Registration No. 333-96559
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 2 ON FORM S-3 TO
FORM S-1 ON FORM S-3
UNDER
THE SECURITIES ACT OF 1933
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AIG SunAmerica Life Assurance Company
(doing business as ANCHOR NATIONAL LIFE INSURANCE COMPANY) ("Anchor National")
(Exact name of registrant as specified in its charter)
California 6311 86-0198983
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification Number)
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)
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Approximate date of commencement of proposed sale 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 being 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. / / _____________
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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),
may determine.
Registrant is filing this Post-Effective Amendment No. 2 to make certain
non-material changes to the Registration Statement. Pursuant to oral permission
to do so provided by Mr. William Kotapish to Anchor National and confirmed on
April 26, 2001, this Registration Statement contains multiple prospectuses with
the substantially similar MVA feature. The Registrant does not intend for this
Post-Effective Amendment No. 2 to delete from the Registration Statement, any
document included in the Registration Statement but not filed herein, including
any currently effective Prospectus or supplement thereto.
[SEASONS LOGO]
PROSPECTUS
ALLOCATED FIXED AND VARIABLE GROUP ANNUITY
issued by
VARIABLE ANNUITY ACCOUNT FIVE
and
ANCHOR NATIONAL LIFE INSURANCE COMPANY
July 29, 2002
The annuity contract has 11 investment choices - 7 fixed account options which
offer interest rates guaranteed by Anchor National for different periods of time
and 4 variable investment STRATEGIES:
GROWTH
MODERATE GROWTH
BALANCED GROWTH
CONSERVATIVE GROWTH
which invest in the underlying portfolios of
SEASONS SERIES TRUST
which is managed by:
PUTNAM INVESTMENT MANAGEMENT, INC.
T. ROWE PRICE ASSOCIATES, INC.
JANUS CAPITAL MANAGEMENT LLC.
SUNAMERICA ASSET MANAGEMENT CORPORATION
WELLINGTON MANAGEMENT COMPANY, LLP
You can put your money into any one or all of the STRATEGIES and/or fixed
account options.
Please read this prospectus carefully before investing and keep it for your
future reference. It contains important information you should know about the
Seasons Variable Annuity.
To learn more about the annuity offered by this prospectus, you can obtain a
copy of the Statement of Additional Information ("SAI") dated July 29, 2002. The
SAI has been filed with the Securities and Exchange Commission ("SEC") and can
be considered part of this prospectus.
The table of contents of the SAI appears on page 30 of this prospectus. For a
free copy of the SAI, call us at 800/445-SUN2 or write our Annuity Service
Center at, P.O. Box 54299, Los Angeles, California 90054-0299.
A registration statement has been filed with the SEC under the Securities Act of
1933 relating to the contract. This prospectus does not contain all the
information in the registration statement as permitted by SEC regulations. The
omitted information can be obtained from the SEC's principal office in
Washington, D.C., upon payment of a prescribed fee.
In addition, the SEC maintains a website (http://www.sec.gov) that contains the
SAI, materials incorporated by reference and other information filed
electronically with the SEC.
ANNUITIES INVOLVE RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL, AND ARE NOT A
DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR ENDORSED BY, ANY BANK. THEY ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Anchor National Life Insurance Company is in the process of changing its name to
AIG SunAmerica Life Assurance Company. We anticipate this process will take some
time to implement in all jurisdictions where we do business. We expect the name
change to be completed during 2003. To begin this process we officially changed
the name in our stated of domicile, Arizona. However, we continue to do
business, today, under the name Anchor National and will refer to the Company by
that name throughout this prospectus. You will be notified when the name is
changed to AIG SunAmerica Life Assurance Company and we are no longer doing
business as Anchor National. Please keep in mind, this is a name change only and
will not affect the substance of your contract.
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE
Anchor National's Annual Report on Form 10-K/A for the year ended December 31,
2001 and its quarterly report on Form 10-Q for the quarter ended March 31, 2002
are incorporated herein by reference.
All documents or reports filed by Anchor National under Section 13(a), 13(c),
14, or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") after the effective date of this prospectus are also incorporated by
reference. Statements contained in this prospectus and subsequently filed
documents which are incorporated by reference or deemed to be incorporated by
reference are deemed to modify or supersede documents incorporated herein by
reference.
Anchor National files its Exchange Act documents and reports, including its
annual and quarterly reports on Form 10-K and Form 10-Q, electronically pursuant
to EDGAR under CIK No. 0000006342.
Anchor National is subject to the informational requirements of the Securities
and Exchange Act of 1934 (as amended). We file reports and other information
with the SEC to meet those requirements. You can inspect and copy this
information at SEC public facilities at the following locations:
WASHINGTON, DISTRICT OF COLUMBIA
450 Fifth Street, N.W., Room 1024
Washington, D.C. 20549
CHICAGO, ILLINOIS
500 West Madison Street
Chicago, IL 60661
NEW YORK, NEW YORK
233 Broadway
New York, NY 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 Portfolios and the contract, please
refer to the registration statements and exhibits.
The SEC also maintains a website (http://www.sec.gov) that contains the SAI,
materials incorporated by reference and other information filed electronically
with the SEC by Anchor National.
Anchor National will provide without charge to each person to whom this
prospectus is delivered, upon written or oral request, a copy of the above
documents incorporated by reference. Requests for these documents should be
directed to Anchor National's Annuity Service Center, as follows:
Anchor National Life Insurance Company
Annuity Service Center
P.O. Box 54299
Los Angeles, California 90054-0299
Telephone Number: (800) 445-SUN2
SECURITIES AND EXCHANGE
COMMISSION POSITION ON
INDEMNIFICATION
Indemnification for liabilities arising under the Securities Act of 1933 (the
"Act") is provided to Anchor National's officers, directors and controlling
persons. The SEC has advised that it believes such indemnification is against
public policy under the Act and unenforceable. If a claim for indemnification
against such liabilities (other than for Anchor National's payment of expenses
incurred or paid by its directors, officers or controlling persons in the
successful defense of any legal action) is asserted by a director, officer or
controlling person of Anchor National in connection with the securities
registered under this prospectus, Anchor National will submit to a court with
jurisdiction to determine whether the indemnification is against public policy
under the Act. Anchor National will be governed by final judgment of the issue.
However, if in the opinion of Anchor National's counsel this issue has been
determined by controlling precedent, Anchor National will not submit the issue
to a court for determination.
2
TABLE OF CONTENTS
<Table>
GLOSSARY.................................................... 4
HIGHLIGHTS.................................................. 5
FEE TABLES.................................................. 6
Owner Transaction Expenses.............................. 6
Annual Separate Account Expenses........................ 6
Investment Portfolio Expenses........................... 7
EXAMPLES.................................................... 8
THE SEASONS VARIABLE ANNUITY................................ 9
PURCHASING A SEASONS VARIABLE ANNUITY....................... 10
Allocation of Purchase Payments......................... 10
Accumulation Units...................................... 10
Free Look............................................... 11
Exchange Offers......................................... 11
INVESTMENT OPTIONS.......................................... 11
Variable Investment Options............................. 12
The STRATEGIES........................................ 12
STRATEGY Rebalancing.................................. 14
Fixed Account Options................................... 14
Market Value Adjustment................................. 15
Transfers During the Accumulation Phase................. 15
Dollar Cost Averaging................................... 16
Principal Advantage Program............................. 17
Voting Rights........................................... 17
Substitution............................................ 18
ACCESS TO YOUR MONEY........................................ 18
Systematic Withdrawal Program........................... 19
Minimum Contract Value.................................. 19
Qualified Contract Owners............................... 19
DEATH BENEFIT............................................... 19
Death of the Annuitant.................................. 20
EXPENSES.................................................... 20
Insurance Charges....................................... 21
Withdrawal Charges...................................... 21
Investment Charges...................................... 21
Contract Maintenance Fee................................ 21
Transfer Fee............................................ 22
Premium Tax............................................. 22
Income Taxes............................................ 22
Reduction or Elimination of Charges and Expenses and
Additional Amounts Credited............................ 22
INCOME OPTIONS.............................................. 22
Annuity Date............................................ 22
Income Options.......................................... 23
Allocation of Income Payments........................... 23
Fixed or Variable Income Payments....................... 24
Income Payments......................................... 24
Transfers During the Income Phase....................... 24
Deferment of Payments................................... 24
TAXES....................................................... 24
Annuity Contracts in General............................ 24
Tax Treatment of Distributions--Non-qualified
Contracts.............................................. 25
Tax Treatment of Distributions--Qualified Contracts..... 25
Tax Treatment of Death Benefits......................... 26
Minimum Distributions................................... 26
Diversification......................................... 27
PERFORMANCE................................................. 27
OTHER INFORMATION........................................... 28
Anchor National......................................... 28
The Separate Account.................................... 28
The General Account..................................... 28
Distribution of the Contract............................ 28
Administration.......................................... 29
Legal Proceedings....................................... 29
Custodian............................................... 29
INDEPENDENT ACCOUNTANTS..................................... 29
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.... 30
APPENDIX A--CONDENSED FINANCIAL INFORMATION................. A-1
APPENDIX B--MARKET VALUE ADJUSTMENT......................... B-1
APPENDIX C--PREMIUM TAXES................................... C-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
insurer which issues this policy.
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").
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").
STRATEGY(IES)--A sub-account of Variable Annuity Account Five which provides for
the variable investment options available under the contract. Each STRATEGY has
its own investment objective and is invested in the underlying investment
portfolios of the Seasons Series Trust.
4
ANCHOR NATIONAL OFFERS SEVERAL DIFFERENT VARIABLE ANNUITY PRODUCTS TO MEET THE
DIVERSE NEEDS OF OUR INVESTORS. EACH PRODUCT MAY PROVIDE DIFFERENT FEATURES AND
BENEFITS AND CORRESPONDINGLY DIFFERENT FEES, CHARGES AND EXPENSES. WHEN WORKING
WITH YOUR FINANCIAL ADVISOR TO DETERMINE THE BEST PRODUCT TO MEET YOUR NEEDS YOU
SHOULD CONSIDER, AMONG OTHER THINGS, WHETHER THE FEATURES OF THIS CONTRACT AND
THE RELATED FEES PROVIDE THE MOST APPROPRIATE PACKAGE TO HELP MEET YOUR
LONG-TERM RETIREMENT SAVINGS GOALS.
HIGHLIGHTS
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THE SEASONS 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 ANY COMBINATION OF THE FOUR PRE-ALLOCATED STRATEGIES 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. Your 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 SEASONS 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
Strategies. There are investment charges on amounts invested in the Strategies.
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, withdrawals charges no longer
apply to that portion of the Purchase Payment. Please see the FEE TABLE,
PURCHASING A SEASONS 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.
5
SEASONS VARIABLE ANNUITY FEE TABLES
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OWNER TRANSACTION
EXPENSES
Withdrawal Charge as a percentage of Purchase Payments:
<Table>
Year 1...................................... 7%
Year 2...................................... 6%
Year 3...................................... 6%
Year 4...................................... 5%
Year 5...................................... 4%
Year 6...................................... 3%
Year 7...................................... 2%
Year 8...................................... 0%
</Table>
<Table>
Contract Maintenance
Charge................. $35 each year ($30 in
North Dakota)
Transfer Fee............. No charge for first 4
transfers each contract
year; thereafter, the fee
is $25 per transfer ($10
in Pennsylvania and
Texas)
</Table>
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>
6
INVESTMENT PORTFOLIO EXPENSES
FOR STRATEGY UNDERLYING PORTFOLIOS
(as a percentage of daily net asset value of each investment portfolio as of the
fiscal year end of the Trust ending March 31, 2002)
<Table>
<Caption>
MANAGEMENT OTHER TOTAL ANNUAL
FEE EXPENSES EXPENSES
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Stock 0.85% 0.10% 0.95%
Asset Allocation: Diversified Growth 0.85% 0.11% 0.96%
Multi-Managed Growth 0.89% 0.16% 1.05%
Multi-Managed Moderate Growth 0.85% 0.14% 0.99%
Multi-Managed Income/Equity 0.81% 0.19% 1.00%
Multi-Managed Income(1) 0.77% 0.28% 1.05%
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</Table>
(1) For Multi-Managed Income, the adviser recouped prior year expense
reimbursements, resulting in an expense ratio before recoupment of 1.01%.
The Investment Portfolio Expenses table set forth above identifies the total
investment expenses charged by the underlying investment portfolios of Seasons
Series Trust. As explained in this prospectus, each variable investment option
(STRATEGY) under this contract invests in a combination of three of these
underlying portfolios. The total investment charge depending on the particular
STRATEGY, will be a proportion of the investment charges of the underlying
portfolio in which each STRATEGY invests. Accordingly, the actual investment
portfolio expenses incurred by contract holders within a STRATEGY will vary
depending upon the daily net asset value of each investment portfolio in which
each STRATEGY is invested. You can get a better understanding of the practical
ramifications of this blended investment charge by looking at the next table
Investment Portfolio Expenses by STRATEGY. That table sets forth an estimate of
the annual investment charge you may incur as a result of the ratio of the
STRATEGY(IES) investment in the underlying portfolios.
The total investment expenses for each contract owner will be based upon the
STRATEGY in which they are invested. Each STRATEGY invests in different
proportions of these underlying portfolios. The proportion of each portfolio in
each particular STRATEGY determines the amounts of investment charge borne by
each contractholder.
THE ABOVE INVESTMENT PORTFOLIO EXPENSES WERE PROVIDED BY SEASONS SERIES TRUST.
WE HAVE NOT INDEPENDENTLY VERIFIED THE ACCURACY OF THE INFORMATION.
INVESTMENT PORTFOLIO EXPENSES BY STRATEGY
(based on the total annual expenses of the underlying investment portfolios
reflected above as of the fiscal year end of the Trust ending March 31, 2002)
<Table>
<Caption>
MANAGEMENT OTHER TOTAL ANNUAL
FEE EXPENSES EXPENSES
- ------------------------------------------------------------------------------------------------
STRATEGY
Growth 0.87% 0.13% 1.00%
Moderate Growth 0.85% 0.12% 0.97%
Balanced Growth 0.83% 0.15% 0.98%
Conservative Growth(1) 0.80% 0.22% 1.02%
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</Table>
(1) For Conservative Growth Strategy, the adviser recouped prior year expense
reimbursements, resulting in an expense ratio before recoupment of 0.99%.
7
EXAMPLES
You will pay the following expenses on a $1,000 investment in each STRATEGY,
assuming a 5% annual return on assets, STRATEGY expenses after waiver,
reimbursement or recoupment, (assuming the waiver reimbursement or recoupment
will continue for the period shown if applicable and:
(a) that you surrender the contract at the end of the stated time
period;
(b) that the contract is annuitized or not surrendered.*
<Table>
<Caption>
TIME PERIODS
- ---------------------------------------------------------------------------------------
STRATEGY 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------------------------
Growth (a) $95 (a) $137 (a) $172 (a) $282
(b) $25 (b) $ 77 (b) $132 (b) $282
Moderate Growth (a) $95 (a) $137 (a) $171 (a) $279
(b) $25 (b) $ 77 (b) $131 (b) $279
Balanced Growth (a) $95 (a) $137 (a) $171 (a) $280
(b) $25 (b) $ 77 (b) $131 (b) $280
Conservative Growth (a) $95 (a) $138 (a) $173 (a) $284
(b) $25 (b) $ 78 (b) $133 (b) $284
- ----------------------------------
</Table>
* We do not currently charge a withdrawal charge when you elect to begin income
payments.
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 (contract level)
expenses and investment portfolio expenses by STRATEGY. We converted the
contract administration charge to a percentage (0.09%) using an assumed
contract size of $40,000. The actual impact of the administration charge may
differ from the percentage and may be waived for contract values over
$50,000. The Examples assume that no transfer fees were imposed. Premium
taxes are not reflected but may be applicable. Additional information on the
portfolio company fees can be found in the Trust prospectus located behind
this prospectus.
2. SAAMCo may voluntarily waive or reimburse certain expenses to increase an
investment portfolios' investment return. All waivers and/or reimbursements
may be terminated at any time. Furthermore, SAAMCo may recoup any waivers or
reimbursements within two years after such waivers or reimbursements are
granted, provided that the investment portfolio is able to make such payment
and remain in compliance with the foregoing expense limitations. To date,
none of the investment portfolio expenses have exceeded the stated caps.
Therefore no waiver of fees or reimbursements were implemented.
3. 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.
8
THE SEASONS VARIABLE ANNUITY
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An annuity is a contract between you and an insurance company. You are the owner
of the contract. The contract provides three main benefits:
- Tax Deferral: 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 advisor.
This annuity was developed to help you contribute to your retirement savings.
The flexibility and diversification offered by this annuity can help you reach
your retirement savings goals. 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
STRATEGIES which, like mutual funds, vary with market conditions. You can gain
or lose money if you invest in these STRATEGIES. If you allocate money to the
STRATEGY(IES), the amount of money you accumulate in your contract depends on
the performance of the STRATEGY(IES) in which you invest.
The Contract also offers several fixed account options for varying time periods.
Fixed account options earn interest at a rate set and guaranteed by Anchor
National. If you allocate money to the fixed account options, the amount of
money that accumulates in the Contract depends on the total interest credited to
the particular fixed account option(s) in which you are invested.
For more information on STRATEGIES and fixed account options available under
this contract, SEE INVESTMENT OPTIONS ON PAGE 11.
Anchor National Life Insurance Company (Anchor National, The Company, Us, We)
issues the Seasons Variable Annuity. When you purchase a Seasons 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.
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. This variable annuity
may not be available for sale in your state. Please check with your financial
advisor regarding availability.
9
PURCHASING A SEASONS VARIABLE ANNUITY
- --------------------------------------------------------------------------------
A 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 INITIAL SUBSEQUENT
PURCHASE PAYMENT PURCHASE PAYMENT
---------------- ----------------
Qualified $2,000 $500
Non-qualified $5,000 $500
</Table>
Prior Company approval is required to make 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 $50.00.
We may refuse any Purchase Payment. In general, we will not issue a contract to
anyone who is age 70 1/2 or older, unless they certify to us 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.
This contract is no longer available for purchase by new policyowners.
ALLOCATION OF PURCHASE PAYMENTS
We invest your Purchase Payments in the fixed accounts and STRATEGIES 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 credited based upon the Accumulation Unit
Value (AUV) next determined after receipt. SEE INVESTMENT OPTIONS PAGE 11.
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 STRATEGY(IES) you select. In order to
keep track of the value of your contract, we use a unit of measure called an
Accumulation Unit which works like a share of a mutual fund. During the Income
Phase, we call them Annuity Units. We base the number of Annuity Units you
receive on the unit value of the STRATEGY 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.
10
An Accumulation Unit value is determined each day that the New York Stock
Exchange ("NYSE") is open. We calculate an Accumulation Unit for each STRATEGY
after the NYSE closes each day. We do this by:
1. determining the total value of money invested in a particular STRATEGY;
2. subtracting from that amount any asset-based charges and any other
charges such as taxes we have deducted; and
3. dividing this amount by the number of outstanding Accumulation Units.
The value of an Accumulation Unit may go up or down from day to day. When you
make a Purchase Payment, we credit your contract with Accumulation Units. The
number of Accumulation Units credited is determined by dividing the amount of
the Purchase Payment allocated to a STRATEGY by the value of the Accumulation
Unit for that STRATEGY.
EXAMPLE:
We receive a $25,000 Purchase Payment from you on Wednesday. You want your
money to be invested in the Moderate Growth STRATEGY. We determine that the
value of an Accumulation Unit for the Moderate Growth STRATEGY is $11.10
when the NYSE closes on Wednesday. We then divide $25,000 by $11.10 and
credit your contract on Wednesday night with 2,252.252 Accumulation Units
for the Moderate Growth STRATEGY.
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. Unless otherwise required by
state law, you will receive back the value of the money allocated to the
STRATEGIES on the day we receive your request plus any Purchase Payment in the
fixed account options. This value may be more or less than the money you
initially invested. Thus, the investment risk is borne by you during the free
look period.
Certain states (and under all contracts issued as IRAs) require us to return
your Purchase Payments upon a free look request. With respect to those
contracts, we reserve the right to put your money in the 1-year fixed account
option during the free look period. If 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 reallocate your
money according to your instructions.
EXCHANGE OFFERS
From time to time, we may offer to allow you to exchange an older variable
annuity issued by Anchor National or one of its affiliates, for a newer product
with more current features and benefits, also issued by Anchor National or one
of its affiliates. Such an Exchange Offer will be made in accordance with the
applicable state and federal securities and insurance rules and regulations. We
will explain the specific terms and conditions of any such Exchange Offer at the
time the offer is made.
INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
The contract offers variable investment options which we call STRATEGIES and
fixed account options. We designed the contract to meet your varying investment
needs over time. You can achieve this by using the STRATEGIES alone or in
concert with the fixed account options. A mixture of your investment in the
STRATEGY(IES) and fixed account options may lower the risk associated with
investing only in a variable investment option.
11
VARIABLE INVESTMENT OPTIONS:
THE STRATEGIES
The contract offers four multi-manager variable investment STRATEGIES, each with
a different investment objective. We designed the STRATEGIES to meet your
investment needs over time, considering factors such as your age, goals and risk
tolerance. However, each STRATEGY is designed to achieve different levels of
growth over time.
Each STRATEGY invests in three of the six underlying investment portfolios of
the Seasons Series Trust. The allocation of money among these investment
portfolios varies depending on the objective of the STRATEGY.
SunAmerica Asset Management Corp. ("SAAMCo"), which is affiliated with Anchor
National manages Seasons Series Trust. SAAMCo engaged sub-advisers to provide
investment advice for certain investment portfolios.
The underlying investment portfolios of Seasons Series Trust include the Asset
Allocation: Diversified Growth Portfolio, the Stock Portfolio and the
Multi-Managed Growth, Multi-Managed Moderate Growth, Multi-Managed Income/Equity
and Multi-Managed Income Portfolios (the "Multi-Managed Portfolios"). Seasons
Series Trust contains other underlying investment portfolios in addition to
those listed here which are not available for investment under this contract.
The Asset Allocation: Diversified Growth Portfolio is managed by Putnam
Investment Management, Inc. The Stock Portfolio is managed by T. Rowe Price
Associates, Inc. All of the Multi-Managed Portfolios include the same three
basic investment components: a growth component managed by Janus Capital
Management LLC., a balanced component managed by SAAMCo and a fixed income
component managed by Wellington Management Company, LLP. The Growth STRATEGY and
the Moderate Growth STRATEGY also have an aggressive growth component which
SAAMCo manages. The percentage that any one of these components represents in
the Multi-Managed Portfolio varies in accordance with the investment objective.
YOU SHOULD READ THE PROSPECTUS FOR SEASONS SERIES TRUST CAREFULLY BEFORE
INVESTING. THE TRUST PROSPECTUS CONTAINS DETAILED INFORMATION ABOUT THE
INVESTMENT PORTFOLIOS AND IS ATTACHED TO THIS PROSPECTUS.
Each STRATEGY uses an investment approach based on asset allocation. This
approach is achieved by each STRATEGY investing in distinct percentages in three
specific underlying funds of the Seasons Series Trust. In turn, the underlying
funds invest in a combination of domestic and international stocks, bonds and
cash. Based on the percentage allocation to each specific underlying fund and
each underlying fund's investment approach, each STRATEGY has a neutral asset
allocation mix of stocks, bonds and cash. At the beginning of each quarter a
rebalancing occurs among the underlying funds to realign each STRATEGY with its
distinct percentage investment in the three underlying funds. This rebalancing
is designed to help maintain the neutral asset allocation mix for each STRATEGY.
The pie charts on the following pages demonstrate:
- the neutral asset allocation mix for each STRATEGY; and
- the percentage allocation in which each STRATEGY invests.
12
<Table>
GROWTH BALANCED GROWTH
GOAL: Long-term growth of capital, allocating its GOAL: Focuses on conservation of principal by investing
assets primarily to stocks. This STRATEGY may be best in a more balanced weighting of stocks and bonds, with a
suited for those with longer periods to invest. secondary objective of seeking a high total return. This
STRATEGY may be best suited for those approaching retirement
[GROWTH CHART] and with less tolerance for investment risk.
[BALANCED GROWTH CHART]
UNDERLYING INVESTMENT UNDERLYING INVESTMENT
PORTFOLIOS & MANAGERS PORTFOLIOS & MANAGERS
MULTI-MANAGED GROWTH PORTFOLIO 50% MULTI-MANAGED INCOME/EQUITY PORTFOLIO 55%
Managed by: Managed by:
Janus Capital Management LLC. Janus Capital Management LLC.
SunAmerica Asset Management Corp. SunAmerica Asset Management Corp.
Wellington Management Company, LLP Wellington Management Company, LLP
STOCK PORTFOLIO 25% STOCK PORTFOLIO 20%
Managed by T. Rowe Price Associates, Inc. Managed by T. Rowe Price Associates, Inc.
ASSET ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO 25% ASSET ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO 25%
Managed by Putnam Investment Management, Inc. Managed by Putnam Investment Management, Inc.
</Table>
<Table>
MODERATE GROWTH CONSERVATIVE GROWTH
GOAL: Growth of capital through investments in GOAL: Capital preservation while maintaining some
equities, with a secondary objective of conservation of potential for growth over the long term. This STRATEGY may
principal by allocating more of its assets to bonds than be best suited for those with lower investment risk
the Growth STRATEGY. This STRATEGY may be best suited for tolerance.
those nearing retirement years but still earning income. [CONSERVATIVE GROWTH CHART]
[MODERATE GROWTH CHART] UNDERLYING INVESTMENT
UNDERLYING INVESTMENT PORTFOLIOS & MANAGERS
PORTFOLIOS & MANAGERS
MULTI-MANAGED INCOME PORTFOLIO 60%
MULTI-MANAGED MODERATE GROWTH PORTFOLIO 55% Managed by:
Managed by: Janus Capital Management LLC.
Janus Capital Management LLC. SunAmerica Asset Management Corp.
SunAmerica Asset Management Corp. Wellington Management Company, LLP
Wellington Management Company, LLP
STOCK PORTFOLIO 15%
STOCK PORTFOLIO 20% Managed by T. Rowe Price Associates, Inc.
Managed by T. Rowe Price Associates, Inc. ASSET ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO 25%
ASSET ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO 25% Managed by Putnam Investment Management, Inc.
Managed by Putnam Investment Management, Inc.
</Table>
13
STRATEGY REBALANCING
Each STRATEGY is designed to meet its investment objective by allocating a
portion of your money to three different investment portfolios. In order to
maintain the mix of investment portfolios consistent with each STRATEGY's
objective, each STRATEGY within your contract will be rebalanced each quarter.
On the first business day of each quarter (or as close to such date as is
administratively practicable) your money will be allocated among the various
investment portfolios according to the percentages set forth on the prior pages.
Additionally, within each Multi-Managed Portfolio, your money will be rebalanced
among the various components. We also reserve the right to rebalance any
STRATEGY more frequently if rebalancing is, deemed necessary and not adverse to
the interests of contract owners invested in such STRATEGY. Rebalancing a
STRATEGY may involve shifting a portion of assets out of underlying investment
portfolios with higher returns into underlying investment portfolios with
relatively lower returns. Transfers made as a result of rebalancing a STRATEGY
are not counted against your four free transfers per year.
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. In Maryland
and Washington only the one year fixed account option is available. The seven
and ten year guarantee periods are not available in Oregon. Additionally, we
guarantee the interest rate for money allocated to the six-month DCA fixed
account and/or the one 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 16 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.
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 MVA fixed account
options. In each scenario your money may be credited a different rate of
interest as follows:
- INITIAL RATE: Rate credited to new Purchase Payments allocated to the
fixed account when you purchase your contract.
- CURRENT RATE: Rate credited to subsequent Purchase Payments allocated to
the fixed account.
- RENEWAL RATE: Rate credited to money transferred from a fixed account or
one of the STRATEGIES into a fixed account and to money remaining in a
fixed account after expiration of a guarantee period.
Each of these rates may differ from one and other. Although once declared the
applicable rate is guaranteed until the guarantee period expires.
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 STRATEGIES. If you want to reallocate your money to
a different fixed account option or STRATEGY, 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 1-year or 6-month 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 effective rate of 3%.
SEE DOLLAR COST AVERAGING PAGE 16 for more information.
You may reallocate money to a fixed account option (other than the DCA fixed
accounts) or to any of the STRATEGIES after the end of the Guarantee Period.
However, if you do not give us different instructions within
14
30 days after the end of your Guarantee Period, we will keep your money in the
fixed account for the same Guarantee Period you previously selected. You will
receive the renewal interest rate then in effect for that Guarantee Period.
MARKET VALUE ADJUSTMENT
NOTE: MARKET VALUE ADJUSTMENTS APPLY TO THE 3, 5, 7 OR 10 YEAR FIXED ACCOUNT
OPTIONS ONLY. THESE OPTIONS ARE NOT AVAILABLE IN ALL STATES. PLEASE CONTACT YOUR
FINANCIAL ADVISOR FOR MORE INFORMATION. THE MARKET VALUE ADJUSTMENT DOES NOT
APPLY TO WITHDRAWALS TO PAY A DEATH BENEFIT OR CONTRACT FEES AND CHARGES.
If you take money out of the three, five, seven or ten year fixed account
options before the end of the guarantee period, we make an adjustment to your
contract (the "Market Value Adjustment"). This Market Value Adjustment 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 market value adjustment.
We calculate the market value adjustment 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 rate
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 market value adjustment 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 or transfer. Where the market value adjustment is
positive, we add the adjustment to your withdrawal or transfer from the fixed
account option.
The one year fixed account option and the DCA fixed accounts do not impose a
market value adjustment. These fixed account 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 B for more information on how we calculate the Market Value
Adjustment.
TRANSFERS DURING THE ACCUMULATION PHASE
Except as provided in the next sentence with respect to the DCA fixed account,
you can transfer money among the STRATEGIES and the fixed account options by
written request or by telephone. Although you may transfer money out of the DCA
fixed accounts, you may not transfer money into the DCA fixed accounts from any
STRATEGY or any fixed account option. You can make four transfers every year
without incurring a transfer fee. We measure a year from the anniversary of the
date we issued your contract. If you make more than four transfers in a year,
there is a $25 transfer fee per transfer ($10 in Pennsylvania and Texas).
Additionally, transfers out of a multi-year fixed account option may be subject
to a market value adjustment.
The minimum amount you can transfer is $500 or a lesser amount if you transfer
the entire balance from a STRATEGY or a fixed account option. If any money will
remain in a STRATEGY or fixed account option after making a transfer, it must be
at least $500. Your request for transfer must clearly state which STRATEGY(IES)
and/or fixed account option(s) are involved and the amount you want to transfer.
Please see the section Dollar Cost Averaging on page 16 for specific rules
regarding the DCA fixed accounts.
We will accept transfers by telephone unless you specify otherwise on your
contract application. We have in place procedures to provide reasonable
assurance that instructions given to us by telephone are genuine. Thus, we
15
disclaim all liability for any claim, loss or expense from any error. If we fail
to use such procedures, we may be liable for any losses due to unauthorized or
fraudulent instructions.
We will also accept internet account transfers unless you specify otherwise on
your contract application. We have appropriate procedures in place to provide
reasonable assurance that the transactions executed are genuine. Thus, we
disclaim all liability for any claim, loss or expense from any error resulting
from instructions received over the internet. If we fail to follow our
procedures we may be liable for any losses due to unauthorized or fraudulent
transactions.
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.
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 systematically transfer
a set percentage or amount from any STRATEGY or the one year fixed account
option (we call these source accounts) to another STRATEGY. You can also select
to transfer the entire value in a STRATEGY or the one year fixed investment
option in a stated number of transfers. Transfers may be monthly or quarterly.
You can change the amount or frequency at any time by notifying us in writing.
The minimum transfer amount is $500, unless you use the DCA fixed accounts (see
below). Fixed Account options are not available as target accounts for the DCA
program.
When you make either your initial Purchase Payment or a subsequent Purchase
Payment and want to participate in the Dollar Cost Averaging Program with that
money, you may also use a DCA fixed account as a source account. You cannot
transfer money from a STRATEGY or other fixed investment option into a DCA fixed
account.
When the one-year DCA fixed account is used for the DCA Program, all of your
money in the one-year DCA fixed account will be transferred to the STRATEGY(IES)
you select in either monthly or quarterly transfers (as selected by you) by the
end of the one year period for which the interest rate is guaranteed (one year
from the date of your deposit). Once selected, you cannot change the frequency.
When the six-month DCA fixed account is used, all of the money you allocate to
the six-month DCA fixed account is transferred to the STRATEGY(IES) you select
in monthly transfers by the end of the six month period for which the interest
rate is guaranteed.
The minimum amount that may be allocated to a DCA fixed account is $500 and the
minimum amount that may be transferred from a DCA fixed account to the
STRATEGY(IES) you select is $100. Therefore, if the amount allocated to a DCA
fixed account is such that the transfer amount under the frequency selected
would fail to meet the $100 minimum transfer requirement, the number of
transfers under the program would be reduced to comply with the minimum transfer
requirement. For example, if you allocate $500 to the six-month DCA fixed
account, your money will be transferred out over a period of five months.
If you want to stop participation in the Dollar Cost Averaging Program and you
are using a DCA fixed account as your source account, we will either transfer
your money to the STRATEGY(IES) or fixed investment option(s) you select, or, in
the absence of express instructions, we will transfer your money to the one year
fixed investment option which will earn interest at the rate then being offered
for new Purchase Payments for a period of one year.
By allocating amounts to the STRATEGIES on a regular schedule as opposed to
allocating the total amount at one particular time, you may be less susceptible
to the impact of market fluctuations. However, there is no
16
assurance that you will earn a greater profit. You are still subject to loss in
a declining market. Dollar cost averaging involves continuous investment in
securities regardless of fluctuating price levels. You should consider your
financial ability to continue to invest through periods of low prices.
Transfers under this program are not counted against your four free transfers
per year. In addition, any transfer to the one-year fixed investment option upon
termination of this program will not be counted against your four free
transfers.
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
Conservative Growth STRATEGY to the Growth STRATEGY 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.
PRINCIPAL ADVANTAGE PROGRAM
The Principal Advantage Program allows you to invest in one or more
STRATEGY(IES) without putting the amount of your principal at direct risk. The
program accomplishes this by allocating your investment strategically between
the fixed account options and STRATEGY(IES). 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
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 STRATEGY(IES) 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 STRATEGY(IES), as determined by you, to provide
opportunity for greater growth.
VOTING RIGHTS
Anchor National is the legal owner of the Seasons Series Trust shares. However,
when the underlying investment portfolios of the Seasons Series Trust solicit
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.
17
SUBSTITUTION
We may amend your contract due to changes to the PORTFOLIOS offered under your
contract. For example, we may offer new PORTFOLIOS, delete PORTFOLIOS, or stop
accepting allocations and/or investments in a particular PORTFOLIO. We may move
assets and/or re-direct future premium allocations from one PORTFOLIO to another
if we receive investor approval through a proxy vote or SEC approval for a fund
substitution. This would occur if a PORTFOLIO is no longer an appropriate
investment for the contract, for reason such as continuing substandard
performance, or for changes to the portfolio manager, investment objectives,
risks and strategies, or federal or state laws. The new PORTFOLIO offered may
have different fees and expenses. You will be notified of any upcoming proxies
or substitutions that affect your PORTFOLIO choices.
ACCESS TO YOUR MONEY
- --------------------------------------------------------------------------------
You can access money in your contract in two ways:
- by making a partial or total withdrawal, and/or;
- by receiving income payments during the Income Phase. SEE INCOME OPTIONS
PAGE 22.
Generally, we deduct a withdrawal charge applicable to any total or partial
withdrawal and a market value adjustment if a withdrawal comes from the 3, 5, 7
or 10 year fixed account options. If you withdraw your entire contract value, we
also deduct any applicable premium taxes and a contract maintenance fee. SEE
EXPENSES PAGE 20.
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 we will recoup any surrender charges which would have been due
at the time the free withdrawals were taken if your free withdrawal had not been
free.
Generally, each contract year you may withdraw up to 10% of your Purchase
Payments which are subject to a withdrawal charge free of any withdrawal charge.
This is the free withdrawal amount.
Purchase payments, above and beyond the amount of your free withdrawal amount,
that are invested for less than 7 years and withdrawn 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. 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 is determined by the age of the Purchase
Payment remaining in the contract at the time of the withdrawal. For the purpose
of calculating the withdrawal charge, any prior Free Withdrawal is not
subtracted from the total Purchase Payments still subject to withdrawal charges.
For example, you make an initial Purchase Payment of $100,000. For purposes of
this example we will assume a 0% growth rate over the life of the contract and
no subsequent Purchase Payments. In contract year 2 and year 3, you take out
your maximum free withdrawal of $10,000 for each year. After that free
withdrawal 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 Purchase Payments still subject to withdrawal charge
($100,000)
C = The withdrawal charge percentage applicable to the age of each Purchase
Payment (6%) [B X C = $6,000]
D = Your full surrender value ($74,000)
We calculate charges due on a total withdrawal on the day after we receive your
request and your contract. We return your contract value less any applicable
fees and charges.
18
Under most circumstances, the minimum partial withdrawals amount is $1,000. We
require that the value left in any STRATEGY or fixed account be at least $500,
after the withdrawal. You must send a written withdrawal request. Unless you
provide us with different instructions, partial withdrawals will be made in
equal amounts from each STRATEGY and fixed account option in which your contract
is invested.
Washington residents should consult their financial adviser for additional
information.
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 account option. Such deferrals are limited to six months.
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 the free withdrawal 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.
WITHDRAWAL CHARGES, MARKET VALUE ADJUSTMENTS, INCOME TAXES, TAX PENALTIES AND
CERTAIN RESTRICTIONS MAY APPLY TO ANY WITHDRAWAL YOU MAKE, INCLUDING SYSTEMATIC
WITHDRAWALS.
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. PLEASE SEE TAXES ON PAGE 24 for a more detailed explanation.
DEATH BENEFIT
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If you should die before beginning the Income Phase of your contract, we will
pay a death benefit to your Beneficiary.
If you should die prior to reaching age 75 or, in the case of joint owners, if
an owner should die prior to the youngest owner reaching age 75, the death
benefit will be equal to the greater of:
1. The value of your contract at the time we receive all required paperwork
and satisfactory proof of death and the Beneficiary's election as to how
the benefit should be paid; or
2. Total Purchase Payments less withdrawals, applicable charges, market
value adjustments and taxes, accumulated at 3% from the date your
contract was issued until the date of death, plus any Purchase
19
Payments received, less any withdrawals, applicable charges, market
value adjustments and taxes made or charged, after the date of death.
If the contract was issued after your 75th birthday or if you should die after
you reach age 75, or, in the case of joint owners, if the contract was issued
after both owners' 75th birthday or if an owner dies after the youngest owner
reaches age 75, the death benefit will be the greater of:
1. The value of your contract at the time we receive all required paperwork
and satisfactory proof of death and the Beneficiary's election as to how
the death benefit will be paid; or
2. Total Purchase Payments received by us before age 75 (in the case of
joint owners, before the younger owner reaches age 75) less any
withdrawals, applicable charges, market value adjustments and taxes,
accumulated at 3% from the date your contract was issued until your 75th
birthday (or, if there is a joint owner, the 75th Birthday of the
youngest owner), plus any subsequent Purchase Payments received, less
any withdrawals, applicable charges, market value adjustments and taxes
made or charged, after your 75th birthday.
The death benefit is not paid after you switch to 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.
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 must be paid within 5 years of the date of death, unless the
Beneficiary elects to have the death benefit payable in the form of an income
option. If the Beneficiary elects an income option, it must be paid over the
Beneficiary's lifetime or for a period not extending beyond the Beneficiary's
life expectancy. Income payments must begin within one year of your death. If
the Beneficiary is the spouse of the owner, he or she can elect to continue the
contract at the then current value.
The death benefit will be calculated and paid out when we receive all required
paperwork and satisfactory proof of death. We consider satisfactory proof of
death one of the following: (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. 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.
DEATH OF THE ANNUITANT
If the Annuitant dies before annuity payments begin, you can name a new
Annuitant. If no Annuitant is named within 30 days, you will become the
Annuitant. However, if the owner is a non-natural person (for example, a
corporation), then the death of the Annuitant will be treated as the death of
the owner, no new Annuitant may be named and the death benefit will be paid.
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 and withdrawal charges. However, the investment charges under
your contract may increase or decrease. Some states may require that we charge
less than the amounts described below.
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INSURANCE CHARGES
The Company deducts a mortality and expense risk charge in the amount of 1.40%,
annually of the value of your contract invested in the STRATEGIES. 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 PAGE 18. If you take money out in excess of the Free Withdrawal Amount,
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 seven 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>
YEAR 1 2 3 4 5 6 7 8
- ----------------- --- --- --- --- --- --- --- ---
Withdrawal
Charge......... 7% 6% 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.
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. We will not 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 PAGE
24).
INVESTMENT CHARGES
Charges are deducted from the assets of the investment portfolios underlying the
STRATEGIES for the advisory and other expenses of the portfolios. THE FEE TABLES
ON PAGE 6 ILLUSTRATE THESE CHARGES AND EXPENSES. FOR MORE DETAILED INFORMATION
ON THESE INVESTMENT CHARGES, REFER TO THE TRUST PROSPECTUS WHICH IS ATTACHED TO
THIS PROSPECTUS.
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 will 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.
21
TRANSFER FEE
We currently permit four free transfers between investment options, every
contract year. We charge you $25 for each transfer over four in any one year
($10 in Pennsylvania and Texas). We deduct the transfer fee from the STRATEGY
and/or fixed account option from which you request the transfer (SEE INVESTMENT
OPTIONS PAGE 11).
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 annuitize
the contract. In the future, we may assess this deduction at the time you put
Purchase Payment(s) into the contract or upon payment of a death benefit.
APPENDIX C provides more information about premium taxes.
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,
its 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
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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 to the extent discussed
under Option 5, 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, certain Qualified contracts require you to take
minimum distributions after you reach age 70 1/2. SEE TAXES PAGE 24.
22
INCOME OPTIONS
Currently, this Contract offers five standard Income Options. Other payout
options may be available. Contact the Annuity Service Center for more
information. If you elect to receive income payments but do not select an
option, your income payments will be made in accordance with option 4 for a
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 factors 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 SURVIVOR LIFE ANNUITY WITH 10 OR 20 YEAR PERIOD CERTAIN
This option is similar to option 2 above, with an additional guarantee of
payments for at least 10 years. If the Annuitant and the Survivor die before all
of the guaranteed payments have been made, the remaining payments are made to
the Beneficiary under your Contract.
OPTION 4 - LIFE ANNUITY WITH 10 OR 20 YEAR PERIOD CERTAIN
This option is similar to option 1 above. In addition, this option provides a
guarantee that income payments will be made for at least 10 or 20 years. You
select the number of years. If the Annuitant dies before all guaranteed income
payments are made, the remaining income payments go to the Beneficiary under
your Contract.
OPTION 5 - INCOME FOR A SPECIFIED PERIOD
This option provides income payments for a guaranteed period ranging from 5 to
30 years. If the Annuitant dies before all of the guaranteed income payments are
made, the remaining income payments are made to the Beneficiary under your
contract. Additionally, if variable income payments are elected under this
option, you (or the Beneficiary under the contract if the Annuitant dies prior
to all guaranteed payments being made) may redeem the contract value after the
Annuity Date. The amount available upon such redemption would be the discounted
present value of any remaining guaranteed 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.
ALLOCATION OF INCOME 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 your STRATEGIES.
23
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 STRATEGIES 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.
INCOME PAYMENTS
If you are invested in the STRATEGIES after the Annuity date, your income
payments will vary depending on four things:
- for life options, your age when payments begin, and;
- the value of your contract in the STRATEGIES on the Annuity Date, and;
- the 3.5% assumed investment rate used in the annuity table for the
contract, and;
- the performance of the STRATEGIES in which you are invested during the
time you receive income payments.
If you are invested in both the fixed account options and the STRATEGIES after
the Annuity Date, the allocation of funds between the fixed accounts and
STRATEGIES also impacts the amount of your annuity payments.
We make income payments on a monthly, quarterly, semi-annual or annual basis.
You instruct us to send you a check or to have the payments directly deposited
into your bank account. If state law allows, we distribute annuities with a
contract value of $5,000 or less in a lump sum. Also, if the selected income
option results in income payments of less than $50 per payment, we may decrease
the frequency of the payments, state law allowing.
TRANSFERS DURING THE INCOME PHASE
You may transfer money among the STRATEGIES during the Income Phase. Transfers
are subject to the same limitations as transfers during the Accumulation Phase.
However, you may not transfer money from the fixed account into the STRATEGIES
or from the STRATEGIES into the fixed accounts during the Income Phase. SEE
EXPENSES PAGE 20.
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 ("SAI") for a more detailed
discussion of the income payments.
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 that satisfy specific tax and ERISA requirements automatically
provide tax deferral
24
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.
25
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
26
discussion of the potential adverse tax consequences associated with non-natural
ownership of a non-qualified annuity contract.
GIFTS, PLEDGES AND/OR ASSIGNMENTS OF A NON-QUALIFIED CONTRACT
If you transfer ownership of your Non-Qualified contract to a person other than
your spouse (or former spouse incident to divorce) as a gift you will pay
federal income tax on the contract's cash value to the extent it exceeds your
cost basis. The recipient's cost basis will be increased by the amount on which
you will pay federal taxes. Also, the IRC treats any assignment or pledge (or
agreement to assign or pledge) of any portion of a Non-Qualified contract as a
withdrawal. See the SAI for a more detailed discussion regarding potential tax
consequences of gifting, assigning or pledging a non-qualified contract.
DIVERSIFICATION
The IRC imposes certain diversification requirements on the underlying
investments for a variable annuity. We believe that the underlying Variable
Portfolios' management monitors the Variable Portfolios so as to comply with
these requirements. To be treated as a variable annuity for tax purposes, the
underlying investments must meet these requirements.
The diversification regulations do not provide guidance as to the circumstances
under which you, and not Anchor National, would be considered the owner of the
shares of the Variable Portfolios under your Nonqualified Contract, because of
the degree of control you exercise over the underlying investments. This
diversification requirement is sometimes referred to as "investor control." It
is unknown to what extent owners are permitted to select investments, to make
transfers among Variable Portfolios or the number and type of Variable
Portfolios owners may select from. If any guidance is provided which is
considered a new position, then the guidance would generally be applied
prospectively. However, if such guidance is considered not to be a new position,
it may be applied retroactively. This would mean you, as the owner of the
Nonqualified Contract, could be treated as the owner of the underlying Variable
Portfolios. Due to the uncertainty in this area, we reserve the right to modify
the contract in an attempt to maintain favorable tax treatment.
These investor control limitations generally do not apply to Qualified
Contracts, which are referred to as "Pension Plan Contracts" for purposes of
this rule, although the limitations could be applied to Qualified Contracts in
the future.
PERFORMANCE
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From time to time we will advertise the performance of the STRATEGIES. Any such
performance results are based on historical earnings and are not intended to
indicate future performance.
For each STRATEGY we will show performance against a comparison index which is
made up of the S&P 500 Index, the Lehman Brothers Corporate/Government Index and
the Lipper Money Market Index. The comparison index will blend the referenced
indices in proportion to the neutral allocation of stocks, bonds and cash within
each STRATEGY as indicated on pages 9 and 10 of this prospectus.
Additionally, we may show performance of each STRATEGY in comparison to various
appropriate 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 for additional 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 IBCA Duff &
Phelps. A.M. Best's and Moody's ratings reflect their current opinion of our
financial strength and performance in comparison to
27
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 STRATEGIES.
OTHER INFORMATION
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ANCHOR NATIONAL
Anchor National is a stock life insurance company originally organized under the
laws of the state of California in April 1965. On January 1, 1996, Anchor
National redomesticated under the laws of the state of Arizona.
Anchor National and its affiliates, SunAmerica Life Insurance Company, First
SunAmerica Life Insurance Company, SunAmerica Asset Management Corporation, and
the SunAmerica Financial Network, Inc. (comprising six wholly owned
broker-dealers), specialize in retirement savings and investment products and
services. Business focuses include, fixed and variable annuities, mutual funds,
broker-dealer services and trust administration services.
THE SEPARATE ACCOUNT
Anchor National originally established a separate account, Variable Annuity
Account Five (the "Separate Account"), under Arizona law on July 8, 1996. The
Separate Account is registered with the SEC as a unit investment trust under the
Investment Company Act of 1940, as amended.
Anchor National owns the assets in the Separate Account. However, the assets in
the Separate Account are not chargeable with liabilities arising out of any
other business conducted by Anchor National. Income gains and losses (realized
and unrealized) resulting from assets in the Separate Account are credited to or
charged against the Separate Account without regard to other income, gains or
losses of Anchor National. Assets in the Separate Account are not guaranteed for
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 7.25% of your Purchase Payments. We may
also pay a bonus to representatives for contracts which stay active for a
particular period of time, in addition to standard commissions. We do not deduct
commissions paid to registered representatives directly from your Purchase
Payments.
From time to time, we may pay or allow additional promotional incentives in the
form of cash or other compensation. We reserve the right to offer these
additional incentives only to certain broker-dealers that sell or are expected
to sell, certain minimum amounts of the contract, or other contracts offered by
us. Promotional incentives may change at any time.
SunAmerica Capital Services, Inc., 733 Third Avenue, 4th Floor, New York, New
York 10017 distributes the contracts. SunAmerica Capital Services is an
affiliate of Anchor National, and is a registered as a broker-dealer under the
Exchange Act of 1934 and a member of the National Association of Securities
Dealers, Inc.
No underwriting fees are paid in connection with the distribution of the
contracts.
28
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.
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 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.
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 for AIG SunAmerica Life Assurance
Company (formerly Anchor National Life Insurance Company) at December 31, 2001
and 2000 and, for the years ended December 31, 2001, 2000 and 1999 and audited
financial statements of Variable Annuity Account Five at April 30, 2002, for the
years ended April 30, 2002 and 2001, are included in the Statement of Additional
Information and incorporated by reference in this prospectus and have been so
included in reliance on the reports of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
29
TABLE OF CONTENTS OF
STATEMENT OF ADDITIONAL INFORMATION
<Table>
Separate Account............................................ 3
General Account............................................. 4
Performance Data............................................ 4
Income Payments............................................. 4
Annuity Unit Values......................................... 5
Taxes....................................................... 8
Distribution of Contracts................................... 13
Financial Statements........................................ 13
</Table>
30
APPENDIX A - CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
<Table>
<Caption>
INCEPTION FISCAL FISCAL 3/31/00 4/30/00 4/30/01
TO YEAR YEAR TO TO TO
STRATEGIES 3/31/98 3/31/99 3/31/00 4/30/00 4/30/01 4/30/02
- ----------------------------- --------- --------- --------- --------- --------- ---------
- ----------------------------------------------------------------------------------------------------
Growth (Inception Date
4/15/97)
Beginning AUV.............. 10.00 13.09 15.89 21.30 20.24 17.060
End AUV.................... 13.09 15.89 21.30 20.24 17.06 14.397
Ending Number of AUs....... 3,950,133 7,643,378 8,130,517 8,249,540 7,812,757 6,819,437
- ----------------------------------------------------------------------------------------------------
Moderate Growth (Inception
Date 4/15/97)
Beginning AUV.............. 10.00 12.76 15.09 19.48 18.61 16.298
End AUV.................... 12.76 15.09 19.48 18.61 16.30 14.197
Ending Number of AUs....... 3,639,458 7,968,543 8,508,732 8,649,412 8,525,921 7,608,915
- ----------------------------------------------------------------------------------------------------
Balanced Growth (Inception
Date 4/15/97)
Beginning AUV.............. 10.00 12.44 14.05 16.68 16.11 14,985
End AUV.................... 12.44 14.05 16.68 16.11 14.99 13.731
Ending Number of AUs....... 2,789,702 6,957,319 7,049,356 7,030,568 6,773,402 6,208,464
- ----------------------------------------------------------------------------------------------------
Conservative Growth
(Inception Date 4/15/97)
Beginning AUV.............. 10.00 12.06 13.21 14.89 14.50 14.137
End AUV.................... 12.06 13.21 14.89 14.50 14.14 13.445
Ending Number of AUs....... 1,536,220 5,313,501 5,332,213 5,350,653 5,064,829 4,841,527
- ----------------------------------------------------------------------------------------------------
</Table>
AUV-Accumulation Unit Value
AU-Accumulation Units
A-1
APPENDIX B - 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+0.005*)](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 Initial 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
N is the number of full months remaining in the term you initially
agreed to leave your money in the fixed investment option.
* In Pennsylvania this number will be zero.
EXAMPLES OF THE MARKET VALUE ADJUSTMENT
The examples below assume the following:
(1) You made an initial Purchase Payment of $10,000 and allocated it to the
10-year fixed investment option at a rate of 5%;
(2) You make a partial withdrawal of $4,000 when 2 1/2 years (30 months)
remain in the 10-year term you initially agreed to leave your money in the fixed
investment option (N=30); 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 market value adjustment. The market value adjustment is
assessed on the amount withdrawn less any withdrawal charges.
NEGATIVE ADJUSTMENT
Assume that on the date of withdrawal, the Initial interest rate in effect for
new Purchase Payments in the 3-year fixed investment option (2 1/2 years rounded
up to the next full year) is 6%.
The market value adjustment factor is
= [(1+I)/(1+J+0.005)](N/12) - 1
= [(1.05)/(1.06+.005)](30/12) - 1
= (0.985915)(2.5) - 1
= 0.965160 - 1
= -0.034840
The requested withdrawal amount is multiplied by the market value adjustment
factor to determine the market value adjustment:
$4,000 X (-0.034840) = -$139.36
$139.36 represents the market value adjustment that will be deducted from the
money remaining in the 10-year fixed investment option.
B-1
POSITIVE ADJUSTMENT
Assume that on the date of withdrawal, the Initial interest rate in effect for a
new Purchase Payments in the 3-year fixed investment option (2 1/2 years rounded
up to the next full year) is 4%.
The market value adjustment factor is:
= [(1+I/(1+J+0.005)](N/12)(N/12) - 1
= [(1.05)/(1.04+.005)](30/12) - 1
= (1.004785)(2.5) - 1
= 1.012005 - 1
= +0.012005
The requested withdrawal amount is multiplied by the market value adjustment
factor to determine the market value adjustment:
$4,000 X (+0.012005) = +$48.02
$48.02 represents the market value adjustment that would be added to your
withdrawal.
B-2
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% 2.00%
Nevada..................................................... 0% 3.50%
South Dakota............................................... 0% 1.25%*
West Virginia.............................................. 1.00% 1.00%
Wyoming.................................................... 0% 1.00%
</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 Seasons 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
(Seasons Select II LOGO)
PROSPECTUS
July 29, 2002
ALLOCATED FIXED AND VARIABLE GROUP ANNUITY
issued by
VARIABLE ANNUITY ACCOUNT FIVE
and
ANCHOR NATIONAL LIFE INSURANCE COMPANY
The annuity contract has 24 investment choices - 7 fixed investment options (5
fixed investment options if the Seasons Rewards Program is elected) which offer
interest rates guaranteed by Anchor National for different periods of time, 9
variable investment SELECT PORTFOLIOS, 4 variable investment FOCUSED PORTFOLIOS
and 4 variable investment SEASONS STRATEGIES:
<Table>
<Caption>
SELECT PORTFOLIOS FOCUSED PORTFOLIOS SEASONS STRATEGIES
LARGE CAP GROWTH FOCUS GROWTH GROWTH
LARGE CAP COMPOSITE FOCUS GROWTH AND INCOME MODERATE GROWTH
LARGE CAP VALUE FOCUS VALUE BALANCED GROWTH
MID CAP GROWTH FOCUS TECHNET CONSERVATIVE GROWTH
MID CAP VALUE
SMALL CAP
INTERNATIONAL EQUITY
DIVERSIFIED FIXED INCOME
CASH MANAGEMENT
</Table>
all of which invest in the underlying portfolios of
SEASONS SERIES TRUST
which is managed by:
<Table>
<Caption>
SELECT PORTFOLIOS FOCUSED PORTFOLIOS SEASONS STRATEGIES
AIG GLOBAL INVESTMENT CORP. AMERICAN CENTURY INVESTMENT MANAGEMENT, INC. PUTNAM INVESTMENT MANAGEMENT, INC.
GOLDMAN SACHS ASSET MANAGEMENT DRESDNER RCM GLOBAL FUNDS T. ROWE PRICE ASSOCIATES, INC.
JANUS CAPITAL MANAGEMENT LLC. FRED ALGER MANAGEMENT JANUS CAPITAL MANAGEMENT LLC.
LORD, ABBETT & CO. HARRIS ASSOCIATES L.P. SUNAMERICA ASSET MANAGEMENT CORPORATION
SUNAMERICA ASSET MANAGEMENT JENNISON ASSOCIATES WELLINGTON MANAGEMENT COMPANY, LLP
CORPORATION MARSICO CAPITAL MANAGEMENT LLC
T. ROWE PRICE ASSOCIATES, INC. SUNAMERICA ASSET MANAGEMENT CORPORATION
GOLDMAN SACHS ASSET MANAGEMENT/ THIRD AVENUE FUNDS
GOLDMAN SACHS ASSET MANAGEMENT THORNBERG INVESTMENT MANAGEMENT
INT'L VANWAGONER CAPITAL MANAGEMENT
WELLINGTON MANAGEMENT COMPANY,
LLP
</Table>
You can put your money into any one or all of the SELECT PORTFOLIOS, FOCUSED
PORTFOLIOS, SEASONS STRATEGIES and/or fixed investment options.
Please read this prospectus carefully before investing and keep it for your
future reference. It contains important information you should know about the
Seasons Select(II) Variable Annuity. If elected, this variable annuity provides
a payment enhancement program called "Seasons Rewards." Your withdrawal charge
schedule will be longer and greater than other contracts offered without the
Seasons Rewards program.
To learn more about the annuity offered by this prospectus, you can obtain a
copy of the Statement of Additional Information ("SAI") dated July 29, 2002. The
SAI has been filed with the Securities and Exchange Commission ("SEC") and can
be considered part of this prospectus.
The table of contents of the SAI appears on page 48 of this prospectus. For a
free copy of the SAI, call us at 800/445-SUN2 or write our Annuity Service
Center at, P.O. Box 54299, Los Angeles, California 90054-0299.
A registration statement has been filed with the SEC under the Securities Act of
1933 relating to the contract. This prospectus does not contain all the
information in the registration statement as permitted by SEC regulations. The
omitted information can be obtained from the SEC's principal office in
Washington, D.C., upon payment of a prescribed fee.
In addition, the SEC maintains a website (http://www.sec.gov) that contains the
SAI, materials incorporated by reference and other information filed
electronically with the SEC.
ANNUITIES INVOLVE RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL, AND ARE NOT A
DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR ENDORSED BY, ANY BANK. THEY ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Anchor National Life Insurance Company is in the process of changing its name to
AIG SunAmerica Life Assurance Company. We anticipate this process will take some
time to implement in all jurisdictions where we do business. We expect the name
change to be completed during 2003. To begin this process we officially changed
the name in our state of domicile, Arizona. However, we continue to do business,
today, under the name Anchor National and will refer to the Company by that name
throughout this prospectus. You will be notified when the name is changed to AIG
SunAmerica Life Assurance Company and we are no longer doing business as Anchor
National. Please keep in mind, this is a name change only and will not affect
the substance of your contract.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Anchor National's Annual Report on Form 10-K/A for the year ended December 31,
2001 and its quarterly report on Form 10-Q for the quarter ended March 31, 2002
are herein incorporated by reference.
All documents or reports filed by Anchor National under Section 13(a), 13(c),
14, or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") after the effective date of this prospectus are also incorporated by
reference. Statements contained in this prospectus and subsequently filed
documents which are incorporated by reference or deemed to be incorporated by
reference are deemed to modify or supersede documents incorporated herein by
reference.
Anchor National files its Exchange Act documents and reports, including its
annual and quarterly reports on Form 10-K and Form 10-Q, electronically pursuant
to EDGAR under CIK No. 0000006342.
Anchor National is subject to the informational requirements of the Securities
and Exchange Act of 1934 (as amended). We file reports and other information
with the SEC to meet those requirements. You can inspect and copy this
information at SEC public facilities at the following locations:
WASHINGTON, DISTRICT OF COLUMBIA
450 Fifth Street, N.W., Room 1024
Washington, D.C. 20549
CHICAGO, ILLINOIS
500 West Madison Street
Chicago, IL 60661
NEW YORK, NEW YORK
233 Broadway
New York, NY 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 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
2
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.
3
TABLE OF CONTENTS
<Table>
GLOSSARY.................................................... 5
HIGHLIGHTS.................................................. 6
FEE TABLES.................................................. 7
Owner Transaction Expenses............................... 7
Annual Separate Account Expenses......................... 7
The Optional Income Protector Fee........................ 7
The Optional Seasons Estate Advantage Fee................ 7
Optional Seasons Promise Fee............................. 7
Investment Portfolio Expenses of Portfolios and Seasons
Strategies............................................. 8
EXAMPLES.................................................... 10
THE SEASONS SELECT(II) VARIABLE ANNUITY..................... 15
PURCHASING A SEASONS SELECT(II) VARIABLE ANNUITY............ 16
Allocation of Purchase Payments.......................... 16
Seasons Promise Feature.................................. 16
Seasons Rewards Program.................................. 18
Accumulation Units....................................... 20
Free Look................................................ 21
Exchange Offers.......................................... 21
INVESTMENT OPTIONS.......................................... 21
Variable Investment Options.............................. 22
The PORTFOLIOS......................................... 22
The SEASONS STRATEGIES................................. 23
Market Value Adjustment.................................. 25
Transfers During the Accumulation Phase.................. 26
Dollar Cost Averaging.................................... 27
Asset Allocation Rebalancing Program..................... 28
Principal Advantage Program.............................. 28
Voting Rights............................................ 29
Substitution............................................. 29
ACCESS TO YOUR MONEY........................................ 29
Free Withdrawal Provision................................ 29
Systematic Withdrawal Program............................ 31
Minimum Contract Value................................... 31
Qualified Contract Owners................................ 31
DEATH BENEFIT............................................... 31
Standard Death Benefit................................... 32
Seasons Estate Advantage................................. 33
Spousal Continuation..................................... 34
EXPENSES.................................................... 35
Insurance Charges........................................ 35
Withdrawal Charges....................................... 35
Investment Charges....................................... 36
Contract Maintenance Fee................................. 36
Transfer Fee............................................. 36
Optional Seasons Promise Fee............................. 37
Seasons Estate Advantage Fee............................. 37
Optional Income Protector Fee............................ 37
Premium Tax.............................................. 37
Income Taxes............................................. 37
Reduction or Elimination of Charges and Expenses, and
Additional Amounts Credited............................ 37
INCOME OPTIONS.............................................. 37
Annuity Date............................................. 37
Income Options........................................... 38
Allocation of Annuity Payments........................... 39
Transfers During the Income Phase........................ 39
Deferment of Payments.................................... 39
Income Protector......................................... 40
TAXES....................................................... 42
Annuity Contracts in General............................. 42
Tax Treatment of Distributions--Non-qualified
Contracts.............................................. 42
Tax Treatment of Distributions--Qualified Contracts...... 42
Minimum Distributions.................................... 43
Tax Treatment of Death Benefits.......................... 43
Tax Treatment of Non-Qualified Contracts Owned by a Trust
or Corporation......................................... 44
Tax Treatment of Gifts, Pledges and/or Assignments of a
Non-Qualified Annuity Contract......................... 44
Diversification.......................................... 44
PERFORMANCE................................................. 45
OTHER INFORMATION........................................... 46
Anchor National.......................................... 46
The Separate Account..................................... 46
The General Account...................................... 46
Distribution of the Contract............................. 46
Administration........................................... 46
Legal Proceedings........................................ 47
Custodian................................................ 47
INDEPENDENT ACCOUNTANTS..................................... 47
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.... 48
APPENDIX A--CONDENSED FINANCIAL INFORMATION................. A-1
APPENDIX B--SEASONS REWARDS PROGRAM EXAMPLES................ B-1
APPENDIX C--MARKET VALUE ADJUSTMENT......................... C-1
APPENDIX D--DEATH BENEFITS FOLLOWING SPOUSAL CONTINUATION... D-1
APPENDIX E--HYPOTHETICAL EXAMPLE OF THE OPERATION OF THE
INCOME PROTECTOR PROGRAM................................... E-1
APPENDIX F--PREMIUM TAXES................................... F-1
</Table>
4
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").
PAYMENT ENHANCEMENT(S)--The amount(s) allocated to your contract by Us under the
Seasons Rewards Program. Payment enhancements are calculated as a percentage of
your Purchase Payments and are considered earnings.
PORTFOLIO(S)--A sub-account of Variable Annuity Account Five which provides for
the variable investment options available under the contract. Each SELECT and
FOCUSED PORTFOLIO has a distinct investment objective and is invested in the
underlying investment portfolios of the Seasons Series Trust. This investment
option allocates assets to an underlying fund in which a portion of the assets
is managed by three different advisors.
PURCHASE PAYMENTS--The money you give us to buy the contract, as well as any
additional money you give us to invest in the contract after you own it.
QUALIFIED (CONTRACT)--A contract purchased with pretax dollars. These contracts
are generally purchased under a pension plan, specially sponsored program or
individual retirement account ("IRA").
STRATEGY(IES)--A sub-account of Variable Annuity Account Five which provides for
the variable investment options available under the contract. Each SEASONS
STRATEGY has its own investment objective and is invested in the underlying
investment portfolios of the Seasons Series Trust. This investment option
allocates assets to three out of six available portfolios, each of which is
managed by a different investment advisor.
5
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 SEASONS REWARDS PROGRAM. CONTRACTS WITHOUT SEASONS REWARDS
PROGRAM HAVE THE SAME MORTALITY AND EXPENSE RISK CHARGES AS THE SAME CONTRACT
WITH THE PROGRAM. HOWEVER, CONTRACTS WITHOUT THE SEASONS REWARDS PROGRAM
GENERALLY HAVE A SHORTER SURRENDER CHARGE SCHEDULE WHICH MAY HAVE LOWER
PERCENTAGES IN CERTAIN YEARS. WHEN WORKING WITH YOUR FINANCIAL ADVISOR TO
DETERMINE THE BEST PRODUCT TO MEET YOUR NEEDS YOU SHOULD CONSIDER, AMONG OTHER
THINGS WHETHER THE FEATURES OF THIS CONTRACT AND THE RELATED FEES PROVIDE THE
MOST APPROPRIATE PACKAGE TO HELP YOU MEET YOUR LONG-TERM RETIREMENT SAVINGS
GOALS.
HIGHLIGHTS
- --------------------------------------------------------------------------------
The Seasons Select(II) 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 the Select Portfolios, Focused Portfolios and/or
pre-allocated Strategies ("Variable Portfolios") and fixed account options. You
may also elect to participate in the Seasons Rewards program of the contract
that can provide you with Payment Enhancements to invest in your contract in
exchange for a longer withdrawal 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 Seasons Rewards, you receive
any again 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
SEASONS SELECT(II) 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 percentage 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 Seasons
Rewards Program, withdrawal charges no longer apply to that portion of the
Purchase Payment. Please see the FEE TABLE, PURCHASING A SEASONS SELECT(II)
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
representative 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.
6
SEASONS SELECT(II) 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 9 10
Schedule A*.......... 7% 6% 6% 5% 4% 3% 2% 0% 0% 0%
Schedule B**......... 9% 8% 7% 6% 6% 5% 4% 3% 2% 0%
</Table>
* This schedule applies to each Purchase Payment if you are NOT participating
in the Seasons Rewards Program.
** This schedule applies to each Purchase Payment if you are participating in
the Seasons Rewards Program.
<Table>
TRANSFER FEE.......... No charge for first 15
transfers each contract
year; thereafter, fee is $25
($10 in Pennsylvania and
Texas) per transfer.
CONTRACT MAINTENANCE
CHARGE................ $35 each year ($30 in North
Dakota) (waived for
contracts over $50,000)
</Table>
ANNUAL SEPARATE ACCOUNT EXPENSES
(as a percentage of your 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>
OPTIONAL INCOME PROTECTOR FEE
(The Income Protector Program which is described more fully in the prospectus is
optional and if elected, the fee is deducted annually from your contract value.)
<Table>
Fee as a percentage of your
Income Benefit Base*.......... 0.10%
</Table>
* The Income Benefit Base 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 since the prior contract anniversary
and fees and charges applicable to those withdrawals.
OPTIONAL SEASONS ESTATE ADVANTAGE FEE
(Seasons Estate Advantage, which offers a choice of two enhanced death benefits
and an Earnings Advantage benefit, 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.... 0.25%
</Table>
OPTIONAL SEASONS PROMISE FEE
(This feature is more fully described in the prospectus and if elected, the fee
is deducted at the end of the first contract quarter and quarterly thereafter
from your contract value.)
<Table>
<Caption>
CONTRACT YEAR ANNUALIZED CHARGE*
0-7.................. 1.00%
8-10................. 0.80%
11+.................. None
</Table>
* As a percentage of your contract value minus purchase payments received after
the 90th day since the purchase of your contract.
7
INVESTMENT PORTFOLIO EXPENSES OF VARIABLE PORTFOLIOS
SEASONS SERIES TRUST
(as a percentage of daily net asset value after any applicable reimbursement or
waiver of expenses, as of the fiscal year end of the Trust ending March 31,
2002)
<Table>
<Caption>
MANAGEMENT SERVICE (12b-1) OTHER TOTAL ANNUAL
FEE FEES EXPENSES EXPENSES
- -----------------------------------------------------------------------------------------------
SELECT PORTFOLIOS
- -----------------------------
Large Cap Growth(1,3) 0.80% 0.15% 0.30% 1.25%
Large Cap Composite(1,3) 0.80% 0.15% 0.30% 1.25%
Large Cap Value(1,3) 0.80% 0.15% 0.30% 1.25%
Mid Cap Growth(1,3) 0.85% 0.15% 0.30% 1.30%
Mid Cap Value(1,3) 0.85% 0.15% 0.30% 1.30%
Small Cap(1,3) 0.85% 0.15% 0.30% 1.30%
International Equity(1,3) 1.00% 0.15% 0.30% 1.45%
Diversified Fixed
Income(1,3) 0.70% 0.15% 0.30% 1.15%
Cash Management(4) 0.55% 0.15% 0.30% 1.00%
- -----------------------------------------------------------------------------------------------
FOCUSED PORTFOLIOS
- -----------------------------
Focus Growth(1,3) 1.00% 0.15% 0.30% 1.45%
Focus Growth and
Income(1,2,3) 1.00% 0.15% 0.31% 1.46%
Focus Value(1,2,3,5) 1.00% 0.15% 0.31% 1.46%
Focus TechNet(1,2,3) 1.20% 0.15% 0.31% 1.66%
- -----------------------------------------------------------------------------------------------
</Table>
(1) For this portfolio, the adviser, SunAmerica Asset Management Corp. has
voluntarily agreed to waive fees or expenses, if necessary, to keep
operating expenses at or below established maximum amounts. All waivers or
reimbursements may be terminated at any time. Only certain portfolios relied
on these waivers and/or reimbursements during this fiscal year as follows:
Absent fee waivers or reimbursement expenses by the adviser or custody
credits, you would have incurred the following expenses during the last
fiscal year: Large Cap Growth (1.29%), Large Cap Composite (1.68%), Large
Cap Value (1.31%), Mid Cap Growth (1.42%), Mid Cap Value (1.42%), Small Cap
(1.56%), International Equity (2.20%), Diversified Fixed Income (1.25%),
Focus Growth (1.66%), Focus Growth & Income (2.47%), Focus Value (2.54%)
(annualized) and Focus TechNet (2.97%).
(2) Gross of custody credits of 0.01%
(3) The ratio reflects an expense cap as follows: Large Cap Growth 1.25%, Large
Cap Composite 1.25%, Large Cap Value 1.25%, Mid Cap Growth 1.30%, Mid Cap
Value 1.30%, Small Cap 1.30%, International Equity 1.45%, Diversified Fixed
Income 1.15%, Focus Growth 1.45%, Focus Growth & Income 1.45%, Focus Value
1.45%, and Focus TechNet 1.65%.
(4) For Cash Management, the adviser recouped prior year expense reimbursements,
resulting in expense ratios before recoupment of 0.97%.
(5) Annualized
8
INVESTMENT PORTFOLIO EXPENSES
BY SEASONS STRATEGY
(based on the total annual expenses of the underlying investment portfolios
reflected below after any applicable reimbursement or waiver of expenses, as of
the fiscal year end of the Trust ending March 31, 2002)
<Table>
<Caption>
MANAGEMENT SERVICE (12b-1) OTHER TOTAL ANNUAL
FEE FEES EXPENSES EXPENSES
- --------------------------------------------------------------------------------------------------
SEASONS STRATEGY
- -----------------------------------------
Growth 0.87% 0.15% 0.13% 1.15%
Moderate Growth 0.85% 0.15% 0.12% 1.12%
Balanced Growth 0.83% 0.15% 0.15% 1.13%
Conservative Growth(1) 0.80% 0.15% 0.22% 1.17%
- --------------------------------------------------------------------------------------------------
</Table>
(1)For Conservative Growth, the adviser recouped prior year expense
reimbursements, resulting in an expense ratio before recoupment of 1.13%.
IMPORTANT INFORMATION ABOUT PORTFOLIO EXPENSES IF INVESTED IN SEASONS
STRATEGIES:
The Investment Portfolio Expenses table set forth below identifies the total
investment expenses charged by the underlying investment portfolios of Seasons
Series Trust. Each contractholder invested in a SEASONS STRATEGY will incur only
a portion of the investment expense of those portfolios in which the SEASONS
STRATEGY invests. The table above entitled "Investment Portfolio Expenses by
SEASONS STRATEGY" shows an approximation of the total investment expenses a
contractholder may incur if invested in each respective SEASONS STRATEGY, after
the automatic quarterly rebalancing of such SEASONS STRATEGY as described on
page 18. The actual investment expenses incurred by contractholders within a
SEASONS STRATEGY will vary depending upon the daily net asset value of each
investment portfolio in which such SEASONS STRATEGY is invested.
INVESTMENT PORTFOLIO EXPENSES
FOR SEASONS STRATEGY UNDERLYING PORTFOLIOS
(as a percentage of daily net asset value of each investment portfolio as of the
fiscal year end of the Trust ending March 31, 2002)
<Table>
<Caption>
MANAGEMENT SERVICE (12b-1) OTHER TOTAL ANNUAL
FEE FEES EXPENSES EXPENSES
- --------------------------------------------------------------------------------------------------
SEASONS STRATEGY UNDERLYING
PORTFOLIOS
Stock 0.85% 0.15% 0.10% 1.10%
Asset Allocation: Diversified Growth 0.85% 0.15% 0.11% 1.11%
Multi-Managed Growth 0.89% 0.15% 0.16% 1.20%
Multi-Managed Moderate Growth 0.85% 0.15% 0.14% 1.14%
Multi-Managed Income/Equity 0.81% 0.15% 0.18% 1.14%
Multi-Managed Income(1) 0.77% 0.15% 0.28% 1.20%
- --------------------------------------------------------------------------------------------------
</Table>
(1) For Multi-Managed Income, the adviser recouped prior year expense
reimbursements, resulting in expense ratios before recoupment of 1.15%.
THE ABOVE INVESTMENT PORTFOLIO EXPENSES WERE PROVIDED BY SEASONS SERIES TRUST.
WE HAVE NOT INDEPENDENTLY VERIFIED THE ACCURACY OF THE INFORMATION.
9
EXAMPLES - IF YOU DO NOT PARTICIPATE IN THE
SEASONS REWARDS PROGRAM
You will pay the following expenses on a $1,000 investment in each Select
Portfolio, Focused Portfolio or Seasons Strategy, assuming a 5% annual return on
assets, Portfolio Expenses after waiver, reimbursement or recoupment, (assuming
the waiver, reimbursement or recoupment will continue for the period shown) if
applicable and:
(a) you surrender the contract at the end of the stated time period and
no optional features are elected.
(b) you elect the optional Seasons Estate Advantage and the Seasons
Promise features with the following charges (0.25% and 1.00%,
respectively), and you surrender the contract at the end of the
stated period.(1)
(c) you do not surrender the contract and no optional features are
elected.*
(d) you elect the optional Seasons Estate Advantage and the Seasons
Promise features with the following charges (0.25.% and 1.00%,
respectively), and you do not surrender the contract.(1)
<Table>
<Caption>
TIME PERIODS
- ---------------------------------------------------------------------------------
SELECT PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------------------
Large Cap Growth (a) $ 98 (a) $145 (a) $185 (a) $307
(b) $111 (b) $184 (b) $249 (b) $428
(c) $ 28 (c) $ 85 (c) $145 (c) $307
(d) $ 41 (d) $124 (d) $209 (d) $428
Large Cap Composite (a) $ 98 (a) $145 (a) $185 (a) $307
(b) $111 (b) $184 (b) $249 (b) $428
(c) $ 28 (c) $ 85 (c) $145 (c) $307
(d) $ 41 (d) $124 (d) $209 (d) $428
Large Cap Value (a) $ 98 (a) $145 (a) $185 (a) $307
(b) $111 (b) $184 (b) $249 (b) $428
(c) $ 28 (c) $ 85 (c) $145 (c) $307
(d) $ 41 (d) $124 (d) $209 (d) $428
Mid Cap Growth (a) $ 98 (a) $146 (a) $187 (a) $312
(b) $112 (b) $186 (b) $251 (b) $432
(c) $ 28 (c) $ 86 (c) $147 (c) $312
(d) $ 42 (d) $126 (d) $211 (d) $432
Mid Cap Value (a) $ 98 (a) $146 (a) $187 (a) $312
(b) $112 (b) $186 (b) $251 (b) $432
(c) $ 28 (c) $ 86 (c) $147 (c) $312
(d) $ 42 (d) $126 (d) $211 (d) $432
Small Cap (a) $ 98 (a) $146 (a) $187 (a) $312
(b) $112 (b) $186 (b) $251 (b) $432
(c) $ 28 (c) $ 86 (c) $147 (c) $312
(d) $ 42 (d) $126 (d) $211 (d) $432
International Equity (a) $100 (a) $151 (a) $195 (a) $326
(b) $113 (b) $190 (b) $258 (b) $444
(c) $ 30 (c) $ 91 (c) $155 (c) $326
(d) $ 43 (d) $130 (d) $218 (d) $444
Diversified Fixed Income (a) $ 97 (a) $142 (a) $180 (a) $297
(b) $110 (b) $181 (b) $244 (b) $420
(c) $ 27 (c) $ 82 (c) $140 (c) $297
(d) $ 40 (d) $121 (d) $204 (d) $420
Cash Management (a) $ 95 (a) $137 (a) $172 (a) $282
(b) $109 (b) $177 (b) $238 (b) $407
(c) $ 25 (c) $ 77 (c) $132 (c) $282
(d) $ 39 (d) $117 (d) $198 (d) $407
- ---------------------------------------------------------------------------------
</Table>
(1) If you do not elect the optional Seasons Promise feature, you could elect
the optional Income Protector feature for a fee of 0.10%. If you elected the
optional Income Protector fee your expenses would be lower.
*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.
10
<Table>
<Caption>
- ---------------------------------------------------------------------------------
FOCUSED PORTFOLIOS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------------------
Focus Growth (a) $100 (a) $151 (a) $195 (a) $326
(b) $113 (b) $190 (b) $258 (b) $444
(c) $ 30 (c) $ 91 (c) $155 (c) $326
(d) $ 43 (d) $130 (d) $218 (d) $444
Focus Growth and Income (a) $100 (a) $151 (a) $195 (a) $327
(b) $113 (b) $190 (b) $259 (b) $445
(c) $ 30 (c) $ 91 (c) $155 (c) $327
(d) $ 43 (d) $130 (d) $219 (d) $445
Focus Value (a) $100 (a) $151 (a) $195 (a) $327
(b) $113 (b) $190 (b) $259 (b) $445
(c) $ 30 (c) $ 91 (c) $155 (c) $327
(d) $ 43 (d) $130 (d) $219 (d) $445
Focus TechNet (a) $102 (a) $157 (a) $205 (a) $345
(b) $115 (b) $196 (b) $268 (b) $461
(c) $ 32 (c) $ 97 (c) $165 (c) $345
(d) $ 45 (d) $136 (d) $228 (d) $461
- ---------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
- ---------------------------------------------------------------------------------
SEASONS STRATEGY 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------------------
Growth (a) $ 97 (a) $142 (a) $180 (a) $297
(b) $110 (b) $181 (b) $244 (b) $420
(c) $ 27 (c) $ 82 (c) $140 (c) $297
(d) $ 40 (d) $121 (d) $204 (d) $420
Moderate Growth (a) $ 96 (a) $141 (a) $178 (a) $294
(b) $110 (b) $181 (b) $243 (b) $417
(c) $ 26 (c) $ 81 (c) $138 (c) $294
(d) $ 40 (d) $121 (d) $203 (d) $417
Balanced Growth (a) $ 96 (a) $141 (a) $179 (a) $295
(b) $110 (b) $181 (b) $244 (b) $418
(c) $ 26 (c) $ 81 (c) $139 (c) $295
(d) $ 40 (d) $121 (d) $204 (d) $418
Conservative Growth (a) $ 97 (a) $143 (a) $181 (a) $299
(b) $110 (b) $182 (b) $245 (b) $421
(c) $ 27 (c) $ 83 (c) $141 (c) $299
(d) $ 40 (d) $122 (d) $205 (d) $421
- ---------------------------------------------------------------------------------
</Table>
11
EXAMPLES - IF YOU PARTICIPATE IN THE
SEASONS REWARDS PROGRAM
You will pay the following expenses on a $1,000 investment in each Select
Portfolio, Focused Portfolio or Seasons Strategy, assuming a 5% annual return on
assets, Portfolio Expenses after waiver, reimbursement or recoupment, (assuming
the waiver, reimbursement or recoupment will continue for the period shown) if
applicable and:
(e) you surrender the contract at the end of the stated time period and
no optional features are elected.
(f) you elect the optional Seasons Estate Advantage and the Seasons
Promise features with the following charges (0.25% and 1.00%,
respectively), and you surrender the contract at the end of the
stated period.(1)
(g) you do not surrender the contract and no optional features are
elected.*
(h) you elect the optional Seasons Estate Advantage and the Seasons
Promise features with the following charges (0.25.% and 1.00%,
respectively), and you do not surrender the contract.(1)
<Table>
<Caption>
TIME PERIODS
- ----------------------------------------------------------------------------------------------
SELECT PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------------------------
Large Cap Growth (a) $118 (a) $157 (a) $198 (a) $313
(b) $132 (b) $197 (b) $263 (b) $436
(c) $ 28 (c) $ 87 (c) $148 (c) $313
(d) $ 42 (d) $127 (d) $213 (d) $436
Large Cap Composite (a) $118 (a) $157 (a) $198 (a) $313
(b) $132 (b) $197 (b) $263 (b) $436
(c) $ 28 (c) $ 87 (c) $148 (c) $313
(d) $ 42 (d) $127 (d) $213 (d) $436
Large Cap Value (a) $118 (a) $157 (a) $198 (a) $313
(b) $132 (b) $197 (b) $263 (b) $436
(c) $ 28 (c) $ 87 (c) $148 (c) $313
(d) $ 42 (d) $127 (d) $213 (d) $436
Mid Cap Growth (a) $119 (a) $158 (a) $200 (a) $318
(b) $132 (b) $198 (b) $266 (b) $441
(c) $ 29 (c) $ 88 (c) $150 (c) $318
(d) $ 42 (d) $128 (d) $216 (d) $441
Mid Cap Value (a) $119 (a) $158 (a) $200 (a) $318
(b) $132 (b) $198 (b) $266 (b) $441
(c) $ 29 (c) $ 88 (c) $150 (c) $318
(d) $ 42 (d) $128 (d) $216 (d) $441
Small Cap (a) $119 (a) $158 (a) $200 (a) $318
(b) $132 (b) $198 (b) $266 (b) $441
(c) $ 29 (c) $ 88 (c) $150 (c) $318
(d) $ 42 (d) $128 (d) $216 (d) $441
International Equity (a) $120 (a) $163 (a) $208 (a) $332
(b) $134 (b) $203 (b) $273 (b) $453
(c) $ 30 (c) $ 93 (c) $158 (c) $332
(d) $ 44 (d) $133 (d) $223 (d) $453
Diversified Fixed Income (a) $117 (a) $154 (a) $193 (a) $303
(b) $131 (b) $194 (b) $259 (b) $428
(c) $ 27 (c) $ 84 (c) $143 (c) $303
(d) $ 41 (d) $124 (d) $209 (d) $428
Cash Management (a) $116 (a) $149 (a) $185 (a) $288
(b) $129 (b) $189 (b) $251 (b) $415
(c) $ 26 (c) $ 79 (c) $135 (c) $288
(d) $ 39 (d) $119 (d) $201 (d) $415
- ----------------------------------------------------------------------------------------------
</Table>
(1) If you do not elect the optional Seasons Promise feature, you could elect
the optional Income Protector feature for a fee of 0.10%. If you elected the
optional Income Protector fee your expenses would be lower.
(*) 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.
12
<Table>
<Caption>
- ----------------------------------------------------------------------------------------
FOCUSED PORTFOLIOS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------------------
Focus Growth (a) $120 (a) $163 (a) $208 (a) $332
(b) $134 (b) $203 (b) $273 (b) $453
(c) $ 30 (c) $ 93 (c) $158 (c) $332
(d) $ 44 (d) $133 (d) $223 (d) $453
Focus Growth and Income (a) $120 (a) $163 (a) $208 (a) $333
(b) $134 (b) $203 (b) $273 (b) $454
(c) $ 30 (c) $ 93 (c) $158 (c) $333
(d) $ 44 (d) $133 (d) $223 (d) $454
Focus Value (a) $120 (a) $163 (a) $208 (a) $333
(b) $134 (b) $203 (b) $273 (b) $454
(c) $ 30 (c) $ 93 (c) $158 (c) $333
(d) $ 44 (d) $133 (d) $223 (d) $454
Focus TechNet (a) $122 (a) $169 (a) $218 (a) $352
(b) $136 (b) $209 (b) $282 (b) $470
(c) $ 32 (c) $ 99 (c) $168 (c) $352
(d) $ 46 (d) $139 (d) $232 (d) $470
- ----------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
- ----------------------------------------------------------------------------------------
SEASONS STRATEGY 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------------------
Growth (a) $117 (a) $154 (a) $193 (a) $303
(b) $131 (b) $194 (b) $259 (b) $428
(c) $ 27 (c) $ 84 (c) $143 (c) $303
(d) $ 41 (d) $124 (d) $209 (d) $428
Moderate Growth (a) $117 (a) $153 (a) $191 (a) $300
(b) $131 (b) $193 (b) $257 (b) $425
(c) $ 27 (c) $ 83 (c) $141 (c) $300
(d) $ 41 (d) $123 (d) $207 (d) $425
Balanced Growth (a) $117 (a) $153 (a) $192 (a) $301
(b) $131 (b) $193 (b) $258 (b) $426
(c) $ 27 (c) $ 83 (c) $142 (c) $301
(d) $ 41 (d) $123 (d) $208 (d) $426
Conservative Growth (a) $117 (a) $154 (a) $194 (a) $305
(b) $131 (b) $194 (b) $260 (b) $430
(c) $ 27 (c) $ 84 (c) $144 (c) $305
(d) $ 41 (d) $124 (d) $210 (d) $430
- ----------------------------------------------------------------------------------------
</Table>
EXPLANATION OF FEE TABLES AND EXAMPLES
1. The purpose of the Fee Tables is to show you the various expenses you will
incur directly and indirectly by investing in the contract. The example
reflects owner transaction expenses, separate account expenses including
optional benefit fees in some examples and investment portfolio expenses by
SELECT PORTFOLIO, FOCUSED PORTFOLIO and SEASONS STRATEGY. We converted the
contract administration charge to a percentage (0.09%) using an assumed
contract size of $40,000. The actual impact of the administration charge may
differ from this percentage and may be waived for contract values over
$50,000. Additional information on the portfolio company fees can be found in
the Trust prospectus located behind this prospectus.
2. The Examples assume an insurance charge of 1.40% and that no transfer fees
were imposed. Although premium taxes may apply in certain states, they are
not reflected in the Examples.
3. For certain underlying investment portfolios in which the SELECT PORTFOLIOS,
FOCUSED PORTFOLIOS and SEASONS STRATEGIES invest, the adviser, SunAmerica
Asset Management Corp. has voluntarily agreed to waive fees or reimburse
expenses, if necessary, to keep annual operating expenses at or below the
following percentages of each Portfolio's average net assets: Large Cap
Growth 1.25%, Large Cap Composite 1.25%, Large Cap Value 1.25%, Mid Cap
Growth 1.30%, Mid Cap Value 1.30%, Small Cap 1.30%, International Equity
1.45%, Diversified Fixed Income 1.15%, Focus Growth 1.45%, Focus Value 1.45%,
Focus TechNet 1.65%, and Focus Growth and Income 1.45%. These expense caps
are also net of custody credits of 0.01% for Focus Value, Focus TechNet and
Focus Growth and Income.
13
4. Examples reflecting participation in the Seasons Rewards program reflect
surrender charge Schedule B. The total expenses at the end of each period do
not take into account any Upfront Deferred Payment Enhancement which may be
added to your contract if you elect the Seasons Rewards Program. If you elect
the Seasons Rewards Program, your expenses may differ from the information
shown here.
5. Examples reflecting application of optional features and benefits use the
highest fees and charges being offered for these features. If you elected the
Income Protector program instead of Seasons Promise program, your expenses
would be lower than those shown in these tables. The fee for the Seasons
Promise and Income Protector features are not calculated as a percentage of
your daily net asset value but on other calculation more fully described in
the prospectus.
6. 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 for the SELECT PORTFOLIOS, FOCUSED
PORTFOLIOS and SEASONS STRATEGIES are contained in Appendix A--Condensed
Financial Information.
14
THE SEASONS SELECT(II) VARIABLE ANNUITY
- --------------------------------------------------------------------------------
An annuity is a contract between you and an insurance company. You are the owner
of the contract. The contract provides three main benefits:
- Tax Deferral: You do not pay taxes on your earnings from the annuity
until you withdraw them.
- Death Benefit: If you die during the Accumulation Phase, the insurance
company pays a death benefit to your Beneficiary.
- Guaranteed Income: If elected, you receive a stream of income for your
lifetime, or another available period you select.
Tax-qualified retirement plans (e.g., IRAs, 401(k) or 403(b) plans) defer
payment of taxes on earnings until withdrawn. If you are considering funding a
tax-qualified retirement plan with an annuity, you should know that an annuity
does not provide any additional tax deferral treatment of earnings beyond the
treatment provided by the tax-qualified retirement plan itself. However,
annuities do provide other features and benefits which may be valuable to you.
You should fully discuss this decision with your financial advisor.
This annuity was developed to help you contribute to your retirement savings.
This annuity works in two stages, the Accumulation Phase and the Income Phase.
Your contract is in the Accumulation Phase during the period when you make
payments into the contract. The Income Phase begins when you request us to start
making payments to you out of the money accumulated in your contract.
The Contract is called a "variable" annuity because it allows you to invest in
variable investment portfolios which we call SELECT PORTFOLIOS, FOCUSED
PORTFOLIOS and SEASONS STRATEGIES. The SELECT PORTFOLIOS, FOCUSED PORTFOLIOS and
SEASONS STRATEGIES, are similar to mutual funds, in that they have specific
investment objectives and their performance varies. You can gain or lose money
if you invest in these SELECT PORTFOLIOS, FOCUSED PORTFOLIOS or SEASONS
STRATEGIES. The amount of money you accumulate in your contract depends on the
performance of the SELECT PORTFOLIO(S), FOCUSED PORTFOLIO(S) or SEASONS
STRATEGY(IES) in which you invest.
The Contract also offers several fixed account options for varying time periods.
Fixed account options earn interest at a rate set and guaranteed by Anchor
National. If you allocate money to the fixed account options, the amount of
money that accumulates in your Contract depends on the total interest credited
to the particular fixed account option(s) in which you are invested.
For more information on SELECT PORTFOLIOS, FOCUSED PORTFOLIOS, SEASONS
STRATEGIES and fixed account options available under this contract, SEE
INVESTMENT OPTIONS PAGE 21.
Anchor National issues the Seasons Select(II) Variable Annuity. When you
purchase a Seasons Select(II) Variable Annuity, a contract exists between you
and Anchor National. The Company is a stock life insurance company organized
under the laws of the state of Arizona. Its principal place of business is 1
SunAmerica Center, Los Angeles, California 90067. The Company conducts life
insurance and annuity business in the District of Columbia and all states except
New York. Anchor National is an indirect, wholly owned subsidiary of American
International Group, Inc., a Delaware corporation. Seasons Select(II) 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, or 9 years if you elect to
participate in the Seasons Rewards Program. 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.
15
PURCHASING A SEASONS SELECT(II) 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 $500 $50
Non-qualified $5,000 $500 $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 the 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 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 81 or older. Seasons Estate Advantage is not 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 is contingent upon
prior review and approval by the Company.
ALLOCATION OF PURCHASE PAYMENTS
We invest your Purchase Payments in the fixed accounts, SELECT PORTFOLIO(S),
FOCUSED PORTFOLIO(S) and/or SEASONS STRATEGY(IES) according to your
instructions. If we receive a Purchase Payment without allocation instructions,
we will invest the money according to your last allocation instructions.
Purchase Payments are applied to your contract based upon the value of the
variable investment option next determined after receipt of your money. SEE
INVESTMENT OPTIONS PAGE 21.
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.
SEASONS PROMISE FEATURE
The Seasons Promise is an optional feature of your variable annuity currently
available only on contracts issued on or after July 29, 2002. If you elect this
feature, for which you will be charged an annualized fee, at the end of
applicable waiting period your contract will be worth at least the amount of
your initial Purchase Payment (less adjustments for withdrawals). The Seasons
Promise may offer protection in the event that your contract value declines due
to unfavorable investment performance in your contract. The Seasons Promise
feature has rules and restrictions, which are discussed more fully, below.
16
ELECTION OF THE FEATURE
You may only elect this feature at the time your contract is issued, so long as
the applicable waiting period prior to receiving the benefit ends before your
latest Annuity Date. You can elect this feature on your contract application.
The effective date for this feature will be your contract issue date. Seasons
Promise is not available if you elect the Income Protector program. SEE INCOME
PROTECTOR ON PAGE 40.
The Seasons Promise feature 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 for availability.
APPLICABLE WAITING PERIOD AND BENEFIT DATE
If you elect the Seasons Promise, at the end of the applicable waiting period we
will evaluate your contract to determine if a Seasons Promise benefit is payable
to you. The applicable waiting period is ten full contract years from your
contract issue date. The last day in the waiting period is your benefit date,
the date on which we will calculate any Seasons Promise benefit payable to you.
TERMINATION
Generally, this feature and its corresponding charge cannot be terminated prior
to the end of the waiting period. The feature terminates automatically following
the end of the waiting period. In addition, the Seasons Promise will no longer
be available and no benefit will be paid if a death benefit is paid or if the
contract is fully surrendered or annuitized before the end of the waiting
period.
CALCULATION OF THE BENEFIT
The Seasons Promise is a one-time adjustment to your contract value in the event
that your contract value at the end of the waiting period is less than the
guaranteed amount. The amount of the benefit payable to you, if any, at the end
of the waiting period will be based upon the amount of your initial Purchase
Payment and may also include certain portions of subsequent Purchase Payments
contributed to your contract over specified periods of time, as follows:
<Table>
<Caption>
PERCENTAGE OF PURCHASE PAYMENTS INCLUDED IN THE
TIME ELAPSED SINCE EFFECTIVE DATE SEASONS PROMISE BENEFIT CALCULATION
- --------------------------------- -----------------------------------------------
1-90 days (purchase payment(s)) 100%
91+ days 0%
</Table>
THE SEASONS PROMISE FEATURE MAY NOT GUARANTEE A RETURN OF ALL OF YOUR PURCHASE
PAYMENTS. IF YOU PLAN TO ADD SUBSEQUENT PURCHASE PAYMENTS OVER THE LIFE OF YOUR
CONTRACT, YOU SHOULD KNOW THAT THE SEASONS PROMISE WOULD NOT PROTECT THE
MAJORITY OF THOSE PAYMENTS.
The Seasons Promise benefit calculation is equal to your Seasons Promise Base,
as defined below, minus your Contract Value on the benefit date. If the
resulting amount is positive, you will receive a benefit under the feature. If
the resulting amount is negative, you will not receive a benefit. Your Seasons
Promise Base is equal to (a) minus (b) where:
(a) is/are the Purchase Payments received on or after the effective
date multiplied by the applicable percentages in the table above,
and;
(b) is an adjustment for all withdrawals and applicable fees and
charges made subsequent to the effective date, in an amount
proportionate to the amount by which the withdrawal decreased the
contract value on the date of the withdrawal.
Payment Enhancements under the Seasons Rewards feature are not considered
Purchase Payments and are not used in the calculation of the Seasons Promise
Base.
17
We will allocate any benefit amount contributed to the contract value on the
benefit date to the Cash Management portfolio. Any Seasons Promise benefit paid
is not considered a Purchase Payment for purposes of calculating other benefits.
Benefits based on earnings, such as Seasons Estate Advantage, will continue to
define earnings as the difference between contract value and Purchase Payments
adjusted for withdrawals. For information about how the benefit is treated for
income tax purposes you should consult your qualified tax advisor for
information concerning your particular circumstances.
SINCE THE SEASONS PROMISE FEATURE MAY NOT GUARANTEE A RETURN OF ALL PURCHASE
PAYMENTS AT THE END OF THE WAITING PERIOD, IT IS IMPORTANT TO REALIZE THAT
SUBSEQUENT PURCHASE PAYMENTS MADE INTO THE CONTRACT MAY DECREASE THE VALUE OF
THE SEASONS PROMISE BENEFIT. For example, if near the end of the waiting period
your Seasons Promise Base is greater than your contract value, and you then make
a subsequent Purchase Payment that causes your Contract Value to be larger than
your Seasons Promise Base on your benefit date, you will not receive any benefit
even though you have paid for the Seasons Promise feature throughout the waiting
period. You should discuss subsequent Purchase Payments with your financial
advisor as such activity may reduce the value of this Seasons Promise benefit.
THE SEASONS PROMISE CHARGE
Seasons Promise is an optional feature. If elected, you will incur an additional
charge for this feature. The annualized charge will be deducted on a quarterly
basis throughout the waiting period, beginning at the end of the first contract
quarter following the effective date of the feature and up to and including on
the benefit date. The full quarterly charge will be deducted at the time of a
full surrender or annuitization prior to the end of the waiting period, even
though no Seasons Promise benefit is payable. Once the feature is terminated, as
discussed above, the charge will no longer be deducted. The annual charge is:
<Table>
<Caption>
CONTRACT YEAR ANNUALIZED CHARGE*
------------- ------------------
0-7 1.00%
8-10 0.80%
11+ None
</Table>
* As a percentage of your contract value minus purchase payments received after
the 90th day since the purchase of your contract.
The amount of this charge is subject to change at anytime for prospectively
issued contracts.
EFFECT OF SPOUSAL CONTINUATION ON THE SEASONS PROMISE FEATURE
If your qualified spouse chooses to continue this contract upon your death, this
benefit cannot be terminated. The effective date, the waiting period and the
corresponding benefit payment date will not change as a result of a spousal
continuation. SEE SPOUSAL CONTINUATION PAGE 34.
WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE SEASONS PROMISE FEATURE
(IN ITS ENTIRETY OR ANY COMPONENT) AT ANY TIME FOR PROSPECTIVELY ISSUED
CONTRACTS.
SEASONS REWARDS PROGRAM
If you elect to participate in the Seasons 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 35. If you make an early withdrawal of
Purchase Payments, we may effectively recoup a portion of any bonuses applicable
to any payment withdrawn. SEE EXPENSES, PAGE 35. The Seasons Rewards Program may
not be approved for sale in your state or through the broker-dealer with which
your financial advisor is affiliated. 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 Seasons Rewards Program.
However, you may use the 1-year fixed account option as a Dollar Cost Averaging
source account.
18
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 Seasons
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 to your contract value on the date we receive each
subsequent Purchase Payment the amount of that 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. 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
future date (the "Deferred Payment Enhancement Date"). We calculate the Deferred
Payment Enhancement amount, if any, as a percentage of each Purchase Payment
(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 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.
APPENDIX B shows how we calculate any applicable Deferred Payment Enhancement
amount.
CURRENT ENHANCEMENT LEVELS
The Enhancement Levels, Upfront Payment Enhancement Rate and Deferred Payment
Enhancement Date applicable to all purchase payments currently are as follows:
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------
UPFRONT PAYMENT DEFERRED PAYMENT DEFERRED PAYMENT
ENHANCEMENT LEVEL ENHANCEMENT RATE ENHANCEMENT RATE ENHANCEMENT DATE
- -------------------------------------------------------------------------------------------------------
Under $500,000 5% 0% N/A
- -------------------------------------------------------------------------------------------------------
$500,000 - more 6% 0% N/A
- -------------------------------------------------------------------------------------------------------
</Table>
19
The applicable Payment Enhancement rate is that which is in effect, when we
receive each purchase payment under your contract. Future Upfront Enhancement
Rates may change at any time, but will never be less than 2%. We are currently
not offering a Deferred Payment Enhancement Rate. Future Deferred Payment
Enhancement Rates may increase or stay the same; there is no minimum Deferred
Payment Enhancement Rate. The number of years before which you may receive any
applicable future Deferred Payment Enhancement may change as well.
90 DAY WINDOW
Contracts issued with the Seasons Rewards feature may be eligible for a
"Look-Back Adjustment." 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
any applicable 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. 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
allocation instructions on file for subsequent Purchase Payments at the time we
make the contribution. If applicable, any Deferred Look Back Adjustment will be
allocated to the Cash Management portfolio.
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 it paid on your contract;
- You switch to the Income Phase of your contract; or
- You fully withdraw the corresponding Purchase Payment.
APPENDIX B provides an example of the 90 Day Window Provision.
WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE SEASONS REWARDS PROGRAM
(IN ITS ENTIRETY OR ANY COMPONENT) AT ANY TIME.
Check with your representative for information on the Upfront Payment
Enhancement Rate, Deferred Payment Enhancement Rate and Deferred Payment
Enhancement Date.
ACCUMULATION UNITS
The value of the variable portion of your contract will go up or down depending
upon the investment performance of the SELECT PORTFOLIO(S), FOCUSED PORTFOLIO(S)
or SEASONS STRATEGY(IES) you select. In order to keep track of the value of your
contract, we use a unit of measure called an Accumulation Unit which works like
a share of a mutual fund. During the Income Phase, we call them Annuity Units.
An Accumulation Unit value is determined each day that the New York Stock
Exchange ("NYSE") is open. We base the number of units you receive on the unit
value of the variable investment option as of the date we receive your money, if
we receive it before 1:00 p.m. Pacific Standard Time (PST) and on the next day's
unit value if we receive your money after 1:00 p.m. PST. We calculate an
Accumulation Unit for each SEASONS STRATEGY, SELECT PORTFOLIO or FOCUSED
PORTFOLIO after the NYSE closes each day. We do this by:
1. determining the total value of money invested in a particular SEASONS
STRATEGY, SELECT PORTFOLIO or FOCUSED PORTFOLIO;
2. subtracting from that amount any asset-based charges and any other
charges such as taxes we have deducted; and
3. dividing this amount by the number of outstanding Accumulation Units.
20
EXAMPLE (CONTRACTS WITHOUT SEASONS REWARDS):
We receive a $25,000 Purchase Payment from you on Wednesday. You allocate
the money to the Focus Growth Portfolio. We determine that the value of an
Accumulation Unit for the Focus Growth Portfolio is $11.10 when the NYSE
closes on Wednesday. We then divide $25,000 by $11.10 and credit your
contract on Wednesday night with 2,252.2523 Accumulation Units for the Focus
Growth Portfolio.
EXAMPLE (CONTRACTS WITH SEASONS REWARDS):
We receive a $25,000 Purchase Payment from you on Wednesday. You allocate
the money to the Focus Growth 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 Focus Growth 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 Focus
Growth Portfolio.
FREE LOOK
You may cancel your contract within ten days after receiving it (or longer if
required by state law). We call this a "free look." To cancel, you must mail the
contract along with your free look request to our Annuity Service Center at P.O.
Box 54299, Los Angeles, California 90054-0299.
We will refund to you the value of your contract on the day we receive your
request MINUS any applicable Free Look Payment Enhancement Deduction, if you had
elected the Seasons Rewards program. The Free Look Payment Enhancement Deduction
is equal of 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 investment option during the
free look period and will allocate your money according to your instructions at
the end of the applicable free look period. Currently, we do not put your money
in the Cash Management investment option during the free look period unless you
allocate your money to it. If your contract was issued in a state requiring
return of Purchase Payments or as an IRA and you cancel your contract during the
free look period, we return the greater of (1) your Purchase Payments; or (2)
the value of your contract 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 regulations. We
will explain the specific terms and conditions of any such exchange offer at the
time the offer is made.
INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
The contract offers variable investment options which we call SELECT PORTFOLIOS,
FOCUSED PORTFOLIOS and SEASONS STRATEGIES, and fixed investment options. We
designed the contract to meet your varying investment needs over time. You can
achieve this by using the SELECT PORTFOLIOS, FOCUSED PORTFOLIOS and/or SEASONS
STRATEGIES alone or in concert with the fixed investment options. The SELECT
PORTFOLIOS, FOCUSED PORTFOLIOS and SEASONS STRATEGIES operate similar to a
mutual fund but are only available through the purchase of certain variable
annuities. A mixture of your
21
investment in the SELECT PORTFOLIOS, FOCUSED PORTFOLIOS and/or SEASONS
STRATEGIES and fixed account options may lower the risk associated with
investing only in a variable investment option.
VARIABLE INVESTMENT OPTIONS
Each of the variable investment options of the contract invests in underlying
portfolios of Seasons Series Trust. SAAMCo, an affiliate of Anchor National,
manages Seasons Series Trust. SAAMCo has engaged sub-advisers to provide
investment advice for certain of the underlying investment portfolios.
YOU SHOULD READ THE PROSPECTUS FOR THE SEASONS SERIES TRUST CAREFULLY BEFORE
INVESTING. THE TRUST PROSPECTUS WHICH IS ATTACHED HERETO CONTAINS DETAILED
INFORMATION ABOUT THE UNDERLYING INVESTMENT PORTFOLIOS INCLUDING INVESTMENT
OBJECTIVE AND RISK FACTORS.
THE PORTFOLIOS
The contract offers nine SELECT PORTFOLIOS, each with a distinct investment
objective, utilizing a disciplined investing style to achieve its objective.
Each SELECT PORTFOLIO invests in an underlying investment portfolio of the
Seasons Series Trust. Except for the Cash Management portfolio, each underlying
portfolio is multi-managed by a team of three money managers, one component of
the underlying portfolios is an unmanaged component that tracks a particular
target index or subset of an index. The other two components are actively
managed. The unmanaged component of each underlying portfolio is intended to
balance some of the risks associated with an actively traded portfolio.
The contract also currently offers four FOCUSED PORTFOLIOS. Each multi-managed
FOCUSED PORTFOLIO offers you at least three different professional managers, and
each of which advises a separate portion of the FOCUSED PORTFOLIO. Each manager
actively selects a limited number of stocks that represent their best stock
selections. This approach to investing results in a more concentrated portfolio,
which will be less diversified than the SELECT PORTFOLIOS, and may be subject to
greater market risks.
Each underlying PORTFOLIO and the respective managers are:
<Table>
<Caption>
SELECT PORTFOLIOS FOCUSED PORTFOLIOS
LARGE CAP GROWTH MID CAP GROWTH INTERNATIONAL EQUITY FOCUS GROWTH
AIG Global Investment Corp. AIG Global Investment Corp. AIG Global Investment Corp. Fred Alger
Goldman Sachs T. Rowe Price Goldman Sachs Int'l Jennison
Janus Wellington Lord Abbett Marsico
LARGE CAP COMPOSITE MID CAP VALUE DIVERSIFIED FIXED INCOME FOCUS GROWTH & INCOME
AIG Global Investment Corp. AIG Global Investment Corp. AIG Global Investment Corp. Harris Associates L.P.
SAAMCo Goldman Sachs SAAMCo Marsico
T. Rowe Price Lord Abbett Wellington Thornberg
LARGE CAP VALUE SMALL CAP CASH MANAGEMENT FOCUS VALUE
AIG Global Investment Corp. AIG Global Investment Corp. SAAMCo American Century
T. Rowe Price Lord Abbett Third Avenue
Wellington SAAMCo Thornberg
FOCUS TECHNET
Dresdner
SAAMCo
Van Wagoner
</Table>
PORTFOLIO OPERATION
Each PORTFOLIO is designed to meet a distinct investment objective facilitated
by the management philosophy of three different money managers (except for the
Cash Management portfolio). Generally, the Purchase Payments received for
allocation to each PORTFOLIO will be allocated equally among the three managers
for that PORTFOLIO. Each quarter SAAMCo will evaluate the asset allocation
between the three managers of each PORTFOLIO. If SAAMCo determines that the
assets have become significantly unequal in allocation among the
22
managers, then the incoming cash flows may be redirected in an attempt to
stabilize the allocations. Generally, existing PORTFOLIO assets will not be
rebalanced. However, we reserve the right to do so in the event that it is
deemed necessary and not adverse to the interests of contract owners invested in
the PORTFOLIO.
THE SEASONS STRATEGIES
The contract offers four multi-manager variable investment SEASONS STRATEGIES,
each with a different investment objective. We designed the SEASONS STRATEGIES
utilizing an asset allocation approach to meet your investment needs over time,
considering factors such as your age, goals and risk tolerance. However, each
SEASONS STRATEGY is designed to achieve different levels of growth over time.
Each SEASONS STRATEGY invests in three underlying investment portfolios of the
Seasons Series Trust. The allocation of money among these investment portfolios
varies depending on the objective of the SEASONS STRATEGY.
The underlying investment portfolios of Seasons Series Trust in which the
SEASONS STRATEGIES invest include the Asset Allocation: Diversified Growth
Portfolio, the Stock Portfolio and the Multi-Managed Growth, Multi-Managed
Moderate Growth, Multi-Managed Income/Equity and Multi-Managed Income Portfolios
(the "Multi-Managed Portfolios").
The Asset Allocation: Diversified Growth Portfolio is managed by Putnam. The
Stock Portfolio is managed by T. Rowe Price. All of the Multi-Managed Portfolios
include the same three basic investment components: a growth component managed
by Janus Capital Management LLC., a balanced component managed by SAAMCo and a
fixed income component managed by Wellington, LLP. The Growth SEASONS STRATEGY
and the Moderate Growth SEASONS STRATEGY also have an aggressive growth
component which SAAMCo manages. The percentage that any one of these components
represents in each Multi-Managed Portfolio varies in accordance with the
investment objective.
Each SEASONS STRATEGY uses an investment approach based on asset allocation.
This approach is achieved by each SEASONS STRATEGY investing in distinct
percentages in three specific underlying funds of the Seasons Series Trust. In
turn, the underlying funds invest in a combination of domestic and international
stocks, bonds and cash. Based on the percentage allocation to each specific
underlying fund and each underlying fund's investment approach, each SEASONS
STRATEGY initially has a neutral asset allocation mix of stocks, bonds and cash.
SEASONS STRATEGY REBALANCING
Each SEASONS STRATEGY is designed to meet its investment objective by allocating
a portion of your money to three different investment portfolios. At the
beginning of each quarter a rebalancing occurs among the underlying funds to
realign each SEASONS STRATEGY with its distinct percentage investment in the
three underlying funds. This rebalancing is designed to help maintain the
neutral asset allocation mix for each SEASONS STRATEGY. The pie charts on the
following pages demonstrate:
- the neutral asset allocation mix for each SEASONS STRATEGY; and
- the percentage allocation in which each SEASONS STRATEGY invests.
On the first business day of each quarter (or as close to such date as is
administratively practicable) your money will be allocated among the various
investment portfolios according to the percentages set forth on the prior pages.
Additionally, within each Multi-Managed Portfolio, your money will be rebalanced
among the various components. We also reserve the right to rebalance any SEASONS
STRATEGY more frequently if rebalancing is, deemed necessary and not adverse to
the interests of contract owners invested in such SEASONS STRATEGY. Rebalancing
a SEASONS STRATEGY may involve shifting a portion of assets out of underlying
investment portfolios with higher returns into underlying investment portfolios
with relatively lower returns.
23
<Table>
GROWTH BALANCED GROWTH
GOAL: Long-term growth of capital, allocating its GOAL: Focuses on conservation of principal by investing
assets primarily to stocks. This SEASONS STRATEGY may be in a more balanced weighting of stocks and bonds, with a
best suited for those with longer periods to invest. secondary objective of seeking a high total return. This
SEASONS STRATEGY may be best suited for those approaching
retirement and with less tolerance for investment risk.
[BALANCED GROWTH CHART]
[GROWTH CHART]
UNDERLYING INVESTMENT
UNDERLYING INVESTMENT PORTFOLIOS & MANAGERS
PORTFOLIOS & MANAGERS
MULTI-MANAGED INCOME/EQUITY PORTFOLIO 55%
MULTI-MANAGED GROWTH PORTFOLIO 50% Managed by:
Managed by: Janus Capital Management LLC.
Janus Capital Management LLC. SunAmerica Asset Management Corp.
SunAmerica Asset Management Corp. Wellington Management Company, LLP
Wellington Management Company, LLP STOCK PORTFOLIO 20%
STOCK PORTFOLIO 25% Managed by T. Rowe Price Associates, Inc.
Managed by T. Rowe Price Associates, Inc. ASSET ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO 25%
ASSET ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO 25% Managed by Putnam Investment Management, Inc.
Managed by Putnam Investment Management, Inc.
</Table>
24
<Table>
MODERATE GROWTH CONSERVATIVE GROWTH
GOAL: Growth of capital through investments in GOAL: Capital preservation while maintaining some
equities, with a secondary objective of conservation of potential for growth over the long term. This SEASONS
principal by allocating more of its assets to bonds than STRATEGY may be best suited for those with lower investment
the Growth SEASONS STRATEGY. This SEASONS STRATEGY may be risk tolerance.
best suited for those nearing retirement years but still
earning income.
[MODERATE GROWTH CHART] [CONSERVATIVE GROWTH CHART]
UNDERLYING INVESTMENT UNDERLYING INVESTMENT
PORTFOLIOS & MANAGERS PORTFOLIOS & MANAGERS
MULTI-MANAGED MODERATE GROWTH PORTFOLIO 55% MULTI-MANAGED INCOME PORTFOLIO 60%
Managed by: Managed by:
Janus Capital Management LLC. Janus Capital Management LLC.
SunAmerica Asset Management Corp. SunAmerica Asset Management Corp.
Wellington Management Company, LLP Wellington Management Company, LLP
STOCK PORTFOLIO 20% STOCK PORTFOLIO 15%
Managed by T. Rowe Price Associates, Inc. Managed by T. Rowe Price Associates, Inc.
ASSET ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO 25% ASSET ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO 25%
Managed by Putnam Investment Management, Inc. Managed by Putnam Investment Management, Inc.
</Table>
25
FIXED INVESTMENT OPTIONS
The contract also offers seven fixed investment options (five fixed investment
options if you enroll in the Seasons Rewards Program). 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 and Washington only the one year fixed account option is available.
Additionally, if you do not elect to enroll in the Seasons Rewards Program, you
have the option of allocating your money to the 6-month and/or 1-year DCA fixed
account. 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 27 for
additional information about, including limitations on, the availability and
operation of the DCA fixed accounts. The DCA fixed accounts are only available
for new Purchase Payments.
All of these fixed account options pay interest at rates set and guaranteed by
Anchor National. Interest rates may differ from time to time and are set at our
sole discretion. We will never credit less than a 3% annual effective rate to
any of the fixed account options. The interest rate offered for new Purchase
Payments may differ from that offered for subsequent Purchase Payments and money
already in the fixed account options. 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.
If you purchased your contract on or after July 29, 2002, we may restrict your
ability to allocate amounts to the one year fixed account during any time period
that the rate we are crediting on that account is equal to the minimum
guaranteed interest rate of 3%. See your financial advisor to learn about any
current restrictions.
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 SEASONS STRATEGIES, SELECT PORTFOLIOS or FOCUSED
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 SELECT PORTFOLIO(S),
FOCUSED PORTFOLIO(S) and/or SEASONS STRATEGY(IES). The rates applicable to the
DCA fixed accounts may differ from each other and/or the other fixed account
options but will never be less than an effective rate of 3%. SEE DOLLAR COST
AVERAGING ON PAGE 27 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 SELECT PORTFOLIO(S), FOCUSED
PORTFOLIO(S) or SEASONS STRATEGY(IES). If you want to reallocate your money, you
must contact us within 30 days after the end of the current guarantee period and
instruct us how to reallocate your money. If we do not hear from you, we will
keep your money in the same guarantee period where it will earn the renewal
interest rate applicable at that time.
MARKET VALUE ADJUSTMENT
NOTE: MARKET VALUE ADJUSTMENTS APPLY TO THE 3, 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
25
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.
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 C 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 SELECT
PORTFOLIO(S), FOCUSED PORTFOLIO(S), SEASONS STRATEGY(IES) and the fixed
investment options by written request or by telephone subject to our rules.
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. 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.
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 SELECT PORTFOLIO, FOCUSED PORTFOLIO, SEASONS STRATEGY
or a fixed investment option. Any money remaining in a SELECT PORTFOLIO, FOCUSED
PORTFOLIO, SEASONS STRATEGY or fixed investment option after making a transfer
must equal at least $100. 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 27 for specific rules regarding
the DCA fixed accounts.
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
26
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
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 37.
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 investment options. Under the program you systematically transfer a set
dollar amount or percentage from any SELECT PORTFOLIO, FOCUSED PORTFOLIO and/or
SEASONS STRATEGY or the 1-year fixed account option (source accounts) to any
other SELECT PORTFOLIO, FOCUSED PORTFOLIO or SEASONS STRATEGY. 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. Fixed
account options are not available as target accounts for the DCA program.
We also offer the 6-month and a 1-year DCA fixed accounts exclusively to
facilitate this program. If you elect to participate in the Seasons 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 can not
transfer money already in your contract into these options. If you allocate a
Purchase Payment into a DCA fixed account, we transfer all your money allocated
to that account into the SELECT PORTFOLIO(S), FOCUSED PORTFOLIO(S) or SEASONS
STRATEGY(IES) you select over the selected 6-month or 1-year period. You cannot
change the option or the frequency of transfers once selected. The minimum
transfer amount if you use the 6-month or 1-year DCA fixed accounts to provide
dollar cost averaging is $100.
If allocated to the 6-month DCA fixed account, we transfer your money over a
maximum of 6 monthly transfers. We base the actual number of transfers on the
total amount allocated to the account. For example, if you allocate $500 to the
6-month DCA fixed account, we transfer your money over a period of five months,
so that each payment complies with the $100 per transfer minimum.
We determine the amount of the transfers from the 1-year DCA fixed account based
on:
- the total amount of money allocated to the account, and
- the frequency of transfers selected.
For example, let's say you allocate $1,000 to the 1-year DCA account and you
select monthly transfers, we completely transfer all of your money to the
selected investment options over a period of ten months. You may terminate your
DCA program at any time. If money remains in the DCA fixed account, we transfer
the remaining money to the 1-year fixed investment option, unless we receive
different instructions from you. Transfers resulting from a termination of this
program do not count towards your 15 free transfers.
27
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 Mid-Cap Value SELECT 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.
ASSET ALLOCATION REBALANCING PROGRAM
Earnings in your contract may cause the percentage of your investment in each
investment option to differ from your original allocations. The Automatic Asset
Rebalancing Program addresses this situation. At your election, we periodically
rebalance your investments in the SEASONS STRATEGIES, SELECT PORTFOLIOS and/or
FOCUSED PORTFOLIOS to return your allocations to their original percentages.
Asset rebalancing typically involves shifting a portion of your money out of an
investment option with a higher return into an investment option with a lower
return. At your request, rebalancing occurs on a quarterly, semi-annual or
annual basis. Transfers made as a result of rebalancing do not count against
your 15 free transfers for the contract year. We reserve the right to modify,
suspend or terminate this program at any time.
PRINCIPAL ADVANTAGE PROGRAM
The Principal Advantage Program allows you to invest in one or more of the
SELECT PORTFOLIOS, FOCUSED PORTFOLIOS or SEASONS STRATEGIES without putting your
principal at direct risk. The program accomplishes this by allocating your
investment strategically between the fixed investment options (other than the
DCA fixed accounts) and the SELECT PORTFOLIO(S), FOCUSED PORTFOLIO(S) or SEASONS
STRATEGY(IES) you select. You decide how much you want to invest and
approximately when you want a return of principal. We calculate how much of your
Purchase Payment to allocate to the particular fixed investment option to ensure
that it grows to an amount equal to your total principal invested under this
program.
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 SELECT PORTFOLIOS, FOCUSED PORTFOLIOS or SEASONS
STRATEGIES, as determined by you, to provide opportunity for greater growth.
28
We reserve the right to modify, suspend or terminate this program at any time.
VOTING RIGHTS
Anchor National is the legal owner of the Trust's shares. 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
We may amend your contract due to changes to the investment variable portfolios
offered under your contract. For example, we may offer new portfolios, delete
portfolios, or stop accepting allocations and/or investments in a particular
portfolio. We may move assets and re-direct future premium allocations from one
portfolio to another if we receive investor approval through a proxy vote or SEC
approval for a fund substitution. This would occur if a portfolio is no longer
an appropriate investment for the contract, for 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 investment
variable Portfolio offered may have different fees and expenses. You will be
notified of any upcoming proxies or substitutions that affect your portfolio
choices.
ACCESS TO YOUR MONEY
- --------------------------------------------------------------------------------
You can access money in your contract in two ways:
- by making a partial or total withdrawal, and/or;
- by receiving income payments during the Income Phase. SEE INCOME OPTIONS
ON PAGE 37.
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 35. 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 SELECT PORTFOLIO, FOCUSED PORTFOLIO, SEASONS STRATEGY or fixed account be
at least $500 after the withdrawal. You must send a written withdrawal request.
Unless you provide us with different instructions, partial withdrawals will be
made in equal amounts from each SELECT PORTFOLIO, FOCUSED PORTFOLIO, SEASONS
STRATEGY and the fixed investment option in which your contract is invested.
Withdrawals from fixed investment options prior to the end of the guarantee
period may result in a 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
29
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).
If you participate in the Seasons Rewards Program, you will not receive any
applicable Deferred Payment Enhancement if you fully withdraw a Purchase Payment
or your contract value prior to the corresponding Deferred Payment Enhancement
Date. SEE SEASONS REWARDS PROGRAM ON PAGE 18.
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.
Purchase Payments withdrawn, above and beyond the amount of your free withdrawal
amount, which have been invested for less than 7 years, or 9 years if you elect
to participate in the Seasons Rewards Program, 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
election of the Seasons Rewards Program, Income Protector Program or Seasons
Estate 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
30
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.
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 42 for a more detailed explanation.
DEATH BENEFIT
- --------------------------------------------------------------------------------
If you die during the Accumulation Phase of your contract, we pay a death
benefit to your beneficiary. 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 37.
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 calculated and paid out when we receive all required
paperwork and satisfactory proof of death. We consider satisfactory proof of
death one of the following: (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 income option. If the Beneficiary elects an income option, it
must be paid over the Beneficiary's lifetime or for a period not extending
beyond the Beneficiary's life expectancy. Income payments must begin within one
year of the owner's death. If the Beneficiary is the spouse of the owner,
31
he or she can elect to continue the contract, rather than receive a death
benefit. SEE SPOUSAL CONTINUATION ON PAGE 34. 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 all required paperwork and satisfactory proof of death,
we pay a lump sum death benefit to the Beneficiary.
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 two death benefit options: the Standard Death Benefit
which is automatically included in your contract for no additional fee, and
Seasons Estate Advantage which offers a choice between two optional enhanced
death benefits, along with an Earnings Advantage feature, for an additional fee.
If you choose Seasons Estate Advantage, you must do so at the time of contract
application and the election cannot be terminated.
The term "Net Purchase Payment" is used frequently in explaining the death
benefit options. Net Purchase Payment is an on-going calculation. It does not
represent a contract value.
We define Net Purchase Payments as Purchase Payments less an Adjustment for each
withdrawal. If you have not taken any withdrawals from your contract, Net
Purchase Payments equals total Purchase Payments into your contract. To
calculate the Adjustment amount for the first withdrawal made under the
contract, we determine the percentage by which the withdrawal reduced contract
value. For example, a $10,000 withdrawal from a $100,000 contract is a 10%
reduction in value. This percentage is calculated by dividing the amount of each
withdrawal (including fees and charges applicable to the withdrawal) by the
contract value immediately before taking that withdrawal. The resulting
percentage is then multiplied by the amount of total Purchase Payments and
subtracted from the amount of total Purchase Payments on deposit at the time of
the withdrawal. The resulting amount is the initial Net Purchase Payment
calculation.
To arrive at the Net Purchase Payment calculation for subsequent withdrawals, we
determine the percentage by which the contract value is reduced by taking the
amount of the withdrawal in relation to the contract value immediately before
taking the withdrawal. We then multiply the Net Purchase Payment calculation as
determined prior to the withdrawal by this percentage. We subtract that result
from the Net Purchase Payment calculation as determined prior to the withdrawal
to arrive at all subsequent Net Purchase Payment calculation.
If you have not taken any withdrawals from your contract, Net Purchase Payments
equals total Purchase Payments into your contract.
If Seasons Rewards is elected, any payment enhancements are not considered
Purchase Payments.
STANDARD DEATH BENEFIT
The standard death benefit on your contract, if you are age 74 or younger at the
time of death, is the greater of:
1. Net Purchase Payments compounded at a 3% annual growth rate from the date
of issue until the date of death, plus any Purchase Payments recorded
after the date of death; and reduced for any withdrawals (and fees and
charges applicable to those withdrawals) recorded after the date of death,
in the same proportion that the withdrawal reduced the contract value on
the date of the withdrawal.
2. the contract value on the date we receive all required paperwork and
satisfactory proof of death.
If you are age 75 or older at the time of death, the death benefit is the
greater of:
1. Net Purchase Payments compounded at a 3% annual growth rate from date of
issue until the your 75th birthday, plus any Purchase Payments recorded
after the 75th birthday; and reduced for any withdrawals (and fees and
charges applicable to those withdrawals) recorded after the 75th birthday,
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 all required paperwork and
satisfactory proof of death.
32
If you have not taken any withdrawals from your contract, Net Purchase Payments
equals total Purchase Payments into your contract.
SEASONS ESTATE ADVANTAGE
The Seasons Estate Advantage is an optional feature that offers a choice between
two enhanced death benefits, each of which includes an Earnings Advantage
component. You must elect Seasons Estate Advantage at the time we issue your
contract and once elected it cannot be terminated by you. Seasons Estate
Advantage is not available if you are age 81 or older at the time of contract
issue.
If you elect Seasons Estate Advantage, we will pay your Beneficiary the sum of A
plus B, where:
A. is the amount payable under the selected enhanced death benefit (see
option 1 or 2 below); and
B. is the amount payable, if any, under the Earnings Advantage benefit.
A. Enhanced Death Benefit Options:
1. 5% Accumulation Option--the death benefit is the greater of:
a. the contract value on the date we receive all required paperwork and
satisfactory proof of death; or
b. Net Purchase Payments compounded to the earlier of the 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 the latest Annuity Date and you selected the 5%
Accumulation option, any death benefit payable under the contract will be
the Standard Death Benefit as described above. Therefore, your beneficiary
will not receive any benefit from Seasons Estate Advantage. The 5%
Accumulation option may not be available in all states.
2. Maximum Anniversary Value Option--the death benefit is the greater of:
a. Net Purchase Payments; or
b. the contract value on the date we receive all required paperwork and
satisfactory proof of death; or
c. the maximum anniversary value on any contract anniversary prior to your
81st birthday. The anniversary value equals the contract value on a
contract anniversary increased by any Purchase Payments recorded after
that anniversary; and reduced for any withdrawals (and fees and charges
applicable to those withdrawals) recorded after the anniversary, in the
same proportion that the withdrawal reduced the contract value on the date
of the withdrawal.
If you are age 90 or older at the time of death and you had selected the
Maximum Anniversary Value option, the death benefit will be equal to the
contract value on the date we receive all required paperwork and
satisfactory proof of death. Therefore, your beneficiary will not receive
any benefit from Season's Estate Advantage. The Maximum Anniversary Value
option may not be available in all states.
B. Earnings Advantage Benefit:
The Earnings Advantage benefit may increase the death benefit amount. If you
have earnings in your contract at the time of death, we will add a percentage of
those earnings (the "Earnings Advantage Percentage"), subject to a maximum
dollar amount (the "Maximum Earnings Advantage Percentage"), to the death
benefit payable.
33
The Contract Year of Death will determine the Earnings Advantage Percentage and
the Maximum Earnings Advantage amount, as set forth below:
<Table>
<Caption>
- --------------------------------------------------------------------------------------------------------------------
EARNINGS ADVANTAGE MAXIMUM
CONTRACT YEAR OF DEATH PERCENTAGE EARNINGS ADVANTAGE PERCENTAGE
- --------------------------------------------------------------------------------------------------------------------
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 must be invested for at least six months at the time of your
death to be included as part of Net Purchase Payments for the purposes of the
Maximum Earnings Advantage calculation.
What is the Contract Year of Death?
Contract Year of Death is the number of full 12 month periods beginning with the
date your contract is issued and ending on the date of death.
What is the Earnings Advantage Percentage Amount?
We determine the amount of the Earnings Advantage based upon a percentage of
earnings in your contract at the time of your death. For the purpose of this
calculation, earnings are defined as (1) minus (2) where
(1) equals the contract value on the date of death; and
(2) equals Net Purchase Payments.
What is the Maximum Earnings Advantage?
The Earnings Advantage amount is subject to a maximum. The maximum Earnings
Advantage amount is equal to a percentage of your Net Purchase Payments.
The Earnings Advantage feature may not be available in all states.
If you elect the 5% Accumulation enhanced death benefit option or the Maximum
Anniversary enhanced death benefit, the Earnings Advantage benefit will only be
paid if your date of death is prior to your latest Annuity Date.
We assess a fee for Seasons Estate Advantage. We deduct daily the annual charge
of 0.25% of the average daily ending value of the assets you have allocated to
the SELECT PORTFOLIO(S), FOCUSED PORTFOLIO(S) and/or SEASONS STRATEGY(IES). This
fee will terminate, if the benefit is no longer available to you based on your
age, as discussed above. In the state of Washington only the Maximum Anniversary
Value component of the Seasons Estate Advantage death benefit is available.
Neither the 5% Accumulation nor the Earnings Advantage is available in
Washington. The fee charged for the Maximum Anniversary Value option in
Washington is .25% of the average daily ending value of the assets allocated to
the PORTFOLIO AND/OR SEASONS STRATEGIES.
WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE SEASONS ESTATE
ADVANTAGE FEATURE (IN ITS ENTIRETY OR ANY COMPONENT) AT ANY TIME ON
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. 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.
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
34
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 any other calculation except as noted in Appendix D.
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 Seasons Estate Advantage and the
available death benefit will be the Standard Death Benefit. We will terminate
Seasons Estate Advantage if the Continuing Spouse is age 81 or older on the
Continuation Date if a Continuation Contribution is added to the contract value;
and the available death benefit will be the Standard Death Benefit. If Seasons
Estate Advantage is continued and the Continuing Spouse dies after the latest
Annuity Date and the 5% Accumulation option was in effect, the death benefit
will be the Standard Death Benefit. If Maximum Anniversary value was elected and
the Continuing Spouse lives to age 90 or older, the death benefit will be
contract value. However if death occurs after age 90 but before latest annuity
date the Continuing Spouse will benefit from the Earnings Advantage. SEE
APPENDIX D FOR FURTHER EXPLANATION OF THE DEATH BENEFIT CALCULATIONS FOLLOWING A
SPOUSAL CONTINUATION.
WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE SPOUSAL CONTINUATION
PROVISION (IN ITS ENTIRETY OR ANY COMPONENT) AT ANY TIME FOR PROSPECTIVELY
ISSUED CONTRACTS.
EXPENSES
- --------------------------------------------------------------------------------
There are charges and expenses associated with your contract. These charges and
expenses reduce your investment return. We will not increase the contract
maintenance fee or withdrawal charges under your contract. However the
investment charges under your contract may increase or decrease. Some states may
require that we charge less than the amounts described below.
INSURANCE CHARGES
The Company deducts a mortality and expense risk charge in the amount of 1.40%
annually of the value of your contract invested in the SELECT PORTFOLIO(S),
FOCUSED PORTFOLIO(S) and/or SEASONS STRATEGY(IES). We deduct the charge daily.
This charge compensates the Company for the mortality and expense risk and the
costs of contract distribution assumed by the Company.
Generally, the mortality risks assumed by the Company arise from its contractual
obligations to make income payments after the Annuity Date and to provide a
death benefit. The expense risk assumed by the Company is that the costs of
administering the contracts and the Separate Account will exceed the amount
received from the administrative fees and charges assessed under the contract.
If these charges do not cover all of our expenses, we will pay the difference.
Likewise, if these charges exceed our expenses, we will keep the difference. 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
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 29. The withdrawal charge percentage declines each
year a Purchase Payment is in the contract, as follows:
WITHDRAWAL CHARGE WITHOUT THE SEASONS REWARDS PROGRAM (SCHEDULE A)
<Table>
<Caption>
YEAR 1 2 3 4 5 6 7 8
- ----------------- --- --- --- --- --- --- --- ---
Withdrawal
Charge......... 7% 6% 6% 5% 4% 3% 2% 0%
</Table>
35
WITHDRAWAL CHARGE WITH THE SEASONS REWARDS PROGRAM (SCHEDULE B)
<Table>
<Caption>
YEAR 1 2 3 4 5 6 7 8 9 10
- ----------------- --- --- --- --- --- --- --- --- --- ---
Withdrawal
Charge......... 9% 8% 7% 6% 6% 5% 4% 3% 2% 0%
</Table>
After a Purchase Payment has been in the contract for seven complete years, or
nine complete years if you elect to participate in the Seasons Rewards Program,
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.
The Seasons Rewards Program 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 investment management fees are higher on the Seasons
Rewards Program than contracts that do not feature the Program.
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 42.
INVESTMENT CHARGES
Investment Management Fees
Charges are deducted from the assets of the investment portfolios underlying the
SELECT PORTFOLIO(S), FOCUSED PORTFOLIO(S) or SEASONS STRATEGY(IES) for the
advisory and other expenses of the portfolios. SEE FEE TABLES ON PAGE 7.
Service Fees
Portfolio shares are all subject to fees imposed under a servicing plan adopted
by the Seasons Series Trust pursuant to Rule 12b-1 under the Investment Company
Act of 1940. The service fee of 0.15% (also known as a 12b-1 fee) is used
generally to pay financial intermediaries for services provided over the life of
the contract.
FOR MORE DETAILED INFORMATION ON THESE INVESTMENT CHARGES, REFER TO THE
PROSPECTUS FOR THE SEASONS SERIES TRUST, ATTACHED.
Contract Maintenance Fee
During the Accumulation Phase, we subtract a contract maintenance fee from your
account once per year. This charge compensates us for the cost of contract
administration. If your contract value is $50,000 or more on your contract
anniversary date, we will waive the charge. This waiver is subject to change
without notice. We will deduct the $35 ($30 in North Dakota) contract
maintenance fee on a pro-rata basis from your account value on your contract
anniversary. In the states of Pennsylvania, Texas and Washington a contract
maintenance fee will be deducted pro-rata from the SELECT PORTFOLIO(S), FOCUSED
PORTFOLIO(S) and/or SEASONS STRATEGY(IES) in which you are invested, only. If
you withdraw your entire contract value, we deduct the fee from that withdrawal.
TRANSFER FEE
We currently 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 PAGE 22.
36
OPTIONAL SEASONS PROMISE FEE
Please see page 18 of this prospectus for additional information regarding the
Seasons Promise fee.
SEASONS ESTATE ADVANTAGE FEE
Please see page 33 of this prospectus for additional information regarding the
Seasons Estate Advantage fee.
OPTIONAL INCOME PROTECTOR FEE
Please see page 41 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 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, 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.
37
If you participate in the Seasons Rewards Program and switch to the Income Phase
prior to a Deferred Payment Enhancement Date, if applicable, we will not
allocate any corresponding Deferred Payment Enhancement to your contract. SEE
SEASONS REWARDS PROGRAM ON PAGE 18.
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 42.
INCOME OPTIONS
Currently, this Contract offers five Income Options. Other income options may be
available. Please 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 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.
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.
38
ALLOCATION OF ANNUITY PAYMENTS
You can choose income payments that are fixed, variable or both. If payments are
fixed, Anchor National guarantees the amounts of each payment. If the payments
are variable, the amounts are not guaranteed. They will go up and/or down based
upon the performance of the SELECT PORTFOLIO(S), FOCUSED PORTFOLIO(S) or SEASONS
STRATEGY(IES) in which you invest.
FIXED OR VARIABLE INCOME PAYMENTS
If at the date when income payments begin you are invested in the SELECT
PORTFOLIO(S), FOCUSED PORTFOLIO(S) and/or SEASONS STRATEGY(IES) only, your
income payments will be variable. If your money is only in fixed accounts at
that time, your income payments will be fixed in amount. If you are invested in
both fixed and variable options at the time you begin the Income Phase, a
portion of your income payments will be fixed and a portion will be variable.
INCOME PAYMENTS
We make income payments on a monthly, quarterly, semi-annual or annual basis.
You instruct us to send you a check or to have the payments 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.
Your income payments will vary if you are invested in the SELECT PORTFOLIO(S),
FOCUSED PORTFOLIO(S) and/or SEASONS STRATEGY(IES) after the Annuity date
depending on four factors:
- for life options, your age when payments begin,
- the value of your contract in the SELECT PORTFOLIO(S), FOCUSED
PORTFOLIO(S) and/or SEASONS STRATEGY(IES) on the Annuity Date,
- the 3.5% assumed investment rate for variable income payments used in the
annuity table for the contract, and;
- the performance of the SELECT PORTFOLIO(S), FOCUSED PORTFOLIO(S) and/or
SEASONS STRATEGY(IES) in which you are invested during the time you
receive income payments.
If you are invested in both the fixed account options and the SELECT
PORTFOLIO(S), FOCUSED PORTFOLIO(S) and/or SEASONS STRATEGY(IES) after the
Annuity Date, the allocation of funds between the fixed accounts and SELECT
PORTFOLIO(S), FOCUSED PORTFOLIO(S) and/or SEASONS STRATEGY(IES) also impacts the
amount of your annuity payments.
TRANSFERS DURING THE INCOME PHASE
During the Income Phase, one (1) transfer per month is permitted between the
SELECT PORTFOLIO(S), FOCUSED PORTFOLIO(S) and SEASONS STRATEGY(IES). No other
transfers are allowed during the Income Phase.
DEFERMENT OF PAYMENTS
We may defer making fixed payments for up to six months, or less if required by
law. Interest is credited to you during the deferral period.
Please read the Statement of Additional Information, available upon request, for
a more detailed discussion of the income options.
39
INCOME PROTECTOR
You may elect to enroll in the Income Protector Program. The Income Protector
Program can provide a future "safety net" which offers you the ability to
receive a guaranteed fixed minimum retirement income when you choose to begin
receiving income payments. With 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.
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?
We base the amount of minimum retirement income available to you if you take
income payments using the Income Protector 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. Your participation becomes effective on either the date of issue of the
contract (if the feature is elected at the time of application) or on the
contract anniversary following your enrollment in the program.
The Income Benefit Base is only a calculation. It does not represent a contract
value, nor does it guarantee performance of the SELECT PORTFOLIO(S), FOCUSED
PORTFOLIO(S) or SEASONS STRATEGY(IES) in which you invest.
Your Income Benefit Base increases if you make subsequent Purchase Payments and
decreases if you withdraw money from your contract. The exact Income Benefit
Base calculation is equal to (a) plus (b) minus (c) where:
(a) is equal to, for the first year of calculation, your contract value on
the date your participation became effective, and for each subsequent
year of calculation, the Income Benefit Base of your prior contract
anniversary, and;
(b) is equal to the sum of all subsequent Purchase Payments made into the
contract since the prior contract anniversary, and;
(c) is equal to all withdrawals and applicable fees, charges since the last
contract anniversary in an amount proportionate to the amount by which
such withdrawals decreased your contract value.
ENROLLING IN THE PROGRAM
If you decide that you want the protection offered by the Income Protector
program, you must elect the Program by completing the Income Protector Election
Form. You can not terminate your enrollment once elected.
ELECTING TO RECEIVE INCOME
In order to exercise your rights under the Income Protector feature, you may not
begin the Income Phase for at least nine years following the date your
enrollment in the program became effective. Further, you may begin taking income
payments using the Income Protector feature only within 30 days after the ninth
or later contract anniversary following the effective date of your enrollment in
the Income Protector program.
The contract anniversary prior to your election to begin receiving income
payments is your Income Benefit Date. We calculate your Income Benefit Base as
of that date to use in determining your guaranteed minimum fixed
40
retirement income. To determine the minimum guaranteed retirement income
available to you, we apply your final Income Benefit Base to the annuity rates
stated in your Income Protector endorsement for the income option you select.
You then choose if you would like to receive the income annually, semi-annually,
quarterly or monthly for the time guaranteed under your selected income option.
Your final Income Benefit Base is equal to (a) minus (b) where:
(a) is your Income Benefit Base as of your Income Benefit Date, and;
(b) is any partial withdrawals of contract value and any charges applicable
to those withdrawals (including any negative MVA) and any withdrawal
charges otherwise applicable, calculated as if you fully surrender your
contract as of the Income Benefit Date, and any applicable premium
taxes.
The income options available when using the Income Protector feature to receive
your retirement income are:
- Life Annuity with 10 years guaranteed, or
- Joint and 100% Survivor Life Annuity with 20 years guaranteed
At the time you elect to begin receiving income payments, we will calculate your
income payments using both your Income Benefit Base and your contract value. We
will use the same income option for each calculation; however, the annuity
factors used to calculate your income under the Income Protector feature will be
different. You will receive whichever provides a greater stream of income. If
you elect to receive income payments using the Income Protector feature your
income payments will be fixed in amount.
NOTE TO QUALIFIED CONTRACT HOLDERS
Qualified contracts generally require that you select an income option that does
not exceed your life expectancy. That restriction, if it applies to you, may
limit the benefit of the Income Protector program. To utilize the Income
Protector feature, you must take income payments under one of the two income
options described above. If those income options exceed your life expectancy,
you may be prohibited from receiving your guaranteed fixed income under the
program. If you own a Qualified contract to which this restriction applies and
you elect the Income Protector program, you may pay for this minimum guarantee
and not be able to realize the benefit.
Generally, for Qualified contracts:
- for the Life Annuity with 10 years guaranteed, you must annuitize before
age 79, and;
- for the Joint and 100% Survivor Annuity with 20 years guaranteed, both
annuitants must be 70 or younger or one of the annuitants must be 65 or
younger upon annuitization. Other age combinations may be available.
You may wish to consult your tax advisor for information concerning your
particular circumstances.
FEES ASSOCIATED WITH THE INCOME PROTECTOR PROGRAM
If you elect to participate in the Income Protector program we deduct a fee
equal to 0.10% of your Income Benefit Base from your contract value on each
contract anniversary beginning with the contract anniversary following the
anniversary on which your enrollment in the program becomes effective. We will
deduct this charge from your contract value on every contract anniversary up to
and including your Income Benefit Date. Additionally, if you fully surrender
your contract prior to your contract anniversary, we will deduct the fee at the
time of surrender based on your Income Benefit Base as of the surrender date.
Once elected, the Income Protector Program and its corresponding charges may not
be terminated until full surrender or annuitization of the contract occurs.
For an example of the operation of the Income Protector feature, please SEE
EXHIBIT E.
The Income Protector program may not be available in all states. Check with your
financial advisor for availability in your state.
If you elect Seasons Promise, you may not elect to participate in the Income
Protector Program.
We reserve the right to modify, suspend or terminate the program at any time.
41
TAXES
- --------------------------------------------------------------------------------
NOTE: WE PREPARED THE FOLLOWING INFORMATION ON TAXES AS A GENERAL DISCUSSION OF
THE SUBJECT. THIS INFORMATION ADDRESSES GENERAL FEDERAL TAXATION MATTERS, AND
GENERALLY DOES NOT ADDRESS STATE TAXATION ISSUES OR QUESTIONS. IT IS NOT TAX
ADVICE. WE CAUTION YOU TO SEEK COMPETENT TAX ADVICE ABOUT YOUR OWN
CIRCUMSTANCES. WE DO NOT GUARANTEE THE TAX STATUS OF YOUR ANNUITY. TAX LAWS
CONSTANTLY CHANGE, THEREFORE, WE CANNOT GUARANTEE THAT THE INFORMATION CONTAINED
HEREIN IS COMPLETE AND/OR ACCURATE.
ANNUITY CONTRACTS IN GENERAL
The Internal Revenue Code ("IRC") provides for special rules regarding the tax
treatment of annuity contracts Generally, taxes on the earnings in your annuity
contract are deferred until you take the money out. Qualified retirement
investments that satisfy specific tax and ERISA requirements automatically
provide tax deferral regardless of whether the underlying contract is an
annuity, a trust, or a custodial account. Different rules apply depending on how
you take the money out and whether your contract is Qualified or Non-Qualified.
If you do not purchase your contract under a pension plan, a specially sponsored
employer program or an individual retirement account, your contract is referred
to as a Non-Qualified contract. A Non-Qualified contract receives different tax
treatment than a Qualified contract. In general, your cost basis in a
Non-Qualified contract is equal to the Purchase Payments you put into the
contract. You have already been taxed on the cost basis in your contract.
If you purchase your contract under a pension plan, a specially sponsored
employer program or as an individual retirement account, your contract is
referred to as a Qualified contract. Examples of qualified plans are: Individual
Retirement Accounts ("IRAs"), Roth IRAs, Tax-Sheltered Annuities (referred to as
403(b) contracts), plans of self-employed individuals (often referred to as H.R.
10 Plans or Keogh Plans) and pension and profit sharing plans, including 401(k)
plans. Typically you have not paid any tax on the Purchase Payments used to buy
your contract and therefore, 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
42
purchase expenses (only from an IRA); and, except in the case of an IRA; (8)
when you separate from service after attaining age 55; and (9) when paid to an
alternate payee pursuant to a qualified domestic relations order.
The IRC limits the withdrawal of an employee's voluntary Purchase Payments to a
Tax-Sheltered Annuity (TSA). Withdrawals can only be made when an owner: (1)
reaches age 59 1/2; (2) severs employment with the employer; (3) dies; (4)
becomes disabled (as defined in the IRC); or (5) experiences a hardship (as
defined in the IRC). In the case of hardship, the owner can only withdraw
Purchase Payments. Additional plan limitations may also apply. Amounts held in a
TSA annuity contract as of December 31, 1988 are not subject to these
restrictions. Qualifying transfers of amounts from one TSA contract to another
TSA contract under section 403(b) or to a custodial account under section
403(b)(7), and qualifying transfers to a state defined benefit plan to purchase
service credits, are not considered distributions, and thus are not subject to
these withdrawal limitations. If amounts are transferred from a custodial
account described in Code section 403(b)(7) to this contract the transferred
amount will retain the custodial account withdrawal restrictions.
Withdrawals from other Qualified Contracts are often limited by the IRC and by
the employer's plan.
MINIMUM DISTRIBUTIONS
Generally, the IRS requires that you begin taking annual distributions from
qualified annuity contracts by April 1 of the calendar year following the later
of (1) the calendar year in which you attain age 70 1/2 or (2) the calendar year
in which you retire. If you own more than one TSA, you may be permitted to take
your annual distributions in any combination from your TSAs. A similar rule
applies if you own more than one IRA. However, you cannot satisfy this
distribution requirement for your TSA contract by taking a distribution from an
IRA, and you cannot satisfy the requirement for your IRA by taking a
distribution from a TSA.
You may be subject to a surrender charge on withdrawals taken to meet minimum
distribution requirements, if the withdrawals exceed the contract's maximum
penalty free amount.
Failure to satisfy the minimum distribution requirements may result in a tax
penalty. You should consult your tax advisor for more information.
You may elect to have the required minimum distribution amount on your contract
calculated and withdrawn each year under the automatic withdrawal option. You
may select either monthly, quarterly, semiannual or annual withdrawals for this
purpose. This service is provided as a courtesy and we do not guarantee the
accuracy of our calculations. Accordingly, we recommend you consult your tax
advisor concerning your required minimum distribution. You may terminate your
election for automated minimum distribution at any time by sending a written
request to our Annuity Service Center. We reserve the right to change or
discontinue this service at any time.
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
43
Contract Value. This Contract offers death benefits, which may exceed the
greater of Purchase Payments or Contract Value. If the IRS determines that these
benefits are providing life insurance, the contract may not qualify as an IRA
(including Roth IRAs). You should consult your tax adviser regarding these
features and benefits prior to purchasing a contract.
CONTRACTS OWNED BY A TRUST OR CORPORATION
A Trust or Corporation ("Non-Natural Owner") that is considering purchasing this
contract should consult a tax advisor. Generally, the IRC does not treat a
Non-Qualified contract owned by a non-natural owner as an annuity contract for
Federal income tax purposes. The non-natural owner pays tax currently on the
contract's value in excess of the owner's cost basis. However, this treatment is
not applied to a Contract held by a trust or other entity as an agent for a
natural person nor to Contracts held by Qualified Plans. See the SAI for a more
detailed discussion of the potential adverse tax consequences associated with
non-natural ownership of a non-qualified annuity contract.
GIFTS, PLEDGES AND/OR ASSIGNMENTS OF A NON-QUALIFIED CONTRACT
If you transfer ownership of your Non-Qualified contract to a person other than
your spouse (or former spouse incident to divorce) as a gift you will pay
federal income tax on the contract's cash value to the extent it exceeds your
cost basis. The recipient's cost basis will be increased by the amount on which
you will pay federal taxes. Also, the IRC treats any assignment or pledge (or
agreement to assign or pledge) of any portion of a Non-Qualified contract as a
withdrawal. See the SAI for a more detailed discussion regarding potential tax
consequences of gifting, assigning or pledging a non-qualified contract.
DIVERSIFICATION
The IRC imposes certain diversification requirements on the underlying
investments for a variable annuity. We believe that the underlying Variable
Portfolios' management monitors the Variable Portfolios so as to comply with
these requirements. To be treated as a variable annuity for tax purposes, the
underlying investments must meet these requirements.
The diversification regulations do not provide guidance as to the circumstances
under which you, and not Anchor National, would be considered the owner of the
shares of the Variable Portfolios under your Nonqualified Contract, because of
the degree of control you exercise over the underlying investments. This
diversification requirement is sometimes referred to as "investor control." It
is unknown to what extent owners are permitted to select investments, to make
transfers among Variable Portfolios or the number and type of Variable
Portfolios owners may select from. If any guidance is provided which is
considered a new position, then the guidance would generally be applied
prospectively. However, if such guidance is considered not to be a new position,
it may be applied retroactively. This would mean you, as the owner of the
Nonqualified Contract , could be treated as the owner of the underlying Variable
Portfolios. Due to the uncertainty in this area, we reserve the right to modify
the contract in an attempt to maintain favorable tax treatment.
These investor control limitations generally do not apply to Qualified
Contracts, which are referred to as "Pension Plan Contracts" for purposes of
this rule, although the limitations could be applied to Qualified Contracts in
the future.
44
PERFORMANCE
- --------------------------------------------------------------------------------
From time to time we will advertise the performance of the SELECT PORTFOLIOS,
FOCUSED PORTFOLIOS and/or SEASONS STRATEGIES. Any such performance results are
based on historical earnings and are not intended to indicate future
performance.
We advertise the Cash Management Portfolio's yield and effective yield. In
addition, the other SELECT PORTFOLIOS, FOCUSED PORTFOLIOS and SEASONS STRATEGIES
advertise total return, gross yield and yield-to-maturity. These figures
represent past performance of the SELECT PORTFOLIOS, FOCUSED PORTFOLIOS and
SEASONS STRATEGIES. These performance numbers do not indicate future results.
We may show performance of each SELECT PORTFOLIO, FOCUSED PORTFOLIO and/or
SEASONS STRATEGY in comparison to various appropriate indices and the
performance of other similar variable annuity products with similar objectives
as reported by such independent reporting services as Morningstar, Inc., Lipper
Analytical Services, Inc. and the Variable Annuity Research Data Service
("VARDS").
Please see the Statement of Additional Information, available upon request, for
more information regarding the methods used to calculate performance data.
Anchor National may also advertise the rating and other information assigned to
it by independent industry ratings organizations. Some of those organizations
are A.M. Best Company ("A.M. Best"), Moody's Investor's Service ("Moody's"),
Standard & Poor's Insurance Rating Services ("S&P"), and Fitch 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.
45
OTHER INFORMATION
- --------------------------------------------------------------------------------
ANCHOR NATIONAL
Anchor National is a stock life insurance company originally organized under the
laws of the state of California in April, 1965. On January 1, 1996, Anchor
National redomesticated under the laws of the state of Arizona.
Anchor National and its affiliates, SunAmerica Life Insurance Company, First
SunAmerica Life Insurance Company, SunAmerica Asset Management Corporation and
the SunAmerica Financial Network, Inc. (comprising six wholly owned
broker-dealers), specialize in retirement savings and investment products and
services. Business focuses include fixed and variable annuities, mutual funds
and broker-dealer services.
THE SEPARATE ACCOUNT
Anchor National originally established a separate account, Variable Annuity
Account Five (the "Separate Account"), under Arizona law on July 8, 1996. The
Separate Account is registered with the SEC as a unit investment trust under the
Investment Company Act of 1940, as amended.
Anchor National owns the assets in the Separate Account. However, the assets in
the Separate Account are not chargeable with liabilities arising out of any
other business conducted by Anchor National. Income gains and losses (realized
and unrealized) resulting from assets in the Separate Account are credited to or
charged against the Separate Account without regard to other income, gains or
losses of Anchor National. Assets in the Separate Account are not guaranteed by
Anchor National.
THE GENERAL ACCOUNT
Money allocated to the fixed account options goes into Anchor National's general
account. The general account consists of all of Anchor National's assets other
than assets attributable to a separate account. All of the assets in the general
account are chargeable with the claims of any Anchor National contract holders
as well as all of its creditors. The general account funds are invested as
permitted under state insurance laws.
DISTRIBUTION OF THE CONTRACT
Registered representatives of broker-dealers sell the contract. We pay
commissions to these representatives for the sale of the contracts. We do not
expect the total commissions to exceed 7.5% of your Purchase Payments. Contracts
sold with the Seasons Rewards Program may result in our paying a lower
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 is an
affiliate of Anchor National, and is a registered as a broker-dealer under the
Exchange Act of 1934 and a member of the National Association of Securities
Dealers, Inc.
No underwriting fees are paid in connection with the distribution of the
contracts.
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
46
quarterly. Purchase payments received through the Automatic Payment Plan or a
salary reduction arrangement, may also be confirmed quarterly. For all other
transactions, we send confirmations immediately.
During the Accumulation and Income Phases, you will receive a statement of your
transactions over the past quarter and a summary of your account values. Please
contact our Annuity Service Center at 1-800-445-SUN2, if you have any comment,
question or service request.
We send out transaction confirmations and quarterly statements. It is your
responsibility to review these documents carefully and notify us of any
inaccuracies immediately. We investigate all inquiries. To the extent that we
believe we made an error, we retroactively adjust your contract, provided you
notify us within 30 days of receiving the transaction confirmation or quarterly
statement. Any other adjustments we deem warranted are made as of the time we
receive notice of the error.
LEGAL PROCEEDINGS
There are no pending legal proceedings affecting the Separate Account. Anchor
National and its subsidiaries engage in various kinds of routine litigation. In
management's opinion these matters are not of material importance to the
Company's total assets, with the potential exception of McMurdie, et al. v.
SunAmerica Inc., et al, Case No. BC 194082, filed on July 10, 1998 in the
Superior Court for the County of Los Angeles. This lawsuit is a representative
action wherein the plaintiffs allege violations of California's Business and
Professions Code Sections 17200 et seq. The Company is vigorously defending the
lawsuit. The probability of any particular outcome is not reasonably estimable
at this time.
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 for AIG SunAmerica Life Assurance
Company (formerly Anchor National Life Insurance Company) at December 31, 2001
and 2000 and, for the years ended December 31, 2001, 2000 and 1999 and audited
consolidated financial statements of Variable Annuity Account Five at April 30,
2002, for the years ended April 30, 2002 and 2001, are included in the Statement
of Additional Information and incorporated by reference in this prospectus and
have been so included in reliance on the reports of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
47
TABLE OF CONTENTS OF
STATEMENT OF ADDITIONAL INFORMATION
<Table>
Separate Account............................................ 3
General Account............................................. 4
Performance Data............................................ 4
Income Payments............................................. 9
Annuity Unit Values......................................... 10
Taxes....................................................... 13
Distribution of Contracts................................... 18
Financial Statements........................................ 18
</Table>
48
APPENDIX A - CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
<Table>
<Caption>
FISCAL 3/31/00 4/30/00 4/30/01
INCEPTION TO YEAR TO TO TO
SEASONS STRATEGIES 3/31/99 3/31/00 4/30/00 4/30/01 4/30/02
- ---------------------------------- ------------ --------- --------- --------------- ---------
- ------------------------------------------------------------------------------------------------------
Growth (Inception Date: 4/15/97)
Beginning AUV................... 15.05 15.89 21.30 (a) 20.24 17.039
(b) 20.24 17.018
Ending AUV...................... 15.89 21.30 20.24 (a) 17.04 14.356
(b) 17.02 14.302
Ending Number of AUs............ 31,169 1,653,495 1,871,300 (a) 398,040 1,596,999
(b) 1,431,268 5,159,748
- ------------------------------------------------------------------------------------------------------
Moderate Growth (Inception Date:
4/15/97)
Beginning AUV................... 14.25 15.09 19.48 (a) 18.62 16.288
(b) 18.62 16.267
Ending AUV...................... 15.09 19.48 18.62 (a) 16.29 14.164
(b) 16.27 14.111
Ending Number of AUs............ 93,136 1,559,019 1,760,865 (a) 483,256 2,793,004
(b) 1,692,012 7,849,672
- ------------------------------------------------------------------------------------------------------
Balanced Growth (Inception Date:
4/15/97)
Beginning AUV................... 13.80 14.05 16.68 (a) 16.11 14.973
(b) 16.11 14.956
Ending AUV...................... 14.05 16.68 16.11 (a) 14.97 13.695
(b) 14.96 13.645
Ending Number of AUs............ 85,553 991,695 1,061,795 (a) 375,068 2,883,697
(b) 1,049,088 5,761,721
- ------------------------------------------------------------------------------------------------------
Conservative Growth (Inception
Date: 4/15/97)
Beginning AUV................... 13.03 13.21 14.89 (a) 14.50 14.127
(b) 14.50 14.101
Ending AUV...................... 13.21 14.89 14.50 (a) 14.13 13.410
(b) 14.10 13.353
Ending Number of AUs............ 33,892 623,175 629,067 (a) 181,135 2,004,171
(b) 795,377 3,915,976
- ------------------------------------------------------------------------------------------------------
</Table>
(a) Without election of optional Estate Advantage feature.
(b) With election of optional Estate Advantage feature, which became
available for sale on October 16, 2000.
AUV-Accumulation Unit Value
AU-Accumulation Units
A-1
<Table>
<Caption>
FISCAL 3/31/00 4/30/00 4/30/01
INCEPTION TO YEAR TO TO TO
SELECT PORTFOLIOS 3/31/99 3/31/00 4/30/00 4/30/01 4/30/02
- ---------------------------------- ------------ --------- --------- --------------- ---------
- ------------------------------------------------------------------------------------------------------
Large Cap Growth (Inception Date:
3/1/99)
Beginning AUV................... 10.00 10.68 14.94 (a) 13.99 10.121
(b) 13.99 10.107
Ending AUV...................... 10.68 14.94 13.99 (a) 10.12 7.931
(b) 10.11 7.900
Ending Number of AUs............ 85,647 1,058,317 1,158,071 (a) 138,746 858,299
(b) 1,108,465 3,700,885
- ------------------------------------------------------------------------------------------------------
Large Cap Composite (Inception
Date: 3/1/99)
Beginning AUV................... 10.00 10.41 12.88 (a) 12.30 10.419
(b) 12.30 10.405
Ending AUV...................... 10.41 12.88 12.30 (a) 10.42 8.858
(b) 10.40 8.825
Ending Number of AUs............ 33,347 316,855 361,941 (a) 30,196 358,258
(b) 397,804 1,315,528
- ------------------------------------------------------------------------------------------------------
Large Cap Value (Inception Date:
3/1/99)
Beginning AUV................... 10.00 10.32 10.75 (a) 10.79 12.354
(b) 10.79 12.338
Ending AUV...................... 10.32 10.75 10.79 (a) 12.35 11.297
(b) 12.34 11.254
Ending Number of AUs............ 34,004 531,732 571,490 (a) 110,091 957,260
(b) 899,551 3,590,415
- ------------------------------------------------------------------------------------------------------
Mid Cap Growth (Inception Date:
3/1/99)
Beginning AUV................... 10.00 10.62 18.41 (a) 16.85 13.691
(b) 16.85 13.674
Ending AUV...................... 10.62 18.41 16.85 (a) 13.69 12.185
(b) 13.67 12.140
Ending Number of AUs............ 27,096 529,844 612,249 (a) 80,629 523,422
(b) 678,174 2,223,309
- ------------------------------------------------------------------------------------------------------
</Table>
(a) Without election of optional Estate Advantage feature.
(b) With election of optional Estate Advantage feature, which became
available for sale on October 16, 2000.
AUV-Accumulation Unit Value
AU-Accumulation Units
A-2
<Table>
<Caption>
FISCAL 3/31/00 4/30/00 4/30/01
INCEPTION TO YEAR TO TO TO
SELECT PORTFOLIOS 3/31/99 3/31/00 4/30/00 4/30/01 4/30/02
- ---------------------------------- ------------ --------- --------- --------------- ---------
- ------------------------------------------------------------------------------------------------------
Mid Cap Value (Inception Date:
3/1/99)
Beginning AUV................... 10.00 10.10 10.93 (a) 11.14 14.202
(b) 11.14 14.184
Ending AUV...................... 10.10 10.93 11.14 (a) 14.20 15.629
(b) 14.18 15.569
Ending Number of AUs............ 11,278 297,306 318,151 (a) 98,363 661,329
(b) 598,874 2,517,897
- ------------------------------------------------------------------------------------------------------
Small Cap (Inception Date: 3/1/99)
Beginning AUV................... 10.00 10.35 15.00 (a) 13.56 11.201
(b) 13.56 11.186
Ending AUV...................... 10.35 15.00 13.56 (a) 11.20 10.455
(b) 11.19 10.415
Ending Number of AUs............ 22,807 432,850 481,239 (a) 61,891 553,867
(b) 499,597 2,317,632
- ------------------------------------------------------------------------------------------------------
International Equity (Inception
Date: 3/1/99)
Beginning AUV................... 10.00 10.51 13.61 (a) 12.46 9.608
(b) 12.46 9.595
Ending AUV...................... 10.51 13.61 12.46 (a) 9.61 7.768
(b) 9.60 7.742
Ending Number of AUs............ 23,961 314,634 384,946 (a) 87,318 833,895
(b) 532,261 1,773,503
- ------------------------------------------------------------------------------------------------------
Diversified Fixed Income
(Inception Date: 3/10/99)
Beginning AUV................... 10.00 10.02 10.00 (a) 9.96 10.570
(b) 9.96 10.555
Ending AUV...................... 10.02 10.00 9.96 (a) 10.57 10.912
(b) 10.56 10.870
Ending Number of AUs............ 31,762 474,014 513,721 (a) 217,162 1,388,027
(b) 732,849 3,049,466
- ------------------------------------------------------------------------------------------------------
Cash Management (Inception Date:
3/26/99)
Beginning AUV................... 10.00 10.00 10.32 (a) 10.35 10.774
(b) 10.35 10.759
Ending AUV...................... 10.00 10.32 10.35 (a) 10.77 10.836
(b) 10.76 10.794
Ending Number of AUs............ 970 380,169 235,608 (a) 713,829 1,156,309
(b) 1,188,716 1,692,359
- ------------------------------------------------------------------------------------------------------
</Table>
(a) Without election of optional Estate Advantage feature.
(b) With election of optional Estate Advantage feature, which became
available for sale on October 16, 2000.
AUV-Accumulation Unit Value
AU-Accumulation Units
A-3
<Table>
<Caption>
FISCAL 3/31/00 4/30/00 4/30/01
INCEPTION TO YEAR TO TO TO
FOCUSED PORTFOLIOS 3/31/99 3/31/00 4/30/00 4/30/01 4/30/02
- ------------------------------------- ------------ ------- ------- --------------- ---------
- -----------------------------------------------------------------------------------------------------
Focus Growth (7/7/00)
Beginning AUV...................... 0 0 0 (a) 10.00 7.642
(b) 10.00 7.633
Ending AUV......................... 0 0 0 (a) 7.64 6.570
(b) 7.63 6.545
Ending Number of AUs............... 0 0 0 (a) 336,517 977,193
(b) 1,598,717 4,088,242
- -----------------------------------------------------------------------------------------------------
Focus Growth and Income (12/29/00)
Beginning AUV...................... 0 0 0 (a) 10.00 9.354
(b) 10.00 8.942
Ending AUV......................... 0 0 0 (a) 9.35 8.537
(b) 8.94 8.140
Ending Number of AUs............... 0 0 0 (a) 22,928 343,267
(b) 197,045 1,284,539
- -----------------------------------------------------------------------------------------------------
Focus Value* (10/04/01)
Beginning AUV...................... 0 0 0 (a) 0 10.000
(b) 0 10.000
Ending AUV......................... 0 0 0 (a) 0 10.740
(b) 0 10.727
Ending Number of AUs............... 0 0 0 (a) 0 216,178
(b) 0 990,167
- -----------------------------------------------------------------------------------------------------
Focus TechNet (12/29/00)
Beginning AUV...................... 0 0 0 (a) 10.00 6.327
(b) 10.00 7.009
Ending AUV......................... 0 0 0 (a) 6.33 3.299
(b) 7.01 3.646
Ending Number of AUs............... 0 0 0 (a) 55,512 295,604
(b) 233,849 1,089,889
- -----------------------------------------------------------------------------------------------------
</Table>
* This portfolio was not available for sale in this product until October
1, 2001.
(a) Without election of optional Estate Advantage feature.
(b) With election of optional Estate Advantage feature, which became
available for sale on October 16, 2000.
AUV-Accumulation Unit Value
AU-Accumulation Units
A-4
APPENDIX B - SEASONS REWARDS PROGRAM EXAMPLES
- --------------------------------------------------------------------------------
The following examples assume an initial $125,000 Purchase Payment is made and
that the Company is offering Upfront and Deferred Payment Enhancements in
accordance with this chart:
<Table>
<Caption>
- --------------------------------------------------------------------------------------------------------
UPFRONT PAYMENT DEFERRED PAYMENT DEFERRED PAYMENT
ENHANCEMENT LEVEL ENHANCEMENT RATE ENHANCEMENT RATE ENHANCEMENT DATE
- --------------------------------------------------------------------------------------------------------
Under $100,000 2% 0% N/A
- --------------------------------------------------------------------------------------------------------
$100,000 - $499,999 2% 1% Nine years from the date we
receive each Purchase Payment.
- --------------------------------------------------------------------------------------------------------
$500,000 - more 2% 2% Nine years from the date we
receive each Purchase Payment.
- --------------------------------------------------------------------------------------------------------
</Table>
I. DEFERRED PAYMENT ENHANCEMENT
If you elect to participate in the Seasons 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 Deferred Payment Enhancement Rate may
increase, decrease or be eliminated at any time.
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.
B-1
II. 90 DAY WINDOW
Contracts issued with the Seasons Rewards feature 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) No withdrawal in the first 90 days.
(2) Initial Purchase Payment of $50,000 on November 1, 2000.
(3) Subsequent Purchase Payment of $50,000 on January 15, 2001.
(4) Subsequent Purchase Payment of $25,000 on January 28, 2001.
ENHANCEMENT AT THE TIME PURCHASE PAYMENT RECEIVED
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------
DEFERRED
PURCHASE UPFRONT DEFERRED PAYMENT
PAYMENT PAYMENT PAYMENT ENHANCEMENT
DATE OF PURCHASE PAYMENT AMOUNT ENHANCEMENT ENHANCEMENT DATE
- ---------------------------------------------------------------------------------------------------
November 1, 2000 $50,000 2% 0% N/A
- ---------------------------------------------------------------------------------------------------
January 15, 2001 $50,000 2% 1% January 15, 2010
- ---------------------------------------------------------------------------------------------------
January 28, 2001 $25,000 2% 1% January 28, 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 $125,000. According to the Enhancement Levels in effect at the time this
contract was issued, a $125,000 Purchase Payment would have received a 2%
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 payment enhancements would be adjusted at the end of the 90
days as follows:
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------
DEFERRED
PURCHASE UPFRONT DEFERRED PAYMENT
PAYMENT PAYMENT PAYMENT ENHANCEMENT
DATE OF PURCHASE PAYMENT AMOUNT ENHANCEMENT ENHANCEMENT DATE
- ---------------------------------------------------------------------------------------------------
November 1, 2000 $50,000 2% 1% November 1, 2009
- ---------------------------------------------------------------------------------------------------
January 15, 2001 $50,000 2% 1% January 15, 2010
- ---------------------------------------------------------------------------------------------------
January 28, 2001 $25,000 2% 1% January 28, 2010
- ---------------------------------------------------------------------------------------------------
</Table>
B-2
APPENDIX C - 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 factor
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
= 1.004785 - 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.
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.
C-1
APPENDIX D - DEATH BENEFITS FOLLOWING SPOUSAL CONTINUATION
- --------------------------------------------------------------------------------
The term "Continuation Net Purchase Payment" is used frequently to describe the
death benefit options payable to the beneficiary of a Continuing Spouse. We
define Continuation Net Purchase Payment as Net Purchase Payments made as of the
Continuation Date plus any Purchase Payments recorded after the Continuation
Date; and reduced for any withdrawals (and fees and charges applicable to those
withdrawals) recorded after the Continuation Date, in the same proportion that
the withdrawal reduced the contract value on the date of the withdrawal. For the
purposes of calculating Continuation Net Purchase Payments, the amount that
equals the contract value on the Continuation Date, including the Continuation
Contribution is considered a Purchase Payment. If the Continuing Spouse makes no
additional Purchase Payments or withdrawals, Continuation Net Purchase Payments
equal the contract value on the Continuation Date, including the Continuation
Contribution. All other capitalized terms have the meanings defined in the
glossary and/or prospectus.
STANDARD DEATH BENEFIT PAYABLE UPON CONTINUING SPOUSE'S DEATH
I. If the Standard Death Benefit is applicable upon the Continuing Spouse's
death and a Continuation Contribution was made:
A. If the Continuing Spouse is age 74 or younger at the time of death, we
will pay the beneficiary the greater of:
1. Continuation Net Purchase Payments compounded at a 3% annual growth
rate from the Continuation Date until the 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 date of death, in the same proportion that the withdrawal reduced
the contract value on the date of the withdrawal.
2. The contract value on the date we receive all required paperwork and
satisfactory proof of death.
B. If the Continuing Spouse is age 75 or older at the time of death the
Standard Death Benefit is the greater of:
1. Continuation Net Purchase Payments compounded at a 3% annual growth
rate from the Continuation Date until the Continuing Spouse's 75th
birthday, plus any Purchase Payments recorded after the Continuing
Spouse's 75th birthday; and reduced for any withdrawal (and fees and
charges applicable to those withdrawals) recorded after the 75th
birthday, in the same proportion that the withdrawal reduced the
contract value on the date of the withdrawal.
2. The contract value on the date we receive all required paperwork and
satisfactory proof of death.
II. If the Standard Death Benefit is applicable upon the Continuing Spouse's
death and no Continuation Contributions was made:
A. If the Continuing Spouse is age 74 or younger at the time of death, the
death benefit is the greater of:
1. Net Purchase Payments compounded at a 3% annual growth rate from the
date of issue until the date of death, plus any Purchase Payments
recorded after the date of death; and reduced for any withdrawals
(and fees and charges applicable to those withdrawals) recorded after
the date of death, in the same proportion that the withdrawal reduced
the contract value on the date of withdrawal.
2. the contract value on the date we receive all required paperwork and
satisfactory proof of death.
B. If the Continuing Spouse is age 75 or older at the time of death, the
death benefit is the greater of:
1. Net Purchase Payments compounded at a 3% annual growth rate from the
date of issue until your Continuing Spouse's 75(th) birthday, plus
any Purchase Payments recorded after the 75(th) birthday, and reduced
for any withdrawals (and fees and charges applicable to those
withdrawals) recorded after the
D-1
75(th) birthday, 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 all required paperwork and
satisfactory proof of death.
SEASONS ESTATE ADVANTAGE DEATH BENEFIT PAYABLE UPON CONTINUING SPOUSE'S DEATH
If Seasons Estate Advantage is applicable upon the Continuing Spouse's death, we
will pay the Beneficiary the sum of A plus B, where:
A. equals the amount payable under the selected enhanced death benefit
(option 1 or 2 below, as selected by the original owner); and
B. equals the amount payable, if any, under the Earnings Advantage benefit.
A. Enhanced Death Benefit Options for Spousal Continuation:
I. If the 5% Accumulation option is selected and a Continuation
Contribution was made the death benefit is the greater of:
a. The contract value on the date we receive all required paperwork and
satisfactory proof of the Continuing Spouse's death; or
b. Continuation Net Purchase Payments made from the Continuation Date
including the Continuation Contribution, compounded to the earlier of
the Continuing Spouse's 80th birthday or the date of death at a 5%
annual growth rate, plus any Purchase Payments recorded after the
80th birthday or the date of death; and reduced for any withdrawals
(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 Continuation Net
Purchase Payments.
II. If 5% Accumulation Option is selected and no Continuation Contribution
was made:
a. the contract value on the date we receive all required paperwork and
satisfactory proof of the Continuing Spouse's death; or
b. Net Purchase Payments made from the date of issue compounded to the
earlier of the Continuing Spouse's 80(th) birthday or the date of
death at a 5% annual growth rate, plus any Purchase Payments recorded
after the 80(th) birthday or the date of death; and reduced for any
withdrawals (and fees and charges applicable to those withdrawals)
recorded after the 80(th) birthday or the date of death, in the same
proportion that the withdrawal reduced the contract value on the date
of the withdrawal, up to a maximum of two times the Net Purchase
Payments.
If the Continuing Spouse dies after the latest Annuity Date and the 5%
Accumulation option applied, any death benefit payable under the contract will
be the Standard Death Benefit as described above. The Continuing Spouse's
beneficiary will not receive any benefit from Seasons Estate Advantage.
III. If the Maximum Anniversary Value option is selected and if the
Continuing Spouse is younger than age 90 at the time of death and a
Continuation Contribution was made, the death benefit is the greater
of:
a. Continuation Net Purchase Payments; or
b. The contract value on the date we receive all required paperwork and
satisfactory proof of the Continuing Spouse's death; or
c. The maximum anniversary value on any contract anniversary (of the
original issue date) occurring after the Continuation Date but prior
to the Continuing Spouse's 81st birthday. The anniversary value
equals the value on the contract anniversary plus any Purchase
Payments recorded after that anniversary; and reduced for any
withdrawals (and fees and charges applicable to those withdrawals)
recorded after that
D-2
anniversary, in the same proportion that the withdrawal reduced the
contract value on the date of the withdrawal.
IV. If the Maximum Anniversary Value option is selected and no Continuation
Contribution was made the death benefit is the greater of:
a. Net Purchase Payments; or
b. The contract value on the date we receive all required paperwork and
satisfactory proof of the Continuing Spouse's death; or
c. The maximum anniversary value on any contract anniversary (of the
original issue date) occurring after the issue date but before the
Continuing Spouse's 81st birthday. The anniversary value equals the
value on the contract anniversary plus any Purchase Payments recorded
after that anniversary; and reduced for any withdrawals (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 all required paperwork and satisfactory
proof of death. The Continuing Spouse's beneficiary will not receive any benefit
from Seasons Estate Advantage. However, the Continuing Spouse's Beneficiary may
still receive a benefit from Earnings Advantage if the date of death is prior to
the latest annuity date.
B. Earnings Advantage Benefit for Spousal Continuation:
The Earnings Advantage benefit may increase the death benefit amount. The
Earnings Advantage benefit is only available if the original owner elected
Seasons Estate Advantage and it has not been discontinued or terminated. If the
Continuing Spouse had earnings in the contract at the time of his/her death, we
will add a percentage of those earnings (the "Earnings Advantage Percentage"),
subject to a maximum dollar amount (the "Maximum Earnings Advantage
Percentage"), to the death benefit payable.
If a Continuation Contribution has been made, the Contract Year of Death will
determine the Earnings Advantage Percentage and the Maximum Earnings Advantage
amount, as set forth below:
<Table>
<Caption>
- -------------------------------------------------------------------------------------------
EARNINGS ADVANTAGE
CONTRACT YEAR OF DEATH PERCENTAGE MAXIMUM EARNINGS ADVANTAGE PERCENTAGE
- -------------------------------------------------------------------------------------------
Years 0-4 25% of earnings 25% of Continuation Net Purchase Payments
- -------------------------------------------------------------------------------------------
Years 5-9 40% of earnings 40% of Continuation Net Purchase Payments*
- -------------------------------------------------------------------------------------------
Years 10+ 50% of earnings 50% of Continuation Net Purchase Payments*
- -------------------------------------------------------------------------------------------
</Table>
* PURCHASE PAYMENTS MUST BE INVESTED FOR AT LEAST SIX MONTHS AT THE TIME OF YOUR
DEATH TO BE INCLUDED AS PART OF CONTINUATION NET PURCHASE PAYMENTS FOR
PURPOSES OF THE MAXIMUM EARNINGS ADVANTAGE CALCULATION.
What is the Contract Year of Death?
Contract Year of Death is the number of full 12 month periods starting on the
Continuation Date and ending on the Continuing Spouse's date of death.
What is the Earnings Advantage Amount?
We determine the Earnings Advantage amount based upon a percentage of earnings
in the contract at the time of the Continuing Spouse's death. For the purpose of
this calculation, earnings are defined as (1) minus (2) where
(1) equals the contract value on the Continuing Spouse's date of death;
(2) equals the Continuation Net Purchase Payment(s).
D-3
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 reaching age 95.
WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE SPOUSAL CONTINUATION
PROVISION (IN ITS ENTIRETY OR ANY COMPONENT) AT ANY TIME ON PROSPECTIVELY ISSUED
CONTRACTS.
D-4
APPENDIX E - HYPOTHETICAL EXAMPLE OF THE OPERATION OF THE INCOME PROTECTOR
PROGRAM:
- --------------------------------------------------------------------------------
This table assumes a $100,000 initial investment in a Non-qualified contract,
the election of the optional Income Protector Program at contract issue, with no
withdrawals, additional payments or premium taxes, no election of Seasons
Rewards, Seasons Estate Advantage, Earnings Advantage or Seasons Promise.
<Table>
- -----------------------------------------------------------------------------------------------------------------------------
ANNUAL INCOME IF YOU ANNUITIZE ON THE FOLLOWING CONTRACT ANNIVERSARIES:
9 10 15 20
IF AT ISSUE YOU ARE... 1-8 (AGE 69) (AGE 70) (AGE 75) (AGE 80)
- -----------------------------------------------------------------------------------------------------------------------------
Male (M), Age 60* N/A 6,480 6,672 7,716 8,832
- -----------------------------------------------------------------------------------------------------------------------------
Female (F), Age 60* N/A 5,700 5,880 6,900 8,112
- -----------------------------------------------------------------------------------------------------------------------------
M and F, Age 60** N/A 4,920 5,028 5,544 5,928
- -----------------------------------------------------------------------------------------------------------------------------
</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 advisor for information regarding availability of this program in your
state.
Election of the Income Protector Program is not permitted if the Seasons Promise
benefit is elected.
E-1
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% 2.00%
Nevada...................................................... 0% 3.50%
South Dakota................................................ 0% 1.25%*
West Virginia............................................... 1.00% 1.00%
Wyoming..................................................... 0% 1.00%
</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 Seasons Select(II) Variable
Annuity Statement of Additional Information to:
(Please print or type and fill in all information.)
------------------------------------------------------------------
Name
------------------------------------------------------------------
Address
------------------------------------------------------------------
City/State/Zip
------------------------------------------------------------------
Date: ------------ Signed: ---------------------------------------
Return to: Anchor National Life Insurance Company, Annuity Service Center, P.O.
Box 52499, Los Angeles, California 90054-0299
Part II
-------
Information Not Required in Prospectus
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses in connection with the issuance
and distribution of the securities being registered, other than underwriting
discounts and commissions. All of the amounts shown are estimates, except the
SEC registration fee.
SEC registration fee ....................................... $ 5,560
Printing and engraving ..................................... 50,000
Legal fees and expenses .................................... 10,000
Rating agency fees ......................................... 7,500
Miscellaneous .............................................. 10,000
---------
Total ................................................... $ 83,060
=========
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 Statements Schedules.
Exhibit No. Description
- ----------- -----------
(1) Form of Underwriting Agreement ***
(2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or
Succession **
(3) (a) Amended and Restated Articles of Incorporation+++++
(b) Amended and Restated By-Laws+++++
(4) (a) Individual Fixed and Variable Annuity Contract+++
(b) Individual Retirement Annuity Endorsement+++
(c) Purchase Payment Accumulation Optional Death Benefit Endorsement+++
(d) Maximum Anniversary Value Optional Death Benefit Endorsement+++
(e) Spousal Continuation Death Benefit Endorsement+++
(f) Optional Income Benefit Endorsement+++
(g) Death Benefit Endorsement+++
(h) Deferred Annuity Application+++
(5) Opinion of Counsel re: Legality **
(including on Exhibit (23)(b))
(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 **
(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 +
II-1
(28) Information Reports Furnished to State Insurance Regulatory Authority **
(29) Other Exhibits **
* Herewith
** Not Applicable
*** Incorporated by Reference to Pre-Effective Amendment No. 1 of this
Registration Statement on Form S-1 filed on March 11, 1997.
**** Incorporated by Reference to Post Effective Amendment No. 11 of this
Registration Statement filed on Form S-3 on April 9, 2001.
+ Incorporated by Reference to Pre-Effective Amendment No. 2 to
Registration Statement No. 333-08877 on Form S-1, filed on February 1,
1999.
++ Incorporated by Reference to the Post-Effective Amendment No. 8 of this
Registration Statement filed on Form S-3 on July 19, 2000.
+++ Incorporated by Reference to Post-Effective Amendment No. 9 of this
Registration Statement filed in Form S-3 on September 25, 2000.
++++ Incorporated by Reference to Post Effective Amendment No. 10 of this
Registration Statement filed on Form S-3 on December 19, 2000.
+++++ Incorporated by Reference to Post-Effective Amendment 14 of this
Registration Statement filed on Form S-3 on April 12, 2002.
II-2
Item 17. Undertakings.
The undersigned registrant 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 such 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.
(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.
II-3
SIGNATURES
Pursuant to the requirement 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 Post Effective
Amendment to the 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 31st day of July, 2002.
By: ANCHOR NATIONAL LIFE INSURANCE COMPANY
By: /s/ JAY S. WINTROB
--------------------------------------
Jay S. Wintrob
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Post
Effective Amendment to Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
JAY S. WINTROB* Director, Chief Executive Officer July 31, 2002
- ------------------- (Principal Executive Officer)
Jay S. Wintrob
JANA W. GREER* Director & President July 31, 2002
- -------------------
Jana W. Greer
N. SCOTT GILLIS* Director & Senior Vice President July 31, 2002
- ------------------- (Principal Financial Officer)
N. Scott Gillis
JAMES R. BELARDI* Director & Senior Vice President July 31, 2002
- -------------------
James R. Belardi
MAURICE S. HEBERT*
- ------------------- Controller & Vice President July 31, 2002
Maurice S. Hebert (Principal Accounting Officer)
MARC H. GAMSIN* Director & Senior Vice President July 31, 2002
- -------------------
Marc H. Gamsin
*By: /s/ CHRISTINE A. NIXON Attorney-in-Fact July 31, 2002
----------------------
Christine A. Nixon
Dated: July 31, 2002
II-4
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- ----------------------------------------------------------------
(23a) Consent of Independent Accountants