As filed with the Securities and Exchange Commission on September 16, 2002.
Registration No. 333-70252
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
POST-EFFECTIVE AMENDMENT NO. 2 ON
FORM S-3 REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
--------------------
AIG SUNAMERICA LIFE ASSURANCE COMPANY (doing business as
ANCHOR NATIONAL LIFE INSURANCE COMPANY) ("Anchor National")
(Exact name of registrant as specified in its charter)
California 6311 86-0198983
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification No.)
incorporation or Number) organization)
1 SunAmerica Center
Los Angeles, California 90067-6022
(310) 772-6000
(Address, including zip code, and telephone number,
including area code, or registrant's
principal executive offices)
Christine A. Nixon, Esquire
Anchor National
1 SunAmerica Center
Los Angeles, California 90067-6022
(310) 772-6000
(Name, address, including zip code, and telephone number,
including area code of agent for service)
----------------------
Approximate date of commencement of proposed 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. [ ] _______________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
shall determine.
Registrant is filing this Post-Effective Amendment No. 2 for the sole purpose
of adding investment options to one of the two Prospectuses within this
Registration Statement, pursuant to oral permission to do so provided by Mr.
William Kotapish to Anchor National. The Registrant does not intend for this
Post-Effective Amendment No. 2 to delete from the Registration Statement, any
document included in the Registration Statement but not filed here, including
any currently effective Prospectus or supplement thereto.
================================================================================
[POLARIS II LOGO]
PROSPECTUS
SEPTEMBER 30, 2002
<Table>
Please read this prospectus carefully FLEXIBLE PAYMENT DEFERRED ANNUITY CONTRACTS
before investing and keep it for issued by
future reference. It contains ANCHOR NATIONAL LIFE INSURANCE COMPANY
important information about the in connection with
Polaris(II) Variable Annuity. VARIABLE SEPARATE ACCOUNT
The annuity has 48 investment choices -7 fixed account
To learn more about the annuity options and 41 Variable Portfolios listed below. The 7 fixed
offered by this prospectus, you can account options include specified periods of 1, 3, 5, 7 and
obtain a copy of the Statement of 10 years and DCA accounts for 6-month and 1-year periods.
Additional Information ("SAI") dated The 41 Variable Portfolios are part of the American Funds
September 30, 2002. The SAI has been Insurance Services ("AFT"), the Anchor Series Trust ("AST"),
filed with the Securities and the Lord Abbett Series Fund, Inc. ("LAT"), the SunAmerica
Exchange Commission ("SEC") and is Series Trust ("SST") or the Van Kampen Life Investment Trust
incorporated by reference into this ("VKT").
prospectus. The Table of Contents of
the SAI appears on page 33 of this STOCKS:
prospectus. For a free copy of the MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
SAI, call us at (800) 445-SUN2 or - Alliance Growth Portfolio SST
write to us at our Annuity Service - Global Equities Portfolio SST
Center, P.O. Box 54299, Los Angeles, - Growth-Income Portfolio SST
California 90054-0299. MANAGED BY CAPITAL RESEARCH AND MANAGEMENT COMPANY
- American Funds Global Growth Portfolio AFT
In addition, the SEC maintains a - American Funds Growth Portfolio AFT
website (http://www.sec.gov) that - American Funds Growth-Income Portfolio AFT
contains the SAI, materials MANAGED BY DAVIS ADVISERS
incorporated by reference and other - Davis Venture Value Portfolio SST
information filed electronically with - Real Estate Portfolio SST
the SEC by Anchor National. MANAGED BY FEDERATED INVESTORS L.P.
- Federated Value Portfolio SST
ANNUITIES INVOLVE RISKS, INCLUDING - Telecom Utility Portfolio SST
POSSIBLE LOSS OF PRINCIPAL, AND ARE MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
NOT A DEPOSIT OR OBLIGATION OF, OR - Goldman Sachs Research Portfolio SST
GUARANTEED OR ENDORSED BY, ANY BANK. MANAGED BY LORD ABBETT & CO.
THEY ARE NOT FEDERALLY INSURED BY THE - Lord Abbett Series Fund, Inc. -- Growth and Income
FEDERAL DEPOSIT INSURANCE Portfolio LAT
CORPORATION, THE FEDERAL RESERVE - Lord Abbett Series Fund, Inc. -- Mid-Cap Value
BOARD OR ANY OTHER AGENCY. Portfolio LAT
MANAGED BY MARSICO CAPITAL MANAGEMENT, LLC
This variable annuity provides an - Marsico Growth Portfolio SST
optional bonus feature called MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
"Principal Rewards". If you elect - MFS Growth & Income Portfolio SST
this feature, in exchange for bonuses - MFS Mid-Cap Growth Portfolio SST
credited to your contract, your MANAGED BY PUTNAM INVESTMENT MANAGEMENT INC.
surrender charge schedule will be - Emerging Markets Portfolio SST
longer and greater than if you chose - International Growth & Income Portfolio SST
not to elect this feature. These - Putnam Growth Portfolio SST
withdrawal charges may offset the MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP.
value of any bonus, if you make an - Aggressive Growth Portfolio SST
early withdrawal. - Blue Chip Growth Portfolio SST
- "Dogs" of Wall Street Portfolio SST
- Growth Opportunities Portfolio SST
MANAGED BY VAN KAMPEN/VAN KAMPEN ASSET MANAGEMENT INC.
- International Diversified Equities Portfolio SST
- Technology Portfolio SST
- Van Kampen LIT Comstock Portfolio, Class II
Shares VKT
- Van Kampen LIT Emerging Growth Portfolio, Class II
Shares VKT
- Van Kampen LIT Growth and Income Portfolio, Class II
Shares VKT
MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP
- Capital Appreciation Portfolio AST
- Growth Portfolio AST
- Natural Resources Portfolio AST
BALANCED:
MANAGED BY CAPITAL RESEARCH AND MANAGEMENT COMPANY
- American Funds Asset Allocation Portfolio AFT
MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
- MFS Total Return Portfolio SST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP.
- SunAmerica Balanced Portfolio SST
MANAGED BY WM ADVISORS, INC.
- Asset Allocation Portfolio SST
BONDS:
MANAGED BY FEDERATED INVESTORS L.P.
- Corporate Bond Portfolio SST
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL
- Global Bond Portfolio SST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP.
- High-Yield Bond Portfolio SST
MANAGED BY VAN KAMPEN
- Worldwide High Income Portfolio SST
MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP
- Government & Quality Bond Portfolio AST
CASH:
MANAGED BY BANC OF AMERICA CAPITAL MANAGEMENT, LLC
- Cash Management Portfolio SST
</Table>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
2
Anchor National Life Insurance Company is in the process of changing its name to
AIG SunAmerica Life Assurance Company. We anticipate this process will take some
time to implement in all jurisdictions where we do business. We expect the name
change to be completed during 2003. To begin this process we officially changed
the name in our state of domicile, Arizona. However, we continue to do business,
today, under the name Anchor National and will refer to the Company by that name
throughout this prospectus. You will be notified when the name is changed to AIG
SunAmerica Life Assurance Company and we are no longer doing business as Anchor
National. Please keep in mind, this is a name change only and will not affect
the substance of your contract.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
- ----------------------------------------------------------------
- ----------------------------------------------------------------
Anchor National's Annual Report on Form 10-K/A for the year ended December 31,
2001 is incorporated herein by reference.
All documents or reports filed by Anchor National under Section 13(a), 13(c),
14, or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") after the effective date of this prospectus are also incorporated by
reference. Statements contained in this prospectus and subsequently filed
documents which are incorporated by reference or deemed to be incorporated by
reference are deemed to modify or 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 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>
------------------------------------------------------------------
------------------------------------------------------------------
TABLE OF CONTENTS
------------------------------------------------------------------
------------------------------------------------------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 2
SECURITIES AND EXCHANGE COMMISSION POSITION ON
INDEMNIFICATION............................................ 2
GLOSSARY.................................................... 3
HIGHLIGHTS.................................................. 4
FEE TABLES.................................................. 5
Owner Transaction Expenses............................ 5
Contract Maintenance Fee.............................. 5
Annual Separate Account Expenses...................... 5
Optional EstatePlus Fee............................... 5
Portfolio Expenses.................................... 5
EXAMPLES.................................................... 7
THE POLARIS(II) VARIABLE ANNUITY............................ 13
PURCHASING A POLARIS(II) VARIABLE ANNUITY................... 14
Allocation of Purchase Payments....................... 14
Principal Rewards Program............................. 14
Accumulation Units.................................... 15
Free Look............................................. 16
INVESTMENT OPTIONS.......................................... 16
Variable Portfolios................................... 16
Anchor Series Trust............................... 16
SunAmerica Series Trust........................... 16
Lord Abbett Series Fund, Inc...................... 17
Van Kampen Life Investment Trust.................. 17
American Funds Insurance Series................... 17
Fixed Account Options................................. 17
Market Value Adjustment ("MVA")....................... 18
Transfers During the Accumulation Phase............... 18
Dollar Cost Averaging................................. 19
Asset Allocation Rebalancing Program.................. 20
Principal Advantage Program........................... 20
Voting Rights......................................... 20
Substitution.......................................... 20
ACCESS TO YOUR MONEY........................................ 21
Systematic Withdrawal Program......................... 22
Nursing Home Waiver................................... 22
Minimum Contract Value................................ 22
DEATH BENEFIT............................................... 22
Option 1 - Purchase Payment Accumulation Option....... 23
Option 2 - Maximum Anniversary Option................. 23
EstatePlus............................................ 23
Spousal Continuation.................................. 24
EXPENSES.................................................... 25
Insurance Charges..................................... 25
Withdrawal Charges.................................... 25
Investment Charges.................................... 26
Contract Maintenance Fee.............................. 26
Transfer Fee.......................................... 26
Optional EstatePlus Fee............................... 26
Premium Tax........................................... 26
Income Taxes.......................................... 26
Reduction or Elimination of Charges and Expenses,
and Additional Amounts Credited..................... 26
INCOME OPTIONS.............................................. 26
Annuity Date.......................................... 26
Income Options........................................ 27
Fixed or Variable Income Payments..................... 27
Income Payments....................................... 27
Transfers During the Income Phase..................... 28
Deferment of Payments................................. 28
The Income Protector Feature.......................... 28
TAXES....................................................... 29
Annuity Contracts in General.......................... 29
Tax Treatment of Distributions - Non-Qualified
Contracts............................................. 29
Tax Treatment of Distributions - Qualified
Contracts............................................. 30
Minimum Distributions................................. 30
Tax Treatment of Death Benefits....................... 30
Contracts Owned by a Trust or Corporation............. 31
Gifts, Pledges and/or Assignments of a Non-qualified
Contract.............................................. 31
Diversification....................................... 31
PERFORMANCE................................................. 31
OTHER INFORMATION........................................... 32
Anchor National....................................... 32
The Separate Account.................................. 32
The General Account................................... 32
Distribution of the Contract.......................... 32
Administration........................................ 32
Legal Proceedings..................................... 32
Ownership............................................. 33
Custodian............................................. 33
Independent Accountants............................... 33
Registration Statement................................ 33
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION....
33
APPENDIX A - CONDENSED FINANCIAL INFORMATION................ A-1
APPENDIX B - PRINCIPAL REWARDS PROGRAM EXAMPLES............. B-1
APPENDIX C - MARKET VALUE ADJUSTMENT ("MVA")................ C-1
APPENDIX D - DEATH BENEFITS FOLLOWING SPOUSAL
CONTINUATION............................................... D-1
APPENDIX E - PREMIUM TAXES.................................. E-1
APPENDIX F - HYPOTHETICAL EXAMPLE OF THE OPERATION OF THE
INCOME PROTECTOR FEATURE................................... F-1
------------------------------------------------------------------
------------------------------------------------------------------
GLOSSARY
------------------------------------------------------------------
------------------------------------------------------------------
We have capitalized some of the technical terms used in this
prospectus. To help you understand these terms, we have defined
them in this glossary.
ACCUMULATION PHASE - The period during which you invest money in
your contract.
ACCUMULATION UNITS - A measurement we use to calculate the value
of the variable portion of your contract during the Accumulation
Phase.
ANNUITANT(S) - The person(s) on whose life (lives) we base income
payments.
ANNUITY DATE - The date on which income payments are to begin, as
selected by you.
ANNUITY UNITS - A measurement we use to calculate the amount of
income payments you receive from the variable portion of your
contract during the Income Phase.
BENEFICIARY - The person designated to receive any benefits under
the contract if you or the Annuitant dies.
COMPANY - Anchor National Life Insurance Company, We, Us, the
insurer which issues this contract.
INCOME PHASE - The period during which we make income payments to
you.
IRS - The Internal Revenue Service.
NON-QUALIFIED (CONTRACT) - A contract purchased with after-tax
dollars. In general, these contracts are not under any pension
plan, specially sponsored program or individual retirement account
("IRA").
PAYMENT ENHANCEMENT(S) - The amount(s) allocated to your contract
by us under the Principal Rewards Program. Payment Enhancements
are calculated as a percentage of your Purchase Payments and are
considered earnings.
PURCHASE PAYMENTS - The money you give us to buy the contract, as
well as any additional money you give us to invest in the contract
after you own it.
QUALIFIED (CONTRACT) - A contract purchased with pretax dollars.
These contracts are generally purchased under a pension plan,
specially sponsored program or IRA.
TRUSTS - Refers to the American Funds Insurance Series, the Anchor
Series Trust, the Lord Abbett Series Fund, Inc., the SunAmerica
Series Trust and the Van Kampen Life Investment Trust
collectively.
VARIABLE PORTFOLIO(S) - The variable investment options available
under the contract. Each Variable Portfolio has its own investment
objective and is invested in the underlying investments of the
American Funds Insurance Series, the Anchor Series Trust, the Lord
Abbett Series Fund, Inc., the SunAmerica Series Trust or the Van
Kampen Life Investment Trust.
</Table>
ALL FINANCIAL REPRESENTATIVES OR AGENTS THAT SELL THE CONTRACTS OFFERED BY THIS
PROSPECTUS ARE REQUIRED TO DELIVER A PROSPECTUS.
3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HIGHLIGHTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Polaris(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 a variety of variable and fixed account options. You may also
elect to participate in the Principal Rewards feature of the contract that can
provide you with Payment Enhancements to invest in your contract. If you elect
participation in this feature, your contract will be subject to a longer
surrender charge schedule. Like all deferred annuities, the contract has an
Accumulation Phase and an Income Phase. During the Accumulation Phase, you
invest money in your contract. The Income Phase begins when you start receiving
income payments from your annuity to provide for your retirement.
FREE LOOK: If you cancel your contract within 10 days after receiving it (or
whatever period is required in your state), we will cancel the contract without
charging a withdrawal charge. You will receive whatever your contract is worth
on the day that we receive your request. This amount may be more or less than
your original Purchase Payment. We will return your original Purchase Payment if
required by law. If you elected to participate in Principal Rewards, you receive
any gain and we bear any loss on any Payment Enhancement(s) if you decide to
cancel your contract during the free look period. Please see PURCHASING A
POLARIS(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
1.52% annually of the average daily value of your contract allocated to the
Variable Portfolios. There are investment charges on amounts invested in the
Variable Portfolios. If you elect optional features available under the contract
we may charge additional fees for these features. A separate withdrawal charge
schedule applies to each Purchase Payment. The amount of the withdrawal charge
declines over time. After a Purchase Payment has been in the contract for seven
complete years, or nine complete years if you participate in the Principal
Rewards Program, withdrawal charges no longer apply to that portion of the
Purchase Payment. Please see the FEE TABLE, PURCHASING A POLARIS(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 advisor
or contact us at Anchor National Life Insurance Company Annuity Service Center
P.O. Box 54299 Los Angeles, California 90054-0299. Telephone Number: (800)
445-SUN2.
ANCHOR NATIONAL OFFERS SEVERAL DIFFERENT VARIABLE ANNUITY PRODUCTS TO MEET THE
DIVERSE NEEDS OF OUR INVESTORS. EACH PRODUCT MAY PROVIDE DIFFERENT FEATURES AND
BENEFITS OFFERED AT DIFFERENT FEES, CHARGES AND EXPENSES. WE ALSO OFFER PRODUCTS
THAT DO NOT OFFER THE PRINCIPAL REWARDS PROGRAM. CONTRACTS WITHOUT PRINCIPAL
REWARDS PROGRAM HAVE THE SAME MORTALITY AND EXPENSE RISK CHARGES AS THE SAME
CONTRACT WITH THE PROGRAM. HOWEVER, CONTRACTS WITHOUT THE PRINCIPAL 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.
PLEASE READ THE PROSPECTUS CAREFULLY FOR MORE DETAILED INFORMATION REGARDING
THESE AND OTHER FEATURES AND BENEFITS OF THE CONTRACT, AS WELL AS THE RISKS OF
INVESTING.
4
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FEE TABLES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OWNER TRANSACTION EXPENSES
WITHDRAWAL CHARGE (AS A PERCENTAGE OF EACH PURCHASE PAYMENT)
<Table>
YEARS: 1 2 3 4 5 6 7 8 9 10
Without Principal 7% 6% 5% 4% 3% 2% 1% 0% 0% 0%
Rewards
With Principal Rewards 9% 9% 8% 7% 6% 5% 4% 3% 2% 0%
</Table>
<Table>
TRANSFER FEE No charge for first 15 transfers each
contract year; thereafter, fee is $25
($10 in Pennsylvania and Texas) per
transfer
</Table>
CONTRACT MAINTENANCE FEE*
$35 ($30 in North Dakota)
*waived if contract value is $50,000 or more
ANNUAL SEPARATE ACCOUNT EXPENSES
(AS A PERCENTAGE OF YOUR DAILY NET ASSET VALUE)
<Table>
Mortality and Expense Risk Charge........................ 1.37%
Distribution Expense Charge.............................. 0.15%
-----
TOTAL SEPARATE ACCOUNT EXPENSES........................ 1.52%
=====
</Table>
OPTIONAL ESTATEPLUS FEE
(ESTATEPLUS, AN ENHANCED DEATH BENEFIT FEATURE, IS OPTIONAL AND IF ELECTED, THE
FEE IS AN ANNUALIZED CHARGE THAT IS DEDUCTED DAILY.)
<Table>
Fee as a percentage of your daily net asset value......... 0.25%
</Table>
PORTFOLIO EXPENSES
ANCHOR SERIES TRUST
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER REIMBURSEMENT OR WAIVER OF EXPENSES
FOR THE TRUST'S FISCAL YEAR ENDED DECEMBER 31, 2001)
<Table>
<Caption>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEE EXPENSES EXPENSES
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Capital Appreciation 0.70% 0.05% 0.75%
- -----------------------------------------------------------------------------------------------------------
Gov't & Quality Bond 0.58% 0.06% 0.64%
- -----------------------------------------------------------------------------------------------------------
Growth 0.67% 0.05% 0.72%
- -----------------------------------------------------------------------------------------------------------
Natural Resources 0.75% 0.15% 0.90%
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
</Table>
SUNAMERICA SERIES TRUST
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER REIMBURSEMENT OR WAIVER OF EXPENSES
FOR THE TRUST'S FISCAL YEAR ENDED JANUARY 31, 2002)
<Table>
<Caption>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEE EXPENSES EXPENSES
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Aggressive Growth 0.68% 0.07% 0.75%
- -----------------------------------------------------------------------------------------------------------
Alliance Growth 0.60% 0.05% 0.65%
- -----------------------------------------------------------------------------------------------------------
Asset Allocation 0.59% 0.07% 0.66%
- -----------------------------------------------------------------------------------------------------------
Blue Chip Growth(1) 0.70% 0.15% 0.85%
- -----------------------------------------------------------------------------------------------------------
Cash Management 0.48% 0.04% 0.52%
- -----------------------------------------------------------------------------------------------------------
Corporate Bond 0.60% 0.07% 0.67%
- -----------------------------------------------------------------------------------------------------------
Davis Venture Value 0.71% 0.05% 0.76%
- -----------------------------------------------------------------------------------------------------------
Dogs of Wall Street 0.60% 0.11% 0.71%
- -----------------------------------------------------------------------------------------------------------
Emerging Markets 1.25% 0.28% 1.53%
- -----------------------------------------------------------------------------------------------------------
Federated Value 0.69% 0.07% 0.76%
- -----------------------------------------------------------------------------------------------------------
Global Bond 0.68% 0.13% 0.81%
- -----------------------------------------------------------------------------------------------------------
Global Equities 0.72% 0.15% 0.87%
- -----------------------------------------------------------------------------------------------------------
Goldman Sachs Research(1) 1.20% 0.15% 1.35%
- -----------------------------------------------------------------------------------------------------------
Growth-Income 0.53% 0.05% 0.58%
- -----------------------------------------------------------------------------------------------------------
Growth Opportunities(1) 0.75% 0.25% 1.00%
- -----------------------------------------------------------------------------------------------------------
High-Yield Bond 0.63% 0.08% 0.71%
- -----------------------------------------------------------------------------------------------------------
International Diversified Equities 1.00% 0.23% 1.23%
- -----------------------------------------------------------------------------------------------------------
International Growth and Income 0.95% 0.25% 1.20%
- -----------------------------------------------------------------------------------------------------------
Marsico Growth(1,2) 0.85% 0.16% 1.01%
- -----------------------------------------------------------------------------------------------------------
MFS Growth and Income 0.70% 0.08% 0.78%
- -----------------------------------------------------------------------------------------------------------
MFS Mid-Cap Growth 0.75% 0.07% 0.82%
- -----------------------------------------------------------------------------------------------------------
MFS Total Return 0.66% 0.07% 0.73%
- -----------------------------------------------------------------------------------------------------------
Putnam Growth 0.77% 0.05% 0.82%
- -----------------------------------------------------------------------------------------------------------
Real Estate 0.80% 0.12% 0.92%
- -----------------------------------------------------------------------------------------------------------
SunAmerica Balanced 0.60% 0.06% 0.66%
- -----------------------------------------------------------------------------------------------------------
Technology 1.20% 0.25% 1.45%
- -----------------------------------------------------------------------------------------------------------
Telecom Utility(3) 0.75% 0.10% 0.85%
- -----------------------------------------------------------------------------------------------------------
Worldwide High Income(3) 1.00% 0.11% 1.11%
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
</Table>
(1) For this portfolio, the advisor, SunAmerica Asset Management Corp., has
voluntarily agreed to waive fees or expenses, if necessary, to keep
operating expenses at or below established maximum amounts. All waivers
or reimbursements may be terminated at any time. Only certain portfolios
relied on these waivers and/or reimbursements during this fiscal year.
Absent fee waivers or reimbursement of expenses by the adviser or custody
credits, you would have incurred the following expenses during the last
fiscal year: Blue Chip Growth 1.16%; Goldman Sachs Research 1.49%; Growth
Opportunities 1.19%; and Marsico Growth 1.86%.
(2) The expense ratio is gross of custody credits of 0.01%. The actual
expense ratio is capped at 1.00%.
(3) Gross of custody credits of 0.01%
5
LORD ABBETT SERIES FUND, INC.
(AS A PERCENTAGE OF NET ASSETS AFTER REIMBURSEMENT OR WAIVER OF EXPENSES FOR THE
TRUST'S FISCAL YEAR ENDED DECEMBER 31, 2001)
<Table>
<Caption>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEE EXPENSES EXPENSES
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Lord Abbett Series Fund, Inc. -- Growth and Income* 0.50% 0.47% 0.97%
- -----------------------------------------------------------------------------------------------------------
Lord Abbett Series Fund, Inc. -- Mid-Cap Value* 0.75% 0.35% 1.10%
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
</Table>
(*) The Growth and Income and Mid-Cap Value Portfolios have each established
non-12b-1 service fee arrangements which are reflected under "Other
Expenses". The information in the chart above relating to the Mid-Cap
Value Portfolio has been restated to reflect the fees and expenses that
will be applicable during 2002. For the year 2001, Lord, Abbett & Co.
(Lord Abbett) voluntarily waived a portion of its management fees of
0.75% of average daily net assets of the Mid-Cap Value Portfolio and
subsidized a portion of the Mid-Cap Value Portfolio's expenses to the
extent necessary to maintain the Portfolio's "Other Expenses" at an
aggregate of 0.35% of its average daily net assets. Absent any waivers
and reimbursements the total annual gross fund expenses for the Mid-Cap
Value Portfolio would have been 1.20% for the year 2001. For the year
2002, Lord Abbett does not intend to waive its management fees for the
Mid-Cap Value Portfolio but has contractually agreed to continue to
reimburse a portion of the Mid-Cap Value Portfolio's expenses to the
extent necessary to maintain the Portfolio's "Other Expenses" at an
aggregate of 0.35% of its average daily net assets.
VAN KAMPEN LIFE INVESTMENT TRUST
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER REIMBURSEMENT OR WAIVER OF EXPENSES
FOR THE TRUST'S FISCAL YEAR ENDED DECEMBER 31, 2001)
<Table>
<Caption>
MANAGEMENT SERVICE (12B-1) OTHER TOTAL ANNUAL
PORTFOLIO FEE FEE EXPENSES EXPENSES
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Van Kampen LIT Comstock(1) 0.60% 0.25% 0.21% 1.06%
- ---------------------------------------------------------------------------------------------------------------------------
Van Kampen LIT Emerging Growth(2) 0.70% 0.25% 0.06% 1.01%
- ---------------------------------------------------------------------------------------------------------------------------
Van Kampen LIT Growth and Income(3) 0.60% 0.25% 0.15% 1.00%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Van Kampen Life Investment Trust Comstock Portfolio, Class II Shares.
(2) Van Kampen Life Investment Trust Emerging Growth Portfolio, Class II
Shares.
(3) Van Kampen Life Investment Trust Growth and Income Portfolio, Class II
Shares.
AMERICAN FUNDS INSURANCE SERIES
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER REIMBURSEMENT OR WAIVER OF EXPENSES
FOR THE TRUST'S FISCAL YEAR ENDED DECEMBER 31, 2001)
<Table>
<Caption>
MANAGEMENT SERVICE (12B-1) OTHER TOTAL ANNUAL
PORTFOLIO FEE FEE EXPENSES EXPENSES
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
American Funds Asset Allocation+ 0.43% 0.25% 0.02% 0.70%
- ---------------------------------------------------------------------------------------------------------------------------
American Funds Global Growth+ 0.66% 0.25% 0.04% 0.95%
- ---------------------------------------------------------------------------------------------------------------------------
American Funds Growth+ 0.37% 0.25% 0.01% 0.63%
- ---------------------------------------------------------------------------------------------------------------------------
American Funds Growth-Income+ 0.33% 0.25% 0.02% 0.60%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
+ Separate investment of American Funds Insurance Series, Class 2 Shares.
THE ABOVE PORTFOLIO EXPENSES WERE PROVIDED BY THE TRUSTS. WE HAVE NOT
INDEPENDENTLY VERIFIED THE ACCURACY OF THE INFORMATION.
6
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXAMPLES -- IF YOU DO NOT PARTICIPATE IN THE PRINCIPAL REWARDS PROGRAM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
You will pay the following expenses on a $1,000 investment in each Variable
Portfolio, assuming a 5% annual return on assets, Portfolio Expenses after
waiver, reimbursement or recoupment (assuming the waiver, reimbursement or
repayment 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 surrender the contract at the end of the stated time period and
you elect the optional EstatePlus benefit.
(c) you do not surrender the contract and no optional features are
elected.*
(d) you do not surrender the contract and you elect the optional
EstatePlus benefit.*
<Table>
<Caption>
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Capital Appreciation (a) $ 94 (a) $124 (a) $156 (a) $269
(b) $ 96 (b) $131 (b) $168 (b) $294
(c) $ 24 (c) $ 74 (c) $126 (c) $269
(d) $ 26 (d) $ 81 (d) $138 (d) $294
- --------------------------------------------------------------------------------------------------------------------
Government and Quality Bond (a) $ 93 (a) $120 (a) $150 (a) $258
(b) $ 95 (b) $128 (b) $163 (b) $283
(c) $ 23 (c) $ 70 (c) $120 (c) $258
(d) $ 25 (d) $ 78 (d) $133 (d) $283
- --------------------------------------------------------------------------------------------------------------------
Growth (a) $ 94 (a) $123 (a) $155 (a) $267
(b) $ 96 (b) $130 (b) $167 (b) $292
(c) $ 24 (c) $ 73 (c) $125 (c) $267
(d) $ 26 (d) $ 80 (d) $137 (d) $292
- --------------------------------------------------------------------------------------------------------------------
Natural Resources (a) $ 95 (a) $128 (a) $163 (a) $284
(b) $ 98 (b) $136 (b) $176 (b) $309
(c) $ 25 (c) $ 78 (c) $133 (c) $284
(d) $ 28 (d) $ 86 (d) $146 (d) $309
- --------------------------------------------------------------------------------------------------------------------
Aggressive Growth (a) $ 94 (a) $124 (a) $156 (a) $269
(b) $ 96 (b) $131 (b) $168 (b) $294
(c) $ 24 (c) $ 74 (c) $126 (c) $269
(d) $ 26 (d) $ 81 (d) $138 (d) $294
- --------------------------------------------------------------------------------------------------------------------
Alliance Growth (a) $ 93 (a) $121 (a) $151 (a) $259
(b) $ 95 (b) $128 (b) $163 (b) $284
(c) $ 23 (c) $ 71 (c) $121 (c) $259
(d) $ 25 (d) $ 78 (d) $133 (d) $284
- --------------------------------------------------------------------------------------------------------------------
Asset Allocation (a) $ 93 (a) $121 (a) $151 (a) $260
(b) $ 95 (b) $128 (b) $164 (b) $285
(c) $ 23 (c) $ 71 (c) $121 (c) $260
(d) $ 25 (d) $ 78 (d) $134 (d) $285
- --------------------------------------------------------------------------------------------------------------------
Blue Chip Growth (a) $ 95 (a) $127 (a) $161 (a) $279
(b) $ 97 (b) $134 (b) $173 (b) $304
(c) $ 25 (c) $ 77 (c) $131 (c) $279
(d) $ 27 (d) $ 84 (d) $143 (d) $304
- --------------------------------------------------------------------------------------------------------------------
Cash Management (a) $ 92 (a) $117 (a) $144 (a) $246
(b) $ 94 (b) $124 (b) $157 (b) $271
(c) $ 22 (c) $ 67 (c) $114 (c) $246
(d) $ 24 (d) $ 74 (d) $127 (d) $271
- --------------------------------------------------------------------------------------------------------------------
Corporate Bond (a) $ 93 (a) $121 (a) $152 (a) $261
(b) $ 96 (b) $129 (b) $164 (b) $286
(c) $ 23 (c) $ 71 (c) $122 (c) $261
(d) $ 26 (d) $ 79 (d) $134 (d) $286
- --------------------------------------------------------------------------------------------------------------------
Davis Venture Value (a) $ 94 (a) $124 (a) $156 (a) $270
(b) $ 96 (b) $131 (b) $169 (b) $295
(c) $ 24 (c) $ 74 (c) $126 (c) $270
(d) $ 26 (d) $ 81 (d) $139 (d) $295
- --------------------------------------------------------------------------------------------------------------------
"Dogs" of Wall Street (a) $ 93 (a) $122 (a) $154 (a) $265
(b) $ 96 (b) $130 (b) $166 (b) $290
(c) $ 23 (c) $ 72 (c) $124 (c) $265
(d) $ 26 (d) $ 80 (d) $136 (d) $290
- --------------------------------------------------------------------------------------------------------------------
Emerging Markets (a) $102 (a) $147 (a) $194 (a) $345
(b) $104 (b) $154 (b) $206 (b) $367
(c) $ 32 (c) $ 97 (c) $164 (c) $345
(d) $ 34 (d) $104 (d) $176 (d) $367
- --------------------------------------------------------------------------------------------------------------------
* We do not currently charge a surrender charge upon annuitization unless the contract is annuitized using the
Income Protector feature. We assess the applicable surrender charge upon annuitization under the Income Protector
feature assuming a full surrender of your contract.
</Table>
7
<Table>
<Caption>
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Federated Value (a) $ 94 (a) $124 (a) $156 (a) $270
(b) $ 96 (b) $131 (b) $169 (b) $295
(c) $ 24 (c) $ 74 (c) $126 (c) $270
(d) $ 26 (d) $ 81 (d) $139 (d) $295
- --------------------------------------------------------------------------------------------------------------------
Global Bond (a) $ 94 (a) $125 (a) $159 (a) $275
(b) $ 97 (b) $133 (b) $171 (b) $300
(c) $ 24 (c) $ 75 (c) $129 (c) $275
(d) $ 27 (d) $ 83 (d) $141 (d) $300
- --------------------------------------------------------------------------------------------------------------------
Global Equities (a) $ 95 (a) $127 (a) $162 (a) $281
(b) $ 98 (b) $135 (b) $174 (b) $306
(c) $ 25 (c) $ 77 (c) $132 (c) $281
(d) $ 28 (d) $ 85 (d) $144 (d) $306
- --------------------------------------------------------------------------------------------------------------------
Goldman Sachs Research (a) $100 (a) $141 (a) $186 (a) $328
(b) $102 (b) $149 (b) $198 (b) $351
(c) $ 30 (c) $ 91 (c) $156 (c) $328
(d) $ 32 (d) $ 99 (d) $168 (d) $351
- --------------------------------------------------------------------------------------------------------------------
Growth-Income (a) $ 92 (a) $118 (a) $147 (a) $252
(b) $ 95 (b) $126 (b) $160 (b) $277
(c) $ 22 (c) $ 68 (c) $117 (c) $252
(d) $ 25 (d) $ 76 (d) $130 (d) $277
- --------------------------------------------------------------------------------------------------------------------
Growth Opportunities (a) $ 96 (a) $131 (a) $168 (a) $294
(b) $ 99 (b) $139 (b) $181 (b) $318
(c) $ 26 (c) $ 81 (c) $138 (c) $294
(d) $ 29 (d) $ 89 (d) $151 (d) $318
- --------------------------------------------------------------------------------------------------------------------
High-Yield Bond (a) $ 93 (a) $122 (a) $154 (a) $265
(b) $ 96 (b) $130 (b) $166 (b) $290
(c) $ 23 (c) $ 72 (c) $124 (c) $265
(d) $ 26 (d) $ 80 (d) $136 (d) $290
- --------------------------------------------------------------------------------------------------------------------
International Diversified Equities (a) $ 99 (a) $138 (a) $180 (a) $316
(b) $101 (b) $145 (b) $192 (b) $340
(c) $ 29 (c) $ 88 (c) $150 (c) $316
(d) $ 31 (d) $ 95 (d) $162 (d) $340
- --------------------------------------------------------------------------------------------------------------------
International Growth and Income (a) $ 98 (a) $137 (a) $178 (a) $314
(b) $101 (b) $144 (b) $190 (b) $337
(c) $ 28 (c) $ 87 (c) $148 (c) $314
(d) $ 31 (d) $ 94 (d) $160 (d) $337
- --------------------------------------------------------------------------------------------------------------------
Marsico Growth (a) $ 96 (a) $131 (a) $169 (a) $295
(b) $ 99 (b) $139 (b) $181 (b) $319
(c) $ 26 (c) $ 81 (c) $139 (c) $295
(d) $ 29 (d) $ 89 (d) $151 (d) $319
- --------------------------------------------------------------------------------------------------------------------
MFS Growth and Income (a) $ 94 (a) $124 (a) $157 (a) $272
(b) $ 97 (b) $132 (b) $170 (b) $297
(c) $ 24 (c) $ 74 (c) $127 (c) $272
(d) $ 27 (d) $ 82 (d) $140 (d) $297
- --------------------------------------------------------------------------------------------------------------------
MFS Mid-Cap Growth (a) $ 95 (a) $126 (a) $159 (a) $276
(b) $ 97 (b) $133 (b) $172 (b) $301
(c) $ 25 (c) $ 76 (c) $129 (c) $276
(d) $ 27 (d) $ 83 (d) $142 (d) $301
- --------------------------------------------------------------------------------------------------------------------
MFS Total Return (a) $ 94 (a) $123 (a) $155 (a) $267
(b) $ 96 (b) $130 (b) $167 (b) $292
(c) $ 24 (c) $ 73 (c) $125 (c) $267
(d) $ 26 (d) $ 80 (d) $137 (d) $292
- --------------------------------------------------------------------------------------------------------------------
Putnam Growth (a) $ 95 (a) $126 (a) $159 (a) $276
(b) $ 97 (b) $133 (b) $172 (b) $301
(c) $ 25 (c) $ 76 (c) $129 (c) $276
(d) $ 27 (d) $ 83 (d) $142 (d) $301
- --------------------------------------------------------------------------------------------------------------------
Real Estate (a) $ 96 (a) $129 (a) $164 (a) $286
(b) $ 98 (b) $136 (b) $177 (b) $311
(c) $ 26 (c) $ 79 (c) $134 (c) $286
(d) $ 28 (d) $ 86 (d) $147 (d) $311
- --------------------------------------------------------------------------------------------------------------------
SunAmerica Balanced (a) $ 93 (a) $121 (a) $151 (a) $260
(b) $ 95 (b) $128 (b) $164 (b) $285
(c) $ 23 (c) $ 71 (c) $121 (c) $260
(d) $ 25 (d) $ 78 (d) $134 (d) $285
- --------------------------------------------------------------------------------------------------------------------
Technology (a) $101 (a) $144 (a) $190 (a) $337
(b) $103 (b) $152 (b) $203 (b) $360
(c) $ 31 (c) $ 94 (c) $160 (c) $337
(d) $ 33 (d) $102 (d) $173 (d) $360
- --------------------------------------------------------------------------------------------------------------------
</Table>
8
<Table>
<Caption>
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Telecom Utility (a) $ 95 (a) $127 (a) $161 (a) $279
(b) $ 97 (b) $134 (b) $173 (b) $304
(c) $ 25 (c) $ 77 (c) $131 (c) $279
(d) $ 27 (d) $ 84 (d) $143 (d) $304
- --------------------------------------------------------------------------------------------------------------------
Worldwide High Income (a) $ 97 (a) $134 (a) $174 (a) $305
(b) $100 (b) $142 (b) $186 (b) $329
(c) $ 27 (c) $ 84 (c) $144 (c) $305
(d) $ 30 (d) $ 92 (d) $156 (d) $329
- --------------------------------------------------------------------------------------------------------------------
Lord Abbett Series Fund, Inc. -- Growth and Income (a) $ 96 (a) $130 (a) $167 (a) $291
(b) $ 99 (b) $138 (b) $179 (b) $315
(c) $ 26 (c) $ 80 (c) $137 (c) $291
(d) $ 29 (d) $ 88 (d) $149 (d) $315
- --------------------------------------------------------------------------------------------------------------------
Lord Abbett Series Fund, Inc. -- Mid-Cap Value (a) $ 97 (a) $134 (a) $173 (a) $304
(b) $100 (b) $141 (b) $186 (b) $328
(c) $ 27 (c) $ 84 (c) $143 (c) $304
(d) $ 30 (d) $ 91 (d) $156 (d) $328
- --------------------------------------------------------------------------------------------------------------------
Van Kampen LIT Comstock, Class II Shares (a) $ 97 (a) $133 (a) $171 (a) $300
(b) $ 99 (b) $140 (b) $184 (b) $324
(c) $ 27 (c) $ 83 (c) $141 (c) $300
(d) $ 29 (d) $ 90 (d) $154 (d) $324
- --------------------------------------------------------------------------------------------------------------------
Van Kampen LIT Emerging Growth, Class II Shares (a) $ 96 (a) $131 (a) $169 (a) $295
(b) $ 99 (b) $139 (b) $181 (b) $319
(c) $ 26 (c) $ 81 (c) $139 (c) $295
(d) $ 29 (d) $ 89 (d) $151 (d) $319
- --------------------------------------------------------------------------------------------------------------------
Van Kampen LIT Growth and Income, Class II Shares (a) $ 96 (a) $131 (a) $168 (a) $294
(b) $ 99 (b) $139 (b) $181 (b) $318
(c) $ 26 (c) $ 81 (c) $138 (c) $294
(d) $ 29 (d) $ 89 (d) $151 (d) $318
- --------------------------------------------------------------------------------------------------------------------
American Funds Asset Allocation (a) $ 93 (a) $122 (a) $153 (a) $264
(b) $ 96 (b) $130 (b) $166 (b) $289
(c) $ 23 (c) $ 72 (c) $123 (c) $264
(d) $ 26 (d) $ 80 (d) $136 (d) $289
- --------------------------------------------------------------------------------------------------------------------
American Funds Global Growth (a) $ 96 (a) $130 (a) $166 (a) $289
(b) $ 98 (b) $137 (b) $178 (b) $314
(c) $ 26 (c) $ 80 (c) $136 (c) $289
(d) $ 28 (d) $ 87 (d) $148 (d) $314
- --------------------------------------------------------------------------------------------------------------------
American Funds Growth (a) $ 93 (a) $120 (a) $150 (a) $257
(b) $ 95 (b) $127 (b) $162 (b) $282
(c) $ 23 (c) $ 70 (c) $120 (c) $257
(d) $ 25 (d) $ 77 (d) $132 (d) $282
- --------------------------------------------------------------------------------------------------------------------
American Funds Growth-Income (a) $ 92 (a) $119 (a) $148 (a) $254
(b) $ 95 (b) $127 (b) $161 (b) $279
(c) $ 22 (c) $ 69 (c) $118 (c) $254
(d) $ 25 (d) $ 77 (d) $131 (d) $279
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
</Table>
9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXAMPLES -- IF YOU PARTICIPATE IN THE PRINCIPAL REWARDS PROGRAM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
You will pay the following expenses on a $1,000 investment in each Variable
Portfolio, assuming a 5% annual return on assets, Portfolio Expenses after
waiver, reimbursement or recoupment (assuming the waiver, reimbursement or
recoupment will continue for the period shown), if applicable and:
(a) you surrender the contract at the end of the stated time period and
no optional features are elected.
(b) you surrender the contract at the end of the stated period and you
elect the optional EstatePlus benefit.
(c) you do not surrender the contract and no optional features are
elected.*
(d) you do not surrender the contract and you elect the optional
EstatePlus benefit.*
<Table>
<Caption>
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Capital Appreciation (a) $114 (a) $155 (a) $188 (a) $275
(b) $117 (b) $163 (b) $201 (b) $300
(c) $ 24 (c) $ 75 (c) $128 (c) $275
(d) $ 27 (d) $ 83 (d) $141 (d) $300
- --------------------------------------------------------------------------------------------------------------
Government and Quality Bond (a) $113 (a) $152 (a) $183 (a) $263
(b) $116 (b) $159 (b) $196 (b) $289
(c) $ 23 (c) $ 72 (c) $123 (c) $263
(d) $ 26 (d) $ 79 (d) $136 (d) $289
- --------------------------------------------------------------------------------------------------------------
Growth (a) $114 (a) $154 (a) $187 (a) $272
(b) $117 (b) $162 (b) $200 (b) $297
(c) $ 24 (c) $ 74 (c) $127 (c) $272
(d) $ 27 (d) $ 82 (d) $140 (d) $297
- --------------------------------------------------------------------------------------------------------------
Natural Resources (a) $116 (a) $160 (a) $196 (a) $290
(b) $118 (b) $167 (b) $209 (b) $315
(c) $ 26 (c) $ 80 (c) $136 (c) $290
(d) $ 28 (d) $ 87 (d) $149 (d) $315
- --------------------------------------------------------------------------------------------------------------
Aggressive Growth (a) $114 (a) $155 (a) $188 (a) $275
(b) $117 (b) $163 (b) $201 (b) $300
(c) $ 24 (c) $ 75 (c) $128 (c) $275
(d) $ 27 (d) $ 83 (d) $141 (d) $300
- --------------------------------------------------------------------------------------------------------------
Alliance Growth (a) $113 (a) $152 (a) $183 (a) $264
(b) $116 (b) $160 (b) $196 (b) $290
(c) $ 23 (c) $ 72 (c) $123 (c) $264
(d) $ 26 (d) $ 80 (d) $136 (d) $290
- --------------------------------------------------------------------------------------------------------------
Asset Allocation (a) $113 (a) $152 (a) $184 (a) $265
(b) $116 (b) $160 (b) $197 (b) $291
(c) $ 23 (c) $ 72 (c) $124 (c) $265
(d) $ 26 (d) $ 80 (d) $137 (d) $291
- --------------------------------------------------------------------------------------------------------------
Blue Chip Growth (a) $115 (a) $158 (a) $194 (a) $285
(b) $118 (b) $166 (b) $206 (b) $310
(c) $ 25 (c) $ 78 (c) $134 (c) $285
(d) $ 28 (d) $ 86 (d) $146 (d) $310
- --------------------------------------------------------------------------------------------------------------
Cash Management (a) $112 (a) $148 (a) $177 (a) $251
(b) $115 (b) $156 (b) $189 (b) $277
(c) $ 22 (c) $ 68 (c) $117 (c) $251
(d) $ 25 (d) $ 76 (d) $129 (d) $277
- --------------------------------------------------------------------------------------------------------------
Corporate Bond (a) $114 (a) $153 (a) $184 (a) $267
(b) $116 (b) $160 (b) $197 (b) $292
(c) $ 24 (c) $ 73 (c) $124 (c) $267
(d) $ 26 (d) $ 80 (d) $137 (d) $292
- --------------------------------------------------------------------------------------------------------------
Davis Venture Value (a) $114 (a) $155 (a) $189 (a) $276
(b) $117 (b) $163 (b) $202 (b) $301
(c) $ 24 (c) $ 75 (c) $129 (c) $276
(d) $ 27 (d) $ 83 (d) $142 (d) $301
- --------------------------------------------------------------------------------------------------------------
"Dogs" of Wall Street (a) $114 (a) $154 (a) $186 (a) $271
(b) $117 (b) $161 (b) $199 (b) $296
(c) $ 24 (c) $ 74 (c) $126 (c) $271
(d) $ 27 (d) $ 81 (d) $139 (d) $296
- --------------------------------------------------------------------------------------------------------------
Emerging Markets (a) $122 (a) $179 (a) $228 (a) $351
(b) $125 (b) $186 (b) $240 (b) $375
(c) $ 32 (c) $ 99 (c) $168 (c) $351
(d) $ 35 (d) $106 (d) $180 (d) $375
- --------------------------------------------------------------------------------------------------------------
* We do not currently charge a surrender charge upon annuitization unless the contract is annuitized using the
Income Protector feature. We assess the applicable surrender charge upon annuitization under the Income
Protector feature assuming a full surrender of your contract.
</Table>
10
<Table>
<Caption>
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Federated Value (a) $114 (a) $155 (a) $189 (a) $276
(b) $117 (b) $163 (b) $202 (b) $301
(c) $ 24 (c) $ 75 (c) $129 (c) $276
(d) $ 27 (d) $ 83 (d) $142 (d) $301
- --------------------------------------------------------------------------------------------------------------
Global Bond (a) $115 (a) $157 (a) $192 (a) $281
(b) $118 (b) $165 (b) $204 (b) $306
(c) $ 25 (c) $ 77 (c) $132 (c) $281
(d) $ 28 (d) $ 85 (d) $144 (d) $306
- --------------------------------------------------------------------------------------------------------------
Global Equities (a) $116 (a) $159 (a) $195 (a) $287
(b) $118 (b) $166 (b) $207 (b) $312
(c) $ 26 (c) $ 79 (c) $135 (c) $287
(d) $ 28 (d) $ 86 (d) $147 (d) $312
- --------------------------------------------------------------------------------------------------------------
Goldman Sachs Research (a) $120 (a) $173 (a) $219 (a) $334
(b) $123 (b) $181 (b) $231 (b) $358
(c) $ 30 (c) $ 93 (c) $159 (c) $334
(d) $ 33 (d) $101 (d) $171 (d) $358
- --------------------------------------------------------------------------------------------------------------
Growth-Income (a) $113 (a) $150 (a) $180 (a) $257
(b) $115 (b) $157 (b) $193 (b) $283
(c) $ 23 (c) $ 70 (c) $120 (c) $257
(d) $ 25 (d) $ 77 (d) $133 (d) $283
- --------------------------------------------------------------------------------------------------------------
Growth Opportunities (a) $117 (a) $163 (a) $201 (a) $300
(b) $119 (b) $170 (b) $214 (b) $325
(c) $ 27 (c) $ 83 (c) $141 (c) $300
(d) $ 29 (d) $ 90 (d) $154 (d) $325
- --------------------------------------------------------------------------------------------------------------
High-Yield Bond (a) $114 (a) $154 (a) $186 (a) $271
(b) $117 (b) $161 (b) $199 (b) $296
(c) $ 24 (c) $ 74 (c) $126 (c) $271
(d) $ 27 (d) $ 81 (d) $139 (d) $296
- --------------------------------------------------------------------------------------------------------------
International Diversified Equities (a) $119 (a) $170 (a) $213 (a) $323
(b) $122 (b) $177 (b) $225 (b) $347
(c) $ 29 (c) $ 90 (c) $153 (c) $323
(d) $ 32 (d) $ 97 (d) $165 (d) $347
- --------------------------------------------------------------------------------------------------------------
International Growth and Income (a) $119 (a) $169 (a) $211 (a) $320
(b) $121 (b) $176 (b) $224 (b) $344
(c) $ 29 (c) $ 89 (c) $151 (c) $320
(d) $ 31 (d) $ 96 (d) $164 (d) $344
- --------------------------------------------------------------------------------------------------------------
Marsico Growth (a) $117 (a) $163 (a) $202 (a) $301
(b) $120 (b) $171 (b) $214 (b) $326
(c) $ 27 (c) $ 83 (c) $142 (c) $301
(d) $ 30 (d) $ 91 (d) $154 (d) $326
- --------------------------------------------------------------------------------------------------------------
MFS Growth and Income (a) $115 (a) $156 (a) $190 (a) $278
(b) $117 (b) $164 (b) $203 (b) $303
(c) $ 25 (c) $ 76 (c) $130 (c) $278
(d) $ 27 (d) $ 84 (d) $143 (d) $303
- --------------------------------------------------------------------------------------------------------------
MFS Mid-Cap Growth (a) $115 (a) $157 (a) $192 (a) $282
(b) $118 (b) $165 (b) $205 (b) $307
(c) $ 25 (c) $ 77 (c) $132 (c) $282
(d) $ 28 (d) $ 85 (d) $145 (d) $307
- --------------------------------------------------------------------------------------------------------------
MFS Total Return (a) $114 (a) $154 (a) $187 (a) $273
(b) $117 (b) $162 (b) $200 (b) $298
(c) $ 24 (c) $ 74 (c) $127 (c) $273
(d) $ 27 (d) $ 82 (d) $140 (d) $298
- --------------------------------------------------------------------------------------------------------------
Putnam Growth (a) $115 (a) $157 (a) $192 (a) $282
(b) $118 (b) $165 (b) $205 (b) $307
(c) $ 25 (c) $ 77 (c) $132 (c) $282
(d) $ 28 (d) $ 85 (d) $145 (d) $307
- --------------------------------------------------------------------------------------------------------------
Real Estate (a) $116 (a) $160 (a) $197 (a) $292
(b) $119 (b) $168 (b) $210 (b) $317
(c) $ 26 (c) $ 80 (c) $137 (c) $292
(d) $ 29 (d) $ 88 (d) $150 (d) $317
- --------------------------------------------------------------------------------------------------------------
SunAmerica Balanced (a) $113 (a) $152 (a) $184 (a) $265
(b) $116 (b) $160 (b) $197 (b) $291
(c) $ 23 (c) $ 72 (c) $124 (c) $265
(d) $ 26 (d) $ 80 (d) $137 (d) $291
- --------------------------------------------------------------------------------------------------------------
Technology (a) $121 (a) $176 (a) $224 (a) $344
(b) $124 (b) $184 (b) $236 (b) $367
(c) $ 31 (c) $ 96 (c) $164 (c) $344
(d) $ 34 (d) $104 (d) $176 (d) $367
- --------------------------------------------------------------------------------------------------------------
</Table>
11
<Table>
<Caption>
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Telecom Utility (a) $115 (a) $158 (a) $194 (a) $285
(b) $118 (b) $166 (b) $206 (b) $310
(c) $ 25 (c) $ 78 (c) $134 (c) $285
(d) $ 28 (d) $ 86 (d) $146 (d) $310
- --------------------------------------------------------------------------------------------------------------
Worldwide High Income (a) $118 (a) $166 (a) $207 (a) $311
(b) $121 (b) $174 (b) $219 (b) $335
(c) $ 28 (c) $ 86 (c) $147 (c) $311
(d) $ 31 (d) $ 94 (d) $159 (d) $335
- --------------------------------------------------------------------------------------------------------------
Lord Abbett Series Fund, Inc. -- Mid-Cap Value (a) $118 (a) $166 (a) $206 (a) $310
(b) $120 (b) $173 (b) $219 (b) $334
(c) $ 28 (c) $ 86 (c) $146 (c) $310
(d) $ 30 (d) $ 93 (d) $159 (d) $334
- --------------------------------------------------------------------------------------------------------------
Lord Abbett Series Fund, Inc. -- Growth and Income (a) $117 (a) $162 (a) $200 (a) $297
(b) $119 (b) $169 (b) $212 (b) $322
(c) $ 27 (c) $ 82 (c) $140 (c) $297
(d) $ 29 (d) $ 89 (d) $152 (d) $322
- --------------------------------------------------------------------------------------------------------------
Van Kampen LIT Comstock, Class II Shares (a) $118 (a) $165 (a) $204 (a) $306
(b) $120 (b) $172 (b) $217 (b) $330
(c) $ 28 (c) $ 85 (c) $144 (c) $306
(d) $ 30 (d) $ 92 (d) $157 (d) $330
- --------------------------------------------------------------------------------------------------------------
Van Kampen LIT Emerging Growth, Class II Shares (a) $117 (a) $163 (a) $202 (a) $301
(b) $120 (b) $171 (b) $214 (b) $326
(c) $ 27 (c) $ 83 (c) $142 (c) $301
(d) $ 30 (d) $ 91 (d) $154 (d) $326
- --------------------------------------------------------------------------------------------------------------
Van Kampen LIT Growth and Income, Class II Shares (a) $117 (a) $163 (a) $201 (a) $300
(b) $119 (b) $170 (b) $214 (b) $325
(c) $ 27 (c) $ 83 (c) $141 (c) $300
(d) $ 29 (d) $ 90 (d) $154 (d) $325
- --------------------------------------------------------------------------------------------------------------
American Funds Asset Allocation (a) $114 (a) $154 (a) $186 (a) $270
(b) $116 (b) $161 (b) $199 (b) $295
(c) $ 24 (c) $ 74 (c) $126 (c) $270
(d) $ 26 (d) $ 81 (d) $139 (d) $295
- --------------------------------------------------------------------------------------------------------------
American Funds Global Growth (a) $116 (a) $161 (a) $199 (a) $295
(b) $119 (b) $169 (b) $211 (b) $320
(c) $ 26 (c) $ 81 (c) $139 (c) $295
(d) $ 29 (d) $ 89 (d) $151 (d) $320
- --------------------------------------------------------------------------------------------------------------
American Funds Growth (a) $113 (a) $151 (a) $182 (a) $262
(b) $116 (b) $159 (b) $195 (b) $288
(c) $ 23 (c) $ 71 (c) $122 (c) $262
(d) $ 26 (d) $479 (d) $135 (d) $288
- --------------------------------------------------------------------------------------------------------------
American Funds Growth-Income (a) $113 (a) $150 (a) $181 (a) $259
(b) $115 (b) $158 (b) $194 (b) $285
(c) $ 23 (c) $ 70 (c) $121 (c) $259
(d) $ 25 (d) $ 78 (d) $134 (d) $285
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</Table>
12
EXPLANATION OF FEE TABLES AND EXAMPLES
1. The purpose of the Fee Tables is to show you the various expenses you would
incur directly and indirectly by investing in the contract. The tables
represent both fees at the separate account (contract level) as well as
portfolio company investment management expenses. Additional information on
the portfolio company fees can be found in the Trust prospectuses located
behind this prospectus.
2. For certain Variable Portfolios, the adviser, SunAmerica Asset Management
Corp., has voluntarily agreed to waive fees or reimburse certain expenses,
if necessary, to keep annual operating expenses at or below the lesser of
the maximum allowed by any applicable state expense limitations or the
following percentages of each Variable Portfolio's average net assets: Blue
Chip Growth 0.85%; Goldman Sachs Research 1.35%; Growth Opportunities 1.00%;
Marsico Growth 1.00% (recouping prior expense reimbursements). The adviser
also may voluntarily waive or reimburse additional amounts to increase a
Variable Portfolio's investment return. All waivers and/or reimbursements
may be terminated at any time. Furthermore, the adviser may recoup any
waivers or reimbursements within two years after such waivers or
reimbursements are granted, provided that the Variable Portfolio is able to
make such payment and remain in compliance with the foregoing expense
limitations.
3. In addition to the stated assumptions, the Examples also assume that an
insurance charge of 1.52% and no transfer fees were imposed. In calculating
the examples, we convert the contract maintenance fee of $35 to a percentage
using an assumed contract value of $40,000. Although premium taxes may apply
in certain states, they are not reflected in the Examples.
4. Examples reflecting participation in the Principal Rewards program reflect
the Principal Rewards surrender charge schedule, and a 2% upfront payment
enhancement.
5. THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
THE HISTORICAL ACCUMULATION UNIT VALUES ARE CONTAINED IN APPENDIX A -- CONDENSED
FINANCIAL INFORMATION.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
THE POLARIS(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: This means that you do not pay taxes on your earnings from
the annuity until you withdraw them.
- Death Benefit: If you die during the Accumulation Phase, the insurance
company pays a death benefit to your Beneficiary.
- Guaranteed Income: If elected, you receive a stream of income for your
lifetime, or another available period you select.
Tax-qualified retirement plans (e.g., IRAs, 401(k) or 403(b) plans) defer
payment of taxes on earnings until withdrawal. If you are considering funding a
tax-qualified retirement plan with an annuity, you should know that an annuity
does not provide any additional tax deferral treatment of earnings beyond the
treatment provided by the tax-qualified retirement plan itself. However,
annuities do provide other features and benefits which may be valuable to you.
You should fully discuss this decision with your financial representative.
This annuity was developed to help you contribute to your retirement savings.
This annuity works in two stages, the Accumulation Phase and the Income Phase.
Your contract is in the Accumulation Phase during the period when you make
payments into the contract. The Income Phase begins when you request us to start
making income payments to you out of the money accumulated in your contract.
The contract is called a "variable" annuity because it allows you to invest in
variable portfolios which, like mutual funds, have different investment
objectives and performance which varies. You can gain or lose money if you
invest in these Variable Portfolios. The amount of money you accumulate in your
contract depends on the performance of the Variable Portfolios in which you
invest. This contract currently offers 41 Variable Portfolios.
The contract also offers several fixed account options for varying time periods.
Fixed account options earn interest at a rate set and guaranteed by Anchor
National. If you allocate money to the fixed account options, the amount of
money that accumulates in the contract depends on the total interest credited to
the particular fixed account option(s) in which you invest.
For more information on investment options available under this contract SEE
INVESTMENT OPTIONS ON PAGE 16.
This annuity is designed to assist in contributing to retirement savings of
investors whose personal circumstances allow for a long-term investment time
horizon. As a function of the Internal Revenue Code ("IRC"), you may be assessed
a 10% federal tax penalty on the taxable portion of any withdrawal made prior to
your reaching age 59 1/2. Additionally, this contract provides that you will be
charged a withdrawal charge on each Purchase Payment withdrawn if that Purchase
Payment has not been invested in this contract for at least 7 years, or 9 years
if you elect to participate in the Principal Rewards Program. Because of these
potential penalties, you should fully discuss all of the benefits and risks of
this contract with your financial representative prior to purchase.
Anchor National Life Insurance Company (Anchor National, The Company, Us, We)
issues the PolarisII Variable Annuity.
13
When you purchase a PolarisII Variable Annuity, a contract exists between you
and Anchor National. The Company is a stock life insurance company organized
under the laws of the state of Arizona. Its principal place of business is 1
SunAmerica Center, Los Angeles, California 90067. The Company conducts life
insurance and annuity business in the District of Columbia and all states except
New York. Anchor National is an indirect, wholly owned subsidiary of American
International Group, Inc. ("AIG"), a Delaware corporation.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
PURCHASING A POLARIS(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.
The following chart shows the minimum initial and subsequent Purchase Payments
permitted under your contract. These amounts depend upon whether a contract is
Qualified or Non-qualified for tax purposes. FOR FURTHER EXPLANATION, SEE TAXES
ON PAGE 29.
<Table>
<Caption>
- -----------------------------------------------------------
Minimum
Minimum Initial Subsequent
Purchase Payment Purchase Payment
- -----------------------------------------------------------
Qualified $2,000 $250
- -----------------------------------------------------------
Non-Qualified $5,000 $500
- -----------------------------------------------------------
</Table>
We reserve the right to require company approval prior to accepting Purchase
Payments greater than $1,000,000. For contracts owned by a non-natural owner, we
reserve the right to require prior Company approval to accept Purchase Payments
greater than $250,000. Subsequent Purchase Payments that would cause total
Purchase Payments in all contracts issued by Anchor National to the same owner
to exceed these limits may also be subject to company pre-approval. We reserve
the right to change the amount at which pre-approval is required, at any time.
Also, the optional automatic payment plan allows you to make subsequent Purchase
Payments of as little as $20.00.
In general, we will not issue a Qualified contract to anyone who is age 70 1/2
or older, unless it is shown that the minimum distribution required by the IRS
is being made. In addition, we may not issue a contract to anyone age 91 or
older. You may not elect to participate in the Principal Rewards Program or
elect the EstatePlus benefit if you are age 81 or older at the time of contract
issue.
We allow spouses to jointly own this contract. However, the age of the older
spouse is used to determine the availability of any age driven benefits. The
addition of a joint owner after the contract has been issued is contingent upon
prior review and approval by the Company.
ALLOCATION OF PURCHASE PAYMENTS
We invest your Purchase Payments in the fixed and variable investment options
according to your instructions. If we receive a Purchase Payment without
allocation instructions, we will invest the money according to your last
allocation instructions. SEE INVESTMENT OPTIONS ON PAGE 16.
In order to issue your contract, we must receive your completed application,
Purchase Payment allocation instructions and any other required paperwork at our
principal place of business. We allocate your initial Purchase Payment within
two days of receiving it. If we do not have complete information necessary to
issue your contract, we will contact you. If we do not have the information
necessary to issue your contract within 5 business days we will send your money
back to you, or ask your permission to keep your money until we get the
information necessary to issue the contract.
PRINCIPAL REWARDS PROGRAM
If you elect to participate in the Principal Rewards program at contract issue,
we contribute an Upfront Payment Enhancement and, if applicable, a Deferred
Payment Enhancement to your contract in conjunction with each Purchase Payment
you invest during the life of your contract. If you elect to participate in this
program, all Purchase Payments are subject to a nine year withdrawal charge
schedule. SEE WITHDRAWAL CHARGES ON PAGE 25. These withdrawal charges may offset
the value of any bonus, if you make an early withdrawal. SEE EXPENSES ON PAGE
25. You may not elect to participate in this program if you are age 81 or older
at the time of contract issue. Amounts we contribute to your contract under this
program are considered earnings and are allocated to your contract as described
below.
Purchase Payments may not be invested in the 6-month or the 1-year Dollar Cost
Averaging (DCA) fixed accounts if you participate in the Principal Rewards
Program. However, you may use the 1-year fixed account option as a DCA source
account.
There may be scenarios in which due to negative market conditions and your
inability to remain invested over the long-term, a contract with the Principal
Rewards program may not perform as well as the contract without the feature.
Enhancement Levels
The Upfront Payment Enhancement Rate, Deferred Payment Enhancement Rate and
Deferred Payment Enhancement Date may be determined based on stated Enhancement
Levels. Each Enhancement Level is a range of dollar amounts which may correspond
to different enhancement rates and dates. Enhancement Levels may change from
time to time, at our sole discretion. The Enhancement Level applicable to your
initial Purchase Payment is determined by the amount of that initial Purchase
Payment. With respect to any subsequent Purchase Payments we determine your
Enhancement Level by adding your contract value on the date we receive each
subsequent Purchase Payment plus the amount of the subsequent Purchase Payment.
14
Upfront Payment Enhancement
An Upfront Payment Enhancement is an amount we add to your contract on the day
we receive a Purchase Payment. We calculate an Upfront Payment Enhancement
amount as a percentage (the "Upfront Payment Enhancement Rate") of each Purchase
Payment. The Upfront Payment Enhancement Rate will always be at least 2%. We
periodically review and establish the Upfront Payment Enhancement Rate, which
may increase or decrease at any time, but will never be less than 2%. The
applicable Upfront Payment Enhancement Rate is that which is in effect for any
applicable Enhancement Level, when we receive each Purchase Payment under your
contract. The Upfront Payment Enhancement amounts are allocated among the fixed
and variable investment options according to the current allocation instructions
in effect when we receive each Purchase Payment.
Deferred Payment Enhancement
A Deferred Payment Enhancement is an amount we may add to your contract on a
stated future date (the "Deferred Payment Enhancement Date") as a percentage of
Purchase Payments received. We refer to this percentage amount as the Deferred
Payment Enhancement Rate. We periodically review and establish the Deferred
Payment Enhancement Rates and Deferred Payment Enhancement Dates. The Deferred
Payment Enhancement Rate being offered may increase, decrease or be eliminated
by us, at any time. The Deferred Payment Enhancement Date, if applicable, may
change at any time. The applicable Deferred Payment Enhancement Date and
Deferred Payment Enhancement Rate are those which may be in effect for any
applicable Enhancement Level, when we receive each Purchase Payment under your
contract. Any applicable Deferred Payment Enhancement, when credited, is
allocated to the Cash Management Variable Portfolio.
If you withdraw any portion of a Purchase Payment, to which a Deferred Payment
Enhancement applies, prior to the Deferred Payment Enhancement Date, we reduce
the amount of the corresponding Deferred Payment Enhancement in the same
proportion that your withdrawal (and any fees and charges associated with such
withdrawals) reduces that Purchase Payment. For purposes of the Deferred Payment
Enhancement, withdrawals are assumed to be taken from earnings first, then from
Purchase Payments, on a first-in-first-out basis.
APPENDIX B shows how we calculate any applicable Deferred Payment Enhancement
amount.
We will not allocate any applicable Deferred Payment Enhancement to your
contract if any of the following circumstances occurs prior to the Deferred
Payment Enhancement Date:
- You surrender your contract;
- A death benefit is paid on your contract;
- You switch to the Income Phase of your contract; or
- You fully withdraw the corresponding Purchase Payment.
If Principal Rewards is elected and a Spousal Continuation of the contract
occurs, Deferred Payment Enhancements will be allocated as they would have been
under the original contract.
See your financial representative for information on the current Enhancement
Levels and Payment Enhancement rates.
90 Day Window
Contracts issued with the Principal Rewards feature after April 3, 2000, may be
eligible for a "Look-Back Adjustment." As of the 90th day after your contract
was issued, we will total your Purchase Payments made over those 90 days,
without considering any investment gain or loss in contract value on those
Purchase Payments. If your total Purchase Payments bring you to an Enhancement
Level which, as of the date we issued your contract, would have provided for a
higher Upfront and/or Deferred Payment Enhancement Rate on each Purchase
Payment, you will get the benefit of the Enhancement Rate(s) that were
applicable to that higher Enhancement Level at the time your contract was
issued. 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 and if applicable, to the Cash Management
Portfolio, for a Deferred Look Back Adjustment.
APPENDIX B provides an example of the 90 Day Window Provision.
The Principal Rewards Program may not be available in your state or through the
broker-dealer with which your financial advisor is affiliated. Please check with
your financial advisor regarding the availability of this program.
WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE PRINCIPAL REWARDS
PROGRAM (IN ITS ENTIRETY OR ANY COMPONENT) AT ANY TIME.
ACCUMULATION UNITS
When you allocate a Purchase Payment to the Variable Portfolios, we credit your
contract with Accumulation Units of the separate account. We base the number of
Accumulation Units you receive on the unit value of the Variable Portfolio as of
the day we receive your money if we receive it before 1 p.m. Pacific Standard
Time, or on the next business day's unit value if we receive your money after 1
p.m. Pacific Standard Time. The value of an Accumulation Unit goes up and down
based on the performance of the Variable Portfolios.
15
We calculate the value of an Accumulation Unit each day that the New York Stock
Exchange ("NYSE") is open as follows:
1. We determine the total value of money invested in a particular Variable
Portfolio;
2. We subtract from that amount all applicable contract charges; and
3. We divide this amount by the number of outstanding Accumulation Units.
We determine the number of Accumulation Units credited to your contract by
dividing the Purchase Payment and Payment Enhancement, if applicable, by the
Accumulation Unit value for the specific Variable Portfolio.
EXAMPLE (CONTRACTS WITHOUT PRINCIPAL REWARDS):
We receive a $25,000 Purchase Payment from you on Wednesday. You allocate
the money to the Global Bond Portfolio. We determine that the value of an
Accumulation Unit for the Global Bond Portfolio is $11.10 when the NYSE
closes on Wednesday. We then divide $25,000 by $11.10 and credit your
contract on Wednesday night with 2252.2523 Accumulation Units for the
Global Bond Portfolio.
EXAMPLE (CONTRACTS WITH PRINCIPAL REWARDS):
We receive a $25,000 Purchase Payment from you on Wednesday. You allocate
the money to the Global Bond Portfolio. If the Upfront Payment Enhancement
is 2.00% of your Purchase Payment, we would add an Upfront Payment
Enhancement of $500 to your contract. We determine that the value of an
Accumulation Unit for the Global Bond Portfolio is $11.10 when the NYSE
closes on Wednesday. We then divide $25,500 by $11.10 and credit your
contract on Wednesday with 2,297.2973 Accumulation Units for the Global
Bond Portfolio.
Performance of the Variable Portfolios and expenses under your contract affect
Accumulation Unit values. These factors cause the value of your contract to go
up and down.
FREE LOOK
You may cancel your contract within ten days after receiving it (or longer if
required by state law). We call this a "free look." To cancel, you must mail the
contract along with your free look request to our Annuity Service Center at P.O.
Box 54299, Los Angeles, California 90054-0299.
If you decide to cancel your contract during the free look period, we will
refund to you the value of your contract on the day we receive your request
minus the Free Look Payment Enhancement Deduction, if applicable. The Free Look
Payment Enhancement Deduction is equal to the lesser of (1) the value of any
Payment Enhancement(s) on the day we receive your free look request; or (2) the
Payment Enhancement amount(s), if any, which we allocated to your contract.
Thus, you receive any gain and we bear any loss on any Payment Enhancement(s) if
you decide to cancel your contract during the free look period.
Certain states require us to return your Purchase Payments upon a free look
request. Additionally, all contracts issued as an IRA require the full return of
Purchase Payments upon a free look. With respect to those contracts, we reserve
the right to put your money in the Cash Management Portfolio during the free
look period and will allocate your money according to your instructions at the
end of the applicable free look period. Currently, we do not put your money in
the Cash Management Portfolio during the free look period unless you allocate
your money to it. If your contract was issued in a state requiring return of
Purchase Payments or as an IRA and you cancel your contract during the free look
period, we return the greater of (1) your Purchase Payments; or (2) the value of
your contract minus the Free Look Payment Enhancement Deduction, if applicable.
At the end of the free look period, we allocate your money according to your
instructions.
EXCHANGE OFFERS
From time to time, we may offer to allow you to exchange an older variable
annuity issued by Anchor National or one of its affiliates, for a newer product
with more current features and benefits, also issued by Anchor National or one
of its affiliates. Such an exchange offer will be made in accordance with
applicable state and federal securities and insurance rules and regulations. We
will explain the specific terms and conditions of any such exchange offer at the
time the offer is made.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
INVESTMENT OPTIONS
- ----------------------------------------------------------------
- ----------------------------------------------------------------
VARIABLE PORTFOLIOS
The contract currently offers 41 Variable Portfolios. These Variable Portfolios
invest in shares of the American Funds Insurance Series, the Anchor Series
Trust, the SunAmerica Series Trust, Lord Abbett Series Fund, Inc. and the Van
Kampen Life Investment Trust, (the "Trusts"). Additional Variable Portfolios may
be available in the future. The Variable Portfolios operate similar to a mutual
fund but are only available through the purchase of certain insurance contracts.
SunAmerica Asset Management Corp., an indirect wholly owned subsidiary of AIG,
is the investment adviser to the Anchor and SunAmerica Series Trusts. Van Kampen
Asset Management Inc. is the investment advisor to the Van Kampen Life
Investment Trust. Lord, Abbett & Co. is the investment adviser to the Lord
Abbett Series Fund, Inc. Capital Research and Management Company is the
investment adviser to the American Funds Insurance Series. The Trusts may serve
as the underlying investment vehicles for other variable annuity contracts
issued by Anchor National, and other affiliated/unaffiliated insurance
companies. Neither Anchor National nor the Trusts believe that offering shares
of the Trusts in this manner disadvantages you. The adviser monitors the Trusts
for potential conflicts.
The Variable Portfolios along with their respective subadvisers are listed
below:
ANCHOR SERIES TRUST
Wellington Management Company, LLP serves as subadviser to the Anchor Series
Trust portfolios. Anchor Series Trust ("AST") has investment portfolios in
addition to those listed
16
below that are not available for investment under the contract.
SUNAMERICA SERIES TRUST
Various subadvisers provide investment advice for the SunAmerica Series Trust
portfolios. SunAmerica Series Trust ("SST") has investment portfolios in
addition to those listed below that are not available for investment under the
contract.
LORD ABBETT SERIES FUND, INC.
Lord, Abbett & Co. provides investment advice for the Lord Abbett Series Fund,
Inc. portfolios. Lord Abbett Series Fund, Inc. ("LAT") has investment portfolios
in addition to those listed below that are not available for investment under
the contract.
VAN KAMPEN LIFE INVESTMENT TRUST
Van Kampen Asset Management Inc. provides investment advice for the Van Kampen
Life Investment Trust ("VKT") portfolios. Van Kampen Life Investment Trust has
investment portfolios in addition to those listed here that are not available
for investment under the contract.
AMERICAN FUNDS INSURANCE SERIES
Capital Research and Management Company provides investment advice for the
American Funds Insurance Series ("AFT") portfolios. American Funds Insurance
Series has investment portfolios in addition to those listed here that are not
available for investment under the contract.
STOCKS:
MANAGED BY CAPITAL RESEARCH AND MANAGEMENT COMPANY
- American Funds Global Growth Portfolio AFT
- American Funds Growth Portfolio AFT
- American Funds Growth-Income Portfolio AFT
MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
- Alliance Growth Portfolio SST
- Global Equities Portfolio SST
- Growth-Income Portfolio SST
MANAGED BY DAVIS ADVISERS
- Davis Venture Value Portfolio SST
- Real Estate Portfolio SST
MANAGED BY FEDERATED INVESTORS L.P.
- Federated Value Portfolio SST
- Telecom Utility Portfolio SST
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
- Goldman Sachs Research Portfolio SST
MANAGED BY LORD, ABBETT & CO.
- Lord Abbett Series Fund, Inc. --
Growth and Income Portfolio LAT
- Lord Abbett Series Fund, Inc. --
Mid-Cap Value Portfolio LAT
MANAGED BY MARSICO CAPITAL MANAGEMENT, LLC
- Marsico Growth Portfolio SST
MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
- MFS Growth and Income Portfolio SST
- MFS Mid-Cap Growth Portfolio SST
MANAGED BY PUTNAM INVESTMENT MANAGEMENT INC.
- Emerging Markets Portfolio SST
- International Growth and Income Portfolio SST
- Putnam Growth Portfolio SST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP.
- Aggressive Growth Portfolio SST
- Blue Chip Growth Portfolio SST
- "Dogs" of Wall Street Portfolio SST
- Growth Opportunities Portfolio SST
MANAGED BY VAN KAMPEN/VAN KAMPEN ASSET MANAGEMENT INC.
- International Diversified Equities Portfolio SST
- Technology Portfolio SST
- Van Kampen LIT Comstock Portfolio, Class II Shares VKT
- Van Kampen LIT Emerging Growth Portfolio, Class II Shares VKT
- Van Kampen LIT Growth and Income Portfolio, Class II Shares VKT
MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP
- Capital Appreciation Portfolio AST
- Growth Portfolio AST
- Natural Resources Portfolio AST
BALANCED:
MANAGED BY CAPITAL RESEARCH AND MANAGEMENT COMPANY
- American Funds Asset Allocation Portfolio AFT
MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
- MFS Total Return Portfolio SST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP.
- SunAmerica Balanced Portfolio SST
MANAGED BY WM ADVISORS, INC.
- Asset Allocation Portfolio SST
BONDS:
MANAGED BY FEDERATED INVESTORS L.P.
- Corporate Bond Portfolio SST
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT INT'L.
- Global Bond Portfolio SST
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP.
- High-Yield Bond Portfolio SST
MANAGED BY VAN KAMPEN
- Worldwide High Income Portfolio SST
MANAGED BY WELLINGTON MANAGEMENT COMPANY LLP
- Government & Quality Bond Portfolio AST
CASH:
MANAGED BY BANC OF AMERICA CAPITAL MANAGEMENT, LLC
- Cash Management Portfolio SST
YOU SHOULD READ THE ATTACHED PROSPECTUSES FOR THE TRUSTS CAREFULLY. THESE
PROSPECTUSES CONTAIN DETAILED INFORMATION ABOUT THE VARIABLE PORTFOLIOS,
INCLUDING EACH VARIABLE PORTFOLIO'S INVESTMENT OBJECTIVE AND RISK FACTORS.
FIXED ACCOUNT OPTIONS
The contract also offers seven fixed account options. Anchor National will
guarantee the interest rate earned on money you allocate to any of these fixed
account options. We currently offer fixed account options for periods of one,
three, five, seven and ten years, which we call guarantee periods. If you do not
elect to participate in the Principal Rewards Program, you also have the option
of allocating your money to the 6-month DCA fixed account and/or the 1-year DCA
fixed account (the "DCA fixed accounts") which are available in conjunction with
the Dollar Cost Averaging Program. The 6-month and 1-year DCA fixed account
options are not available to you if you elect to participate in the Principal
Rewards Program. Please see the section on DOLLAR COST AVERAGING ON PAGE 19 for
additional
17
information about, including limitations on, and the availability and operation
of the DCA fixed accounts. The DCA fixed accounts are only available for new
Purchase Payments.
Each guarantee period may offer a different interest rate but will never be less
than an annual effective rate of 3%. Once established the rates for specified
payments do not change during the guarantee period. The guarantee period is that
period for which we credit the applicable rate (one, three, five, seven or ten
years).
There are three scenarios in which you may put money into the fixed account
options. In each scenario your money may be credited a different rate of
interest as follows:
- Initial Rate: Rate credited to amounts allocated to the fixed account
when you purchase your contract.
- Current Rate: Rate credited to subsequent amounts allocated to the fixed
account.
- Renewal Rate: Rate credited to money transferred from a fixed account or
a Variable Portfolio into a fixed account and to money remaining in a
fixed account after expiration of a guarantee period. (Renewal rates do
not apply to DCA fixed account options.)
Each of these rates may differ from one another. Once declared, the applicable
rate is guaranteed until the corresponding guarantee period expires.
When a guarantee period ends, you may leave your money in the same fixed
investment option (other than the DCA fixed accounts). You may also reallocate
your money to another fixed investment option (other than the DCA fixed
accounts) or to the Variable Portfolios. If you want to reallocate your money to
a different fixed account option or a Variable Portfolio, you must contact us
within 30 days after the end of the current interest guarantee period and
instruct us how to reallocate the money. We do not contact you. If we do not
hear from you, your money will remain in the same fixed account option, where it
will earn interest at the renewal rate then in effect for the fixed account
option.
The DCA fixed accounts also credit a fixed rate of interest. Interest is
credited to amounts allocated to the 6-month or 1-year DCA fixed account while
your investment is systematically transferred to the Variable Portfolios. The
rates applicable to the DCA fixed accounts may differ from each other and/or the
other fixed account options but will never be less than an annual effective rate
of 3%. See DOLLAR COST AVERAGING ON PAGE 19 for more information.
MARKET VALUE ADJUSTMENT ("MVA")
NOTE: MARKET VALUE ADJUSTMENTS APPLY TO THE 3, 5, 7 AND 10-YEAR FIXED ACCOUNT
OPTIONS ONLY. THESE OPTIONS ARE NOT AVAILABLE IN ALL STATES. PLEASE CONTACT YOUR
FINANCIAL REPRESENTATIVE FOR MORE INFORMATION.
If you take money out of the multi-year fixed account options before the end of
the guarantee period, we make a market value adjustment to your contract. We
refer to the adjustment as a market value adjustment (the "MVA"). The MVA
reflects any difference in the interest rate environment between the time you
place your money in the fixed account option and the time when you withdraw or
transfer that money. This adjustment can increase or decrease your contract
value. You have 30 days after the end of each guarantee period to reallocate
your funds without incurring any MVA.
We calculate the MVA by doing a comparison between current rates and the rate
being credited to you in the fixed account option. For the current rate we use a
rate being offered by us for a guarantee period that is equal to the time
remaining in the guarantee period from which you seek withdrawal. If we are not
currently offering a guarantee period for that period of time, we determine an
applicable rate by using a formula to arrive at a number between the interest
rates currently offered for the two closest periods available.
Generally, if interest rates drop between the time you put your money into the
fixed account options and the time you take it out, we credit a positive
adjustment to your contract. Conversely, if interest rates increase during the
same period, we post a negative adjustment to your contract.
Where the MVA is negative, we first deduct the adjustment from any money
remaining in the fixed account option. If there is not enough money in the fixed
account option to meet the negative deduction, we deduct the remainder from your
withdrawal. Where the MVA is positive, we add the adjustment to your withdrawal
amount.
The multi-year MVA fixed accounts are not available to Maryland and Washington
state policyholders.
Anchor National does not assess a MVA against withdrawals under the following
circumstances:
- If a withdrawal is made within 30 days after the end of a guarantee
period;
- If a withdrawal is made to pay contract fees and charges;
- To pay a death benefit; and
- Upon annuitization, if occurring on the latest Annuity Date.
APPENDIX C shows how we calculate the MVA.
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase you may transfer funds between the Variable
Portfolios and/or the fixed account options. Funds already in your contract
cannot be transferred into the DCA fixed accounts. You must transfer at least
$100. If less than $100 will remain in any Variable Portfolio after a transfer,
that amount must be transferred as well.
You may request transfers of your account value between the Variable Portfolios
and/or the fixed account options in writing or by telephone subject to our
rules. Additionally, you may access your account and request transfers between
Variable Portfolios and/or the fixed account options through SunAmerica's
website (http://www.sunamerica.com). We currently allow 15 free transfers per
contract per year. We charge $25 ($10 in Pennsylvania and Texas) for each
additional transfer in any contract year. Transfers resulting from your
participation in the DCA program count against your 15 free transfers per
contract year. However, transfers resulting from your participation in the
automatic asset rebalancing program do not count against your 15 free transfers.
We may accept transfer requests by telephone or the internet unless you tell us
not to on your contract application.
18
Additionally, you may request transfers over the internet unless you indicate
you do not wish your account to be traded over the internet. When receiving
instructions over the telephone or the internet, we follow appropriate
procedures to provide reasonable assurance that the transactions executed are
genuine. Thus, we are not responsible for any claim, loss or expense from any
error resulting from instructions received over the telephone or internet. If we
fail to follow our procedures, we may be liable for any losses due to
unauthorized or fraudulent instructions.
We may limit the number of transfers in any contract year or refuse any transfer
request for you or others invested in the contract if we believe that excessive
trading or a specific transfer request or group transfer requests may have a
detrimental effect on unit values or the share prices of the underlying Variable
Portfolios.
This product is not designed for professional "market timing" organizations or
other organizations or individuals engaged in trading strategies that seek to
benefit from short term price fluctuations or price irregularities by making
programming transfers, frequent transfers or transfers that are large in
relation to the total assets of the underlying portfolio in which the Variable
Portfolios invest. These marketing timing strategies are disruptive to the
underlying portfolios in which the Variable Portfolios invest and thereby
potentially harmful to investors. If we determine, in our sole discretion, that
your transfer patterns among the Variable Portfolios reflect a market timing
strategy, we reserve the right to take action to protect the other investors.
Such action may include but would not be limited to restricting the mechanisms
you can use to request transfers among the Variable Portfolios or imposing
penalty fees on such trading activity and/or otherwise restricting transfer
options in accordance with state and federal rules and regulations.
Certain transfers will be restricted in order to protect you from abusive or
disruptive trading activity. You can request up to 15 transfers per contract
each contract year via U.S. Mail, telephone, facsimile or internet. Any transfer
request in excess of 15 transfers per contract year must be submitted in writing
by U.S. Mail. Transfer requests sent by same day mail, overnight mail or courier
service will not be accepted. Transfer requests required to be submitted by U.S.
Mail can only be cancelled in a written request submitted via U.S. Mail. We will
process any transfer and/or cancellation request as of the day we receive it, if
received before 1:00 p.m. Pacific Standard Time ("PST"). If received after 1:00
p.m. PST, the request will be processed on the next business day. This policy
will apply beginning September 30, 2002 through your next contract anniversary
and then during each contract year thereafter. Transfers pursuant to Dollar Cost
Averaging or Automatic Asset Rebalancing programs will not count towards Our
calculation of when you have exceeded the 15 transfers for purposes of
restricting your transfer rights. However, Dollar Cost Averaging transfers do
count towards the 15 free transfers for purposes of determining when we will
begin charging you for transfers over 15. See Dollar Cost Averaging below.
Regardless of the number of transfers you have made, we will monitor and may
terminate your transfer privileges if we determine that you are engaging in a
pattern of transfers that reflects a market timing strategy or is potentially
harmful to other policy owners. Some of the factors we will consider include:
- the dollar amount of the transfer;
- the total assets of the Variable Portfolio involved in the transfer;
- the number of transfers completed in the current calendar quarter; or
- whether the transfer is part of a pattern of transfers to take advantage
of short-term market fluctuations or market inefficiencies.
For information regarding transfers during the Income Phase, SEE INCOME OPTIONS
ON PAGE 26.
We reserve the right to modify, suspend, waive or terminate these transfer
provisions at any time.
DOLLAR COST AVERAGING
The Dollar Cost Averaging ("DCA") program allows you to invest gradually in the
Variable Portfolios. Under the program you systematically transfer a set dollar
amount or percentage of portfolio value from one Variable Portfolio or the
1-year fixed account option (source accounts) to any other Variable Portfolio.
Transfers may be monthly or quarterly and count against your 15 free transfers
per contract year. You may change the frequency at any time by notifying us in
writing. The minimum transfer amount under the DCA program is $100, regardless
of the source account. Fixed account options are not available as target
accounts for the DCA program.
We also offer the 6-month and 1-year DCA fixed accounts exclusively to
facilitate this program. If you elected to participate in the Principal Rewards
Program, the 6-month and 1-year DCA fixed accounts are not available under your
contract. The DCA fixed accounts only accept new Purchase Payments. You cannot
transfer money already in your contract into these options. If you allocate new
Purchase Payments into a DCA fixed account, we transfer all your money allocated
to that account into the Variable Portfolios over the selected 6-month or 1-year
period. You cannot change the option or the frequency of transfers once
selected.
If allocated to the 6-month DCA fixed account, we transfer your money over a
maximum of 6 monthly transfers. We base the actual number of transfers on the
total amount allocated to the account. For example, if you allocate $500 to the
6-month DCA fixed account, we transfer your money over a period of five months,
so that each payment complies with the $100 per transfer minimum.
We determine the amount of the transfers from the 1-year DCA fixed account based
on
- the total amount of money allocated to the account, and
- the frequency of transfers selected.
For example, let's say you allocate $1,000 to the 1-year DCA fixed account. You
select monthly transfers. We completely transfer all of your money to the
selected investment options over a period of ten months.
19
You may terminate your DCA program at any time. If money remains in the DCA
fixed accounts, we transfer the remaining money to the 1-year fixed account
option, unless we receive different instructions from you. Transfers resulting
from a termination of this program do not count towards your 15 free transfers.
The DCA program is designed to lessen the impact of market fluctuations on your
investment. However, we cannot ensure that you will make a profit. When you
elect the DCA program, you are continuously investing in securities regardless
of fluctuating price levels. You should consider your tolerance for investing
through periods of fluctuating price levels.
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want to gradually move $750 each quarter from the Cash
Management Portfolio to the Aggressive Growth Portfolio over six quarters.
You set up dollar cost averaging and purchase Accumulation Units at the
following values:
<Table>
<Caption>
- ---------------------------------------------
ACCUMULATION UNITS
QUARTER UNIT PURCHASED
- ---------------------------------------------
1 $ 7.50 100
2 $ 5.00 150
3 $10.00 75
4 $ 7.50 100
5 $ 5.00 150
6 $ 7.50 100
- ---------------------------------------------
</Table>
You paid an average price of only $6.67 per Accumulation Unit over six
quarters, while the average market price actually was $7.08. By investing
an equal amount of money each month, you automatically buy more
Accumulation Units when the market price is low and fewer Accumulation
Units when the market price is high. This example is for illustrative
purposes only.
ASSET ALLOCATION REBALANCING PROGRAM
Earnings in your contract may cause the percentage of your investment in each
investment option to differ from your original allocations. The Automatic Asset
Rebalancing Program addresses this situation. At your election, we periodically
rebalance your investments in the Variable Portfolios to return your allocations
to their original percentages. Asset rebalancing typically involves shifting a
portion of your money out of an investment option with a higher return into an
investment option with a lower return.
At your request, rebalancing occurs on a quarterly, semiannual or annual basis.
Transfers made as a result of rebalancing do not count against your 15 free
transfers for the contract year.
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want your initial Purchase Payment split between two
Variable Portfolios. You want 50% in the Corporate Bond Portfolio and 50%
in the Growth Portfolio. Over the next calendar quarter, the bond market
does very well while the stock market performs poorly. At the end of the
calendar quarter, the Corporate Bond Portfolio now represents 60% of your
holdings because it has increased in value and the Growth Portfolio
represents 40% of your holdings. If you had chosen quarterly rebalancing,
on the last day of that quarter, we would sell some of your units in the
Corporate Bond Portfolio to bring its holdings back to 50% and use the
money to buy more units in the Growth Portfolio to increase those holdings
to 50%.
PRINCIPAL ADVANTAGE PROGRAM
The Principal Advantage Program allows you to invest in one or more Variable
Portfolios without putting your principal at direct risk. The program
accomplishes this by allocating your investment strategically between the fixed
account options and Variable Portfolios. You decide how much you want to invest
and approximately when you want a return of principal. We calculate how much of
your Purchase Payment to allocate to the particular fixed account option to
ensure that it grows to an amount equal to your total principal invested under
this program. We invest the rest of your principal in the Variable Portfolio(s)
of your choice.
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want to allocate a portion of your initial Purchase Payment
of $100,000 to the fixed account option. You want the amount allocated to
the fixed account option to grow to $100,000 in 7 years. If the 7-year
fixed account option is offering a 5% interest rate, we will allocate
$71,069 to the 7-year fixed account option to ensure that this amount will
grow to $100,000 at the end of the 7-year period. The remaining $28,931 may
be allocated among the Variable Portfolios, as determined by you, to
provide opportunity for greater growth.
VOTING RIGHTS
Anchor National is the legal owner of the Trusts' shares. However, when a
Variable Portfolio solicits proxies in conjunction with a vote of shareholders,
we must obtain your instructions on how to vote those shares. We vote all of the
shares we own in proportion to your instructions. This includes any shares we
own on our own behalf. Should we determine that we are no longer required to
comply with these rules, we will vote the shares in our own right.
SUBSTITUTION
We may amend your contract due to changes to the Variable Portfolios offered
under your contract. For example, we may offer new Variable Portfolios, delete
Variable Portfolios, or stop accepting allocations and/or investments in a
particular Variable Portfolio. We may move assets and re-direct future premium
allocations from one Variable Portfolio to another if we receive investor
approval through a proxy vote or SEC approval for a fund substitution. This
would occur if a Variable Portfolio is no longer an appropriate investment for
the contract, for reasons such as continuing substandard
20
performance, or for changes to the portfolio manager, investment objectives,
risks and strategies, or federal or state laws. The new Variable Portfolio
offered may have different fees and expenses. You will be notified of any
upcoming proxies or substitutions that affect your Variable Portfolio choices.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
ACCESS TO YOUR MONEY
- ----------------------------------------------------------------
- ----------------------------------------------------------------
You can access money in your contract in two ways:
- by making a partial or total withdrawal; and/or
- by receiving income payments during the Income Phase. SEE INCOME OPTIONS
ON PAGE 26.
Generally, we deduct a withdrawal charge applicable to any total or partial
withdrawal and a MVA if a partial withdrawal comes from the 3, 5, 7 or 10 year
fixed account options. If you withdraw your entire contract value, we also
deduct premium taxes and a contract maintenance fee. SEE EXPENSES ON PAGE 25.
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 in which there are Purchase Payments still subject to a
withdrawal charge we will recoup any withdrawal charges which would have been
due if your prior free withdrawal had not been free (except in the State of
Washington for contracts with Principal Rewards). Additionally, if you
participate in the Principal Rewards Program you will not receive your Deferred
Payment Enhancement if you fully withdraw a Purchase Payment or your contract
value prior to the corresponding Deferred Payment Enhancement Date. SEE
PRINCIPAL REWARDS PROGRAM ON PAGE 14.
Purchase payments, above and beyond the amount of your free withdrawal amount,
that are withdrawn prior to the end of the seventh or ninth year if you elect to
participate in the Principal Rewards Program will result in your paying a
penalty in the form of a surrender charge. The amount of the charge and how it
applies are discussed more fully below. SEE EXPENSES ON PAGE 25. You should
consider, before purchasing this contract, the effect this charge will have on
your investment if you need to withdraw more money than the free withdrawal
amount. You should fully discuss this decision with your financial
representative.
To determine your free withdrawal amount and your withdrawal charge, we refer to
two special terms. These are penalty free earnings and the total invested
amount.
The penalty-free earnings portion of your contract is simply your account value
less your total invested amount. The total invested amount is the total of all
Purchase Payments you have made into the contract less portions of some prior
withdrawals you made. The portions of prior withdrawals that reduce your total
invested amount are as follows:
- Free withdrawals in any year that were in excess of your penalty-free
earnings and were based on the part of the total invested amount that was
no longer subject to withdrawal charges at the time of the withdrawal,
and
- Any prior withdrawals (including withdrawal charges on those withdrawals)
of the total invested amount on which you already paid a surrender
penalty.
When you make a withdrawal, we assume that it is taken from penalty-free
earnings first, then from the total invested amount on a first-in, first-out
basis. This means that you can also access your Purchase Payments which are no
longer subject to a withdrawal charge before those Purchase Payments which are
still subject to the withdrawal charge.
During the first year after we issue your contract your free withdrawal amount
is the greater of (1) your penalty-free earnings; and (2) if you are
participating in the Systematic Withdrawal program, a total of 10% of your total
invested amount. If you are a Washington resident, you may withdraw during the
first contract year, the greater of (1); (2); or (3) interest earnings from the
amounts allocated to the fixed account options, not previously withdrawn.
After the first contract year, you can take out the greater of the following
amounts each year (1) your penalty-free earnings and any portion of your total
invested amount no longer subject to withdrawal charges; and (2) 10% of the
portion of your total invested amount that has been in your contract for at
least one year. If you are a Washington resident, your maximum free withdrawal
amount, after the first contract year, is the greater of (1); (2); or (3)
interest earnings from amounts allocated to the fixed account options, not
previously withdrawn.
Although we do not assess a withdrawal charge when you take a 10% penalty-free
withdrawal, we will proportionally reduce the amount of any corresponding
Deferred Payment Enhancement.
We calculate charges due on a total withdrawal on the day after we receive your
request and your contract. We return to you your contract value less any
applicable fees and charges.
The withdrawal charge percentage is determined by the age of the Purchase
Payment remaining in the contract at the time of the withdrawal. For the purpose
of calculating the withdrawal charge, any prior Free Withdrawal is not
subtracted from the total Purchase Payments still subject to withdrawal charges.
For example, you make an initial Purchase Payment of $100,000. For purposes of
this example we will assume a 0% growth rate over the life of the contract, no
subsequent Purchase Payments, and no Principal Rewards election. In contract
year 2, you take out your maximum free withdrawal of $10,000. After that free
withdrawal your contract value is $90,000. In contract year 5 you request a full
surrender of your contract. We will apply the following calculation,
A-(B x C)=D, where:
A=Your contract value at the time of your request for surrender ($90,000)
B=The amount of your Purchase Payments still subject to withdrawal charge
($100,000)
C=The withdrawal charge percentage applicable to the age of each Purchase
Payment (3%)[B x C=$3,000]
D=Your full surrender value ($87,000)
21
Under most circumstances, the partial withdrawal minimum is $1,000. We require
that the value left in any investment option be at least $100, after the
withdrawal. You must send a written withdrawal request. Unless you provide us
with different instructions, partial withdrawals will be made pro rata from each
Variable Portfolio and the fixed account option in which your contract is
invested.
Under certain Qualified plans, access to the money in your contract may be
restricted. Additionally, withdrawals made prior to age 59 1/2 may result in a
10% IRS penalty tax. SEE TAXES ON PAGE 29.
We may be required to suspend or postpone the payment of a withdrawal for any
period of time when: (1) the NYSE is closed (other than a customary weekend and
holiday closings); (2) trading with the NYSE is restricted; (3) an emergency
exists such that disposal of or determination of the value of shares of the
Variable Portfolios is not reasonably practicable; (4) the SEC, by order, so
permits for the protection of contract owners.
Additionally, we reserve the right to defer payments for a withdrawal from a
fixed account option. Such deferrals are limited to no longer than six months.
SYSTEMATIC WITHDRAWAL PROGRAM
During the Accumulation Phase, you may elect to receive periodic income payments
under the systematic withdrawal program. Under the program, you may choose to
take monthly, quarterly, semi-annual or annual payments from your contract.
Electronic transfer of these funds to your bank account is also available. The
minimum amount of each withdrawal is $100. If you are an Oregon resident, the
minimum withdrawal amount is $250 per withdrawal or an amount equal to your free
withdrawal amount. There must be at least $500 remaining in your contract at all
times. Withdrawals may be taxable and a 10% IRS penalty tax may apply if you are
under age 59 1/2. There is no additional charge for participating in this
program, although a withdrawal charge and/or MVA may apply.
The program is not available to everyone. Please check with our Annuity Service
Center, which can provide the necessary enrollment forms. We reserve the right
to modify, suspend or terminate this program at any time.
NURSING HOME WAIVER
If you are confined to a nursing home for 60 days or longer, we may waive the
withdrawal charge and/or market value adjustment on certain withdrawals prior to
the Annuity Date (not available in Texas). The waiver applies only to
withdrawals made while you are in a nursing home or within 90 days after you
leave the nursing home. Your contract prohibits use of this waiver during the
first 90 days after you purchase your contract. In addition, the confinement
period for which you seek the waiver must begin after you purchase your
contract.
In order to use this waiver, you must submit with your withdrawal request, the
following documents: (1) a doctor's note recommending admittance to a nursing
home; (2) an admittance form which shows the type of facility you entered; and
(3) a bill from the nursing home which shows that you met the 60 day confinement
requirement.
MINIMUM CONTRACT VALUE
Where permitted by state law, we may terminate your contract if both of the
following occur: (1) your contract is less than $500 as a result of withdrawals;
and (2) you have not made any Purchase Payments during the past three years. We
will provide you with sixty days written notice. At the end of the notice
period, we will distribute the contract's remaining value to you.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
DEATH BENEFIT
- ----------------------------------------------------------------
- ----------------------------------------------------------------
If you die during the Accumulation Phase of your contract, we pay a death
benefit to your Beneficiary. At the time you purchase your contract, you must
select one of the two death benefits options described below. Once selected, you
cannot change your death benefit option. You should discuss the available
options with your financial representative to determine which option is best for
you.
We will not pay a Deferred Payment Enhancement on a Purchase Payment if you die
before the corresponding Deferred Payment Enhancement Date. SEE PRINCIPAL
REWARDS PROGRAM ON PAGE 14.
We do not pay the death benefit if you die after you switch to the Income Phase.
However, if you die during the Income Phase, your Beneficiary receives any
remaining guaranteed income payments in accordance with the income option you
selected. SEE INCOME OPTIONS ON PAGE 26.
You name your Beneficiary. You may change the Beneficiary at any time, unless
you previously made an irrevocable Beneficiary designation.
We calculate and pay the death benefit when we receive all required paperwork
and satisfactory proof of death. We consider the following satisfactory proof of
death:
1. a certified copy of the death certificate; or
2. a certified copy of a decree of a court of competent jurisdiction as to
the finding of death; or
3. a written statement by a medical doctor who attended the deceased at the
time of death; or
4. any other proof satisfactory to us.
We may require additional proof before we pay the death benefit.
The death benefit must be paid within 5 years of the date of death unless the
Beneficiary elects to have it payable in the form of an income option. If the
Beneficiary elects an income option, it must be paid over the Beneficiary's
lifetime or for a period not extending beyond the Beneficiary's life expectancy.
Payments must begin within one year of your death.
If the Beneficiary is the spouse of a deceased owner, he or she can elect to
continue the Contract. SEE SPOUSAL CONTINUATION ON PAGE 24.
If a Beneficiary does not elect a specific form of pay out within 60 days of our
receipt of all required paperwork and satisfactory proof of death, we pay a lump
sum death benefit to the Beneficiary.
The term Net Purchase Payment is used frequently in explaining these death
benefit options. Net Purchase
22
Payments is an on-going calculation. It does not represent a contract value.
We define Net Purchase Payments as Purchase Payments less an Adjustment for each
withdrawal. If you have not taken any withdrawals from your contract, Net
Purchase Payments equals total purchase payments into your contract. To
calculate the Adjustment amount for the first withdrawal made under the
contract, we determine the percentage by which the withdrawal reduced the
contract value. For example, a $10,000 withdrawal from a $100,000 contract is a
10% reduction in value. This percentage is calculated by dividing the amount of
each withdrawal (and any applicable fees and charges) by the contract value
immediately before taking the withdrawal. The resulting percentage is then
multiplied by the amount of the total Purchase Payments and subtracted from the
amount of the total Purchase Payments on deposit at the time of the withdrawal.
The resulting amount is the initial Net Purchase Payment.
To arrive at the Net Purchase Payment calculation for subsequent withdrawals, we
determine the percentage by which the contract value is reduced by taking the
amount of the withdrawal in relation to the contract value immediately before
taking the withdrawal. We then multiply the Net Purchase Payment calculation as
determined prior to the withdrawal, by this percentage. We subtract that result
from the Net Purchase Payment calculation as determined prior to the withdrawal
to arrive at all subsequent Net Purchase Payment calculations.
The term "Gross Withdrawals" as used in describing the death benefit option
below is defined as withdrawals and the fees and charges applicable to those
withdrawals.
The information below describes the death benefits on contracts issued on or
after October 24, 2001:
OPTION 1 - PURCHASE PAYMENT ACCUMULATION OPTION
The death benefit is the greatest of:
1. the contract value at the time we receive all required paperwork and
satisfactory proof of death; or
2. Net Purchase Payments compounded at a 4% annual growth rate until the
date of death (3% growth rate if age 70 or older at the time of contract
issue) plus any Purchase Payments recorded after the date of death; and
reduced for any Gross Withdrawals in the same proportion that the Gross
Withdrawal reduced contract value on the date of the Gross Withdrawal;
or
3. the contract value on the seventh contract anniversary, plus any
Purchase Payments since the seventh contract anniversary; and reduced
for any Gross Withdrawals since the seventh contract anniversary in the
same proportion that each Gross Withdrawal reduced the contract value on
the date of the Gross Withdrawal, all compounded at a 4% annual growth
rate until the date of death (3% growth rate if age 70 or older at the
time of contract issue) plus any purchase payments recorded after the
date of death; and reduced for each Gross Withdrawal recorded after the
date of death in the same proportion that each Gross Withdrawal reduced
the contract value on the date of the Gross Withdrawal.
The Purchase Payment Accumulation option may not be available to Washington
state policyowners. Please check with your financial advisor regarding
availability.
OPTION 2 - MAXIMUM ANNIVERSARY OPTION
The death benefit is the greatest of:
1. the contract value at the time we receive all required paperwork and
satisfactory proof of death; or
2. Net Purchase Payments; or
3. the maximum anniversary value on any contract anniversary prior to your
81st birthday. The anniversary value equals the contract value on a
contract anniversary plus any Purchase Payments since that contract
anniversary; and reduced for any Gross Withdrawals since the contract
anniversary in the same proportion that each Gross Withdrawal reduced
the contract value on the date of the Gross Withdrawal.
If you are age 90 or older at the time of death and selected the Option 2 death
benefit, the death benefit will be equal to contract value at the time we
receive all required paperwork and satisfactory proof of death. Accordingly, you
do not get the advantage of Option 2 if:
- you are age 81 or older at the time of contract issue; or
- you are age 90 or older at the time of your death.
The death benefit options on contracts issued before October 24, 2001 would be
subject to a different calculation. Please see the Statement of Additional
Information for details.
ESTATEPLUS
EstatePlus is an optional benefit that, if selected, may increase your death
benefit amount.
The EstatePlus benefit may increase the death benefit amount. If you have
earnings in your contract at the time of death, we will add a percentage of
those earnings (the "EstatePlus Percentage"), subject to a maximum dollar amount
(the "Maximum EstatePlus Percentage"), to the death benefit payable. The
EstatePlus benefit, if any, is added to the death benefit payable under the
Purchase Payment Accumulation or Maximum Anniversary options. The contract year
of your death will determine the EstatePlus Percentage and the Maximum
EstatePlus Percentage.
23
The table below provides the details if you are age 69 or younger at the time we
issue your contract:
<Table>
<Caption>
- -------------------------------------------------------------
CONTRACT YEAR ESTATEPLUS MAXIMUM
OF DEATH PERCENTAGE ESTATEPLUS PERCENTAGE
- -------------------------------------------------------------
Years 0-4 25% of earnings 40% of Net Purchase
Payments
- -------------------------------------------------------------
Years 5-9 40% of earnings 65% of Net Purchase
Payments*
- -------------------------------------------------------------
Years 10+ 50% of earnings 75% of Net Purchase
Payments*
- -------------------------------------------------------------
</Table>
If you are between your 70th and 81st birthdays at the time we issue your
contract the table below shows the available EstatePlus benefit:
<Table>
<Caption>
- ---------------------------------------------------------------
MAXIMUM
CONTRACT YEAR ESTATEPLUS ESTATEPLUS
OF DEATH PERCENTAGE PERCENTAGE
- ---------------------------------------------------------------
All Contract Years 25% of earnings 40% of Net
Purchase Payments*
- ---------------------------------------------------------------
</Table>
* Purchase Payments received after the 5(th) contract anniversary must remain in
the contract for at least 6 full months to be included as part of Net Purchase
Payments for the purpose of the Maximum EstatePlus calculation.
What is the Contract Year of Death?
Contract Year of Death is the number of full 12 month periods beginning with the
date your contract is issued and ending on the date of death.
What is the EstatePlus Percentage Amount?
We determine the amount of the EstatePlus benefit, based on a percentage of the
earnings in your contract at the time of your death. For the purpose of this
calculation, earnings equals contract value minus Net Purchase Payments as of
the date of death. If the earnings amount is negative, no EstatePlus amount will
be added.
What is the Maximum EstatePlus Amount?
The EstatePlus benefit is subject to a maximum dollar amount. The maximum
EstatePlus amount is equal to a percentage of your Net Purchase Payments.
You must elect EstatePlus at the time of contract application. Once elected, you
may not terminate or change this election.
We assess a 0.25% fee for EstatePlus. On a daily basis we deduct this annual
charge from the average daily ending value of the assets you have allocated to
the Variable Portfolios.
EstatePlus is not available if you are age 81 or older at the time we issue your
contract. Furthermore, a Continuing Spouse cannot benefit from EstatePlus if
he/she is age 81 or older on the Continuation Date. SEE SPOUSAL CONTINUATION
BELOW. The EstatePlus benefit is not payable after the latest Annuity Date. You
may pay for the EstatePlus benefit and your beneficiary may never receive the
benefit if you live past the latest Annuity Date. SEE INCOME OPTIONS ON PAGE 26.
EstatePlus may not be available in your state or through the broker-dealer with
which your financial advisor is affiliated. See your financial advisor for
information regarding availability.
WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE ESTATEPLUS BENEFIT (IN
ITS ENTIRETY OR ANY COMPONENT AT ANY TIME) AT ANY TIME FOR PROSPECTIVELY ISSUED
CONTRACTS.
SPOUSAL CONTINUATION
If you are the original owner of the contract and the Beneficiary is your
spouse, your spouse may elect to continue the contract after your death. The
spouse becomes the new owner ("Continuing Spouse"). Generally, the contract and
its elected features, if any, remain the same. The Continuing Spouse is subject
to the same fees, charges and expenses applicable to the original owner of the
contract. A spousal continuation can only take place upon the death of the
original owner of the contract.
To the extent that the Continuing Spouse invests in the Variable Portfolios or
MVA fixed accounts, they will be subject to investment risk as was the original
owner.
Upon a spouse's continuation of the contract, we will contribute to the contract
value an amount by which the death benefit that would have been paid to the
beneficiary upon the death of the original owner exceeds the contract value
("Continuation Contribution"), if any. We calculate the Continuation
Contribution as of the date of the original owner's death. We will add the
Continuation Contribution as of the date we receive both the Continuing Spouse's
written request to continue the contract and proof of death of the original
owner in a form satisfactory to us ("Continuation Date"). The Continuation
Contribution is not considered a Purchase Payment for the purposes of any other
calculations except as explained in Appendix D.
Generally, the Continuing Spouse cannot change any contract provisions as the
new owner. However, on the Continuation Date, the Continuing Spouse may
terminate the original owner's election of EstatePlus. We will terminate
EstatePlus if the Continuing Spouse is age 81 or older on the Continuation Date.
If EstatePlus is terminated or if the Continuing Spouse dies after the latest
Annuity Date, no EstatePlus benefit will be payable. The age of the Continuing
Spouse on the Continuation Date and on the date of the Continuing Spouse's death
will be used in determining any future death benefits under the Contract. SEE
APPENDIX D
24
FOR A DISCUSSION OF THE DEATH BENEFIT CALCULATIONS AFTER A SPOUSAL CONTINUATION.
WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE SPOUSAL CONTINUATION
PROVISION (IN ITS ENTIRETY OR ANY COMPONENT) AT ANY TIME FOR PROSPECTIVELY
ISSUED CONTRACTS.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
EXPENSES
- ----------------------------------------------------------------
- ----------------------------------------------------------------
There are charges and expenses associated with your contract. These charges and
expenses reduce your investment return. We will not increase the contract
maintenance fee or the insurance and withdrawal charges under your contract.
However, the investment charges under your contract may increase or decrease.
Some states may require that we charge less than the amounts described below.
INSURANCE CHARGES
The Company deducts a mortality and expense risk charge in the amount of 1.52%
annually of the value of your contract invested in the Variable Portfolios. We
deduct the charge daily. This charge compensates the Company for the mortality
and expense risk and the costs of contract distribution assumed by the Company.
Generally, the mortality risks assumed by the Company arise from its contractual
obligations to make income payments after the Annuity Date and to provide a
death benefit. The expense risk assumed by the Company is that the costs of
administering the contracts and the Separate Account will exceed the amount
received from the administrative fees and charges assessed under the contract.
If these charges do not cover all of our expenses, we will pay the difference.
Likewise, if these charges exceed our expenses, we will keep the difference. The
Insurance Charge is expected to result in a profit. Profit may be used for any
legitimate cost/expense including distribution, depending upon market
conditions.
OTHER REVENUE
We may receive compensation of up to 0.25% from the investment advisers of
certain of the underlying investments of the Trusts for services related to the
availability of those underlying investments of the Trusts in the Contract.
WITHDRAWAL CHARGES
The contract provides a free withdrawal amount every year. SEE ACCESS TO YOUR
MONEY ON PAGE 21. If you take money out in excess of the free withdrawal amount,
you may incur a withdrawal charge. You may also incur a withdrawal charge upon a
full surrender.
We apply a withdrawal charge against each Purchase Payment you put into the
contract. After a Purchase Payment has been in the contract for 7 complete
years, or 9 years if you elected to participate in the Principal Rewards
Program, no withdrawal charge applies. The withdrawal charge equals a percentage
of the Purchase Payment you take out of the contract. The withdrawal charge
percentage declines each year a Purchase Payment is in the contract. The two
withdrawal charge schedules are as follows:
WITHDRAWAL CHARGE WITHOUT THE PRINCIPAL REWARDS PROGRAM
<Table>
<Caption>
- -----------------------------------------------------------------------------------------
YEAR 1 2 3 4 5 6 7 8
- -----------------------------------------------------------------------------------------
WITHDRAWAL
CHARGE 7% 6% 5% 4% 3% 2% 1% 0%
- -----------------------------------------------------------------------------------------
</Table>
WITHDRAWAL CHARGE WITH THE PRINCIPAL REWARDS PROGRAM
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------
YEAR 1 2 3 4 5 6 7 8 9 10
- -----------------------------------------------------------------------------------------------------------
WITHDRAWAL
CHARGE 9% 9% 8% 7% 6% 5% 4% 3% 2% 0%
- -----------------------------------------------------------------------------------------------------------
</Table>
When calculating the withdrawal charge, we treat withdrawals as coming first
from the Purchase Payments that have been in your contract the longest. However,
for tax purposes, your withdrawals are considered earnings first, then Purchase
Payments.
These higher potential withdrawal charges may compensate us for the expenses
associated with the Principal Rewards Program.
The Principal Rewards feature of this contract is designed to reward long term
investing. We expect that if you remain committed to this investment over the
long term, we will profit as a result of fees charged over the life of your
contract. However, neither the mortality and expense fees, distribution
expenses, contract maintenance fee nor the investment management fees are higher
on the Principal Rewards version, than the contract without an election of the
bonus feature.
Whenever possible, we deduct the withdrawal charge from the money remaining in
your contract. If you withdraw all of your contract value, we deduct any
applicable withdrawal charges from the amount withdrawn.
We will not assess a withdrawal charge for money withdrawn to pay a death
benefit or to pay contract fees or charges. We will not assess a withdrawal
charge when you switch to the Income Phase, except when you elect to receive
income payments using the Income Protector feature. If you elect to receive
income payments using the Income Protector feature, we assess the entire
withdrawal charge applicable to Purchase Payments remaining in your contract
when calculating your income benefit base. SEE INCOME OPTIONS ON PAGE 26.
25
Withdrawals made prior to age 59 1/2 may result in tax penalties. SEE TAXES ON
PAGE 29.
INVESTMENT CHARGES
INVESTMENT MANAGEMENT FEES
Charges are deducted from your Variable Portfolios for the advisory and other
expenses of the Variable Portfolios. THE FEE TABLES LOCATED AT PAGE 5 illustrate
these charges and expenses. For more detailed information on these investment
charges, refer to the prospectuses for the Trusts which are attached.
12B-1 FEES
Shares of certain trusts may be subject to fees imposed under a distribution
and/or servicing plan adopted pursuant to Rule 12b-1 under the Investment
Company Act of 1940. For SunAmerica Series Trust ("SST"), under the distribution
plan which is applicable to all classes of shares, recaptured brokerage
commissions will be used to make payments to SunAmerica Capital Services, Inc.,
the SST's Distributor, to pay for various distribution activities on behalf of
the SST Portfolios. These distribution fees will not increase the cost of your
investment or affect your return.
In addition, the 0.25% fee applicable to Class II shares of the Van Kampen Life
Investment Trust and Class 2 shares of the American Funds Insurance Series is
generally used to pay financial intermediaries for services provided over the
life of your contract.
For more detailed information on these Investment Charges, refer to the
prospectuses for the American Funds Insurance Series, Anchor Series Trust,
SunAmerica Series Trust, Lord Abbett Series Fund, Inc. and Van Kampen Life
Investment Trust.
CONTRACT MAINTENANCE FEE
During the Accumulation Phase, we subtract a contract maintenance fee from your
account once per year. This charge compensates us for the cost of contract
administration. We deduct the $35 contract maintenance fee ($30 in North Dakota)
from your account value on your contract anniversary. If you withdraw your
entire contract value, we deduct the fee from that withdrawal.
If your contract value is $50,000 or more on your contract anniversary date, we
will waive the charge. This waiver is subject to change without notice.
TRANSFER FEE
We currently permit 15 free transfers between investment options each contract
year. We charge you $25 for each additional transfer that contract year ($10 in
Pennsylvania and Texas). SEE INVESTMENT OPTIONS ON PAGE 16.
OPTIONAL ESTATEPLUS FEE
Please see page 23 for more information on the EstatePlus fee.
PREMIUM TAX
Certain states charge the Company a tax on the premiums you pay into the
contract. We deduct from your contract these premium tax charges. Currently we
deduct the charge for premium taxes when you take a full withdrawal or begin the
Income Phase of the contract. In the future, we may assess this deduction at the
time you put Purchase Payment(s) into the contract or upon payment of a death
benefit.
APPENDIX E provides more information about premium taxes.
INCOME TAXES
We do not currently deduct income taxes from your contract. We reserve the right
to do so in the future.
REDUCTION OR ELIMINATION OF CHARGES AND EXPENSES, AND ADDITIONAL AMOUNTS
CREDITED
Sometimes sales of the contracts to groups of similarly situated individuals may
lower our administrative and/or sales expenses. We reserve the right to reduce
or waive certain charges and expenses when this type of sale occurs. In
addition, we may also credit additional interest to policies sold to such
groups. We determine which groups are eligible for such treatment. Some of the
criteria we evaluate to make a determination are: size of the group; amount of
expected Purchase Payments; relationship existing between us and prospective
purchaser; nature of the purchase; length of time a group of contracts is
expected to remain active; purpose of the purchase and whether that purpose
increases the likelihood that our expenses will be reduced; and/or any other
factors that we believe indicate that administrative and/or sales expenses may
be reduced.
Anchor National may make such a determination regarding sales to its employees,
it affiliates' employees and employees of currently contracted broker-dealers;
its registered representatives and immediate family members of all of those
described.
We reserve the right to change or modify any such determination or the treatment
applied to a particular group, at any time.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
INCOME OPTIONS
- ----------------------------------------------------------------
- ----------------------------------------------------------------
ANNUITY DATE
During the Income Phase, we use the money accumulated in your contract to make
regular income payments to you. You may switch to the Income Phase any time
after your second contract anniversary. You select the month and year you want
income payments to begin. The first day of that month is the Annuity Date. You
may change your Annuity Date, so long as
26
you do so at least seven days before the income payments are scheduled to begin.
Once you begin receiving income payments, you cannot change your income option.
Except as indicated under Option 5 below, once you begin receiving income
payments, you cannot otherwise access your money through a withdrawal or
surrender.
If you switch to the Income Phase prior to a Deferred Payment Enhancement Date,
we will not allocate the corresponding Deferred Payment Enhancement to your
contract. SEE PRINCIPAL REWARDS PROGRAM ON PAGE 14.
Income payments must begin on or before your 95th birthday or on your tenth
contract anniversary, whichever occurs later (latest Annuity Date). If you do
not choose an Annuity Date, your income payments will automatically begin on
this date. Certain states may require your income payments to start earlier.
If the Annuity Date is past your 85th birthday, your contract could lose its
status as an annuity under Federal tax laws. This may cause you to incur adverse
tax consequences.
In addition, most Qualified contracts require you to take minimum distributions
after you reach age 70 1/2. SEE TAXES ON PAGE 29.
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 based on joint lives, we pay according
to Option 3 for a period of 10 years.
We base our calculation of income payments on the life of the Annuitant and the
annuity rates set forth in your contract. As the contract owner, you may change
the Annuitant at any time prior to the Annuity Date. You must notify us if the
Annuitant dies before the Annuity Date and designate a new Annuitant.
OPTION 1 - LIFE INCOME ANNUITY
This option provides income payments for the life of the Annuitant. Income
payments stop when the Annuitant dies.
OPTION 2 - JOINT AND SURVIVOR LIFE ANNUITY
This option provides income payments for the life of the Annuitant and for the
life of another designated person. Upon the death of either person, we will
continue to make income payments during the lifetime of the survivor. Income
payments stop when the survivor dies.
OPTION 3 - JOINT AND SURVIVOR LIFE ANNUITY WITH 10 OR 20 YEARS GUARANTEED
This option is similar to Option 2 above, with an additional guarantee of
payments for at least 10 or 20 years. If the Annuitant and the survivor die
before all of the guaranteed income payments have been made, the remaining
payments are made to the Beneficiary under your contract.
OPTION 4 - LIFE ANNUITY WITH 10 OR 20 YEARS GUARANTEED
This option is similar to Option 1 above. In addition, this option provides a
guarantee that income payments will be made for at least 10 or 20 years. You
select the number of years. If the Annuitant dies before all guaranteed income
payments are made, the remaining income payments go to the Beneficiary under
your contract.
OPTION 5 - INCOME FOR A SPECIFIED PERIOD
This option provides income payments for a guaranteed period ranging from 5 to
30 years. If the Annuitant dies before all the guaranteed income payments are
made, the remaining income payments are made to the Beneficiary under your
contract. Additionally, if variable income payments are elected under this
option, you (or the Beneficiary under the contract if the Annuitant dies prior
to all guaranteed income payments being made) may redeem any remaining
guaranteed variable income payments after the Annuity Date. The amount available
upon such redemption would be the discounted present value of any remaining
guaranteed variable income payments. If provided for in your contract, any
applicable withdrawal charge will be deducted from the discounted value as if
you fully surrendered your contract.
The value of an Annuity Unit, regardless of the option chosen, takes into
account the mortality and expense risk charge. Since Option 5 does not contain
an element of mortality risk, no benefit is derived from this charge.
For more information regarding income options using the Income Protection
feature, please see below.
Please read the Statement of Additional Information ("SAI") for a more detailed
discussion of the income options.
FIXED OR VARIABLE INCOME PAYMENTS
You can choose income payments that are fixed, variable or both. Unless
otherwise elected, if at the date when income payments begin you are invested in
the Variable Portfolios only, your income payments will be variable and if your
money is only in fixed accounts at that time, your income payments will be fixed
in amount. Further, if you are invested in both fixed and variable investment
options when income payments begin, your payments will be fixed and variable
unless otherwise elected. If income payments are fixed, Anchor National
guarantees the amount of each payment. If the income payments are variable the
amount is not guaranteed.
INCOME PAYMENTS
We make income payments on a monthly, quarterly, semiannual or annual basis. You
instruct us to send you a check or to have the payments directly deposited into
your bank account. If state law allows, we distribute annuities with a contract
value of $5,000 or less in a lump sum. Also, if the selected income option
27
results in income payments of less than $50 per payment, we may decrease the
frequency of payments, state law allowing.
If you are invested in the Variable Portfolios after the Annuity date, your
income payments vary depending on four things:
- for life options, your age when payments begin; and
- the value of your contract in the Variable Portfolios on the Annuity
Date; and
- the 3.5% assumed investment rate used in the annuity table for the
contract; and
- the performance of the Variable Portfolios in which you are invested
during the time you receive income payments.
If you are invested in both the fixed account options and the Variable
Portfolios after the Annuity Date, the allocation of funds between the fixed and
variable options also impacts the amount of your annuity payments.
TRANSFERS DURING THE INCOME PHASE
During the Income Phase, one transfer per month is permitted between the
Variable Portfolios. No other transfers are allowed during the Income Phase.
DEFERMENT OF PAYMENTS
We may defer making fixed payments for up to six months, or less if required by
law. Interest is credited to you during the deferral period.
THE INCOME PROTECTOR FEATURE
The Income Protector feature is a future "safety net" which offers you the
ability to receive a guaranteed fixed minimum retirement income when you switch
to the Income Phase. With the Income Protector feature you know the level of
minimum income that will be available to you upon annuitization, regardless of
fluctuating market conditions.
The Income Protector is a standard feature of your contract. There is no
additional charge associated with this feature. This feature may not be
available in your state. Check with your financial representative regarding
availability.
Other options were previously available under the Income Protector feature.
Generally, if you purchased your contract between November 2, 1998 and March 31,
1999 and the Income Protector feature was available in your state at that time,
the other provisions continue to apply to your contract. Please contact our
Annuity Service Center for more information.
We reserve the right to modify, suspend or terminate the Income Protector
feature at any time.
HOW WE DETERMINE THE AMOUNT OF YOUR MINIMUM GUARANTEED INCOME
We base the amount of minimum income available to you if you elect to receive
income payments using the Income Protector feature upon a calculation we call
the income benefit base.
The income benefit base is only a calculation. It does not represent a contract
value, nor does it guarantee performance of the Variable Portfolios in which you
invest.
Your income benefit base increases if you make subsequent Purchase Payments and
decreases if you withdraw money from your contract. The exact income benefit
base calculation is equal to (a) plus (b) minus (c) where:
(a) is equal to, for the first year of calculation, your initial Purchase
Payment, or for each subsequent year of calculation, the income benefit
base on the prior contract anniversary, and;
(b) is equal to the sum of all subsequent Purchase Payments made into the
contract since the last contract anniversary, and;
(c) is equal to all withdrawals and applicable fees and charges since the
last contract anniversary, in an amount proportionate to the amount by
which such withdrawals decreased your contract value.
ELECTING TO RECEIVE INCOME PAYMENTS
You may elect to begin the Income Phase of your contract using the Income
Protector feature ONLY within the 30 days after the seventh or later contract
anniversary.
The contract anniversary prior to your election to begin receiving income
payments is your income benefit date. This is the date as of which we calculate
your income benefit base to use in determining your guaranteed minimum fixed
retirement income. Your final income benefit base is equal to (a) minus (b)
where:
(a) is equal to your income benefit base as of your income benefit date,
and;
(b) is equal to any partial withdrawals of contract value and any charges
applicable to those withdrawals and any withdrawal charges otherwise
applicable, calculated as if you fully surrender your contract as the
income benefit date, and any applicable premium taxes.
To arrive at the minimum guaranteed retirement income available to you we apply
to your final income benefit base 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 that income annually, semi-annually quarterly or monthly
for the time guaranteed under your selected income option. The income options
28
available when using the income protector feature to receive your retirement
income are:
- Life Annuity with 10 Years Guaranteed, or
- Joint and Survivor Life Annuity with 20 Years Guaranteed
At the time you elect to begin receiving income payments, we will calculate your
income payments using both your income benefit base and your contract value. We
will use the same income option for each calculation, however, the annuity
factors used to calculate your income under the Income Protector feature will be
different. You will receive whichever provides a greater stream of income. If
you elect to receive income payments using the Income Protector feature your
income payments will be fixed in amount. You are not required to use the Income
Protector feature to receive income payments.
If a Spousal Beneficiary elects to continue the contract on the death of the
original owner, the Income Protector feature will continue. The Continuation
Contribution is not a purchase payment and therefore will not impact the income
benefit base calculation. The waiting period before electing to use the Income
Protector feature will be counted from the original issue date of the contract.
NOTE TO QUALIFIED CONTRACT HOLDERS
Qualified contracts generally require that you select an income option which
does not exceed your life expectancy. That restriction, if it applies to you,
may limit your ability to use the Income Protector feature.
You may wish to consult your tax advisor for information concerning your
particular circumstances. SEE APPENDIX F FOR AN EXAMPLE OF THE OPERATION OF THE
INCOME PROTECTOR FEATURE.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
TAXES
- ----------------------------------------------------------------
- ----------------------------------------------------------------
NOTE: WE PREPARED THE FOLLOWING INFORMATION ON TAXES AS A GENERAL DISCUSSION OF
THE SUBJECT. THIS INFORMATION ADDRESSES GENERAL FEDERAL TAXATION MATTERS, AND
GENERALLY DOES NOT ADDRESS STATE TAXATION ISSUES OR QUESTIONS. IT IS NOT TAX
ADVICE. WE CAUTION YOU TO SEEK COMPETENT TAX ADVICE ABOUT YOUR OWN
CIRCUMSTANCES. WE DO NOT GUARANTEE THE TAX STATUS OF YOUR ANNUITY. TAX LAWS
CONSTANTLY CHANGE, THEREFORE, WE CANNOT GUARANTEE THAT THE INFORMATION CONTAINED
HEREIN IS COMPLETE AND/OR ACCURATE.
ANNUITY CONTRACTS IN GENERAL
The Internal Revenue Code ("IRC") provides for special rules regarding the tax
treatment of annuity contracts Generally, taxes on the earnings in your annuity
contract are deferred until you take the money out. Qualified retirement
investments that satisfy specific tax and ERISA requirements automatically
provide tax deferral regardless of whether the underlying contract is an
annuity, a trust, or a custodial account. Different rules apply depending on how
you take the money out and whether your contract is Qualified or Non-Qualified.
If you do not purchase your contract under a pension plan, a specially sponsored
employer program or an individual retirement account, your contract is referred
to as a Non-Qualified contract. A Non-Qualified contract receives different tax
treatment than a Qualified contract. In general, your cost basis in a
Non-Qualified contract is equal to the Purchase Payments you put into the
contract. You have already been taxed on the cost basis in your contract.
If you purchase your contract under a pension plan, a specially sponsored
employer program or as an individual retirement account, your contract is
referred to as a Qualified contract. Examples of qualified plans are: Individual
Retirement Accounts ("IRAs"), Roth IRAs, Tax-Sheltered Annuities (referred to as
403(b) contracts), plans of self-employed individuals (often referred to as H.R.
10 Plans or Keogh Plans) and pension and profit sharing plans, including 401(k)
plans. Typically you have not paid any tax on the Purchase Payments used to buy
your contract and therefore, 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.
29
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; (9) when paid for health insurance if you are unemployed
and meet certain requirements; and (10) 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 an IRA, you must begin taking distributions when
you attain age 70 1/2, regardless of when 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
30
greater of Purchase Payments or Contract Value. This Contract offers death
benefits, which may exceed the greater of Purchase Payments or Contract Value.
If the IRS determines that these benefits are providing life insurance, the
contract may not qualify as an IRA (including Roth IRAs). You should consult
your tax adviser regarding these features and benefits prior to purchasing a
contract.
CONTRACTS OWNED BY A TRUST OR CORPORATION
A Trust or Corporation ("Non-Natural Owner") that is considering purchasing this
contract should consult a tax advisor. Generally, the IRC does not treat a
Non-Qualified contract owned by a non-natural owner as an annuity contract for
Federal income tax purposes. The non-natural owner pays tax currently on the
contract's value in excess of the owner's cost basis. However, this treatment is
not applied to a Contract held by a trust or other entity as an agent for a
natural person nor to Contracts held by Qualified Plans. See the SAI for a more
detailed discussion of the potential adverse tax consequences associated with
non-natural ownership of a non-qualified annuity contract.
GIFTS, PLEDGES AND/OR ASSIGNMENTS OF A NON-QUALIFIED CONTRACT
If you transfer ownership of your Non-Qualified contract to a person other than
your spouse (or former spouse incident to divorce) as a gift you will pay
federal income tax on the contract's cash value to the extent it exceeds your
cost basis. The recipient's cost basis will be increased by the amount on which
you will pay federal taxes. Also, the IRC treats any assignment or pledge (or
agreement to assign or pledge) of any portion of a Non-Qualified contract as a
withdrawal. See the SAI for a more detailed discussion regarding potential tax
consequences of gifting, assigning or pledging a non-qualified contract.
DIVERSIFICATION
The IRC imposes certain diversification requirements on the underlying
investments for a variable annuity. We believe that the underlying Variable
Portfolios' management monitors the Variable Portfolios so as to comply with
these requirements. To be treated as a variable annuity for tax purposes, the
underlying investments must meet these requirements.
The diversification regulations do not provide guidance as to the circumstances
under which you, and not Anchor National, would be considered the owner of the
shares of the Variable Portfolios under your Nonqualified Contract, because of
the degree of control you exercise over the underlying investments. This
diversification requirement is sometimes referred to as "investor control." It
is unknown to what extent owners are permitted to select investments, to make
transfers among Variable Portfolios or the number and type of Variable
Portfolios owners may select from. If any guidance is provided which is
considered a new position, then the guidance would generally be applied
prospectively. However, if such guidance is considered not to be a new position,
it may be applied retroactively. This would mean you, as the owner of the
Nonqualified Contract, could be treated as the owner of the underlying Variable
Portfolios. Due to the uncertainty in this area, we reserve the right to modify
the contract in an attempt to maintain favorable tax treatment.
These investor control limitations generally do not apply to Qualified
Contracts, which are referred to as "Pension Plan Contracts" for purposes of
this rule, although the limitations could be applied to Qualified Contracts in
the future.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
PERFORMANCE
- ----------------------------------------------------------------
- ----------------------------------------------------------------
We advertise the Cash Management Portfolio's yield and effective yield. In
addition, the other Variable Portfolios advertise total return, gross yield and
yield-to-maturity. These figures represent past performance of the Variable
Portfolios. These performance numbers do not indicate future results.
When we advertise performance for periods prior to the date the contracts were
first issued, we derive the figures from the performance of the corresponding
portfolios for the Trusts, if available. We modify these numbers to reflect
charges and expenses as if the contract was in existence during the period
stated in the advertisement. Figures calculated in this manner do not represent
actual historic performance of the particular Variable Portfolio.
Consult the Statement of Additional Information for more detailed information
regarding the calculation of performance data. The performance of each Variable
Portfolio may also be measured against unmanaged market indices. The indices we
use include but are not limited to the Dow Jones Industrial Average, the
Standard & Poor's 500, the Russell 1000 Growth Index, the Morgan Stanley Capital
International Europe, Australia and Far East Index ("EAFE") and the Morgan
Stanley Capital International World Index. We may compare the Variable
Portfolios' performance to that of other variable annuities with similar
objectives and policies as reported by independent ranking agencies such as
Morningstar, Inc., Lipper Analytical Services, Inc. or Variable Annuity Research
& Data Service ("VARDS").
Anchor National may also advertise the rating and other information assigned to
it by independent industry ratings organizations. Some of those organizations
are A.M. Best Company ("A.M. Best"), Moody's Investor's Service ("Moody's"),
Standard & Poor's Insurance Rating Services ("S&P"), and Fitch IBCA Duff &
Phelps. A.M. Best's and Moody's ratings reflect their current opinion of our
financial strength and performance in comparison to others in the life and
health insurance industry. S&P's and Fitch IBCA Duff & Phelps' ratings measure
the ability of an insurance company to meet its obligations under insurance
policies it issues. These two ratings do not measure the insurer's ability to
meet
31
non-policy obligations. Ratings in general do not relate to the performance of
the Variable Portfolios.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
OTHER INFORMATION
- ----------------------------------------------------------------
- ----------------------------------------------------------------
ANCHOR NATIONAL
Anchor National is a stock life insurance company originally organized under the
laws of the state of California in April 1965. On January 1, 1996, Anchor
National redomesticated under the laws of the state of Arizona.
Anchor National and its affiliates, SunAmerica Life Insurance Company, First
SunAmerica Life Insurance Company, SunAmerica Asset Management Corp., and the
SunAmerica Financial Network, Inc. (comprising six-wholly owned broker-dealers),
specialize in retirement savings and investment products and services. Business
focuses include fixed and variable annuities, mutual funds and broker-dealer
services.
THE SEPARATE ACCOUNT
Anchor National established Variable Separate Account ("separate account"),
under Arizona law on January 1, 1996 when it assumed the separate account,
originally established under California law on June 25, 1981. The separate
account is registered with the SEC as a unit investment trust under the
Investment Company Act of 1940, as amended. Assets in the separate account are
not guaranteed by Anchor National.
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.
THE GENERAL ACCOUNT
Money allocated to the fixed account options goes into Anchor National's general
account. The general account consists of all of Anchor National's assets other
than assets attributable to a separate account. All of the assets in the general
account are chargeable with the claims of any Anchor National contract holders
as well as all of its creditors. The general account funds are invested as
permitted under state insurance laws.
DISTRIBUTION OF THE CONTRACT
Registered representatives of broker-dealers sell the contract. We pay
commissions to these representatives for the sale of the contracts. We do not
expect the total commissions to exceed 7% of your Purchase Payments. Contracts
sold with the Principal Rewards program may result in our paying 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, an affiliate
of Anchor National, is registered as a broker-dealer under the Exchange Act of
1934 and is a member of the National Association of Securities Dealers, Inc. No
underwriting fees are paid in connection with the distribution of the contracts.
ADMINISTRATION
We are responsible for the administrative servicing of your contract. Please
contact our Annuity Service Center
at 1-800-445-SUN2, if you have any comment, question or service request.
We send out transaction confirmations and quarterly statements. During the
Accumulation Phase, you will receive confirmation of transactions within your
contract. Transactions made pursuant to contractual or systematic agreements,
such as deduction of the annual maintenance fee and dollar cost averaging, may
be confirmed quarterly. Purchase Payments received through the automatic payment
plan or a salary reduction arrangement, may also be confirmed quarterly. For all
other transactions, we send confirmations immediately. It is your responsibility
to review these documents carefully and notify us of any inaccuracies
immediately. We investigate all inquiries. To the extent that we believe we made
an error, we retroactively adjust your contract, provided you notify us within
30 days of receiving the transaction confirmation or quarterly statement. Any
other adjustments we deem warranted are made as of the time we receive notice of
the error.
LEGAL PROCEEDINGS
There are no pending legal proceedings affecting the Separate Account. Anchor
National and its subsidiaries engage in various kinds of routine litigation. In
management's opinion these matters are not of material importance to the
Company's total assets, with the potential exception of McMurdie, et al. v.
SunAmerica Inc., et al, Case No. BC 194082, filed on July 10, 1998 in the
Superior Court for the County of Los Angeles. This lawsuit is a representative
action wherein the plaintiffs allege violations of
32
California's Business and Professions Code Sections 17200 et seq. The Company is
vigorously defending the lawsuit. The probability of any particular outcome is
not reasonably estimable at this time.
OWNERSHIP
The PolarisII Variable Annuity is a Flexible Payment Group Deferred Annuity
contract. We issue a group contract to a contract holder for the benefit of the
participants in the group. As a participant in the group, you will receive a
certificate which evidences your ownership. As used in this prospectus, the term
contract refers to your certificate. In some states, a Flexible Payment
Individual Modified Guaranteed and Variable Deferred Annuity contract is
available instead. Such a contract is identical to the contract described in
this prospectus, with the exception that we issue it directly to the owner.
CUSTODIAN
State Street Bank and Trust Company, 255 Franklin Street, Boston, Massachusetts
02110, serves as the custodian of the assets of the separate account. Anchor
National pays State Street Bank for services provided, based on a schedule of
fees.
INDEPENDENT ACCOUNTANTS
The audited consolidated financial statements of AIG SunAmerica Life Assurance
Company (formerly Anchor National Life Insurance Company) at December 31, 2001
and 2000, for the years ended December 31, 2001, 2000 and 1999 and the audited
financial statements of Variable Separate Account (Portion Relating to the
Polaris II Variable Annuity) at December 31, 2001, and for the years ended
December 31, 2001 and 2000, are incorporated by reference in this prospectus in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
REGISTRATION STATEMENT
A registration statement has been filed with the SEC under the Securities Act of
1933 relating to the contract. This prospectus does not contain all the
information in the registration statement as permitted by SEC regulations. The
omitted information can be obtained from the SEC's principal office in
Washington, D.C., upon payment of a prescribed fee.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
TABLE OF CONTENTS OF
STATEMENT OF ADDITIONAL INFORMATION
- ----------------------------------------------------------------
- ----------------------------------------------------------------
Additional information concerning the operations of the separate account is
contained in a Statement of Additional Information ("SAI"), which is available
without charge upon written request addressed to us at our Annuity Service
Center, P.O. Box 54299, Los Angeles, California 90054-0299 or by calling (800)
445-SUN2. The contents of the SAI are tabulated below.
<Table>
Separate Account.............................. 3
General Account............................... 3
Performance Data.............................. 4
Income Payments............................... 12
Annuity Unit Values........................... 12
Death Benefit Options for Contracts Issued
Before October 24, 2001..................... 15
Taxes......................................... 19
Distribution of Contracts..................... 25
Financial Statements.......................... 25
</Table>
33
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
APPENDIX A - CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<Table>
<Caption>
INCEPTION TO FISCAL YEAR FISCAL YEAR 11/30/99- FISCAL YEAR FISCAL YEAR
PORTFOLIOS 11/30/97 11/30/98 11/30/99 12/31/99 12/31/00 12/31/01
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Capital Appreciation (Inception Date - 6/3/97)
Beginning AUV............... $ 18.52 $ 21.26 $ 23.72 $ 36.39 (a) $43.17 (a) $39.336
(b) $43.17 (b) $39.336
Ending AUV.................. $ 21.26 $ 23.72 $ 36.39 $ 43.17 (a) $39.34 (a) $33.864
(b) $39.34 (b) $33.775
Ending Number of AUs........ 1,392,262 7,356,862 13,201,318 13,721,175 (a) 19,549,855 (a) 20,540,882
(b) -- (b) 419,516
- ---------------------------------------------------------------------------------------------------------------------------------
Government and Quality Bond (Inception Date - 6/11/97)
Beginning AUV............... $ 11.99 $ 12.65 $ 13.66 $ 13.37 (a) $13.28 (a) $14.557
(b) $13.28 (b) $14.557
Ending AUV.................. $ 12.65 $ 13.66 $ 13.37 $ 13.28 (a) $14.56 (a) $15.330
(b) $14.56 (b) $15.292
Ending Number of AUs........ 395,258 5,697,571 11,644,751 11,975,781 (a) 14,182,463 (a) 20,198,773
(b) -- (b) 479,420
- ---------------------------------------------------------------------------------------------------------------------------------
Growth (Inception Date - 6/3/97)
Beginning AUV............... $ 17.93 $ 20.31 $ 24.41 $ 29.74 (a) $32.61 (a) $31.785
(b) $32.61 (b) $31.785
Ending AUV.................. $ 20.31 $ 24.41 $ 29.74 $ 32.61 (a) $31.78 (a) $27.208
(b) $31.78 (b) $27.144
Ending Number of AUs........ 789,274 3,678,108 6,788,755 7,022,979 (a) 10,117,970 (a) 11,155,857
(b) -- (b) 249,712
- ---------------------------------------------------------------------------------------------------------------------------------
Natural Resources (Inception Date - 6/4/97)
Beginning AUV............... $ 12.39 $ 11.14 $ 9.30 $ 11.40 (a) $12.50 (a) $14.706
(b) $12.50 (b) $14.706
Ending AUV.................. $ 11.14 $ 9.30 $ 11.40 $ 12.50 (a) $14.71 (a) $14.327
(b) $14.71 (b) $14.289
Ending Number of AUs........ 195,946 641,479 1,180,750 1,166,052 (a) 1,895,730 (a) 2,107,217
(b) -- (b) 65,345
- ---------------------------------------------------------------------------------------------------------------------------------
Aggressive Growth (Inception Date - 6/9/97)
Beginning AUV............... $ 10.03 $ 11.51 $ 11.86 $ 19.02 (a) $24.30 (a) $20.283
(b) $24.30 (b) $20.283
Ending AUV.................. $ 11.51 $ 11.86 $ 19.02 $ 24.30 (a) $20.28 (a) $13.648
(b) $20.28 (b) $13.621
Ending Number of AUs........ 821,105 2,794,187 6,626,618 7,344,520 (a) 12,934,676 (a) 11,741,647
(b) -- (b) 165,723
- ---------------------------------------------------------------------------------------------------------------------------------
Alliance Growth (Inception Date - 6/2/97)
Beginning AUV............... $ 21.81 $ 24.51 $ 32.81 $ 44.31 (a) $48.56 (a) $38.509
(b) $48.56 (b) $38.509
Ending AUV.................. $ 24.51 $ 32.81 $ 44.31 $ 48.56 (a) $38.51 (a) $32.621
(b) $38.51 (b) $32.541
Ending Number of AUs........ 2,092,044 12,001,651 24,844,446 25,720,432 (a) 33,118,445 (a) 32,796,144
(b) -- (b) 424,109
- ---------------------------------------------------------------------------------------------------------------------------------
Asset Allocation (Inception Date - 6/3/97)
Beginning AUV............... $ 16.59 $ 17.98 $ 18.22 $ 19.10 (a) $19.81 (a) $19.448
(b) $19.81 (b) $19.448
Ending AUV.................. $ 17.98 $ 18.22 $ 19.10 $ 19.81 (a) $19.45 (a) $18.614
(b) $19.45 (b) $18.582
Ending Number of AUs........ 1,498,681 8,996,522 11,800,263 11,832,744 (a) 11,738,646 (a) 11,549,900
(b) -- (b) 93,512
- ---------------------------------------------------------------------------------------------------------------------------------
Blue Chip Growth (Inception Date - 7/10/00)
Beginning AUV............... -- -- -- -- (a) $10.00 (a) $8.569
(b) $10.00 (b) $8.569
Ending AUV.................. -- -- -- -- (a) $8.57 (a) $6.692
(b) $8.57 (b) $6.674
Ending Number of AUs........ -- -- -- -- (a) 1,222,398 (a) 3,041,531
(b) -- (b) 178,390
- ---------------------------------------------------------------------------------------------------------------------------------
Cash Management (Inception Date - 6/5/97)
Beginning AUV............... $ 11.24 $ 11.43 $ 11.83 $ 12.20 (a) $12.25 (a) $12.793
(b) $12.25 (b) $12.793
Ending AUV.................. $ 11.43 $ 11.83 $ 12.20 $ 12.25 (a) $12.79 (a) $13.062
(b) $12.79 (b) $13.028
Ending Number of AUs........ 1,514,290 5,488,046 13,454,926 14,181,154 (a) 14,798,813 (a) 20,961,757
(b) -- (b) 554,085
- ---------------------------------------------------------------------------------------------------------------------------------
AUV - Accumulation Unit Value
AU - Accumulation Units
(a) Without election of the optional EstatePlus feature.
(b) With election of the optional EstatePlus feature.
</Table>
A-1
<Table>
<Caption>
INCEPTION TO FISCAL YEAR FISCAL YEAR 11/30/99- FISCAL YEAR FISCAL YEAR
PORTFOLIOS 11/30/97 11/30/98 11/30/99 12/31/99 12/31/00 12/31/01
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Corporate Bond (Inception Date - 6/9/97)
Beginning AUV............... $ 11.83 $ 12.54 $ 13.15 $ 12.78 (a) $12.76 (a) $13.190
(b) $12.76 (b) $13.190
Ending AUV.................. $ 12.54 $ 13.15 $ 12.78 $ 12.76 (a) $13.19 (a) $13.972
(b) $13.19 (b) $13.933
Ending Number of AUs........ 328,300 3,633,064 7,121,685 7,196,448 (a) 7,598,504 (a) 10,226,795
(b) -- (b) 249,861
- ---------------------------------------------------------------------------------------------------------------------------------
Davis Venture Value (Inception Date - 6/2/97)
Beginning AUV............... $ 18.63 $ 21.30 $ 23.36 $ 26.57 (a) $27.88 (a) $30.052
(b) $27.88 (b) $30.052
Ending AUV.................. $ 21.30 $ 23.36 $ 26.57 $ 27.88 (a) $30.05 (a) $26.245
(b) $30.05 (b) $26.176
Ending Number of AUs........ 4,281,879 20,734,371 32,218,454 32,960,877 (a) 42,436.151 (a) 45,588,640
(b) -- (b) 933,871
- ---------------------------------------------------------------------------------------------------------------------------------
"Dogs of Wall Street" (Inception Date - 4/1/98)
Beginning AUV............... $ -- $ 10.00 $ 9.71 $ 9.12 (a) $8.99 (a) $9.122
(b) $8.99 (b) $9.122
Ending AUV.................. $ -- $ 9.71 $ 9.12 $ 8.99 (a) $9.12 (a) $9.692
(b) $9.12 (b) $9.668
Ending Number of AUs........ -- 4,324,225 8,879,703 8,952,838 (a) 7,474,726 (a) 8,422,179
(b) -- (b) 132,744
- ---------------------------------------------------------------------------------------------------------------------------------
Emerging Markets (Inception Date - 6/5/97)
Beginning AUV............... $ 10.14 $ 7.97 $ 6.14 $ 8.99 (a) $10.77 (a) $6.755
(b) $10.77 (b) $6.755
Ending AUV.................. $ 7.97 $ 6.14 $ 8.99 $ 10.77 (a) $6.75 (a) $6.539
(b) $6.75 (b) $6.523
Ending Number of AUs........ 663,212 2,574,316 4,857,715 5,310,973 (a) 8,357,898 (a) 8,225,699
(b) -- (b) 84,736
- ---------------------------------------------------------------------------------------------------------------------------------
Federated Value (Inception Date - 6/4/97)
Beginning AUV............... $ 12.14 $ 13.62 $ 15.86 $ 16.43 (a) $16.89 (a) $17.029
(b) $16.89 (b) $17.029
Ending AUV.................. $ 13.62 $ 15.86 $ 16.43 $ 16.89 (a) $17.03 (a) $16.381
(b) $17.03 (b) $16.335
Ending Number of AUs........ 736,333 3,783,248 6,616,993 6,700,126 (a) 7,439,722 (a) 9,390,883
(b) -- (b) 148,736
- ---------------------------------------------------------------------------------------------------------------------------------
Global Bond (Inception Date - 6/11/97)
Beginning AUV............... $ 12.41 $ 13.08 $ 14.40 $ 14.11 (a) $14.09 (a) $15.158
(b) $14.09 (b) $15.158
Ending AUV.................. $ 13.08 $ 14.40 $ 14.11 $ 14.09 (a) $15.16 (a) $15.678
(b) $15.16 (b) $15.639
Ending Number of AUs........ 183,563 1,342,157 2,692,066 2,749,995 (a) 3,502,566 (a) 4,077,848
(b) -- (b) 139,008
- ---------------------------------------------------------------------------------------------------------------------------------
Global Equities (Inception Date - 6/3/97)
Beginning AUV............... $ 16.54 $ 16.90 $ 19.21 $ 24.20 (a) $26.57 (a) $21.653
(b) $26.57 (b) $21.653
Ending AUV.................. $ 16.90 $ 19.21 $ 24.20 $ 26.57 (a) $21.65 (a) $17.472
(b) $21.65 (b) $17.425
Ending Number of AUs........ 600,294 2,566,912 4,915,631 5,366,080 (a) 9,807,829 (a) 10,081,336
(b) -- (b) 85,889
- ---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Research (Inception Date - 7/5/00)
Beginning AUV............... -- -- -- -- (a) $10.00 (a) $9.735
(b) $10.00 (b) $9.735
Ending AUV.................. -- -- -- -- (a) $9.74 (a) $7.173
(b) $9.74 (b) $7.154
Ending Number of AUs........ -- -- -- -- (a) 2,906,979 (a) 3,150,473
(b) -- (b)227,904
- ---------------------------------------------------------------------------------------------------------------------------------
Growth-Income (Inception Date - 6/3/97)
Beginning AUV............... $ 18.84 $ 21.41 $ 25.71 $ 33.11 (a) $35.91 (a) $32.417
(b) $35.91 (b) $32.417
Ending AUV.................. $ 21.41 $ 25.71 $ 33.11 $ 35.91 (a) $32.42 (a) $26.847
(b) $32.42 (b) $26.783
Ending Number of AUs........ 1,949,292 9,786,202 19,070,913 19,671,134 (a) 25,858,191 (a) 26,032,596
(b) -- (b) 345,030
- ---------------------------------------------------------------------------------------------------------------------------------
Growth Opportunities (Inception Date - 7/6/00)
Beginning AUV............... -- -- -- -- (a) $10.00 (a) $8.829
(b) $10.00 (b) $8.829
Ending AUV.................. -- -- -- -- (a) $8.83 (a) $5.807
(b) $8.83 (b) $5.798
Ending Number of AUs........ -- -- -- -- (a) 2,537,947 (a) 4,404,177
(b) -- (b) 150,318
- ---------------------------------------------------------------------------------------------------------------------------------
AUV - Accumulation Unit Value
AU - Accumulation Units
(a) Without election of the optional EstatePlus feature.
(b) With election of the optional EstatePlus feature.
</Table>
A-2
<Table>
<Caption>
INCEPTION TO FISCAL YEAR FISCAL YEAR 11/30/99- FISCAL YEAR FISCAL YEAR
PORTFOLIOS 11/30/97 11/30/98 11/30/99 12/31/99 12/31/00 12/31/01
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
High-Yield Bond (Inception Date - 6/9/97)
Beginning AUV............... $ 13.63 $ 14.66 $ 14.25 $ 14.71 (a) $14.87 (a) $13.278
(b) $14.87 (b) $13.278
Ending AUV.................. $ 14.66 $ 14.25 $ 14.71 $ 14.87 (a) $13.28 (a) $12.511
(b) $13.28 (b) $12.489
Ending Number of AUs........ 758,856 5,006,115 7,918,425 8,096,738 (a) 8,995,563 (a) 9,717,178
(b) -- (b) 211,929
- ---------------------------------------------------------------------------------------------------------------------------------
International Diversified Equities (Inception Date - 6/4/97)
Beginning AUV............... $ 12.04 $ 11.62 $ 13.53 $ 15.49 (a) $16.92 (a) $13,614
(b) $16.92 (b) $13.614
Ending AUV.................. $ 11.62 $ 13.53 $ 15.49 $ 16.92 (a) $13.61 (a) $10.196
(b) $13.61 (b) $10.162
Ending Number of AUs........ 1,040,812 4,519,545 6,989,492 7,176,791 (a) 9,563,404 (a) 9,259,404
(b) -- (b) 145,800
- ---------------------------------------------------------------------------------------------------------------------------------
International Growth and Income (Inception Date - 6/4/97)
Beginning AUV............... $ 9.97 $ 10.33 $ 11.16 $ 13.40 (a) $14.07 (a) $14.023
(b) $14.07 (b) $14.023
Ending AUV.................. $ 10.33 $ 11.16 $ 13.40 $ 14.07 (a) $14.02 (a) $10.743
(b) $14.02 (b) $10.713
Ending Number of AUs........ 1,310,126 6,738,263 11,676,801 12,288,580 (a) 17,253,320 (a) 17,888,673
(b) -- (b) 344,784
- ---------------------------------------------------------------------------------------------------------------------------------
Marsico Growth (Inception Date - 12/29/00)
Beginning AUV............... -- -- -- -- (a) $10.00 (a) $10.000
(b) $10.00 (b) $10.000
Ending AUV.................. -- -- -- (a) $10.00 (a) $8.521
(b) $10.00 (b) $8.498
Ending Number of AUs........ -- -- -- -- (a) $46.00 (a) 1,236,562
(b) -- (b) 277,115
- ---------------------------------------------------------------------------------------------------------------------------------
MFS Growth and Income (Inception Date - 6/4/97)
Beginning AUV............... $ 15.82 $ 17.63 $ 20.46 $ 22.55 (a) $23.67 (a) $23.224
(b) $23.67 (b) $23.224
Ending AUV.................. $ 17.63 $ 20.46 $ 22.55 $ 23.67 (a) $23.22 (a) $19.203
(b) $23.22 (b) $19.159
Ending Number of AUs........ 191,101 694,076 4,109,201 4,397,413 (a) 6,735,966 (a) 8,156,869
(b) -- (b) 255,263
- ---------------------------------------------------------------------------------------------------------------------------------
MFS Mid-Cap Growth (Inception Date - 4/5/99)
Beginning AUV............... -- -- -- $ 14.23 (a) $16.31 (a) $17.607
(b) $16.31 (b) $17.607
Ending AUV.................. -- -- $ 14.23 $ 16.31 (a) $17.61 (a) $13.420
(b) $17.61 (b) $13.385
Ending Number of AUs........ -- -- 2,204,857 2,713,848 (a) 13,667,663 (a) 16,760,748
(b) -- (b) 642,519
- ---------------------------------------------------------------------------------------------------------------------------------
MFS Total Return (Inception Date - 6/10/97)
Beginning AUV............... $ 14.44 $ 15.45 $ 17.28 $ 18.50 (a) $18.60 (a) $21.433
(b) $18.60 (b) $21.433
Ending AUV.................. $ 15.45 $ 17.28 $ 18.50 $ 18.60 (a) $21.43 (a) $21.225
(b) $21.43 (b) $21.183
Ending Number of AUs........ 218,391 1,492,175 4,740,884 5,054,346 (a) 7,385,194 (a) 13,032,692
(b) -- (b) 673,743
- ---------------------------------------------------------------------------------------------------------------------------------
Putnam Growth (Inception Date - 6/3/97)
Beginning AUV............... $ 15.80 $ 18.47 $ 22.29 $ 28.36 (a) $31.67 (a) $25.556
(b) $31.67 (b) $25.556
Ending AUV.................. $ 18.47 $ 22.29 $ 28.36 $ 31.67 (a) $25.56 (a) $19.097
(b) $25.56 (b) $19.049
Ending Number of AUs........ 831,178 4,949,624 11,111,497 11,459,476 (a) 15,003,547 (a) 14,599,473
(b) -- (b) 133,955
- ---------------------------------------------------------------------------------------------------------------------------------
Real Estate (Inception Date - 6/4/97)
Beginning AUV............... $ 9.98 $ 11.44 $ 9.80 $ 8.50 (a) $8.91 (a) $10.856
(b) $8.91 (b) $10.856
Ending AUV.................. $ 11.44 $ 9.80 $ 8.50 $ 8.91 (a) $10.86 (a) $11.339
(b) $10.86 (b) $11.307
Ending Number of AUs........ 887,321 3,336,767 3,959,755 3,993,765 (a) 4,778,388 (a) 5,036,997
(b) -- (b) 46,928
- ---------------------------------------------------------------------------------------------------------------------------------
SunAmerica Balanced (Inception Date - 6/5/97)
Beginning AUV............... $ 11.84 $ 13.22 $ 15.60 $ 18.23 (a) $19.69 (a) $17.560
(b) $19.69 (b) $17.560
Ending AUV.................. $ 13.22 $ 15.60 $ 18.23 $ 19.69 (a) $17.56 (a) $15.021
(b) $17.56 (b) $14.988
Ending Number of AUs........ 363,136 3,543,245 11,283,979 11,995,695 (a) 17,356,197 (a) 18,029,355
(b) -- (b) 169,447
- ---------------------------------------------------------------------------------------------------------------------------------
AUV - Accumulation Unit Value
AU - Accumulation Units
(a) Without election of the optional EstatePlus feature.
(b) With election of the optional EstatePlus feature.
</Table>
A-3
<Table>
<Caption>
INCEPTION TO FISCAL YEAR FISCAL YEAR 11/30/99- FISCAL YEAR FISCAL YEAR
PORTFOLIOS 11/30/97 11/30/98 11/30/99 12/31/99 12/31/00 12/31/01
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Technology (Inception Date - 7/5/00)
Beginning AUV............... -- -- -- -- (a) $10.00 (a) $6.692
(b) $10.00 (b) $6.692
Ending AUV.................. -- -- -- -- (a) $6.69 (a) $3.452
(b) $6.69 (b) $3.444
Ending Number of AUs........ -- -- -- -- (a) 5,369,650 (a) 8,649,828
(b) -- (b) 547,923
- ---------------------------------------------------------------------------------------------------------------------------------
Telecom Utility (Inception Date - 6/6/97)
Beginning AUV............... $ 11.41 $ 12.74 $ 14.56 $ 15.16 (a) $15.11 (a) $13.538
(b) $15.11 (b) $13.538
Ending AUV.................. $ 12.74 $ 14.56 $ 15.16 $ 15.11 (a) $13.54 (a) $11.504
(b) $13.54 (b) $11.480
Ending Number of AUs........ 177,618 1,807,529 4,083,169 4,232,249 (a) 4,961,979 (a) 4,657,143
(b) -- (b) 55,333
- ---------------------------------------------------------------------------------------------------------------------------------
Worldwide High Income (Inception Date - 6/5/97)
Beginning AUV............... $ 15.57 $ 15.98 $ 13.57 $ 15.23 (a) $15.70 (a) $15.005
(b) $15.70 (b) $15.005
Ending AUV.................. $ 15.98 $ 13.57 $ 15.23 $ 15.70 (a) $15.00 (a) $14.299
(b) $15.00 (b) $14.278
Ending Number of AUs........ 596,308 2,430,509 2,853,924 2,824,430 (a) 2,942,189 (a) 2,783,883
(b) -- (b) 32,981
- ---------------------------------------------------------------------------------------------------------------------------------
Lord Abbett Series Fund, Inc. -
Mid-Cap Value* (Inception Date - N/A)
Beginning AUV............... -- -- -- -- -- --
Ending AUV.................. -- -- -- -- -- --
Ending Number of AUs........ -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Lord Abbett Series Fund, Inc. -
Growth and Income* (Inception Date - N/A)
Beginning AUV............... -- -- -- -- -- --
Ending AUV.................. -- -- -- -- -- --
Ending Number of AUs........ -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Van Kampen LIT Comstock, Class II Shares (Inception Date - 10/15/01)
Beginning AUV............... -- -- -- -- -- (a) $10.000
(b) $10.000
Ending AUV.................. -- -- -- -- -- (a) $10.214
(b) $10.216
Ending Number of AUs........ -- -- -- -- -- (a) 664,336
(b) 10,966
- ---------------------------------------------------------------------------------------------------------------------------------
Van Kampen LIT Emerging Growth, Class II Shares (Inception Date - 10/15/01)
Beginning AUV............... -- -- -- -- -- (a) $10.000
(b) $10.000
Ending AUV.................. -- -- -- -- -- (a) $10.377
(b) $10.334
Ending Number of AUs........ -- -- -- -- -- (a) 125,556
(b) 1,065
- ---------------------------------------------------------------------------------------------------------------------------------
Van Kampen LIT Growth and Income, Class II Shares (Inception
Date - 10/15/01)
Beginning AUV............... -- -- -- -- -- (a) $10.000
(b) $10.000
Ending AUV.................. -- -- -- -- -- (a) $10.556
(b) $10.549
Ending Number of AUs........ -- -- -- -- -- (a) 242,732
(b) 6,733
- ---------------------------------------------------------------------------------------------------------------------------------
AUV - Accumulation Unit Value
AU - Accumulation Units
(a) Without election of the optional EstatePlus feature.
(b) With election of the optional EstatePlus feature.
* This fund was not available for sale until May 1, 2002.
</Table>
A-4
<Table>
<Caption>
INCEPTION TO FISCAL YEAR FISCAL YEAR 11/30/99- FISCAL YEAR FISCAL YEAR
PORTFOLIOS 11/30/97 11/30/98 11/30/99 12/31/99 12/31/00 12/31/01
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
American Funds Asset Allocation (Inception Date - N/A)**
-- -- -- -- -- (a) --
-- -- -- -- -- (b) --
-- -- -- -- -- (c) --
-- -- -- -- -- (d) --
- ---------------------------------------------------------------------------------------------------------------------------------
American Funds Global Growth (Inception Date - N/A)**
-- -- -- -- -- (a) --
-- -- -- -- -- (b) --
-- -- -- -- -- (c) --
-- -- -- -- -- (d) --
- ---------------------------------------------------------------------------------------------------------------------------------
American Funds Growth (Inception Date - N/A)**
-- -- -- -- -- (a) --
-- -- -- -- -- (b) --
-- -- -- -- -- (c) --
-- -- -- -- -- (d) --
- ---------------------------------------------------------------------------------------------------------------------------------
American Funds Growth - Income (Inception Date - N/A)**
-- -- -- -- -- (a) --
-- -- -- -- -- (b) --
-- -- -- -- -- (c) --
-- -- -- -- -- (d) --
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
AUV - Accumulation Unit Value
AU - Accumulation Units
(a) Without election of the optional EstatePlus feature.
(b) With election of the optional EstatePlus feature.
** This fund was not available for sale until September 30, 2002.
</Table>
A-5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
APPENDIX B - PRINCIPAL REWARDS PROGRAM EXAMPLES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
I. DEFERRED PAYMENT ENHANCEMENT
If you elect to participate in the Principal Rewards Program at contract issue,
we contribute at least 2% of each Purchase Payment to your contract for each
Purchase Payment we receive as an Upfront Payment Enhancement. Any applicable
Deferred Payment Enhancement is allocated to your contract on the corresponding
Deferred Payment Enhancement Date and, if declared by the Company, is a
percentage of your remaining Purchase Payment on the Deferred Payment
Enhancement Date. Deferred Purchase Payment Enhancements are reduced
proportionately by partial withdrawals of that Purchase Payment prior to the
Deferred Payment Enhancement Date.
The examples that follow assume an initial Purchase Payment of $125,000 and that
the Deferred Payment Enhancement is 1%.
For purposes of the example, the Deferred Payment Enhancement Date is the 9th
anniversary of the Purchase Payment.
EXAMPLE 1 - NO WITHDRAWALS ARE MADE
The Upfront Payment Enhancement allocated to your contract is $2,500 (2% of
$125,000).
On your 9th contract anniversary, the Deferred Payment Enhancement Date, your
Deferred Payment Enhancement of $1,250 (1% of your remaining Purchase Payment or
$125,000) will be allocated to your contract.
EXAMPLE 2 - WITHDRAWAL MADE PRIOR TO DEFERRED PAYMENT ENHANCEMENT DATE
As in Example 1, your Upfront Payment Enhancement is $2,500.
This example also assumes the following:
1. Your contract value on your 5th contract anniversary is $190,000.
2. You request a withdrawal of $75,000 on your 5th contract anniversary.
3. No subsequent Purchase Payments have been made.
4. No prior withdrawals have been taken.
5. Funds are not allocated to any of the MVA Fixed Accounts.
On your 5th contract anniversary, your penalty-free earnings in the contract are
$65,000 ($190,000 contract value less your $125,000 investment in the contract).
Therefore, you are withdrawing $10,000 of your initial Purchase Payment. Your
contract value will also be reduced by a $500 withdrawal charge on the $10,000
Purchase Payment (5% of $10,000). Your gross withdrawal is $75,500 of which
$10,500 constitutes part of your Purchase Payment.
The withdrawal of $10,500 of your $125,000 Purchase Payment is a withdrawal of
8.4% of your Purchase Payment. Therefore, only 91.6%, or $114,500, of your
initial Purchase Payment remains in your contract.
On your 9th contract anniversary, the Deferred Payment Enhancement Date,
assuming no other transactions occur affecting the Purchase Payment, we allocate
your Deferred Payment Enhancement of $1,145 (1% of your remaining Purchase
Payment, $114,500) to your contract.
II. 90 DAY WINDOW
The following hypothetical examples assume that the Company is offering Upfront
and Deferred Payment Enhancements in accordance with this chart at the time each
Purchase Payment is received:
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------
UPFRONT PAYMENT DEFERRED PAYMENT
ENHANCEMENT ENHANCEMENT DEFERRED PAYMENT
ENHANCEMENT LEVEL RATE RATE ENHANCEMENT DATE
- -----------------------------------------------------------------------------------------------
Under $40,000 2% 0% N/A
- -----------------------------------------------------------------------------------------------
$40,000 - $99,999 4% 0% N/A
- -----------------------------------------------------------------------------------------------
Nine years from the
$100,000 - $499,999 4% 1% date we receive each
Purchase Payment.
- -----------------------------------------------------------------------------------------------
Nine years from the
$500,000 - more 4% 2% date we receive each
Purchase Payment.
- -----------------------------------------------------------------------------------------------
</Table>
Contracts issued with the Principal Rewards feature after April 3, 2000, may be
eligible for a "Look-Back Adjustment." As of the 90th day after your contract
was issued, we will total your Purchase Payments remaining in your contract at
that time, without considering any investment gain or loss in contract value on
those Purchase Payments. If your total Purchase Payments bring you to an
Enhancement Level which, as of the date we issued your contract, would have
provided for a higher Upfront and/or Deferred Payment Enhancement Rate on each
Purchase Payment, you will get the benefit of the Enhancement Rate(s) that were
applicable to that higher Enhancement Level at the time your contract was
issued.
B-1
This example assumes the following:
1. Current Enhancement Levels, Rates and Dates (beginning December 1, 2000)
throughout the first 90 days.
2. No withdrawal in the first 90 days.
3. Initial Purchase Payment of $35,000 on December 1, 2000.
4. Subsequent Purchase Payment of $40,000 on January 15, 2001.
5. Subsequent Purchase Payment of $25,000 on January 30, 2001.
6. Subsequent Purchase Payment of $7,500 on February 12, 2001.
ENHANCEMENT AT THE TIME PURCHASE PAYMENTS ARE RECEIVED
<Table>
<Caption>
- --------------------------------------------------------------------------------------------
DEFERRED
PURCHASE UPFRONT DEFERRED PAYMENT
DATE OF PAYMENT PAYMENT PAYMENT ENHANCEMENT
PURCHASE PAYMENT AMOUNT ENHANCEMENT ENHANCEMENT DATE
- --------------------------------------------------------------------------------------------
December 1, 2000 $35,000 2% 0% N/A
- --------------------------------------------------------------------------------------------
January 15, 2001 $40,000 4% 0% N/A
- --------------------------------------------------------------------------------------------
January 30, 2001 $25,000 4% 1% January 30, 2010
- --------------------------------------------------------------------------------------------
February 12, 2001 $ 7,500 4% 1% February 12, 2010
- --------------------------------------------------------------------------------------------
</Table>
ENHANCEMENT ADJUSTMENTS ON THE 90TH DAY FOLLOWING CONTRACT ISSUE
The sum of all Purchase Payments made in the first 90 days of the contract
equals $107,500. According to the Enhancement Levels in effect at the time this
contract was issued, a $107,500 Purchase Payment would have received a 4%
Upfront Payment Enhancement and a 1% Deferred Payment Enhancement. Under the 90
Day Window provision all Purchase Payments made within those first 90 days would
receive the benefit of the parameters in place at the time the contract was
issued, as if all of the Purchase Payments were received on the date of issue.
Thus, the first two Purchase Payments would be adjusted on the 90th day
following contract issue, as follows:
<Table>
<Caption>
- --------------------------------------------------------------------------------------------
DEFERRED
PURCHASE UPFRONT DEFERRED PAYMENT
DATE OF PAYMENT PAYMENT PAYMENT ENHANCEMENT
PURCHASE PAYMENT AMOUNT ENHANCEMENT ENHANCEMENT DATE
- --------------------------------------------------------------------------------------------
December 1, 2000 $35,000 4% 1% December 1, 2009
- --------------------------------------------------------------------------------------------
January 15, 2001 $40,000 4% 1% January 15, 2010
- --------------------------------------------------------------------------------------------
January 30, 2001 $25,000 4% 1% January 30, 2010
- --------------------------------------------------------------------------------------------
February 12, 2001 $ 7,500 4% 1% February 12, 2010
- --------------------------------------------------------------------------------------------
</Table>
B-2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
APPENDIX C - MARKET VALUE ADJUSTMENT ("MVA")
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The MVA reflects the impact that changing interest rates have on the value of
money invested at a fixed interest rate. The longer the period of time remaining
in the term you initially agreed to leave your money in the fixed account
option, the greater the impact of changing interest rates. The impact of the MVA
can be either positive or negative, and is computed by multiplying the amount
withdrawn, transferred or switched to the Income Phase by the following factor:
[(1+I/(1+J+L)](N/12) - 1
The MVA formula may differ in certain states
where:
I is the interest rate you are earning on the money invested in the
fixed account option;
J is the interest rate then currently available for the period of time
equal to the number of years remaining in the term you initially agreed
to leave your money in the fixed account option; and
N is the number of full months remaining in the term you initially
agreed to leave your money in the fixed account option.
L=0.005, except in PA where L will be equal to zero.
EXAMPLES OF THE MVA
The examples below assume the following:
(1) You made an initial Purchase Payment of $10,000 and allocated it to the
10-year fixed account option at a rate of 5%;
(2) You make a partial withdrawal of $4,000 when 1 year (12 months) remains
in the 10-year term you initially agreed to leave your money in the
fixed account option (N=12); and
(3) You have not made any other transfers, additional Purchase Payments, or
withdrawals.
No withdrawal charges are reflected because your Purchase Payment has been in
the contract for nine full years. If a withdrawal charge applies, it is deducted
before the MVA. The MVA is assessed on the amount withdrawn less any withdrawal
charges.
POSITIVE ADJUSTMENT
Assume that on the date of withdrawal, the interest rate in effect for a new
Purchase Payments in the 1-year fixed account option is 4%.
The MVA factor is = [(1+I/(1+J+0.005)](N/12) - 1
= [(1.05)/(1.04+0.005)](12/12) - 1
= (1.004785)(1) - 1
= 1.004785 - 1
= + 0.004785
The requested withdrawal amount is multiplied by the MVA factor to determine the
MVA:
$4,000 x (+0.004785) = +$19.14
$19.14 represents the MVA that would be added to your withdrawal.
NEGATIVE ADJUSTMENT
Assume that on the date of withdrawal, the interest rate in effect for new
Purchase Payments in the 1-year fixed account option is 6%.
The MVA factor is = [(1+I)/(1+J+0.005)](N/12) - 1
= [(1.05)/(1.06+0.005)](12/12) - 1
= (0.985915)(1) - 1
= 0.985915 - 1
= - 0.014085
The requested withdrawal amount is multiplied by the MVA factor to determine the
MVA:
$4,000 X (-0.014085) = -$56.34
$56.34 represents the MVA that will be deducted from the money remaining in the
10-year fixed account option.
C-1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
APPENDIX D - DEATH BENEFITS FOLLOWING SPOUSAL CONTINUATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Capitalized terms used in this Appendix have the same meaning as they have in
prospectus.
The term Continuation Net Purchase Payments is used frequently to describe the
death benefits payable to the beneficiary of the Continuing Spouse for contracts
issued on or after October 24, 2001. We define Continuation Net Purchase
Payments as Net Purchase Payments made on and/or after the Continuation Date.
For the purpose of calculating Continuation Net Purchase Payments, the amount
that equals the contract value on the Continuation Date, including the
Continuation Contribution is considered a Purchase Payment. If the Continuing
Spouse makes no additional Purchase Payments or withdrawals, Continuation Net
Purchase Payments equals the contract value on the Continuation Date, including
the Continuation Contribution.
The term "Gross Withdrawals" as used in describing the death benefit option
below is defined as withdrawals and the fees and charges applicable to those
withdrawals.
The following describes the death benefit options following spousal continuation
for contracts issued on or after October 24, 2001:
A. DEATH BENEFIT PAYABLE UPON CONTINUING SPOUSE'S DEATH:
1. Purchase Payment Accumulation Option
If a Continuation Contribution is added on the Continuation Date, the
death benefit is the greatest of:
a. The contract value on the date we receive all required paperwork and
satisfactory proof of the Continuing Spouse's death; or
b. Continuation Net Purchase Payments compounded to the date of death at
a 4% annual growth rate, (3% growth rate if the Continuing Spouse was
age 70 or older on the Continuation Date) plus any Purchase Payments
recorded after the date of death; and reduced by any Gross
Withdrawals recorded after the date of death in the same proportion
that the Gross Withdrawal reduced the contract value on the date of
each withdrawal; or
c. The contract value on the seventh contract anniversary following the
original issue date of the contract, plus any Purchase Payments since
the seventh contract anniversary and reduced for any Gross
Withdrawals recorded after the seventh contract anniversary in the
same proportion that the Gross Withdrawal reduced the contract value
on the date of the Gross Withdrawal, all compounded at a 4% annual
growth rate until the date of death (3% annual growth rate if the
Continuing Spouse is age 70 or older on the Continuation Date) plus
any Purchase Payments; and reduced for any withdrawals recorded after
the date of death in the same proportion that each withdrawal reduced
the contract value on the date of the withdrawal.
If a Continuation Contribution is not added on the Continuation Date,
the death benefit is the greater of:
a. The contract value on the date we receive all required paperwork and
satisfactory proof of the Continuing Spouse's death; or
b. Net Purchase Payments made from the original contract issue date
compounded to the date of death at a 4% annual growth rate, (3%
growth rate if the Continuing Spouse was age 70 or older on the
original contract issue date) plus any Purchase Payments recorded
after the date of death; and reduced for any Gross Withdrawals
recorded after the date of death in the same proportion that each
Gross Withdrawal reduced the contract value on the date of the
withdrawal; or
c. The contract value on the seventh contract anniversary following the
original issue date of the contract, plus any Purchase Payments since
the seventh contract anniversary; and reduced for any Gross
Withdrawals since the seventh contract anniversary in the same
proportion that each Gross Withdrawal reduced the contract value on
the date of the Gross Withdrawal, all compounded at a 4% annual
growth rate until the date of death (3% annual growth rate if the
Continuing Spouse is age 70 or older on the contract issue date) plus
any Purchase Payments; and reduced for any Gross Withdrawals recorded
after the date of death in the same proportion that each Gross
Withdrawal reduced the contract value on the date of the Gross
Withdrawal.
2. Maximum Anniversary Value Option -- if the continuing spouse is below
age 90 at the time of death, and:
If a Continuation Contribution is added on the Continuation Date, the
death benefit is the greatest of:
a. The contract value on the date we receive all required paperwork and
satisfactory proof of the Continuing Spouse's death; or
b. Continuation Net Purchase Payments; or
D-1
c. The maximum anniversary value on any contract anniversary occurring
after the Continuation Date and prior to the Continuing Spouse's 81st
birthday. The anniversary value equals the contract value on a
contract anniversary plus any Purchase Payments made since that
contract anniversary; and reduced for any Gross Withdrawals recorded
since the contract anniversary in the same proportion that each Gross
Withdrawal reduced the contract value on the date of the Gross
Withdrawal. Contract anniversary is defined as any anniversary
following the full 12 month period after the original contract issue
date.
If a Continuation Contribution is not added on the Continuation Date,
the death benefit is the greatest of:
a. The contract value on the date we receive all required paperwork and
satisfactory proof of the Continuing Spouse's death; or
b. Net Purchase Payments received since the original issue date; or
c. The maximum anniversary value on any contract anniversary from the
original contract issue date prior to the Continuing Spouse's 81st
birthday. The anniversary value equals the contract value on a
contract anniversary plus any Purchase Payments since that contract
anniversary; and reduced for any Gross Withdrawals since the contract
anniversary in the same proportion that the Gross Withdrawal reduced
each contract value on the date of the Gross Withdrawal. Contract
anniversary is defined as the full 12 month period after the original
contract issue date.
If the Continuing Spouse is age 90 or older at the time of death, under the
Maximum Anniversary death benefit, their beneficiary will receive only the
contract value at the time we receive all required paperwork and satisfactory
proof of death.
Please see the Statement of Additional Information for a description of the
death benefit calculations following a Spousal Continuation for contracts issued
before October 24, 2001.
B. THE ESTATEPLUS BENEFIT PAYABLE UPON CONTINUING SPOUSE'S DEATH:
The EstatePlus benefit may increase the death benefit amount. The EstatePlus
benefit is only available if the original owner elected EstatePlus and it has
not been terminated. If the Continuing Spouse had earnings in the contract at
the time of his/her death, we will add a percentage of those earnings (the
"EstatePlus Percentage"), subject to a maximum dollar amount (the "Maximum
EstatePlus Percentage"), to the death benefit payable, based on the number of
years the Continuing Spouse has held the contract since the Continuation Date.
The EstatePlus benefit, if any, is added to the death benefit payable under the
Purchase Payment Accumulation or the Maximum Anniversary option.
The term "Continuation Net Purchase Payment" is used frequently to describe the
EstatePlus benefit payable to the beneficiary of the Continuing Spouse. We
define Continuation Net Purchase Payment as Net Purchase Payments made as of the
Continuation Date. For the purpose of calculating Continuation Net Purchase
Payments, the amount that equals the contract value on the Continuation Date,
including the Continuation Contribution is considered a Purchase Payment. If the
Continuing Spouse makes no additional Purchase Payments or withdrawal,
Continuation Net Purchase Payments equals the contract value on the Continuation
Date, including the Continuation Contribution.
The following table provides the details, if the Continuing Spouse is age 69 or
younger on the Continuation Date:
<Table>
<Caption>
- -------------------------------------------------------------
CONTRACT YEAR ESTATEPLUS MAXIMUM
OF DEATH PERCENTAGE ESTATEPLUS PERCENTAGE
- -------------------------------------------------------------
Years 0-4 25% of earnings 40% of Continuation
Net Purchase Payments
- -------------------------------------------------------------
Years 5-9 40% of earnings 65% of Continuation
Net Purchase
Payments*
- -------------------------------------------------------------
Years 10+ 50% of earnings 75% of Continuation
Net Purchase
Payments*
- -------------------------------------------------------------
</Table>
If the Continuing Spouse is between their 70th and 81st birthdays on the
Continuation Date, the table below shows the available EstatePlus benefit:
<Table>
<Caption>
- -------------------------------------------------------------
CONTRACT YEAR ESTATEPLUS MAXIMUM
OF DEATH PERCENTAGE ESTATEPLUS PERCENTAGE
- -------------------------------------------------------------
All Contract 25% of earnings 40% of Continuation
Years Net Purchase
Payments*
- -------------------------------------------------------------
</Table>
* Purchase Payments received after the 5(th) year following the Continuation
Date must remain in the contract for at least six months to be included as
part of Continuation Net Purchase Payments for purpose of the Maximum
EstatePlus calculation.
What is the Contract Year of Death?
Contract Year of Death is the number of full 12 month periods starting on the
Continuation Date and ending on the Continuing Spouse's date of death.
What is the EstatePlus amount?
We determine the EstatePlus amount based upon a percentage of earnings in the
contract at the time of the
D-2
Continuing Spouse's death. For the purpose of this calculation, earnings are
defined as (1) minus (2) where
(1) equals the contract value on the Continuing Spouse's date of
death;
(2) equals the Continuation Net Purchase Payment(s).
What is the Maximum EstatePlus amount?
The EstatePlus benefit is subject to a maximum dollar amount. The Maximum
EstatePlus amount is a percentage of the Continuation Net Purchase Payments.
WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE SPOUSAL CONTINUATION
PROVISION (IN ITS ENTIRETY OR ANY COMPONENT) AT ANY TIME FOR PROSPECTIVELY
ISSUED CONTRACTS.
D-3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
APPENDIX E - PREMIUM TAXES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Premium taxes vary according to the state and are subject to change without
notice. In many states, there is no tax at all. Listed below are the current
premium tax rates in those states that assess a premium tax. For current
information, you should consult your tax adviser.
<Table>
<Caption>
QUALIFIED NON-QUALIFIED
STATE CONTRACT CONTRACT
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
California .50% 2.35%
- ----------------------------------------------------------------------------------------
Maine 0% 2%
- ----------------------------------------------------------------------------------------
Nevada 0% 3.5%
- ----------------------------------------------------------------------------------------
South Dakota 0% 1.25%*
- ----------------------------------------------------------------------------------------
West Virginia 1% 1%
- ----------------------------------------------------------------------------------------
Wyoming 0% 1%
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
</Table>
* On the first $500,000 of premiums; 0.80% on the amount in excess of
$500,000.
E-1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
APPENDIX F - HYPOTHETICAL EXAMPLE OF THE OPERATION OF THE INCOME PROTECTOR
FEATURE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This table assumes $100,000 initial investment in a Non-qualified contract with
no withdrawals, additional Purchase Payments or premium taxes.
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------------
Minimum annual income if you elect to receive income payments
If at issue on contract anniversary . . .
you are . . . 7 10 15 20
- -------------------------------------------------------------------------------------------------------------
Male 6,108 6,672 7,716 8,832
age 60*
- -------------------------------------------------------------------------------------------------------------
Female 5,388 5,880 6,900 8,112
age 60*
- -------------------------------------------------------------------------------------------------------------
Joint** 4,716 5,028 5,544 5,928
Male-60
Female-60
- -------------------------------------------------------------------------------------------------------------
</Table>
* Life annuity with 10 years guaranteed
** Joint and survivor life annuity with 20 years guaranteed
F-1
- --------------------------------------------------------------------------------
Please forward a copy (without charge) of the Polaris(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.
<Table>
SEC registration fee ................................. $20,000
Printing and engraving ............................... 50,000
Legal fees and expenses .............................. 10,000
Rating agency fees ................................... 7,500
Miscellaneous ........................................ 10,000
-------
Total ............................................ $97,500
=======
</Table>
Item 15. Indemnification of Directors and Officers.
Section 10-851 of the Arizona Corporations and Associations law permits the
indemnification of directors, officers, employees and agents of Arizona
corporations. Article Eight of the Company's Restated Articles of Incorporation,
as amended and restated (the "Articles") and Article Five of the Company's
By-Laws ("By-Laws") authorize the indemnification of directors and officers to
the full extent required or permitted by the Laws of the State of Arizona, now
or hereafter in force, whether such persons are serving the Company, or, at its
request, any other entity, which indemnification shall include the advance of
expenses under the procedures and to the full extent permitted by law. In
addition, the Company's officers and directors are covered by certain directors'
and officers' liability insurance policies maintained by the Company's parent.
Reference is made to section 10-851 of the Arizona Corporations and Associations
Law, Article Eight of the Articles, and Article Five of the By-Laws, which are
incorporated herein by reference.
Item 16. Exhibits and Financial Statement Schedules.
Exhibit No. Description
----------- -----------
(1) Form of Underwriting Agreement***
(2) Plan of Acquisition, Reorganization,
Arrangement, Liquidation or Succession**
(3) (a) Articles of Incorporation*
(b) By-Laws*
(4) (a) Group Annuity Certificate***
(b) (Principal Rewards) Group Annuity Certificate*****
(c) Individual Annuity Contract***
(d) (Principal Rewards) Individual Annuity Contract*****
(e) Participant Enrollment Form*****
(f) Annuity Application*****
(5) Opinion of Counsel re: Legality of Securities+
(6) Opinion re Discount on Capital Shares**
(7) Opinion re Liquidation Preference**
(8) Opinion re Tax Matters**
(9) Voting Trust Agreement**
(10) Material Contracts**
(11) Statement re Computation of Per Share
Earnings**
(12) Statement re Computation of Ratios**
(14) Material Foreign Patents**
(15) Letter re Unaudited Financial Information**
(16) Letter re Change in Certifying Accountant**
(21) Subsidiaries of Registrant******
(23) (a) Consent of Independent Accountants (Filed Herewith)
(b) Consent of Attorney***
(24) Powers of Attorney+
(25) Statement of Eligibility of Trustee**
(26) Invitation for Competitive Bids**
(27) Financial Data Schedule****
(28) Information Reports Furnished to State
Insurance Regulatory Authority**
(29) Other Exhibits**
* Incorporated by Reference to
Post-Effective Amendment No. 1 to
Registration Statement No. 333-70252
filed on April 12, 2002.
** Not Applicable
*** Incorporated by Reference to
Pre-Effective Amendment No. 1 to
Registration Statement No. 333-18333
on Form S-1 filed on April 18, 1997.
**** Incorporated by Reference to
Post-Effective Amendment No. 5 to
Registration Statement No. 333-18333
on Form S-3 Filed February 2, 1999.
***** Incorporated by Reference to
Post-Effective Amendment No. 7 to
Registration Statement No. 333-18333
on Form S-3 Filed April 1, 1999
****** Incorporated by Reference to
Post-Effective Amendment No. 8 to
Registration Statement No. 333-18333
on Form S-3 Filed June 23, 1999.
+ Incorporated by reference to Initial
Registration Statement No. 533-70252
on Form S-3 filed September 26,
2001.
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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Los Angeles, State of California on this 16th
day of September, 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
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
JAMES R. BELARDI* Senior Vice President & September 16, 2002
- -------------------- Director
James R. Belardi
MARC H. GAMSIN* September 16, 2002
- -------------------- President & Director
Marc H. Gamsin
N. SCOTT GILLIS* Senior Vice President & September 16, 2002
- -------------------- Director
N. Scott Gillis (Principal Financial Officer)
JANA W. GREER* President & Director September 16, 2002
- --------------------
Jana W. Greer
MAURICE S. HEBERT* Vice President & September 16, 2002
- ------------------- Controller
Maurice S. Hebert (Principal Accounting Officer)
JAY S. WINTROB* Chief Executive Officer & September 16, 2002
- -------------------- Director
Jay S. Wintrob (Principal Executive Officer)
* /s/ CHRISTINE A. NIXON Attorney-in-Fact September 16, 2002
- ------------------------
Christine A. Nixon
EXHIBIT INDEX
Number Description
- ------ -----------
23(a) Consent of Independent Accountants