As filed with the Securities and Exchange Commission on December 21, 2001
Registration No. 33-81476
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
Post-Effective Amendment
No. 14 on Form S-3
under
The Securities Act of 1933
--------------------
ANCHOR NATIONAL LIFE INSURANCE COMPANY
(Exact name of registrant as specified in its charter)
California 6311 86-0198983
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification No.)
incorporation or Number)
organization)
1 SunAmerica Center
Los Angeles, California 90067-6022
(310) 772-6000
(Address, including zip code, and telephone number,
including area code, or registrant's
principal executive offices)
Christine A. Nixon, Esquire
Anchor National Life Insurance Company
1 SunAmerica Center
Los Angeles, California 90067-6022
(310) 772-6000
(Name, address, including zip code, and telephone number, including area code
of agent for service)
----------------------
Approximate date of commencement of proposed 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 to be offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ______________
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ______________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
----------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
shall determine.
Registrant is filing this Post-Effective Amendment No. 14 to make
certain non-material changes to the Registration Statement. Pursuant to oral
permission to do so provided by Mr. William Kotapish to Anchor National and
confirmed on April 26, 2001, this Registration Statement contains multiple
prospectuses with the substantially similar MVA feature. The Registrant does
not intend for this Post-Effective Amendment No. 14 to delete from the
Registration Statement, any document included in the Registration Statement but
not filed herein, including any currently effective Prospectus or supplement
thereto.
VISTA CAPITAL ADVANTAGE
PROSPECTUS
DECEMBER 31, 2001
FLEXIBLE PAYMENT GROUP DEFERRED ANNUITY CONTRACTS
ISSUED BY
ANCHOR NATIONAL LIFE INSURANCE COMPANY
IN CONNECTION WITH
VARIABLE ANNUITY ACCOUNT TWO
The annuity has 11 investment choices - 5 fixed account options and 6
variable investment portfolios listed below. The 5 fixed account options include
market value adjustment fixed accounts for specified periods of 1, 3, 5, 7 and
10 years. Each of the 6 variable investment portfolios invest solely in the
shares of one of the following currently available underlying Funds of Mutual
Fund Variable Annuity Trust:
<Table>
- International Equity - Asset Allocation
- Capital Growth - U.S. Government Income
- Growth and Income - Money Market
</Table>
Additional Underlying Funds may be made available in the future.
Please read this prospectus carefully before investing and keep it for
future reference. It contains important information about the Vista Capital
Advantage Variable Annuity.
To learn more about the annuity offered by this prospectus, you can
obtain a copy of the Statement of Additional Information ("SAI") dated December
31, 2001. The SAI has been filed with the Securities and Exchange Commission
("SEC") and is incorporated by reference into this prospectus. The Table of
Contents of the SAI appears on page 28 of this prospectus. For a free copy of
the SAI, call us at (800) 445-SUN2 or write to us at our Annuity Service Center,
P.O. Box 54299, Los Angeles, California 90054-0299.
In addition, the SEC maintains a website (http://www.sec.gov) that
contains the SAI, materials incorporated by reference and other information
filed electronically with the SEC by Anchor National.
ANNUITIES INVOLVE RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AND ARE
NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR ENDORSED BY, ANY BANK. THEY ARE
NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
- --------------------------------------------------------------------------------
Anchor National's Annual Report on Form 10-K for the year ended December
31, 2000, and its quarterly report on Form 10-Q for the quarters ended March 31,
2001, June 30, 2001 and September 30, 2001 are incorporated herein by reference.
All documents or reports filed by Anchor National under Section 13(a),
13(c), 14, or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") after the effective date of this prospectus are also
incorporated by reference. Statements contained in this prospectus and
subsequently filed documents which are incorporated by reference or deemed to be
incorporated by reference are deemed to modify or supersede documents
incorporated herein by reference.
Anchor National files its Exchange Act documents and reports, including its
annual and quarterly reports on Form 10-K and Form 10-Q, electronically pursuant
to EDGAR under CIK No. 0000006342.
Anchor National is subject to the informational requirements of the
Securities and Exchange Act of 1934 (as amended). We file reports and other
information with the SEC to meet those requirements. You can inspect and copy
this information at SEC public facilities at the following locations:
WASHINGTON, DISTRICT OF COLUMBIA
450 Fifth Street, N.W., Room 1024
Washington, D.C. 20549
CHICAGO, ILLINOIS
500 West Madison Street
Chicago, IL 60661
NEW YORK, NEW YORK
233 Broadway
New York, NY 10048
To obtain copies by mail contact the Washington, D.C. location. After you
pay the fees as prescribed by the rules and regulations of the SEC, the required
documents are mailed.
Registration statements under the Securities Act of 1933, as amended,
related to the contracts offered by this prospectus are on file with the SEC.
This prospectus does not contain all of the information contained in the
registration statements and exhibits. For further information regarding the
separate account, Anchor National and its general account, the Variable
Portfolios and the contract, please refer to the registration statements and
exhibits.
The SEC also maintains a website (http://www.sec.gov) that contains the
SAI, materials incorporated by reference and other information filed
electronically with the SEC by Anchor National.
Anchor National will provide without charge to each person to whom this
prospectus is delivered, upon written or oral request, a copy of the 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
2
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SECURITIES AND EXCHANGE COMMISSION POSITION ON INDEMNIFICATION
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Indemnification for liabilities arising under the Securities Act of 1933
(the "Act") is provided to Anchor National's officers, directors and controlling
persons. The SEC has advised that it believes such indemnification is against
public policy under the Act and unenforceable. If a claim for indemnification
against such liabilities (other than for Anchor National's payment of expenses
incurred or paid by its directors, officers or controlling persons in the
successful defense of any legal action) is asserted by a director, officer or
controlling person of Anchor National in connection with the securities
registered under this prospectus, Anchor National will submit to a court with
jurisdiction to determine whether the indemnification is against public policy
under the Act. Anchor National will be governed by final judgment of the issue.
However, if in the opinion of Anchor National's counsel, this issue has been
determined by controlling precedent, Anchor National will not submit the issue
to a court for determination.
3
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
ITEM ----
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 2
SECURITIES AND EXCHANGE COMMISSION POSITION ON
INDEMNIFICATION........................................... 3
DEFINITIONS................................................. 5
HIGHLIGHTS.................................................. 6
FEE TABLES.................................................. 7
EXAMPLES.................................................... 8
PERFORMANCE DATA............................................ 9
DESCRIPTION OF ANCHOR NATIONAL, THE SEPARATE ACCOUNT AND THE
GENERAL ACCOUNT........................................... 9
Anchor National Life Insurance Company................. 9
Separate Account....................................... 10
General Account........................................ 10
VARIABLE PORTFOLIO OPTIONS.................................. 10
Voting Rights.......................................... 11
Substitution of Securities............................. 11
FIXED ACCOUNT OPTIONS....................................... 12
Fixed Accounts......................................... 12
Market Value Adjustment ("MVA")........................ 12
CONTRACT CHARGES............................................ 12
Insurance Charges...................................... 13
Withdrawal Charges..................................... 13
Investment Charges..................................... 13
Contract Maintenance Fee............................... 13
Transfer Fee........................................... 14
Premium Tax............................................ 14
Income Taxes........................................... 14
Reduction or Elimination of Charges and Expenses, and
Additional Amounts Credited........................... 14
Free Withdrawal Amount................................. 14
Nursing Home Waiver.................................... 15
DESCRIPTION OF THE CONTRACTS................................ 15
Summary................................................ 15
Ownership.............................................. 15
Annuitant.............................................. 15
Modification of the Contract........................... 15
Assignment............................................. 15
Death Benefit.......................................... 16
PURCHASES, WITHDRAWALS AND CONTRACT VALUE................... 17
Purchase Payments...................................... 17
Allocation of Purchase Payments........................ 17
Accumulation Units..................................... 17
Free Look.............................................. 18
Transfers During the Accumulation Phase................ 18
Automatic Dollar Cost Averaging Program................ 19
Asset Allocation Rebalancing........................... 20
Principal Advantage Program............................ 20
Withdrawals............................................ 21
Systematic Withdrawal Program.......................... 21
Minimum Contract Value................................. 21
INCOME PHASE................................................ 22
Annuity Date........................................... 22
Income Options......................................... 22
Transfers During the Income Phase...................... 23
Deferment of Payments.................................. 23
TAXES....................................................... 24
Annuity Contracts in General........................... 24
Tax Treatment of Distributions -- Non-qualified
Contracts............................................. 24
</Table>
4
<Table>
<Caption>
PAGE
ITEM ----
Tax Treatment of Distributions -- Qualified
Contracts............................................. 24
Tax Treatment of Non-qualified Contracts Owned by a
Trust or Corporation.................................. 25
Tax Treatment of Gifts, Pledges and/or Assignments of a
Non-qualified Contract................................ 25
Minimum Distributions.................................. 25
Tax Treatment of Death Benefits........................ 26
Diversification........................................ 26
ADMINISTRATION.............................................. 26
Distribution of Contracts.............................. 27
CUSTODIAN................................................... 27
LEGAL PROCEEDINGS........................................... 27
REGISTRATION STATEMENT...................................... 28
INDEPENDENT ACCOUNTANTS..................................... 28
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.... 28
APPENDIX A -- MARKET VALUE ADJUSTMENT ("MVA")............... A-1
APPENDIX B -- WITHDRAWALS AND WITHDRAWAL CHARGES............ B-1
APPENDIX C -- PREMIUM TAXES................................. C-1
APPENDIX D -- CONDENSED FINANCIAL INFORMATION............... D-1
</Table>
All financial representatives or agents that sell the contracts offered by this
prospectus are required to deliver a prospectus.
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DEFINITIONS
- --------------------------------------------------------------------------------
The following terms, as used in this prospectus, have the indicated
meanings:
ACCUMULATION PHASE -- The period during which you invest money in your contract.
ACCUMULATION UNIT -- A unit of measurement which 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 begin, as selected by you.
ANNUITY UNIT(S) -- 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.
INCOME PHASE -- The period during which we make income payments to you.
IRS -- The Internal Revenue Service.
NON-QUALIFIED (CONTRACT) -- A contract purchased with after-tax dollars. In
general, these contracts are not under any pension plan, specially sponsored
program or individual retirement account ("IRA").
PURCHASE PAYMENTS -- The money you give us to buy the contract, as well as any
additional money you give us to invest in the contract after you own it.
QUALIFIED (CONTRACT) -- A contract purchased with pre-tax dollars. These
contracts are generally purchased under a pension plan, specially sponsored
program or IRA.
TRUST -- Mutual Fund Variable Annuity Trust, an open-end management investment
company.
UNDERLYING FUND(S) -- The underlying series of the Trust in which the Variable
Portfolios invest.
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 Trust.
5
- ------------------------------------------------------
- ------------------------------------------------------
HIGHLIGHTS
- ------------------------------------------------------
- ------------------------------------------------------
The Vista Capital Advantage Variable Annuity is a contract between you and
Anchor National Life Insurance Company ('Anchor National"). It is designed to
help you invest on a tax-deferred basis and meet long-term financial goals.
There are minimum Purchase Payment amounts required to purchase a contract.
Purchase Payments may be invested in a variety of variable and fixed account
options. Like all deferred annuities, the contract has an Accumulation Phase and
an Income Phase. During the Accumulation Phase, you invest money in your
contract. The Income Phase begins when you start receiving income payments from
your annuity to provide for your retirement.
FREE LOOK: You may cancel your contract within 10 days after receiving it
(or whatever period is required in your state). You will receive whatever your
contract is worth on the day that we receive your request. The amount refunded
may be more or less than your original Purchase Payment. We will return your
original Purchase Payment if required by law. Please see PURCHASING A VISTA
CAPITAL ADVANTAGE VARIABLE ANNUITY in the prospectus.
EXPENSES: There are fees and charges associated with the contract. Each
year, we deduct a $30 contract maintenance fee from your contract, which may be
waived for contracts of $50,000 or more. We also deduct insurance charges which
equal 1.40% annually of the average daily value of your contract allocated to
the Variable Portfolios. There are investment charges on amounts invested in the
Variable Portfolios. If you elect optional features available under the contract
we may charge additional fees for those features. A separate withdrawal charge
schedule applies to each Purchase Payment. The amount of the withdrawal charge
declines over time. After a Purchase Payment has been in the contract for seven
complete years, withdrawal charges no longer apply to that portion of the
Purchase Payment. Please see the FEE TABLE, PURCHASING A VISTA CAPITAL ADVANTAGE
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. 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.
6
- --------------------------------------------------------------------------------
FEE TABLES
- --------------------------------------------------------------------------------
OWNER TRANSACTION EXPENSES
WITHDRAWAL CHARGE (AS A PERCENTAGE OF PURCHASE PAYMENTS):
<Table>
<Caption>
YEAR
One.................................................. 6%
Two.................................................. 6%
Three................................................ 5%
Four................................................. 5%
Five................................................. 4%
Six.................................................. 3%
Seven................................................ 2%
Eight and later...................................... 0%
ANNUAL CONTRACT MAINTENANCE FEE............................. $30
TRANSFER FEE................................................ $25
(No transfer fee applies to the first 15 transfers in each
contract year; thereafter, fee is $25 ($10 in Pennsylvania
and Texas) per transfer in any contract year.)
</Table>
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ANNUAL SEPARATE ACCOUNT EXPENSES
(AS A PERCENTAGE OF DAILY NET ASSET VALUE)
<Table>
MORTALITY RISK CHARGE....................................... 0.90%
EXPENSE RISK CHARGE......................................... 0.35%
DISTRIBUTION EXPENSE CHARGE................................. 0.15%
----
TOTAL EXPENSE CHARGE................................. 1.40%
====
</Table>
ANNUAL TRUST EXPENSES
MUTUAL FUND VARIABLE ANNUITY TRUST
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER REIMBURSEMENT OR WAIVER OF EXPENSES
FOR THE TRUST'S
FISCAL YEAR ENDED AUGUST 31, 2001):
<Table>
<Caption>
TOTAL ANNUAL
MANAGEMENT FEE OTHER EXPENSES EXPENSES*
-------------- -------------- ------------
International Equity............................... .00% 1.10% 1.10%
Capital Growth..................................... .00% .90% .90%
Growth and Income.................................. .10% .80% .90%
Asset Allocation................................... .00% .85% .85%
U.S. Government Income............................. .00% .80% .80%
Money Market....................................... .00% .55% .55%
</Table>
- ---------------
* Absent fee waivers or reimbursement of expenses by the adviser, you would have
incurred the following expenses during the last fiscal year: International
Equity 3.38%; Capital Growth 1.75%; Growth and Income 1.51%; Asset Allocation
2.25%; U.S. Government Income 2.26%; and Money Market 2.77%.
THE ABOVE EXPENSES WERE PROVIDED BY THE TRUST. THE COMPANY HAS NOT
VERIFIED THE ACCURACY OF THE INFORMATION.
7
- --------------------------------------------------------------------------------
EXAMPLES
- --------------------------------------------------------------------------------
You will pay the following expenses on a $1,000 investment in each Variable
Portfolio, assuming a 5% annual return on assets, and:
(a) You surrender the contract at the end of the stated time period;
(b) You do not surrender the contract.*
<Table>
<Caption>
TIME PERIODS
----------------------------------------
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------- ------ ------- ------- --------
International Equity......................... (a) $86 $130 $177 $291
(b) $26 $ 80 $137 $291
Capital Growth............................... (a) $84 $124 $167 $271
(b) $24 $ 74 $127 $271
Growth and Income............................ (a) $84 $124 $167 $271
(b) $24 $ 74 $127 $271
Asset Allocation............................. (a) $84 $123 $164 $266
(b) $24 $ 73 $124 $266
U.S. Government Income....................... (a) $83 $121 $162 $261
(b) $23 $ 71 $122 $261
Money Market................................. (a) $81 $114 $149 $235
(b) $21 $ 64 $109 $235
</Table>
- ---------------
* We do not currently assess a surrender charge upon annuitization.
EXPLANATION OF FEE TABLES AND EXAMPLES
1. The purpose of the Fee Tables is to show you the various expenses you would
incur directly and indirectly by investing in the contract.
2. For the Underlying Funds the adviser, J.P. Morgan Fleming Asset Management
(USA) ("JPMFAM (USA)"), has voluntarily agreed to waive fees or reimburse
certain expenses, to keep annual operating expenses at the levels indicated
under "Annual Trust Expenses" on the prior page. The adviser also may
voluntarily waive or reimburse additional amounts to increase an Underlying
Fund'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 Underlying Fund is able to make such payment and
remain in compliance with the foregoing expense limitations.
3. The Examples assume that no transfer fees were imposed. Although premium
taxes may apply in certain states, they are not reflected in the Examples.
4. THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
THE HISTORICAL ACCUMULATION UNIT VALUES ARE CONTAINED IN APPENDIX
D -- CONDENSED FINANCIAL INFORMATION.
8
- --------------------------------------------------------------------------------
PERFORMANCE DATA
- --------------------------------------------------------------------------------
We advertise the Money Market Portfolio's "yield" and "effective yield."
Both figures are based on historical earnings and are not intended to indicate
future performance. The "yield" of the Money Market Portfolio refers to the net
income generated for a contract funded by an investment in the Money Market
Portfolio over a seven-day period. This income is then "annualized." That is,
the amount of income generated by the investment during that week is assumed to
be generated each week over a 52-week period and is shown as a percentage of the
investment. The "effective yield" is calculated similarly but, when annualized,
the income earned by an investment in the Money Market Portfolio is assumed to
be reinvested at the end of each seven-day period. The "effective yield" will be
slightly higher than the "yield" because of the compounding effect of this
assumed reinvestment. Neither the yield nor the effective yield takes into
consideration the effect of any capital changes that might have occurred during
the seven-day period, nor do they reflect the impact of premium taxes or any
withdrawal charges. The impact of other recurring charges on both yield figures
is, however, reflected in them to the same extent it would affect the yield (or
effective yield) for a contract of average size.
In addition, the separate account may advertise "total return" data for its
other Variable Portfolios. Like the yield figures described above, total return
figures are based on historical data and are not intended to indicate future
performance. The "total return" is a computed rate of return that, when
compounded annually over a stated period of time and applied to a hypothetical
initial investment in a Variable Portfolio made at the beginning of the period,
will produce the same contract value at the end of the period that the
hypothetical investment would have produced over the same period (assuming a
complete redemption of the contract at the end of the period). Recurring
contract charges are reflected in the total return figures in the same manner as
they are reflected in the yield data for contracts funded through the Money
Market Portfolio. The effect of applicable withdrawal charges due to the assumed
redemption will be reflected in the return figures, but may be omitted in
additional return figures given for comparison.
The separate account may also advertise an annualized 30-day (or one month)
yield figure for Variable Portfolios other than the Money Market Portfolio.
These yield figures are based upon the actual performance of the Variable
Portfolio over a 30-day (or one month) period ending on a date specified in the
advertisement. Like the total return data described above, the 30-day (or one
month) yield data will reflect the effect of all recurring contract charges (but
will not reflect any withdrawal charges or premium taxes). The yield figure is
derived from net investment gain (or loss) over the period expressed as a
fraction of the investment's value at the end of the period.
More detailed information on the computation of advertised performance data
for the separate account is contained in the SAI.
- --------------------------------------------------------------------------------
DESCRIPTION OF ANCHOR NATIONAL, THE SEPARATE ACCOUNT
AND THE GENERAL ACCOUNT
- --------------------------------------------------------------------------------
ANCHOR NATIONAL LIFE INSURANCE COMPANY
Anchor National issues the Vista Capital Advantage Variable Annuity. When
you purchase a Vista Capital Advantage Variable Annuity, a contract exists
between you and Anchor National. Anchor National 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. We conduct 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.
9
Anchor National and its affiliates, SunAmerica Life Insurance Company,
First SunAmerica Life Insurance Company, SunAmerica Asset Management Corp., and
the SunAmerica Financial Network, Inc. comprising six wholly-owned
broker-dealers, specialize in retirement savings and investment products and
services. Business focuses include fixed and variable annuities, mutual funds,
broker-dealer services and trust administration services.
Anchor National may advertise the rating and other information assigned to
it by independent industry ratings organizations. Some of those organizations
are A.M. Best Company ("A.M. Best"), Moody's Investor's Service ("Moody's"),
Standard & Poor's Insurance Rating Services ("S&P"), and Fitch, IBA Duff &
Phelps ("Duff Phelps"). A.M. Best's and Moody's ratings reflect their current
opinion of Anchor National's financial strength and performance in comparison to
others in the life and health insurance industry. S&P's and Duff & Phelps'
ratings measure the ability of an insurance company to meet its obligations
under insurance policies it issues. These two ratings do not measure the
insurer's ability to meet non-policy obligations. These ratings do not relate to
the performance of the Variable Portfolios.
SEPARATE ACCOUNT
Anchor National originally established Variable Annuity Account Two (the
"separate account") on May 24, 1994. The separate account is registered with the
SEC as a unit investment trust under the Investment Company Act of 1940, as
amended. Anchor National owns the assets of 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.
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.
- --------------------------------------------------------------------------------
VARIABLE PORTFOLIO OPTIONS
- --------------------------------------------------------------------------------
The contract currently offers six Variable Portfolios. These Variable
Portfolios invest in shares of the Mutual Fund Variable Annuity Trust. These
Variable Portfolios operate similarly to a mutual fund but are only available
through the purchase of this annuity contract. The Underlying Funds are:
<Table>
- INTERNATIONAL EQUITY - ASSET ALLOCATION
- CAPITAL GROWTH - U.S. GOVERNMENT INCOME
- GROWTH AND INCOME - MONEY MARKET
</Table>
JPMFAM (USA) acts as investment adviser and JPMorgan Chase Bank ("JPMorgan
Chase") acts as administrator and custodian for the Trust. J.P. Morgan Fleming
Asset Management (London) Limited, an English corporation ("JPMFAM London") is
the investment subadviser to the International Equity Portfolio. As investment
adviser to the Underlying Funds, JPMFAM (USA) makes investment decisions subject
to policies set by the Board of Trustees of the Trust. As administrator of the
Underlying Funds, JPMorgan Chase provides certain services including
coordinating relationships with independent contractors and agents; preparing
and filing of certain documents; preparing financial statements; arranging for
the maintenance of books and records; and providing office facilities. Certain
of these services have been delegated to J.P. Morgan Fund Distributors, Inc.
("JPMFD") which serves as sub-administrator to the Underlying Funds. As
custodian for the
10
Underlying Funds, JPMorgan Chase's responsibilities include safeguarding and
controlling the Underlying Funds' cash and securities, handling the receipt and
delivery of securities, determining income and collecting interest on
investments, maintaining books of original entry and other required books and
accounts, and calculating daily net asset values.
The Underlying Funds' investment objectives are as follows:
INTERNATIONAL EQUITY PORTFOLIO seeks long-term capital appreciation and
income by investing primarily in a portfolio of marketable equity securities of
issuers located throughout the world.
CAPITAL GROWTH PORTFOLIO seeks long-term capital appreciation. This
Variable Portfolio invests primarily in common stocks which are widely
diversified by industry and company.
GROWTH AND INCOME PORTFOLIO seeks growth of capital and income by investing
primarily in common stocks and other securities which demonstrate the potential
for appreciation and/or dividends.
ASSET ALLOCATION PORTFOLIO seeks high total return (including income and
capital gains) by investing in a diversified portfolio of equity and debt
securities, including common stocks, convertible securities and government and
corporate fixed-income obligations. The Adviser considers both the opportunity
for gain and the risk of loss in making investments, and may alter the
percentages of assets invested in equity and fixed income securities, depending
on the judgment of the Adviser as to general market and economic conditions,
trends and yields and interest rates and changes in fiscal and monetary
policies.
U.S. GOVERNMENT INCOME PORTFOLIO seeks relatively high current income,
liquidity and security of principal. This Variable Portfolio invests in
obligations issued, guaranteed or insured by the U.S. Government, its agencies
or instrumentalities. Neither the United States nor any of its agencies insures
or guarantees the market value of shares of this Variable Portfolio.
MONEY MARKET PORTFOLIO seeks high current income while preserving capital
by investing in a diversified selection of money market investments.
There is no assurance that the investment objective of any of the
Underlying Funds will be met. You bear the complete investment risk for Purchase
Payments allocated to a Variable Portfolio. Contract values will fluctuate in
accordance with the investment performance of the Variable Portfolio(s).
Additionally, contract fees and charges reduce investment return.
You should read the prospectus for the trust carefully. The prospectus
contains detailed information about the underlying funds, including more
detailed information about each underlying funds' investment objective and risk
factors.
VOTING RIGHTS
Anchor National is the legal owner of the Trust's shares. However, when an
Underlying Fund 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. Should we determine that we
are no longer required to comply with these rules, we will vote the shares in
our own right.
SUBSTITUTION OF SECURITIES
If Underlying Funds become unavailable for investment, we may be required
to substitute shares of another Underlying Fund. We will seek prior approval of
the SEC and give you notice before substituting shares.
11
- --------------------------------------------------------------------------------
FIXED ACCOUNT OPTIONS
- --------------------------------------------------------------------------------
FIXED ACCOUNTS
The contract also offers fixed account options for periods of 1, 3, 5, 7 or
10 years. We call these time periods guarantee periods. All of these fixed
account options pay interest at rates set and guaranteed by Anchor National.
Interest rates may differ from time to time and are set at our sole discretion.
We will never credit less than a 3% annual effective rate to any of the fixed
account options. The interest rate offered for new Purchase Payments may differ
from interest rates offered for subsequent Purchase Payments and money already
in the fixed account options. In addition, different guarantee periods offer
different interest rates. Once established, the rates for specified payments do
not change during the specified period.
When a guarantee period ends, you may leave your money in the same
guarantee period. You may also reallocate your money to another fixed account
option or to the Variable Portfolios. If you want to reallocate your money you
must contact us within 30 days after the end of the current guarantee period and
instruct us how to reallocate the money. If we do not hear from you, we will
keep your money in the same guarantee period where it will earn the renewal
interest rate applicable at that time.
MARKET VALUE ADJUSTMENT ("MVA")
If you take money out of the fixed account options before the end of the
guarantee period, we make an adjustment to your contract (the "MVA"). The MVA
reflects any difference in the interest rate environment between the time you
place your money in the fixed account option and the time when you withdraw that
money. This adjustment can increase or decrease your contract value. You have 30
days after the end of each guarantee period to reallocate your funds without
incurring any MVA.
We calculate the MVA by doing a comparison between current rates and the
rate being credited to you in the fixed account option. For the current rate we
use a rate being offered by us for a guarantee period that is equal to the time
remaining in the guarantee period from which you seek withdrawal. If we are not
currently offering a guarantee period for that period of time, we determine an
applicable rate by using a formula to arrive at a number between the interest
rates currently offered for the two closest periods available.
Generally, if interest rates drop between the time you put your money into
the fixed account options and the time you take it out, we credit a positive
adjustment to your contract. Conversely, if interest rates increase during the
same period, we post a negative adjustment to your contract.
Where the MVA is negative, we 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.
APPENDIX A shows how to calculate the MVA.
- --------------------------------------------------------------------------------
CONTRACT CHARGES
- --------------------------------------------------------------------------------
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.
12
INSURANCE CHARGES
The Company deducts a mortality and expense risk charge in the amount of
1.40%, annually of the value of your contract invested in the 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.
WITHDRAWAL CHARGES
The contract provides a free withdrawal amount every year. (SEE CONTRACT
CHARGES, FREE WITHDRAWAL AMOUNT, PAGE 14.) Additionally, earnings in your
contract may be withdrawn free of withdrawal charges. If you take money out in
excess of the free withdrawal amount, you may incur a withdrawal charge.
We apply a withdrawal charge against each Purchase Payment you put into the
contract. After a Purchase Payment has been in the contract for seven complete
years, no withdrawal charge applies to that Purchase Payment. The withdrawal
charge equals a percentage of the Purchase Payment you take out of the contract.
The withdrawal charge percentage declines each year a Purchase Payment is in the
contract, as follows:
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------
YEAR 1 2 3 4 5 6 7 8
- ------------------------------------------------------------------------------------------------------
WITHDRAWAL CHARGE 6% 6% 5% 5% 4% 3% 2% 0%
- ------------------------------------------------------------------------------------------------------
</Table>
When calculating the withdrawal charge, we treat withdrawals as coming
first from the Purchase Payments that have been in your contract the longest.
However, for tax purposes, your withdrawals are considered earnings first, then
Purchase Payments.
Whenever possible, we deduct the withdrawal charge from the money remaining
in your contract. If you withdraw all of your contract value, applicable
withdrawal charges are deducted from the amount withdrawn.
We do not assess a withdrawal charge for money withdrawn to pay a death
benefit or to begin the Income Phase of your contract. Withdrawals made prior to
age 59 1/2 may result in a 10% IRS penalty tax. SEE TAXES, PAGE 25.
APPENDIX B provides more information on withdrawals and the withdrawal
charge.
INVESTMENT CHARGES
Charges are deducted from your Variable Portfolios for the advisory and
other expenses of the Underlying Funds. THE FEE TABLES LOCATED AT PAGE 7
illustrate these charges and expenses. For more detailed information on these
investment charges, refer to the attached prospectus for the Trust.
CONTRACT MAINTENANCE FEE
During the Accumulation Phase, we subtract a contract maintenance fee from
your account once per contract year. This charge compensates us for the cost of
contract administration. We deduct the $30 contract maintenance fee on a
pro-rata basis from your account value on your contract anniversary. If you
withdraw your entire contract value, the fee is deducted from that withdrawal.
13
TRANSFER FEE
The contract currently provides for 15 free transfers between investment
options each contract year. After that, a charge of $25 applies to each
additional transfer in any one contract year ($10 in Pennsylvania and Texas).
SEE TRANSFERS DURING THE ACCUMULATION PHASE, PAGE 18.
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 C provides more information about premium taxes.
INCOME TAXES
We do not currently deduct income taxes from your contract. We reserve the
right to do so in the future.
REDUCTION OR ELIMINATION OF CHARGES AND EXPENSES, AND ADDITIONAL AMOUNTS
CREDITED
Sometimes sales of the contracts to groups of similarly situated
individuals may lower our administrative and/or sales expenses. We reserve the
right to reduce or waive certain charges and expenses when this type of sale
occurs. In addition, we may also credit additional interest to policies sold to
such groups. We determine which groups are eligible for such treatment. Some of
the criteria used 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.
We may make such a determination regarding sales to our employees, our
affiliates' employees and employees of currently contracted broker-dealers, our
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.
FREE WITHDRAWAL AMOUNT
Your contract provides for a free withdrawal amount each year. Purchase
Payments that are no longer subject to a withdrawal charge and not previously
withdrawn, plus earnings, may be withdrawn without penalty.
After the first full contract year, the contract provides for a free
withdrawal amount on your first withdrawal of the contract year. The free
withdrawal amount is the greater of (1) earnings in your contract and (2) 10% of
your total Purchase Payments invested for at least one year and not yet
withdrawn. Total Purchase Payments are equal to your total Purchase Payments
invested in the contract less any Purchase Payments withdrawn upon which a
surrender charge was paid and the amount of the surrender charge. Additionally,
once a Purchase Payment is no longer subject to withdrawal charges, it is no
longer included when determining total Purchase Payments.
Upon a full surrender of your contract, to the extent you previously
withdraw Purchase Payments free of a withdrawal charge under the free withdrawal
provision, we will recoup the full withdrawal charge on such amounts, as if that
money was still invested in the contract on the date of surrender.
14
We will waive the withdrawal charge upon payment of a death benefit. Where
legally permitted, the withdrawal charge may be eliminated when a contract is
issued to an officer, director or employee of the Company or its affiliates.
NURSING HOME WAIVER
If your contract was issued with the appropriate rider and you are confined
to a nursing home for 60 days or longer, we may waive the withdrawal charge
and/or the MVA 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 rider
prohibits use of this waiver during the first 90 days after purchase. 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.
- --------------------------------------------------------------------------------
DESCRIPTION OF THE CONTRACTS
- --------------------------------------------------------------------------------
SUMMARY
This contract works in two stages, the Accumulation Phase and the Income
Phase. Your contract is in the Accumulation Phase while you make payments into
the contract. The Income Phase begins when you request that we begin making
payments to you out of the money accumulated in your contract.
OWNERSHIP
The Vista Capital Advantage Variable Annuity is a Flexible Payment Group
Deferred Annuity Contract. Anchor National issues 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.
ANNUITANT
The annuitant is the person on whose life we base income payments. You may
change the Annuitant at any time before the Annuity Date. You may also designate
a second person on whose life, together with the annuitant, income payments
depend. If the annuitant dies before the Annuity Date, you must notify us and
select a new annuitant.
MODIFICATION OF THE CONTRACT
Only the Company's President, a Vice President or Secretary may approve a
change or waive a provision of the contract. Any change or waiver must be in
writing. We reserve the right to modify the terms of the contract as necessary
to comply with changes in applicable law.
ASSIGNMENT
Contracts issued pursuant to Non-qualified plans that are not subject to
Title 1 of the Employee Retirement Income Security Act of 1974 ("ERISA") may be
assigned by the owner at any time during the lifetime of the Annuitant prior to
the Annuity Date. We will not be bound by any assignment until
15
written notice is received by us at our Annuity Service Center. We are not
responsible for the validity, tax or other legal consequences of any assignment.
An assignment will not affect any payments we may make or actions we may take
before we receive notice of the assignment.
If the contract is issued pursuant to a Qualified plan (or a Non-qualified
plan that is subject to Title 1 of ERISA), it may not be assigned, pledged or
otherwise transferred except under such conditions as may be allowed under
applicable law.
BECAUSE AN ASSIGNMENT MAY BE A TAXABLE EVENT, YOU SHOULD CONSULT A
COMPETENT TAX ADVISER SHOULD YOU WISH TO ASSIGN YOUR CONTRACT.
DEATH BENEFIT
If you die during the Accumulation Phase of your contract, we pay a death
benefit to your Beneficiary.
If you were less than age 70 when your contract was issued, the death
benefit is equal to the greater of:
1. the value of your contract at the time we receive satisfactory proof of
death; or
2. total Purchase Payments less any withdrawals (and any fees or charges
applicable to such withdrawals); or
3. the maximum anniversary value on any contract anniversary preceding your
death. The anniversary value equals the value of your contract on a
contract anniversary plus any Purchase Payments and less any withdrawals
(and any fees or charges applicable to such withdrawals) since that
contract anniversary.
If you were age 70 or older when your contract was issued, the death
benefit will equal the value of your contract at the time we receive
satisfactory proof of death.
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 PHASE, INCOME OPTIONS, PAGE 22.)
You name your Beneficiary. You may change the Beneficiary at any time,
unless you previously made an irrevocable Beneficiary designation.
We pay the death benefit when we receive 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 payment must begin immediately upon receipt of all
necessary documents. In any event, 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 the date
of your death. If a Beneficiary does not elect a specific form of pay out within
60 days of our receipt of proof of death, we pay a lump sum death benefit to the
Beneficiary.
16
If the Beneficiary is the spouse of a deceased owner, he or she can elect
to continue the contract at the then current value. If the Beneficiary/spouse
continues the contract, we do not pay a death benefit to him or her.
- --------------------------------------------------------------------------------
PURCHASES, WITHDRAWALS AND CONTRACT VALUE
- --------------------------------------------------------------------------------
PURCHASE PAYMENTS
A Purchase Payment is the money you give us to buy a contract. Any
additional money you give us to invest in the contract after purchase is a
subsequent Purchase Payment.
This chart shows the minimum initial and subsequent Purchase Payments
permitted under your contract. These amounts depend upon whether your contract
is Qualified or Non-qualified for tax purposes. SEE TAXES, PAGE 24.
<Table>
<Caption>
- --------------------------------------------------------------------
MINIMUM
MINIMUM INITIAL SUBSEQUENT
PURCHASE PAYMENT PURCHASE PAYMENT
- --------------------------------------------------------------------
Qualified $2,000 $250
- --------------------------------------------------------------------
Non-Qualified $5,000 $250
- --------------------------------------------------------------------
</Table>
Prior Company approval is required to accept Purchase Payments greater than
$1,500,000. The Company reserves the right to refuse any Purchase Payment
including one which would cause Total Purchase Payments to exceed $1,500,000 at
the time of the Purchase Payment. Further, we reserve the right to aggregate all
contracts having the same owners' and/or annuitants' social security or federal
tax identification number for purposes of determining which contracts and/or
purchase payments require Company pre-approval. Also, the optional automatic
payment plan allows you to make subsequent Purchase Payments of as little as
$20.
We may refuse any Purchase Payment. In general, Anchor National will not
issue a Qualified contract to anyone who is age 70 1/2 or older, unless it is
shown that the minimum distribution required by the IRS is being made. In
addition, we may not issue a contract to anyone over age 85.
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 invest the money according to your last allocation
instructions. SEE VARIABLE PORTFOLIO OPTIONS, PAGE 10 AND FIXED ACCOUNT OPTIONS,
PAGE 12.
In order to issue your contract, we must receive your completed
application, Purchase Payment allocation instructions and any other required
paperwork at our principal place of business. We allocate your initial purchase
payment within two days of receiving it. If we do not have complete information
necessary to issue your contract, we will contact you. If we do not have the
information necessary to issue your contract within 5 business days we will:
- Send your money back to you, or;
- Ask your permission to keep your money until we get the information
necessary to issue the contract.
ACCUMULATION UNITS
When you allocate a Purchase Payment to the Variable Portfolios, we credit
your contract with Accumulation Units of the separate account. We base the
number of Accumulation Units you receive on the unit value of the Variable
Portfolio as of the day we receive your money if we receive it before 1 p.m.
Pacific Standard Time, or on the next business day's unit value if we receive
your money after
17
1 p.m. Pacific Standard Time. The value of an Accumulation Unit will go up and
down based on the performance of the Variable Portfolios.
We calculate the value of an Accumulation Unit each day that the New York
Stock Exchange ("NYSE") is open as follows:
1. We determine the total value of money invested in a particular Variable
Portfolio;
2. We subtract from that amount all applicable contract charges; and
3. We divide this amount by the number of outstanding Accumulation Units.
We determine the number of Accumulation Units credited to your contract by
dividing the Purchase Payment by the Accumulation Unit value for the specific
Variable Portfolio.
EXAMPLE:
We receive a $25,000 Purchase Payment from you on Wednesday. You allocate
the money to the Asset Allocation Portfolio. The value of an Accumulation
Unit for the Asset Allocation Portfolio is $11.10 when the NYSE closes on
Wednesday. Your Purchase Payment of $25,000 is then divided by $11.10 and
we credit your contract on Wednesday night with 2252.52 Accumulation Units
of the Asset Allocation Portfolio.
Performance of the Variable Portfolios and the charges 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). Anchor National calls this a "free look." To cancel,
you must mail the contract along with your free look request to the Annuity
Service Center at P.O. Box 54299, Los Angeles, California 90054-0299. We will
refund the value of your contract on the day we receive your request. The amount
refunded to you may be more or less than the amount you originally invested.
Certain states require us to return your Purchase Payments upon a free look
request. Additionally, all contracts issued as an IRA require the full return of
Purchase Payments upon a free look.
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase you may transfer funds between the Variable
Portfolios and/or the fixed account options. You must transfer at least $100. If
less than $100 will remain in any Variable Portfolio after a transfer, that
amount must be transferred as well.
You may request transfers of your account value between the Variable
Portfolios and/or the fixed account options in writing or by telephone. We
currently allow 15 free transfers per contract per year. A charge of $25 ($10 in
Pennsylvania and Texas) for each additional transfer in any contract year
applies after the first 15 transfers. 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 accept transfer requests by telephone unless you specify not to on your
contract application. Additionally, in the future you may be able to execute
transfers or other financial transactions over the internet. When receiving
instructions over the telephone, 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.
Upon implementation of internet account transfers we will have appropriate
procedures in place to provide reasonable assurance that the transactions
executed are genuine. Thus, Anchor National would not be responsible for any
claim, loss or expense from any error resulting from instructions
18
received over the internet. If we fail to follow any 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
Funds.
Where permitted by law, we may accept your authorization for a third party
to make transfers for you subject to certain rules. We reserve the right to
suspend or cancel such acceptance at any time and will notify you accordingly.
Additionally, we may restrict the investment options available for transfers
during any period in which such third party acts for you. We will notify such
third party beforehand regarding any restrictions. However, we will not enforce
these restrictions if we are satisfied that:
- such third party has been appointed by a court of competent jurisdiction
to act on your behalf; or
- such third party is a trustee/fiduciary for you or appointed by you to
act on your behalf for all your financial affairs.
We may provide administrative or other support services to independent
third parties you authorize to make transfers on your behalf. We do not
currently charge extra for providing these support services. This includes, but
is not limited to, transfers between investment options in accordance with
market timing strategies. Such independent third parties may or may not be
appointed with us for the sale of annuities. However, WE DO NOT ENGAGE ANY THIRD
PARTIES TO OFFER INVESTMENT ALLOCATION SERVICES OF ANY TYPE. WE TAKE NO
RESPONSIBILITY FOR THE INVESTMENT ALLOCATION AND TRANSFERS TRANSACTED ON YOUR
BEHALF BY SUCH THIRD PARTIES OR FOR ANY INVESTMENT ALLOCATION RECOMMENDATIONS
MADE BY SUCH PARTIES.
For information regarding transfers during the Income Phase, SEE INCOME
PHASE, TRANSFERS DURING THE INCOME PHASE, PAGE 23.
We reserve the right to modify, suspend, waive or terminate these transfer
provisions at any time.
AUTOMATIC DOLLAR COST AVERAGING PROGRAM
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 the Money Market Portfolio,
U.S. Government Income Portfolio or the 1-year fixed account option (source
accounts) to any other Variable Portfolio. Fixed Account options are not
available as target accounts for Dollar Cost Averaging. Transfers may be
monthly, quarterly, semiannually or annually. You may change the frequency at
any time by notifying us in writing. The minimum transfer amount under the DCA
program is $100, regardless of the source account.
The DCA program is designed to lessen the impact of market fluctuations on
your investment. However, we cannot ensure that you will make a profit. When you
elect the DCA program, you are continuously investing in securities regardless
of fluctuating price levels. You should consider your tolerance for investing
through periods of fluctuating price levels.
We reserve the right to modify, suspend or terminate this program at any
time.
19
EXAMPLE:
Assume that you want to gradually move $750 each quarter from the Money
Market Portfolio to the Growth and Income Portfolio over six quarters. You
set up dollar cost averaging and purchase Accumulation Units at the
following hypothetical values:
<Table>
<Caption>
- -----------------------------------------------------------
ACCUMULATION UNITS
QUARTER UNIT VALUE 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>
In this example, you paid an average price of only $6.67 per Accumulation
Unit over six quarters, while the average market price actually was $7.08.
By investing an equal amount of money each month, you automatically buy
more Accumulation Units when the market price is low and fewer Accumulation
Units when the market price is high. This example is for illustrative
purposes only.
ASSET ALLOCATION REBALANCING
Earnings in your contract may cause the percentage of your investment in
each investment option to differ from your original allocations. The automatic
asset rebalancing program addresses this situation. At your election, we
periodically rebalance your investments to return your allocations to their
original percentages.
Asset rebalancing may involve shifting a portion of your money out of an
investment option with a higher return into an investment option with a lower
return. You request quarterly, semiannual or annual rebalancing. 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 U.S. Government Income Portfolio
and 50% in the Capital Growth Portfolio. Over the next calendar quarter,
the U.S. Government Income Portfolio outperforms the Capital Growth
Portfolio. At the end of the calendar quarter, the U.S. Government Income
Portfolio now represents 60% of your holdings because it has increased in
value and the Capital Growth Portfolio represents 40% of your holdings. If
you had chosen quarterly rebalancing, on the last day of that quarter,
Anchor National would sell some of your units in the U.S. Government Income
Portfolio to bring its holdings back to 50% and use the money to buy more
units in the Capital 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
investment options and Variable Portfolios. You decide how much you want to
invest and approximately when you want a return of principal. Anchor National
calculates how much of your Purchase Payment needs to be allocated to the
particular fixed investment option to ensure that it grows to an amount equal to
your total principal invested under this program. The remaining principal is
invested in the Variable Portfolio(s) of your choice.
Anchor National reserves the right to modify, suspend or terminate this
program at any time.
20
EXAMPLE:
Assume that you want to allocate a portion of your initial Purchase Payment
of $100,000 to the fixed investment option. You want the amount allocated
to the fixed investment option to grow to $100,000 in 7 years. If the
7-year fixed investment option is offering a 5% interest rate, Anchor
National allocates $71,069 to the 7-year fixed investment option to ensure
that this amount will grow to $100,000 at the end of the 7-year period. The
remaining $28,931 may be allocated among the Variable Portfolios, as
determined by you, to provide opportunity for greater growth.
WITHDRAWALS
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 PHASE,
PAGE 22.)
Generally, we deduct a withdrawal charge applicable to any total or partial
withdrawal and a MVA against withdrawals from the 3, 5, 7 or 10 year fixed
account options. If you withdraw your entire contract value, a deduction for
premium taxes and the contract maintenance fee also occurs. (SEE CONTRACT
CHARGES, WITHDRAWAL CHARGE, PAGE 15.)
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, PAGE 24.)
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
different instructions, partial withdrawals will be made pro rata from each
Variable Portfolio and the fixed account option in which your contract is
invested.
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 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, semiannual or annual payments from your
contract. Electronic transfer of these funds to your bank account is available.
The minimum amount of each withdrawal is $250. There must be at least $100
remaining in each Variable Portfolio after a withdrawal from your contract at
all times. Withdrawals may be subject to a withdrawal charge, a MVA and
taxation, 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.
The program is not available to everyone. Please check with our Annuity
Service Center, which can provide the necessary enrollment forms. Anchor
National reserves the right to modify, suspend or terminate this program at any
time.
MINIMUM CONTRACT VALUE
Where permitted by state law, we may terminate your contract if both of the
following occur: (1) your contract is less than $500 as a result of withdrawals;
and (2) you have not made any Purchase Payments during the past three years. We
will provide you with sixty days written notice. At the end of the notice
period, we will distribute the contract value to you.
21
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INCOME PHASE
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ANNUITY DATE
During the Income Phase, we use the money accumulated in your contract to
make regular income payments to you. You may switch to the Income Phase any time
after your 2nd contract anniversary. You select the month and year in which you
want income payments to begin. The first day of that month is the Annuity Date.
You may change your Annuity Date, so long as you do so at least seven days
before the income payments are scheduled to begin. Once you begin receiving
income payments, you cannot change your income option. Except as indicated under
Option 5 below, once you begin receiving income payments, you cannot otherwise
access your money through a withdrawal or surrender.
Income payments must begin on or before your 90th birthday or on your tenth
contract anniversary, whichever occurs later. If you do not choose an Annuity
Date, your income payments will automatically begin on this date. Certain states
may require your income payments to start earlier.
If the Annuity Date is past your 85th birthday, your contract could lose
its status as an annuity under Federal tax laws. This may cause you to incur
adverse tax consequences.
In addition, most Qualified contracts require you to take minimum
distributions after you reach age 70 1/2. (SEE TAXES, PAGE 24.)
INCOME OPTIONS
Currently, this contract offers five income options. If you elect to
receive income payments but do not select an option, your income payments will
be made in accordance with option 4 for a period of 10 years. For income
payments based on joint lives, we pay according to option 3.
We base our calculation of income payments on the life of the Annuitant and
the annuity rates set forth in your contract. As the contract owner, you may
change the Annuitant at any time prior to the Annuity Date. You must notify us
if the Annuitant dies before the Annuity Date and designate a new Annuitant.
OPTION 1 -- LIFE INCOME ANNUITY
This option provides income payments for the life of the Annuitant. Income
payments stop when the Annuitant dies.
OPTION 2 -- JOINT AND SURVIVOR LIFE ANNUITY
This option provides income payments for the life of the Annuitant and for
the life of another designated person. Upon the death of either person, we will
continue to make income payments during the lifetime of the survivor. Income
payments stop whenever the survivor dies.
OPTION 3 -- JOINT AND SURVIVOR LIFE ANNUITY WITH 10 YEARS GUARANTEED
This option is similar to option 2 above, with an additional guarantee of
payments for at least 10 years. If the Annuitant and the survivor die before all
of the guaranteed income payments have been made, the remaining payments are
made to the Beneficiary under your contract.
OPTION 4 -- LIFE ANNUITY WITH 10 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.
22
OPTION 5 -- INCOME FOR A SPECIFIED PERIOD
This option provides income payments for a guaranteed period ranging from 3
to 30 years. If the Annuitant dies before all of the guaranteed income payments
are made, the remaining income payments will be made to the Beneficiary under
your contract. Additionally, if variable payments are elected under this option,
you (or the Beneficiary under the contract if the Annuitant dies prior to all
guaranteed payments being made) may redeem the contract value after the Annuity
Date. The amount available upon such redemption would be the discounted present
value of any remaining guaranteed payments.
Please read the SAI for a more detailed discussion of the income options.
You can choose income payments that are fixed, variable or both. If at the
date when income payments begin you are invested in the Variable Portfolios
only, your income payments will be variable. If your money is only in fixed
accounts at that time, your income payments will be fixed in amount. Further, if
you are invested in both the fixed and variable investment options when payments
begin your payments will be fixed and variable. If income payments are fixed,
Anchor National guarantees the amount of each payment. If the income payments
are variable, the amount is not guaranteed.
We make income payments on a monthly, quarterly, semiannual or annual
basis. You instruct us to send you a check or to have the payments directly
deposited into your bank account. If state law allows, we distribute annuities
with a contract value of $5,000 or less in a lump sum. Also, if the selected
income option results in income payments of less than $50 per payment, the
frequency of your payments may be decreased, 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 income 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 income payments for up to six months, or less if
required by law. Interest is credited to you during the deferral period.
23
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TAXES
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NOTE: WE PREPARED THE FOLLOWING INFORMATION ON TAXES AS A GENERAL
DISCUSSION OF THE SUBJECT. IT IS NOT TAX ADVICE. WE CAUTION YOU TO SEEK
COMPETENT TAX ADVICE ABOUT YOUR OWN CIRCUMSTANCES. WE DO NOT GUARANTEE THE TAX
STATUS OF YOUR ANNUITY. TAX LAWS CONSTANTLY CHANGE, THEREFORE WE CANNOT
GUARANTEE THAT THE INFORMATION CONTAINED HEREIN IS COMPLETE AND/OR ACCURATE.
ANNUITY CONTRACTS IN GENERAL
The Internal Revenue Code ("federal tax code" or "IRC") provides for
special rules regarding the tax treatment of annuity contracts. Generally, taxes
on the earnings in your annuity contract are deferred until you take the money
out. Qualified retirement investments automatically provide tax deferral
regardless of whether the underlying contract is an annuity. Different rules
apply depending on how you take the money out and whether your contract is
Qualified or Non-qualified.
If you do not purchase your contract under a pension plan, a specially
sponsored employer program or an individual retirement account ("IRA"), 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 IRA, your contract is referred to as a Qualified
contract. Examples of qualified plans are: IRAs, Roth IRAs, Tax-Sheltered
Annuities (referred to as 403(b) contracts), H.R. 10 Plans (referred to as Keogh
Plans) and pension and profit sharing plans, including 401(k) plans. Typically
you have not paid any tax on the Purchase Payments used to buy your contract and
therefore, you have no cost basis in your contract.
TAX TREATMENT OF DISTRIBUTIONS -- NON-QUALIFIED CONTRACTS
If you make a withdrawal from a Non-qualified contract, the IRC treats such
a withdrawal as first coming from the earnings and then as coming from your
Purchase Payments. For income payments, any portion of each payment that is
considered a return of your Purchase Payment will not be taxed. Withdrawn
earnings are treated as income to you and are taxable. The 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 come from Purchase Payments made prior to August
14, 1982.
TAX TREATMENT OF DISTRIBUTIONS -- QUALIFIED CONTRACTS
Generally, you have not paid any taxes on the Purchase Payments used to buy
a Qualified contract. Any amount of money you take out as a withdrawal or as
income payments is taxable income. The IRC further provides for a 10% penalty
tax on any withdrawal or income payment paid to you other than in conjunction
with the following circumstances: (1) after reaching age 59 1/2; (2) when paid
to your Beneficiary after you die; (3) after you become disabled (as defined in
the IRC); (4) when paid in a series of substantially equal installments made for
your life or for the joint lives of you and your Beneficiary; (5) to the extent
such withdrawals do not exceed limitations set by the IRC for amounts paid
during the taxable year for medical care; (6) to fund higher education expenses
(as defined in IRC); (7) to fund certain first-time home purchase expenses; and,
except in the case of an IRA; (8) when you separate from service after attaining
age 55; and (9) when paid to an alternate payee pursuant to a qualified domestic
relations order.
24
The IRC limits the withdrawal of Purchase Payments from certain
Tax-Sheltered Annuities. Withdrawals can only be made when an owner: (1) reaches
age 59 1/2; (2) leaves his or her job; (3) dies; (4) becomes disabled (as
defined in the IRC); or (5) experiences hardship (as defined in the IRC). In the
case of hardship, the owner can only withdraw Purchase Payments. These
restrictions do not apply to amounts transferred to another TSA contract under
Section 403(b) or to a custodial account under Section 403(b)(7).
TAX TREATMENT OF NON-QUALIFIED CONTRACTS OWNED BY A TRUST OR CORPORATION
A Trust or Corporation ("Non-Natural Owner") that is considering purchasing
this contract should consult a tax advisor. Generally, the IRC does not treat a
Non-qualified contract owned by a non-natural owner as an annuity contract for
Federal income tax purposes. The non-natural owner pays tax currently on the
contract's value in excess of the owner's cost basis. SEE THE STATEMENT OF
ADDITIONAL INFORMATION FOR A MORE DETAILED DISCUSSION OF THE POTENTIAL ADVERSE
TAX CONSEQUENCES ASSOCIATED WITH NON-NATURAL OWNERSHIP OF A NON-QUALIFIED
ANNUITY CONTRACT.
TAX TREATMENT OF GIFTS, PLEDGES AND/OR ASSIGNMENTS OF A NON-QUALIFIED CONTRACT
If you gift your Non-qualified contract to a person other than your spouse
(or former spouse incident to divorce) you will pay federal tax on the
contract's cash value to the extent it exceeds your cost basis. The recipient's
cost basis will be increased by the amount on which you will pay federal taxes.
Also, the IRC treats any assignment or pledge (or agreement to assign or pledge)
of any portion of a Non-qualified contract as a withdrawal. PLEASE SEE THE
STATEMENT OF ADDITIONAL INFORMATION FOR A MORE DETAILED DISCUSSION REGARDING
POTENTIAL TAX CONSEQUENCES OF GIFTING, ASSIGNING OR PLEDGING A NON-QUALIFIED
CONTRACT.
MINIMUM DISTRIBUTIONS
Generally, the IRS requires that you begin taking annual distributions from
Qualified contracts by April 1, of the calendar year following the later of (1)
the calendar year in which you attain age 70 1/2 or (2) for Qualified contracts
other than IRAs the calendar year in which you retire. Minimum distributions are
not required in a Roth IRA, during your lifetime. Failure to satisfy the minimum
distribution requirements may result in a tax penalty. You should contact your
tax advisor for more information.
The IRS has issued new proposed regulations regarding required minimum
distributions from Qualified contracts. These new rules are to be effective
January 1, 2002. However, these new rules may be used in determining required
minimum distributions for 2001 by owners of IRAs, Tax-Sheltered Annuities and
pension and profit sharing plans. You should consult your Qualified plan sponsor
and your tax advisor to determine if these new rules are available for your
benefit.
We currently waive surrender charges and MVA on withdrawals taken to meet
minimum distribution requirements. Current operational practice is to provide a
free withdrawal of the greater of the contract's maximum penalty free amount or
the required minimum distribution amount for a particular contract (but not
both).
You may elect to have the required minimum distribution amount on your
contract calculated and withdrawn each year under the automatic withdrawal
option. You may select either monthly, quarterly, semi-annual or annual
withdrawals for this purpose. This service is provided as a courtesy and we do
not guarantee the accuracy of our calculations. Accordingly, we recommend you
consult your tax advisor concerning your required minimum distribution. You may
terminate your election for automated minimum distribution at any time by
sending a written request to our Annuity Service Center. We reserve the right to
change, modify or discontinue the service at any time.
25
TAX TREATMENT OF DEATH BENEFITS
Any death benefits paid under the contract are taxable to the Beneficiary.
The rules governing the taxation of payments from an annuity contract, as
discussed above, generally apply whether the death benefits are paid as lump sum
or annuity payments. Estate taxes may also apply.
Certain enhanced death benefits may be purchased under your contract.
Although these types of benefits are used as investment protection and should
not give rise to any adverse tax effects, the IRS could take the position that
some or all of the charges for these death benefits should be treated as a
partial withdrawal from the contract. In such case, the amount of the partial
withdrawal may be includable in taxable income and subject to the 10% penalty if
the owner is under 59 1/2.
If you own a Qualified contract and purchase these enhanced death benefits,
the IRS may consider these benefits "incidental death benefits." The IRC imposes
limits on the amount of the incidental death benefits allowable for Qualified
contracts. If the death benefit(s) selected by you are considered to exceed
these limits, the benefit(s) could result in taxable income to the owner of the
Qualified contract. Furthermore, the IRC provides that the assets of an IRA
(including a Roth IRA) may not be invested in life insurance, but may provide,
in the case of death during the Accumulation Phase, for a death benefit payment
equal to the greater of Purchase Payments or contract value. This Contract
offers death benefits, which may exceed the greater of Purchase Payments or
contract value. If the IRS determines that these benefits are providing life
insurance, the contract may not qualify as an IRA (including Roth IRAs). You
should consult your tax adviser regarding these features and benefits prior to
purchasing a contract.
DIVERSIFICATION
The IRC imposes certain diversification requirements on the underlying
investments for a variable annuity. We believe that each 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, because of the degree of control you exercise
over the underlying investments, and not Anchor National, would be considered
the owner of the shares of the Variable Portfolios. 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 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.
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ADMINISTRATION
- --------------------------------------------------------------------------------
We are responsible for the administrative servicing of your contract.
Please contact our Annuity Service Center at 1-800-445-SUN2, if you have any
comment, question or service request.
During the accumulation phase, you will receive confirmation of
transactions within your contract. Transactions made pursuant to contractual or
systematic agreements, such as deduction of the annual maintenance fee and
dollar cost averaging, may be confirmed quarterly. Purchase payments received
through the automatic payment plan or a salary reduction arrangement, may also
be confirmed quarterly. For all other transactions, we send confirmations
immediately.
26
During the accumulation and income phases, you will receive a statement of
your transactions over the past quarter and a summary of your account values.
It is your responsibility to review these documents carefully and notify us
of any inaccuracies immediately. We investigate all inquiries. To the extent
that we believe we made an error, we retroactively adjust your contract,
provided you notify us within 30 days of receiving the transaction confirmation
or quarterly statement. Any other adjustments we deem warranted are made as of
the time we receive notice of the error.
DISTRIBUTION OF CONTRACTS
Registered representatives of broker-dealers sell the contract. Anchor
National pays commissions to these representatives for the sale of the
contracts. We do not expect the total commissions to exceed 6.5% of your
Purchase Payments. We may also pay a bonus to representatives for contracts
which stay active for a particular period of time, in addition to standard
commissions. We do not deduct commissions paid to registered representatives
directly from your Purchase Payments.
From time to time, we may pay or allow additional promotional incentives in
the form of cash or other compensation. We reserve the right to offer these
additional incentives only to certain broker-dealers that sell or are expected
to sell, certain minimum amounts of the contract, or other contracts offered by
us. Promotional incentives may change at any time.
J.P. Morgan Fund Distributors, Inc. ("JPMFD"), located at 1211 Avenue of
the Americas, New York, New York, 10036, serves as distributor of the Contracts.
JPMFD is registered as a broker-dealer under the Securities Exchange Act of
1934, as amended, and is a member of the National Association of Securities
Dealers, Inc. JPMFD is not affiliated with Anchor National or the Adviser to the
Trust. No underwriting fees are paid in connection with the distribution of
these contracts.
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CUSTODIAN
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JPMorgan Chase Bank, 3 Metrotech Center, Brooklyn, New York 11245, serves
as the custodian of the assets of the separate account.
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LEGAL PROCEEDINGS
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There are no pending legal proceedings affecting the separate account.
Anchor National and its subsidiaries engage in various kinds of routine
litigation. In management's opinion, these matters are not of material
importance to their respective total assets nor are they material with respect
to the separate account.
27
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REGISTRATION STATEMENT
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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.
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INDEPENDENT ACCOUNTANTS
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The audited consolidated financial statements of Anchor National at
December 31, 2000 and 1999, for the years ended December 31, 2000 and 1999, for
the three months ended December 31, 1998 and for the year ended September 30,
1998, are presented in the Statement of Additional Information. Financial
Statements of the Separate Account are also included in the Statement of
Additional Information reflecting Variable Annuity Account Two at August 31,
2001 and for each of the two years in the period ended August 31, 2001. The
financial statements have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
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TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
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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>
<Caption>
PAGE
----
Performance Data............................................ 1
Income Payments............................................. 3
Annuity Unit Values......................................... 3
Qualified Plans............................................. 6
Distribution of Contracts................................... 10
Financial Statements........................................ 11
</Table>
28
APPENDIX A
MARKET VALUE ADJUSTMENT ("MVA")
The MVA reflects the impact that changing interest rates have on the value of
money invested at a fixed interest rate. The longer the period of time remaining
in the term you initially agreed to leave your money in the fixed 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 annuitized by the following factor:
[(1+I/(1+J+0.005)](N/12) - 1
The MVA formula may differ in certain states
where:
I is the interest rate you are earning on the money invested in the
fixed account option;
J is the interest rate then currently available for the period of time
equal to the number of years remaining in the term you initially agreed
to leave your money in the fixed account option (fractional years are
rounded up to the next full year); and
N is the number of full months remaining in the term you initially
agreed to leave your money in the fixed account option.
EXAMPLES OF THE MVA
The examples below assume the following:
(1) You made an initial Purchase Payment of $10,000 and allocated it to the
10-year fixed account option at a rate of 5%;
(2) You make a partial withdrawal of $4,000 when 2 1/2 years (30 months)
remain in the 10-year term you initially agreed to leave your money in
the fixed account option (N=30);
(3) The accumulated value attributable to the Purchase Payment on the date
of withdrawal is $14,168.20; and
(4) You have not made any other transfers, additional Purchase Payments, or
withdrawals.
No withdrawal charges are reflected because your Purchase Payment has been in
the contract for seven full years. If a withdrawal charge applies, it is
deducted before the MVA. The MVA is assessed on the amount withdrawn less any
withdrawal charges.
POSITIVE ADJUSTMENT
Assume that on the date of withdrawal, the interest rate in effect for a new
Purchase Payments in the 3-year fixed account option is 4%.
The MVA factor is = [(1+I/(1+J+0.005)](N/12) - 1
= [(1.05)/(1.04+.005)](30/12) - 1
= (1.004785)(2.5) - 1
= 1.012005 - 1
= + 0.012005
The requested withdrawal amount is multiplied by the MVA factor to determine the
MVA:
$4,000 x (+0.012005) = +$48.02
$48.02 represents the MVA that would be added to your withdrawal.
NEGATIVE ADJUSTMENT
Assume that on the date of withdrawal, the interest rate in effect for new
Purchase Payments in the 3-year fixed investment option (2 1/2 years rounded up
to the next full year) is 6%.
The MVA factor is = [(1+I)/(1+J+0.005)](N/12) - 1
= [(1.05)/(1.06+.005)](30/12) - 1
= (0.985915)(2.5) - 1
= 0.965160 - 1
= - 0.034840
The requested withdrawal amount is multiplied by the MVA factor to determine the
MVA:
$4,000 X (- 0.034840) = -$139.36
$139.36 represents the MVA that will be deducted from the money remaining in the
10-year fixed account option.
A-1
EXAMPLE OF FULL WITHDRAWAL WITH MVA AND WITHDRAWAL CHARGE
Assume the same facts as in Part 2, above, except that under assumption (2)
a complete withdrawal is requested with 4 1/2 years (54 months) remaining in the
guarantee period (i.e., N = 54). The guarantee amount on the date of withdrawal
is $12,908.13. As was the case with the Examples in Part 1, above, the earnings
may be withdrawn free of withdrawal charge, leaving the initial Purchase Payment
of $10,000 subject to the Charge. The applicable withdrawal charge is 3% or
$300.
EXAMPLE OF A POSITIVE MVA:
Assume that on the date of withdrawal the current interest rate for a
new guarantee period of 5 years is 4%:
The MVA factor = [(1 + I)/(1 + J + .005)]N/12 -1
= [(1.05)/(1.04 + .005)](54/12) -1
= (1.004785)4.5 -1
= 1.021712 -1
= +0.021712
The MVA is:
($12,908.13 - $300 - $30) X (+0.021712) = +$273.10
And the net amount available upon surrender is:
$12,908.13 - $300 + $273.10 - $30 = $12,851.23
EXAMPLE OF A NEGATIVE MVA:
Assume that on the date of withdrawal the current interest rate for a
new guarantee period of 5 years is 6%:
The MVA factor = [(1 + I)/(1 + J + .005)]N/12 -1
= [(1.05)/(1.06 + .005)](54/12) -1
= (0.985915)4.5 -1
= 0.938164 -1
= -0.061836
The withdrawal charge of $300 and the contract maintenance fee of $30
are applied first; the MVA factor is applied against the remaining
guarantee amount:
MVA = ($12,908.13 - $300 - $30) X (-0.061836) = -$777.79
The net amount available upon withdrawal is the guarantee amount
reduced by the withdrawal charge, the MVA and the contract administration
charge:
$12,908.13 - $300 - $777.79 - $30 = $11,800.35
A-2
APPENDIX B
WITHDRAWALS AND WITHDRAWAL CHARGES
PART 1 -- SEPARATE ACCOUNT (THE MVA DOES NOT APPLY TO THE SEPARATE ACCOUNT)
These examples assume the following:
(1) The initial Purchase Payment was $10,000, allocated solely to one
Variable Portfolio;
(2) The date of full surrender or partial withdrawal occurs during the
3rd contribution year;
(3) The contract value at the time of surrender or withdrawal is
$12,000; and
(4) No other Purchase Payments or previous partial withdrawals have
been made.
EXAMPLE A -- FULL SURRENDER:
(1) Earnings in the Variable Portfolio ($12,000 - $10,000 = $2,000)
are not subject to the withdrawal charge.
(2) The balance of the full surrender ($12,000 - $2,000 = $10,000) is
subject to a 5% withdrawal charge applicable during the 3rd contribution
year.
(3) The amount of the withdrawal charge is .05 X $10,000 = $500.
(4) The contract administration charge is deducted from the full
surrender amount. The amount of the full surrender is
$12,000 - $500 - $30 = $11,470.
EXAMPLE B -- PARTIAL WITHDRAWAL (IN THE AMOUNT OF $3,000):
(1) For the same reasons as given in Steps 1 and 2 of Example A,
above, $2,000 can be withdrawn free of the withdrawal charge.
(2) Although 10% of the Purchase Payment is available without
imposition of a withdrawal charge (.10 X $10,000 = $1,000), this free
withdrawal amount is, like the withdrawal charge, applied first to
earnings. Since the earnings exceed the free withdrawal amount, only the
earnings can be withdrawn free of the scheduled withdrawal charge.
(3) The balance of the requested partial withdrawal
($3,000 - $2,000 = $1,000) is subject to the withdrawal charge applicable
during the 3rd contribution year (5%).
(4) The amount of the withdrawal charge is equal to the amount
required to complete the partial withdrawal ($3,000 - $2,000 = $1,000)
divided by (1 - .05) = 0.95, less the amount required to complete the
partial withdrawal.
withdrawal charge = ($1,000/0.95) - $1,000
= $52.63
In this example, in order for the owner to receive the amount requested
($3,000), a gross withdrawal of $3,052.63 must be processed with $52.63
representing the withdrawal charge calculated above.
Examples C and D assume the following:
(1) The initial Purchase Payment was $20,000, allocated solely to one
Variable Portfolio;
(2) The full surrender or partial withdrawal occurs during the 3rd
contribution year;
B-1
(3) The owner's contract value at the time of surrender or withdrawal
is $21,500; and
(4) No other Purchase Payments or partial withdrawals have been made.
EXAMPLE C -- PARTIAL WITHDRAWAL (IN THE MAXIMUM AMOUNT AVAILABLE WITHOUT
WITHDRAWAL CHARGE):
(1) Earnings in the Variable Portfolio ($21,500 - $20,000 = $1,500)
are not subject to the withdrawal charge.
(2) An additional free withdrawal of 10% of the Purchase Payments less
earnings (.10 X $20,000 - $1,500 = $500) is also available free of the
withdrawal charge, so that
(3) The maximum partial withdrawal without withdrawal charge is the
sum of the earnings and the additional free withdrawal
($1,500 + $500 = $2,000).
EXAMPLE D -- FULL SURRENDER IMMEDIATELY FOLLOWING THE PARTIAL WITHDRAWAL IN
EXAMPLE C:
(1) The owner's contract value after the partial withdrawal in Example
C is $21,500 - $2,000 = $19,500.
(2) The Purchase Payment amount for calculating the withdrawal charge
is the original $20,000 (additional free withdrawal amounts do not reduce
the Purchase Payment amount for purposes of calculating the withdrawal
charge).
(3) The amount of the withdrawal charge is .05 X $20,000 = $1,000.
(4) The contract administration charge is deducted from the full
surrender amount. The amount of the full surrender is
$19,500 - $1,000 - $30 = $18,470.
B-2
APPENDIX C - PREMIUM TAXES
Premium taxes vary according to the state and are subject to change without
notice. In many states, there is no tax at all. Listed below are the current
premium tax rates in those states that assess a premium tax. For current
information, you should consult your tax adviser.
<Table>
<Caption>
QUALIFIED NON-QUALIFIED
STATE CONTRACT CONTRACT
========================================================================
California 0.50% 2.35%
- ------------------------------------------------------------------------
Maine 0% 2.00%
- ------------------------------------------------------------------------
Nevada 0% 3.50%
- ------------------------------------------------------------------------
South Dakota 0% 1.25%*
- ------------------------------------------------------------------------
West Virginia 1.00% 1.00%
- ------------------------------------------------------------------------
Wyoming 0% 1.00%
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
</Table>
*on the 1st $500,000 of purchase payments, 0.80% on amount in excess of
$500,000.
C-1
APPENDIX D
- --------------------------------------------------------------------------------
CONDENSED FINANCIAL INFORMATION
ACCUMULATION UNIT VALUES
- --------------------------------------------------------------------------------
<Table>
<Caption>
FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR
PORTFOLIOS 8/31/97 8/31/98 8/31/99 8/31/00 8/31/01
---------- ----------- ----------- ----------- ----------- -----------
International Equity
Beginning AUV................ $ 10.92 $ 11.67 $ 11.22 $ 13.83 $ 16.45
Ending AUV................... $ 11.67 $ 11.22 $ 13.83 $ 16.45 $ 12.21
Ending Number of AUs......... 133,652 177,422 138,949 98,829 77,743
Capital Growth
Beginning AUV................ $ 13.95 $ 17.51 $ 14.43 $ 18.58 $ 23.46
Ending AUV................... $ 17.51 $ 14.43 $ 18.58 $ 23.46 $ 20.65
Ending Number of AUs......... 289,931 346,507 270,686 194,169 172,385
Growth and Income
Beginning AUV................ $ 13.07 $ 17.47 $ 16.29 $ 19.47 $ 21.19
Ending AUV................... $ 17.47 $ 16.29 $ 19.47 $ 21.19 $ 17.27
Ending Number of AUs......... 340,235 421,494 310,897 224,499 207,061
Asset Allocation
Beginning AUV................ $ 12.00 $ 14.49 $ 14.30 $ 15.76 $ 16.99
Ending AUV................... $ 14.49 $ 14.30 $ 15.76 $ 16.99 $ 14.20
Ending Number of AUs......... 76,458 94,030 90,646 72,790 67,946
U.S. Government Income
Beginning AUV................ $ 10.79 $ 11.50 $ 12.61 $ 12.28 $ 13.06
Ending AUV................... $ 11.50 $ 12.61 $ 12.28 $ 13.06 $ 14.24
Ending Number of AUs......... 37,216 75,003 72,653 60,517 56,958
Money Market
Beginning AUV................ $ 10.47 $ 10.84 $ 11.22 $ 11.58 $ 12.06
Ending AUV................... $ 10.84 $ 11.22 $ 11.58 $ 12.06 $ 12.49
Ending Number of AUs......... 163,778 22,868 31,391 19,313 20,194
</Table>
- ---------------
AUV -- Accumulation Unit Value
AU -- Accumulation Units
D-1
- --------------------------------------------------------------------------------
Please forward a copy (without charge) of the Statement of Additional
Information concerning Vista Capital Advantage issued by Anchor National
Life Insurance Company to:
(Please print or type and fill in all information.)
---------------------------------------------------------------------
Name
---------------------------------------------------------------------
Address
---------------------------------------------------------------------
City/State/Zip
<Table>
Date: ------------------------------------ Signed: ---------------------------------------
</Table>
Return to: Anchor National Life Insurance Company, Annuity Service Center,
P.O. Box 52499, Los Angeles, California 90054-0299
- --------------------------------------------------------------------------------
VCA-1-1200
PART II
-------
Information Not Required in Prospectus
Item 14. Other Expenses of Issuance and Distribution.
-------------------------------------------
The following table sets forth the expenses in connection with the issuance
and distribution of the securities being registered, other than underwriting
discounts and commissions. All of the amounts shown are estimates, except the
SEC registration fee.
<Table>
SEC registration fee ................................. $ 24,338.10
Printing and engraving ............................... $ 50,000
Legal fees and expenses .............................. $ 10,000
Rating agency fees ................................... $ 7,500
Miscellaneous ........................................ $ 10,000
-----------
Total ............................................ $101,338.10
</Table>
Item 15. Indemnification of Directors and Officers.
------------------------------------------
Section 10-851 of the Arizona Corporations and Associations law permits the
indemnification of directors, officers, employees and agents of Arizona
corporations. Article Eight of the Company's Restated Articles of Incorporation,
as amended and restated (the "Articles") and Article Five of the Company's
By-Laws ("By-Laws") authorize the indemnification of directors and officers to
the full extent required or permitted by the Laws of the State of Arizona, now
or hereafter in force, whether such persons are serving the Company, or, at its
request, any other entity, which indemnification shall include the advance of
expenses under the procedures and to the full extent permitted by law. In
addition, the Company's officers and directors are covered by certain directors'
and officers' liability insurance policies maintained by the Company's parent.
Reference is made to section 10-851 of the Arizona Corporations and Associations
Law, Article Eight of the Articles, and Article Five of the By-Laws, which are
incorporated herein by reference.
Item 16. Exhibits and Financial Statement Schedules.
-------------------------------------------
Exhibit No. Description
(1) Underwriting Agreement***
(2) Plan of Acquisition, Reorganization,
Arrangement, Liquidation or Succession**
(3) (a) Articles of Incorporation***
(b) By-Laws+
(4) (a) Vista Capital Advantage
Fixed and Variable Contract***
(b) Application for Contract***
(5) Opinion of Counsel re: Legality***
(6) Opinion re Discount on Capital Shares**
(7) Opinion re Liquidation Preference**
(8) Opinion re Tax Matters**
(9) Voting Trust Agreement**
(10) Material Contracts**
(11) Statement re Computation of Per Share
Earnings**
(12) Statement re Computation of Ratios**
(14) Material Foreign Patents**
(15) Letter re Unaudited Financial Information**
(16) Letter re Change in Certifying Accountant**
(21) Subsidiaries of Registrant***
(23) (a) Consent of Independent Accountants*
(b) Consent of Attorney***
(24) Powers of Attorney*****
(25) Statement of Eligibility of Trustee**
(26) Invitation for Competitive Bids**
(27) Financial Data Schedule****
(28) Information Reports Furnished to State
Insurance Regulatory Authority**
(29) Other Exhibits**
* Filed Herewith
** Not Applicable
*** Incorporated by Reference to Post-Effective Amendment No.
3 to Registration Statement No. 33-81476 on Form S-1
filed on 12-24-97.
**** Incorporated by Reference to Post-Effective Amendment No.
5 to Registration Statement No. 33-81476 on Form S-1
filed on 12-24-98.
***** Incorporated by Reference to Post- Effective Amendment 9
to Registration Statement No. 33-81476 on Form S-3 filed
on December 19, 2000.
+ Incorporated by Reference to Post-Effective Amendment No.
10 to Registration Statement No. 33-81476 filed on April
10, 2001.
Item 17. Undertakings.
------------
The undersigned registrant, Anchor National Life Insurance
Company, hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement
to include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof; and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 and, where applicable, each
filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide
offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Los Angeles, State of California on this 21st
day of December, 2001.
By: ANCHOR NATIONAL LIFE INSURANCE COMPANY
By: /s/ JAY S. WINTROB
-----------------------------------------
Jay S. Wintrob
President and Chief Executive Officer
Pursuant to the Securities Act of 1933, this Post-Effective Amendment to
the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ JAY S. WINTROB Chief Executive Officer,
- --------------------- President & Director December 21, 2001
Jay S. Wintrob (Principal Executive Officer)
N. SCOTT GILLIS* Senior Vice President & December 21, 2001
- --------------------- Director
N. Scott Gillis (Principal Financial Officer)
JAMES R. BELARDI* Senior Vice President & December 21, 2001
- --------------------- Director
James R. Belardi
JANA W. GREER* Senior Vice President & December 21, 2001
- --------------------- Director
Jana W. Greer
MAURICE S. HEBERT* Vice President & Controller December 21, 2001
- --------------------- (Principal Accounting Officer)
Maurice S. Hebert
MARC H. GAMSIN* Senior Vice President & December 21, 2001
- ---------------------- Director
Marc H. Gamsin
By: /s/ CHRISTINE A. NIXON December 21, 2001
-----------------------
Christine A. Nixon
Attorney-in-Fact
Date: December 21, 2001
EXHIBIT INDEX
Number Description
- ------ -----------
23(a) Consent of Independent Accountants