Service Center, as follows:
Anchor National Life Insurance Company
Annuity Service Center
P.O. Box 54299
Los Angeles, California 90054-0299
Telephone Number: (800) 445-SUN2
SECURITIES AND EXCHANGE COMMISSION POSITION ON INDEMNIFICATION
Indemnification for liabilities arising under the Securities Act of 1933 (the
"Act") is provided to Anchor National's officers, directors and controlling
persons. The SEC has advised that it believes such indemnification is against
public policy under the Act and unenforceable. If a claim for indemnification
against such liabilities (other than for Anchor National's payment of expenses
incurred or paid by its directors, officers or controlling persons in the
successful defense of any legal action) is asserted by a director, officer or
controlling person of Anchor National in connection with the securities
registered under this prospectus, Anchor National will submit to a court with
jurisdiction to determine whether the indemnification is against public policy
under the Act. Anchor National will be governed by final judgment of the issue.
However, if in the opinion of Anchor National's counsel this issue has been
determined by controlling precedent, Anchor National will not submit the issue
to a court for determination.
2
TABLE OF CONTENTS
<Table>
GLOSSARY.................................................... 4
HIGHLIGHTS.................................................. 5
FEE TABLES.................................................. 6
Owner Transaction Expenses............................... 6
Annual Separate Account Expenses......................... 6
The Optional Income Protector Fee........................ 6
The Optional Estate Rewards Death Benefit Fee............ 6
The Optional Earnings Advantage Fee...................... 6
Investment Portfolio Expenses of Variable Portfolios..... 7
EXAMPLES.................................................... 9
THE WM DIVERSIFIED STRATEGIES VARIABLE ANNUITY.............. 12
PURCHASING A WM DIVERSIFIED STRATEGIES VARIABLE ANNUITY..... 13
Allocation of Purchase Payments.......................... 13
Accumulation Units....................................... 13
Free Look................................................ 14
INVESTMENT OPTIONS.......................................... 14
Variable Portfolios...................................... 14
Market Value Adjustment.................................. 16
Transfers During the Accumulation Phase.................. 17
Dollar Cost Averaging.................................... 18
Asset Allocation Rebalancing Program..................... 19
Principal Advantage Program.............................. 19
Voting Rights............................................ 19
Substitution............................................. 19
ACCESS TO YOUR MONEY........................................ 19
Free Withdrawal Provision................................ 20
Systematic Withdrawal Program............................ 21
Nursing Home Waiver...................................... 21
Minimum Contract Value................................... 22
Qualified Contract Owners................................ 22
DEATH BENEFIT............................................... 22
Standard Death Benefit................................... 23
Estate Rewards Death Benefit............................. 23
Spousal Continuation..................................... 25
EXPENSES.................................................... 25
Insurance Charges........................................ 25
Withdrawal Charges....................................... 26
Investment Charges....................................... 26
Contract Maintenance Fee................................. 26
Transfer Fee............................................. 27
Option Death Benefit Fees................................ 27
Optional Income Protector Fee............................ 27
Premium Tax.............................................. 27
Income Taxes............................................. 27
Reduction or Elimination of Charges and Expenses, and
Additional Amounts Credited............................ 27
INCOME OPTIONS.............................................. 28
Annuity Date............................................. 28
Income Options........................................... 28
Allocation of Annuity Payments........................... 29
Transfers During the Income Phase........................ 30
Deferment of Payments.................................... 30
The Income Protector..................................... 30
TAXES....................................................... 33
Annuity Contracts in General............................. 33
Tax Treatment of Distributions--Non-qualified
Contracts.............................................. 33
Tax Treatment of Distributions--Qualified Contracts...... 33
Minimum Distributions.................................... 34
Tax Treatment of Death Benefits.......................... 34
Diversification.......................................... 35
PERFORMANCE................................................. 35
OTHER INFORMATION........................................... 36
Anchor National.......................................... 36
The Separate Account..................................... 36
Custodian................................................ 36
The General Account...................................... 36
Distribution of the Contract............................. 36
Administration........................................... 37
Legal Proceedings........................................ 37
INDEPENDENT ACCOUNTANTS..................................... 37
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.... 38
APPENDIX A--MARKET VALUE ADJUSTMENT......................... A-1
APPENDIX B--DEATH BENEFITS FOLLOWING SPOUSAL CONTINUATION... B-1
APPENDIX C.................................................. C-1
APPENDIX D--PREMIUM TAXES................................... D-1
</Table>
3
GLOSSARY
We have capitalized some of the technical terms used in this prospectus. To help
you understand these terms, we define them in this glossary.
ACCUMULATION PHASE--The period during which you invest money in your contract.
ACCUMULATION UNITS--A measurement we use to calculate the value of the variable
portion of your contract during the Accumulation Phase.
ANNUITANT(S)--The person(s) on whose life (lives) we base annuity payments.
ANNUITY DATE--The date on which annuity payments are to begin, as selected by
you.
ANNUITY UNITS--A measurement we use to calculate the amount of annuity payments
you receive from the variable portion of your contract during the Income Phase.
BENEFICIARY(IES)--The person(s) designated to receive any benefits under the
contract if you or the Annuitant dies.
COMPANY--Anchor National Life Insurance Company ("Anchor National"), We, Us, the
issuer of this annuity contract.
INCOME PHASE--The period during which we make annuity payments to you.
IRS--The Internal Revenue Service.
NON-QUALIFIED (CONTRACT)--A contract purchased with after-tax dollars. In
general, these contracts are not under any pension plan, specially sponsored
program or individual retirement account ("IRA").
VARIABLE PORTFOLIOS--A sub-account of Variable Separate Account which provides
for the variable investment options available under the contract. Each has a
distinct investment objective and is invested in the underlying investment
portfolios of the Anchor Series Trust, SunAmerica Series Trust or the WM
Variable Trust as applicable.
PURCHASE PAYMENTS--The money you give us to buy the contract, as well as any
additional money you give us to invest in the contract after you own it.
QUALIFIED (CONTRACT)--A contract purchased with pretax dollars. These contracts
are generally purchased under a pension plan, specially sponsored program or
individual retirement account ("IRA").
4
HIGHLIGHTS
ANCHOR NATIONAL OFFERS SEVERAL DIFFERENT VARIABLE ANNUITY PRODUCTS TO MEET THE
DIVERSE NEEDS OF OUR INVESTORS. EACH PRODUCT MAY OFFER DIFFERENT FEATURES AND
BENEFITS AND CORRESPONDINGLY DIFFERENT FEES AND CHARGES. WHEN WORKING WITH YOUR
INVESTMENT REPRESENTATIVE TO DETERMINE THE BEST PRODUCT TO MEET YOUR NEEDS YOU
SHOULD CONSIDER, AMONG OTHER THINGS, WHETHER THE FEATURES OF THIS CONTRACT AND
THE RELATED FEES PROVIDE THE MOST APPROPRIATE PACKAGE TO HELP YOU MEET YOUR
LONG-TERM RETIREMENT SAVINGS GOALS.
The WM Diversified Strategies Variable Annuity is a contract between you and
Anchor National Life Insurance Company (Anchor National). It is designed to help
you invest on a tax-deferred basis and meet long-term financial goals. There are
minimum Purchase Payment amounts required to purchase a contract. Purchase
Payments may be invested in a variety of variable and fixed account options.
Like all deferred annuities, the contract has an Accumulation Phase and an
Income Phase. During the Accumulation Phase, you invest money in your contract.
The Income Phase begins when you start receiving income payments from your
annuity to provide for your retirement.
FREE LOOK: If you cancel your contract within 10 days after receiving it (or
whatever period is required in your state), we will cancel the contract without
charging a withdrawal charge. You will receive whatever your contract is worth
on the day that we receive your request. This amount may be more or less than
your original Purchase Payment. We will return your original Purchase Payment if
required by law. Please see PURCHASING A WM DIVERSIFIED STRATEGIES VARIABLE
ANNUITY in the prospectus.
EXPENSES: There are fees and charges associated with the contract. Each year, we
deduct a $35 contract maintenance fee from your contract, which may be waived
for contracts of $50,000 or more. We also deduct insurance charges, which equal
1.40% annually of the average daily value of your contract allocated to the
Variable Portfolios. There are investment charges on amounts invested in the
Variable Portfolios. If you elect optional features available under the contract
we may charge additional fees for these features. A separate withdrawal charge
schedule applies to each Purchase Payment. The amount of the withdrawal charge
declines over time. After a Purchase Payment has been in the contract for seven
complete years, withdrawal charges no longer apply to that portion of the
Purchase Payment. Please see the FEE TABLE, PURCHASING A WM DIVERSIFIED
STRATEGIES VARIABLE ANNUITY and EXPENSES in the prospectus.
ACCESS TO YOUR MONEY: You may withdraw money from your contract during the
Accumulation Phase. If you do so, earnings are deemed to be withdrawn first. You
will pay income taxes on earnings and untaxed contributions when you withdraw
them. Payments received during the Income Phase are considered partly a return
of your original investment. A federal tax penalty may apply if you make
withdrawals before age 59 1/2. As noted above, a withdrawal charge may apply.
Please see ACCESS TO YOUR MONEY and TAXES in the prospectus.
DEATH BENEFIT: A death benefit feature is available under the contract to
protect your Beneficiaries in the event of your death during the Accumulation
Phase. Optional enhanced death benefits are also available. Please see DEATH
BENEFITS in the prospectus.
INCOME OPTIONS: When you are ready to begin taking income, you can choose to
receive income payments on a variable basis, fixed basis or a combination of
both. You may also chose from five different income options, including an option
for income that you cannot outlive. Please see INCOME OPTIONS in the prospectus.
PLEASE READ THE PROSPECTUS CAREFULLY FOR MORE DETAILED INFORMATION REGARDING
THESE AND OTHER FEATURES AND BENEFITS OF THE CONTRACT, AS WELL AS THE RISKS OF
INVESTING.
INQUIRIES: If you have questions about your contract call your investment
representative or contact us at Anchor National Life Insurance Company Annuity
Service Center P.O. Box 54299 Los Angeles, California 90054-0299. Telephone
Number: 1 (877) 311-WMVA (9682).
5
WM DIVERSIFIED STRATEGIES VARIABLE ANNUITY FEE TABLES
- --------------------------------------------------------------------------------
OWNER TRANSACTION EXPENSES
Withdrawal Charge as a percentage of Purchase Payments:
<Table>
<Caption>
YEARS: 1 2 3 4 5 6 7 8
7% 6% 6% 5% 4% 3% 2% 0%
</Table>
<Table>
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
</Table>
THE OPTIONAL ESTATE REWARDS DEATH BENEFIT FEE
(The Estate Rewards Death Benefit offers a choice of one of two optional
enhanced death benefits which are described more fully in the prospectus. If
elected, the fee is an annualized charge that is deducted daily from your
contract value.)
<Table>
Fee as a % of your daily
net asset value........ .15%
</Table>
THE OPTIONAL INCOME PROTECTOR FEE
(The Income Protector which is described more fully in the prospectus is
optional and if elected the fee is deducted annually from your contract value.)
<Table>
<Caption>
GROWTH RATE ANNUAL FEE AS A % OF YOUR INCOME BENEFIT BASE*
- ----------- ----------------------------------------------
0%.... .10%
</Table>
* 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)
<Table>
Mortality Risk Charge..................... 0.90%
Expense Risk Charge....................... 0.35%
Distribution Expense Charge............... 0.15%
----
Total Separate Account
Expenses...................... 1.40%
</Table>
THE OPTIONAL EARNINGS ADVANTAGE FEE
(Earnings Advantage, an enhanced death benefit feature, which is described more
fully in the prospectus is optional and if elected, the fee is an annualized
charge that is deducted daily from your contract value.)
<Table>
Fee as a % of your daily
net asset value........ .25%
</Table>
6
INVESTMENT PORTFOLIO EXPENSES OF VARIABLE
PORTFOLIOS
ANCHOR SERIES TRUST
(as a percentage of average net assets for the
Trust's fiscal year ended December 31, 2000)
<Table>
<Caption>
MANAGEMENT SERVICE (12b-1) OTHER TOTAL ANNUAL
PORTFOLIO FEE FEES(1) EXPENSES EXPENSES
- ----------------------------------------------------------------------------------------------------
Capital Appreciation(2) 0.70% 0.15% 0.05% 0.90%
- ----------------------------------------------------------------------------------------------------
SUNAMERICA SERIES TRUST
(as a percentage of average net assets after
reimbursement or waiver of expenses for the
Trust's fiscal year ended January 31, 2001)
Alliance Growth 0.60% 0.15% 0.04% 0.79%
Davis Venture Value 0.71% 0.15% 0.04% 0.90%
Global Equities 0.70% 0.15% 0.14% 0.99%
MFS Mid Cap Growth(3,4) 0.75% 0.15% 0.07% 0.97%
Technology(5) 1.20% 0.15% 0.29% 1.64%
- ----------------------------------------------------------------------------------------------------
</Table>
(1) This Service Fee became effective pursuant to a 12b-1 Plan adopted by the
Board of Trustees on May 21, 2001 (SunAmerica Series Trust) and May 30, 2001
(Anchor Series Trust). Although the Service Fee is reflected in the figures
shown here, it was not in effect on December 31, 2000 or January 1, 2001 for
the Anchor Series Trust or SunAmerica Series Trust, respectively.
(2) The expenses noted here are restated to reflect a management fee increase
for the portfolio which became effective on August 1, 2000, following
approval by the Board of Trustees and shareholders. Actual management fees
and total annual expenses incurred at fiscal year end 2000 were 0.65% and
0.70%, respectively.
(3) For this portfolio the adviser, SunAmerica Asset Management Corp., has
voluntarily agreed to waive fees or expenses as necessary to keep operating
expenses at or below established maximum amounts. All waivers or
reimbursments may be terminated at any time. Only certain portfolios relied
on these waivers and/or reimbursements during this fiscal year as follows:
MFS Mid-Cap Growth Portfolio, the adviser recouped prior year expense
reimbursements that were mathematically insignificant resulting in the
expense ration before and after recoupment remaining at 0.82%.
(4) Gross of custody credits of 0.01%.
(5) Annualized.
THE ABOVE INVESTMENT PORTFOLIO EXPENSES WERE PROVIDED BY THE TRUSTS.
WE HAVE NOT INDEPENDENTLY VERIFIED THE ACCURACY OF THE INFORMATION.
7
THE WM VARIABLE TRUST
(as a percentage of daily net asset value of each investment portfolio as of the
fiscal year end of the Trust ended December 31, 2000)
<Table>
<Caption>
TOTAL
MANAGEMENT OTHER ANNUAL
FEE EXPENSES(1) EXPENSES(1, 2)
- -------------------------------------------------------------------------------------------------------
Balanced Portfolio* 0.10% 0.19% 0.29%
Conservative Balanced Portfolio 0.10% 0.34% 0.44%
Conservative Growth Portfolio* 0.10% 0.18% 0.28%
Equity Income Fund 0.63% 0.19% 0.82%
Flexible Income Portfolio* 0.10% 0.21% 0.31%
Growth & Income Fund 0.76% 0.03% 0.79%
Growth Fund 0.88% 0.06% 0.94%
Growth Fund of the Northwest 0.63% 0.10% 0.73%
Income Fund 0.50% 0.08% 0.58%
International Growth Fund 0.92% 0.21% 1.13%
Mid Cap Stock Fund(3) 0.75% 0.11% 0.86%
Money Market Fund 0.45% 0.15% 0.60%
Short Term Income Fund 0.50% 0.14% 0.64%
Small Cap Stock Fund 0.86% 0.07% 0.93%
Strategic Growth Portfolio* 0.10% 0.20% 0.30%
U.S. Government Securities Fund(4) 0.50% 0.08% 0.58%
- -------------------------------------------------------------------------------------------------------
</Table>
(1) The Other Expenses for the Portfolios and the Funds are based on 2000
operating experience adjusted to reflect the elimination of an
administration fee that had been paid by the funds prior to January 1, 2001.
(2) The Annual Expenses of the Portfolios, combined with the Annual Expenses of
the underlying Funds are shown under "Annual Expenses of the Portfolios and
Underlying Funds Combined," immediately following.
(3) Other Expenses are estimated for the current fiscal year for the Mid Cap
Stock Fund.
* ANNUAL EXPENSES OF THE PORTFOLIOS AND UNDERLYING FUNDS COMBINED
Each Portfolio will invest in Funds of the WM Trust and in the WM High Yield
Fund (a series of WM Trust I) in keeping with certain allocations and
investment objectives. You will bear certain expenses associated with those
Funds in addition to those related to the Portfolios themselves. The chart
below shows estimated combined annual expenses for each Portfolio and the
Funds in which the Portfolio may invest. The expenses are based upon estimated
expenses of each Portfolio and underlying Fund for the fiscal year ended
December 31, 2000, restated to reflect current management fees. Please refer
to the Trust prospectus for more details.
The estimates assume a constant allocation of each Portfolio's assets among the
Funds identical to such Portfolio's actual allocation at December 31, 2000.
<Table>
<Caption>
COMBINED
PORTFOLIOS ANNUAL EXPENSES
- -----------------------------------------------------------------------------
Balanced Portfolio.......................................... 1.04%
Conservative Balanced Portfolio............................. 1.15%
Conservative Growth Portfolio............................... 1.10%
Flexible Income Portfolio................................... 0.97%
Strategic Growth Portfolio.................................. 1.17%
- -----------------------------------------------------------------------------
</Table>
THE ABOVE INVESTMENT PORTFOLIO EXPENSES WERE PROVIDED THE WM VARIABLE TRUST. WE
HAVE NOT INDEPENDENTLY VERIFIED THE ACCURACY OF THE INFORMATION.
8
EXAMPLES
You will pay the following expenses on a $1,000 investment, assuming a 5% annual
return on assets, Investment Portfolio Expenses after any waiver, reimbursement
or recoupment (assuming the waiver, reimbursement or recoupment will continue
for the period shown), if applicable, and
(a) If the contract is surrendered at the end of the stated time period
and no optional features are elected.
(b) If the contract is surrendered and you elect the Enhanced Death
Benefit, Earnings Advantage and the Income Protector Program at the
maximum charges offered of .15%, .25%, .10%, respectively.
(c) If the contract is not surrendered or is annuitized and no optional
features are elected.*
(d) If the contract is not surrendered and you elect the Enhanced Death
Benefit, Earnings Advantage and the Income Protector Program at the
maximum charges offered of 15%, 25%, 10%, respectively.
<Table>
<Caption>
TIME PERIODS
- ---------------------------------------------------------------------------------------------------------------------
ANCHOR SERIES TRUST 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------------------------------------------------------
Capital Appreciation Portfolio (a) $ 94 (a) $134 (a) $167 (a) $272
(b) $ 99 (b) $149 (b) $192 (b) $321
(c) $ 24 (c) $ 74 (c) $127 (c) $272
(d) $ 29 (d) $ 89 (d) $152 (d) $321
- ---------------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------------------------------
SUNAMERICA SERIES TRUST 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------------------------------------------------------
Alliance Growth Portfolio (a) $ 93 (a) $131 (a) $162 (a) $261
(b) $ 98 (b) $146 (b) $187 (b) $311
(c) $ 23 (c) $ 71 (c) $122 (c) $261
(d) $ 28 (d) $ 86 (d) $147 (d) $311
Davis Venture Value Portfolio (a) $ 94 (a) $134 (a) $167 (a) $272
(b) $ 99 (b) $149 (b) $192 (b) $321
(c) $ 24 (c) $ 74 (c) $127 (c) $272
(d) $ 29 (d) $ 89 (d) $152 (d) $321
Global Equities Portfolio (a) $ 95 (a) $137 (a) $172 (a) $281
(b) $100 (b) $152 (b) $197 (b) $330
(c) $ 25 (c) $ 77 (c) $132 (c) $281
(d) $ 30 (d) $ 92 (d) $157 (d) $330
MFS Mid Cap Growth (a) $ 95 (a) $137 (a) $171 (a) $279
(b) $100 (b) $151 (b) $196 (b) $328
(c) $ 25 (c) $ 77 (c) $131 (c) $279
(d) $ 30 (d) $ 91 (d) $156 (d) $328
Technology Portfolio (a) $102 (a) $156 (a) $204 (a) $344
(b) $107 (b) $171 (b) $228 (b) $389
(c) $ 32 (c) $ 96 (c) $164 (c) $344
(d) $ 37 (d) $111 (d) $188 (d) $389
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
9
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------------------------------
WM VARIABLE TRUST 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------------------------------------------------------
Balanced Portfolio (a) $ 96 (a) $139 (a) $174 (a) $286
(b) $101 (b) $154 (b) $199 (b) $334
(c) $ 26 (c) $ 79 (c) $134 (c) $286
(d) $ 31 (d) $ 94 (d) $159 (d) $334
Conservative Balanced Portfolio (a) $ 97 (a) $142 (a) $180 (a) $297
(b) $102 (b) $157 (b) $204 (b) $345
(c) $ 27 (c) $ 82 (c) $140 (c) $297
(d) $ 32 (d) $ 97 (d) $164 (d) $345
Conservative Growth Portfolio (a) $ 96 (a) $140 (a) $177 (a) $292
(b) $101 (b) $155 (b) $202 (b) $340
(c) $ 26 (c) $ 80 (c) $137 (c) $292
(d) $ 31 (d) $ 95 (d) $162 (d) $340
Equity Income Fund (a) $ 93 (a) $132 (a) $163 (a) $264
(b) $ 98 (b) $147 (b) $188 (b) $314
(c) $ 23 (c) $ 72 (c) $123 (c) $264
(d) $ 28 (d) $ 87 (d) $148 (d) $314
Flexible Income Portfolio (a) $ 95 (a) $137 (a) $171 (a) $279
(b) $100 (b) $151 (b) $196 (b) $328
(c) $ 25 (c) $ 77 (c) $131 (c) $279
(d) $ 30 (d) $ 91 (d) $156 (d) $328
Growth & Income Fund (a) $ 93 (a) $131 (a) $162 (a) $261
(b) $ 98 (b) $146 (b) $187 (b) $311
(c) $ 23 (c) $ 71 (c) $122 (c) $261
(d) $ 28 (d) $ 86 (d) $147 (d) $311
Growth Fund (a) $ 95 (a) $136 (a) $169 (a) $276
(b) $100 (b) $151 (b) $194 (b) $325
(c) $ 25 (c) $ 76 (c) $129 (c) $276
(d) $ 30 (d) $ 91 (d) $154 (d) $325
Growth Fund of the Northwest (a) $ 92 (a) $129 (a) $159 (a) $255
(b) $ 97 (b) $144 (b) $184 (b) $305
(c) $ 22 (c) $ 69 (c) $119 (c) $255
(d) $ 27 (d) $ 84 (d) $144 (d) $305
Income Fund (a) $ 91 (a) $125 (a) $151 (a) $240
(b) $ 96 (b) $140 (b) $176 (b) $290
(c) $ 21 (c) $ 65 (c) $111 (c) $240
(d) $ 26 (d) $ 80 (d) $136 (d) $290
International Growth Fund (a) $ 96 (a) $141 (a) $179 (a) $295
(b) $101 (b) $156 (b) $203 (b) $343
(c) $ 26 (c) $ 81 (c) $139 (c) $295
(d) $ 31 (d) $ 96 (d) $163 (d) $343
Mid Cap Stock Fund (a) $ 94 (a) $133 (a) $165 (a) $268
(b) $ 99 (b) $148 (b) $190 (b) $317
(c) $ 24 (c) $ 73 (c) $125 (c) $268
(d) $ 29 (d) $ 88 (d) $150 (d) $317
Money Market Fund (a) $ 91 (a) $125 (a) $152 (a) $242
(b) $ 96 (b) $140 (b) $177 (b) $292
(c) $ 21 (c) $ 65 (c) $112 (c) $242
(d) $ 26 (d) $ 80 (d) $137 (d) $292
Short Term Income Fund (a) $ 92 (a) $127 (a) $154 (a) $246
(b) $ 97 (b) $142 (b) $179 (b) $296
(c) $ 22 (c) $ 67 (c) $114 (c) $246
(d) $ 27 (d) $ 82 (d) $139 (d) $296
Small Cap Stock Fund (a) $ 94 (a) $135 (a) $169 (a) $275
(b) $ 99 (b) $150 (b) $194 (b) $324
(c) $ 24 (c) $ 75 (c) $129 (c) $275
(d) $ 29 (d) $ 90 (d) $154 (d) $324
Strategic Growth Portfolio (a) $ 97 (a) $143 (a) $181 (a) $299
(b) $102 (b) $157 (b) $205 (b) $346
(c) $ 27 (c) $ 83 (c) $141 (c) $299
(d) $ 32 (d) $ 97 (d) $165 (d) $346
U.S. Government Securities Fund (a) $ 91 (a) $125 (a) $151 (a) $240
(b) $ 96 (b) $140 (b) $176 (b) $290
(c) $ 21 (c) $ 65 (c) $111 (c) $240
(d) $ 26 (d) $ 80 (d) $136 (d) $290
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
* We do not currently charge a surrender charge upon annuitization, unless the
contract is annuitized under the Income Protector Program. We will assess any
applicable surrender charges upon annuitizations effected using the Income
Protector Program as if you had fully surrendered your contract.
10
EXPLANATION OF FEE TABLES AND EXAMPLES
1. The purpose of the Fee Tables is to show you the various expenses you
will incur directly and indirectly by investing in the contract. The
example reflects owner transaction expenses, separate account expenses
including optional benefit fees in some examples and variable portfolio
expenses. We converted the contract administration charge to a percentage
(0.09%) using an assumed contract size of $40,000. The actual impact of
the administration charge may differ from this percentage and may be
waived for contract values over $50,000.
2. The Examples assume that no transfer fees were imposed. Premium taxes are
not reflected but may be applicable.
3. For certain underlying investment portfolios in which the Variable
Portfolios invest, the adviser voluntarily agreed to waive fees or
reimburse expenses, if necessary, to keep annual operating expenses at or
below the following percentages of each of the following Portfolios'
average net assets: MFS Mid Cap Growth 1.15% (recouping prior expense
reimbursement); and Technology 1.55%. The adviser also may voluntarily
waive or reimburse additional amounts to increase the investment return
to a Portfolio's investors. The adviser may terminate all such waivers
and/or reimbursements at any time. Further, any waivers or reimbursements
made by the adviser with respect to a Portfolio are subject to recoupment
from that Portfolio within the following two years, provided that the
Portfolio is able to effect such payment to the adviser and remain in
compliance with the foregoing expense limitations.
4. THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
As of the date of this Prospectus sales of WM Diversified Strategies Variable
Annuity have not begun. Therefore no condensed financial information is shown in
this prospectus.
11
THE WM DIVERSIFIED STRATEGIES
VARIABLE ANNUITY
- --------------------------------------------------------------------------------
An annuity is a contract between you and an insurance company. You are the owner
of the contract. The contract provides three main benefits:
- Tax Deferral: You do not pay taxes on your earnings from the annuity
until you withdraw them.
- Death Benefit: If you die during the Accumulation Phase, the insurance
company pays a death benefit to your Beneficiary.
- Guaranteed Income: If elected, you receive a stream of income for your
lifetime, or another available period you select.
Tax-qualified retirement plans (e.g., IRAs, 401(k) or 403(b) plans) defer
payment of taxes on earnings until withdrawn. If you are considering funding a
tax-qualified retirement plan with an annuity, you should know that an annuity
does not provide any additional tax deferral treatment of earnings beyond the
treatment provided by the tax-qualified retirement plan itself. However,
annuities do provide other features and benefits which may be valuable to you.
You should fully discuss this decision with your financial advisor.
This annuity was developed to help you contribute to your retirement savings.
This annuity works in two stages, the Accumulation Phase and the Income Phase.
Your contract is in the Accumulation Phase during the period when you make
payments into the contract. The Income Phase begins when you request us to start
making payments to you out of the money accumulated in your contract.
The Contract is called a "variable" annuity because it allows you to invest in
variable investment portfolios which we call Variable Portfolios. The Variable
Portfolios, are similar to mutual funds, in that they have specific investment
objectives and their performance varies. You can gain or lose money if you
invest in these Variable Portfolios. The amount of money you accumulate in your
contract depends on the performance of the Variable Portfolio(s) in which you
invest.
The Contract also offers several fixed account options for varying time periods.
Fixed account options earn interest at a rate set and guaranteed by Anchor
National. If you allocate money to the fixed account options, the amount of
money that accumulates in your Contract depends on the total interest credited
to the particular fixed account option(s) in which you are invested.
For more information on the Variable Portfolios and fixed account options
available under this contract, SEE INVESTMENT OPTIONS PAGE 14.
Anchor National issues the WM Diversified Strategies Variable Annuity. When you
purchase a WM Diversified Strategies Variable Annuity, a contract exists between
you and Anchor National. The Company is a stock life insurance company organized
under the laws of the state of Arizona. Its principal place of business is 1
SunAmerica Center, Los Angeles, California 90067. The Company conducts life
insurance and annuity business in the District of Columbia and all states except
New York. Anchor National is an indirect, wholly owned subsidiary of American
International Group, Inc., a Delaware corporation. WM Diversified Strategies may
not currently be available in all states. Please check with your financial
advisor regarding availability in your state.
This annuity is designed for investors whose personal circumstances allow for a
long-term investment time horizon, to assist in contributing to retirement
savings. As a function of the federal tax code you may be assessed a 10% federal
tax penalty on any withdrawal made prior to your reaching age 59 1/2.
Additionally, this contract provides that you will be charged a withdrawal
charge on each Purchase Payment withdrawn if that Purchase Payment has not been
invested in this contract for at least 7 years. Because of these potential
penalties, you should fully discuss all of the benefits and risks of this
contract with your financial adviser prior to purchase.
12
PURCHASING A WM DIVERSIFIED STRATEGIES
VARIABLE ANNUITY
- --------------------------------------------------------------------------------
An initial Purchase Payment is the money you give us to buy a contract. Any
additional money you give us to invest in the contract after purchase is a
subsequent Purchase Payment.
This chart shows the minimum initial and subsequent Purchase Payments permitted
under your contract. These amounts depend upon whether a contract is Qualified
or Non-qualified for tax purposes.
<Table>
<Caption>
MINIMUM MINIMUM SUBSEQUENT
MINIMUM INITIAL SUBSEQUENT PURCHASE PAYMENT--
PURCHASE PAYMENT PURCHASE PAYMENT AUTOMATIC PAYMENT PLAN
---------------- ---------------- ----------------------
Qualified $2,000 $100 $50
Non-qualified $5,000 $100 $50
</Table>
Prior Company approval is required to accept Purchase Payments greater than
$1,500,000. The Company reserves the right to refuse any Purchase Payment
including one which would cause Total Purchase Payments to exceed $1,500,000 at
the time of the Purchase Payment. Also, the optional Automatic Payment Plan
allows you to make subsequent payments as small as $50.
In general, we will not issue a Qualified contract to anyone who is age 70 1/2
or older, unless they certify to us that the minimum distribution required by
the federal tax code is being made. In addition, we may not issue a contract to
anyone age 91 or older (unless state law requires otherwise). Neither Estate
Rewards nor Earnings Advantage is available to you if you are age 81 or older at
the time of contract issue.
We allow spouses to jointly own this contract. However, the age of the older
spouse is used to determine the availability of any age driven benefits. The
addition of a joint owner after the contract has been issued in contingent upon
prior review and approval by the Company.
ALLOCATION OF PURCHASE PAYMENTS
We invest your Purchase Payments in the fixed accounts and/or Variable
Portfolio(s) according to your instructions. If we receive a Purchase Payment
without allocation instructions, we will invest the money according to your last
allocation instructions. Purchase Payments are applied to your contract based
upon the value of the variable investment option next determined after receipt
of your money. SEE INVESTMENT OPTIONS PAGE 14.
In order to issue your contract, we must receive your completed application,
Purchase Payment allocation instructions and any other required paper work at
our Annuity Service Center. We allocate your initial Purchase Payment within two
days of receiving it. If we do not have complete information necessary to issue
your contract, we will contact you. If we do not have the information necessary
to issue your contract within 5 business days we will:
- Send your money back to you; or
- Ask your permission to keep your money until we get the information
necessary to issue the contract.
ACCUMULATION UNITS
The value of the variable portion of your contract will go up or down depending
upon the investment performance of the Variable Portfolio(s) you select. In
order to keep track of the value of your contract, we use a unit of measure
called an Accumulation Unit which works like a share of a mutual fund. During
the Income Phase, we call them Annuity Units.
13
An Accumulation Unit value is determined each day that the New York Stock
Exchange ("NYSE") is open. We base the number of Accumulation Units you receive
on the unit value of the Variable Portfolio as of the day we receive your money
if we receive it before 1:00 p.m. Pacific Standard Time ("PST") and on the next
day's unit value if we receive your money after 1:00 p.m. PST. We calculate an
Accumulation Unit for each Variable Portfolio after the NYSE closes each day. We
do this by:
1. determining the total value of money invested in a particular Variable
Portfolio;
2. subtracting from that amount any asset-based charges and any other
charges such as taxes we have deducted; and
3. dividing this amount by the number of outstanding Accumulation Units.
EXAMPLE:
We receive a $25,000 Purchase Payment from you on Wednesday. You allocate
the money to the Alliance Growth Portfolio. We determine that the value of
an Accumulation Unit for the Alliance Growth Portfolio is $11.10 when the
NYSE closes on Wednesday. We then divide $25,000 by $11.10 and credit your
contract on Wednesday night with 2,252.2523 Accumulation Units for the
Alliance Growth Portfolio.
FREE LOOK
You may cancel your contract within ten days after receiving it (or longer if
required by state law). We call this a "free look." To cancel, you must mail the
contract along with your free look request to our Annuity Service Center at P.O.
Box 54299, Los Angeles, California 90054-0299. We will refund to you the value
of your contract on the day we receive your request. The amount refunded to you
may be more or less than your original investment.
Certain states require us to return your Purchase Payments upon a free look
request. Additionally, all contracts issued as an IRA require the full return of
Purchase Payments upon a free look. With respect to those contracts, we reserve
the right to put your money in the Money Market investment option during the
free look period and will allocate your money according to your instructions at
the end of the applicable free look period. Currently, we do not put your money
in the Money Market investment option during the free look period unless you
allocate your money to it. If your contract was issued in a state requiring
return of Purchase Payments or as an IRA and you cancel your contract during the
free look period, we return the greater of (1) your Purchase Payments; or (2)
the value of your contract. At the end of the free look period, we allocate your
money according to your instructions.
INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
The contract offers variable investment options which we call Variable
Portfolios, and fixed investment options. We designed the contract to meet your
varying investment needs over time. You can achieve this by using the Variable
Portfolios alone or in concert with the fixed investment options. The Variable
Portfolios operate similar to a mutual fund but are only available through the
purchase of certain variable annuities. A mixture of your investment in the
Variable Portfolios and fixed account options may lower the risk associated with
investing only in a variable investment option.
VARIABLE PORTFOLIOS
The contract currently offers 22 Variable Portfolios. These Variable Portfolios
invest in shares of the Anchor Series Trust, SunAmerica Series Trust and the WM
Variable Trust (the "Trusts"), Additional Variable Portfolios may be available
in the future. The Variable Portfolios operate similar to a mutual fund but are
only available through the purchase of certain insurance contracts.
SunAmerica Asset Management Corp., an indirect wholly owned subsidiary of AIG,
is the investment adviser to the AST and SAST Trusts. WM Advisors is the adviser
to the WMVT. The Trusts serve as the underlying investment vehicles for other
variable annuity contracts issued by Anchor National, and other affiliated/
unaffiliated insurance companies. Neither Anchor National nor the Trusts believe
that offering shares of the Trusts in this manner disadvantages you. The adviser
monitors the Trusts for potential conflicts.
14
ANCHOR SERIES TRUST
Wellington Management Company, LLP serves as subadviser to the AST Portfolio.
AST has Variable Portfolios in addition to those listed below which are not
available for investment under the contract.
SUNAMERICA SERIES TRUST
Various subadvisers provide investment advice for the SAST Portfolios. SAST has
Variable Portfolios in addition to those listed below which are not available
for investment under the contract.
WM VARIABLE TRUST
WM Advisors, Inc. serves as adviser for the WMVT Funds and also hires
subadvisers to manage the day-to-day operations of certain investment options.
The 22 Variable Portfolios along with their respective subadvisers are listed
below:
<Table>
STRATEGIC ASSET MANAGEMENT PORTFOLIOS
Strategic Growth WM Advisors, Inc. WMVT
Conservative Growth WM Advisors, Inc. WMVT
Balanced WM Advisors, Inc. WMVT
Conservative Balanced WM Advisors, Inc. WMVT
Flexible Income WM Advisors, Inc. WMVT
EQUITY FUNDS
Equity Income WM Advisors, Inc. WMVT
Growth & Income WM Advisors, Inc. WMVT
Davis Venture Value Davis Selected Advisors, LP SAST
Growth Fund of the Northwest WM Advisors, Inc. WMVT
Alliance Growth Alliance Capital Mgmt, L.P. SAST
Growth Janus Capital Corporation WMVT
Capital Appreciation Wellington Mgmt. Co. LLP AST
MFS Mid Cap Growth Massachusetts Financial Services Co. SAST
Mid Cap Stock WM Advisors, Inc. WMVT
Small Cap Stock WM Advisors, Inc. WMVT
Global Equities Alliance Capital Mgmt. L.P. SAST
International Growth Capital Guardian Trust Company WMVT
Technology Morgan Stanley Investment Mgmt. Inc. SAST
FIXED-INCOME FUNDS
U.S. Government Securities WM Advisors, Inc. WMVT
Income WM Advisors, Inc. WMVT
Short Term Income WM Advisors, Inc. WMVT
Money Market WM Advisors, Inc. WMVT
</Table>
YOU SHOULD READ THE PROSPECTUSES FOR THE TRUSTS ATTACHED HERETO CAREFULLY. THESE
PROSPECTUSES CONTAIN DETAILED INFORMATION ABOUT THE PORTFOLIOS, INCLUDING EACH
VARIABLE PORTFOLIO'S INVESTMENT OBJECTIVE AND RISK FACTORS.
FIXED INVESTMENT OPTIONS
The contract also offers seven fixed investment options. Anchor National will
guarantee the interest rate earned on money you allocate to any of these fixed
investment options. We currently offer fixed investment options for periods of
one, three, five, seven and ten years, which we call guarantee periods. In
Maryland, Oregon and Washington only the one year fixed account option is
available. We guarantee the interest rate for money allocated to the 6-month DCA
fixed account and/or the 1-year DCA fixed account (the "DCA fixed accounts")
which are available only in conjunction with the Dollar Cost Averaging Program.
Please see the section on the Dollar Cost Averaging Program on page 26 for
additional information about, including limitations on, the availability and
operation of the DCA fixed accounts. The DCA fixed accounts are only available
for new Purchase Payments.
15
All of these fixed account options pay interest at rates set and guaranteed by
Anchor National. Interest rates may differ from time to time and are set at our
sole discretion. We will never credit less than a 3% annual effective rate to
any of the fixed account options. The interest rate offered for new Purchase
Payments may differ from that offered for subsequent Purchase Payments and money
already in the fixed account options. In addition, different guarantee periods
offer different interest rates. Rates for specified payments are declared at the
beginning of the guarantee period and do not change during the specified period.
There are three scenarios in which you may put money into the fixed account
options. In each scenario your money may be credited a different rate of
interest as follows:
- INITIAL RATE: Rate credited to new Purchase Payments allocated to the
fixed account when you purchase your contract.
- CURRENT RATE: Rate credited to subsequent Purchase Payments allocated to
the fixed account.
- RENEWAL RATE: Rate credited to money remaining in a fixed account after
expiration of a guarantee period and money transferred from a fixed
account or one of the Variable Portfolios into a fixed account.
Each of these rates may differ from one another. Although once declared the
applicable rate is guaranteed until your guarantee period expires.
The DCA fixed accounts also credit a fixed rate of interest. Interest is
credited to amounts allocated to the 6-month or 1-year DCA fixed account while
your investment is systematically transferred to the Variable Portfolio(s). The
rates applicable to the DCA fixed accounts may differ from each other and/or the
other fixed account options but will never be less than an effective rate of 3%.
SEE DOLLAR COST AVERAGING ON PAGE 18 for more information.
When a guarantee period ends, you may leave your money in the same guarantee
period. You may also reallocate money to another fixed investment option (other
than the DCA fixed accounts) or to any of the Variable Portfolio(s). If you want
to reallocate your money, you must contact us within 30 days after the end of
the current guarantee period and instruct us how to reallocate your money. If we
do not hear from you, we will keep your money in the same guarantee period where
it will earn the renewal interest rate applicable at that time.
For Contracts issued in the state of Oregon withdrawal charge schedule applied
to amounts withdrawn from the one year fixed account declines over seven years
as follows: 6%, 5%, 4%, 3%, 2%, 1%, 0%.
MARKET VALUE ADJUSTMENT
NOTE: THE FOLLOWING DISCUSSION APPLIES TO THE 3, 5, 7 OR 10 YEAR FIXED
INVESTMENT OPTIONS ONLY. THESE OPTIONS ARE NOT AVAILABLE IN MARYLAND, OREGON AND
WASHINGTON AND MAY NOT BE AVAILABLE IN OTHER STATES. PLEASE CONTACT YOUR
FINANCIAL ADVISOR FOR MORE INFORMATION. THIS DISCUSSION DOES NOT APPLY TO
WITHDRAWALS TO PAY A DEATH BENEFIT OR CONTRACT FEES AND CHARGES.
If you take money out of the 3, 5, 7 or 10 year fixed investment options before
the end of the guarantee period, we make an adjustment to your contract (the
"market value adjustment" or "MVA"). This market value adjustment reflects any
difference in the interest rate environment between the time you place your
money in the fixed investment option and the time when you withdraw or transfer
that money. This adjustment can increase or decrease your contract value. You
have 30 days after the end of each guarantee period to reallocate your funds
without incurring a market value adjustment.
We will not assess a market value adjustment against withdrawals made (1) to pay
a death benefit; (2) to pay contract fees and charges; or (3) to begin the
Income Phase of your contract on the latest Annuity Date.
We calculate the market value adjustment by doing a comparison between current
rates and the rate being credited to you in the fixed investment option. For the
current rate we use a rate being offered by us for a guarantee period that is
equal to the time remaining in the guarantee period from which you seek
withdrawal or transfer. If we are not currently offering a guarantee period for
that period of time, we determine an applicable rate by using a formula to
arrive at a number between the interest rates currently offered for the two
closest periods available.
16
Generally, if interest rates drop between the time you put your money into the
fixed investment options and the time you take it out, we credit a positive
adjustment to your contract. On the other hand, if interest rates increase
during the same period, we post a negative adjustment to your contract.
Where the market value adjustment is negative, we first deduct the adjustment
from any money remaining in the fixed investment option. If there is not enough
money in the fixed investment option to meet the negative deduction, we deduct
the remainder from your withdrawal or transfer amount. Where the market value
adjustments is positive, we add the adjustment to your withdrawal amount or
transfer amount. For withdrawals under the systematic withdrawal program that
result in a negative market value adjustment, the MVA amount will be deducted
from your withdrawal.
The 1-year fixed investment option and the DCA fixed accounts do not impose a
market value adjustment. These fixed investment options are not registered under
the Securities Act of 1933 and are not subject to the provisions of the
Investment Company Act of 1940.
Please see APPENDIX A for more information on how we calculate the market value
adjustment.
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase, you may transfer money among the Variable
Portfolio(s) and the fixed investment options by written request or by
telephone. Additionally, you may access your account and request transfers
through our website, www.sunamerica.com. Funds already in your contract cannot
be transferred into the DCA fixed accounts. Transfers out of a 3, 5, 7 or 10
year fixed investment option may be subject to a market value adjustment.
The minimum amount you can transfer is $100, or a lesser amount if you transfer
the entire balance from a Variable Portfolio or a fixed investment option. Any
money remaining in a Variable Portfolio or fixed investment option after making
a transfer must equal at least $100. Your request for transfer must clearly
state which investment option(s) are involved and the amount you want to
transfer. Please see the section on Dollar Cost Averaging on page 26 for
specific rules regarding the DCA fixed accounts. We currently allow 15 free
transfers per contract year. We charge $25 ($10 in Pennsylvania and Texas) for
each additional transfer in a contract year.
We will accept transfers by telephone and/or the internet unless you specify
otherwise on your contract application. When receiving telephone and/or the
internet account transfers, we follow appropriate procedures to provide
reasonable assurance that the transactions executed are genuine. Thus, we are
not responsible for any claim, loss or expense from any error resulting from
instructions received over the telephone or the internet. If we fail to follow
our procedures we may be liable for any losses due to unauthorized or fraudulent
transactions.
For information regarding transfers during the Income Phase, SEE INCOME OPTIONS
ON PAGE 28.
We may limit the number of transfers in any contract year or refuse any transfer
request for you or others invested in the contract if we believe that excessive
trading or a specific transfer request or group transfer requests may have a
detrimental effect on unit values or the share prices of the underlying
portfolios.
Where permitted by law, we may accept your authorization for a third party to
make transfers for you subject to our rules. We reserve the right to suspend or
cancel such acceptance at any time and will notify you accordingly.
Additionally, we may restrict the investment options available for transfers
during any period in which such third party acts for you. We notify such third
party beforehand regarding any restrictions. However, we will not enforce these
restrictions if we are satisfied that such third party has been appointed by a
court of competent jurisdiction to act on your behalf; or such third party is a
trustee/fiduciary appointed, by you or for you, to act on your behalf for all
your financial affairs.
We may provide administrative or other support services to independent third
parties you authorize to make transfers on your behalf. We do not currently
charge you extra for providing these support services. This includes, but is not
limited to, transfers between investment options in accordance with market
timing strategies. Such independent third parties may or may not be appointed
with us for the sale of annuities. However, WE DO NOT ENGAGE ANY THIRD PARTIES
TO OFFER INVESTMENT ALLOCATION SERVICES OF ANY TYPE. WE TAKE NO RESPONSIBILITY
FOR THE INVESTMENT ALLOCATION AND TRANSFERS TRANSACTED ON YOUR BEHALF BY SUCH
THIRD PARTIES OR FOR ANY INVESTMENT ALLOCATION RECOMMENDATIONS MADE BY SUCH
PARTIES.
17
We reserve the right to modify, suspend or terminate the transfer privileges at
any time.
DOLLAR COST AVERAGING
The Dollar Cost Averaging ("DCA") program allows you to invest gradually in the
Variable Portfolios. Under the program you systematically transfer a set dollar
amount or percentage from any Variable Portfolio or the 1-year fixed account
option (source accounts) to any other Variable Portfolio. You may also
systematically transfer the interest earned in the 1-year fixed account to any
of the Variable Portfolios. Transfers may be monthly or quarterly. You may
change the frequency at any time by notifying us in writing.
We also offer the 6-month and a 1-year DCA fixed accounts exclusively to
facilitate this program. The DCA fixed accounts only accept new Purchase
Payments with a minimum of $600 in the 6-month DCA and $1200 in the 1-year DCA
with monthly transfers and $400 in 1-year DCA with quarterly transfers. You can
not transfer money already in your contract into these options. If you allocate
a Purchase Payment into a DCA fixed account, we transfer all your money
allocated to that account into the Variable Portfolio(s) you select over the
selected 6-month or 1-year period. You cannot change the option or the frequency
of transfers once selected. The minimum transfer amount if you use the 6-month
or 1-year DCA fixed accounts to provide dollar cost averaging is $100.
We determine the amount of the transfers from the 1-year DCA fixed account based
on:
- the total amount of money allocated to the account, and
- the frequency of transfers selected.
In Oregon, the withdrawal schedule applicable to funds placed in the DCA fixed
accounts is 6% for the period when those funds are in the DCA fixed accounts.
Once those funds are moved into the target accounts they are subject to the
standard withdrawal charge schedule. SEE EXPENSES ON PAGE 25.
The DCA program is designed to lessen the impact of market fluctuations on your
investment. However, we cannot ensure that you will make a profit. When you
elect the DCA Program, you are continuously investing in securities regardless
of fluctuating price levels. You should consider your tolerance for investing
through periods of fluctuating price levels.
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want to gradually move $750 each quarter from the Money
Market Portfolio to the Alliance Growth Portfolio over six quarters. You
set up dollar cost averaging and purchase Accumulation Units at the
following values:
<Table>
<Caption>
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
</Table>
You paid an average price of only $6.67 per Accumulation Unit over six
quarters, while the average market price actually was $7.08. By investing
an equal amount of money each month, you automatically buy more
Accumulation Units when the market price is low and fewer Accumulation
Units when the market price is high. This example is for illustrative
purposes only.
18
ASSET ALLOCATION REBALANCING PROGRAM
Earnings in your contract may cause the percentage of your investment in each
investment option to differ from your original allocations. The Automatic Asset
Rebalancing Program addresses this situation. At your election, we periodically
rebalance your investments in the Variable Portfolios to return your allocations
to their original percentages. Asset rebalancing typically involves shifting a
portion of your money out of an investment option with a higher return into an
investment option with a lower return. At your request, rebalancing occurs on a
quarterly, semi-annual or annual basis. We reserve the right to modify, suspend
or terminate this program at any time.
PRINCIPAL ADVANTAGE PROGRAM
The Principal Advantage Program allows you to invest in one or more of the
Variable Portfolios without putting your principal at direct risk. The program
accomplishes this by allocating your investment strategically between the fixed
investment options (other than the DCA fixed accounts) and the Variable
Portfolio(s) you select. You decide how much you want to invest and
approximately when you want a return of principal. We calculate how much of your
Purchase Payment needs to be allocated to the particular fixed investment option
to ensure that it grows to an amount equal to your total principal invested
under this program.
EXAMPLE:
Assume that you want to allocate a portion of your initial Purchase Payment
of $100,000 to the fixed investment option. You want the amount allocated
to the fixed investment option to grow to $100,000 in 7 years. If the
7-year fixed investment option is offering a 5% interest rate, we will
allocate $71,069 to the 7-year fixed investment option to ensure that this
amount will grow to $100,000 at the end of the 7-year period. The remaining
$28,931 may be allocated among the Variable Portfolios, as determined by
you, to provide opportunity for greater growth.
We reserve the right to modify, suspend or terminate this program at any time.
VOTING RIGHTS
Anchor National is the legal owner of shares of the Trusts. However, when an
underlying portfolio solicits proxies in conjunction with a vote of
shareholders, we must obtain your instructions on how to vote those shares. We
vote all of the shares we own in proportion to your instructions. This includes
any shares we own on our own behalf. Should we determine that we are no longer
required to comply with these rules, we will vote the shares in our own right.
SUBSTITUTION
If any of the underlying portfolios become unavailable for investment, we may be
required to substitute shares of another investment portfolio. We will seek
prior approval of the SEC and give you notice before substituting shares.
ACCESS TO YOUR MONEY
- --------------------------------------------------------------------------------
You can access money in your contract in two ways:
- by making a partial or total withdrawal, and/or;
- by receiving income payments during the Income Phase. SEE INCOME OPTIONS
ON PAGE 28.
19
Generally, we deduct a withdrawal charge applicable to any partial or total
withdrawal and a market value adjustment if a withdrawal comes from the 3, 5, 7
or 10 year fixed investment options prior to the end of a guarantee period. If
you withdraw your entire contract value, we also deduct any applicable premium
taxes and a contract maintenance fee. SEE EXPENSES ON PAGE 25. We calculate
charges due on a total withdrawal on the day after we receive your request and
other required paper work. We return your contract value less any applicable
fees and charges.
The minimum partial withdrawal amount is $1,000. We require that the value left
in any Variable Portfolio or fixed account be at least $500 after the
withdrawal. You must send a written withdrawal request. Unless you provide us
with different instructions, partial withdrawals will be made in equal amounts
from each Variable Portfolio and the fixed investment option in which your
contract is invested. Withdrawals from fixed investment options prior to the end
of the guarantee period may result in a market value adjustment.
We may be required to suspend or postpone the payment of a withdrawal for any
period of time when: (1) the NYSE is closed (other than a customary weekend and
holiday closings); (2) trading with the NYSE is restricted; (3) an emergency
exists such that disposal of or determination of the value of shares of the
Portfolios is not reasonably practicable; (4) the SEC, by order, so permits for
the protection of contract owners.
Additionally, we reserve the right to defer payments for a withdrawal from a
fixed investment option. Such deferrals are limited to no longer than six
months.
FREE WITHDRAWAL PROVISION
Your contract provides for a free withdrawal amount each year. A free withdrawal
amount is the portion of your account that we allow you to take out each year
without being charged a surrender penalty. However, upon a future full surrender
of your contract, any previous free withdrawals would be subject to a surrender
charge, if any is applicable at the time of the full surrender (except in the
state of Washington).
To determine your free withdrawal amount and the amount, if any, on which we
assess a withdrawal charge, we refer to two special terms. These are
penalty-free earnings and the Total Invested Amount.
The penalty-free earnings portion of your contract is your account value less
your Total Invested Amount. The Total Invested Amount is the total of all
Purchase Payments you have made into the contract less portions of some prior
withdrawals you made. The portions of prior withdrawals that reduce your Total
Invested Amount are as follows:
1. Any prior withdrawals on which you previously paid a withdrawal charge,
plus the amount of the withdrawal charge.
2. Any prior free withdrawals in any year that were in excess of your
penalty-free earnings and were free because the Purchase Payment
withdrawn is no longer subject to surrender charges at the time of the
withdrawal.
When you make a withdrawal, we assume that it is taken from penalty-free
earnings first, then from the Total Invested Amount on a first-in, first-out
basis. This means that you can also access your Purchase Payments which are no
longer subject to a surrender charge before those Purchase Payments which are
still subject to the surrender charge.
During your first contract year your free withdrawal amount is the greater of:
1. Your penalty-free earnings, or;
2. If you are participating in the Systematic Withdrawal program, a total
of 10% of your Total Invested Amount less any prior withdrawals taken
during the contract year.
After the first contract year, you can take out the greater of the following
amounts each year:
1. Your penalty free earnings and any portion of your Total Invested
Amount no longer subject to surrender charges, or;
2. 10% of the portion of your Total Invested Amount that has been in your
contract for at least one year less any withdrawals taken during the
contract year.
20
Purchase Payments withdrawn, above and beyond the amount of your free withdrawal
amount, which have been invested for less than 7 years will result in your
paying a withdrawal charge. The amount of the charge and how it applies are
discussed more fully below. You should consider, before purchasing this
contract, the effect this charge will have on your investment if you need to
withdraw more money than the free withdrawal amount. You should fully discuss
this decision with your financial advisor.
The withdrawal charge percentage applicable is determined by the age of the
Purchase Payment being withdrawn. For purposes of calculating the surrender
charge in the event of a full surrender, the charge is calculated based on the
remaining Total Invested Amount still subject to surrender charge.
For example, you make an initial Purchase Payment of $100,000. For purposes of
this example, we will assume a 0% growth rate over the life of the contract, no
Income Protector Program, Estate Rewards or Earnings Advantage and no subsequent
Purchase Payments. In contract year 2 and year 3, you take out your maximum free
withdrawal of $10,000 for each year. After those free withdrawals your contract
value is $80,000. In contract year 5 you request a full surrender of your
contract. We will apply the following calculation, A - (B X C) = D, where:
A = Your contract value at the time of your request for surrender ($80,000)
B = The amount of your Total Invested Amount still subject to surrender charge
($100,000)
C = The withdrawal charge percentage applicable to the age of each Purchase
Payment at the time of full surrender (4%) [B X C = $4,000]
D = Your full surrender value ($76,000)
SYSTEMATIC WITHDRAWAL PROGRAM
If you elect, we use money in your contract to pay you monthly, quarterly,
semi-annual or annual payments during the Accumulation Phase. Electronic
transfer of these funds to your bank account is also available. The minimum
amount of each withdrawal is $250. There must be at least $500 remaining in your
contract at all times. Withdrawals may be taxable and a 10% IRS tax penalty may
apply if you are under age 59 1/2. Any withdrawals you make using this program
count against your free withdrawal amount as described above. Withdrawals in
excess of that amount may incur a withdrawal charge. There is no additional
charge for participating in this program.
The program is not available to everyone. Please check with our Annuity Service
Center, which can provide the necessary enrollment forms. We reserve the right
to modify, suspend or terminate this program at any time.
NURSING HOME WAIVER
If you are confined to a nursing home for 60 days or longer, we may waive the
withdrawal charge and/or market value adjustment on certain withdrawals prior to
the Annuity Date (not available in Texas). The waiver applies only to
withdrawals made while you are in a nursing home or within 90 days after you
leave the nursing home. Your contract prohibits use of this waiver during the
first 90 days after you purchase your contract. In addition, the confinement
period for which you seek the waiver must begin after you purchase your
contract.
21
In order to use this waiver, you must submit with your withdrawal request, the
following documents: (1) a doctor's note recommending admittance to a nursing
home; (2) an admittance form which shows the type of facility you entered; and
(3) a bill from the nursing home which shows that you met the 60 day confinement
requirement.
MINIMUM CONTRACT VALUE
Where permitted by state law, we may terminate your contract if both of the
following occur: (1) your contract is less than $500 as a result of withdrawals;
and (2) you have not made any Purchase Payments during the past three years. We
will provide you with sixty days written notice. At the end of the notice
period, we will distribute the contract's remaining value to you.
QUALIFIED CONTRACT OWNERS
Certain Qualified plans restrict and/or prohibit your ability to withdraw money
from your contract. SEE TAXES ON PAGE 33 for a more detailed explanation.
DEATH BENEFIT
- --------------------------------------------------------------------------------
If you should die during the Accumulation Phase, your Beneficiary will receive a
death benefit. The death benefit options are discussed in detail below.
The death benefit is not paid after you are in the Income Phase. If you die
during the Income Phase, your Beneficiary will receive any remaining guaranteed
income payments in accordance with the income option you choose. SEE INCOME
OPTIONS ON PAGE 28.
You select the Beneficiary to receive any amounts payable on death. You may
change the Beneficiary at any time, unless you previously made an irrevocable
Beneficiary designation. A new Beneficiary designation is not effective until we
record the change.
The death benefit will be paid out when we receive adequate proof of death: (1)
a certified copy of a death certificate; (2) a certified copy of a decree of
court of competent jurisdiction as to the finding of death; (3) a written
statement by a medical doctor who attended the deceased at the time of death; or
(4) any other proof satisfactory to us. We may also require additional
documentation or proof in order for the death benefit to be paid.
The death benefit must be paid within 5 years of the date of death. The
Beneficiary may, in the alternative, elect to have the death benefit payable in
the form of an annuity. If the Beneficiary elects an income option, it must be
paid over the Beneficiary's lifetime or for a period not extending beyond the
Beneficiary's life expectancy. Income payments must begin within one year of the
owner's death. If the Beneficiary is the spouse of the owner, he or she can
elect to continue the contract, rather than receive a death benefit. SEE SPOUSAL
CONTINUATION ON PAGE 25. If the Beneficiary does not make a specific election as
to how they want the death benefit distributed within sixty days of our receipt
of adequate proof of death, it will be paid in a lump sum.
If the Annuitant dies before annuity payments begin, you can name a new
Annuitant. If no Annuitant is named within 30 days, you will become the
Annuitant. However, if the owner is a non-natural person (for example, a trust),
then the death of the Annuitant will be treated as the death of the owner, no
new Annuitant may be named and the death benefit will be paid.
This contract provides three death benefit options: The first is, the Standard
Death Benefit which is automatically included in your contract for no additional
fee. We also offer, for an additional fee, an optional
22
enhanced death benefit called "Estate Rewards" which offers you the selection of
one of two options. If you choose the Estate Rewards death benefit you may also
elect, for an additional fee, the Earnings Advantage feature. Your death benefit
elections must be made at the time of contract application and the election
cannot be terminated.
The term "Net Purchase Payment" is used frequently in explaining the death
benefit options. We define Net Purchase Payments as Purchase Payments less an
adjustment for each withdrawal.
To calculate the adjustment amount for a withdrawal, you first determine the
percentage by which the contract value is reduced by the withdrawal, on the date
of the withdrawal. This percentage is calculated by dividing the amount of each
withdrawal (including fees and charges applicable to the withdrawal) by the
contract value immediately before taking that withdrawal. The percentage amount
is then multiplied by the amount of Net Purchase Payments immediately before the
withdrawal to get the adjustment amount. This amount is subtracted from the
amount of Net Purchase Payment(s) immediately before the withdrawal.
If you have not taken any withdrawals from your contract, Net Purchase Payments
equals total Purchase Payments into your contract.
STANDARD DEATH BENEFIT
The standard death benefit on your contract is the greater of:
1. Net Purchase Payments compounded at a 3% annual growth rate from the
date of issue until the earlier of age 75 or the date of death, plus
any Purchase Payments recorded after the earlier of age 75 or the date
of death; and reduced for any withdrawals (and fees and charges
applicable to those withdrawals) recorded after the earlier of age 75
or date of death, in the same proportion that the withdrawal reduced
the contract value on the date of the withdrawal.
2. the contract value at the time we receive satisfactory proof of death.
ESTATE REWARDS DEATH BENEFIT(S)
For an additional fee, you may elect one of the Estate Rewards Death Benefits
which can provide greater protection for your beneficiaries. You must chose
between Option 1 and Option 2 at the time you purchase your contract and you can
not change your election at any time. The Estate Rewards Death Benefit is not
available if you are age 81 or older at the time of contract issue. The fee for
Estate Rewards death benefit is .15% of the average daily ending value of the
assets you have allocated to the Variable Portfolios.
OPTION 1 - 5% ACCUMULATION OPTION
THE DEATH BENEFIT IS THE GREATER OF:
a. the contract value at the time we receive satisfactory proof of death;
or
b. Net Purchase Payments compounded to the earlier of your 80th birthday
or the date of death, at a 5% annual growth rate, plus any Purchase
Payments recorded after the 80th birthday or the date of death; and
reduced for any withdrawals (and fees and charges applicable to those
withdrawals) recorded after the 80th birthday or the date of death, in
the same proportion that the withdrawal reduced the contract value on
the date of the withdrawal, up to a maximum benefit of two times the
Net Purchase Payments made over the life of your contract.
If you die after your latest Annuity Date, the 5% Accumulation Option death
benefit reverts to the Standard Death Benefit. Thus, your beneficiaries may
receive no benefit from Estate Rewards Death Benefit. This option may not be
available in all states. Check with your investment representative regarding
availability.
23
OPTION 2 - MAXIMUM ANNIVERSARY VALUE OPTION
THE DEATH BENEFIT IS THE GREATEST OF:
a. Net Purchase Payments; or
b. the contract value at the time we receive satisfactory proof of death;
or
c. the maximum anniversary value on any contract anniversary prior to your
81st birthday. The anniversary value equals the contract value on a
contract anniversary increased by any Purchase Payments recorded after
that anniversary; and reduced for any withdrawals (and fees and charges
applicable to those withdrawals) recorded after the anniversary, in the
same proportion that the withdrawal reduced the contract value on the
date of the withdrawal.
If you are age 90 or older at the time of death and you had selected
the Maximum Anniversary Value option, if payable, a death benefit will
be equal to the contract value at the time we receive satisfactory
proof of death. Thus, your beneficiaries may receive no benefit from
your election of the Estate Rewards Death Benefit. This option may not
be available in all states. Check with your Investment Representative
regarding availability.
EARNINGS ADVANTAGE
The Earnings Advantage benefit may increase the Estate Rewards death benefit
amount. In order to make an Earnings Advantage election you must have already
elected one of the Estate Rewards Death Benefits described above. The Earnings
Advantage is available for an additional charge of .25% of the average daily
ending value of the assets you have allocated to the Variable Portfolios. You
are not required to elect the Earnings Advantage feature if you select the
Estate Rewards Death Benefit, but once elected, generally it can not be
terminated. Further, if you elect both the Estate Rewards and Earnings Advantage
the combined charge will be .40% of the average daily ending value of the assets
you have allocated to the Variable Portfolios.
If you have earnings in your contract at the time of death, we will add a
percentage of those earnings (the "Earnings Advantage Percentage"), subject to a
maximum dollar amount (the "Maximum Earnings Advantage Percentage"), to the
death benefit payable.
The Contract Year of Death will determine the Earnings Advantage Percentage and
the Maximum Earnings Advantage amount, as set forth below:
<Table>
- ------------------------------------------------------------------------------------------------------------------
EARNINGS ADVANTAGE MAXIMUM
CONTACT YEAR OF DEATH PERCENTAGE EARNINGS ADVANTAGE AMOUNT
- ------------------------------------------------------------------------------------------------------------------
Years 0 - 4 25% of Earnings 25% of Net Purchase Payments
- ------------------------------------------------------------------------------------------------------------------
Years 5 - 9 40% of Earnings 40% of Net Purchase Payments*
- ------------------------------------------------------------------------------------------------------------------
Years 10+ 50% of Earnings 50% of Net Purchase Payments*
- ------------------------------------------------------------------------------------------------------------------
</Table>
* Purchase Payments received after the 5th contract anniversary must remain in
the contract for at least 6 full months to be included as part of the Net
Purchase Payments for the purpose of the Maximum Earnings Advantage Amount
calculation.
What is the Contract Year of Death?
Contract Year of Death is the number of full 12 month periods beginning with the
date your contract is issued and ending on the date of death.
What is the Earnings Advantage Percentage Amount?
We determine the amount of the Earnings Advantage based upon a percentage of
earnings in your contract at the time of your death. For the purpose of this
calculation, earnings are defined as (1) minus (2) where
(1) equals the contract value on the date of death; and
24
(2) equals Net Purchase Payments.
What is the Maximum Earnings Advantage?
The Earnings Advantage amount is subject to a maximum. The maximum Earnings
Advantage amount is equal to a percentage of your Net Purchase Payments.
The Earnings Advantage benefit will only be paid if your date of death is prior
to the latest Annuity Date. Thus, your beneficiaries may receive no benefit from
your election of the Earnings Advantage Benefit if you die before your latest
Annuity Date. This option may not be available in all states. Check with your
Investment Representative regarding availability.
WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THESE DEATH BENEFIT
FEATURES (IN THEIR ENTIRETY OR ANY COMPONENT) AT ANY TIME FOR PROSPECTIVELY
ISSUED CONTRACTS.
SPOUSAL CONTINUATION
If you are the original owner of the contract and the Beneficiary is your
spouse, your Spouse may elect to continue the contract after your death. The
spouse becomes the new owner ("Continuing Spouse"). The contract and its elected
features, if any, remain the same. The Continuing Spouse is subject to the same
fees, charges and expenses applicable to the original owner of the contract. The
Continuing Spouse can only elect to continue the contract upon the death of the
original owner of the contract.
Upon continuation of the contract, we will contribute to the contract value an
amount by which the death benefit that would have been paid to the beneficiary
upon the death of the original owner exceeds the contract value ("Continuation
Contribution"), if any. We calculate the Continuation Contribution as of the
date of the original owner's death. We will add the Continuation Contribution as
of the date we receive both the Continuing Spouse's written request to continue
the contract and proof of death of the original owner in a form satisfactory to
us ("Continuation Date"). The age of the Continuing Spouse on the Continuation
Date and on the date of the Continuing Spouse's death will be used in
determining any future death benefits under the Contract. SEE APPENDIX B FOR
FURTHER EXPLANATION OF THE DEATH BENEFIT CALCULATION FOLLOWING A SPOUSAL
CONTINUATION. The Continuation Contribution is not considered a Purchase Payment
for any other calculation except as noted in Appendix B. To the extent the
Continuing Spouse invests in the Variable Portfolios or MVA fixed accounts, they
will be subject to investment risk as was the original owner.
Generally, the Continuing Spouse cannot change any contract provisions as the
new owner. However, on the Continuation Date, the Continuing Spouse may
terminate the original owner's election of Earnings Advantage. We will terminate
Earnings Advantage if the Continuing Spouse is age 81 or older on the
Continuation Date. If Earnings Advantage is not terminated or discontinued and
the Continuing Spouse dies after the latest Annuity Date no Earnings Advantage
benefit will be payable.
EXPENSES
- --------------------------------------------------------------------------------
There are charges and expenses associated with your contract. These charges and
expenses reduce your investment return. We will not increase the contract
maintenance fee or withdrawal charges under your contract. However the
investment charges under your contract may increase or decrease. Some states may
require that we charge less than the amounts described below.
INSURANCE CHARGES
The amount of this charge is 1.40% annually of the value of your contract
invested in the Variable Portfolio(s). We deduct the charge daily, on a pro-rata
basis, from the value of your contract allocated to the Variable
25
Portfolio(s). The insurance charge compensates us for the mortality and expense
risks and the costs of contract distribution assumed by Anchor National. If
these charges do not cover all of our expenses, we will pay the difference.
Likewise, if these charges exceed our expenses, we will keep the difference.
WITHDRAWAL CHARGES
During the Accumulation Phase you may make withdrawals from your contract.
However, a withdrawal charge may apply. We apply a withdrawal charge upon an
early withdrawal against each Purchase Payment you put into the contract. The
withdrawal charge equals a percentage of the Purchase Payment you take out of
the contract. The contract does provide a free withdrawal amount every year. SEE
ACCESS TO YOUR MONEY ON PAGE 19. The withdrawal charge percentage declines each
year a Purchase Payment is in the contract, as follows:
<Table>
<Caption>
YEAR 1 2 3 4 5 6 7 8
- ----------------- --- --- --- --- --- --- --- ---
Withdrawal Charge 7% 6% 6% 5% 4% 3% 2% 0%
</Table>
After a Purchase Payment has been in the contract for seven complete years the
withdrawal charge no longer applies to that Purchase Payment. When calculating
the withdrawal charge, we treat withdrawals as coming first from the Purchase
Payments that have been in your contract the longest. However, for tax purposes,
your withdrawals are considered earnings first, then Purchase Payments.
Whenever possible, we deduct the withdrawal charge from the money remaining in
your contract from each of your investment options on a pro-rata basis. If you
withdraw all of your contract value, we deduct any applicable withdrawal charges
from the amount withdrawn. We will not assess a withdrawal charge for money
withdrawn to pay a death benefit. We do not currently assess a withdrawal charge
upon election to receive income payments from your contract. Withdrawals made
prior to age 59 1/2 may result in tax penalties. SEE TAXES ON PAGE 33.
INVESTMENT CHARGES
Investment Management Fees
Charges are deducted from the assets of the investment portfolios underlying the
Variable Portfolio(s) for the advisory and other expenses of the portfolios. SEE
FEE TABLES ON PAGE 6.
Service Fees
Portfolio shares of the Anchor Series Trust and SunAmerica Series Trust are all
subject to fees imposed under a servicing plan adopted by the Boards of Trustees
pursuant to Rule 12b-1 under the Investment Company Act of 1940. This service
fee of 0.15%, which is also known as a 12b-1 fee, may be used to compensate
financial intermediaries for service provided over the life of your contract.
FOR MORE DETAILED INFORMATION ON THESE INVESTMENT CHARGES, REFER TO THE
PROSPECTUSES FOR THE ANCHOR SERIES TRUST, SUNAMERICA SERIES TRUST AND/OR WM
VARIABLE TRUST.
CONTRACT MAINTENANCE FEE
During the Accumulation Phase, we subtract a contract maintenance fee from your
account once per year. This charge compensates us for the cost of contract
administration. If your contract value is $50,000 or more on your contract
anniversary date, we will waive the charge. This waiver is subject to change
without notice. We will deduct the $35 ($30 in North Dakota) contract
maintenance fee on a pro-rata basis from your account
26
value on your contract anniversary. In the states of Pennsylvania, Texas and
Washington a contract maintenance fee will be deducted pro-rata from the
Variable Portfolio(s) in which you are invested, only. If you withdraw your
entire contract value, we deduct the fee from that withdrawal.
TRANSFER FEE
We currently allow 15 free transfers per contract year. We charge $25 ($10 in
Pennsylvania and Texas) for each additional transfer in a contract year.
OPTIONAL DEATH BENEFIT FEES
Please see pages 23 and 24 of this prospectus for additional information
regarding the Estate Rewards death benefit and Earnings Advantage fee.
OPTIONAL INCOME PROTECTOR FEE
Please see page 30 of this prospectus for additional information regarding the
Income Protector fee.
PREMIUM TAX
Certain states charge the Company a tax on the premiums you pay into the
contract. We deduct from your contract these premium tax charges. Currently we
deduct the charge for premium taxes when you fully surrender or annuitize the
contract. In the future, we may assess this deduction at the time you put
Purchase Payment(s) into the contract or upon payment of a death benefit.
APPENDIX D provides more information about premium taxes.
INCOME TAXES
We do not currently deduct income taxes from your contract. We reserve the right
to do so in the future.
REDUCTION OR ELIMINATION OF CHARGES AND EXPENSES, AND ADDITIONAL AMOUNTS
CREDITED
Sometimes sales of the contracts to groups of similarly situated individuals may
lower our administrative and/or sales expenses. We reserve the right to reduce
or waive certain charges and expenses when this type of sale occurs. In
addition, we may also credit additional interest to policies sold to such
groups. We determine which groups are eligible for such treatment. Some of the
criteria we evaluate to make a determination are: size of the group; amount of
expected Purchase Payments; relationship existing between us and prospective
purchaser; nature of the purchase; length of time a group of contracts is
expected to remain active; purpose of the purchase and whether that purpose
increases the likelihood that our expenses will be reduced; and/or any other
factors that we believe indicate that administrative and/or sales expenses may
be reduced.
Anchor National may make such a determination regarding sales to its employees,
it affiliates' employees and employees of currently contracted broker-dealers;
its registered representatives and immediate family members of all of those
described.
We reserve the right to change or modify any such determination or the treatment
applied to a particular group, at any time.
27
INCOME OPTIONS
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ANNUITY DATE
During the Income Phase, the money in your Contract is used to make regular
income payments to you. You may switch to the Income Phase any time after your
second contract anniversary. You select the month and year in which you want
income payments to begin. The first day of that month is the Annuity Date. You
may change your Annuity Date, so long as you do so at least seven days before
the income payments are scheduled to begin. Once you begin receiving income
payments, you cannot change your Income Option. Except as discussed under Option
5, once you begin receiving income payments, you cannot otherwise access your
money through a withdrawal or surrender. Other pay out options may be available.
Contact Our Annuity Service Center for more information.
Income payments must begin on or before your 95th birthday or on your tenth
contract anniversary, whichever occurs later. If you do not choose an Annuity
Date, your income payments will automatically begin on this date (latest Annuity
Date.) Certain states may require your income payments to start earlier.
If the Annuity Date is past your 85th birthday, your contract could lose its
status as an annuity under Federal tax laws. This may cause you to incur adverse
tax consequences. In addition, certain Qualified contracts require you to take
minimum distributions after you reach age 70 1/2. SEE TAXES ON PAGE 33.
INCOME OPTIONS
Currently, this Contract offers five Income Options. If you elect to receive
income payments but do not select an option, your income payments will be made
in accordance with Option 4 for a period of 10 years. For income payments
selected for joint lives, we pay according to Option 3.
We base our calculation of income payments on the life of the Annuitant and the
annuity rates set forth in your contract. As the contract owner, you may change
the Annuitant at any time prior to the Annuity Date. You must notify us if the
Annuitant dies before the Annuity Date and then designate a new Annuitant.
OPTION 1 - LIFE INCOME ANNUITY
This option provides income payments for the life of the Annuitant. Income
payments stop when the Annuitant dies.
OPTION 2 - JOINT AND SURVIVOR LIFE ANNUITY
This option provides income payments for the life of the Annuitant and for the
life of another designated person. Upon the death of either person, we will
continue to make income payments during the lifetime of the survivor. Income
payments stop whenever the survivor dies.
OPTION 3 - JOINT AND 100% SURVIVOR LIFE ANNUITY WITH 10 YEAR PERIOD CERTAIN
This option is similar to Option 2 above, with an additional guarantee of
payments for at least 10 years. If the Annuitant and the Survivor die before all
of the payments have been made, the remaining payments are made to the
Beneficiary under your Contract.
28
OPTION 4 - LIFE ANNUITY WITH 10 OR 20 YEAR PERIOD CERTAIN
This option is similar to Option 1 above. In addition, this option provides a
guarantee that income payments will be made for at least 10 or 20 years. You
select the number of years. If the Annuitant dies before all guaranteed income
payments are made, the remaining income payments go to the Beneficiary under
your Contract.
OPTION 5 - INCOME FOR A SPECIFIED PERIOD
This option provides income payments for a guaranteed period ranging from 5 to
30 years. If the Annuitant dies before all the guaranteed income payments are
made, the remaining income payments are made to the Beneficiary under your
contract. Additionally, if variable income payments are elected under this
option, you (or the Beneficiary under the contract if the Annuitant dies prior
to all guaranteed payments being made) may redeem the contract value (in full or
in part) after the Annuity Date. The amount available upon such redemption would
be the discounted present value of any remaining guaranteed payments. The value
of an Annuity Unit, regardless of the option chosen, takes into account the
mortality and expense risk charge. Since Option 5 does not contain an element of
mortality risk, no benefit is derived from this charge.
We make income payments on a monthly, quarterly, semi-annual or annual basis.
You instruct us to send you a check or to have the payments direct deposited
into your bank account. If state law allows, we distribute annuities with a
contract value of $5,000 or less in a lump sum. Also, if the selected income
option results in annuity payments of less than $50 per payment, we may decrease
the frequency of the payments, state law allowing. See the INCOME PROTECTOR
section below for specifics relative to taking income under that feature.
ALLOCATION OF ANNUITY PAYMENTS
You can choose income payments that are fixed, variable or both. If payments are
fixed, Anchor National guarantees the amounts of each payment. If the payments
are variable, the amounts are not guaranteed. They will go up and/or down based
upon the performance of the Variable Portfolio(s) in which you invest.
FIXED OR VARIABLE INCOME PAYMENTS
If at the date when income payments begin you are invested in the Variable
Portfolio(s) only, your income payments will be variable. If your money is only
in fixed accounts at that time, your income payments will be fixed in amount. If
you are invested in both fixed and variable options at the time you begin the
Income Phase, a portion of your income payments will be fixed and a portion will
be variable.
INCOME PAYMENTS
Your income payments will vary if you are invested in the Variable Portfolio(s)
after the Annuity date depending on four factors:
- for life options, your age when payments begin,
- the value of your contract in the Variable Portfolio(s) on the Annuity
Date,
- the 3.5% assumed investment rate for variable income payments used in the
annuity table for the contract, and;
- the performance of the Variable Portfolio(s) in which you are invested
during the time you receive income payments.
29
If you are invested in both the fixed account options and the Variable
Portfolio(s) after the Annuity Date, the allocation of funds between the fixed
accounts and Variable Portfolio(s) also impacts the amount of your annuity
payments.
TRANSFERS DURING THE INCOME PHASE
During the Income Phase, one (1) transfer per month is permitted between the
Variable Portfolios. No other transfers are allowed during the Income Phase.
DEFERMENT OF PAYMENTS
We may defer making fixed payments for up to six months, or less if required by
law. Interest is credited to you during the deferral period.
Please read the Statement of Additional Information, available upon request, for
a more detailed discussion of the income options.
INCOME PROTECTOR
You may elect to enroll in the Income Protector Program. The Income Protector
Program can provide a future "safety net" which can offer you the ability to
receive a guaranteed fixed minimum retirement income when you choose to switch
to the Income Phase. If you elect the Income Protector you can know the level of
minimum income that will be available to you upon annuitization, regardless of
fluctuating market conditions. In order to utilize the program, you must follow
the provisions discussed below.
The minimum level of Income Protector benefit available is generally based upon
your Purchase Payments remaining in your contract at the time you decide to
begin taking income. If available and elected, a growth rate can provide
increased levels of minimum guaranteed income. We charge a fee for the Income
Protector benefit. The amount of the fee and levels of income protection
available to you are described below. This feature may not be available in your
state. Once you have made an Income Protector election it can not be changed or
terminated. Check with your financial advisor regarding availability.
You are not required to use the Income Protector to receive income payments. The
general provisions of your contract provide other income options. However, we
will not refund fees paid for the Income Protector if you begin taking income
payments under the general provisions of your contract. In addition, if
applicable, surrender charges will be assessed upon your beginning the Income
Phase, if you annuitize under the Income Protector Program. YOU MAY NEVER NEED
TO RELY UPON INCOME PROTECTOR IF YOUR CONTRACT PERFORMS WITHIN A HISTORICALLY
ANTICIPATED RANGE. HOWEVER, PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
Certain federal tax code restrictions on the income options available to
qualified retirement investors may have an impact on your ability to benefit
from this feature. Qualified investors should read NOTE TO QUALIFIED CONTRACT
HOLDERS, below.
HOW DO WE DETERMINE THE AMOUNT OF YOUR MINIMUM GUARANTEED INCOME?
If you elect the Income Protector Program, we base the amount of minimum
retirement income available to you upon a calculation we call the Income Benefit
Base. At the time your enrollment in the Income Protector program becomes
effective, your Initial Income Benefit Base is equal to your contract value. If
elected, your participation becomes effective on the date of issue of the
contract.
The Income Benefit Base is only a calculation. It does not represent a contract
value, nor does it guarantee performance of the Variable Portfolios in which you
invest.
30
Your Income Benefit Base increases if you make subsequent Purchase Payments and
decreases if you withdraw money from your contract. The exact Income Benefit
Base calculation is equal to (a) plus (b) minus (c) where:
(a) is equal to, for the first year of calculation, your contract value on
the date your participation became effective, and for each subsequent
year of calculation, the Income Benefit Base of your prior contract
anniversary, and;
(b) is equal to the sum of all subsequent Purchase Payments made into the
contract since the prior contract anniversary, and;
(c) is equal to all withdrawals and applicable fees and charges since the
last contract anniversary, in an amount proportionate to the amount by
which such withdrawals decreased your contract value. Your Income
Benefit Base may accumulate at the elected growth rate, if available,
from the date your election becomes effective through your Income
Benefit Date.
Any applicable growth rate will reduce to 0% on the anniversary immediately
after the annuitant's 90th birthday.
LEVEL OF PROTECTION
If you decide that you want the protection offered by the Income Protector
Program, you must elect the Income Protector by completing the Income Protector
Election Form available through our Annuity Service Center. You must elect the
Income Protector feature at the time your contract is issued. You may only elect
one of the offered alternatives, if more than one is available, and you can
never change your election once made.
Your Income Benefit Base will begin accumulating at the applicable growth rate
on the contract anniversary following our receipt of your completed election
form. In order to obtain the benefit of the Income Protector you may not begin
the income Phase for at least nine years following your election. You may not
elect the Income Protector Program if the required waiting period before
beginning the income phase would occur later than your latest Annuity Date.
The Income Protector option(s) currently available under this contract are:
<Table>
<Caption>
FEE* AS A % OF YOUR INCOME WAITING PERIOD BEFORE THE
OPTION GROWTH RATE BENEFIT BASE INCOME PHASE
- ---------------------------- ---------------------------- ---------------------------- ----------------------------
Income Protector Base 0% .10% 9 years
</Table>
ELECTING TO RECEIVE INCOME
You may elect to begin the Income Phase of your contract using the Income
Protector Program ONLY within the 30 days after the 9th or later contract
anniversary following the effective date of your Income Protector participation.
The contract anniversary of or prior to your election to begin receiving income
payments is your Income Benefit Date. We calculate your Income Benefit Base as
of that date to use in determining your guaranteed minimum fixed retirement
income. To determine the minimum guaranteed retirement income available to you,
we apply your final Income Benefit Base to the annuity rates stated in your
Income Protector endorsement for the income option you select. You then choose
if you would like to receive the income annually, semi-annually, quarterly or
monthly for the time guaranteed under your selected income option. Your final
Income Benefit Base is equal to (a) minus (b) where:
(a) is your Income Benefit Base as of your Income Benefit Date, and;
(b) is any partial withdrawals of contract value and any charges applicable
to those withdrawals and any withdrawal charges otherwise applicable,
calculated as if you fully surrender your contract as of the Income
Benefit Date, and any applicable premium taxes.
31
The income options available when using the Income Protector feature to receive
your retirement income are:
- Life Annuity with 10 years guaranteed, or
- Joint and 100% Survivor Life Annuity with 20 years guaranteed
At the time you elect to begin receiving income payments, we will calculate your
income payments using both your Income Benefit Base and your contract value. We
will use the same income option for each calculation; however, the annuity
factors used to calculate your income under the Income Protector feature will be
different. You will receive whichever provides a greater stream of income. If
you elect to receive income payments using the Income Protector feature your
income payments will be fixed in amount.
FEES ASSOCIATED WITH THE INCOME PROTECTOR PROGRAM
If you elect to participate in the Income Protector program we charge an annual
fee, as follows:
<Table>
<Caption>
OPTION FEE* AS A % OF YOUR INCOME BENEFIT BASE
- ---------------------------- ---------------------------------------
Income Protector Base .10%
</Table>
We deduct the annual fee from your actual Contract Value. We begin deducting the
annual fee on your first contract anniversary.
Additionally, if you fully surrender your contract prior to your contract
anniversary, we will deduct the fee at the time of surrender based on your
Income Benefit Base as of the surrender date. Once elected, the Income Protector
Program and its corresponding charges may not be terminated until full surrender
or annuitization of the contract occurs.
NOTE TO QUALIFIED CONTRACT HOLDERS
Qualified contracts generally require that you select an income option that does
not exceed your life expectancy. That restriction, if it applies to you, may
limit the benefit of the Income Protector program. To utilize the Income
Protector feature, you must take income payments under one of the two income
options described above. If those income options exceed your life expectancy,
you may be prohibited from receiving your guaranteed fixed income under the
program. If you own a Qualified contract to which this restriction applies and
you elect the Income Protector program, you may pay for this minimum guarantee
and not be able to realize the benefit.
Generally, for Qualified contracts:
- for the Life Annuity with 10 years guaranteed, you must annuitize before
age 79, and;
- for the Joint and 100% Survivor Annuity with 20 years guaranteed, both
annuitants must be 70 or younger or one of the annuitants must be 65 or
younger upon annuitization. Other age combinations may be available.
You may wish to consult your tax advisor for information concerning your
particular circumstances.
The Income Protector program may not be available in all states. Check with your
financial advisor for availability in your state.
We reserve the right to modify, suspend or terminate the Income Protector
Program at any time.
32
TAXES
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NOTE: WE PREPARED THE FOLLOWING INFORMATION ON TAXES AS A GENERAL DISCUSSION OF
THE SUBJECT. IT IS NOT TAX ADVICE. WE CAUTION YOU TO SEEK COMPETENT TAX ADVICE
ABOUT YOUR OWN CIRCUMSTANCES. WE DO NOT GUARANTEE THE TAX STATUS OF YOUR
ANNUITY. TAX LAWS CONSTANTLY CHANGE, THEREFORE WE CANNOT GUARANTEE THAT THE
INFORMATION CONTAINED HEREIN IS COMPLETE AND/OR ACCURATE.
ANNUITY CONTRACTS IN GENERAL
The Internal Revenue Code ("federal tax code") provides for special rules
regarding the tax treatment of annuity contracts. Generally, taxes on the
earnings in your annuity contract are deferred until you take the money out.
Qualified retirement investments automatically provide tax deferral regardless
of whether the underlying contract is an annuity. Different rules apply
depending on how you take the money out and whether your contract is Qualified
or Non-qualified.
If you do not purchase your contract under a pension plan, a specially sponsored
employer program or an individual retirement account, your contract is referred
to as a Non-qualified contract. A Non-qualified contract receives different tax
treatment than a Qualified contract. In general, your cost basis in a
Non-qualified contract is equal to the Purchase Payments you put into the
contract. You have already been taxed on the cost basis in your contract.
If you purchase your contract under a pension plan, a specially sponsored
employer program or as an individual retirement account, your contract is
referred to as a Qualified contract. Examples of Qualified plans are: Individual
Retirement Accounts ("IRAs"), Roth IRAs, Tax-Sheltered Annuities (referred to as
403(b) contracts), H.R. 10 Plans (referred to as Keogh Plans) and pension and
profit sharing plans, including 401(k) plans. Typically you have not paid any
tax on the Purchase Payments used to buy your contract and therefore, you have
no cost basis in your contract.
TAX TREATMENT OF DISTRIBUTIONS--NON-QUALIFIED CONTRACTS
If you make a withdrawal from a Non-qualified contract, the federal tax code
treats such a withdrawal as first coming from the earnings and then as coming
from your Purchase Payments. For annuity payments, any portion of each payment
that is considered a return of your Purchase Payment will not be taxed.
Withdrawn earnings are treated as income to you and are taxable. The federal tax
code provides for a 10% penalty tax on any earnings that are withdrawn other
than in conjunction with the following circumstances: (1) after reaching age
59 1/2; (2) when paid to your Beneficiary after you die; (3) after you become
disabled (as defined in the federal tax code); (4) in a series of substantially
equal installments made for your life or for the joint lives of you and you
Beneficiary; (5) under an immediate annuity; or (6) which come from Purchase
Payments made prior to August 14, 1982.
TAX TREATMENT OF DISTRIBUTIONS--QUALIFIED CONTRACTS
Generally, you have not paid any taxes on the Purchase Payments used to buy a
Qualified contract. Any amount of money you take out as a withdrawal or as
income payments is taxable income. The federal tax code further provides for a
10% penalty tax on any withdrawal or income payment paid to you other than in
conjunction with the following circumstances: (1) after reaching age 59 1/2; (2)
when paid to your Beneficiary after you die; (3) after you become disabled (as
defined in the federal tax code); (4) in a series of substantially equal
installments made for your life or for the joint lives of you and your
Beneficiary; (5) to the extent such withdrawals do not exceed limitations set
by the federal tax code for amounts paid during the taxable year for
33
medical care; (6) to fund higher education expenses (as defined in federal tax
code); (7) to fund certain first-time home purchase expenses; and, except in the
case of an IRA; (8) when you separate from service after attaining age 55; and
(9) when paid to an alternate payee pursuant to a qualified domestic relations
order.
The federal tax code limits the withdrawal of Purchase Payments from certain
Tax-Sheltered Annuities. Withdrawals can only be made when an owner: (1) reaches
age 59 1/2; (2) leaves his or her job; (3) dies; (4) becomes disabled (as
defined in the federal tax code); or (5) in the case of hardship. In the case of
hardship, the owner can only withdraw Purchase Payments.
MINIMUM DISTRIBUTIONS
Generally, the IRS requires that you begin taking annual distributions from
Qualified contracts by April 1, of the calendar year following the later of (1)
the calendar year in which you attain age 70 1/2 or 2) for Qualified contracts
other than IRAs the calendar year in which you retire. Minimum distributions are
not required in a Roth IRA, during your lifetime. Failure to satisfy the minimum
distribution requirements may result in a tax penalty. You should contact your
tax advisor for more information.
We currently waive surrender charges and MVA on withdrawals taken to meet
minimum distribution requirements. Current operational practice is to provide a
free withdrawal of the greater of the contract's maximum penalty free amount or
the required minimum distribution amount for a particular contract (but not
both).
You may elect to have the required minimum distribution amount on your contract
calculated and withdrawn each year under the automatic withdrawal option. You
may select either monthly, quarterly, semi-annual or annual withdrawals for this
purpose. This service is provided as a courtesy and we do not guarantee the
accuracy of our calculations. Accordingly, we recommend you consult your tax
advisor concerning your required minimum distribution. You may terminate your
election for automated minimum distribution at any time by sending a written
request to our Annuity Service Center. We reserve the right to change, modify or
discontinue the service at any time.
TAX TREATMENT OF DEATH BENEFITS
Any death benefits paid under the contract are taxable to the Beneficiary. The
rules governing the taxation of payments from an annuity contract, as discussed
above, generally apply whether the death benefits are paid as lump sum or
annuity payments. Estate taxes may also apply.
Certain enhanced death benefits may be purchased under your contract. Although
these types of benefits are used as investment protection and should not give
rise to any adverse tax effects, the IRS could take the position that some or
all of the charges for these death benefits should be treated as a partial
withdrawal from the contract. In such case, the amount of the partial withdrawal
may be includable in taxable income and subject to the 10% penalty if the owner
is under 59 1/2.
If you own a Qualified contract and purchase these enhanced death benefits, the
IRS may consider these benefits "incidental death benefits." The IRC imposes
limits on the amount of the incidental death benefits allowable for Qualified
contracts. If the death benefit(s) selected by you are considered to exceed
these limits, the benefit(s) could result in taxable income to the owner of the
Qualified contract. Furthermore, the IRC provides that the assets of an IRA
(including a Roth IRA) may not be invested in life insurance, but may provide,
in the case of death during the Accumulation Phase, for a death benefit payment
equal to the greater of Purchase Payments or contract value. This Contract
offers death benefits, which may exceed the greater of Purchase Payments or
contract value. If the IRS determines that these benefits are providing life
insurance, the contract may not qualify as an IRA (including Roth IRAs). You
should consult your tax adviser regarding these features and benefits prior to
purchasing a contract.
34
DIVERSIFICATION
The federal tax code imposes certain diversification requirements on the
underlying investments for a variable annuity. We believe that the underlying
Portfolios' management monitors the variable Portfolios so as to comply with
these requirements. To be treated as a variable annuity for tax purposes, the
underlying investments must meet these requirements.
The diversification regulations do not provide guidance as to the circumstances
under which you, because of the degree of control you exercise over the
underlying investments, and not Anchor National, would be considered the owner
of the shares of the Portfolios. It is unknown to what extent owners are
permitted to select investments, to make transfers among Portfolios or the
number and type of Portfolios owners may select from. If any guidance is
provided which is considered a new position, then the guidance would generally
be applied prospectively. However, if such guidance is considered not to be a
new position, it may be applied retroactively. This would mean you, as the owner
of the contract, could be treated as the owner of the underlying variable
investment Portfolios. Due to the uncertainty in this area, we reserve the right
to modify the contract in an attempt to maintain favorable tax treatment.
PERFORMANCE
- --------------------------------------------------------------------------------
From time to time we will advertise the performance of the Variable Portfolios.
Any such performance results are based on historical earnings and are not
intended to indicate future performance.
We advertise the Cash Management Portfolio's yield and effective yield. In
addition, the other Variable Portfolios advertise total return, gross yield and
yield-to-maturity. These figures represent past performance of the Variable
Portfolios. These performance numbers do not indicate future results.
We may show performance of each Variable Portfolios in comparison to various
appropriate indices and the performance of other similar variable annuity
products with similar objectives as reported by such independent reporting
services as Morningstar, Inc., Lipper Analytical Services, Inc. and the Variable
Annuity Research Data Service ("VARDS").
Please see the Statement of Additional Information, available upon request, for
more information regarding the methods used to calculate performance data.
Anchor National may also advertise the rating and other information assigned to
it by independent industry ratings organizations. Some of those organizations
are A.M. Best Company ("A.M. Best"), Moody's Investor's Service ("Moody's"),
Standard & Poor's Insurance Rating Services ("S&P"), and Fitch, IBA Duff &
Phelps A.M. Best's and Moody's ratings reflect their current opinion of our
financial strength and performance in comparison to others in the life and
health insurance industry. S&P's and Duff & Phelps' ratings measure the ability
of an insurance company to meet its obligations under insurance policies it
issues. These two ratings do not measure the insurer's ability to meet
non-policy obligations. Ratings in general do not relate to the performance of
the variable Portfolios.
35
OTHER INFORMATION
- --------------------------------------------------------------------------------
ANCHOR NATIONAL
Anchor National is a stock life insurance company originally organized under the
laws of the state of California in April, 1965. On January 1, 1996, Anchor
National redomesticated under the laws of the state of Arizona.
Anchor National and its affiliates, SunAmerica Life Insurance Company, First
SunAmerica Life Insurance Company, SunAmerica Asset Management Corporation,
SunAmerica Trust Company, and the SunAmerica Financial Network, Inc. (comprising
six wholly owned broker-dealers), specialize in retirement savings and
investment products and services. Business focuses include fixed and variable
annuities, mutual funds, broker-dealer services and trust administration
services.
THE SEPARATE ACCOUNT
Anchor National originally established a separate account, Variable Separate
Account (the "Separate Account"), under Arizona law on January 1, 1996 when it
assumed the separate account, originally established under California law on
June 25, 1981. The Separate Account is registered with the SEC as a unit
investment trust under the Investment Company Act of 1940, as amended.
Anchor National owns the assets in the Separate Account. However, the assets in
the Separate Account are not chargeable with liabilities arising out of any
other business conducted by Anchor National. Income gains and losses (realized
and unrealized) resulting from assets in the Separate Account are credited to or
charged against the Separate Account without regard to other income, gains or
losses of Anchor National. Amounts deposited to the Separate Account are not
guaranteed by Anchor National.
CUSTODIAN
State Street Bank and Trust Company, 255 Franklin Street, Boston, Massachusetts
02110, serves as the custodian of the assets of the Separate Account. Anchor
National pays State Street Bank for services provided, based on a schedule of
fees.
THE GENERAL ACCOUNT
Money allocated to the fixed account options goes into Anchor National's general
account. The general account consists of all of Anchor National's assets other
than assets attributable to a separate account. All of the assets in the general
account are chargeable with the claims of any Anchor National contract holders
as well as all of its creditors. The general account funds are invested as
permitted under state insurance laws.
DISTRIBUTION OF THE CONTRACT
Registered representatives of broker-dealers sell the contract. We pay
commissions to these representatives for the sale of the contracts. We do not
expect the total commissions to exceed 8.0% of your Purchase Payments. We may
also pay a bonus to representatives for contracts which stay active for a
particular period of time, in addition to standard commissions. We do not deduct
commissions paid to registered representatives directly from your Purchase
Payments.
36
From time to time, we may pay or allow additional promotional incentives in the
form of cash or other compensation. We reserve the right to offer these
additional incentives only to certain broker-dealers that sell or are expected
to sell, certain minimum amounts of the contract, or other contracts offered by
us. Promotional incentives may change at any time.
WM Funds Distributor, 12009 Foundation Place, Suite 350, Gold River, California
95670 distributes the contracts. WM Funds Distributor is a registered as a
broker-dealer under the Exchange Act of 1934 and a member of the National
Association of Securities Dealers, Inc.
No underwriting fees are paid in connection with the distribution of the
contracts.
ADMINISTRATION
We are responsible for the administrative servicing of your contract. During the
Accumulation Phase, you will receive confirmation of transactions within your
contract. Transactions made pursuant to contractual or systematic agreements,
such as deduction of the annual maintenance fee and dollar cost averaging, may
be confirmed quarterly. Purchase payments received through the Automatic Payment
Plan or a salary reduction arrangement, may also be confirmed quarterly. For all
other transactions, we send confirmations immediately.
During the Accumulation and Income Phases, you will receive a statement of your
transactions over the past quarter and a summary of your account values. Please
contact our Annuity Service Center at 1-877-311-WMVA (9682), if you have any
comment, question or service request.
We send out transaction confirmations and quarterly statements. It is your
responsibility to review these documents carefully and notify us of any
inaccuracies immediately. We investigate all inquiries. To the extent that we
believe we made an error, we retroactively adjust your contract, provided you
notify us within 30 days of receiving the transaction confirmation or quarterly
statement. Any other adjustments we deem warranted are made as of the time we
receive notice of the error.
LEGAL PROCEEDINGS
There are no pending legal proceedings affecting the Separate Account. Anchor
National and its subsidiaries engage in various kinds of routine litigation. In
management's opinion, these matters are not of material importance to their
respective total assets nor are they material with respect to the Separate
Account.
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
The audited consolidated financial statements of Anchor National Life Insurance
Company at December 31, 2000 and 1999, for the years ended December 31, 2000 and
1999, for the three months ended December 31, 1998 and for the year ended
September 30, 1998, are incorporated by reference in this prospectus in reliance
on the report of PricewaterhouseCoopers LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting. As of the date
of this Prospectus, sale of these contracts have not begun. Therefore, financial
statements for Variable Separate Account (portion related to the WM Diversified
Strategies Variable Annuity) are not contained herein.
37
TABLE OF CONTENTS OF
STATEMENT OF ADDITIONAL INFORMATION
<Table>
Separate Account............................................
General Account.............................................
Performance Data............................................
Income Payments.............................................
Annuity Unit Values.........................................
Taxes.......................................................
Distribution of Contracts...................................
Financial Statements........................................
</Table>
38
APPENDIX A - MARKET VALUE ADJUSTMENT
- --------------------------------------------------------------------------------
The market value adjustment reflects the impact that changing interest rates
have on the value of money invested at a fixed interest rate. The longer the
period of time remaining in the term you initially agreed to leave your money in
the fixed investment option, the greater the impact of changing interest rates.
The impact of the market value adjustment can be either positive or negative,
and is computed by multiplying the amount withdrawn, transferred or annuitized
by the following factor:
[(1+I/(1+J+L)](N/12) - 1
The market value adjustment formula
may differ in certain states
where:
I is the interest rate you are earning on the money invested in
the fixed investment option;
J is the interest rate then currently available for the period of
time equal to the number of years remaining in the term you initially agreed to
leave your money in the fixed investment option; and
L is equal to 0.005, except in Florida where it is equal to .0025.
N is the number of full months remaining in the term you initially
agreed to leave your money in the fixed investment option.
EXAMPLES OF THE MARKET VALUE ADJUSTMENT
The examples below assume the following:
(1) You made an initial Purchase Payment of $10,000 and allocated it to the
10-year fixed investment option at a rate of 5%;
(2) You make a partial withdrawal of $4,000 when 1 year (12 months) remain
in the 10-year term you initially agreed to leave your money in the fixed
investment option (N=12); and
(3) You have not made any other transfers, additional Purchase Payments, or
withdrawals.
No withdrawal charges are reflected because your Purchase Payment has been in
the contract for nine full years. If a withdrawal charge applies, it is deducted
before the market value adjustment. The market value adjustment is assessed on
the amount withdrawn less any withdrawal charges.
POSITIVE ADJUSTMENT
Assume that on the date of withdrawal, the interest rate in effect for a new
Purchase Payments in the 1-year fixed investment option is 4%.
The market value adjustment factor is
= [(1+I/(1+J+0.005)](N/12) - 1
= [(1.05)/(1.04+0.005)](12/12) - 1
= (1.004785)(1) 1) - 1
= 1.004785 - 1
= +0.004785
The requested withdrawal amount is multiplied by the market value adjustment
factor to determine the market value adjustment:
$4,000 X (+0.004785) = +$19.14
$19.14 represents the market value adjustment that would be added to your
withdrawal.
A-1
NEGATIVE ADJUSTMENT
Assume that on the date of withdrawal, the interest rate in effect for new
Purchase Payments in the 1-year fixed investment option is 6%.
The market value adjustment factor is
= [(1+I)/(1+J+0.005)](N/12) - 1
= [(1.05)/(1.06+0.005)](12/12) - 1
= (0.985915)(1) - 1
= 0.985915 - 1
= -0.014085
The requested withdrawal amount is multiplied by the market value adjustment
factor to determine the market value adjustment:
$4,000 X (-0.014085) = -$56.34
$56.34 represents the market value adjustment that will be deducted from the
money remaining in the 10-year fixed investment option.
A-2
APPENDIX B - DEATH BENEFITS FOLLOWING SPOUSAL CONTINUATION
- --------------------------------------------------------------------------------
Capitalized terms used in the Appendix have the same meaning as they have in the
Death Benefit section starting on page 22 of the prospectus.
The term "Continuation Net Purchase Payment" is used frequently to describe the
death benefit options payable to the beneficiary of a Continuing Spouse. We
define Continuation Net Purchase Payment as Net Purchase Payments made as of the
Continuation Date. For the purposes of calculating Continuation Net Purchase
Payments, the amount that equals the contract value on the Continuation Date,
including the Continuation Contribution is considered a Purchase Payment. If the
Continuing Spouse makes no additional Purchase Payments or withdrawals,
Continuation Net Purchase Payments equal the contract value on the Continuation
Date, including the Continuation Contribution.
STANDARD DEATH BENEFIT PAYABLE UPON CONTINUING SPOUSE'S DEATH
If the Standard Death Benefit is applicable upon the Continuing Spouse's death
we will pay the beneficiary the greater of:
1. Continuation Net Purchase Payments compounded at a 3% annual growth
rate until the earlier of Continuing Spouses age 75 or the date of
death of the Continuing Spouse, plus any Purchase Payments recorded
after the date of death of the Continuing Spouse; and reduced for any
withdrawals (and fees and charges applicable to those withdrawals)
recorded after the earlier of age 75 or the date of death, in the same
proportion that the withdrawal reduced the contract value on the date
of the withdrawal.
2. The contract value at the time we receive satisfactory proof of death.
ENHANCED DEATH BENEFIT PAYABLE UPON CONTINUING SPOUSE'S DEATH
If the Enhanced Death Benefit is applicable upon the Continuing Spouse's death,
we will pay the Beneficiary the applicable death benefit under Option 1 or
Option 2.
OPTION 1 - 5% ACCUMULATION:
The death benefit is the greater of:
a. The contract value on the date we receive satisfactory proof of the
Continuing Spouse's death; or
b. Net Purchase Payments made from the original contract issue date
including the Continuation Contribution, compounded to the earlier of
the Continuing Spouse's 80th birthday or the date of death at a 5%
annual growth rate, plus any Purchase Payments recorded after the 80th
birthday or the date of death; and reduced for any withdrawals (and
fees and charges applicable to those withdrawals) recorded after the
80th birthday or the date of death, in the same proportion that the
withdrawal reduced the contract value on the date of the withdrawal, up
to a maximum benefit of two times the Net Purchase Payments.
If the Continuing Spouse dies after the latest Annuity Date and the [5%]
Accumulation option applied, any death benefit payable under the contract will
be the Standard Death Benefit as described above. The Continuing Spouse's
beneficiary will not receive any benefit from the Enhanced Death Benefit.
OPTION 2 - MAXIMUM ANNIVERSARY VALUE:
If the continuing Spouse is younger than age 90 at the time of death, the death
benefit is the greatest of:
a. Continuation Net Purchase Payments; or
b. The contract value at the time we receive satisfactory proof of the
Continuing Spouse's death; or
c. The maximum anniversary value on any contract anniversary (of the
original issue date) occurring after the Continuation Date prior to
the Continuing Spouse's 81st birthday. The anniversary value equals
the value on the contract anniversary plus any Purchase Payments
recorded after that
B-1
anniversary; and reduced for any withdrawals (and fees and charges
applicable to those withdrawals) recorded after that anniversary, in the
same proportion that the withdrawal reduced the contract value on the
date of the withdrawal.
If the Continuing Spouse is age 90 or older at the time of death and the Maximum
Anniversary Value option applied, the death benefit will be equal to the
contract value at the time we receive satisfactory proof of death.
EARNINGS ADVANTAGE BENEFIT FOR SPOUSAL CONTINUATION:
If the original owner's Earnings Advantage remained in effect upon continuation,
the Earnings Advantage benefit may increase the death benefit amount. The
Earnings Advantage benefit is only available if the original owner elected the
feature and it has not been discontinued or terminated. If the Continuing Spouse
had earnings in the contract at the time of his/her death, we will add a
percentage of those earnings (the "Earnings Advantage Percentage"), subject to a
maximum dollar amount (the "Maximum Earnings Advantage Percentage"), to the
death benefit payable.
The Contract Year of Death (from Continuation Date forward) will determine the
Earnings Advantage Percentage and the Maximum Earnings Advantage amount, as set
forth below:
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------
EARNINGS ADVANTAGE
CONTACT YEAR OF DEATH PERCENTAGE MAXIMUM EARNINGS ADVANTAGE PERCENTAGE
- ----------------------------------------------------------------------------------------------
Years 0 - 4 25% of Earnings 25% of Continuation Net Purchase Payments
- ----------------------------------------------------------------------------------------------
Years 5 - 9 40% of Earnings 40% of Continuation Net Purchase Payments*
- ----------------------------------------------------------------------------------------------
Years 10+ 50% of Earnings 50% of Continuation Net Purchase Payments*
- ----------------------------------------------------------------------------------------------
</Table>
* PURCHASE PAYMENTS RECEIVED AFTER THE 5TH ANNIVERSARY FOLLOWING THE
CONTINUATION DATE MUST REMAIN IN THE CONTRACT FOR AT LAST 6 FULL MONTHS TO BE
INCLUDED AS PART OF THE NET PURCHASE PAYMENTS FOR THE PURPOSE OF THE MAXIMUM
EARNINGS ADVANTAGE PERCENTAGE CALCULATION.
What is the Contract Year of Death?
Contract Year of Death is the number of full 12 month periods starting on the
Continuation Date and ending on the Continuing Spouse's date of death.
What is the Earnings Advantage Amount?
We determine the Earnings Advantage amount based upon a percentage of earnings
in the contract at the time of the Continuing Spouse's death. For the purpose of
this calculation, earnings are defined as (1) minus (2) where
(1) equals the contract value on the Continuing Spouse's date of death;
(2) equals the Continuation Net Purchase Payment(s).
What is the Maximum Earnings Advantage amount?
The Earnings Advantage amount is subject to a maximum. The Maximum Earnings
Advantage amount is a percentage of the Continuation Net Purchase Payments.
The Earnings Advantage benefit will only be paid if the Continuing Spouse's date
of death is prior to the latest Annuity Date.
WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE SPOUSAL CONTINUATION
PROVISION (IN ITS ENTIRETY OR ANY COMPONENT) AT ANY TIME.
B-2
APPENDIX C
- --------------------------------------------------------------------------------
HYPOTHETICAL EXAMPLE OF THE OPERATION OF THE INCOME PROTECTOR PROGRAM:
This table assumes a $100,000 initial investment in a non qualified contract
with no further premiums, no withdrawals and no premium taxes; and the election
of the optional Base Income Protector at contract issue.
<Table>
- -----------------------------------------------------------------------------------------------------------------------------
ANNUAL INCOME IF YOU ANNUITIZE ON THE FOLLOWING CONTRACT ANNIVERSARY
IF AT ISSUE YOU 9 10 11 15 19 20
ARE... 1-8 (AGE 69) (AGE 70) (AGE 71) (AGE 75) (AGE 79) (AGE 80)
- -----------------------------------------------------------------------------------------------------------------------------
MALE N/A 6,480 6,672 6,864 7,716 8,616 8,832
AGE 60*
- -----------------------------------------------------------------------------------------------------------------------------
FEMALE N/A 5,700 5,880 6,060 6,900 7,860 8,112
AGE 60*
- -----------------------------------------------------------------------------------------------------------------------------
MALE, AGE 60 N/A 4,920 5,028 5,136 5,544 5,868 5,928
FEMALE, AGE 60**
- -----------------------------------------------------------------------------------------------------------------------------
</Table>
* Life Annuity with 10 Year Period Certain
** Joint and 100% Survivor Annuity with 20 Year Period Certain
The Income Protector may not be available in your state. Please consult your
financial adviser for information regarding availability of this program in your
state.
C-1
APPENDIX D - PREMIUM TAXES
- --------------------------------------------------------------------------------
Premium taxes vary according to the state and are subject to change without
notice. In many states, there is no tax at all. Listed below are the current
premium tax rates in those states that assess a premium tax. For current
information, you should consult your tax adviser.
<Table>
<Caption>
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%
</Table>
D-1
PART II
-------
Information Not Required in Prospectus
Item 14. Other Expenses of Issuance and Distribution.
-------------------------------------------
The following table sets forth the expenses in connection with the issuance
and distribution of the securities being registered, other than underwriting
discounts and commissions. All of the amounts shown are estimates, except the
SEC registration fee.
<Table>
SEC registration fee ................................. $ 24,338.10
Printing and engraving ............................... $ 50,000
Legal fees and expenses .............................. $ 10,000
Rating agency fees ................................... $ 7,500
Miscellaneous ........................................ $ 10,000
-----------
Total ............................................ $101,338.10
</Table>
Item 15. Indemnification of Directors and Officers.
------------------------------------------
Section 10-851 of the Arizona Corporations and Associations law permits the
indemnification of directors, officers, employees and agents of Arizona
corporations. Article Eight of the Company's Restated Articles of Incorporation,
as amended and restated (the "Articles") and Article Five of the Company's
By-Laws ("By-Laws") authorize the indemnification of directors and officers to
the full extent required or permitted by the Laws of the State of Arizona, now
or hereafter in force, whether such persons are serving the Company, or, at its
request, any other entity, which indemnification shall include the advance of
expenses under the procedures and to the full extent permitted by law. In
addition, the Company's officers and directors are covered by certain directors'
and officers' liability insurance policies maintained by the Company's parent.
Reference is made to section 10-851 of the Arizona Corporations and Associations
Law, Article Eight of the Articles, and Article Five of the By-Laws, which are
incorporated herein by reference.
Item 16. Exhibits and Financial Statement Schedules.
-------------------------------------------
Exhibit No. Description
(1) Underwriting Agreement***
(2) Plan of Acquisition, Reorganization,
Arrangement, Liquidation or Succession**
(3) (a) Articles of Incorporation*
(b) By-Laws*
(4) (a) Vista Capital Advantage
Fixed and Variable Contract***
(b) Application for Contract***
(5) Opinion of Counsel re: Legality***
(6) Opinion re Discount on Capital Shares**
(7) Opinion re Liquidation Preference**
(8) Opinion re Tax Matters**
(9) Voting Trust Agreement**
(10) Material Contracts**
(11) Statement re Computation of Per Share
Earnings**
(12) Statement re Computation of Ratios**
(14) Material Foreign Patents**
(15) Letter re Unaudited Financial Information**
(16) Letter re Change in Certifying Accountant**
(21) Subsidiaries of Registrant***
(23) (a) Consent of Independent Accountants*
(b) Consent of Attorney***
(24) Powers of Attorney*****
(25) Statement of Eligibility of Trustee**
(26) Invitation for Competitive Bids**
(27) Financial Data Schedule****
(28) Information Reports Furnished to State
Insurance Regulatory Authority**
(29) Other Exhibits**
* Filed Herewith
** Not Applicable
*** Incorporated by Reference to
Post-Effective Amendment No. 3
to Registration Statement
No. 33-81476 on Form S-1
filed on 12-24-97.
**** Incorporated by Reference to
Post-Effective Amendment No. 5
to Registration Statement
No. 33-81476 on Form S-1 filed
on 12-24-98.
***** Incorporated by Reference to Post-
Effective Amendment 9 to
Registration Statement No. 33-81476
on Form S-3 filed on December 19,
2000.
Item 17. Undertakings.
------------
The undersigned registrant, Anchor National, hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement
to include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof; and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 and, where applicable, each
filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide
offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Los Angeles, State of California on this 12th
day of April, 2002.
By: ANCHOR NATIONAL LIFE INSURANCE COMPANY
By: /s/ JAY S. WINTROB
-----------------------------------------
Jay S. Wintrob
President
Pursuant to the Securities Act of 1933, this Post-Effective Amendment to
the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
JAY S. WINTROB* Chief Executive Officer,
- --------------------- President & Director April 12, 2002
Jay S. Wintrob (Principal Executive Officer)
N. SCOTT GILLIS* Senior Vice President & April 12, 2002
- --------------------- Director
N. Scott Gillis (Principal Financial Officer)
JAMES R. BELARDI* Senior Vice President & April 12, 2002
- --------------------- Director
James R. Belardi
JANA W. GREER* Senior Vice President & April 12, 2002
- --------------------- Director
Jana W. Greer
MAURICE S. HEBERT* Vice President & Controller April 12, 2002
- --------------------- (Principal Accounting Officer)
Maurice S. Hebert
MARC H. GAMSIN* Senior Vice President & April 12, 2002
- ---------------------- Director
Marc H. Gamsin
By: /s/ CHRISTINE A. NIXON April 12, 2002
-----------------------
Christine A. Nixon
Attorney-in-Fact
Date:
EXHIBIT INDEX
Number Description
- ------ -----------
23(a) Consent of Independent Accountants
3(a) Articles of Incorporation
3(b) By-Laws