-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AxTDmwFtCTQEhCxGdoMfsGuFwSMUUFdSMD1FCSD6cZNojRZYhvoFyKnQrF4o9f0w SO7E698Uit5A/uhC+fDBXA== 0000950148-95-000734.txt : 19951119 0000950148-95-000734.hdr.sgml : 19951119 ACCESSION NUMBER: 0000950148-95-000734 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19951113 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANCHOR NATIONAL LIFE INSURANCE CO CENTRAL INDEX KEY: 0000006342 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 860198983 STATE OF INCORPORATION: CA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: S-1 SEC ACT: 1933 Act SEC FILE NUMBER: 033-64129 FILM NUMBER: 95589182 BUSINESS ADDRESS: STREET 1: 1 SUNAMERICA CENTER STREET 2: C/O THOMAS B PHILLIPS CITY: LOS ANGELES STATE: CA ZIP: 90067 BUSINESS PHONE: 3107726056 MAIL ADDRESS: STREET 1: 1 SUN AMERICA CENTER CITY: LOS ANGELES STATE: CA ZIP: 90067 FORMER COMPANY: FORMER CONFORMED NAME: ANCHOR LIFE INSURANCE CO DATE OF NAME CHANGE: 19600201 S-1 1 FORM S-1 1 As filed with the Securities and Exchange Commission on November 10, 1995 Registration No. 33- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------- FORM S-1 REGISTRATION STATEMENT 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) Susan L. Harris, 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)
Title of Proposed Proposed Each Class of Maximum Maximum Securities Amount Offering Aggregate Amount of to be to be Price Offering Registration Registered Registered Per Unit Price Fee - ---------- ----------- -------- --------- ------------ Fixed Annuity Contract * * $290,000 $100.00
- -------------------------------------------------------------------------------- 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. 2 CROSS REFERENCE SHEET ANCHOR NATIONAL LIFE INSURANCE COMPANY Cross Reference Sheet Pursuant to Regulation S-K, Item 501(b)
Form S-1 Item Number and Caption Heading in Prospectus - -------------------------------- --------------------- 1. Forepart of the Registration Statement and Outside Front Cover Page of Prospectus............... Outside Front Cover Page 2. Inside Front and Outside Back Cover Pages of Prospectus.............. Inside Front Cover 3. Summary of Information, Risk Factors and Ratio of Earnings to Fixed Charges....................... Front Cover; Summary; Fixed Account Options Company, the 4. Use of Proceeds........................ Description of the Separate Account and the General Account; Fixed Account Options; Purchases, Withdrawals and Contract Value 5. Determination of Offering Price........ Not Applicable 6. Dilution............................... Not Applicable 7. Selling Security Holders............... Not Applicable 8. Plan of Distribution................... Purchases, Withdrawals and Contract Value 9. Description of Securities to be Registered............................. Description of the Contracts; Fixed Account Options; Contract Charges; Annuity Period 10. Interests of Named Experts and Counsel............................ Not Applicable 11. Information with Respect to the Registrant......................... Description of the Company, the Separate Account and the General Account; Additional Information about the Company; Financial Statements 12. Disclosure of Commission Position on Indemnification for Securities Act Liabilities........................ Not Applicable
3 - -------------------------------------------------------------------------------- VISTA ADVANTAGE ADVISOR FLEXIBLE PAYMENT GROUP DEFERRED ANNUITY CONTRACTS - -------------------------------------------------------------------------------- ISSUED BY ANCHOR NATIONAL LIFE INSURANCE COMPANY IN CONNECTION WITH VARIABLE ANNUITY ACCOUNT TWO-T CORRESPONDENCE ACCOMPANIED ALL OTHER CORRESPONDENCE, BY PAYMENTS ANNUITY SERVICE CENTER: P.O. BOX 100330 P.O. BOX 54299 PASADENA, CALIFORNIA 91189-0001 LOS ANGELES, CALIFORNIA 90054-0299 TELEPHONE NUMBER: (800) 90-VISTA The Contracts offered by this prospectus provide for accumulation of Contract Values and payment of annuity benefits on a fixed and/or variable basis. The Contracts are available for both Qualified and Nonqualified Plans (See "Taxes," page 31). Purchase Payments under the Contracts may be allocated among the Portfolios of the Separate Account, and/or to one or more of the Fixed Account options funded through the Company's General Account. Each of the six Portfolios of the Separate Account described in this prospectus is invested solely in the shares of one of the following currently available Underlying Funds of Mutual Fund Variable Annuity Trust: - International Equity - Asset Allocation - Capital Growth - U.S. Treasury Income - Growth and Income - Money Market Additional Underlying Funds may be made available in the future. The Fixed Account options pay fixed rates of interest declared by the Company for specified Guarantee Periods from the dates amounts are allocated to the Fixed Account. As of the date of this prospectus, one, three, five, seven and ten year options were available in most states. Please contact the Company or the financial representative from whom this prospectus was obtained for information as to currently available guarantee options. Such declared rates will vary from time to time but will not be less than 3% per annum, and, once established for a particular allocation, will not change during the course of the Guarantee Period. However, withdrawals, transfers or annuitizations from the three, five, seven and ten year Fixed Account options prior to the end of the applicable Guarantee Period(s) will generally result in the imposition of a Market Value Adjustment (See page 17). This prospectus concisely sets forth the information a prospective investor ought to know before investing. PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR YOUR FUTURE REFERENCE. Participants bear the complete investment risk for all Purchase Payments allocated to the Separate Account. With respect to allocations to the Fixed Account, Participants also bear the risk that amounts prematurely withdrawn, transferred or annuitized from, the General Account prior to the end of their respective Guarantee Periods could result in the Participant receiving less than Purchase Payments so allocated. 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. THE CONTRACTS OFFERED BY THIS PROSPECTUS INVOLVE RISK, INCLUDING LOSS OF PRINCIPAL, AND ARE NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR ENDORSED BY, ANY BANK AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. THE CONTRACTS OFFERED BY THIS PROSPECTUS ARE NOT AVAILABLE IN ALL STATES. This Prospectus is dated , 1995. 4 ADDITIONAL INFORMATION: The Company has filed registration statements (the "Registration Statements") with the Securities and Exchange Commission ("Commission") under the Securities Act of 1933, as amended, relating to the Contracts offered by this prospectus. This prospectus has been filed as a part of the Registration Statements and does not contain all of the information set forth in the Registration Statements and exhibits thereto, and reference is hereby made to the Registration Statements and exhibits for further information relating to the Company, the Separate Account, and the Contracts. The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and in accordance therewith files reports and other information with the Commission. Such reports and other information filed by the Company can be inspected and copied, and copies can be obtained at the public reference facilities of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, or at the regional offices in Chicago and New York. The addresses of these regional offices are as follows: 500 West Madison Street, Chicago, Illinois 60661, and 7 World Trade Center, 13th Floor, New York, New York 10048. Copies of such material also can be obtained by mail from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of the fees prescribed by the rules and regulations of the Commission at prescribed rates. A Statement of Additional Information about the variable portion of the Contracts has been filed with the Commission, as part of the Registration Statements, and is available without charge upon written or oral request to the Company at its Annuity Service Center at the address and telephone number given on the prior page. The Table of Contents of the Statement of Additional Information dated , 1995, appears on page 51 of this prospectus. 2 5 TABLE OF CONTENTS
ITEM PAGE - ---- ---- DEFINITIONS.......................................................................... 4 SUMMARY.............................................................................. 7 FEE TABLES........................................................................... 10 EXAMPLES............................................................................. 11 CONDENSED FINANCIAL INFORMATION -- ACCUMULATION UNIT VALUES.......................... 12 PERFORMANCE DATA..................................................................... 12 DESCRIPTION OF THE COMPANY, THE SEPARATE ACCOUNT AND THE GENERAL ACCOUNT............. 13 Company......................................................................... 13 Separate Account................................................................ 13 General Account................................................................. 14 SEPARATE ACCOUNT INVESTMENTS......................................................... 15 Underlying Funds................................................................ 15 Voting Rights................................................................... 16 Substitution of Securities...................................................... 16 FIXED ACCOUNT OPTIONS................................................................ 17 Allocations..................................................................... 17 Renewals........................................................................ 17 Market Value Adjustment......................................................... 17 CONTRACT CHARGES..................................................................... 18 Mortality and Expense Risk Charge............................................... 18 Transfer Fee.................................................................... 19 Distribution Expense Charge..................................................... 19 Premium Taxes................................................................... 19 Deduction for Separate Account Income Taxes..................................... 19 Other Expenses.................................................................. 19 Reduction of Charges for Sales to Certain Groups................................ 20 DESCRIPTION OF THE CONTRACTS......................................................... 20 Summary......................................................................... 20 Participant..................................................................... 20 Annuitant....................................................................... 20 Modification of the Contract.................................................... 20 Assignment...................................................................... 21 Death Benefit................................................................... 21 Beneficiary..................................................................... 21 PURCHASES, WITHDRAWALS AND CONTRACT VALUE............................................ 22 Minimum Purchase Payment........................................................ 22 Automatic Payment Plan........................................................ 22 Automatic Dollar Cost Averaging Program....................................... 22 Asset Allocation Rebalancing Program.......................................... 22 Principal Advantage Program................................................... 23 Participant's Account........................................................... 23 Allocation of Purchase Payments................................................. 23 Transfer During Accumulation Period............................................. 24 Separate Account Accumulation Unit Value........................................ 24 Fixed Account Accumulation Value................................................ 25 Distribution of Contracts....................................................... 25 Withdrawals (Redemptions)....................................................... 25 Systematic Withdrawal Program................................................. 26 ERISA Plans................................................................... 26 Deferment of Fixed Account Withdrawal Payments................................ 26 Minimum Contract Value.......................................................... 27 ANNUITY PERIOD....................................................................... 27 Annuity Date.................................................................... 27 Deferment of Payments......................................................... 27 Payments to Participant....................................................... 27 Allocation of Annuity Payments.................................................. 27 Annuity Options................................................................. 27 Other Options................................................................... 29 Transfer During Annuity Period.................................................. 29 Death Benefit During Annuity Period............................................. 29
3 6
ITEM PAGE - ---- ---- Annuity Payments................................................................ 29 Initial Monthly Annuity Payment............................................... 29 Subsequent Monthly Payments................................................... 30 Annuity Unit Value.............................................................. 30 Net Investment Factor......................................................... 30 ADMINISTRATION....................................................................... 31 TAXES................................................................................ 31 General......................................................................... 31 Withholding Tax on Distributions................................................ 32 Diversification -- Separate Account Investments................................. 32 Multiple Contracts.............................................................. 33 Tax Treatment of Assignments.................................................... 33 Qualified Plans................................................................. 33 Tax Treatment of Withdrawals.................................................... 34 Qualified Plans............................................................... 34 Nonqualified Plans............................................................ 35 ADDITIONAL INFORMATION ABOUT THE COMPANY............................................. 36 Selected Consolidated Financial Information..................................... 36 Management's Discussion and Analysis of Financial Condition and Results of Operations..................................................................... 37 Properties...................................................................... 47 Directors and Executive Officers................................................ 48 Executive Compensation.......................................................... 49 Security Ownership of Certain Beneficial Owners and Management.................. 49 STATE REGULATION..................................................................... 49 CUSTODIAN............................................................................ 50 LEGAL PROCEEDINGS.................................................................... 50 REGISTRATION STATEMENTS.............................................................. 51 INDEPENDENT ACCOUNTANTS.............................................................. 51 ADDITIONAL INFORMATION ABOUT THE SEPARATE ACCOUNT.................................... 51 FINANCIAL STATEMENTS................................................................. 51 APPENDIX A -- THE MARKET VALUE ADJUSTMENT............................................ A-1
- -------------------------------------------------------------------------------- DEFINITIONS - -------------------------------------------------------------------------------- The following terms, as used in this prospectus, have the indicated meanings: ACCUMULATION PERIOD -- The period between the Certificate Date and the Annuity Date; the build-up phase under the Contract. ACCUMULATION UNIT -- A unit of measurement which the Company uses to calculate Contract Value under the variable portion of the Contracts during the Accumulation Period. ANNUITY SERVICE CENTER -- Its address and phone number are: P.O. Box 54299, Los Angeles, California 90054-0299; (800) 90-VISTA. Correspondence accompanying a payment should be directed to P.O. Box 100330, Pasadena, California 91189-0001. The Company will notify Contractholders and Participants of any change in address or telephone number. ANNUITANT -- The natural person on whose life the annuity benefits under a Certificate are based. ANNUITIZATION -- The process by which a Participant converts from the Accumulation Period to the Annuity Period. Upon Annuitization, the Certificate is converted from the build-up phase to the phase during which the Participant or other payee(s) receive periodic annuity payments. ANNUITY DATE -- The date on which annuity payments are to begin. ANNUITY PERIOD -- The period starting on the Annuity Date. ANNUITY UNIT -- A unit of measurement which the Company uses to calculate the amount of Variable Annuity payments. BENEFICIARY(IES) -- The person(s) designated to receive any benefits under a Certificate upon the death of the Annuitant or the Participant. 4 7 CERTIFICATE -- A document that describes and evidences a Participant's rights under a group Contract. CERTIFICATE DATE -- The date a Certificate is issued. CODE -- The Internal Revenue Code of 1986, as amended. COMPANY -- Anchor National Life Insurance Company, a California corporation. CONTRACT(S) -- The Flexible Payment Group Deferred Annuity Contracts offered by this prospectus. CONTRACT VALUE -- The value under a Contract of a Participant's Account, equal to the sum of the values of the Participant's interest in the Fixed Account and the Separate Account. CONTRACT YEAR -- A year starting from the Certificate Date in one calendar year and ending on the Certificate Date in the succeeding calendar year. CONTRACTHOLDER -- The person or entity to whom a group Contract has been issued on behalf of Participants in a particular group. CONTRIBUTION YEAR -- With respect to a given Purchase Payment, a year starting from the date of the Purchase Payment in one calendar year and ending on the day before the anniversary of such date in the succeeding calendar years. The Contribution Year in which a Purchase Payment is made is "Contribution Year 0"; subsequent Contribution Years are successively numbered beginning with Contribution Year 1. CURRENT INTEREST RATE -- The interest rate as declared from time to time by the Company to be in effect for allocations to the Fixed Account for a specified Guarantee Period. It is equal to the sum of the subsequent Guarantee Rate and the excess interest rate, if any, declared by the Company for such allocation. The subsequent Guarantee Rate will not be less than 3% per annum. DUE PROOF OF DEATH -- (1) A certified copy of a 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 the Company. FIXED ACCOUNT -- Contract Values allocated to the Company's General Account under one or more of the Fixed Account options under the Contract. FIXED ANNUITY -- A series of payments that are fixed in amount and made during the Annuity Period to a payee under a Certificate. GENERAL ACCOUNT -- The Company's general investment account which contains all the assets of the Company, with the exception of the Separate Account and other segregated asset accounts. GUARANTEE AMOUNT -- The accumulated value of that portion of a Participant's Account allocated to the Fixed Account for a Guarantee Period. GUARANTEE PERIOD -- A period during which an allocation to the Fixed Account will earn interest at the Current Interest Rate that was in effect for that period when the allocation was made. GUARANTEE RATE -- The interest rate in effect for a particular allocation to the Fixed Account for a specified Guarantee Period. LATEST ANNUITY DATE -- The first day of the month following the 85th birthday of the Annuitant. In the case of Contracts issued in connection with Qualified Plans, the Code generally requires that a minimum distribution be taken by April 1 of the calendar year following the calendar year in which the Participant attains age 70 1/2. Accordingly, the Company may require a Participant in a Qualified Plan to annuitize prior to such date unless the Participant demonstrates that the minimum distribution is otherwise being made. 5 8 MARKET VALUE ADJUSTMENT -- An adjustment applied to amounts withdrawn, transferred or annuitized from the three, five, seven and ten year Fixed Account options prior to the end of the applicable Guarantee Period(s). NONQUALIFIED PLAN -- A retirement plan which does not receive favorable tax treatment under Sections 401, 403(b), 408 or 457 of the Internal Revenue Code. OWNER -- The person(s) having the privileges of ownership defined in the Contracts. Except to the extent restricted by the retirement plan pursuant to which the Contract is issued, the Participant will be the Owner of the Certificate. PARTICIPANT -- The person entitled to benefits under a Contract as evidenced by a Certificate issued to the Participant. PARTICIPANT'S ACCOUNT -- An accounting entity maintained by the Company indicating a Participant's Contract Value under a Certificate. PORTFOLIO -- A subdivision of the Separate Account invested wholly in shares of one of the investment series of the Trust. PURCHASE PAYMENTS -- Amounts paid to the Company for the Contract by or on behalf of a Participant. QUALIFIED PLAN -- A retirement plan which receives favorable tax treatment under Sections 401, 403(b), 408 or 457 of the Internal Revenue Code. SEPARATE ACCOUNT -- A segregated investment account of the Company entitled "Variable Annuity Account Two-T." TRUST -- Mutual Fund Variable Annuity Trust, an open-end management investment company. UNDERLYING FUND(S) -- The underlying series of the Trust in which the Portfolios invest. VALUATION DATE -- Each day the New York Stock Exchange is open for business. VALUATION PERIOD -- The period commencing at the close of normal trading on the New York Stock Exchange ("NYSE") (currently 4:00 p.m. Eastern time) on each Valuation Date and ending at the close of normal trading on the NYSE on the next succeeding Valuation Date. VARIABLE ANNUITY -- A series of payments made during the Annuity Period to a payee under a Certificate which vary in amount in accordance with the investment experience of the Portfolios to which Contract Values have been allocated. WITHDRAWAL VALUE -- Contract Value, minus any premium tax payable, and plus or minus any applicable Market Value Adjustment. 6 9 - -------------------------------------------------------------------------------- SUMMARY - -------------------------------------------------------------------------------- This prospectus describes the uses and objectives of the Contracts, their costs, and the rights and privileges of the Participant and Contractholder, as applicable. It also contains information about the Company, the Fixed Account, the Separate Account and its Portfolios, and the Underlying Funds in which the Portfolios invest. We urge you to read it carefully and retain it and the prospectus for the Trust for future reference. (The prospectus for the Trust is attached to and follows this prospectus). WHAT IS THE CONTRACT? The Contract offered is a tax deferred annuity which provides fixed benefits, variable benefits or a combination of both. A group Contract is issued to the Contractholder covering all Participants in the group. Each Participant receives a Certificate which evidences his or her participation under the Contract. For the purpose of determining benefits under the Contract, a Participant's Account is established for each Participant. The Owner is the person entitled to the rights and privileges of ownership under a Certificate. Except to the extent limited by the retirement plan pursuant to which the Contract was issued, the Participant is the Owner. The Contract described in this prospectus is not available in certain states and a Flexible Payment Individual Modified Guaranteed and Variable Deferred Annuity Contract ("Individual Contract") may be available instead. The Individual Contract is substantially similar to the Contract except that the Individual Contract is issued directly to the Owner, rather than to a Contractholder for the benefit of a Participant. Subject to this difference, the information contained in this prospectus is applicable to the Individual Contract. Individuals wishing to purchase a Certificate must complete an application and provide an initial Purchase Payment which will be sent to the Company at the P.O. Box indicated for Purchase Payments on the cover page of this prospectus or in such other manner as deemed acceptable to the Company. The minimum and maximum of Purchase Payments vary depending upon the type of Contract purchased. (See "Minimum Purchase Payment," page 22). WHAT IS THE DIFFERENCE BETWEEN A VARIABLE ANNUITY AND A FIXED ANNUITY? The Contract has appropriate provisions relating to variable and fixed accumulation values and variable and fixed annuity payments. A Variable Annuity and a Fixed Annuity have certain similarities. Both provide that Purchase Payments, less certain deductions, will be accumulated prior to the Annuity Date. After the Annuity Date, annuity payments will be made to a designated payee (normally, the Participant), for the life of the Annuitant or a period certain or a combination thereof. The Company assumes mortality and expense risks under the Contracts, for which it receives certain compensation. The most significant difference between a Variable Annuity and a Fixed Annuity is that under a Variable Annuity, all investment risk before and after the Annuity Date is assumed by the Participant or other payee; the amounts of the annuity payments vary with the investment performance of the Portfolios of the Separate Account selected by the Participant. Under a Fixed Annuity, in contrast, the investment risk after the Annuity Date is assumed by the Company and the amounts of the annuity payments do not vary. In the case of amounts allocated to the Fixed Account prior to the Annuity Date, the Participant bears the risks (1) that the Guarantee Rate to be credited on amounts allocated to the Fixed Account may not exceed the minimum guaranteed rate of 3% for any Guarantee Period, and (2) that amounts withdrawn, transferred or annuitized from the three, five, seven and ten year Fixed Account options prior to the end of their respective Guarantee Periods could result in the Participant's receiving less than the Purchase Payments so allocated (See "Fixed Account Options -- Market Value Adjustment," page 17). 7 10 HOW MAY PURCHASE PAYMENTS BE ALLOCATED? Purchase Payments for the Contracts may be allocated pursuant to instructions in the application to one or more Portfolios of the Separate Account, and/or to the Company's General Account under one or more of the Fixed Account options under the Contracts. The Separate Account invests in shares of the following Underlying Funds (see "Separate Account Investments," page 15): - - INTERNATIONAL EQUITY - - CAPITAL GROWTH - - GROWTH AND INCOME - - ASSET ALLOCATION - - U.S. TREASURY INCOME - - MONEY MARKET Purchase Payments allocated to Fixed Account option(s) will earn interest at the then Current Interest Rate(s) for the selected Guarantee Period(s). (See "Fixed Account Options," page 17). Prior to the Annuity Date, transfers may be made among the Portfolios and/or the Fixed Account options. Fifteen transfers per Contract Year are permitted before a transfer fee will be assessed. A Market Value Adjustment may also apply, in the case of a transfer from a Fixed Account option. (See "Purchases, Withdrawals and Contract Value -- Transfer During Accumulation Period," page 24). MAY WITHDRAWALS BE MADE BEFORE ANNUITIZATION? Except as explained below, Contract Value may be withdrawn at any time during the Accumulation Period. Contracts in connection with Qualified Plans may be subject to withdrawal restrictions imposed by the Plan. In addition to potential losses due to investment risks, a penalty tax and income tax may apply. Withdrawals from the Fixed Account other than at the end of the applicable Guarantee Periods are generally subject to a Market Value Adjustment. (See page 17). Certain Owners of Nonqualified Plan Contracts and Contracts issued in connection with Individual Retirement Annuities ("IRAs") may choose to withdraw amounts pursuant to a systematic withdrawal program. (See "Purchases, Withdrawals and Contract Value -- Withdrawals (Redemptions) -- Systematic Withdrawal Program," page 26.) Withdrawals are taxable and a 10% federal tax penalty may apply to withdrawals before age 59 1/2. Participants should consult their own tax counsel or other tax adviser regarding any withdrawals or distributions. CAN I EXAMINE THE CONTRACT? The Contractholder (or Participant) may return the Contract (or Certificate, respectively) to the Company within 10 days (or longer period if required by state law) after it is received by delivering or mailing it to the Company's Annuity Service Center. If the Contract or Certificate is returned to the Company, it will be terminated and, unless otherwise required by state law, the Company will pay the Contractholder or Participant an amount equal to the Contract Value represented by the Contract (or Certificate, respectively) on the date it is received by the Company. The Contract Value may be more or less than the Purchase Payments made, thus, the investment risk is borne by the Participant. Since state laws differ as to the consequences of returning a Contract or Certificate, purchasers should refer to the Contracts or Certificates which they receive for information about their circumstances. WHAT ARE THE CHARGES AND DEDUCTIONS UNDER A CONTRACT? A mortality and expense risk charge is assessed daily against the assets of each Portfolio at an annual rate of 0.80%. A distribution expense charge is assessed daily against the assets of each Portfolio at an annual rate of 0.15%. The Contract permits up to 15 free transfers each Contract Year, after which point a $25 transfer fee ($10 in Texas and Pennsylvania) is applicable to each subsequent transfer. 8 11 DOES THE CONTRACT PAY ANY DEATH BENEFITS? A Death Benefit is provided in the event of the death of the Participant during the Accumulation Period. The Death Benefit is equal to the Contract Value at the end of the Valuation Period during which Due Proof of Death and an election of the type of payment to the Beneficiary is received by the Company. (See "Description of the Contracts -- Death Benefit," page 21.) WHAT ARE THE AVAILABLE ANNUITY OPTIONS UNDER THE CONTRACT? There are five available annuity options under the Contract. They include an annuity for life, a joint and survivor annuity, a joint and survivor life annuity with 120 monthly payments guaranteed, a life annuity with 120 or 240 monthly payments guaranteed and monthly payments for a specified number of years. The Annuity Date may not be deferred beyond an Owner's 85th birthday. If a Contractholder does not elect otherwise, monthly annuity payments generally will be made under the fourth option to provide a life annuity with 120 monthly payments certain. (See "Annuity Period -- Annuity Options," page 27.) DOES THE OWNER HAVE ANY VOTING RIGHTS UNDER THE CONTRACT? Owners will have the right to vote on matters affecting the Underlying Funds to the extent that proxies are solicited by the Trust. If the Owner does not vote, the Company will vote such interests in the same proportion as it votes shares for which it has received instructions. (See "Separate Account Investments -- Voting Rights," page 16.) 9 12 - -------------------------------------------------------------------------------- FEE TABLES - -------------------------------------------------------------------------------- OWNER TRANSACTION EXPENSE TRANSFER FEE............................................................................................ $25* (applies solely to transfers in excess of fifteen in a Contract Year)
- --------------- * $10 in Pennsylvania and Texas. The Owner Transaction Expense applies to the Contract Value allocated to the Fixed Account, as well as the Separate Account. - -------------------------------------------------------------------------------- ANNUAL SEPARATE ACCOUNT EXPENSES (AS A PERCENTAGE OF DAILY NET ASSET VALUE) MORTALITY RISK CHARGE.................................................................................. 0.55% EXPENSE RISK CHARGE.................................................................................... 0.25% DISTRIBUTION EXPENSE CHARGE............................................................................ 0.15% ---- TOTAL EXPENSE CHARGE............................................................................. 0.95% ====
- --------------- ANNUAL TRUST EXPENSES* (AS A PERCENTAGE OF AVERAGE NET ASSETS FOR THE PERIOD MARCH 1, 1995 (INCEPTION DATE) TO AUGUST 31, 1995):
TOTAL ANNUAL ADVISORY FEE ADMINISTRATION FEE OTHER EXPENSES EXPENSES ------------ ------------------ -------------- ------------ International Equity................................ .80% .20 .10 1.10% Capital Growth...................................... .60% .20 .10 .90% Growth and Income................................... .60% .20 .10 .90% Asset Allocation.................................... .55% .20 .10 .85% U.S. Treasury Income................................ .50% .20 .10 .80% Money Market........................................ .25% .20 .10 .55%
- --------------- *During the period for which fund expenses are reported, the investment adviser waived a portion of fees and assumed a portion of expenses for the Portfolios. If all fees and expenses had been incurred by the Portfolios, the ratio of expenses to average net assets for each Portfolio would have been as follows: International Equity 2.90%; Capital Growth 1.80%; Growth and Income 1.80%; Asset Allocation 1.65%; U.S. Treasury Income 1.55%; and Money Market 1.21%. 10 13 - -------------------------------------------------------------------------------- EXAMPLES - -------------------------------------------------------------------------------- The example below shows the expenses you would pay at the end of one or three years on a $1,000 investment, assuming a 5% annual return on assets. The information applies if, at the end of the applicable time period, the contract is surrendered or not surrendered. 1 Year 3 Years International Equity $21 $64 Capital Growth $19 $58 Growth and Income $19 $58 Asset Allocation $18 $57 U.S. Treasury Income $18 $55 Money Market $15 $47
- --------------- 1. The purpose of the foregoing table and examples is to assist an investor in understanding the various costs and expenses that he or she will bear directly or indirectly by investing in the Separate Account. The Owner Transaction Expense at the beginning of the table is applicable to Contract Value allocated to the Fixed Account as well as to the Separate Account. However, the balance of the fee tables, and the Examples, apply only to investments in the Separate Account. The table reflects expenses of the Separate Account as well as the Underlying Funds. For additional information see "Contract Charges," beginning on Page 18 of this prospectus; see also the sections relating to management of the Underlying Funds in their respective prospectuses. The examples do not illustrate the tax consequences of surrendering a Contract. 2. The examples assume that there were no transactions which would result in the imposition of the transfer fee. The amount of the transfer fee is $25 ($10 in Pennsylvania and Texas), except that the first 15 transfers per Contract Year are not subject to a fee. (See "Transfer Fee," Page 19). Premium taxes are not reflected. (See "Premium Taxes," Page 19). Transfers from the Fixed Account may be subject to a Market Value Adjustment even if they are not subject to a transfer fee. 3. NEITHER THE FEE TABLES NOR THE EXAMPLES ARE REPRESENTATIONS OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. 11 14 - -------------------------------------------------------------------------------- CONDENSED FINANCIAL INFORMATION ACCUMULATION UNIT VALUES - -------------------------------------------------------------------------------- AS OF THE DATE OF THIS PROSPECTUS, THE SALE OF CONTRACTS HAD NOT COMMENCED, AND THE PORTFOLIOS HAD NO ASSETS. THEREFORE, NO CONDENSED FINANCIAL INFORMATION WITH RESPECT TO THE SEPARATE ACCOUNT IS PRESENTED IN THE PROSPECTUS. - -------------------------------------------------------------------------------- PERFORMANCE DATA - -------------------------------------------------------------------------------- From time to time the Separate Account may advertise the Money Market Portfolio's "yield" and "effective yield." Both yield 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 Portfolio (which invests in shares of the Money Market Portfolio of the Trust) over a seven-day period (which period will be stated in the advertisement). 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 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. 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 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 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 Separate Account may also advertise an annualized 30-day (or one month) yield figure for Portfolios other than the Money Market Portfolio. These yield figures are based upon the actual performance of the 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 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. For a more complete description of Contract charges, see "Contract Charges," beginning on page 18. More detailed information on the computation of advertised performance data for the Separate Account is contained in the Statement of Additional Information. 12 15 - -------------------------------------------------------------------------------- DESCRIPTION OF THE COMPANY, THE SEPARATE ACCOUNT AND THE GENERAL ACCOUNT - -------------------------------------------------------------------------------- COMPANY The Company is a stock life insurance company organized under the laws of the state of California in April 1965. Its legal domicile and principal business address is 1 SunAmerica Center, Los Angeles, California 90067-6022. The Company is a wholly-owned subsidiary of SunAmerica Life Insurance Company, an Arizona corporation, which is wholly-owned by SunAmerica Inc. The Company and its affiliates, SunAmerica Life Insurance Company, First SunAmerica Life Insurance Company, SunAmerica Asset Management Corp. and Resources Trust Company, offer a full line of financial services, including fixed and variable annuities, mutual funds and trust administration services. As of June 30, 1995 the Company had approximately $7.1 billion in assets while SunAmerica Inc., the Company's ultimate parent, together with its subsidiaries, held approximately $27.0 billion of assets, consisting of over $16.2 billion of assets owned, approximately $2.1 billion of assets managed in mutual funds and private accounts, and approximately $8.7 billion under custody in retirement trust accounts. The Company may from time to time publish in advertisements, sales literature and reports to Owners, the ratings and other information assigned to it by one or more independent rating organizations such as A.M. Best Company ("A.M. Best"), Moody's Investors Service, Inc. ("Moody's"). Standard & Poor's Insurance Rating Services ("Standard & Poor's"), and Duff & Phelps. A.M. Best's and Moody's ratings reflect their current opinion on the relative financial strength and operating performance of an insurance company in comparison to the norms of the life/health insurance industry. Standard & Poor's and Duff & Phelps provide ratings which measure the claims-paying ability of insurance companies. These ratings are opinions of an operating insurance company's financial capacity to meet the obligations of its insurance policies in accordance with their terms. Claims-paying ability ratings do not refer to an insurer's ability to meet non-policy obligations (i.e., debt/commercial paper). These ratings do not apply to the Separate Account. However, the contractual obligations under the Contracts are general corporate obligations of the Company. The Company is admitted to conduct life insurance and annuity business in the District of Columbia and in all states except New York. It intends to market the Contract in most of the jurisdictions in which it is admitted to conduct annuity business. The Contracts offered by this prospectus are issued by the Company and will be funded in the Separate Account as well as the Company's General Account. For more detailed information about the Company, see "Additional Information About the Company," page 36. SEPARATE ACCOUNT Variable Annuity Account Two-T was originally established by the Company on April 2, 1995, pursuant to the provisions of California law, as a segregated asset account of the Company. The Separate Account meets the definition of a "separate account" under the federal securities laws and is registered with the Securities and Exchange Commission as a unit investment trust under the Investment Company Act of 1940. This registration does not involve supervision of the management of the Separate Account or the Company by the Securities and Exchange Commission. The assets of the Separate Account are the property of the Company. However, the assets of the Separate Account, equal to its reserves and other contract liabilities, are not chargeable with liabilities arising out of any other business the Company may conduct. Income, gains, and losses, whether or not realized, from assets allocated to the Separate Account are credited to or charged against the Separate Account without regard to other income, gains, or losses of the Company. 13 16 The Separate Account is divided into Portfolios, with the assets of each Portfolio invested in the shares of one of the Underlying Funds. The Company does not guarantee the investment performance of the Separate Account, its Portfolios or the Underlying Funds. Values allocated to the Separate Account and the amount of Variable Annuity payments will vary with the values of shares of the Underlying Funds, and are also reduced by Contract charges. The basic objective of a Variable Annuity contract is to provide Variable Annuity payments which will be to some degree responsive to changes in the economic environment, including inflationary forces and changes in rates of return available from various types of investments. The Contract is designed to seek to accomplish this objective by providing that Variable Annuity payments will reflect the investment performance of the Separate Account with respect to amounts allocated to it both before and after the Annuity Date. Since the Separate Account is always fully invested in shares of the Underlying Funds, its investment performance reflects the investment performance of those entities. The values of such shares held by the Separate Account fluctuate and are subject to the risks of changing economic conditions as well as the risk inherent in the ability of the Underlying Funds' managements to make necessary changes in their portfolios to anticipate changes in economic conditions. Therefore, the Participant bears the entire investment risk that the basic objectives of the Contract may not be realized, and that the adverse effects of inflation may not be lessened. There can be no assurance that the aggregate amount of Variable Annuity payments will equal or exceed the Purchase Payments made with respect to a particular Participant's Account for the reasons described above, or because of the premature death of an Annuitant. Another important feature of the Contract related to its basic objective is the Company's promise that the dollar amount of Variable Annuity payments made during the lifetime of the Annuitant will not be adversely affected by the actual mortality experience of the Company or by the actual expenses incurred by the Company in excess of expense deductions provided for in the Contract (although the Company does not guarantee the amounts of the Variable Annuity payments). GENERAL ACCOUNT The General Account is made up of all of the general assets of the Company other than those allocated to the Separate Account or any other segregated asset account of the Company. A Purchase Payment may be allocated to one or more Guarantee Periods available in connection with the General Account, as elected by the Participant at the time the Purchase Payment is made. In addition, all or part of the Participant's Contract Value may be transferred to Guarantee Periods available under the Contract as described under "Purchases, Withdrawals and Contract Value -- Transfer During Accumulation Period," page 24, and "Annuity Period -- Transfer During Annuity Period," page 29. Assets supporting amounts allocated to Guarantee Periods become part of the Company's General Account assets and are available to fund the claims of all classes of customers of the Company, as well as all classes of its creditors. Accordingly, all of the Company's assets held in the General Account will be available to fund the Company's obligations under the Contracts as well as such other claims. The Company will invest the assets of the General Account in the manner chosen by the Company and allowed by applicable state laws regarding the nature and quality of investments that may be made by life insurance companies and the percentage of their assets that may be committed to any particular type of investment. In general, these laws permit investments, within specified limits and subject to certain qualifications, in federal, state and municipal obligations, corporate bonds, preferred and common stocks, real estate mortgages, real estate and certain other investments. 14 17 - -------------------------------------------------------------------------------- SEPARATE ACCOUNT INVESTMENTS - -------------------------------------------------------------------------------- UNDERLYING FUNDS Each of the Portfolios of the Separate Account invests in the shares of one of the following Underlying Funds, which are investment series of Mutual Fund Variable Annuity Trust, an open-end management investment company registered under the Investment Company Act of 1940: * INTERNATIONAL EQUITY * CAPITAL GROWTH * GROWTH AND INCOME * ASSET ALLOCATION * U.S. TREASURY INCOME * MONEY MARKET The Chase Manhattan Bank, N.A. ("Chase" or the "Adviser") is the investment adviser, administrator and custodian for each of the Underlying Funds. Its headquarters are at One Chase Manhattan Plaza, New York, New York 10081. As investment adviser to the Underlying Funds, Chase makes investment decisions subject to such policies as the Board of Trustees of the Trust may determine. As administrator of the Underlying Funds, Chase provides certain services including coordinating relationships with independent contractors and agents; preparing for signature by officers 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 Vista Broker-Dealer Services, Inc. ("VBDS"), 125 West 55th Street, New York, New York 10019, which serves as sub-administrator to the Underlying Funds. As custodian for the Underlying Funds, 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 and their investment objectives are as follows: INTERNATIONAL EQUITY PORTFOLIO seeks to provide a total return on assets from long-term growth of capital and from income principally through a broad portfolio of marketable equity securities of established foreign companies organized in countries other than the United States and companies participating in foreign economies with prospects for growth. CAPITAL GROWTH PORTFOLIO seeks to provide long-term capital growth primarily through diversified holdings (i.e., at least 80% of its assets under normal circumstances) in common stocks. The Portfolio will invest all of its assets in stocks of issuers (including foreign issuers) with small to medium capitalizations. The Adviser intends to utilize both quantitative and fundamental research to identify undervalued stocks with a catalyst for positive change. Dividend income, if any, is a consideration incidental to the Portfolio's investment objective of growth of capital. This investment policy involves the risks that the issues identified by the Adviser will not appreciate or appreciate as significantly as projected. GROWTH AND INCOME PORTFOLIO seeks to provide long-term capital appreciation and to provide dividend income primarily through a broad portfolio (i.e., at least 80% of its assets under normal circumstances) of common stocks. The Portfolio will invest its assets in stocks of issuers (including foreign issuers) ranging from small to medium to large capitalizations. For the most part, the Adviser will pursue a "contrary opinion" investment approach, selecting common stocks that are currently out of favor with investors in the stock market. These securities are usually characterized by a relatively low price/earnings ratio (using normalized earnings), a low ratio of market price to book value, or underlying asset values that the Adviser believes are not fully reflected in the current market price. The Adviser believes that the risk involved in this policy will be moderated somewhat by the anticipated dividend returns on the stocks to be held by the Portfolio. ASSET ALLOCATION PORTFOLIO seeks to provide maximum total return through a combination of long-term growth of capital and current income by investing in a diversified portfolio of equity and debt securities, including common stocks, convertible securities and government and corporate fixed-income obligations. Under normal market conditions, between 35%-70% of the Portfolio's total assets will be invested in common stocks and other equity investments and at least 15 18 25% of the Portfolio's assets will be invested in fixed-income senior securities, defined for this purpose to include non-convertible corporate debt securities and preferred stock, and government obligations. The Adviser considers both the opportunity for gain and the risk of loss in making investments, and may alter the relative percentages of assets invested in equity and fixed income securities from time to time, 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. TREASURY INCOME PORTFOLIO seeks to provide monthly dividends as well as to protect the value of an investor's investment (i.e., to preserve principal) by investing at least 65% of its assets in debt obligations that are backed by the "full faith and credit" of the U.S. government as well as by using futures contracts on fixed income securities or indexes of fixed income securities and options on such futures contracts for the purpose of protecting (i.e., "hedging") the value of its portfolio. Neither the United States nor any of its agencies insures or guarantees the market value of shares of this Portfolio. MONEY MARKET PORTFOLIO seeks to provide maximum current income consistent with preservation of capital and maintenance of liquidity through investments in U.S. dollar denominated commercial paper, obligations of foreign governments, obligations guaranteed by U.S. banks, and securities issued by the U.S. government or its agencies. DETAILED INFORMATION ABOUT THE UNDERLYING FUNDS IS CONTAINED IN THE ACCOMPANYING CURRENT PROSPECTUS OF THE TRUST. AN INVESTOR SHOULD CAREFULLY REVIEW THAT PROSPECTUS BEFORE ALLOCATING AMOUNTS TO BE INVESTED IN THE PORTFOLIOS OF THE SEPARATE ACCOUNT. There is no assurance that the investment objective of any of the Underlying Funds will be met. Participants bear the complete investment risk for Purchase Payments allocated to a Portfolio. Contract Values will fluctuate in accordance with the investment performance of the Portfolio(s) to which Purchase Payments are allocated, and in accordance with the imposition of the fees and charges assessed under the Contracts. Shares of the Underlying Funds are, and will be, issued and redeemed only in connection with investments in, and payments under, the Contracts. VOTING RIGHTS To the extent required by applicable law, the Company will vote the shares of the Underlying Funds held in the Separate Account at meetings of the shareholders of the Trust in accordance with instructions received from persons having the voting interest in the corresponding Portfolios. The Company will vote shares for which it has not received instructions in the same proportion as it votes shares for which it has received instructions. The Trust does not hold regular meetings of shareholders. The number of shares which a person has a right to vote will be determined as of a date to be chosen by the Trust not more than 60 days prior to the meeting of the Underlying Fund's shareholders. Voting instructions will be solicited by written communication in advance of such meeting. Except as may be limited by the terms of the retirement plan pursuant to which the Contract was issued, the person having such voting rights will be the Participant before the Annuity Date; thereafter the payee entitled to receive payments under the Certificate. SUBSTITUTION OF SECURITIES If the shares of any of the Underlying Funds should no longer be available for investment by the Separate Account or if, in the judgment of the Company's Board of Directors, further investment in the shares of an Underlying Fund is no longer appropriate in view of the purposes of the Contract, the Company may substitute shares of another mutual fund (or series thereof) for Underlying Fund shares already purchased and/or to be purchased in the future by Purchase Payments under the Contract. No such substitution of securities may take place without prior approval of the Commission and under such requirements as the Commission may impose. 16 19 - -------------------------------------------------------------------------------- FIXED ACCOUNT OPTIONS - -------------------------------------------------------------------------------- ALLOCATIONS Purchase Payments may also be allocated, and Contract Values in the Separate Account transferred, to one or more of the fixed accumulation options available through the Company's General Account. Amounts thus applied will earn interest for one or more of the available Guarantee Periods selected by the Owner, at Guarantee Rates based on the Current Interest Rates set by the Company for such Guarantee Periods in effect at the time the amounts are thus applied. Current Interest Rates may change from time to time due to changes in market conditions or other factors. However, the Guarantee Rate in effect at the time one of these options is selected will not change for the remainder of the Guarantee Period. THE COMPANY'S OBLIGATION TO PAY INTEREST AT THE GUARANTEE RATE IS NOT AFFECTED BY THE PERFORMANCE OF THE COMPANY'S GENERAL ACCOUNT INVESTMENTS. Guarantee Periods are currently available for periods of one, three, five, seven and ten years; not all options are available in all states. An Owner may elect to allocate Purchase Payments to one or more of those Guarantee Periods. Each such allocation (to the extent not withdrawn, transferred or annuitized prior to the end of the Guarantee Period), will earn interest, credited daily, at the annual effective Guarantee Rate established for the Guarantee Period at the time the allocation is made. The Guarantee Rate is based on the Current Interest Rate in effect at the time the allocation is made. The Current Interest Rate applicable to renewals for new Guarantee Periods of amounts already allocated to the Fixed Account, or to transfers from the Separate Account to the Fixed Account may differ from the Current Interest Rates applicable to Purchase Payments. The Current Interest Rates are set at the sole discretion of the Company. OWNERS BEAR THE RISK THAT CURRENT INTEREST RATES AVAILABLE AT FUTURE TIMES MAY BE MORE OR LESS THAN THOSE CURRENTLY OR INITIALLY AVAILABLE. THEY ALSO BEAR THE RISK THAT SUCH RATES MAY NOT EXCEED THE GUARANTEED MINIMUM RATE OF 3%. RENEWALS Within 30 days after the end of a Guarantee Period, amounts accumulated during that Guarantee Period may be reallocated to the Fixed Account for a new Guarantee Period of the same or of a different duration. If the new Guarantee Period is of the same duration, the amounts will receive the Current Interest Rate in effect for that duration as of the last day of the previous Guarantee Period and the new Guarantee Period will begin the next following business day. If the new Guarantee Period is of a different duration and the election is received after the expiration of the Guarantee Period, the amounts will receive the Current Interest Rate described in the previous sentence until such time as the election is received (at which time interest will be credited at the Current Interest Rate then in effect for the new selected Guarantee Period). In that case, the new Guarantee Period will begin on the day that the reallocation is made. Also, during such 30-day period, those amounts may be withdrawn, transferred or annuitized without application of the Market Value Adjustment. (See below.) At the end of a Guarantee Period, the Company will, unless the Participant has effectively elected otherwise, assume reallocation for the same period, unless the new period would expire after the Annuity Date (or, if none has been selected, the Latest Annuity Date). In the latter case, the Company will choose the longest available Guarantee Period that will not extend beyond such date. If the renewal occurs within one year prior to that date, interest will be credited to such Annuity Date at the then Current Interest Rate for a one-year Guarantee Period. MARKET VALUE ADJUSTMENT If Contract Value is withdrawn, transferred or, prior to the Annuity Date, annuitized from the three, five, seven or ten year Fixed Account options prior to the expiration of the Guarantee Period (other than withdrawals for the purpose of paying the Death Benefit upon the death of the Participant, withdrawals from the one year Fixed Account option under the Automatic Dollar Cost Averaging Program or Asset Allocation Rebalancing Program, or withdrawals made to pay Contract 17 20 fees or charges), the amounts thus withdrawn, transferred or annuitized are subject to 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, such as a Guarantee Rate. The MVA may 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 where I is the Guarantee Rate in effect; J is the Current Interest Rate available for a period equal to the number of years remaining in the Guarantee Period at the time of withdrawal, transfer or annuitization (fractional years are rounded up to the next full year); and N is the number of full months remaining in the Guarantee Period at the time the withdrawal, transfer or annuitization request is processed. In general, whether the MVA will operate to increase or decrease the Contract Value upon withdrawal, transfer or annuitization is determined by comparing the Guarantee Rate in effect for that allocation to the Current Interest Rate (as of the date of the transaction) that would apply for a Guarantee Period equal to the number of full or fractional years remaining in the Guarantee Period as of that date. (For purposes of determining the MVA, if the Company does not offer a Guarantee Period of that duration, the applicable Current Interest Rate will be determined by linear interpolation between Current Interest Rates for the nearest two Guarantee Periods that are available). If the Current Interest Rate thus determined plus one-half of one percent is greater than the Guarantee Rate, the MVA will be negative and Contract Value will be decreased. Similarly, if the Current Interest Rate plus one-half of one percent is less than the Guarantee Rate, Contract Value will be increased. If the Current Interest Rate is exactly one-half of one percent less than the Guarantee Rate, the MVA will be zero and Contract Value will not be affected by the MVA. The impact of the MVA is more significant the greater the time remaining in the Guarantee Period at the time of withdrawal, transfer or annuitization. If the MVA is negative, it will be assessed first against any remaining value allocated to the Fixed Account under the affected option; any remaining unsatisfied MVA charge will be applied against the proceeds of the withdrawal, transfer or annuitization. If the MVA is positive, it will be credited to the amount withdrawn, transferred or annuitized. Some examples of how the MVA is computed and its impact on Contract Value appear in Appendix A. That portion of the Contracts relating to allocations to the one year Fixed Account option is not registered under the Securities Act of 1933 (the "Act") and is therefore not subject to the provisions of the Act. The Fixed Account options, including the one year Fixed Account, are not subject to the provisions of the Investment Company Act of 1940. - -------------------------------------------------------------------------------- CONTRACT CHARGES - -------------------------------------------------------------------------------- As is more fully described below, charges under the Contract offered by this prospectus are assessed in three ways: (1) as charges against the assets of the Separate Account for the assumption of mortality and expense risks; (2) as charges against the assets of the Separate Account for distribution expenses; and (3) for premium taxes, if applicable. In addition, certain deductions are made from the assets of the Underlying Funds for investment advisory, administrative, custodial and other fees and expenses; those fees and expenses are described in the prospectus for the Trust. MORTALITY AND EXPENSE RISK CHARGE The Company deducts a Mortality and Expense Risk Charge from each Portfolio during each Valuation Period. The aggregate Mortality and Expense Risk Charge is equal, on an annual basis, to 0.80% of the net asset value of each Portfolio (approximately 0.55% is for mortality risks and 18 21 approximately 0.25% is for expense risks). The mortality risks assumed by the Company arise from its contractual obligations: (1) to make annuity payments after the Annuity Date for the life of the Annuitant(s) and (2) to provide a death benefit prior to the Annuity Date. The Mortality and Expense Risk Charge is assessed during both the Accumulation Period and the Annuity Period; however, it is not applied to Contract Values allocated to the Fixed Account. The expense risk assumed by the Company arises from its costs in administering the Contracts and the Separate Account. The expense risk charge is guaranteed by the Company and cannot be increased. TRANSFER FEE In general, a transfer fee of $25 ($10 in Pennsylvania and Texas) is assessed on each transaction effecting transfer(s) from Portfolio(s) to other Portfolio(s), from Portfolio(s) to the Fixed Account, from the Fixed Account to Portfolio(s), and from one Guarantee Period to another within the Fixed Account prior to the end of a Guarantee Period. However, the first fifteen such transactions effecting transfer(s) in any Contract Year are permitted without the imposition of the transfer fee, which will be assessed on the sixteenth and each subsequent transaction within the Contract Year. This fee will be deducted from Contract Values which remain in the Portfolio(s) (or, where applicable, the Fixed Account) from which the transfer was made. If such remaining Contract Value is insufficient to pay the transfer fee, then the fee will be deducted from transferred Contract Values. The transfer fee is at cost with no margin included for profit. DISTRIBUTION EXPENSE CHARGE The Company deducts a Distribution Expense Charge from each Portfolio during each Valuation Period which is equal, on an annual basis, to 0.15% of the net asset value of each Portfolio. This charge is designed to compensate the Company for the cost of distributing the Contracts. The Commission considers the Distribution Expense Charge to constitute a sales charge for purposes of the Investment Company Act of 1940. In no event will this charge be increased. The Distribution Expense Charge is assessed during both the Accumulation Period and the Annuity Period; however, it is not applied to Contract Values allocated to the Fixed Account. PREMIUM TAXES Premium taxes or other taxes payable to a state or other governmental entity will be charged against the Contract Values. Some states assess premium taxes at the time Purchase Payments are made; others assess premium taxes at the time annuity payments begin. The Company currently intends to deduct premium taxes at the time of surrender or withdrawal, upon death of the Participant or upon annuitization; however, it reserves the right to deduct any premium taxes when incurred. Premium taxes generally range from 0% to 3.5%. DEDUCTION FOR SEPARATE ACCOUNT INCOME TAXES While the Company is not currently maintaining a provision for taxes, the Company has reserved the right to establish such a provision for taxes in the future if it determines, in its sole discretion, that it will incur a tax as a result of the operation of the Separate Account. The Company will deduct for any taxes incurred by it as a result of the operation of the Separate Account whether or not there was a provision for taxes and whether or not it was sufficient. (See "Taxes," page 31.) OTHER EXPENSES The charges and expenses applicable to the various Underlying Funds are borne indirectly by Participants having Contract Values allocated to the Portfolios that invest in the respective Underlying Funds. For a summary of current estimates of those charges and expenses, see "Fee Tables," page 10. For more detailed information about those charges and expenses, please refer to the prospectus for the Trust. 19 22 REDUCTION OF CHARGES FOR SALES TO CERTAIN GROUPS The Company may reduce the sales and administrative charges on Contracts sold to certain groups of individuals, or to a trustee, employer or other entity representing a group, where it is expected that such sales will result in savings of sales or administrative expenses. The Company determines the eligibility of groups for such reduced charges, and the amount of such reductions for particular groups, by considering the following factors: (1) the size of the group; (2) the total amount of Purchase Payments expected to be received from the group; (3) the nature of the group for which the Contracts are purchased, and the persistency expected in that group; (4) the purpose for which the Contracts are purchased and whether that purpose makes it likely that expenses will be reduced; and (5) any other circumstances which the Company believes to be relevant to determining whether reduced sales or administrative expenses may be expected. None of the reductions in charges for group sales is contractually guaranteed. Such reductions may be withdrawn or modified by the Company on a uniform basis. The Company's reductions in charges for group sales will not be unfairly discriminatory to the interests of any Owners. - -------------------------------------------------------------------------------- DESCRIPTION OF THE CONTRACTS - -------------------------------------------------------------------------------- SUMMARY The Contracts provide for the accumulation of Contract Values during the Accumulation Period. See "Purchases, Withdrawals and Contract Value," beginning at page 22. Upon Annuitization, benefits are payable under the Contracts in the form of an annuity, either for the life of the Annuitant or for a fixed number of years. (See "Annuity Period -- Annuity Options," page 27.) PARTICIPANT The Participant is the person normally entitled to exercise all rights of ownership under the Contract. The Participant is also the person entitled to receive benefits under the Contract, although the Participant may, subject to limitations in the case of Qualified Plans, designate an alternative payee. ANNUITANT The Annuitant is the person on whose life annuity payments under a Certificate depend. The Participant may change the designated Annuitant at any time prior to the Annuity Date. In the case of a Certificate issued in connection with a plan qualified under Section 403(b) or 408 of the Code, the Participant is the Annuitant. The Participant may also designate a second person on whose life, together with that of the Annuitant, annuity payments depend. In the case of Qualified Plans, the designated second person is generally required to be the Participant's spouse if the Participant is married. In the event an Annuitant dies prior to the Annuity Date, the Participant must notify the Company and designate a new Annuitant. The Participant must attest to the Annuitant being alive before the Company will annuitize a Contract. MODIFICATION OF THE CONTRACT Only the Company's President, a Vice President or Secretary may approve a change or waive any provisions of the Contract. Any change or waiver must be in writing. No agent has the authority to change or waive the provisions of the Contract. The Company reserves the right to change the terms of the Contract as may be necessary to comply with changes in applicable law. 20 23 ASSIGNMENT Contracts issued pursuant to Nonqualified 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. The Company will not be bound by any assignment until written notice is received by the Company at its Annuity Service Center. The Company is not responsible for the validity, tax or other legal consequences of any assignment. An assignment will not affect any payments the Company may make or actions it may take before it receives notice of the assignment. If the Contract is issued pursuant to a Qualified Plan (or a Nonqualified 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, CONTRACT OWNERS SHOULD CONSULT COMPETENT TAX ADVISERS SHOULD THEY WISH TO ASSIGN THEIR CONTRACTS. DEATH BENEFIT If the Participant dies during the Accumulation Period, a death benefit will be payable to the Beneficiary upon receipt by the Company of Due Proof of Death of the Participant. The death benefit will be reduced by premium taxes incurred by the Company, if any. Provided the Beneficiary provides a written election to the Company within 60 days of the Company's receipt of Due Proof of Death of the Participant, the Beneficiary may alternatively elect to (i) receive the death benefit in a lump sum payment, (ii) receive the death benefit in the form of one of the annuity options (over the life of the Beneficiary or over a period not extending beyond the life expectancy of the Beneficiary), with payments commencing within one year of the Participant's death, (iii) elect to continue the Contract and receive the entire Contract Value (adjusted for any applicable Market Value Adjustment) within 5 years after the Participant's death, or (iv) if the Participant was the Beneficiary's spouse, elect to continue the Certificate in force. If no option is selected within 60 days of the Company's receipt of Due Proof of Death of the Participant, the Company will pay the death benefit in a single lump sum to the Beneficiary. The death benefit is equal to the Contract Value at the end of the Valuation Period during which Due Proof of Death and an election of the type of payment to the Beneficiary is received by the Company, at its Annuity Service Center. BENEFICIARY The Participant may designate the Beneficiary(ies) to receive any amount payable on death. The original Beneficiary(ies) will be named in the application. Unless an irrevocable Beneficiary(ies) designation was previously filed, the Participant may change the Beneficiary(ies) prior to the Annuity Date by written request delivered to the Company at its Annuity Service Center or by completing a Change of Beneficiary Form provided by the Company. Any change will take effect when recorded by the Company. The Company is not liable for any payment made or action taken before it records the change. 21 24 - -------------------------------------------------------------------------------- PURCHASES, WITHDRAWALS AND CONTRACT VALUE - -------------------------------------------------------------------------------- MINIMUM PURCHASE PAYMENT The minimum initial Purchase Payment for Contracts issued pursuant to a Nonqualified or Qualified Plan is $75,000 and the maximum is $500,000. Minimum subsequent Purchase Payments for either a Nonqualified Plan or Qualified Plan may be made in amounts of $250 or more ($100 or more if made in connection with an Automatic Payment Plan). The Company reserves the right to refuse any Purchase Payment at any time. Generally, the Company will not issue a Certificate under a Nonqualified Plan to a Participant who is age 85 or older or under a Qualified Plan to a Participant who is age 70 1/2 or older. AUTOMATIC PAYMENT PLAN Participants utilizing automatic bank drafts through the Company's Automatic Payment Plan may make scheduled subsequent Purchase Payments of $100 or more per month. An enrollment form for this program is available through the Company's Annuity Service Center. AUTOMATIC DOLLAR COST AVERAGING PROGRAM Owners who wish to purchase units of the Portfolios over a period of time may be able to do so through the Automatic Dollar Cost Averaging ("DCA") Program. Under this DCA Program, the Owner may authorize the automatic transfer of a fixed dollar amount ($100 minimum) of his or her choice at regular intervals from a source account to one or more of the Portfolios (other than the source account) at the unit values determined on the dates of the transfers. Currently, all Portfolios and the one-year Fixed Account option are available as source accounts. However, the Owner must elect to have the transfers exclusively from one source account. The intervals between transfers may be monthly, quarterly, semiannually or annually, at the option of the Owner. The theory of dollar cost averaging is that, if purchases are made at fluctuating prices, this will have the effect of reducing the aggregate average cost per unit to less than the average of the unit prices on the same purchase dates. However, participation in the DCA Program does not assure the Owner of a greater profit from his or her purchases under the DCA Program; nor will it prevent or necessarily alleviate losses in a declining market. Another option under the DCA Program is the periodic transfer of a selected percentage of the value of the source account to one of the Portfolios (other than the source account). A third option is to transfer the entire Contract Value in the source account in a stated number of transfers as selected by the Participant. Although the various options under the DCA Program will allow transfers to be made from the Portfolios or the one-year Fixed Account option, the Owner must elect to have the transfers made exclusively from one of these source accounts. An Owner may elect to increase, decrease or change the frequency or amount of Purchase Payments under a DCA Program. The application and any Purchase Payments should be sent to the Company at its Annuity Service Center. The Company reserves the right to modify, suspend and terminate the DCA Program at any time. ASSET ALLOCATION REBALANCING PROGRAM Owners may participate in the Asset Allocation Rebalancing ("AAR") Program pursuant to which Owners authorize the Company to automatically transfer their Contract Value on a periodic basis to maintain a particular percentage allocation among the Portfolios or the one year Fixed Account option as selected by the Owner. The Contract Value allocated to each Portfolio will grow or decline at different rates depending on the investment experience of the Portfolio, and Asset Allocation Rebalancing automatically reallocates the Contract Value in the Portfolios and the Fixed Account option to the allocation selected by the Owner. As with dollar cost averaging, one theory behind this type of reallocation is that it may help an Owner purchase Accumulation Units low and sell Accumulation Units high. However, participation in AAR does not assure the Owner of a greater profit 22 25 from his or her purchases under the program; nor will it prevent or necessarily alleviate losses in a declining market. An Owner may select that rebalancing occur on a calendar quarter, semiannual or annual basis and currently all Portfolios and the one year Fixed Account option are the available investment options under AAR. Contract Value reallocation will occur on the last business day before the selected period ends. If an Owner elects to participate in AAR, the entire Contract Value must be included in the program, except for allocations to the 3, 5, 7 and 10 year Fixed Account options. Amounts transferred under AAR are not counted against the 15 free transfers per Contract Year or subject to any transfer charge or negative MVA. Owners may participate in AAR by completing an Asset Allocation Rebalancing Authorization Form or by calling the Company at its Annuity Service Center. On the application or form, as appropriate, the Owner must select the Portfolios or one year Fixed Account option, the percentage of Contract Value to be allocated to each under the program, and the frequency of rebalancing. Owners may modify their allocations or terminate participation in the program by completing an Asset Allocation Rebalancing Form and indicating the appropriate instructions. The Company reserves the right to modify, suspend, or terminate AAR at any time. PRINCIPAL ADVANTAGE PROGRAM Owners may participate in the Principal Advantage Program. Under the Principal Advantage Program, the Owner's Purchase Payment is divided between one or more of the Fixed Account options and one or more of the Portfolios. While the Owner selects the Fixed Account options and the Portfolio(s), the Principal Advantage Program determines the portion of Purchase Payments allocated to each. When determined in accordance with the Principal Advantage Program, the portion allocated to the Fixed Account option(s) will be guaranteed by the Company to grow to equal the full amount of the Purchase Payment over an established period of time. The remaining portion of Purchase Payment is then invested in the Portfolios, where it has the potential to achieve greater growth. An Owner may elect to participate in the Principal Advantage Program (1) at the time of initial purchase, by completing the instructions on the Vista Advantage Advisor application or (2) at the time of a subsequent purchase or reallocation of existing Contract Value, by contacting the Company or the financial representative from whom this Prospectus was obtained. The Company reserves the right to modify, suspend or terminate the Principal Advantage Program at any time. PARTICIPANT'S ACCOUNT The Company will establish a Participant's Account for each Participant under a Contract and will maintain the Participant's Account during the Accumulation Period. The Contract Value of a Participant's Account for any Valuation Period is equal to the sum of the variable accumulation value, if any, plus the fixed accumulation value, if any, of the Participant's Account for that Valuation Period. ALLOCATION OF PURCHASE PAYMENTS Purchase Payments are allocated to the Fixed Account and/or the Portfolio(s) selected by the Participant. Participants making initial Purchase Payments should specify their allocations on the application for a Contract. If the application is in good order, the Company will apply the initial Purchase Payment to the Fixed Account and/or the Portfolio(s), as selected, and credit the Contract with Accumulation Units within two business days of receipt at the Company's P.O. Box for correspondence accompanied by payments. The number of Accumulation Units in a Portfolio attributable to a Purchase Payment is determined by dividing that portion of the Purchase Payment which is allocated to the Portfolio by that Portfolio's Accumulation Unit value as of the end of the Valuation Period when the allocation occurs. IF THE APPLICATION DOES NOT SPECIFY AN ALLOCATION, THE APPLICATION IS NOT IN GOOD ORDER. If the application for a Contract or Certificate is not in good order for this or any other reason, the Company will attempt to rectify it within five business days of its receipt at the Company's P.O. Box for correspondence accompanied by payments. The Company will credit the 23 26 initial Purchase Payment within two business days after the application has been rectified. Unless the prospective Owner consents otherwise, the application and the initial Purchase Payment will be returned if the application cannot be put in good order within five business days of such receipt. Just like Participants making initial Purchase Payments, Participants making subsequent Purchase Payments should specify how they want their payments allocated. OTHERWISE, THE COMPANY WILL AUTOMATICALLY PROCESS THE PURCHASE PAYMENT BASED ON THE PREVIOUS ALLOCATION. TRANSFER DURING ACCUMULATION PERIOD During the Accumulation Period, the Participant, or his or her designated agent, may transfer Contract Values among Portfolios and/or the Fixed Account, by written request or by telephone authorization unless the Participant specifies on the Contract application that telephone transfers are not to be accepted. The Company has in place procedures which are designed to provide reasonable assurance that telephone authorizations are genuine, including tape recording of telephone communications and requesting identifying information. Accordingly, the Company and its affiliates disclaim all liability for any claim, loss or expense resulting from any alleged error or mistake in connection with a telephone transfer which was not properly authorized by the Participant. However, if the Company fails to employ reasonable procedures to ensure that all telephone transfers are properly authorized, the Company may be held liable for such losses. The Company reserves the right to modify or discontinue at any time and without notice the use of telephone transfers and acceptance of transfer instructions from someone other than the Owner. Telephone calls authorizing transfers must be completed by 4:00 p.m. Eastern time on a Valuation Date in order to be effected at the price determined on such Date. Transfer authorizations, whether written or telephone, which are received after 4:00 p.m. Eastern time will be processed as of the next Valuation Date. A transfer fee may be assessed (See "Contract Charges -- Transfer Fee," page 19). This transfer privilege may be suspended, modified or terminated at any time without notice. The minimum partial transfer amount is $100. Also, no partial transfer may be made if the value of the Participant's interest in the Portfolio from which a transfer is being made (or the remaining Guarantee Amount, where applicable) would be less than $100 after the transfer. These dollar amounts are subject to change at the Company's option. The Company may waive the minimum partial transfer amount in connection with preauthorized automatic transfer programs. Both prior to and after the Annuity Date, Contract Values may be transferred from the Separate Account to the Fixed Account. Any amounts allocated or transferred to the Fixed Account may, however, be transferred from the Fixed Account to the Separate Account only prior to the Annuity Date. Transfers may be made within the Fixed Account prior to the expiration date of one or more Guarantee Periods, by electing to have the respective Guarantee Amount(s) applied to newly established Guarantee Periods. Such transfers are counted against the 15 transfer allowance on free transfers. In addition, such transfers are generally subject to a Market Value Adjustment. SEPARATE ACCOUNT ACCUMULATION UNIT VALUE Accumulation Unit value is determined Monday through Friday on each day that the New York Stock Exchange is open for business. A separate Accumulation Unit value is determined for each Portfolio. If the Company elects or is required to assess a charge for taxes, a separate Accumulation Unit value may be calculated for Contracts issued in connection with Nonqualified and Qualified Plans, respectively, within each account. The Accumulation Unit value for each Portfolio will vary with the price of a share in the Underlying Fund and in accordance with the Mortality and Expense Risk Charge, Distribution Expense Charge, and any provision for taxes. Assessment of transfer fees is made separately for each Certificate. They are effected by redemption of Accumulation Units and do not affect Accumulation Unit value. 24 27 The Accumulation Unit value of a Portfolio for any Valuation Period is calculated by subtracting (2) from (1) and dividing the result by (3) where: (1) is the total value at the end of the Valuation Period of the assets attributable to the Accumulation Units of the Portfolio minus liabilities; (2) is the cumulative unpaid charge for the assumption of mortality and expense risks and for the distribution expense; and (3) is the number of Accumulation Units outstanding at the end of the Valuation Period. FIXED ACCOUNT ACCUMULATION VALUE The accumulation value of the fixed portion of a Participant's Account, if any, at any Valuation Date is equal to the sum of the values of all Guarantee Amounts credited to the Participant's Account up to and including that date. Each Guarantee Amount reflects interest accumulated to the Valuation Date at the applicable Guarantee Rate, compounded annually. DISTRIBUTION OF CONTRACTS Contracts are sold by registered representatives of broker-dealers who are licensed insurance agents of the Company, either individually or through an incorporated insurance agency. Commissions on Purchase Payments are paid on a persistency basis which will take into account, among other things, the length of time Purchase Payments have been held under a Contract and Contract Values. The persistency commission is not anticipated to exceed 1.00%, on an annual basis, of Contract Values. All such commissions are paid by the Company. Vista Broker-Dealer Services, Inc. ("VBDS"), located at 125 West 55th Street, New York, New York, 10019, serves as distributor of the Contracts. VBDS 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. VBDS is not affiliated with the Company or the Adviser to the Trust. WITHDRAWALS (REDEMPTIONS) Federal law places a number of constraints on withdrawals from annuity contracts. Subject to those limitations, the Contract Value may be withdrawn at any time during the Accumulation Period. Owners should consult their own tax counsel or other tax advisers regarding any withdrawals. (See "Taxes -- Tax Treatment of Withdrawals," page 34.) Except as explained below, an Owner may redeem a Certificate for all or a portion of its Contract Value during the Accumulation Period. A Market Value Adjustment may be applied, in the case of redemptions from the Fixed Account, which would affect Contract Value. (See "Fixed Account Options -- Market Value Adjustment," page 17.) Withdrawals and distributions from Contracts issued in connection with certain Qualified Plans may be subject to a mandatory 20% withholding requirement. (See "Taxes -- Withholding Tax on Distributions," page 32.) Withdrawals of amounts attributable to contributions made pursuant to a salary reduction agreement (in accordance with Section 403(b)(11) of the Code) are limited to circumstances only: when the Participant attains age 59 1/2, separates from service, dies, becomes disabled (within the meaning of Section 72(m)(7) of the Code), or in the case of hardship. Withdrawals for hardship are restricted to the portion of the Contract Value which represents contributions made by the Participant and does not include any investment results. These limitations on withdrawals apply to: (1) salary reduction contributions made after December 31, 1988; (2) income attributable to such contributions; and (3) income attributable to amounts held as of December 31, 1988. The limitations on withdrawals do not affect rollovers or exchanges between certain Qualified Plans. Tax penalties may also apply. While the foregoing limitations only apply to certain Contracts issued in connection with Sec- 25 28 tion 403(b) Qualified Plans, all Participants should seek competent tax advice regarding any withdrawals or distributions. (See "Taxes," beginning at page 31.) Except in connection with a Systematic Withdrawal Program, described below, the minimum partial withdrawal amount is $1,000, or, if less, the Participant's entire interest in the Portfolio from which a withdrawal is requested (or the Fixed Account, where applicable). The Participant's interest in the Portfolio from which the withdrawal is requested (or the remaining Guarantee Amount) must be at least $100 after the withdrawal is completed if anything is left in that Portfolio (or Fixed Account allocation). A written withdrawal request or Systematic Withdrawal Program enrollment form, as the case may be, must be sent to the Company at its Annuity Service Center. The required program form will not be in good order unless it includes the Participant's Tax I.D. Number (e.g., Social Security Number) and provides instructions regarding withholding of income taxes. The Company provides the required forms. If the request is for total withdrawal, the Certificate (or Contract), or a Lost Certificate (or Contract) Affidavit (which may be obtained by calling the Company at its Annuity Service Center), must be submitted as well. The Withdrawal Value is determined on the basis of the Contract Values next computed following receipt of a request in proper order. The Withdrawal Value will normally be paid within seven days after the day a proper request is received by the Company. However, the Company may suspend the right of withdrawal from the Separate Account or delay payment for such withdrawal more than seven days: (1) during any period when the New York Stock Exchange ("NYSE") is closed (other than customary weekend and holiday closings); (2) when trading on the NYSE is restricted or an emergency exists as determined by the Commission so that disposal of the Separate Account's investments or determination of Accumulation Unit value is not reasonably practicable; or (3) for such other periods as the Commission, by order, may permit for protection of Owners. SYSTEMATIC WITHDRAWAL PROGRAM Certain Participants of Nonqualified Plan Contracts and Contracts issued in connection with IRAs may choose to withdraw amounts pursuant to a Systematic Withdrawal Program. Withdrawals are taxable and a 10% federal tax penalty may apply to withdrawals before age 59 1/2. In addition, withdrawals from the Fixed Account prior to the end of their respective Guarantee Periods are generally subject to a Market Value Adjustment. (See "Fixed Account Options -- Market Value Adjustment," page 17.) Participants must complete an enrollment form which describes the program and send it to the Company at its Annuity Service Center. Participation in the Systematic Withdrawal Program may be elected at the time the Certificate is issued or on any date thereafter, prior to the Annuity Date. Depending on fluctuations in the net asset value of the Portfolios, systematic withdrawals may reduce or even exhaust Contract Value. The minimum systematic withdrawal amount is $250 per withdrawal. The Company reserves the right to modify, suspend or terminate the Systematic Withdrawal Program at any time. ERISA PLANS Spousal consent may be required when a married Participant seeks a distribution from a Contract that has been issued in connection with a Qualified Plan (or a Nonqualified Plan that is subject to Title 1 of ERISA). Participants should obtain competent advice. DEFERMENT OF FIXED ACCOUNT WITHDRAWAL PAYMENTS In the case of withdrawals from the Fixed Account, the Company may defer making payment for a period of up to six months (or the period permitted by applicable state insurance law, if less) from the date the Company receives notice of such withdrawal request. Only under highly unusual circumstances will the Company defer a withdrawal payment from the Fixed Account for more than 7 days, and if the Company defers payment for more than 7 days, it will pay interest of at least 3% per annum on the amount deferred. While all the circumstances under which the Company could defer payment upon withdrawal may not be foreseeable at this time, such circumstances could include, for example, a 26 29 time of unusually high surrender rate among Owners, accompanied by a radical shift in interest rates. If the Company intends to withhold payment for more than 7 days, it will notify affected Owners in writing. MINIMUM CONTRACT VALUE If the Contract Value is less than $500 and no Purchase Payments have been made during the previous three full calendar years, the Company reserves the right, after 60 days written notice to the Participant, to terminate the Certificate and distribute its Withdrawal Value to the Participant. This privilege will be exercised only if the Contract Value has been reduced to less than $500 as a result of withdrawals, and state law permits. In no instance shall such termination occur if the value has fallen below $500 due to either decline in Accumulation Unit value or the imposition of fees and charges. - -------------------------------------------------------------------------------- ANNUITY PERIOD - -------------------------------------------------------------------------------- ANNUITY DATE The Participant selects an Annuity Date (the date on which annuity payments are to begin) at the time of application. The Annuity Date must always be the first day of a calendar month and must be at least two years after the Issue Date, but in any event will be no later than the Latest Annuity Date. Annuity payments will begin no later than the Latest Annuity Date. If no Annuity Date is selected, the Annuity Date will be the Latest Annuity Date. The Participant may change the Annuity Date at any time at least seven days prior to the Annuity Date then indicated on the Company's records by written notice to the Company at its Annuity Service Center. DEFERMENT OF PAYMENTS The Company may defer making Fixed Annuity payments for a period of up to six months or such lesser time as state law may permit. Interest, subject to state law requirements, will be credited during the deferral period. For a discussion of the circumstances under which the Company could defer these payments, please refer to "Purchases, Withdrawals and Contract Value -- Deferment of Fixed Account Withdrawal Payments," above. PAYMENTS TO PARTICIPANT The Company will make annuity payments to the Participant, unless the Participant designates an alternate payee. Such designation must be made in writing to the Company's Annuity Service Center and must be received more than 30 days before the Annuity Date. ALLOCATION OF ANNUITY PAYMENTS If all of the Contract Value on the Annuity Date is allocated to the Fixed Account, the Annuity will be paid as a Fixed Annuity. If all of the Contract Value on that date is allocated to the Separate Account, the Annuity will be paid as a Variable Annuity. If the Contract Value on that date is allocated to both the Fixed Account and the Separate Account, the Annuity will be paid as a combination of a Fixed Annuity and a Variable Annuity to reflect the allocation between the Portfolios and the Fixed Account. Variable Annuity payments will reflect the investment performance of the Portfolios. The Participant(s) may, by written notice to the Company, convert Variable Annuity payments to Fixed Annuity payments. However, Fixed Annuity payments may not be converted to Variable Annuity payments. ANNUITY OPTIONS The Participant, or any Beneficiary who is so entitled, may elect to receive a lump sum at the end of the Accumulation Period. However, a lump sum distribution may be deemed to be a withdrawal, and at least a portion of it may be subject to federal income tax. (See "Taxes -- Tax Treatment of 27 30 Withdrawals," page 34.) Alternatively, any of the annuity options listed below may be elected. The Participant may elect an annuity option or change an annuity option at any time prior to the Annuity Date. If no other annuity option is elected, monthly annuity payments will be made in accordance with annuity option 4 below, a life annuity with a 120-month period certain (annuity option 3 in the case where payments are to be made for the joint lives of the Annuitant and a designated second person and for the life of the survivor). Annuity payments will be made in monthly, quarterly, semiannual or annual installments as selected by the Participant. However, if the amount available to apply under an annuity option is less than $5,000, and state law permits, the Company has the right to pay the annuity in one lump sum. In addition, if the first payment provided would be less than $50, and state law permits, the Company shall have the right to require the frequency of payments be at quarterly, semiannual or annual intervals so as to result in an initial payment of at least $50. NO WITHDRAWALS OF CONTRACT VALUE ARE PERMITTED DURING THE ANNUITY PERIOD FOR ANY ANNUITY OPTION IN WHICH PAYMENTS ARE BASED ON A PERSON'S LIFE. The following annuity options are generally available under the Contract. Each is available in the form of either a Fixed Annuity or a Variable Annuity (or a combination of both Fixed and Variable Annuity). However, there may be restrictions in the retirement plan pursuant to which a Contract has been purchased. OPTION 1 -- LIFE INCOME An annuity payable monthly during the lifetime of the Annuitant. Under this option, no further payments are payable after the death of the Annuitant and there is no provision for a death benefit payable to the Beneficiary. Therefore, it is possible under option 1 for the payee to receive only one monthly annuity payment under the Contract. OPTION 2 -- JOINT AND SURVIVOR ANNUITY An annuity payable monthly while both the Annuitant and a designated second person are living. Upon the death of either person, the monthly income payable will continue during the lifetime of the survivor at either the full amount previously payable or as a percentage (either one-half or two-thirds) of the full amount, as chosen by the Participant at the time of election of this option. Annuity payments terminate automatically and immediately upon the death of the surviving person without regard to the number or total amount of payments received. There is no minimum number of guaranteed payments and it is possible to have only one annuity payment if both the Annuitant and the designated second person die before the due date of the second payment. OPTION 3 -- JOINT AND SURVIVOR LIFE ANNUITY -- 120 MONTHLY PAYMENTS GUARANTEED This option is similar to option 2, above, but with the additional guarantee that payments will be made for not fewer than 120 monthly periods. If the surviving Annuitant dies before all such payments have been made, the balance of the guaranteed number of payments will be made to the Beneficiary. OPTION 4 -- LIFE ANNUITY WITH 120 OR 240 MONTHLY PAYMENTS GUARANTEED An annuity payable monthly during the lifetime of the Annuitant, with the guarantee that if, at the death of the Annuitant, payments have been made for fewer than the guaranteed 120 or 240 monthly periods, as elected by the Owner, the balance of the guaranteed number of payments will be made to the Beneficiary. 28 31 OPTION 5 -- INCOME FOR A SPECIFIED PERIOD Under this option, a payee can elect an annuity payable monthly for any period of years from 5 to 30. This election must be made for full 12 month periods. In the event the payee dies before the specified number of payments has been made, the Beneficiary may elect to continue receiving the scheduled payments or may alternatively elect to receive the discounted present value of any remaining guaranteed payments as a lump sum. The value of an Annuity Unit, regardless of the option chosen, takes into account the Mortality and Expense Risk Charge. (See "Contract Charges -- Mortality and Expense Risk Charge," page 18.) Since option 5, Income for a Specified Period, does not contain an element of mortality risk, the payee is not getting the benefit of the Mortality Risk Charge if option 5 is selected on a variable basis. OTHER OPTIONS At the sole discretion of the Company, other annuity options may be made available. However, to the extent that Contract charges would otherwise apply to a withdrawal or termination, the identical Contract charges may apply with respect to any additional options. With respect to Contracts issued under Sections 401, 403(b) or 408 of the Internal Revenue Code, any payments will be made only to the Participant and/or the Participant's spouse. TRANSFER DURING ANNUITY PERIOD During the Annuity Period, the Owner may transfer the Contract Value to the Fixed Account and/or among Portfolios. Such transfers are subject to the same limitations and conditions as are prescribed for transfers during the Accumulation Period, page 24, except that, in addition, no transfers may be made from the Fixed Account to the Separate Account during the Annuity Period. Transfers from the Separate Account to the Fixed Account are effected by crediting the Fixed Account with the actuarial present value of future annuity payments to be made, assuming that all such payments would be equal to a subsequent Variable Annuity payment as computed on the effective date of the transfer, in the manner described below under "Annuity Payments." DEATH BENEFIT DURING ANNUITY PERIOD If the Annuitant dies after the Annuity Date while the Contract is in force, the death proceeds, if any, will depend upon the annuity option in effect at the time of the Annuitant's death. If the Annuitant dies after the Annuity Date and before the entire interest in the Contract has been distributed, the remaining interest, if any, as provided for in the option elected, will be distributed at least as rapidly as under the method of distribution in effect at the Annuitant's death. ANNUITY PAYMENTS INITIAL MONTHLY ANNUITY PAYMENT The initial annuity payment is determined by taking the Contract Value, less any premium tax, less any Market Value Adjustment that may apply in the case of a premature annuitization of certain Guarantee Amounts, and then applying it to the annuity table specified in the Contract (or, if more favorable to the payee, the annuity tables in effect as of the Annuity Date for similar immediate annuity contracts issued by the Company). Those tables are based on a set amount per $1,000 of proceeds applied. The appropriate rate must be determined by the sex (except where, as in the case of certain Qualified Plans and other employer-sponsored retirement plans, such classification is not permitted) and age of the Annuitant and designated second person, if any. The dollars applied are then divided by 1,000 and the result multiplied by the appropriate annuity factor appearing in the table to compute the amount of the first monthly annuity payment. In the case of a Variable Annuity, that amount is divided by the value of an Annuity Unit as of the Annuity Date to establish the number of Annuity Units representing each Variable Annuity payment. The number of Annuity Units determined for the first Variable Annuity payment remains constant for the second and subsequent monthly Variable Annuity payments, assuming that no reallocation of Contract Values is made. 29 32 SUBSEQUENT MONTHLY PAYMENTS For a Fixed Annuity, the amount of the second and each subsequent monthly annuity payment is the same as that determined above for the first monthly payment. The amount of the second and each subsequent monthly Variable Annuity payment is determined by multiplying the number of Annuity Units, as determined in connection with the determination of the initial monthly annuity payment, above, by the annuity unit value, below, as of the Valuation Period ending on the Valuation Date next preceding the date on which each annuity payment is due. ANNUITY UNIT VALUE The value of an Annuity Unit is determined independently for each Portfolio, but was initially set at $10.00. The annuity tables contained in the Contract are based on a 3.5% per annum assumed investment rate. If the actual net investment rate experienced by a Portfolio exceeds 3.5%, Variable Annuity payments derived from allocations to that Portfolio will increase over time. Conversely, if the actual rate is less than 3.5%, Variable Annuity payments will decrease over time. If the net investment rate equals 3.5%, the Variable Annuity payments will remain constant. If a higher assumed investment rate had been used, the initial monthly payment would be higher, but the actual net investment rate would also have to be higher in order for annuity payments to increase (or not to decrease). The payee receives the value of a fixed number of Annuity Units each month. The value of a fixed number of Annuity Units will reflect the investment performance of the Portfolios elected, and the amount of each annuity payment will vary accordingly. For each Portfolio, the value of an Annuity Unit for any Valuation Period is determined by multiplying the Annuity Unit Value for the immediately preceding Valuation Period by the Net Investment Factor for the Valuation Period for which the Annuity Unit Value is being calculated. The result is then multiplied by a second factor which offsets the effect of the assumed net investment rate of 3.5% per annum which is assumed in the annuity tables contained in the Contract. The Net Investment Factor is described below. More detailed information on the computation of Annuity Unit Values is contained in the Statement of Additional Information. NET INVESTMENT FACTOR The Net Investment Factor is an index applied to measure the net investment performance of a Portfolio from one Valuation Date to the next. The Net Investment Factor may be greater or less than or equal to one; therefore, the value of an Annuity Unit may increase, decrease or remain the same. The Net Investment Factor for any Portfolio for any Valuation Period is determined by dividing (a) by (b) and then subtracting (c) from the result where: (a) is the net result of: (1) the net asset value of an Underlying Fund share held in the Portfolio determined as of the Valuation Date at the end of the Valuation Period, plus (2) the per share amount of any dividend or other distribution declared by the Underlying Fund if the "ex-dividend" date occurs during the Valuation Period, plus or minus (3) a per share credit or charge with respect to any taxes paid or reserved for by the Company during the Valuation Period which are determined by the Company to be attributable to the operation of the Portfolio (no federal income taxes are applicable under present law); (b) is the net asset value of the Underlying Fund share held in the Portfolio determined as of the Valuation Date at the end of the preceding Valuation Period; and (c) is the asset charge factor determined by the Company for the Valuation Period to reflect the charges for assuming the mortality and expense risks and the distribution expenses. 30 33 - -------------------------------------------------------------------------------- ADMINISTRATION - -------------------------------------------------------------------------------- The Company has primary responsibility for all administration of the Contracts and the Separate Account. The mailing address of the Company's Annuity Service Center is P.O. Box 54299, Los Angeles, California 90054-0299, and its telephone number is (800) 90-VISTA. The administrative services provided include, but are not limited to: issuance of the Contracts; maintenance of Participant records; Participant services; calculation of unit values; and preparation of Participant reports. Contract statements and transaction confirmations are mailed to Participants at least quarterly. Participants should read their statements and confirmations carefully and verify their accuracy. Questions about periodic statements should be communicated to the Company promptly. The Company will investigate all complaints and make any necessary adjustments retroactively, provided that it has received notice of a potential error within 30 days after the date of the questioned statement. If the Company has not received notice of a potential error within this time, any adjustment shall be made as of the date that the Annuity Service Center receives notice of the potential error. The Company will also provide Participants with such additional periodic and other reports, information and prospectuses as may be required by federal securities laws. - -------------------------------------------------------------------------------- TAXES - -------------------------------------------------------------------------------- NOTE: THE FOLLOWING DESCRIPTION IS BASED UPON THE COMPANY'S UNDERSTANDING OF CURRENT FEDERAL INCOME TAX LAW APPLICABLE TO ANNUITIES IN GENERAL. THE COMPANY CANNOT PREDICT THE PROBABILITY THAT ANY CHANGES IN SUCH LAWS WILL BE MADE. PURCHASERS ARE CAUTIONED TO SEEK COMPETENT TAX ADVICE REGARDING THE POSSIBILITY OF SUCH CHANGES. THE COMPANY DOES NOT GUARANTEE THE TAX STATUS OF THE CONTRACTS. PURCHASERS BEAR THE COMPLETE RISK THAT THE CONTRACTS MAY NOT BE TREATED AS "ANNUITY CONTRACTS" UNDER FEDERAL INCOME TAX LAWS. GENERAL Section 72 of the Internal Revenue Code of 1986, as amended (the "Code") governs taxation of annuities in general. A Participant is not taxed on increases in the value of a Contract until distribution occurs, either in the form of a non-annuity distribution or as annuity payments under the annuity option elected. For a lump sum payment received as a total surrender (total redemption), the recipient is taxed on the portion of the payment that exceeds the cost basis of the Contract. For a payment received as a withdrawal (partial redemption), federal tax liability is determined on a last-in, first-out basis, meaning taxable income is withdrawn before the cost basis of the Contract is withdrawn. For Contracts issued in connection with Nonqualified Plans, the cost basis is generally the Purchase Payments, while for Contracts issued in connection with Qualified Plans there may be no cost basis. The taxable portion of the lump sum payment is taxed at ordinary income tax rates. Tax penalties may also apply. For annuity payments, the taxable portion is determined by a formula which establishes the ratio that the cost basis of the Contract bears to the total value of annuity payments for the term of the annuity Contract. The taxable portion is taxed at ordinary income tax rates. Participants, Annuitants and Beneficiaries under the Contracts should seek competent financial advice about the tax consequences of distributions under the retirement plan under which the Contracts are purchased. 31 34 The Company is taxed as a life insurance company under the Code. For federal income tax purposes, the Separate Account is not a separate entity from the Company and its operations form a part of the Company. WITHHOLDING TAX ON DISTRIBUTIONS The Code generally requires the Company (or, in some cases, a plan administrator) to withhold tax on the taxable portion of any distribution or withdrawal from a Contract. For "eligible rollover distributions" from Contracts issued under certain types of Qualified Plans, 20% of the distribution must be withheld, unless the payee elects to have the distribution "rolled over" to another eligible plan in a direct "trustee to trustee" transfer. This requirement is mandatory and cannot be waived by the Participant. Withholding on other types of distributions can be waived. An "eligible rollover distribution" is the estimated taxable portion of any amount received by a covered employee from a plan qualified under Section 401(a) or 403(a) of the Code, or from a tax-sheltered annuity qualified under Section 403(b) of the Code (other than (1) annuity payments for the life (or life expectancy) of the employee, or joint lives (or joint life expectancies) of the employee and his or her designated beneficiary, or for a specified period of ten years or more; and (2) distributions required to be made under the Code). Failure to "roll over" the entire amount of an eligible rollover distribution (including an amount equal to the 20% portion of the distribution that was withheld) could have adverse tax consequences, including the imposition of a penalty tax on premature withdrawals, described later in this section. Withdrawals or distributions from a Contract other than eligible rollover distributions are also subject to withholding on the estimated taxable portion of the distribution, but the Participant may elect in such cases to waive the withholding requirement. If not waived, withholding is imposed (1) for periodic payments, at the rate that would be imposed if the payments were wages, or (2) for other distributions, at the rate of 10%. If no withholding exemption certificate is in effect for the payee, the rate under (1) above is computed by treating the payee as a married individual claiming 3 withholding exemptions. DIVERSIFICATION -- SEPARATE ACCOUNT INVESTMENTS Section 817(h) of the Code imposes certain diversification standards on the underlying assets of variable annuity contracts. The Code provides that a variable annuity contract will not be treated as an annuity contract for any period (and any subsequent period) for which the investments are not adequately diversified, in accordance with regulations prescribed by the United States Treasury Department ("Treasury Department"). Disqualification of the Contract as an annuity contract would result in imposition of federal income tax to the Participant with respect to earnings allocable to the Contract prior to the receipt of payments under the Contract. The Code contains a safe harbor provision which provides that annuity contracts such as the Contracts meet the diversification requirements if, as of the close of each calendar quarter, the underlying assets meet the diversification standards for a regulated investment company, and no more than 55% of the total assets consist of cash, cash items, U.S. government securities and securities of other regulated investment companies. The Treasury Department has issued Regulations which establish diversification requirements for the investment portfolios underlying variable contracts such as the Contracts. The Regulations amplify the diversification requirements for variable contracts set forth in the Code and provide an alternative to the safe harbor provision described above. Under the Regulations an investment portfolio will be deemed adequately diversified if (1) no more than 55% of the value of the total assets of the portfolio is represented by any one investment; (2) no more than 70% of the value of the total assets of the portfolio is represented by any two investments; (3) no more than 80% of the value of the total assets of the portfolio is represented by any three investments; and (4) no more than 90% of the value of the total assets of the portfolio is represented by any four investments. For purposes of determining whether or not the diversification standards imposed on the underlying assets of variable 32 35 contracts by Section 817(h) of the Code have been met, "each United States government agency or instrumentality shall be treated as a separate issuer." The Company intends that each of the Underlying Funds will be managed by its investment adviser in such a manner as to comply with these diversification requirements. MULTIPLE CONTRACTS Multiple annuity contracts which are issued within a calendar year to the same contract owner by one company or its affiliates are treated as one annuity contract for purposes of determining the tax consequences of any distribution. Such treatment may result in adverse tax consequences including more rapid taxation of the distributed amounts from such multiple contracts. The Company believes that Congress intended to affect the purchase of multiple deferred annuity contracts which may have been purchased to avoid withdrawal income tax treatment. Owners should consult a tax adviser prior to purchasing more than one annuity contract in any calendar year. TAX TREATMENT OF ASSIGNMENTS An assignment of a Contract may have tax consequences, and may also be prohibited by ERISA in some circumstances. Owners should therefore consult competent legal advisers should they wish to assign their Contracts. QUALIFIED PLANS The Contracts offered by this prospectus are designed to be suitable for use under various types of Qualified Plans. Taxation of Participants in each Qualified Plan varies with the type of plan and terms and conditions of each specific plan. Participants, Annuitants and Beneficiaries are cautioned that benefits under a Qualified Plan may be subject to the terms and conditions of the plan, regardless of the terms and conditions of the contracts issued pursuant to the plan. Following are general descriptions of the types of Qualified Plans with which the Contracts may be used. Such descriptions are not exhaustive and are for general information purposes only. The tax rules regarding Qualified Plans are very complex and will have differing applications depending on individual facts and circumstances. Each purchaser should obtain competent tax advice prior to purchasing a Contract or Certificate issued under a Qualified Plan. Contracts issued pursuant to Qualified Plans include special provisions restricting Contract provisions that may otherwise be available and described in this Prospectus. Generally, Contracts issued pursuant to Qualified Plans are not transferable except upon surrender or annuitization. Various penalty and excise taxes may apply to contributions or distributions made in violation of applicable limitations. Furthermore, certain withdrawal penalties and restrictions may apply to surrenders from Qualified Contracts. (See "Tax Treatment of Withdrawals -- Qualified Plans," below.) (A) H.R. 10 PLANS Section 401 of the Code permits self-employed individuals to establish Qualified Plans for themselves and their employees, commonly referred to as "H.R. 10" or "Keogh" Plans. Contributions made to the Plan for the benefit of the employees will not be included in the gross income of the employees until distributed from the Plan. The tax consequences to Owners may vary depending upon the particular Plan design. However, the Code places limitations and restrictions on all Plans on such items as: amounts of allowable contributions; form, manner and timing of distributions; vesting and nonforfeitability of interests; nondiscrimination in eligibility and participation; and the tax treatment of distributions, withdrawals and surrenders. (See "Tax Treatment of Withdrawals -- Qualified Plans," below.) Purchasers of Contracts or Certificates for use with an H.R. 10 Plan should obtain competent tax advice as to the tax treatment and suitability of such an investment. 33 36 (B) TAX-SHELTERED ANNUITIES Section 403(b) of the Code permits the purchase of "tax-sheltered annuities" by public schools and certain charitable, educational and scientific organizations described in Section 501(c)(3) of the Code. These qualifying employers may make contributions to the Contracts for the benefit of their employees. Such contributions are not includible in the gross income of the employee until the employee receives distributions from the Contract. The amount of contributions to the tax-sheltered annuity is limited to certain maximums imposed by the Code. Furthermore, the Code sets forth additional restrictions governing such items as transferability, distributions, nondiscrimination and withdrawals. (See "Tax Treatment of Withdrawals -- Qualified Plans," below.) Any employee should obtain competent tax advice as to the tax treatment and suitability of such an investment. (C) INDIVIDUAL RETIREMENT ANNUITIES Section 408(b) of the Code permits eligible individuals to contribute to an individual retirement program known as an "Individual Retirement Annuity" ("IRA"). Under applicable limitations, certain amounts may be contributed to an IRA which will be deductible from the individual's gross income. These IRAs are subject to limitations on eligibility, contributions, transferability and distributions. (See "Tax Treatment of Withdrawals -- Qualified Plans," below.) Sales of Contracts for use with IRAs are subject to special requirements imposed by the Code, including the requirement that certain informational disclosure be given to persons desiring to establish an IRA. Purchasers of Contracts or Certificates to be qualified as IRAs should obtain competent tax advice as to the tax treatment and suitability of such an investment. (D) CORPORATE PENSION AND PROFIT-SHARING PLANS Sections 401(a) and 401(k) of the Code permit corporate employers to establish various types of retirement plans for employees. These retirement plans may permit the purchase of the Contracts to provide benefits under the plan. Contributions to the plan for the benefit of employees will not be includible in the gross income of the employee until distributed from the plan. The tax consequences to Owners may vary depending upon the particular plan design. However, the Code places limitations on all plans on such items as amount of allowable contributions; form, manner and timing of distributions; vesting and nonforfeitability of interests; nondiscrimination in eligibility and participation; and the tax treatment of distributions, withdrawals and surrenders. (See "Tax Treatment of Withdrawals -- Qualified Plans," below.) Purchasers of Contracts for use with corporate pension or profit sharing plans should obtain competent tax advice as to the tax treatment and suitability of such an investment. (E) DEFERRED COMPENSATION PLANS -- SECTION 457 Under Section 457 of the Code, governmental and certain other tax-exempt employers may establish, for the benefit of their employees, deferred compensation plans which may invest in annuity contracts. The Code, as in the case of Qualified Plans, establishes limitations and restrictions on eligibility, contributions and distributions. Under these plans, contributions made for the benefit of the employees will not be includible in the employees' gross income until distributed from the plan. However, under a 457 plan all the plan assets shall remain solely the property of the employer, subject only to the claims of the employer's general creditors until such time as made available to an Owner or a Beneficiary. TAX TREATMENT OF WITHDRAWALS QUALIFIED PLANS Section 72(t) of the Code imposes a 10% penalty tax on the taxable portion of any early distribution from qualified retirement plans, including contracts issued and qualified under Code Sections 401 (H.R. 10 and Corporate Pension and Profit Sharing Plans), 403(b) (Tax-Sheltered Annuities) and 408(b) (IRAs). 34 37 The tax penalty will not apply to the following distributions: (1) if distribution is made on or after the date on which the Owner or Annuitant (as applicable) reaches age 59 1/2; (2) distributions following the death or disability of the Owner or Annuitant (as applicable) (for this purpose "disability" is defined in Section 72(m)(7) of the Code); (3) distributions that are part of substantially equal periodic payments made not less frequently than annually for the life (or life expectancy) of the Owner or Annuitant (as applicable) or the joint lives (or joint life expectancies) of such Owner or Annuitant (as applicable) and his or her designated beneficiary; (4) distributions to an Owner or Annuitant (as applicable) who has separated from service after he or she has attained age 55; (5) distributions made to the Owner or Annuitant (as applicable) to the extent such distributions do not exceed the amount allowable as a deduction under Code Section 213 to the Owner or Annuitant (as applicable) for amounts paid during the taxable year for medical care; and (6) distributions made to an alternate payee pursuant to a qualified domestic relations order. The exceptions stated in items (4), (5) and (6) above do not apply in the case of an IRA. Limitations imposed by the Code on withdrawals from tax-sheltered annuities are described above under "Purchases, Withdrawals and Contract Value -- Withdrawals (Redemptions)," page 25. The taxable portion of a withdrawal or distribution from Contracts issued under certain types of plans may, under some circumstances, be "rolled over" into another eligible plan so as to continue to defer income tax on the taxable portion. Effective January 1, 1993, such treatment is available for any "eligible rollover distribution" made by certain types of plans (as described above under "Taxes -- Withholding Tax on Distributions," page 32) that is transferred within 60 days of receipt into a plan qualified under section 401(a) or 403(a) of the Code, a tax-sheltered annuity, an IRA, or an individual retirement account described in section 408(a) of the Code. Plans making such eligible rollover distributions are also required, with some exceptions specified in the Code, to provide for a direct "trustee to trustee" transfer of the distribution to the transferee plan designated by the recipient. Amounts received from IRAs may also be rolled over into other IRAs, individual retirements accounts or certain other plans, subject to limitations set forth in the Code. NONQUALIFIED PLANS Section 72 of the Code governs treatment of distributions from annuity contracts. It provides that if the Contract Value exceeds the aggregate Purchase Payments made, any amount withdrawn not in form of an annuity payment will be treated as coming first from the earnings and then, only after the income portion is exhausted, as coming from the principal. Withdrawn earnings are includible in a taxpayer's gross income. Section 72 further provides that a 10% penalty will apply to the income portion of any premature distribution. The penalty is not imposed on amounts received: (1) after the taxpayer reaches 59 1/2; (2) upon the death of the Owner or Annuitant (as applicable); (3) if the taxpayer is totally disabled; (4) in a series of substantially equal periodic payments made for the life of the taxpayer or for the joint lives of the taxpayer and his or her designated Beneficiary; (5) under an immediate annuity; or (6) which are allocable to purchase payments made prior to August 14, 1982. The above information applies to Contracts issued pursuant to Section 457 of the Code, but does not apply to other Qualified Plan Contracts. Separate tax withdrawal penalties and restrictions apply to Qualified Plan Contracts. 35 38 - -------------------------------------------------------------------------------- ADDITIONAL INFORMATION ABOUT THE COMPANY - -------------------------------------------------------------------------------- SELECTED CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS) The following selected consolidated financial information for Anchor National Life Insurance Company, insofar as it relates to each of the years 1990-1994, has been derived from audited annual financial statements, including the consolidated balance sheets at September 30, 1993 and 1994 and the related consolidated statements of income and of cash flows for each of the three years in the period ended September 30, 1994 and the notes thereto appearing elsewhere herein. The information as of and for the nine months ended June 30, 1994 and 1995 has been derived from unaudited financial information which, in the opinion of management, includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the unaudited interim periods. This information should be read in conjunction with the Management's Discussion and Analysis of Financial Condition and Results of Operations beginning on page 37 and the consolidated financial statements and notes thereto included in this prospectus beginning on page 53.
NINE MONTHS ENDED YEARS ENDED SEPTEMBER 30, JUNE 30, -------------------------------------------------------------- ----------------------- 1990 1991 1992 1993 1994 1994 1995 ---------- ---------- ---------- ---------- ---------- ---------- ---------- RESULTS OF OPERATIONS Net investment income........... $ 28,710 $ 31,882 $ 36,499 $ 48,912 $ 58,996 $ 43,061 $ 38,710 Net realized investment losses........................ (14,907) (12,744) (22,749) (22,247) (33,713) (26,180) (8,874) Fee income...................... 59,002 74,735 95,482 116,443 129,583 97,226 97,713 General and administrative expenses...................... (56,031) (58,364) (55,615) (55,142) (52,636) (38,955) (42,255) Provision for future guaranty fund assessments.............. -- -- -- (4,800) -- -- -- Amortization of deferred acquisition costs............. (12,911) (19,010) (18,224) (30,825) (43,992) (31,148) (40,554) Other income and expenses....... 11,496 14,473 10,741 11,171 9,082 7,046 4,478 ---------- ---------- ---------- ---------- ---------- ---------- ---------- PRETAX INCOME................... 15,359 30,972 46,134 63,512 67,320 51,050 49,218 Income tax expense.............. (6,792) (11,847) (15,361) (21,794) (22,705) (17,640) (17,659) ---------- ---------- ---------- ---------- ---------- ---------- ---------- Income from continuing operations.................... 8,567 19,125 30,773 41,718 44,615 33,410 31,559 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net income of subsidiaries sold to affiliates................. 4,744 7,000 1,312 -- -- -- -- ---------- ---------- ---------- ---------- ---------- ---------- ---------- INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES.................. 13,311 26,125 32,085 41,718 44,615 33,410 31,559 Cumulative effect of change in accounting for income taxes... -- -- -- -- (20,463) (20,463) -- ---------- ---------- ---------- ---------- ---------- ---------- ---------- NET INCOME...................... $ 13,311 $ 26,125 $ 32,085 $ 41,718 $ 24,152 $ 12,947 $ 31,559 ========== ========== ========== ========== ========== ========== ==========
AT SEPTEMBER 30, AT JUNE 30, -------------------------------------------------------------- ----------------------- 1990 1991 1992 1993 1994 1994 1995 ---------- ---------- ---------- ---------- ---------- ---------- ---------- FINANCIAL POSITION Investments..................... $2,012,805 $1,917,719 $2,126,899 $2,093,100 $1,632,072 $1,667,485 $1,804,954 Variable annuity assets......... 2,145,196 2,746,685 3,284,507 4,170,275 4,486,703 4,342,313 4,864,463 Deferred acquisition costs...... 185,628 226,192 288,264 336,677 416,289 373,970 379,113 Other assets.................... 159,330 162,855 91,588 71,337 67,062 72,324 69,803 ---------- ---------- ---------- ---------- ---------- ---------- ---------- TOTAL ASSETS.................... $4,502,959 $5,053,451 $5,791,258 $6,671,389 $6,602,126 $6,456,092 $7,118,333 ========== ========== ========== ========== ========== ========== ========== Reserves for fixed annuity contracts..................... $2,100,972 $1,957,116 $1,735,565 $1,562,136 $1,437,488 $1,437,246 $1,508,072 Variable annuity liabilities.... 2,145,196 2,746,685 3,284,507 4,170,275 4,486,703 4,342,313 4,864,463 Other reserves, payables and accrued liabilities........... 88,522 105,694 398,045 495,740 195,846 232,667 213,776 Senior indebtedness............. 40,174 -- -- -- -- -- -- Subordinated notes payable to Parent........................ -- -- 15,500 34,000 34,000 34,000 34,000 Deferred income taxes........... 273 16,536 35,163 38,145 64,567 60,376 60,705 Shareholder's equity............ 127,822 227,420 322,478 371,093 383,522 349,490 437,317 ---------- ---------- ---------- ---------- ---------- ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY.......... $4,502,959 $5,053,451 $5,791,258 $6,671,389 $6,602,126 $6,456,092 $7,118,333 ========== ========== ========== ========== ========== ========== ==========
36 39 - -------------------------------------------------------------------------------- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- The following is management's discussion and analysis of financial condition and results of operations of Anchor National Life Insurance Company (the "Company") for the three years in the period ended September 30, 1994. RESULTS OF OPERATIONS FOR THE FISCAL YEARS 1992, 1993 AND 1994 INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES totaled $44.6 million in 1994, compared with $41.7 million in 1993 and $32.1 million in 1992. The cumulative effect of the change in accounting for income taxes resulting from the implementation of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," amounted to a nonrecurring non-cash charge of $20.4 million in 1994. Accordingly, net income amounted to $24.2 million in 1994. PRETAX INCOME totaled $67.3 million in 1994, $63.5 million in 1993, and $46.1 million in 1992. The $3.8 million improvement in 1994 primarily resulted from increased net investment income and fee income, partially offset by increased net realized investment losses and additional amortization of deferred acquisition costs. In addition, 1993 results include a $4.8 million provision for future guaranty fund assessments. The $17.4 million improvement in 1993 over 1992 primarily resulted from increased net investment income and fee income, partially offset by an increase in amortization of deferred acquisition costs and the provision for future guaranty fund assessments. Net operating results in 1992 also included the segregated net income of subsidiaries sold to affiliates which amounted to $1.3 million in 1992. During 1992, the Company sold its trust services subsidiary, Resources Trust Company, to an affiliate for cash equal to its book value of $9.4 million. Also during 1992, the Company sold its 70.5% interest in Sun Mortgage Acceptance Corporation to an affiliate for cash equal to its book value of $52.8 million. The consolidated financial statements for prior years have been reclassified to segregate the net assets and operating results of these sold subsidiaries. NET INVESTMENT INCOME, which is the spread between the income earned on invested assets and the interest paid on fixed annuities and other interest-bearing liabilities, increased to $59.0 million in 1994 from $48.9 million in 1993 and $36.5 million in 1992. These amounts represent net investment spreads of 3.78% on average invested assets (computed on a daily basis) of $1.56 billion in 1994, 2.86% on average invested assets of $1.71 billion in 1993 and 2.00% on average invested assets of $1.83 billion in 1992. These improvements in net investment income primarily resulted from reductions in interest rates paid on fixed annuities. Investment income totaled $127.8 million in 1994, $137.6 million in 1993 and $156.8 million in 1992. The declines in investment income of $9.8 million in 1994 and $19.2 million in 1993 resulted primarily from lower levels of average invested assets. The yield on average invested assets totaled 8.20% in 1994, 8.05% in 1993 and 8.58% in 1992. The improvement in yield in 1994 primarily resulted from a decrease in the average level of the short-term portfolio, while the decline in yield from 1992 to 1993 was due primarily to lower prevailing interest rates combined with lower relative average levels of high-yield investments. These yields are computed without subtracting net realized investment losses. If net realized investment losses were included in the computation, the yields would be 6.03% in 1994, 6.75% in 1993 and 7.33% in 1992. There can be no assurance that the Company will achieve similar yields in future periods. The Company has enhanced investment yield since 1992 through its use of dollar roll transactions ("Dollar Rolls") whereby the proceeds from sales of mortgage-backed securities ("MBSs") are invested in short-term securities pending the contractual repurchase of substantially the same securities at discounted prices in the forward market. The Company has been able to engage in Dollar 37 40 Rolls due to the market demand for MBSs for formation of collateralized mortgage obligations ("CMOs"), which was particularly high in 1993. The Company recorded $3.7 million of enhanced yield on a weighted average volume of $253.4 million of such transactions during 1994, compared with $5.7 million of enhanced yield on a weighted average volume of $290.1 million during 1993, and $2.2 million of enhanced yield on a weighted average volume of $141.1 million during 1992. The decline in yield enhancement relative to the volume of Dollar Rolls in 1994 is primarily due to a narrowing of market spreads on such transactions. Total interest expense aggregated $68.8 million in 1994, $88.7 million in 1993 and $120.3 million in 1992. The average rate paid on all interest-bearing liabilities fell to 4.56% (4.50% on fixed annuities) in 1994 from 5.29% (5.28% on fixed annuities) in 1993 and 6.54% (6.54% on fixed annuities) in 1992. These declines in rates were primarily due to a decline in prevailing interest rates that began during the latter half of fiscal 1992 and continued into the first half of fiscal 1994. This was reflected in a corresponding decline in the average crediting rate on annuity contracts, the majority of which reprice annually as interest rate guarantees are renewed. Interest-bearing liabilities averaged $1.51 billion during 1994, compared with $1.68 billion during 1993 and $1.84 billion during 1992. NET REALIZED INVESTMENT LOSSES totaled $33.7 million in 1994, $22.2 million in 1993 and $22.7 million in 1992, and include impairment writedowns of $14.2 million in 1994, $37.7 million in 1993 and $38.0 million in 1992. Therefore, net losses from sales of investments totaled $19.5 million in 1994, compared with net gains of $15.5 million in 1993 and $15.3 million in 1992. Net losses in 1994 include $17.3 million of net losses realized on $673.6 million of sales of bonds. These bond sales include approximately $289.3 million of sales of MBSs made primarily to acquire other MBSs that were then used in Dollar Rolls. In addition, bond sales include $118.3 million of sales of high-yield investments and $158.9 million of sales of certain CMOs and asset-backed securities, which were primarily made to maximize total return. Net gains in 1993 include $17.0 million of gains realized on $1.09 billion of sales of bonds. These bond sales include approximately $735.5 million of sales of MBSs made primarily to acquire other MBSs that were then used in Dollar Rolls and $155.1 million of sales of high-yield investments. Net gains in 1992 include $12.0 million of net gains realized on $1.32 billion of sales of bonds. These bond sales include approximately $645.9 million of sales of MBSs made primarily to acquire other MBSs for use in Dollar Rolls and $117.5 million of high-yield investments made primarily to improve the overall credit quality of the portfolio. Impairment writedowns in 1994 of $14.2 million reflect additional provisions applied to bonds, primarily made in response to the adverse impact of declining interest rates on certain MBSs. Impairment writedowns in 1993 include $5.6 million of provisions applied to mortgage loans that were restructured during 1993 and reduced to the aggregate appraised value of the underlying real estate. Impairment writedowns in 1993 also include $30.3 million of additional provisions applied to bonds, including $28.3 million applied to certain interest-only strips ("IOs"). IOs, a type of MBS used as an asset-liability matching tool to hedge against rising interest rates, are investment grade securities that give the holder the right to receive only the interest payments on a pool of underlying mortgage loans. As would be anticipated in a lower interest rate environment, the amortized cost of these IOs became impaired as a result of increased prepayments of the underlying loans. At September 30, 1994, the amortized cost, which is net of impairment writedowns, of the IOs held by the Company was $9.6 million and their fair value was $7.4 million. Impairment writedowns in 1992 include $16.5 million of provisions applied to bonds in response to increased defaults. Impairment writedowns in 1992 also include $20.4 million of provisions applied to the Company's investment in a real estate-related separate account which the Company liquidated on December 31, 1992. VARIABLE ANNUITY FEES are based on the market value of assets supporting variable annuity contracts in separate accounts. Such fees totaled $79.1 million in 1994, $67.2 million in 1993 and 38 41 $57.1 million in 1992. Variable annuity fees have increased over the last three years principally due to asset growth from the receipt of variable annuity premiums and, during 1993, from increased market values. Variable annuity assets averaged $4.40 billion during 1994, $3.64 billion during 1993 and $3.05 billion during 1992. Variable annuity premiums, which exclude premiums allocated to the fixed accounts of variable annuity products, totaled $769.6 million in 1994, $782.5 million in 1993 and $581.3 million in 1992. Total variable annuity product sales, which include premiums allocated to the fixed accounts of variable annuities, aggregated $909.7 million in 1994, $845.5 million in 1993 and $666.9 million in 1992. Though total variable annuity product sales rose modestly in 1994, variable annuity premiums declined, principally due to a rising demand for fixed-rate investment options, including the fixed accounts of variable annuities, as prevailing interest rates increased during the latter half of the 1994 fiscal year. The Company has encountered increased competition in the variable annuity marketplace in 1994 and anticipates that the market will remain highly competitive for the foreseeable future. ASSET MANAGEMENT FEES, which include investment advisory fees and 12b-1 distribution fees, are based on the market value of assets managed in mutual funds and private accounts by SunAmerica Asset Management Corp. Such fees totaled $31.3 million on average assets managed of $2.39 billion in 1994, $32.3 million on average assets managed of $2.46 billion in 1993 and $25.3 million on average assets managed of $2.15 billion in 1992. Asset management fees decreased in 1994 primarily due to a decline in the market value of assets managed and increased redemptions, both a reflection of adverse market conditions for fixed-income and equity securities which can be attributed, in part, to rising interest rates during the latter half of the 1994 fiscal year. Mutual fund sales in 1994 also were affected by these adverse market conditions. Sales of mutual funds, excluding sales of money market funds, totaled $342.6 million in 1994, compared with $532.4 million in 1993 and $827.6 million in 1992. The decline in mutual fund sales during 1993 resulted primarily from the Company's strategic decision to diversify its mutual fund product sales, and to reduce the percentage of sales derived from back-end loaded products. NET RETAINED COMMISSIONS are primarily derived from commissions on the sales of nonproprietary investment products by the Company's broker-dealer subsidiary, after deducting the substantial portion of such commissions that is passed on to registered representatives. Net retained commissions totaled $19.2 million in 1994, $16.9 million in 1993 and $13.2 million in 1992. Sales of nonproprietary products (mainly mutual funds and general securities) totaled $4.91 billion in 1994, $4.61 billion in 1993 and $3.64 billion in 1992. The increases in net retained commissions are not proportionate to the related changes in sales, primarily due to changes in sales mix. SURRENDER CHARGES on fixed and variable annuities totaled $5.0 million in 1994, compared with $5.3 million in 1993 and $7.2 million in 1992. Surrender charges generally are assessed on annuity withdrawals at declining rates during the first five to seven years of the contract. Withdrawal payments, which include surrenders and lump-sum annuity benefits, totaled $723.9 million in 1994, $557.3 million in 1993 and $651.6 million in 1992. Respectively, these payments represent 12.5%, 10.7% and 13.5% of average fixed and variable annuity reserves. Withdrawals include variable annuity payments from the separate accounts totaling $459.1 million in 1994, $314.2 million in 1993 and $306.4 million in 1992. Variable annuity surrenders have increased during 1994 primarily due to surrenders on a closed block of business, policies coming off surrender charge restrictions and increased competition in the marketplace. In addition, fixed annuity surrenders have increased in 1994 due to policies coming off surrender charge restrictions. Management anticipates that withdrawal rates will be reasonably stable for the foreseeable future and the Company's investment portfolio has been structured to provide sufficient liquidity for anticipated withdrawals. PROVISION FOR FUTURE GUARANTY FUND ASSESSMENTS totaled $4.8 million in 1993. No such provision was recorded in 1994 or 1992. Guaranty associations of the states in which the Company sells annuities assess insurance companies to pay policyholder claims relating to insurer insolvencies. This provision represents management's best estimate, based upon available industry data, of the Company's ultimate exposure to future assessments anticipated as a result of certain large insurance 39 42 company failures that occurred during the past few years. Currently, management estimates that the remaining assessments will be primarily paid over the next four years. GENERAL AND ADMINISTRATIVE EXPENSES totaled $52.6 million in 1994, compared with $55.1 million in 1993 and $55.6 million in 1992, and represent 0.8%, 0.9% and 1.0% of average total assets for fiscal years 1994, 1993 and 1992, respectively. General and administrative expenses remain closely controlled through a company-wide cost containment program. AMORTIZATION OF DEFERRED ACQUISITION COSTS increased during the three-year period primarily due to additional variable annuity and mutual fund sales and the subsequent amortization of related deferred commissions and other acquisition costs. Amortization of all deferred acquisition costs totaled $44.0 million in 1994, $30.8 million in 1993 and $18.2 million in 1992. INCOME TAX EXPENSE totaled $22.7 million in 1994, $21.8 million in 1993 and $15.4 million in 1992, representing effective tax rates of 34% in 1994 and 1993 and 33% in 1992. These tax rates reflect the favorable impact of certain affordable housing tax credits. FINANCIAL CONDITION AND LIQUIDITY SHAREHOLDER'S EQUITY increased by $12.4 million to $383.5 million at September 30, 1994 from $371.1 million at September 30, 1993, primarily due to net income of $24.2 million realized during 1994, partially offset by an $11.8 million increase in net unrealized losses on debt and equity securities available for sale. TOTAL ASSETS decreased by $69.3 million to $6.60 billion at September 30, 1994 from $6.67 billion at September 30, 1993, principally due to a decrease in invested assets, partially offset by increases in variable annuity assets. INVESTED ASSETS at year-end totaled $1.63 billion in 1994, compared with $2.09 billion in 1993. The Company managed most of these investments internally. Invested assets declined by $461.0 million during 1994, primarily as a result of a reduction in unsettled trades and dollar-roll positions, as indicated by the $303.5 million decline in amounts payable to brokers for purchases of securities. Invested assets also declined as a consequence of the change in net unrealized losses on debt and equity securities available for sale charged directly to shareholder's equity. The Company's general investment philosophy is to hold fixed maturity assets for long-term investment. Thus, it does not have a trading portfolio. Effective September 30, 1993, the Company adopted Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" and, accordingly, began to carry the portion of its portfolio of bonds, notes and redeemable preferred stocks that is available for sale (the "Available for Sale Portfolio") at estimated fair value. The remaining portion of its portfolio of bonds, notes and redeemable preferred stocks is held for investment and is carried at amortized cost. BONDS, NOTES AND REDEEMABLE PREFERRED STOCKS, including those held for investment and the Available for Sale Portfolio (the "Bond Portfolio"), at September 30, 1994, had an aggregate amortized cost that exceeded its fair value by $77.8 million (including net unrealized losses of $82.2 million on the Available for Sale Portfolio). The fair value of the Bond Portfolio was $1.4 million above its amortized cost at September 30, 1993 (including net unrealized losses of $12.7 million on the Available for Sale Portfolio). The unrealized losses on the Bond Portfolio at September 30, 1994 principally resulted from increases in prevailing interest rates since September 30, 1993 and the corresponding effect on the Bond Portfolio. Approximately $1.28 billion or 99.9% of the Bond Portfolio (at amortized cost) at September 30, 1994 was rated by Standard and Poor's Corporation ("S&P"), Moody's Investors Service ("Moody's") or under comparable statutory rating guidelines established by the National Association of Insurance Commissioners ("NAIC") and implemented by either the NAIC or the Company. At September 30, 1994, approximately $1.14 billion (at amortized cost) was rated investment grade by 40 43 one or both of these agencies or under the NAIC guidelines, including $857.2 million of U.S. government/agency securities and MBSs. At September 30, 1994, the Bond Portfolio included $141.8 million (fair value, $136.4 million) of bonds not rated investment grade by S&P, Moody's or the NAIC. Based on their September 30, 1994 amortized cost, these bonds accounted for 2.13% of the Company's total assets and 8.26% of invested assets. Non-investment grade securities generally provide higher yields and involve greater risks than investment grade securities because their issuers typically are more highly leveraged and more vulnerable to adverse economic conditions than investment grade issuers. In addition, the trading market for these securities is usually more limited than for investment grade securities. The Company intends that its holdings of such securities not exceed current levels, but its policies may change from time to time, including in connection with any possible acquisition. The Company had no material concentrations of non-investment grade securities at September 30, 1994. The table below summarizes the Company's rated bonds by rating classification as of September 30, 1994. RATED BONDS BY RATING CLASSIFICATION (DOLLARS IN THOUSANDS)
ISSUES NOT RATED BY S&P TOTAL (MOODY'S) -------------------------------------- ISSUES RATED BY S&P (MOODY'S) BY NAIC CATEGORY PERCENT - --------------------------------------------- ----------------------------------- OF ESTIMATED NAIC ESTIMATED INVESTED ESTIMATED S&P (MOODY'S) AMORTIZED FAIR CATEGORY AMORTIZED FAIR AMORTIZED ASSETS FAIR CATEGORY(1) COST VALUE (2) COST VALUE COST (3) VALUE - -------------------- ---------- ---------- --------- ---------- ---------- ---------- ---------- ---------- AAA+ to A- (Aaa to A3)....... $683,104 $632,916 1 $248,236 $240,006 $ 931,340 54.29% $ 872,922 BBB+ to BBB- (Baa1 to Baa3).... 75,086 69,750 2 136,262 125,725 211,348 12.32 195,475 BB+ to BB- (Ba1 to Ba3)...... 19,718 18,798 3 23,510 26,099 43,228 2.52 44,897 B+ to B- (B1 to B3)........ 49,977 44,922 4 28,602 26,557 78,579 4.58 71,479 CCC+ to C- (Caa to C)........ 1,906 1,906 5 5,551 5,634 7,457 0.43 7,540 D................... -- -- 6 12,508 12,508 12,508 0.73 12,508 -------- -------- -------- -------- ---------- ---------- Total rated issues............ $829,791 $768,292 $454,669 $436,529 $1,284,460 $1,204,821 ======== ======== ======== ======== ========== ==========
- --------------- (1) S&P rates debt securities in eleven rating categories, from AAA (the highest) to D (in payment default). A plus(+) or minus(-) indicates the debt's relative standing within the rating category. A security rated BBB- or higher is considered investment grade. Moody's rates debt securities in nine rating categories, from Aaa (the highest) to C (extremely poor prospects of attaining real investment standing). The number 1, 2 or 3 (with 1 the highest and 3 the lowest) indicates the debt's relative standing within the rating category. A security rated Baa3 or higher is considered investment grade. Issues are categorized based on the higher of the S&P or Moody's rating if rated by both agencies. (2) Bonds and short-term promissory instruments are divided into six quality categories for NAIC rating purposes, ranging from 1 (highest) to 5 (lowest) for nondefaulted bonds plus one category, 6, for bonds in or near default. These six categories correspond with the S&P (Moody's) rating groups listed above, with categories 1 and 2 considered investment grade. A substantial portion of the assets in the NAIC categories were rated by the Company based on its implementation of NAIC rating guidelines. (3) At amortized cost. 41 44 SENIOR SECURED LOANS ("Secured Loans") are included in the Bond Portfolio and their amortized cost aggregated $99.0 million at September 30, 1994. Secured Loans are primarily originated by money center or investment banks or are originated directly by the Company. Secured Loans are senior to subordinated debt and equity, and virtually all are secured by assets of the issuer. At September 30, 1994, Secured Loans consisted of loans to 13 borrowers spanning 10 industries, with no industry concentration constituting more than 19% of these assets. While the trading market for Secured Loans is more limited than for publicly traded corporate debt issues, management believes that participation in these transactions has enabled the Company to improve its investment yield. The majority of the Company's Secured Loans are not rated by S&P or Moody's. However, 90% of the Secured Loans (at amortized cost) are rated in NAIC categories 1 and 2. Although, as a result of restrictive financial covenants, Secured Loans involve greater risk of technical default than do publicly traded investment grade securities, management believes that generally the risk of loss upon default for its Secured Loans is mitigated by their three-year average lives, financial covenants and senior secured positions. MORTGAGE LOANS aggregated $108.3 million at September 30, 1994 and consisted of 17 first mortgage loans with an average loan balance of approximately $6.4 million, collateralized by properties located in 8 states. Approximately 43% of the portfolio was office, 23% was retail, 19% was hotel and 15% was multifamily residential. At September 30, 1994, approximately 22% of the portfolio was secured by properties located in California, 22% of the portfolio was secured by properties located in New Jersey and approximately 19% of the portfolio was secured by properties located in Colorado. No more than 12% of the portfolio was secured by properties in any other single state. At September 30, 1994, there were no construction, takeout, farm or land loans and there were two loans with outstanding balances of $20 million or more; these loans aggregated approximately 43% of the portfolio. At September 30, 1994, approximately 7% of the mortgage loan portfolio consisted of loans with balloon payments due before October 1, 1997. At September 30, 1994, there were no loans delinquent by more than 90 days. Loans foreclosed upon and transferred to real estate in the balance sheet during fiscal 1994 totaled $2.9 million (2.7% of total mortgages). On September 30, 1994, one mortgage loan having an aggregate carrying value of $12.1 million had been restructured. No mortgage loans were restructured during the 1993 or 1994 fiscal years. Approximately 63% of the mortgage loans in the portfolio at September 30, 1994 were seasoned loans underwritten to the Company's standards and purchased at or near par from another financial institution which was downsizing its portfolio. Such loans generally have higher average interest rates than loans that could be originated today. The balance of the mortgage loan portfolio has been originated by the Company under strict underwriting standards. Commercial mortgage loans on properties such as offices, hotels and shopping centers represent a higher level of risk for the industry than have mortgage loans secured by multifamily residences. This greater risk is due to several factors, including the larger size of such loans, and the effects of general economic conditions on these commercial properties. However, due to the seasoned nature of the Company's mortgage loans and its strict underwriting standards, the Company believes that it has reduced the risk attributable to its mortgage loan portfolio while maintaining attractive yields. OTHER INVESTED ASSETS aggregated $67.2 million at September 30, 1994, including $45.9 million of investments in limited partnerships and an aggregate of $21.3 million of miscellaneous investments, including policy loans, CMO residuals and leveraged leases. The Company's limited partnership interests primarily include partnerships, accounted for by using the cost method of accounting, that invest mainly in equity securities. ASSET-LIABILITY MATCHING is utilized by the Company to minimize the risks of interest rate fluctuations and disintermediation. The Company believes that its fixed-rate liabilities should be backed by a portfolio principally composed of fixed maturities that generate predictable rates of return. The Company does not have a specific target rate of return. Instead, its rates of return vary over time depending on the current interest rate environment, the slope of the yield curve, the spread at which fixed maturities are priced over the yield curve and general competitive conditions within the 42 45 industry. Its portfolio strategy is designed to achieve adequate risk-adjusted returns consistent with its investment objectives of effective asset-liability matching, liquidity and safety. The Company designs its fixed-rate products and conducts its investment operations in order to closely match the duration of the assets in its investment portfolio to its annuity obligations. The Company seeks to achieve a predictable spread between what it earns on its assets and what it pays on its liabilities by investing principally in fixed maturities. The Company's fixed-rate products incorporate surrender charges or other limitations on when contracts can be surrendered for cash to encourage persistency and discourage withdrawals. Approximately 56% of the Company's fixed annuity reserves had surrender penalties or other restrictions at September 30, 1994. As part of its asset-liability matching discipline, the Company conducts detailed computer simulations that model its fixed-maturity assets and liabilities under commonly used stress-test interest rate scenarios. Based on the results of these computer simulations, the investment portfolio has been constructed with a view to maintaining a desired investment spread between the yield on portfolio assets and the rate paid on its reserves under a variety of possible future interest rate scenarios. The cash flow obtained from MBSs helps to maintain the anticipated spread, while providing desired liquidity. At September 30, 1994, the weighted average life of the Company's investments was approximately four years and the portfolio had a duration of approximately three-and-one-fourth years. Weighted average life is defined as the average time to receipt of all principal, incorporating the effects of scheduled amortization and expected prepayments, weighted by book value. Duration is a common measure for the price sensitivity of a fixed-income security or portfolio to changes in interest rates. It is the weighted average time to receipt of all expected cash flows, both principal and interest, including the effects of scheduled amortization and expected prepayments, in which the weight attached to each year of receipt is the proportion of the present value of cash to be received during that year to the total present value of the portfolio. The Company also seeks to provide liquidity, while enhancing its spread income, by using reverse repurchase agreements ("Reverse Repos"), Dollar Rolls and by investing in MBSs. Reverse Repos involve a sale of securities and an agreement to repurchase the same securities at a later date at an agreed upon price and are generally over-collateralized. Dollar Rolls are similar to Reverse Repos except that the repurchase involves securities that are only substantially the same as the securities sold and the arrangement is not collateralized, nor is it governed by a repurchase agreement. MBSs are generally investment grade securities collateralized by large pools of mortgage loans. MBSs generally pay principal and interest monthly. The amount of principal and interest payments may fluctuate as a result of prepayments of the underlying mortgage loans. There are risks associated with some of the techniques the Company uses to enhance its spread income and match its assets and liabilities. The primary risk associated with Dollar Rolls and Reverse Repos is the risk associated with counterparty nonperformance. The Company believes, however, that the counterparties to its Dollar Rolls and Reverse Repos are financially responsible and that the counterparty risk associated with those transactions is minimal. Counterparty risk associated with Dollar Rolls is further mitigated by the Company's participation in an MBS trading clearinghouse. The sell and buy transactions that are submitted to this clearinghouse are marked to market on a daily basis and each participant is required to over-collateralize its net loss position by 30% with either cash, letters of credit or government securities. The primary risk associated with MBSs is that a changing interest rate environment might cause prepayment of the underlying obligations at speeds slower or faster than anticipated at the time of their purchase. INVESTED ASSETS EVALUATION routinely includes a review by the Company of its portfolio of debt securities. Management identifies monthly those investments that require additional monitoring and carefully reviews the carrying value of such investments at least quarterly to determine whether specific investments should be placed on a nonaccrual basis and to determine declines in value that may be other than temporary. In making these reviews for bonds, management principally considers the adequacy of collateral (if any), compliance with contractual covenants, the borrower's recent financial performance, news reports and other externally generated information concerning the 43 46 creditor's affairs. In the case of publicly traded bonds, management also considers market value quotations, if available. For mortgage loans, management generally considers information concerning the mortgaged property and, among other things, factors impacting the current and expected payment status of the loan and, if available, the current fair value of the underlying collateral. The carrying values of bonds that are determined to have declines in value that are other than temporary are reduced to net realizable value and no further accruals of interest are made. Mortgage loan writedowns are based on losses expected by management to be realized on transfers of mortgage loans to real estate, on the disposition and settlement of mortgage loans and on mortgage loans that management believes may not be collectible in full. Accrual of interest is suspended when principal and interest payments on mortgage loans are past due more than 90 days. DEFAULTED INVESTMENTS, comprising all investments (at amortized cost, net of impairment writedowns) that are in default as to the payment of principal or interest, totaled $4.4 million at September 30, 1994, all of which are unsecured non-investment grade bonds. At September 30, 1994, defaulted investments constituted 0.3% of total invested assets at amortized cost and their fair value was equal to their amortized cost. At September 30, 1993, defaulted investments totaled $10.6 million, all of which were unsecured non-investment grade bonds. At September 30, 1993, defaulted investments constituted 0.5% of total invested assets at amortized cost and their fair value totaled $9.3 million. SOURCES OF LIQUIDITY are readily available to the Company in the form of existing cash and short-term investments, Reverse Repo capacity on invested assets and, if required, proceeds from invested asset sales. At September 30, 1994, approximately $257.4 million of the Company's Bond Portfolio had an aggregate unrealized gain of $8.5 million, while approximately $1.03 billion had an aggregate unrealized loss of $86.3 million. In addition, the Company's investment portfolio also currently provides approximately $16.6 million of monthly cash flow from scheduled principal and interest payments. Management is aware that prevailing market interest rates may shift significantly and has strategies in place to manage either an increase or decrease in prevailing rates. In a rising interest rate environment, the Company's average cost of funds would increase over time as it prices its new and renewing annuities to maintain a generally competitive market rate. Management would seek to place new funds in investments that were matched in duration to, and higher yielding than, the liabilities assumed. The Company believes that liquidity to fund withdrawals would be available through incoming cash flow, the sale of short-term or floating-rate instruments or Reverse Repos on the Company's substantial MBS segment of the Bond Portfolio, thereby avoiding the sale of fixed-rate assets in an unfavorable bond market. In a declining rate environment, the Company's cost of funds would decrease over time, reflecting lower interest crediting rates on its fixed annuities. Should increased liquidity be required for withdrawals, the Company believes that a significant portion of its investments could be sold without adverse consequences in light of the general strengthening that would be expected in the bond market. RESULTS OF OPERATIONS FOR THE FIRST NINE MONTHS OF FISCAL 1995 INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES totaled $31.6 million for the first nine months of 1995 ("Fiscal 1995"), compared with $33.4 million for the first nine months of 1994 ("Fiscal 1994"). The cumulative effect of the change in accounting for income taxes resulting from the implementation of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," amounted to a nonrecurring non-cash charge of $20.5 million in the first quarter of fiscal 1994. Accordingly, net income amounted to $12.9 in Fiscal 1994. PRETAX INCOME totaled $49.2 million in Fiscal 1995, compared with $51.1 million in Fiscal 1994. The $1.9 million decrease in Fiscal 1995 primarily resulted from increases in amortization of deferred acquisition costs and general and administrative expenses, and a decline in net investment income, all of which were partially offset by a decline in net realized investment losses. 44 47 NET INVESTMENT INCOME decreased to $38.7 million in Fiscal 1995 from $43.1 million in Fiscal 1994. These amounts represent net investment spreads of 3.17% on average invested assets (computed on a daily basis) of $1.63 billion in Fiscal 1995 and 3.67% on average invested assets of $1.56 billion in Fiscal 1994. This decline primarily resulted from declines in investment yield and an increase in the average rate paid on fixed annuities. INVESTMENT INCOME totaled $94.5 million in Fiscal 1995, compared with $95.2 million in Fiscal 1994. This $0.7 million decline resulted from decreased investment yields, as the yield on average invested assets decreased to 7.73% in Fiscal 1995 from 8.12% in Fiscal 1994. Yields are computed without subtracting net realized investment losses. If net realized investment losses were included in the computation, the yields would be 7.01% in Fiscal 1995 and 5.88% in Fiscal 1994. There can be no assurance that the Company will achieve similar yields in future periods. The decline in investment yield in Fiscal 1995 was primarily due to lower contributions from the Company's investment in partnerships compared with Fiscal 1994. Partnership income in Fiscal 1995 totaled $4.8 million, compared with $8.2 million in Fiscal 1994. This income represents a yield of 13.18% on average investments in partnerships of $48.5 million in Fiscal 1995, compared with a yield of 28.77% on average investments in partnerships of $37.8 million in Fiscal 1994. The Company continues to enhance investment yield through its use of Dollar Rolls; however, their use did not have a significant impact on investment income in Fiscal 1995. Total interest expense aggregated $55.8 million in Fiscal 1995, compared with $52.1 million in Fiscal 1994. The average rate paid on all interest-bearing liabilities increased to 4.88% in Fiscal 1995 from 4.58% in Fiscal 1994. Interest-bearing liabilities averaged $1.52 billion in both Fiscal 1995 and Fiscal 1994. The increases in the average rate paid on all interest-bearing liabilities primarily resulted from increased average crediting rates on the Company's fixed annuity contracts. Average fixed annuity crediting rates were 4.83% in Fiscal 1995 and 4.52% in Fiscal 1994. During 1995, the Company increased its average crediting rates on fixed annuity contracts relative to those issued in the comparable 1994 periods to maintain a generally competitive market rate. This increase was reflected in a corresponding increase in the average crediting rate on fixed annuity contracts, the majority of which reprice annually as interest rate guarantees are renewed. NET REALIZED INVESTMENT LOSSES totaled $8.9 million in Fiscal 1995, compared with $26.2 million in Fiscal 1994 and include impairment writedowns of bonds of $3.8 million and $14.2 million, respectively. Therefore, for the nine months net losses from sales of investments totaled $5.1 million in Fiscal 1995 and $12.0 million in Fiscal 1994. Net losses in Fiscal 1995 include $9.2 million of net losses realized on $518.2 million of sales of bonds. These bond sales include sales of certain CMOs and asset-backed securities, U.S. Treasury securities, high yield investments and MBSs, all of which were primarily made to maximize total return. Net losses in Fiscal 1994 include $11.6 million of net losses realized on $563.0 million of sales of bonds. These bond sales include sales of MBSs made primarily to acquire other MBSs that were then used in Dollar Rolls. In addition, bond sales include sales of high-yield investments primarily made to improve the overall credit quality of the portfolio. VARIABLE ANNUITY FEES totaled $61.2 million in Fiscal 1995, compared with $58.9 million in Fiscal 1994. Variable annuity assets averaged $4.50 billion during Fiscal 1995, compared with $4.38 billion during Fiscal 1994. Variable annuity premiums, which exclude premiums allocated to the fixed accounts of variable annuity products, aggregated $485.1 million since June 30, 1994. Variable annuity premiums declined to $362.5 million in Fiscal 1995 from $647.0 million in Fiscal 1994. ASSET MANAGEMENT FEES totaled $20.4 million on average assets managed of $2.07 billion in Fiscal 1995, compared with $24.0 million on average assets managed of $2.44 billion in Fiscal 1994. 45 48 Sales of mutual funds, excluding sales of money market funds, totaled $100.0 million in Fiscal 1995, compared with $302.2 million in Fiscal 1994. NET RETAINED COMMISSIONS totaled $16.1 million in Fiscal 1995, compared with $14.3 million in Fiscal 1994. Broker-dealer sales (mainly mutual funds and general securities) totaled $3.80 billion in Fiscal 1995, compared with $3.87 billion in Fiscal 1994. Net retained commissions are not proportionate to sales primarily due to differences in sales mix. SURRENDER CHARGES on fixed and variable annuities totaled $4.6 million in Fiscal 1995 and $3.8 million in Fiscal 1994. Withdrawal payments, which include surrenders and lump-sum annuity benefits, totaled $677.0 million in Fiscal 1995 and $533.5 million in Fiscal 1994, and respectively represent 14.9% and 12.3% of average fixed and variable annuity reserves. Withdrawals include variable annuity payments from the separate accounts totaling $467.7 million in Fiscal 1995 and $334.5 million in Fiscal 1994. Variable annuity surrenders have increased primarily due to surrenders on a closed block of business, policies coming off surrender charge restrictions and increased competition in the marketplace. In addition, fixed annuity surrenders have increased in Fiscal 1995 largely due to policies coming off surrender charge restrictions. Management anticipates that withdrawal rates will remain relatively stable for the foreseeable future and the Company's investment portfolio has been structured to provide sufficient liquidity for anticipated withdrawals. GENERAL AND ADMINISTRATIVE EXPENSES totaled $42.3 million in Fiscal 1995, compared with $39.0 million in Fiscal 1994. General and administrative expenses in Fiscal 1995 include expenses related to a national advertising campaign to increase the Company's brand name awareness. General and administrative expenses remain closely controlled through a company-wide cost containment program and represent approximately 1% of average total assets. AMORTIZATION OF DEFERRED ACQUISITION COSTS increased from that recorded during Fiscal 1994 primarily due to additional fixed and variable annuity and mutual fund sales and the subsequent amortization of related deferred commissions and other acquisition costs. Amortization also has been impacted by a reduction in net realized capital losses and increases in mutual fund redemptions. Amortization of all deferred acquisition costs totaled $40.6 million in Fiscal 1995 and $31.1 million in Fiscal 1994. INCOME TAX EXPENSE totaled $17.7 million in Fiscal 1995, compared with $17.6 million in Fiscal 1994, representing effective tax rates of 36% and 35%, respectively. FINANCIAL CONDITION AND LIQUIDITY AT JUNE 30, 1995 SHAREHOLDER'S EQUITY increased by $53.8 million to $437.3 million at June 30, 1995 from $383.5 million at September 30, 1994. This increase primarily reflects $31.6 million of net income and a $22.2 million decrease in net unrealized losses on debt and equity securities available for sale charged directly to shareholder's equity. TOTAL ASSETS increased by $516.2 million to $7.12 billion at June 30, 1995 from $6.60 billion at September 30, 1994, principally due to a $377.8 million increase in the separate account for variable annuities and a $172.9 million increase in invested assets. INVESTED ASSETS at June 30, 1995 totaled $1.80 billion, compared with $1.63 billion at September 30, 1994. This $172.9 million increase primarily resulted from a $74.5 million decrease in net unrealized losses on debt and equity securities available for sale and a $100.7 million net increase in invested assets fueled by sales of fixed annuities and guaranteed investment contracts. The Bond Portfolio at June 30, 1995 had a fair value that exceeded its aggregate amortized cost by $0.1 million (including net unrealized losses of $7.2 million on the Available for Sale Portfolio). The aggregate amortized cost of the Bond Portfolio was $77.8 million above its fair value at September 30, 1994 (including net unrealized losses of $82.2 million on the Available for Sale Portfolio). The decrease in net unrealized losses on the Bond Portfolio since September 30, 1994 46 49 principally resulted from a decrease in prevailing long-term interest rates and the corresponding effect on the fair value of the Bond Portfolio. Approximately $1.38 billion or 99.9% of the Bond Portfolio (at amortized cost) at June 30, 1995 was rated by S&P, Moody's or under comparable statutory rating guidelines established by the NAIC and implemented by either the NAIC or the Company. At June 30, 1995, approximately $1.24 billion (at amortized cost) was rated investment grade by one or both of these agencies or under the NAIC guidelines, including $969.8 million of U.S. government/agency securities and MBSs. At June 30, 1995, the Bond Portfolio included $144.1 million (fair value, $144.5 million) of bonds not rated investment grade by S&P, Moody's or the NAIC. Based on their June 30, 1995 amortized cost, these bonds accounted for 2.02% of the Company's total assets and 7.91% of invested assets. Defaulted Investments, comprising all investments (at amortized cost) that are in default as to the payment of principal or interest, totaled $0.5 million at June 30, 1995 and $4.4 million at September 30, 1994. At June 30, 1995, defaulted investments constituted 0.02% of total invested assets at amortized cost and their fair value was equal to their amortized cost. At September 30, 1994, defaulted investments constituted 0.3% of total invested assets at amortized cost and their fair value was equal to their amortized cost. SOURCES OF LIQUIDITY continue to be readily available to the Company in the form of existing cash and short-term investments, Reverse Repo capacity on invested assets and, if required, proceeds from invested asset sales. At June 30, 1995, approximately $829.2 million of the Company's Bond Portfolio had an aggregate unrealized gain of $35.2 million, while approximately $556.7 million had an aggregate unrealized loss of $35.1 million. In addition, the Company's investment portfolio also currently provides approximately $18.1 million of monthly cash flow from scheduled principal and interest payments. The Company has undertaken to dispose of $55.8 million of certain of its real estate investments located in the Phoenix, Arizona metropolitan area during the next one to two years, either to affiliated or nonaffiliated parties, and SunAmerica Inc., the ultimate parent, has guaranteed that the Company will receive its statutory carrying value of these assets. - -------------------------------------------------------------------------------- PROPERTIES - -------------------------------------------------------------------------------- The Company's principal office is in leased premises at 1 SunAmerica Center, Los Angeles, California. The Company, through an affiliate, also leases office space in Torrance, California which is utilized for certain recordkeeping and data processing functions. The Company's broker-dealer and asset management subsidiaries lease offices in New York, New York. The Company believes that such properties, including the equipment located therein, are suitable and adequate to meet the requirements of its businesses. 47 50 - -------------------------------------------------------------------------------- DIRECTORS AND EXECUTIVE OFFICERS - -------------------------------------------------------------------------------- The directors and principal officers of Anchor National Life Insurance Company (the "Company") as of June 30, 1995 are listed below, together with information as to their ages, dates of election and principal business occupation during the last five years (if other than their present business occupation).
OTHER POSITIONS AND YEAR OTHER BUSINESS PRESENT ASSUMED EXPERIENCE WITHIN NAME AGE POSITION(S) POSITION(S) LAST FIVE YEARS** FROM-TO ---- --- ----------- ----------- ------------------- ------- Eli Broad* 62 Chairman, Chief Executive 1994 Cofounded SunAmerica Inc. Officer and President of the ("SAI") in 1957 Company Chairman, Chief Executive 1986 Officer and President of SAI Jay S. Wintrob* 38 Executive Vice President of 1991 Senior Vice President 1989-1991 the Company and SAI (Joined SAI in 1987) James R. Belardi* 38 Senior Vice President and 1992 Vice President and Treasurer 1989-1992 Treasurer of the Company and (Joined SAI in 1986) SAI Jana W. Greer* 43 Senior Vice President of the 1994 Vice President (Joined SAI in 1981-1991 Company and SAI 1974) Peter McMillan, III* 38 Executive Vice President and 1994 Senior Vice President, 1989-1994 Chief Investment Officer of SunAmerica Investments, Inc. SunAmerica Investments, Inc. Gary W. Krat* 48 Senior Vice President of the 1992 Chairman, Royal Alliance 1991 to present Company and SAI Associates, Inc. Chief Executive Officer, 1990 to present Royal Alliance Associates, Inc. President, Integrated 1986-1990 Resources Equity Corp. Scott L. Robinson* 49 Senior Vice President of the 1991 Vice President and Controller 1986-1991 Company and Senior Vice (Joined SAI in 1978) President and Controller of SAI Lorin M. Fife* 42 Senior Vice President and 1994 Vice President and Associate 1989-1994 General Counsel of the General Counsel of SAI Company and Vice President (Joined SAI in 1989) and General Counsel -- Regulatory Affairs of SAI Susan L. Harris* 38 Senior Vice President and 1994 Vice President, Associate 1989-1994 Secretary of the Company and General Counsel and Secretary Vice President, General of SAI (Joined SAI in 1985) Counsel -- Corporate Affairs and Secretary of SAI N. Scott Gillis 42 Senior Vice President and 1994 Vice President and 1989-1994 Controller of the Company Controller, SunAmerica Life Companies (Joined SAI in 1985) Edwin Reoliquio 38 Senior Vice President and 1995 Vice President and Actuary, 1990-1995 Actuary of the Company SunAmerica Life Companies
- --------------- * Also serves as a director ** Unless otherwise indicated, officers and positions are with SunAmerica Inc. 48 51 - -------------------------------------------------------------------------------- EXECUTIVE COMPENSATION - -------------------------------------------------------------------------------- All of the executive officers of the Company also serve as employees of SunAmerica Inc. or its affiliates and receive no compensation directly from the Company. Some of the officers also serve as officers of other companies affiliated with the Company. Allocations have been made as to each individual's time devoted to his or her duties as an executive officer of the Company. The following table shows the cash compensation paid or earned, based on these allocations, to the chief executive officer and top four executive officers of the Company whose allocated compensation exceeds $100,000 and to all executive officers of the Company as a group for services rendered in all capacities in the Company during 1994:
NAME OF INDIVIDUAL OR CAPACITIES IN ALLOCATED CASH NUMBER IN GROUP WHICH SERVED COMPENSATION --------------------- ------------- -------------- Eli Broad..................... Chairman, Chief Executive $ 906,341 Officer and President Jay S. Wintrob................ Executive Vice President 527,357 Gary W. Krat.................. Senior Vice President 287,192 James R. Belardi.............. Senior Vice President and 199,581 Treasurer Clark P. Manning, Jr. ........ Former Senior Vice President 188,946 and Actuary All Executive Officers as a Group (10).................. $2,823,262
Directors of the Company who are also employees of SunAmerica Inc. or its affiliates receive no compensation in addition to their compensation as employees of SunAmerica Inc. or its affiliates. No shares of the Company are owned by any executive officer or director. The Company is an indirect wholly-owned subsidiary of SunAmerica Inc. Except for Mr. Broad, the percentage of shares of SunAmerica Inc. beneficially owned by any director does not exceed one percent of the class outstanding. At August 31, 1995, Mr. Broad was the beneficial owner of 1,162,024 shares of Common Stock (approximately 3.9% of the class outstanding) and 5,914,212 shares of Class B Common Stock (approximately 86.7% of the class outstanding). Of the Common Stock, 93,084 shares represent restricted shares granted under the Company's employee stock plans as to which Mr. Broad has no investment power; 337,500 shares are held by a trust formed by Mr. Broad of which he is a beneficiary; and 692,900 shares represent employee stock options held by Mr. Broad and as to which he has no voting or investment power. Of the Class B Stock, 562,500 shares are held by a trust formed by Mr. Broad of which he is a beneficiary; 21,712 shares are held by a foundation of which Mr. Broad is a director and as to which he has shared voting and investment power; and 1,935,000 shares are registered in the name of a corporation as to which Mr. Broad exercises voting and investment power. At August 31, 1995, all directors and officers as a group beneficially owned 2,141,818 shares of Common Stock (approximately 7.2% of the class outstanding) and 5,914,212 shares of Class B Common Stock (approximately 86.7% of the class outstanding). - -------------------------------------------------------------------------------- STATE REGULATION - -------------------------------------------------------------------------------- The Company is subject to regulation and supervision by the states in which it is authorized to transact business. State insurance laws establish supervisory agencies with broad administrative and supervisory powers related to granting and revoking licenses to transact business, regulating marketing and other trade practices, operating guaranty associations, licensing agents, approving policy forms, regulating certain premium rates, regulating insurance holding company systems, establishing reserve requirements, prescribing the form and content of required financial statements and reports, 49 52 performing financial and other examinations, determining the reasonableness and adequacy of statutory capital and surplus, regulating the type and amount of investments permitted, limiting the amount of dividends that can be paid without first obtaining regulatory approval and other related matters. In recent years, the insurance regulatory framework has been placed under increased scrutiny by various states, the federal government and the NAIC. Various states have considered or enacted legislation that changes, and in many cases increases, the states' authority to regulate insurance companies. Legislation has been introduced from time to time in Congress that could result in the federal government assuming some role in the regulation of insurance companies. The NAIC has recently approved and recommended to the states for adoption and implementation several regulatory initiatives designed to reduce the risk of insurance company insolvencies. These initiatives include new investment reserve requirements, risk-based capital standards and restrictions on an insurance company's ability to pay dividends to its stockholders. A committee is also currently developing model laws to govern insurance company investments for adoption by the NAIC. Current proposals are still being debated and the Company is monitoring developments in this area and the effects any change would have on the Company. SunAmerica Asset Management is registered with the Securities and Exchange Commission (the "Commission") as a registered investment adviser under the Investment Advisers Act of 1940. The mutual funds that it markets are subject to regulation under the Investment Company Act of 1940. SunAmerica Asset Management and the mutual funds are subject to regulation and examination by the Commission. In addition, variable annuities and the related separate accounts of the Company are subject to regulation by the Commission under the Securities Act of 1933 and the Investment Company Act of 1940. The Company's broker-dealer subsidiary is subject to regulation and supervision by the states in which it transacts business, as well as by the National Association of Securities Dealers, Inc. (the "NASD"). The NASD has broad administrative and supervisory powers relative to all aspects of business and may examine the subsidiary's business and accounts at any time. - -------------------------------------------------------------------------------- CUSTODIAN - -------------------------------------------------------------------------------- Chase Manhattan Bank, N.A., One Chase Manhattan Plaza, New York, New York 10081, serves as the custodian of the assets of the Separate Account. - -------------------------------------------------------------------------------- LEGAL PROCEEDINGS - -------------------------------------------------------------------------------- There are no pending legal proceedings affecting the Separate Account. The Company and its subsidiaries are engaged in various kinds of routine litigation which, in management's judgment, is not of material importance to their respective total assets or material with respect to the Separate Account. 50 53 - -------------------------------------------------------------------------------- REGISTRATION STATEMENTS - -------------------------------------------------------------------------------- Registration statements have been filed with the Commission under the Securities Act of 1933, as amended, with respect to the Contracts offered by this prospectus. This prospectus does not contain all the information set forth in the registration statements and the exhibits filed as part of the registration statements, to all of which reference is hereby made for further information concerning the Separate Account, the General Account, the Company, the Underlying Funds, the Contracts and the Certificates. Statements found in this prospectus as to the terms of the Contracts, the Certificates and other legal instruments are summaries, and reference is made to such instruments as filed. - -------------------------------------------------------------------------------- INDEPENDENT ACCOUNTANTS - -------------------------------------------------------------------------------- The consolidated financial statements of the Company as of September 30, 1994 and 1993 and for each of the three years in the period ended September 30, 1994 included in this prospectus have been so included in reliance on the report of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. - -------------------------------------------------------------------------------- ADDITIONAL INFORMATION ABOUT THE SEPARATE ACCOUNT - -------------------------------------------------------------------------------- Additional information concerning the operations of the Separate Account is contained in a Statement of Additional Information, which is available without charge upon written request addressed to the Company at its Annuity Service Center, P.O. Box 54299, Los Angeles, California 90054-0299 or (800) 90-VISTA. The contents of the Statement of Additional Information are tabulated below. STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS
PAGE ---- Performance Data...................................................................... 3 Annuity Unit Values; Annuity Payments................................................. 5 Distribution of Contracts............................................................. 7 Financial Statements.................................................................. 7
- -------------------------------------------------------------------------------- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- The consolidated financial statements of the Company which are included in this prospectus should be considered only as bearing on the ability of the Company to meet its obligations with respect to amounts allocated to the General Account and with respect to the Death Benefit and the Company's assumption of the mortality and expense risks. They should not be considered as bearing on the investment performance of the Underlying Fund shares held in the Portfolios of the Separate Account. The value of the interests of Owners, Participants, Annuitants, payees and Beneficiaries under the variable portion of the Contracts is affected primarily by the investment results of the Underlying Funds. 51 54 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholder of Anchor National Life Insurance Company In our opinion, the accompanying consolidated balance sheet and the related consolidated income statement and statement of cash flows present fairly, in all material respects, the financial position of Anchor National Life Insurance Company and its subsidiaries at September 30, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 1994, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Note 8, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," in fiscal 1994. Price Waterhouse LLP Los Angeles, California November 9, 1994 52 55 ANCHOR NATIONAL LIFE INSURANCE COMPANY CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, SEPTEMBER 30, JUNE 30, 1993 1994 1995 -------------- -------------- -------------- (UNAUDITED) ASSETS Investments: Cash and short-term investments............ $ 500,624,000 $ 157,438,000 $ 206,766,000 Bonds, notes and redeemable preferred stocks: Available for sale, at fair value (amortized cost: September 1993, $1,098,439,000; September 1994, $1,108,271,000; June 1995, $1,226,185,000)....................... 1,085,695,000 1,026,120,000 1,219,010,000 Held for investment, at amortized cost (fair value: September 1993, $225,057,000; September 1994, $180,274,000; June 1995, $167,050,000)......................... 210,878,000 175,885,000 159,726,000 Mortgage loans............................. 112,493,000 108,332,000 93,728,000 Common stocks, at fair value (cost: September 1993, $6,450,000; September 1994, $8,789,000; June 1995, $7,645,000)............................. 5,964,000 7,550,000 5,940,000 Real estate................................ 118,108,000 89,539,000 55,798,000 Other invested assets...................... 59,338,000 67,208,000 63,986,000 -------------- -------------- -------------- Total investments.......................... 2,093,100,000 1,632,072,000 1,804,954,000 Variable annuity assets...................... 4,170,275,000 4,486,703,000 4,864,463,000 Accrued investment income.................... 16,255,000 17,565,000 19,927,000 Deferred acquisition costs................... 336,677,000 416,289,000 379,113,000 Other assets................................. 55,082,000 49,497,000 49,876,000 -------------- -------------- -------------- TOTAL ASSETS................................. $6,671,389,000 $6,602,126,000 $7,118,333,000 ============== ============== ============== LIABILITIES AND SHAREHOLDER'S EQUITY Reserves, payables and accrued liabilities: Reserves for fixed annuity contracts....... $1,562,136,000 $1,437,488,000 $1,508,072,000 Reserves for guaranteed investment contracts............................... -- -- 30,155,000 Payable to brokers for purchases of securities.............................. 428,167,000 124,624,000 82,521,000 Income taxes currently payable............. 5,772,000 12,331,000 29,729,000 Other liabilities.......................... 61,801,000 58,891,000 71,371,000 -------------- -------------- -------------- Total reserves, payables and accrued liabilities............................. 2,057,876,000 1,633,334,000 1,721,848,000 -------------- -------------- -------------- Variable annuity liabilities................. 4,170,275,000 4,486,703,000 4,864,463,000 -------------- -------------- -------------- Subordinated notes payable to Parent......... 34,000,000 34,000,000 34,000,000 -------------- -------------- -------------- Deferred income taxes........................ 38,145,000 64,567,000 60,705,000 -------------- -------------- -------------- Shareholder's equity: Common Stock............................... 3,511,000 3,511,000 3,511,000 Additional paid-in capital................. 252,876,000 252,876,000 252,876,000 Retained earnings.......................... 127,936,000 152,088,000 183,647,000 Net unrealized losses on debt and equity securities available for sale........... (13,230,000) (24,953,000) (2,717,000) -------------- -------------- -------------- Total shareholder's equity................. 371,093,000 383,522,000 437,317,000 -------------- -------------- -------------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY... $6,671,389,000 $6,602,126,000 $7,118,333,000 ============== ============== ==============
The accompanying notes are an integral part of these consolidated financial statements. 53 56 ANCHOR NATIONAL LIFE INSURANCE COMPANY CONSOLIDATED INCOME STATEMENT
NINE MONTHS ENDED YEARS ENDED SEPTEMBER 30, JUNE 30, ------------------------------------------- --------------------------- 1992 1993 1994 1994 1995 ------------- ------------ ------------ ------------ ------------ (UNAUDITED) Investment income........................... $ 156,805,000 $137,591,000 $127,758,000 $ 95,207,000 $ 94,466,000 ------------- ------------ ------------ ------------ ------------ Interest expense on: Fixed annuity contracts................... (119,781,000) (87,479,000) (66,311,000) (50,358,000) (53,768,000) Guaranteed investment contracts........... -- -- -- -- (160,000) Senior indebtedness....................... (134,000) (34,000) (71,000) (3,000) (16,000) Subordinated notes payable to Parent...... (391,000) (1,166,000) (2,380,000) (1,785,000) (1,812,000) ------------- ------------ ------------ ------------ ------------ Total interest expense.................... (120,306,000) (88,679,000) (68,762,000) (52,146,000) (55,756,000) ------------- ------------ ------------ ------------ ------------ NET INVESTMENT INCOME....................... 36,499,000 48,912,000 58,996,000 43,061,000 38,710,000 ------------- ------------ ------------ ------------ ------------ NET REALIZED INVESTMENT LOSSES.............. (22,749,000) (22,247,000) (33,713,000) (26,180,000) (8,874,000) ------------- ------------ ------------ ------------ ------------ Fee income: Variable annuity fees..................... 57,050,000 67,222,000 79,101,000 58,865,000 61,175,000 Asset management fees..................... 25,269,000 32,293,000 31,302,000 24,017,000 20,399,000 Net retained commissions.................. 13,163,000 16,928,000 19,180,000 14,344,000 16,139,000 ------------- ------------ ------------ ------------ ------------ TOTAL FEE INCOME............................ 95,482,000 116,443,000 129,583,000 97,226,000 97,713,000 ------------- ------------ ------------ ------------ ------------ Other income and expenses: Surrender charges......................... 7,201,000 5,306,000 5,034,000 3,806,000 4,610,000 General and administrative expenses....... (55,615,000) (55,142,000) (52,636,000) (38,955,000) (42,255,000) Provision for future guaranty fund assessments............................. -- (4,800,000) -- -- -- Amortization of deferred acquisition costs................................... (18,224,000) (30,825,000) (43,992,000) (31,148,000) (40,554,000) Other, net................................ 3,540,000 5,865,000 4,048,000 3,240,000 (132,000) ------------- ------------ ------------ ------------ ------------ TOTAL OTHER INCOME AND EXPENSES............. (63,098,000) (79,596,000) (87,546,000) (63,057,000) (78,331,000) ------------- ------------ ------------ ------------ ------------ PRETAX INCOME............................... 46,134,000 63,512,000 67,320,000 51,050,000 49,218,000 Income tax expense.......................... (15,361,000) (21,794,000) (22,705,000) (17,640,000) (17,659,000) ------------- ------------ ------------ ------------ ------------ INCOME FROM CONTINUING OPERATIONS........... 30,773,000 41,718,000 44,615,000 33,410,000 31,559,000 Net income of subsidiaries sold to affiliates, net of income taxes of $751,000.................................. 1,312,000 -- -- -- -- ------------- ------------ ------------ ------------ ------------ INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES............... 32,085,000 41,718,000 44,615,000 33,410,000 31,559,000 Cumulative effect of change in accounting for income taxes.......................... -- -- (20,463,000) (20,463,000) -- ------------- ------------ ------------ ------------ ------------ NET INCOME.................................. $ 32,085,000 $ 41,718,000 $ 24,152,000 $ 12,947,000 $ 31,559,000 ============= ============ ============ ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 54 57 ANCHOR NATIONAL LIFE INSURANCE COMPANY CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED YEARS ENDED SEPTEMBER 30, JUNE 30, --------------------------------------------------- ----------------------------- 1992 1993 1994 1994 1995 --------------- --------------- --------------- ------------- ------------- (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net income.......................... $ 32,085,000 $ 41,718,000 $ 24,152,000 $ 12,947,000 $ 31,559,000 Adjustments to reconcile net income to net cash provided by operating activities: Interest credited to: Fixed annuity contracts......... 119,781,000 87,479,000 66,311,000 50,358,000 53,768,000 Guaranteed investment contracts.................... -- -- -- -- 160,000 Net realized investment losses.... 22,749,000 22,247,000 33,713,000 26,180,000 8,874,000 Accretion of net discounts on investments..................... (14,090,000) (9,149,000) (2,050,000) (678,000) (5,947,000) Amortization of goodwill.......... 1,173,000 1,167,000 1,169,000 876,000 876,000 Provision for deferred income taxes........................... 18,779,000 2,982,000 19,395,000 17,283,000 (15,836,000) Cumulative effect of change in accounting for income taxes..... -- -- 20,463,000 20,463,000 -- Change in: Deferred acquisition costs........ (62,072,000) (48,413,000) (34,612,000) (30,772,000) (3,124,000) Other assets.................... 384,000 3,017,000 5,133,000 (2,047,000) (1,256,000) Income taxes receivable/payable........... (2,408,000) 23,479,000 6,559,000 (964,000) 17,398,000 Other liabilities............... (6,199,000) 11,596,000 46,000 285,000 (1,198,000) Other, net........................ 5,553,000 466,000 (950,000) (891,000) (2,336,000) --------------- --------------- --------------- ------------- ------------- NET CASH PROVIDED BY OPERATING ACTIVITIES.......................... 115,735,000 136,589,000 139,329,000 93,040,000 82,938,000 --------------- --------------- --------------- ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Premium receipts on: Fixed annuity contracts........... 86,577,000 63,796,000 140,741,000 84,248,000 210,264,000 Guaranteed investment contracts... -- -- -- -- 30,000,000 Net exchanges to (from) the fixed accounts of variable annuity contracts......................... (46,361,000) (45,516,000) (29,286,000) (36,500,000) 40,989,000 Withdrawal payments on: Fixed annuity contracts........... (345,955,000) (245,250,000) (267,197,000) (200,331,000) (209,358,000) Guaranteed investment contracts... -- -- -- -- (5,000) Claims and annuity payments on fixed annuity contracts................. (35,593,000) (33,938,000) (31,146,000) (23,538,000) (25,104,000) Net increase in subordinated notes payable to Parent................. 15,500,000 18,500,000 -- -- -- Net receipts from (repayments of) other short-term financings....... 243,589,000 38,857,000 (171,115,000) (141,340,000) (51,496,000) Capital contributions received...... 80,000,000 -- -- -- -- --------------- --------------- --------------- ------------- ------------- NET CASH USED BY FINANCING ACTIVITIES.......................... (2,243,000) (203,551,000) (358,003,000) (317,461,000) (4,710,000) --------------- --------------- --------------- ------------- -------------
55 58 ANCHOR NATIONAL LIFE INSURANCE COMPANY CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
NINE MONTHS ENDED YEARS ENDED SEPTEMBER 30, JUNE 30, --------------------------------------------------- ----------------------------- 1992 1993 1994 1994 1995 --------------- --------------- --------------- ------------- ------------- (UNAUDITED) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of: Bonds, notes and redeemable pre- ferred stocks available for sale............................ $ -- $(1,254,755,000) $(1,197,743,000) $(936,638,000) $(678,324,000) Bonds, notes and redeemable pre- ferred stocks held for investment...................... -- -- (209,000) (209,000) -- Other bonds, notes and redeemable preferred stocks................ (1,478,405,000) (64,167,000) -- -- -- Mortgage loans.................... (9,530,000) (39,100,000) (10,666,000) (10,666,000) -- Investment in real estate separate account......................... (10,152,000) -- -- -- -- Other investments, excluding short-term investments.......... (11,196,000) (31,674,000) (26,108,000) (19,759,000) (11,086,000) Sales of: Bonds, notes and redeemable pre- ferred stocks available for sale............................ -- 874,966,000 877,068,000 751,420,000 478,051,000 Other bonds, notes and redeemable preferred stocks................ 1,272,255,000 106,142,000 -- -- -- Real estate....................... 38,729,000 38,333,000 33,443,000 33,443,000 36,821,000 Other investments, excluding short-term investments.......... 41,119,000 21,616,000 2,353,000 2,269,000 4,623,000 Redemptions and maturities of: Bonds, notes and redeemable pre- ferred stocks available for sale............................ -- 160,035,000 139,691,000 112,674,000 95,781,000 Bonds, notes and redeemable pre- ferred stocks held for investment...................... -- -- 34,072,000 25,924,000 18,682,000 Other bonds, notes and redeemable preferred stocks................ 261,710,000 259,860,000 -- -- -- Investment in real estate separate account......................... -- 92,130,000 -- -- -- Mortgage loans.................... 10,441,000 17,614,000 10,087,000 11,305,000 14,834,000 Other investments, excluding short-term investments.......... 8,260,000 6,962,000 13,500,000 13,461,000 11,718,000 Payment of holdback liability for 1990 purchase of annuity business.......................... -- (14,250,000) -- -- -- Net receipts from sales of subsidiaries...................... 62,165,000 -- -- -- -- Dividends and returns of capital received from subsidiaries sold to an affiliate........................ 4,400,000 -- -- -- -- --------------- --------------- --------------- ------------- ------------- NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES.......................... 189,796,000 173,712,000 (124,512,000) (16,776,000) (28,900,000) --------------- --------------- --------------- ------------- ------------- NET INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS.............. 303,288,000 106,750,000 (343,186,000) (241,197,000) 49,328,000 CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF PERIOD................. 90,586,000 393,874,000 500,624,000 500,624,000 157,438,000 --------------- --------------- --------------- ------------- ------------- CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD........................... $ 393,874,000 $ 500,624,000 $ 157,438,000 $ 259,427,000 $ 206,766,000 =============== =============== =============== ============= ============= SUPPLEMENTAL CASH FLOW INFORMATION: Interest paid on indebtedness....... $ 134,000 $ 34,000 $ 1,175,000 $ 784,000 $ 2,562,000 =============== =============== =============== ============= ============= Income taxes paid (recovered)....... $ (181,000) $ (6,736,000) $ (3,328,000) $ 1,317,000 $ 16,026,000 =============== =============== =============== ============= =============
The accompanying notes are an integral part of these consolidated financial statements. 56 59 ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES GENERAL: Anchor National Life Insurance Company (the "Company") is a wholly-owned indirect subsidiary of SunAmerica Inc. (the "Parent"). The consolidated financial statements include the accounts of the Company and all significant subsidiaries, including Anchor Investment Advisor, Inc.; SunAmerica Asset Management Corp.; SunAmerica Capital Services, Inc.; Saamsun Holdings Corp.; SAM Holdings Corporation; SunRoyal Holding Corp.; and Royal Alliance Associates, Inc. All significant intercompany transactions have been eliminated. Certain items have been reclassified to conform to the current year's presentation. The interim financial information is unaudited; however, in the opinion of the Company, the interim information includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods. INVESTMENTS: Cash and short-term investments primarily include cash, commercial paper, money market investments, repurchase agreements and short-term bank participations. All such investments are carried at cost plus accrued interest, which approximates fair value, have maturities of twelve months or less and are considered cash equivalents for purposes of reporting cash flows. Bonds, notes and redeemable preferred stocks available for sale and common stocks are carried at aggregate fair value and changes in unrealized net gains or losses, net of tax, are credited or charged directly to shareholder's equity. It is management's intent, and the Company has the ability, to hold the remainder of bonds, notes and redeemable preferred stocks until maturity, and therefore, these investments are carried at amortized cost. Bonds, notes and redeemable preferred stocks, whether available for sale or held for investment, are reduced to estimated net realizable value when necessary for declines in value considered to be other than temporary. Estimates of net realizable value are subjective and actual realization will be dependant upon future events. Mortgage loans are carried at amortized unpaid balances, net of provisions for estimated losses. Real estate is carried at the lower of cost or fair value. Other invested assets include investments in limited partnerships, most of which are accounted for by using the cost method of accounting; separate account investments; leveraged leases; policy loans, which are carried at unpaid balances; and collateralized mortgage obligation residuals. Realized gains and losses on the sale of investments are recognized in operations at the date of sale and are determined using the specific cost identification method. Premiums and discounts on investments are amortized to investment income using the interest method over the contractual lives of the investments. UNITED STATES TREASURY BILL FUTURES CONTRACTS: Gains and losses on United States Treasury Bill Futures Contracts designated as hedges are deferred and subsequently credited or charged to income over the life of the related hedged assets. DEFERRED ACQUISITION COSTS: Policy acquisition costs are deferred and amortized, with interest, over the estimated lives of the contracts in relation to the present value of estimated gross profits, which are composed of net interest income, net realized investment gains and losses, surrender charges and direct administrative expenses. Costs incurred to sell mutual funds are also deferred and amortized over the estimated lives of the funds obtained. Deferred acquisition costs consist of commissions and other costs which vary with, and are primarily related to, the production or acquisition of new business. As debt and equity securities available for sale are carried at aggregate fair value, an adjustment is made to deferred acquisition costs equal to the change in amortization that would have been recorded if such securities had been sold at their stated aggregate fair value and the proceeds reinvested at current yields. The change in this adjustment, net of tax, is included with the change in net unrealized gains or losses on debt and equity securities available for sale that is credited or charged directly to shareholder's equity. At September 30, 1994, deferred acquisition costs have been increased by $45,000,000 for this adjustment. 57 60 ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) VARIABLE ANNUITY ASSETS AND LIABILITIES: The assets and liabilities resulting from the receipt of variable annuity premiums are segregated in separate accounts. The Company receives administrative fees for managing the funds and other fees for assuming mortality and certain expense risks. Such fees are included in Variable Annuity Fees in the income statement. GOODWILL: Goodwill, amounting to $21,815,000 at September 30, 1994, is amortized by using the straight-line method over a period averaging 25 years and is included in Other Assets in the balance sheet. CONTRACTHOLDER RESERVES: Contractholder reserves for fixed annuity contracts are accounted for as investment-type contracts in accordance with Statement of Financial Accounting Standards No. 97, "Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments," and are recorded at accumulated value (premiums received, plus accrued interest, less withdrawals and assessed fees). FEE INCOME: Variable annuity fees and asset management fees are recognized as earned on a daily basis. Net retained commissions are recognized on a trade date basis. 2. ACQUISITIONS AND DIVESTITURES Effective November 30, 1991, the Company acquired Anchor Investment Advisors, Inc. from an affiliated company, SunAmerica Financial, Inc., for cash equal to its book value of $1,797,000. Effective November 30, 1991, the Company sold Resources Trust Company to the Parent for cash equal to its book value of $9,415,000. Effective November 30, 1991, the Company sold its 70.5% interest in Sun Mortgage Acceptance Corporation to SunAmerica Life Insurance Company (formerly known as Sun Life Insurance Company of America) ("SunAmerica Life") for cash equal to its book value of $52,750,000. 3. INVESTMENTS The amortized cost and estimated fair value of bonds, notes and redeemable preferred stocks available for sale and held for investment by major category follow:
ESTIMATED AMORTIZED FAIR COST VALUE -------------- -------------- AT SEPTEMBER 30, 1994: AVAILABLE FOR SALE: Securities of the United States government............... $ 16,623,000 $ 16,379,000 Mortgage-backed securities............................... 833,445,000 765,946,000 Securities of public utilities........................... 13,423,000 12,837,000 Corporate bonds and notes................................ 243,405,000 229,411,000 Redeemable preferred stocks.............................. 1,375,000 1,547,000 -------------- -------------- Total available for sale.............................. $1,108,271,000 $1,026,120,000 ============== ==============
58 61 ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
ESTIMATED AMORTIZED FAIR COST VALUE -------------- -------------- 3. INVESTMENTS (CONTINUED) HELD FOR INVESTMENT: Securities of the United States government............... $ 10,370,000 $ 10,320,000 Mortgage-backed securities............................... 8,831,000 8,725,000 Corporate bonds and notes................................ 126,333,000 130,851,000 Other debt securities.................................... 30,351,000 30,351,000 -------------- -------------- Total held for investment............................. $ 175,885,000 $ 180,247,000 ============== ============== AT SEPTEMBER 30, 1993: AVAILABLE FOR SALE: Mortgage-backed securities............................... $ 849,176,000 $ 828,705,000 Corporate bonds and notes................................ 247,888,000 255,357,000 Redeemable preferred stocks.............................. 1,375,000 1,633,000 -------------- -------------- Total available for sale.............................. $1,098,439,000 $1,085,695,000 ============== ============== HELD FOR INVESTMENT: Securities of the United States Government............... $ 10,153,000 $ 11,306,000 Mortgage-backed securities............................... 15,317,000 15,435,000 Corporate bonds and notes................................ 156,603,000 169,511,000 Other debt securities.................................... 28,805,000 28,805,000 -------------- -------------- Total held for investment............................. $ 210,878,000 $ 225,057,000 ============== ==============
The amortized cost and estimated fair value of bonds, notes and redeemable preferred stocks available for sale and held for investment by contractual maturity follow:
ESTIMATED AMORTIZED FAIR COST VALUE -------------- -------------- AT SEPTEMBER 30, 1994: AVAILABLE FOR SALE: Due in one year or less.................................. $ 991,000 $ 987,000 Due after one year through five years.................... 90,381,000 88,906,000 Due after five years through ten years................... 158,098,000 146,017,000 Due after ten years...................................... 25,356,000 24,264,000 Mortgage-backed securities............................... 833,445,000 765,946,000 -------------- -------------- Total available for sale.............................. $1,108,271,000 $1,026,120,000 ============== ============== HELD FOR INVESTMENT: Due in one year or less.................................. $ 7,427,000 $ 7,517,000 Due after one year through five years.................... 35,285,000 36,351,000 Due after five years through ten years................... 77,203,000 80,091,000 Due after ten years...................................... 47,139,000 47,563,000 Mortgage-backed securities............................... 8,831,000 8,725,000 -------------- -------------- Total held for investment............................. $ 175,885,000 $ 180,247,000 ============== ==============
Actual maturities of bonds, notes and redeemable preferred stocks will differ from those shown above because of prepayments and redemptions. 59 62 ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. INVESTMENTS (CONTINUED) Gross unrealized gains and losses on bonds, notes and redeemable preferred stocks available for sale and held for investment by major category follow:
GROSS GROSS UNREALIZED UNREALIZED GAINS LOSSES ----------- ------------ AT SEPTEMBER 30, 1994: AVAILABLE FOR SALE: Securities of the United States government................... $ -- $ (244,000) Mortgage-backed securities................................... 2,852,000 (70,351,000) Securities of public utilities............................... -- (586,000) Corporate bonds and notes.................................... 753,000 (14,747,000) Redeemable preferred stocks.................................. 172,000 -- ----------- ------------ Total available for sale............................. $ 3,777,000 $(85,928,000) =========== ============ HELD FOR INVESTMENT: Securities of the United States government................... $ 85,000 $ (135,000) Mortgage-backed securities................................... 7,000 (113,000) Corporate bonds and notes.................................... 4,619,000 (101,000) ----------- ------------ Total held for investment............................ $ 4,711,000 $ (349,000) =========== ============ AT SEPTEMBER 30, 1993: AVAILABLE FOR SALE: Mortgage-backed securities................................... $ 9,789,000 $(30,260,000) Corporate bonds and notes.................................... 8,624,000 (1,155,000) Redeemable preferred stocks.................................. 258,000 -- ----------- ------------ Total available for sale............................. $18,671,000 $(31,415,000) =========== ============ HELD FOR INVESTMENT: Securities of the United States government................... $ 1,153,000 $ -- Mortgage-backed securities................................... 118,000 -- Corporate bonds and notes.................................... 12,908,000 -- ----------- ------------ Total held for investment............................ $14,179,000 $ -- =========== ============
At September 30, 1994, gross unrealized gains on equity securities aggregated $878,000 and gross unrealized losses aggregated $2,117,000. At September 30, 1993, gross unrealized gains on equity securities aggregated $330,000 and gross unrealized losses aggregated $816,000. 60 63 ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. INVESTMENTS (CONTINUED) Gross realized investment gains and losses on sales of all types of investments are as follows:
YEARS ENDED SEPTEMBER 30, ---------------------------------------------- 1994 1993 1992 ------------ ------------ ------------ Bonds, notes and redeemable preferred stocks: Available for sale: Realized gains........................... $ 12,760,000 $ 20,193,000 $ -- Realized losses.......................... (31,066,000) (8,132,000) -- Other: Realized gains........................... 890,000 5,194,000 59,422,000 Realized losses.......................... (1,913,000) (257,000) (47,458,000) Equities: Realized gains.............................. 467,000 2,445,000 686,000 Realized losses............................. (303,000) (2,653,000) (283,000) Other investments: Realized gains.............................. -- 255,000 7,050,000 Realized losses............................. (358,000) (1,573,000) (4,178,000) Impairment writedowns......................... (14,190,000) (37,719,000) (37,988,000) ------------ ------------ ------------ Total net realized investment losses.......... $(33,713,000) $(22,247,000) $(22,749,000) ============ ============ ============
The sources and related amounts of investment income are as follows:
YEARS ENDED SEPTEMBER 30, ---------------------------------------------- 1994 1993 1992 ------------ ------------ ------------ Short-term investments........................ $ 4,648,000 $ 7,278,000 $ 10,488,000 Bonds, notes and redeemable preferred stocks...................................... 98,935,000 106,013,000 128,411,000 Mortgage loans................................ 12,133,000 9,418,000 11,571,000 Common stocks................................. 1,000 15,000 5,000 Real estate................................... 1,379,000 302,000 (1,176,000) Limited partnerships.......................... 9,487,000 12,064,000 3,057,000 Other invested assets......................... 1,175,000 2,501,000 4,449,000 ------------ ------------ ------------ Total investment income............. $127,758,000 $137,591,000 $156,805,000 ============ ============ ============
Expenses incurred to manage the investment portfolio amounted to $1,714,000 for the year ended September 30, 1994; $1,478,000 for the year ended September 30, 1993 and $2,057,000 for the year ended September 30, 1992; and are included in General and Administrative Expenses in the income statement. At September 30, 1994, no investment exceeded 10% of the Company's consolidated shareholder's equity. At September 30, 1994, mortgage loans were collateralized by properties located in 8 states, with loans totaling approximately 22% of the aggregate carrying value of the portfolio secured by properties located in California. At September 30, 1994, bonds, notes and redeemable preferred stocks included $141,772,000 (at amortized cost, with fair value of $136,423,000) of investments not rated investment grade by either Standard & Poor's Corporation, Moody's Investors Service or under National Association of Insurance Commissioners' guidelines. The Company had no material concentrations of non-investment grade assets at September 30, 1994. 61 64 ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. INVESTMENTS (CONTINUED) At September 30, 1994, the amortized cost (and fair value) of investments in default as to the payment of principal or interest was $4,406,000, all of which are unsecured non-investment grade bonds. The Company entered into various United States Treasury Bill Futures Contracts with major brokerage firms to shorten the duration of certain investment securities. These futures contracts matured in March 1993. At September 30, 1994, $5,385,000 of bonds, at amortized cost, were on deposit with regulatory authorities in accordance with statutory requirements. The Company has undertaken to dispose of certain real estate investments, having an aggregate carrying value of $84,544,000, during the next one to three years, to affiliated or nonaffiliated parties, and the Parent has guaranteed that the Company will receive its current carrying value for these assets. 4. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS The following estimated fair value disclosures are limited to the reasonable estimates of the fair value of only the Company's financial instruments. The disclosures do not address the value of the Company's recognized and unrecognized nonfinancial assets (including its other invested assets, equity investments and real estate investments) and liabilities or the value of anticipated future business. The Company does not plan to sell most of its assets or settle most of its liabilities at these estimated fair values. The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Selling expenses and potential taxes are not included. The estimated fair value amounts were determined using available market information, current pricing information and various valuation methodologies. If quoted market prices were not readily available for a financial instrument, management determined an estimated fair value. Accordingly, the estimates may not be indicative of the amounts the financial instruments could be exchanged for in a current or future market transaction. The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: CASH AND SHORT TERM INVESTMENTS: Carrying value is considered to be a reasonable estimate of fair value. BONDS, NOTES AND REDEEMABLE PREFERRED STOCKS: Fair value is based principally on independent pricing services, broker quotes and other independent information. MORTGAGE LOANS: Fair values are primarily determined by discounting future cash flows to the present at current market rates, using expected prepayment rates. VARIABLE ANNUITY ASSETS: Variable annuity assets are carried at the market value of the underlying securities. RESERVES FOR FIXED ANNUITY CONTRACTS: Deferred annuity contracts and single premium life contracts are assigned fair value equal to current net surrender value. Annuitized contracts are valued based on the present value of future cash flows at current pricing rates. PAYABLE TO BROKERS FOR PURCHASES OF SECURITIES: Such obligations represent net transactions of a short-term nature for which the carrying value is considered a reasonable estimate of fair value. 62 65 ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 4. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) VARIABLE ANNUITY LIABILITIES: Fair values of contracts in the accumulation phase are based on net surrender values. Fair values of contracts in the payout phase are based on the present value of future cash flows at assumed investment rates. SUBORDINATED NOTES PAYABLE TO PARENT: Fair value is estimated based on the quoted market prices for similar issues. The estimated fair values of the Company's financial instruments at September 1994 and 1993, compared with their respective carrying values are as follows:
CARRYING FAIR VALUE VALUE -------------- -------------- 1994: Assets: Cash and short-term investments........................ $ 157,438,000 $ 157,438,000 Bonds, notes and redeemable preferred stocks........... 1,202,005,000 1,206,367,000 Mortgage loans......................................... 108,332,000 104,835,000 Variable annuity assets................................ 4,486,703,000 4,486,703,000 Liabilities: Reserves for fixed annuity contracts................... 1,437,488,000 1,411,117,000 Payable to brokers for purchases of securities......... 124,624,000 124,624,000 Variable annuity liabilities........................... 4,486,703,000 4,335,753,000 Subordinated notes payable to Parent................... 34,000,000 33,897,000 ============== ============== 1993: Assets: Cash and short-term investments........................ $ 500,624,000 $ 500,624,000 Bonds, notes and redeemable preferred stocks........... 1,296,573,000 1,310,752,000 Mortgage loans......................................... 112,493,000 114,994,000 Variable annuity assets................................ 4,170,275,000 4,170,275,000 Liabilities: Reserves for fixed annuity contracts................... 1,562,136,000 1,542,355,000 Payable to brokers for purchases of securities......... 428,167,000 428,167,000 Variable annuity liabilities........................... 4,170,275,000 4,029,570,000 Subordinated notes payable to Parent................... 34,000,000 35,569,000 ============== ==============
5. INDEBTEDNESS Subordinated notes payable to Parent bear interest at 7% and require future principal payments of $11,500,000 in 1995, $18,500,000 in 1996 and $4,000,000 in 1997. Short-term borrowings, which include short-term bank notes and reverse repurchase agreements, averaged $1,647,000 at a weighted average interest rate of 4.31% during 1994 and $4,318,000 at a weighted average interest rate of 3.42% during 1993. The highest level of short-term borrowings at any month-end was $9,988,000 at 4.40% during 1994. There were no short-term borrowings outstanding at any month-end, but the highest level of short-term borrowings on any given day was $51,813,000 at 3.38% during 1993. There were no short-term borrowings outstanding at September 30, 1994 or 1993. 63 66 ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 6. CONTINGENT LIABILITIES The Company is involved in various kinds of litigation common to its businesses. These cases are in various stages of development and, based on reports of counsel, management believes that provisions made for potential losses are adequate and any further liabilities and costs will not have a material adverse impact upon the Company's financial position or results of operations. 7. SHAREHOLDER'S EQUITY The Company is authorized to issue 4,000 shares of its $1,000 par value Common Stock. At September 30, 1994, 1993 and 1992, 3,511 shares are outstanding. Changes in shareholder's equity are as follows:
YEARS ENDED SEPTEMBER 30, ---------------------------------------------- 1994 1993 1992 ------------ ------------ ------------ ADDITIONAL PAID-IN CAPITAL: Beginning balance........................... $252,876,000 $252,876,000 $172,876,000 Contributions from Sun Life................. -- -- 80,000,000 ------------ ------------ ------------ Ending balance.............................. $252,876,000 $252,876,000 $252,876,000 ============ ============ ============ RETAINED EARNINGS: Beginning balance........................... $127,936,000 $ 86,218,000 $ 54,133,000 Net income.................................. 24,152,000 41,718,000 32,085,000 ------------ ------------ ------------ Ending balance.............................. $152,088,000 $127,936,000 $ 86,218,000 ============ ============ ============ NET UNREALIZED INVESTMENT GAINS (LOSSES): Beginning balance........................... $(13,230,000) $(20,127,000) $ (3,100,000) Change in net unrealized gains (losses) on debt securities available for sale....... (69,407,000) 4,998,000 (17,742,000) Change in net unrealized gains (losses) on equity securities available for sale..... (753,000) 1,899,000 715,000 Adjustment to deferred acquisition costs.... 45,000,000 -- -- Tax effects of net changes.................. 13,437,000 -- -- ------------ ------------ ------------ Ending balance.............................. $(24,953,000) $(13,230,000) $(20,127,000) ============ ============ ============
Dividends which the Company may pay to its shareholder in any year without prior approval of the California Insurance Commissioner are limited by statute. Under California insurance law, without prior approval of the insurance commissioner, dividends and distributions to shareholders are limited to the greater of (i) 10% of the preceding December 31 balance of statutory surplus as regards policyholders or (ii) the prior calendar year's net statutory gain from operations. In addition, new law requires prior notice of any dividend and grants the commissioner authority to order that a dividend not be paid. No dividends were paid in fiscal years 1994, 1993 or 1992. Under statutory accounting principles utilized in filings with insurance regulatory authorities, the Company's net income for the nine months ended September 30, 1994 was $30,439,000. The statutory net income for the year ended December 31, 1993 was $51,686,000 and for the year ended December 31, 1992 was $1,031,000. The Company's statutory capital and surplus was $223,379,000 at September 30, 1994, $199,082,000 at December 31, 1993 and $145,147,000 at December 31, 1992. 64 67 ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 8. INCOME TAXES The components of the provisions for federal income taxes on pretax income consist of the following:
NET REALIZED INVESTMENT GAINS (LOSSES) OPERATIONS TOTAL -------------- ----------- ----------- 1994: Currently payable.............................. $ (6,825,000) $10,135,000 $ 3,310,000 Deferred....................................... (1,320,000) 20,715,000 19,395,000 ------------ ----------- ----------- Total income tax expense....................... $ (8,145,000) $30,850,000 $22,705,000 ============ =========== =========== 1993: Currently payable.............................. $ (836,000) $19,648,000 $18,812,000 Deferred....................................... (6,819,000) 9,801,000 2,982,000 ------------ ----------- ----------- Total income tax expense....................... $ (7,655,000) $29,449,000 $21,794,000 ============ =========== =========== 1992: Currently payable.............................. $ (7,161,000) $ 3,743,000 $(3,418,000) Deferred....................................... (4,352,000) 23,131,000 18,779,000 ------------ ----------- ----------- Total income tax expense....................... $(11,513,000) $26,874,000 $15,361,000 ============ =========== ===========
Income taxes computed at the United States federal income tax rate of 35% for 1994, 34.75% for 1993 and 34% for 1992 and income taxes provided differ as follows:
YEARS ENDED SEPTEMBER 30, ------------------------------------------- 1994 1993 1992 ----------- ----------- ----------- Amount computed at statutory rate.............. $23,562,000 $22,000,000 $15,685,000 Increases (decreases) resulting from: Amortization of differences between book and tax bases of net assets acquired.......... 465,000 1,423,000 (2,075,000) State income taxes, net of federal tax benefit................................... (662,000) (223,000) 2,742,000 Tax credits.................................. (612,000) (1,849,000) (1,460,000) Other........................................ (48,000) 443,000 469,000 ----------- ----------- ----------- Total income tax expense....................... $22,705,000 $21,794,000 $15,361,000 =========== =========== ===========
For United States federal income tax purposes, certain amounts from life insurance operations are accumulated in a memorandum policyholders' surplus account and are taxed only when distributed to shareholders or when such account exceeds prescribed limits. The accumulated policyholders' surplus was $14,300,000 at September 30, 1994. The Company does not anticipate any transactions which would cause any part of this surplus to be taxable. Effective October 1, 1993, the Company adopted the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Accordingly, the cumulative effect of this change in accounting for income taxes was recorded during the quarter ended December 31, 1993 to increase the liability for deferred income taxes by $20,463,000. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax 65 68 ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 8. INCOME TAXES (CONTINUED) reporting purposes. The significant components of the liability for deferred income taxes are as follows:
SEPTEMBER 30, SEPTEMBER 30, 1994 1993 ------------- ------------- Deferred tax liabilities: Investments............................................... $ 17,079,000 $ 3,051,000 Deferred acquisition costs................................ 117,200,000 102,381,000 State income taxes........................................ 2,917,000 4,050,000 ------------ ------------ Total deferred tax liabilities............................ 137,196,000 109,482,000 ------------ ------------ Deferred tax assets: Contractholder reserves................................... (54,819,000) (47,601,000) Guaranty fund assessments................................. (1,197,000) (1,680,000) Deferred expenses......................................... (3,177,000) (1,593,000) Net unrealized losses on certain debt and equity securities............................................. (13,436,000) -- ------------ ------------ Total deferred tax assets................................. (72,629,000) (50,874,000) ------------ ------------ Net deferred tax liability (pro forma at September 30, 1993)..................................................... 64,567,000 58,608,000 Cumulative effect of change in accounting for income taxes recorded in the first quarter 1994........................ -- (20,463,000) ------------ ------------ Deferred income taxes, per balance sheet.................... $ 64,567,000 $ 38,145,000 ============ ============
9. RELATED PARTY MATTERS The Company pays commissions to two affiliated companies, SunAmerica Securities, Inc. ("SAS") and Royal Alliance Associates, Inc. ("Royal"), and, in 1992, also paid commissions to another affiliate, Anchor National Financial Services, Inc. ("ANFS"), whose operations were discontinued on September 30, 1992. These broker-dealers represent a significant portion of the Company's business, amounting to approximately 40.0% in 1994, 43.7% in 1993 and 39.8% in 1992. During the year ended September 30, 1994, commissions paid to SAS and Royal totaled $9,725,000 and $9,000,000, respectively, and during the year ended September 30, 1993, such commission payments totaled $9,151,000 and $8,390,000, respectively. During the year ended September 30, 1992, commissions paid to SAS, Royal and ANFS totaled $3,975,000, $6,993,000 and $3,155,000, respectively. The Company purchases administrative, investment management, accounting, data processing and programming services from SunAmerica Financial, Inc., whose purpose is to provide services to the SunAmerica companies. Amounts paid for such services totaled $36,934,000 for the year ended September 30, 1994, $32,711,000 for the year ended September 30, 1993 and $27,388,000 for the year ended September 30, 1992. SunAmerica Asset Management Corp. ("SunAmerica Asset Management"), receives investment management fees from SunAmerica Life and the Parent. SunAmerica Asset Management received $125,000 from each of these two companies during the year ended September 30, 1994, and received $73,000 during the year ended September 30, 1993. During the year ended September 30, 1994, the Company sold to the Parent real estate for cash equal to its carrying value of $29,761,000. During the year ended September 30, 1993, the Company sold to the Parent various invested assets for cash equal to their carrying values of $88,488,000 (including real estate of $45,668,000). During the year ended September 30, 1993, the Company sold to SunAmerica Life various invested assets with carrying values of $46,332,000 for cash of $46,334,000 and recorded net gains of $2,000. 66 69 ANCHOR NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 10. BUSINESS SEGMENTS The Company has three business segments: annuity operations, asset management, and broker-dealer operations. Respectively, these include the sale of fixed and variable annuities; the management and marketing of mutual funds; and the sale of securities and financial services products. Summarized data for the years ended September 30, 1994, 1993 and 1992 follow:
TOTAL DEPRECIATION AND TOTAL AMORTIZATION PRETAX TOTAL REVENUES EXPENSE INCOME ASSETS ------------ ----------- ----------- -------------- 1994: Annuity operations................... $171,431,000 $26,298,000 $52,253,000 $6,473,065,000 Asset management..................... 32,803,000 19,330,000 7,916,000 102,192,000 Broker-dealer operations............. 19,394,000 408,000 7,151,000 26,869,000 ------------ ----------- ----------- -------------- Total...................... $223,628,000 $46,036,000 $67,320,000 $6,602,126,000 ============ =========== =========== ============== 1993: Annuity operations................... $180,686,000 $23,634,000 $42,489,000 $6,545,966,000 Asset management..................... 33,826,000 8,853,000 14,806,000 98,137,000 Broker-dealer operations............. 17,275,000 440,000 6,217,000 27,286,000 ------------ ----------- ----------- -------------- Total...................... $231,787,000 $32,927,000 $63,512,000 $6,671,389,000 ============ =========== =========== ============== 1992: Annuity operations................... $187,838,000 $14,769,000 $30,607,000 $5,673,250,000 Asset management..................... 26,926,000 5,141,000 10,194,000 94,534,000 Broker-dealer operations............. 14,774,000 371,000 5,333,000 23,474,000 ------------ ----------- ----------- -------------- Total...................... $229,538,000 $20,281,000 $46,134,000 $5,791,258,000 ============ =========== =========== ==============
67 70 APPENDIX A THE MARKET VALUE ADJUSTMENT EXAMPLES OF THE MARKET VALUE ADJUSTMENT (MVA) The Market Value Adjustment Factor appearing on page 17 of the prospectus and reproduced here for convenience is: [(1 + I)/(1 + J + 0.005)]N/12 -1 where I is the Guarantee Rate in effect; J is the Current Interest Rate available for a period equal to the number of years remaining in the Guarantee Period at the time of withdrawal, transfer or annuitization (fractional years are rounded up to the next full year); and N is the number of full months remaining in the Guarantee Period at the time the withdrawal, transfer or annuitization request is processed. These examples assume the following: (1) An initial Purchase Payment of $100,000 was made and allocated to a ten year Guarantee Period with a Guarantee Rate of 5.50% (.055); (2) a partial withdrawal of $4,000 is requested 2 1/2 years (30 months) from the expiration date (i.e., N = 30); (3) the accumulated value attributable to the Purchase Payment (i.e., the Guarantee Amount) on the date of withdrawal is $149,414.74 and (4) no transfers, additional Purchase Payments, or other withdrawals have been made. EXAMPLE OF A NEGATIVE MVA: Assume that on the date of withdrawal, the Current Interest Rate for a new Guarantee Period of 3 years (2 1/2 years rounded up to the next full year) is 6.50%: The MVA factor = [(1 + I)/(1 + J + .005)]N/12 -1 = [(1.055)/(1.065 + .005)](30/12) -1 = (0.985981)2.5 -1 = 0.965321 -1 = -0.034679 The requested withdrawal amount is multiplied by the MVA factor to determine the MVA: MVA = $4,000 X (-0.034679) = -$138.72 $138.72 represents the MVA that will be deducted from the remaining accumulated value. EXAMPLE OF A POSITIVE MVA: Assume that on the date of withdrawal, the Current Interest Rate for a new Guarantee Period of 3 years is 4.50%: The MVA factor = [(1 + I)/(1 + J + .005)]N/12 -1 = [(1.055)/(1.045 + .005)](30/12) -1 = (1.004762)2.5 -1 = 1.011947-1 = +0.011947 The requested withdrawal amount is multiplied by the MVA factor to determine the MVA: $4,000 X 0.011947 = +$47.79 $47.79 represents the MVA that would be added to the amount withdrawn. A-1 71 PART II Information Not Required in Prospectus Item 13. Other Expenses of Issuance and Distribution. ------------------------------------------- Not Applicable Item 14. Indemnification of Directors and Officers. ----------------------------------------- Not Applicable Item 15. Recent Sales of Unregistered Securities. --------------------------------------- Not Applicable Item 16. Exhibits and Financial Statement Schedules. ------------------------------------------
Exhibit No. Description (1) Form of Underwriting Agreement* (2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession** (3) (a) Articles of Incorporation* (b) By-Laws* (4) (a) Vista Capital Advantage Advisor Individual 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** (28) Information Reports Furnished to State Insurance Regulatory Authority** (29) Other Exhibits**
Financial Statements* * Herewith ** Not Applicable *** To Be Filed By Amendment 72 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: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment hereof) which, individually or in the aggregate, represents a fundamental change in the information in the registration statement; (iii) 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. 73 SIGNATURES As required by the Securities Act of 1933, the Registrant has caused this Registration Statement to be signed on its behalf, in the City of Los Angeles, and the State of California, on this 6th day of November, 1995. By: ANCHOR NATIONAL LIFE INSURANCE COMPANY By: /s/ JAY S. WINTROB ------------------------------------- Jay S. Wintrob Executive Vice President POWER-OF-ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints LORIN M. FIFE, SUSAN L. HARRIS AND CHRISTINE A. NIXON or each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, as fully to all intents as he or she might or could do in person, including specifically, but without limiting the generality of the foregoing, to (i) take any action to comply with any rules, regulations or requirements of the Securities and Exchange Commission under the federal securities laws; (ii) make application for and secure any exemptions from the federal securities laws; (iii) register additional annuity contracts under the federal securities laws, if registration is deemed necessary. The undersigned hereby ratifies and confirms all that said attorneys-in-fact and agents or any of them, or their substitutes, shall do or cause to be done by virtue thereof. As required by the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacity and on the dates indicated.
SIGNATURE TITLE DATE /s/ ELI BROAD President, Chief November 6, 1995 - -------------------- Executive Officer and Eli Broad Chairman of the Board (Principal Executive Officer) /s/ SCOTT L. ROBINSON Senior Vice President November 6, 1995 - -------------------- and Director Scott L. Robinson (Principal Financial Officer) /s/ N. SCOTT GILLIS Senior Vice President November 6, 1995 - -------------------- and Controller N. Scott Gillis (Principal Accounting Officer) /s/ JAMES R. BELARDI Director November 6, 1995 - -------------------- James R. Belardi /s/ LORIN M. FIFE Director November 6, 1995 - -------------------- Lorin M. Fife
74 /s/ JANA W. GREER Director November 6, 1995 - -------------------- Jana W. Greer /s/ SUSAN L. HARRIS Director November 6, 1995 - -------------------- Susan L. Harris /s/ GARY W. KRAT Director November 6, 1995 - -------------------- Gary W. Krat /s/ PETER MCMILLAN Director November 6, 1995 - -------------------- Peter McMillan /s/ JAY S. WINTROB Director November 6, 1995 - -------------------- Jay S. Wintrob
75 EXHIBIT INDEX
Sequentially Exhibit Description Numbered Pages - ------- ----------- --------------- (1) Form of Underwriting Agreement (3)(a) Articles of Incorporation (3)(b) By-Laws (4)(a) Vista Capital Advantage Advisor Individual Fixed and Variable Contract (4)(b) Application for Contract (21) Subsidiaries of Registrant (23)(a) Consent of Independent Accountants (24) Powers of Attorney (included on signature page)
EX-1 2 FORM OF UNDERWRITING AGREEMENT 1 EXHIBIT 1 DISTRIBUTION AGREEMENT THIS AGREEMENT, entered into as of this th day of , 1995, is among ANCHOR NATIONAL LIFE INSURANCE COMPANY ("Anchor National"), a life insurance company organized under the laws of the State of California, on behalf of itself and VARIABLE ANNUITY ACCOUNT TWO - T ("Separate Account"), a separate account established by Anchor National pursuant to the insurance laws of the State of California, and VISTA BROKER-DEALER SERVICES ("Distributor"), a corporation organized under the laws of the State of Maryland. WITNESSETH: WHEREAS, Anchor National intends to issue certain flexible payment deferred annuity contracts under the name "Vista Advantage Advisor" (the "Contracts") which will permit allocation of premium payments and contract value to the Separate Account and/or Anchor National's general account ("Fixed Account Options"); and WHEREAS, Anchor National, by resolution adopted on April 2, 1995, established the Separate Account on its books of account, for the purpose of supporting variable benefits under the Contracts; and WHEREAS, the Separate Account will invest in an investment company ("Trust") which will be managed by The Chase Manhattan Bank, N.A. ("Chase"); WHEREAS, the Separate Account has been registered with the Securities and Exchange Commission ("Commission") as a unit investment trust under the Investment Company Act of 1940 ("1940 Act") (File No. 811- ); and WHEREAS, two registration statements for the Contracts, one on Form N-4 relating to the Separate Account and one on Form S-1 relating to the Fixed Account Options (collectively, the "Registration Statements"), have been filed with the Commission under the Securities Act of 1933 (the "1933 Act") (File Nos. 33- and 33- , respectively); and WHEREAS, the two Registration Statements include the same prospectus, and the same definitive form of the prospectus will be used from time to time to offer both the Separate Account and the Fixed Account Options under the Contracts (herein, the "Prospectus"); and WHEREAS, the Distributor, a broker-dealer registered under the Securities Exchange Act of 1934 (the "1934 Act") and a member of the National Association of Securities Dealers, Inc. ("NASD"), proposes to act as distributor on an agency basis in the marketing and distribution of the Contracts; NOW THEREFORE, in consideration of the foregoing, and of the mutual covenants and conditions set forth herein, and for other good and valuable consideration, the receipt of which is hereby acknowledged, Anchor National, the Separate Account and Distributor hereby agree as follows: 1. Authorization of Distributor (a) The Distributor will serve as distributor on an agency basis for the Contracts. This authorization is exclusive until this Agreement is terminated or the authorization is otherwise terminated pursuant to an amendment hereto. The Distributor represents that it will actively engage in its duties under this Agreement on a continuous basis while the Registration Statements (or any other registration statements filed and declared effective in lieu thereof) for the Contracts are effective, consistent with its business and relationship with Chase pursuant to the Omnibus Agreement described in Section 14 2 hereof, and subject to applicable material market and regulatory conditions and any other restrictions that may become applicable to its activities. Anchor National reserves the right at any time to suspend or limit the public offering of the Contracts, upon written notice to Distributor. (b) It is understood that Distributor has no present intention of engaging in sales of the Contracts on a retail basis (although it reserves the right to do so), and intends to restrict its distribution activities to wholesaling activities, and in that regard will recruit and recommend for appointment by Anchor National duly registered broker-dealers and licensed insurance agents (together, "Selling Broker-Dealers") to sell the Contracts on a retail basis directly to purchasers, subject to the provisions of this Agreement and a selling agreement to be entered into between Anchor National, Distributor and such Selling Broker-Dealer. Distributor will provide information and marketing assistance to Selling Broker-Dealers. Distributor shall use its reasonable best efforts to enter into selling agreements for the Contracts with those persons currently selling the Vista family of mutual funds. (c) For so long as the Contracts are still being publicly offered, Anchor National will use its reasonable best efforts to assure that the Contracts are continuously registered under the 1933 Act and, should it ever be required, under state securities laws, and will use reasonable efforts to ensure that the Contracts are approved under state insurance laws when and where necessary so that the Contracts may be offered continuously. Anchor National shall provide internal marketing support for Distributor's wholesaling efforts appropriate for the Contracts, including providing wholesaler training, advanced markets and retirement plan support, sales ideas, competitive information and other market research, and illustrative software. 2. Authorization of Selling Broker-Dealers. Anchor National and the Distributor shall enter into selling agreements ("Selling Agreements") with Selling Broker-Dealers, which shall be broker-dealers registered under the 1934 Act and authorized by applicable state insurance law to sell variable annuity contracts. Selling Agreements shall contain the written representations of Selling Broker-Dealers that all individuals who offer and sell the Contracts pursuant to the Selling Agreements on behalf of such Selling Broker-Dealers are duly registered representatives of such Broker-Dealers and are fully licensed as insurance agents under applicable state insurance laws. Anchor National alone shall be responsible for appointing Selling Broker-Dealers and all persons selling the Contracts on their behalf in accordance with applicable state insurance law, it being understood that Anchor National may refuse to appoint a person or to pay appointment fees with respect to the appointment of a person, to the extent consistent with Anchor National's internal policies applicable to all persons selling its products. Distributor shall have no responsibility in this regard. Anchor National alone shall be responsible for communicating to all Selling Broker-Dealers and their personnel, all policies and procedures applicable to them as such appointed agents of Anchor National. 3. Distributor's Compliance with Applicable Law. Distributor shall be responsible for its compliance, in connection with its duties as distributor of the Contracts under this Agreement, with the requirements of: (a) the 1934 Act; (b) any state securities laws to the extent broker-dealer registration requirements imposed thereby are applicable to it in performing such duties; (c) NASD filing requirements with respect to any advertisements and sales literature for the Contracts, regardless of which person prepared such material; and (d) all applicable state insurance laws and 3 regulations relating to licensed insurance agents, it being understood that a person associated with Distributor, rather than Distributor itself, may hold a corporate insurance agent's license in certain states in which the performance of such duties requires an insurance agent's license. Without limiting the foregoing, Distributor shall be responsible for ensuring that all individuals associated with Distributor who are offering and selling the Contracts on its behalf are licensed as insurance agents under applicable state insurance laws. Anchor National shall appoint and maintain the appointment of Distributor as necessary or appropriate for Distributor to engage in the offer and sale of the Contracts during the term of this Agreement, and in that regard shall appoint any individuals associated with Distributor and designated by Distributor as agents acting on its behalf, provided, however, that Anchor National reserves the right to refuse to appoint any such person, consistent with its duties and responsibilities under applicable insurance law. Anchor National shall be responsible for the payment of all fees and the making of all filings required to effect such appointments during the term of this Agreement. Distributor shall conduct its affairs in accordance with the Rules of Fair Practice of the NASD. 4. Representations and Warranties (a) Anchor National represents and warrants to Distributor on the effective date of this Agreement that: (1) Anchor National is validly existing as a corporation in good standing under the laws of the state of California with power (corporate or otherwise) to own its properties and conduct its business in the manner described in the Registration Statements, is duly qualified to transact the business of a life insurance company and to issue variable annuity products, and is in good standing, in the state of California. (2) The execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate action by Anchor National, and when so executed and delivered this Agreement shall be the valid and binding obligation of Anchor National enforceable in accordance with its terms. (3) Consummation of the transactions contemplated by this Agreement, and the fulfillment of the terms of this Agreement, will not conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time) a default under, the articles of incorporation or bylaws of Anchor National, or any indenture, agreement, mortgage, deed of trust, or other instrument to which Anchor National is a party or by which it is bound, or violate any law, or, to the best of Anchor National's knowledge, any order, rule or regulation applicable to Anchor National of any court or of any federal or State regulatory body, administrative agency or any other governmental instrumentality having jurisdiction over Anchor National or any of its properties. (b) Anchor National further represents and warrants to Distributor, on the effective date of each Registration Statement for the Contracts, that: (1) Anchor National has filed with the Commission all statements, notices, and other documents required for registration of the Contracts, the Separate Account and the Fixed Account Option 4 under the provisions of the 1933 Act and the 1940 Act and regulations thereunder; and, in particular, but not by way of limitation, has filed as exhibits thereto, all contracts or documents of Anchor National relating to the Contracts or the Separate Account or Fixed Account Option which are required to be filed as exhibits thereto by the 1933 Act or the 1940 Act or regulations thereunder. Notwithstanding the foregoing, the parties recognize that this Agreement, in the form in which it is executed, has not been filed with the Registration Statement (an earlier form having been so filed) and it is the intention of Anchor National to file a form of this Agreement with the first post-effective amendment to the Registration Statement. (2) Anchor National has obtained all necessary orders of exemption or approval from the Commission to permit the distribution of the Contracts pursuant to this Agreement and to permit the establishment and operation of the Separate Account as contemplated in the Registration Statements, and such orders apply to Distributor, as principal underwriter for the Contracts and for the Separate Account. (3) Each Registration Statement has been declared effective by the Commission or has become effective in accordance with applicable regulations. Anchor National has not received any notice from the Commission with respect to either Registration Statement pursuant to Section 8(e) of the 1940 Act, and no stop order under the 1933 Act has been issued, and no proceeding therefor has been instituted or threatened by the Commission. (4) Each Registration Statement complies in all material respects with applicable provisions of the 1933 Act and the 1940 Act and regulations thereunder, and no Registration Statement contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading, in light of the circumstances in which they were made; provided, however, that none of the representations and warranties in this Section 5 shall apply to statements or omissions from a Registration Statement made in reliance upon and in conformity with information furnished to Anchor National by Distributor expressly for use therein. (5) The Contracts have been duly and validly authorized and, when issued and delivered against payment therefor, will be duly and validly issued and will conform in all material respects to the description of such Contracts in the Registration Statement. (6) The Separate Account has been duly established by Anchor National and conforms to the description thereof in the Registration Statement. (7) The form of the Contracts have been or prior to commencement of sale will be duly approved to the extent required by the California insurance commission or otherwise have been cleared for the sale of the Contracts in such state. (8) The Contracts and the Separate Account have been duly registered with each state securities 5 commission, agency or other governmental body charged with the regulation of securities (herein, "securities commission") to the extent required by such state, except where failure to effect such registration would not have a material adverse effect on the marketing of the Contracts. (9) No other consent, approval, authorization or order of any court or governmental authority or agency is required for the issuance or sale of the Contracts, the establishment or operation of the Separate Account, or for the consummation of the transactions contemplated by this Agreement, that has not been obtained, except where the failure to obtain such consent, approval or authorization would not have a material adverse effect on the marketing of the Contracts. (c) Distributor represents and warrants to Anchor National that: (1) Distributor is validly existing as a corporation in good standing under the laws of the State of Maryland, with power (corporate or other) to own its properties and conduct its business as a broker-dealer in securities and has been duly qualified for the transaction of such business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties, or conducts any business, so as to require such qualification; (2) Distributor is registered as a broker-dealer with all federal and state authorities with which such registration is required to carry out its obligations as contemplated by this Agreement, and either Distributor or an associated person thereof is licensed as an insurance agent with all state authorities with whom such licensing is required for Distributor to carry out its obligations as contemplated by this Agreement; (3) The execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate action by Distributor, and when so executed and delivered, this Agreement shall be the valid and binding obligation of Distributor enforceable in accordance with its terms. (4) Consummation of the transactions contemplated by this Agreement, and the fulfillment of the terms of this Agreement, will not conflict with, result in any breach of any of the terms or provisions of, or constitute (with or without notice or lapse of time) a default under, the articles of incorporation or by- laws of Distributor, or any indenture, agreement, mortgage, deed of trust, or other instrument to which Distributor is a party or by which Distributor is bound, or violate any law, or, to the best of Distributor's knowledge, any order, rule or regulation applicable to Distributor of any court or of any federal or State regulatory body, administrative agency or any other governmental instrumentality having jurisdiction over Distributor or any of its properties; and (5) There are no material legal or governmental proceedings pending to which Distributor is a party or of which any property of Distributor is 6 the subject which, if determined adversely to Distributor, would individually or in the aggregate have a material adverse effect on the financial position, surplus or operations of Distributor. (6) To the extent that any statements or omissions made in any Registration Statement for the Contracts, or any amendment or supplement thereto, are made in reliance upon and in conformity with information furnished to Anchor National by Distributor expressly for use therein, such information shall conform in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder and, with respect to the presentation of such information, will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. 5. Undertakings of Anchor National (a) For so long as the Contracts are being publicly offered, Anchor National shall use its best efforts to maintain the registration of the Contracts, the Fixed Account Option and the Separate Account with the Commission and to maintain any registrations and approvals of the Contracts, the Fixed Account Option and the Separate Account with any securities or insurance commission or agency of any state whose securities or insurance laws require registration or approval of the Contracts, the Fixed Account Option or the Separate Account for purposes of the distribution contemplated by this Agreement (except where failure to effect or maintain such registration with a state would not have a material adverse effect on the marketing of the Contracts), such efforts to include, without limitation, best efforts to prevent a stop order from being issued by the Commission or any such state commission or, if a stop order has been issued, to cause such stop order to be withdrawn. (b) Anchor National shall take all action required to cause the Separate Account to comply, and to continue to comply, with the provisions of the 1940 Act and regulations and exemptions thereunder applicable to the Separate Account as a registered investment company classified as a unit investment trust and a separate account under the 1940 Act, and shall not take any action unilaterally, in its capacity as depositor for the Separate Account, that would cause Distributor to be in violation of the 1940 Act. (c) Anchor National shall provide Distributor with a preliminary draft of any amendment to a Registration Statement, supplement to the Prospectus, exemptive application or no-action request to be filed with the Commission in connection with the Contracts, the Fixed Account Option and/or the Separate Account. Anchor National shall provide Distributor with a reasonable opportunity to review and comment on any such draft before any such material is filed with the Commission. Anchor National shall furnish Distributor with copies of any such material or amendment thereto, as filed with the Commission, promptly after the filing thereof, and any Commission communication or order with respect thereto, promptly after receipt thereof. Anchor National shall maintain and keep on file in its principal executive office any file memoranda or any supplemental materials referred to in any such Registration Statement, Prospectus, exemptive application and no-action request and shall, as necessary, amend such memoranda or materials 7 and shall provide or otherwise make available copies of such memoranda and materials to the Distributor. (d) Anchor National shall provide Distributor access to such records, officers and employees of Anchor National at reasonable times as Distributor may request is necessary to enable Distributor to fulfill its obligation, as the underwriter under the 1933 Act for the Contracts and as principal underwriter for the Separate Account under the 1940 Act, to perform due diligence and to use reasonable care. (e) Anchor National shall timely file each post-effective amendment to a Registration Statement, Prospectus, Rule 24f-2 notice, annual report on Form N-SAR, and all other reports, notices, statements, and amendments required to be filed by or for Anchor National and/or the Separate Account with the Commission under the 1933 Act, the 1934 Act and/or the 1940 Act or any applicable regulations, and shall pay all filing or registration fees payable in connection therewith. To the extent there occurs an event or development (including, without limitation, a change of applicable law, regulation or administrative interpretation), which in Anchor National's reasonable judgment warrants an amendment to either the Registration Statement or a supplement to the Prospectus, Anchor National shall endeavor to prepare, subject to the Distributor's right to review such material provided in Section 5(c), and file such amendment or supplement with the Commission with all deliberate speed. 6. Notification of Material Developments (a) Anchor National and Distributor each agree to notify the other in writing upon (i) being apprised of the institution of any proceeding, investigation or hearing involving the offer or sale of the Contracts, (ii) the happening of any material event, if known by such notifying party, which makes untrue any statement made in a Registration Statement or which requires the making of a change therein in order to make any statement made therein not materially misleading; or (iii) upon becoming aware that any Prospectus, sales literature or other printed matter or material used in marketing and distributing any Contract contains an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made therein, in light of the circumstances in which they were made, not misleading. (b) In addition, Anchor National shall notify the Distributor immediately or in any event as soon as possible under the following circumstances: (1) Of any request by the Commission for any amendment to a Registration Statement, for any supplement to the Prospectus, or for additional information relating to the Contracts; (2) Of the issuance by the Commission of any stop order with respect to a Registration Statement or any amendment thereto, or the initiation of any proceedings for that purpose or for any other purpose relating to the registration and/or offering of the Contracts; (3) Of any loss or suspension of the approval of the Contracts or distribution thereof by an insurance commission of any state, any loss or suspension of Anchor National's certificate of authority to do business or to issue variable annuity products in any state. 8 7. Books and Records. With respect to the issuance and servicing of the Contracts, and execution of transactions thereunder carried out by Anchor National (or a person acting pursuant to its authorization), Anchor National shall keep records and books relating thereto in a manner and form prescribed by and in accordance with Rules 17a-3 and 17a-4 under the 1934 Act as are required to be maintained by Distributor as a registered broker-dealer acting as distributor for the Contracts. Anchor National acknowledges that it shall maintain such records and books on behalf of Distributor and shall make such records and books of account available for inspection by the Commission. Distributor shall have the right to inspect and make copies of such records and books of account at any time on demand. 8. Authorized Marketing Materials (a) Subsequent to having been notified by Anchor National to commence offers and sales of the Contracts, the Distributor, in connection with its distribution activities hereunder, will utilize no Prospectus purporting to meet the requirements of Section 10(a) of the 1933 Act other than the one so designated by Anchor National. As to other types of sales material used in connection with its distribution activities, the Distributor agrees that it will use, and pursuant to Selling Agreements will require Selling Broker-Dealers to use, only sales materials as have been authorized in writing for use by Anchor National, and which have been filed by Distributor with the NASD, and approved where necessary or required. For purposes of this Agreement, the phrase "sales material" includes, but is not limited to, advertisements (such as material published, or designed for use in, a newspaper, magazine, or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures, or other public media), sales literature (i.e., any written communication distributed or made generally available to customers or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, reprints or excerpts of any other advertisement, sales literature, or published article), Registration Statements, Prospectuses, Statements of Additional Information, shareholder reports, and proxy materials. (b) The Distributor will not distribute any Prospectus, sales material, or any other printed matter or material in the marketing and distribution of any Contract if, to the knowledge of the Distributor, any of the foregoing contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made therein, in the light of the circumstances with which they were made, not misleading. 9. Compensation. The Distributor, as distributor of the Contracts, shall not be entitled to any remuneration from Anchor National or its affiliates. 10. Remittance of Premium Payments. All premium payments collected on the sale of the Contracts by the Distributor, if any, shall be transmitted to Anchor National for immediate allocation to the Separate Account and/or Fixed Account Option in accordance with the directions furnished by the purchasers of such Contracts. 11. Termination. This Agreement will terminate automatically upon its assignment to any person. This Agreement shall terminate, without the payment of any penalty by any party: (a) at the option of Anchor National, upon 60 days' advance written notice to the Distributor; or 9 (b) at the option of the Distributor upon 60 days' advance written notice to Anchor National; or (c) at the option of Anchor National upon written notice of such termination to the Distributor, if formal proceedings against the Distributor involving the offer or sale of the Contracts by the NASD or by the Commission are instituted; or (d) at the option of the Distributor upon written notice of such termination to Anchor National, if formal proceedings against Anchor National by a state insurance regulatory agency initiating seizure or with respect to the Contracts are instituted; or (e) at the option of either party if the offering and sale of the Contracts is terminated or if the Omnibus Agreement defined in Section 14 hereof is terminated; or (f) at the option of either party upon written notice of such termination to the other parties, if any other party or any representative thereof at any time (i) in connection with the offer or sale of the Contracts (A) employs any device, scheme, or artifice to defraud; (B) makes any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or (C) engages in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person; or (ii) breaches its representations or warranties under this Agreement. 12. Notice. Each notice required by this Agreement shall be given in writing and shall be deemed to have been given if delivered personally, given by facsimile or mailed by registered or certified mail (return receipt requested) or by Federal Express or other overnight delivery as follows: if to Anchor National or the Separate Account: c/o SunAmerica Inc. 1 SunAmerica Center Century City Los Angeles, California 90067-6022 Attention: James W. Rowan Vice President with a copy to: SunAmerica Inc. 1 SunAmerica Center Century City Los Angeles, California 90067-6022 Attention: Susan L. Harris Vice President, General Counsel - Corporate Affairs and Secretary if to Distributor: Vista Broker-Dealer Services, Inc. 125 W. 55th Street New York, New York 10019 Attention: President with a copy to: Vista Broker-Dealer Services, Inc. 11th Floor 125 West 55th Street New York, New York 10019 Attention: Paul Costagliola 10 Vice President 13. Indemnification (a) Anchor National shall indemnify and hold harmless Distributor and its affiliates and each of their respective directors and officers and each person, if any, who controls Distributor and its affiliates against any and all losses, claims, damages, liabilities or litigation (including legal and other expenses), arising out of activities undertaken pursuant to this Agreement, to which Distributor and its affiliates or such directors, officers or controlling persons may become subject, under any statute, at common law, or otherwise, which (i) may be based upon any wrongful act or breach of this Agreement by Anchor National, or any of its employees or representatives (other than any insurance agents appointed pursuant to this Agreement or a Selling Agreement), any affiliate of or any person acting on behalf of Anchor National; (ii) may be based upon a breach of the warranties made by Anchor National set forth in this Agreement; or (iii) may be based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statements, Prospectus or Statement of Additional Information for the Contracts or any other written sales material prepared exclusively by Anchor National which is utilized by the Distributor in connection with the sale of Contracts or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (but not if such untrue statement or alleged untrue statement or omission or alleged omission was made in conformity with information furnished to Anchor National by Distributor specifically for use therein), provided, however, that in no case is Anchor National's indemnity in favor of a director or officer or any other person deemed to protect such director or officer or other person against any liability to which any such person would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance of his or her duties or by reason of his or her reckless disregard of obligations and duties under this Agreement. (b) Distributor shall indemnify and hold harmless Anchor National and its affiliates and each of their respective directors and officers and each person, if any, who controls Anchor National against any and all losses, claims, damages, liabilities or litigation (including legal and other expenses) arising out of activities undertaken pursuant to this Agreement, to which Anchor National or its affiliates, or such directors, officers or controlling person may become subject, under any statute, at common law, or otherwise, which (i) may be based upon any wrongful act or breach of this Agreement by Distributor or any of its employees or representatives any affiliate or any person acting on behalf of Distributor; (ii) may be based upon a breach of the warranties made by Distributor set forth in this Agreement; or (iii) may be based on an untrue statement or alleged untrue statement of a material fact contained in the Registration Statements, Prospectus or Statement of Additional Information for the Contracts or any other written sales material utilized in connection with the sale of the Contracts or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (but only to the extent such untrue statement or alleged untrue statement or omission or alleged omission was made in conformity with information furnished to Anchor National by Distributor specifically for use therein); provided, however, that in 11 no case is Distributor's indemnity in favor of a director or officer or any other person deemed to protect such director or officer or other person against any liability to which any such person would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance of his or her duties or by reason of his or her reckless disregard of obligations and duties under this Agreement. (c) The indemnification provision of this Section 13 shall survive any termination of this Agreement. 14. Omnibus Agreement. As between Anchor National and Distributor, this Agreement, together with a certain letter agreement dated as of even date herewith between Anchor National and Distributor, constitutes the entire agreement, verbal and written, of the parties insofar as this Agreement is in furtherance of discharging their respective obligations under that certain agreement dated February 28, 1995 by and among Anchor National, Chase, Distributor and First SunAmerica Life Insurance Company ("Omnibus Agreement"). As between Anchor National and Distributor, accordingly, this Agreement supersedes and annuls all other agreements between the parties relating to the distribution of the Contracts except for the Selling Agreements described in Section 2 hereinabove, the letter agreement referred to herein and the Omnibus Agreement. 15. Amendments. This Agreement may be amended from time to time by the mutual agreement and consent of the undersigned parties; provided that such amendment shall not affect the rights of existing Contract Owners, and that such amendment must be in writing and duly executed. 16. No Third Party Beneficiary. None of the provisions of this Agreement shall inure to the benefit of any person other than the parties hereto or their respective successors, or be deemed to create any rights, benefits or privileges in favor of any person except the parties hereto. 17. No Agency Created Hereby. Except to the extent their duties under this Agreement otherwise require, none of the provisions of this Agreement shall be deemed to designate or appoint any party hereto as the agent of any other party or to authorize or empower any party hereto to act for or to create or incur any obligations on behalf of any other party. 18. Counterparts. This Agreement may be executed and delivered in any one or more counterparts, and each such counterpart so delivered and bearing the original signature of a party hereto shall be binding as to such party, and all counterparts shall together constitute one original and the same instrument. 19. Interpretation. This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of California and shall be interpreted in such a manner as to be effective and valid under the laws of the State of California. If any provision of this Agreement shall be deemed to be prohibited by law or invalid, such provision shall be ineffective only to the extent of the prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 20. Waiver. The waiver by one party of the performance in observance of any covenant or condition to be performed or observed by any other hereunder shall not invalidate this Agreement, nor constitute a waiver by such party of any other covenant or condition to be performed or observed by any other hereunder. The exercise by any party hereto of any right, privilege or remedy provided by this Agreement shall not constitute a waiver by such party of any other covenant or condition to be performed or observed by any other party under 12 this Agreement. The exercise by any party hereto of any right, privilege or remedy provided by this Agreement or otherwise by law shall not exclude the exercise of any other right, privilege or remedy. IN WITNESS WHEREOF, the undersigned parties have caused this Agreement to be duly executed and their respective corporate seals to be hereunto affixed and attested on the date first stated above. ANCHOR NATIONAL LIFE INSURANCE COMPANY By: ----------------------- VARIABLE ANNUITY ACCOUNT TWO - T By: ANCHOR NATIONAL LIFE INSURANCE COMPANY By: ----------------------- VISTA BROKER-DEALER SERVICES, INC. By: ----------------------- EX-3.(A) 3 ARTICLES OF INCORPORATION 1 EXHIBIT (3)(A) FILED 4/12/65 ARTICLES OF INCORPORATION OF SIERRA-NEVADA LIFE INSURANCE COMPANY KNOW ALL MEN BY THESE PRESENTS: That we, the undersigned, have this day voluntarily associated ourselves together for the purpose of forming a corporation under the laws of the State of California, and WE HEREBY CERTIFY: ARTICLE I The name of the corporation shall be: SIERRA-NEVADA LIFE INSURANCE COMPANY. ARTICLE II That the primary purpose for which the corporation is formed is: To engage in the business of insurance as principal, and make contracts of life and endowment insurance, and grant, purchase or dispose of annuities or endowments of any kind; and in such contracts, or in contracts supplemental thereto, to provided additional benefits in the event of death of the insured by accidental means, total and permanent disability to the insured, or specified dismemberment or disablement suffered by the insured; to insure against loss or damage by the sickness, bodily injury or death by accident of the insured. In addition, to the specific lines herein provided, the corporation shall also be empowered to transact any kind or class of insurance which may now or hereafter be permitted to be written, insured or assumed by the corporation of this class and character. The corporation shall also have the following general powers: (a) To enter into contracts or treaties of reinsurance and coinsurance; (b) To purchase, rent, or otherwise acquire real estate and personal property; to sell, lease, mortgage, exchange or otherwise dispose of the same, in whole or in part; to take, hold, and manage every kind of property, real, personal or mixed; to convey or otherwise transfer the same or any part thereof; to rent and lease buildings and lands and all kinds of property from any and to any person whomsoever. (c) To purchase or otherwise acquire real and personal property of any and all kinds that may be lawfully held by a California insurance corporation, including, but not limited to, lands, leaseholds, shares of stock, bonds, mortgages, debentures, and other securities. (d) To lend money and take as security for loans, mortgages and deeds of trust, or either, of real property and pledges of personal property, as may be permitted by law. (e) To borrow money, and from time to time, accept, endorse, execute and issue bonds, debentures, promissory notes, bills of exchange and other obligations of the corporation for moneys borrowed or in payment for property acquired, or for any of the other objects or purposes of the corporation or its business and to secure the payment of any such obligation by mortgage, pledge, deed, indenture, agreement, or other instrument of trust, or by lien upon, assignment of, or agreement in regard to all or any part of the property rights or privileges of the corporation wherever situated, whether now owned or hereafter to be acquired. (f) To make, enter into, carry out and perform contracts of every kind and character with any person, firm, association, corporation, either public or private, municipal or body politic, and with the Government of the United States or any State thereof or any foreign country. (g) The foregoing clauses shall be liberally construed as to purposes and powers, and shall not be construed or held as limiting or restricting any purposes and powers of this corporation which are authorized, or granted, or which may be authorized or granted by the laws of the State of California. 2 ARTICLE III That Los Angeles County is the County in this State where the corporation shall maintain its principal office for the transaction of business. The corporation may, when deemed expedient by the Board of Directors, establish offices and transact business anywhere in the United States of America, the Dominion of Canada, the territories of either, and in foreign countries. ARTICLE IV The corporation is authorized to issue one class of stock, which shall be designated as common stock; the total number of shares which this corporation shall have authority to issue is 100,000 and the aggregate par value of all shares that are to be issued shall be $1,500,000.00, and the par value of each of said shares shall be $15.00. No holders of stock of the corporation shall have any preferential, pre-emptive or other rights to subscribe for or to purchase from the corporation any stock in the corporation of any class, whether or not now authorized, or other securities which the corporation may at any time issue. The common stock of the corporation shall not be assessed by any act of the corporation or its directors or officers, and when issued, shall be fully paid, and no holder of such stock shall be liable for any debts or liabilities of the corporation. ARTICLE V The Board of Directors shall consist of not less than five (5) members and not more than seven (7) members, the exact number of which shall be fixed by a by-law adopted by the shareholders or by the Board of Directors. The minimum and maximum number of Directors may be changed by a by-law duly adopted by the shareholders, provided, however, that the maximum number of Directors shall in no event exceed the minimum by more than two (2); the shareholders may also adopt a by-law providing for a definite number of Directors without provision for an indefinite number. The names and addresses of the persons who are hereby appointed to act as the first Directors of the corporation are:
Name Address - ---- ------- RICHARDS D. BARGER 2161 Adair Street, San Marino, California 91108 ALFRED B. DOUTRE 5471 Keats Street Los Angeles, California 90032 AGNES JOHNSON 611 Normandie Avenue Los Angeles, California 90005 HAUN CHAMBERLAIN 1015 East Lexington, Glendale, California 91206 GERRIE RUE 804 North Garfield Avenue Montebello, California 90540
IN WITNESS WHEREOF, for the purpose of forming this Corporation under the laws of the State of California, we, the undersigned, constituting the Incorporators of this Corporation, including the persons named hereinabove as the first Directors of this Corporation, have executed these Articles of Incorporation, the 6th day of April. 1963. /s/ Richards D. Barger ----------------------------------- Richards D. Barger /s/ Alfred B. Doutre ----------------------------------- 3 Alfred B. Doutre /s/ Agnes Johnson ----------------------------------- Agnes Johnson /s/ Haun Chamberlain ----------------------------------- Haun Chamberlain /s/ Gerrie Rue ----------------------------------- Gerrie Rue STATE OF CALIFORNIA ) ) SS County of Los Angeles ) On this 6th day of April, 1965, before me, the undersigned, a Notary Public in and for said County and State, personally appeared RICHARDS D. BARGER, ALFRED B. DOUTRE, AGNES JOHNSON, HAUN CHAMBERLAIN and GERRIE RUE, known to me to be the persons whose names are subscribed to the within Instrument and acknowledged to me that they executed the same. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal, the day and year in this Certificate first above written. /s/ Richard T. Griffin SEAL ----------------------------------- Notary Public in and for the County of Los Angeles, State of California My Commission Expires March 8, 1966. 4 FILED ENDORSED 7/14/65 CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION OF SIERRA-NEVADA LIFE INSURANCE COMPANY RICHARDS D. BARGER and WILLIAM M. POINDEXTER CERTIFY: (1) That they are the Vice-President and Secretary, respectively, of SIERRA-NEVADA LIFE INSURANCE COMPANY, a California corporation; (2) That at a meeting of the Board of Directors of said Corporation, duly held at Los Angeles, California, on the 8th day of July, 1965, the following resolution was adopted: RESOLVED: That ARTICLE I of the Articles of Incorporation of this Corporation be amended to read as follows: "The name of the Corporation shall be: "ANCHOR LIFE INSURANCE COMPANY". (3) That no shares have been issued by the Corporation, but RICHARDS D. BARGER has subscribed to purchase twenty thousand shares of the $15.00 par value stock of the Corporation, and he has consented, in writing, to the adoption of said Amendment and the form of the written Consent as follows: "The undersigned, being a subscriber to purchase 20,000 shares of the stock of SIERRA-NEVADA LIFE INSURANCE COMPANY, a California corporation, hereby consents to ARTICLE I of the Articles of Incorporation being amended to read as follows: 'ARTICLE I: 'The name of the Corporation shall be: 'ANCHOR LIFE INSURANCE COMPANY."' (4) That the total number of shares entitled to vote on or consent to said Amendment is 20,000 shares, said shares being subject to a Subscription Agreement from RICHARDS D. BARGER. /s/ Richards D. Barger ----------------------------------- Richards D. Barger, Vice-President /s/ William M. Poindexter ----------------------------------- William M. Poindexter, Secretary Each of the undersigned declares, under penalty of perjury, that the matters set forth in the foregoing Certificate are true and correct. EXECUTED at Los Angeles, California, this 8th day of July, 1965. /s/ Richards D. Barger ----------------------------------- Richards D. Barger, Vice-President /s/ William M. Poindexter ----------------------------------- William M. Poindexter, Secretary 5 FILED 12/1/66 CERTIFICATE OF OFFICERS OF ANCHOR LIFE INSURANCE COMPANY AS TO MERGER PROCEEDINGS The undersigned, JACK D. RICH AND RICHARDS D. BARGER, do hereby certify that they are and have been at all times hereinafter mentioned the duly elected and acting President and Assistant Secretary, respectively, of ANCHOR LIFE INSURANCE COMPANY, a California corporation, and do further hereby certify: (a) That a special meeting of the Board of Directors of said Corporation was duly held at 11:00 o'clock A.M. on September 19, 1966 at 40 Parker Road, Elizabeth, New Jersey, at which time there was at all times present and acting a quorum of said Board, to-wit, three (3) if the five (5) members thereof; (b) That at said meeting the following resolution was duly adopted: RESOLVED, that the Plan and Agreement of merger, ("Plan") between this Company and FIRST WESTERN LIFE ]INSURANCE COMPANY, in the form presented to this meeting and incorporated by this reference into this resolution as if fully set forth herein be, and the same hereby is, adopted and approved; and FURTHER, RESOLVED, that the Plan, in the form submitted to this meeting, be submitted to the Shareholders of the Company, and that the Board of Directors of this Company hereby calls a special meeting of the shareholders to be held at 40 Parker Rood, Elizabeth, New Jersey, on Monday, November 7, 1966, at 11:00 A.M., local time, for the purpose, among other purposes, of voting upon the proposed Plan, and the proper officers of the Company are hereby directed to send to each Shareholder entitled to vote at said meeting, a Notice of Special Meeting, Proxy Statement a copy of the Plan and Agreement of Merger, Pro Forma Balance Sheet of the Company, of FIRST WESTERN LIFE INSURANCE COMPANY and the combined Companies, as of the period ending June 30, 1966, and Proxies, all substantially in the form submitted to this meeting and approved hereby with such changes therein as the Chairman of the Company shall approve; and FURTHER RESOLVED, that September 26, 1966, shall be fixed as the record date for the determination of holders of the $15.00 par value Common Stock of the Company entitled to Notice of and to vote on such Plan, and that only such Shareholders of record at the close of business on such date shall be entitled to receive Notice of such meeting and to vote thereat; and FURTHER RESOLVED, that the Plan in the form approved by the Shareholders be submitted to the Insurance Commissioner of the State of California and Arizona for approval prior to its being filed with the Secretary of State of the State of California; and FURTHER RESOLVED, that the proper officers of the Company be, and each of then hereby is, authorized and empowered to do or cause to be done any act or thing, including the obtaining of the consent, approval or authority of any State regulatory body which may be requisite or proper in the premises, and to make, execute and deliver and file any contract, agreement, document, or other instrument which any such person may in his sole discretion, deem necessary proper or advisable to effectuate and carry out the purposes and intentions of the foregoing resolutions. (c) That the vote in favor of said resolution was unanimous; (d) That a special meeting of the Shareholders of said Corporation was duly held at 11:00 o'clock A.M., on November 7, 1966, at 40 Parker Road, Elizabeth, New Jersey; that as said meeting the terms and conditions of said Plan and Agreement of Merger, referred to in said resolution of the of Directors, were approved by a vote of 20,000 common shares, constituting a vote of not less than 2/3rds of the issued and outstanding shares of each Class of stock of said Corporation; 6 (e) That the total number of outstanding common shares of the Corporation is 20,000, constituting the total number of outstanding shares of all classes of stock of said Corporation; (f) That Notice of the time and place and purpose of said special meeting of Shareholders was mailed to each Shareholder not less than twenty (20) days prior to said meeting; that with such Notice there was mailed a statement of the general terms o the proposed Plan and Agreement of Merger, and a copy of said Plan Agreement of Merger; (g) That the name of the surviving corporation is ANCHOR LIFE INSURANCE COMPANY and upon the filing of the within certificate and attached Plan and Agreement of Merger with the Secretary of State of the State of California, the name of the surviving corporation shall be ANCHOR NATIONAL LIFE INSURANCE COMPANY. (h) That the Plan and Agreement of Merger between ANCHOR LIFE INSURANCE COMPANY and FIRST WESTERN LIFE INSURANCE COMPANY merging said FIRST WESTERN LIFE INSURANCE COMPANY into ANCHOR LIFE INSURANCE COMPANY, filed with the Secretary of State of the State of California concurrently with this Certificate, pursuant to the provisions of Sec. 4113 of the Corporations Code, is the Plan and Agreement of Merger hereinabove referred to, and sets forth the terms and conditions approved by said resolution of the Directors and vote of the Shareholders. (i) That the Plan and Agreement of Merger between ANCHOR LIFE INSURANCE COMPANY and FIRST WESTERN LIFE INSURANCE COMPANY, as hereinbefore described in this Certificate, has been approved by the Commissioners of Insurance of the States of Arizona and California under the applicable statutes, rules and regulations of said States; and all acts of both corporations to effectuate the merging of FIRST WESTERN LIFE INSURANCE COMPANY into ANCHOR LIFE INSURANCE COMPANY have been completed pursuant to the Plan and Agreement of Merger. IN WITNESS WHEREOF, the undersigned have executed this Certificate, this 30th day of November, 1966. /s/ [unreadable] ----------------------------------- President Anchor Life Insurance Company /s/ [unreadable] ----------------------------------- Assistant Secretary Anchor Life Insurance Company 7 STATE OF CALIFORNIA ) ) ss. County of Los Angeles ) JACK D. RICH and RICHARDS D. BARGER, being first duly sworn, depose and say: That they are, respectively, the President and Assistant Secretary of ANCHOR LIFE INSURANCE COMPANY, a corporation, the corporation named in the CERTIFICATE OF OFFICERS AS TO MERGER PROCEEDINGS attached hereto; that they make this verification individually and are authorized to make this verification for and on behalf of said Corporation; that they have read the foregoing CERTIFICATE OF OFFICERS AS TO MERGER PROCEEDINGS and know the contents thereof; that the same is true of their own knowledge, except as to those matters which are therein stated on their information or belief, and as to those matters they believe it to be true. /s/ Jack D. Rich ----------------------------------- JACK D. RICH /s/ Richard D. Barger ----------------------------------- RICHARDS D. BARGER Subscribed and sworn to before me this 30th day of November, 1966 /s/ [unreadable] - ------------------------------------- Notary Public in and for said County and State My Commission expires October 18, 1970 [SEAL] 8 Na. chg. to ANCHOR NATIONAL LIFE INSURANCE COMPANY FILED 12/1/66 ANCHOR LIFE INSURANCE COMPANY FIRST WESTERN LIFE INSURANCE COMPANY PLAN AND AGREEMENT OF MERGER THIS PLAN AND AGREEMENT OF MERGER (hereinafter referred to as the "Plan and Agreement") entered into by and between. ANCHOR LIFE INSURANCE COMPANY, a California insurance corporation, (hereinafter sometimes referred to as "ANCHOR LIFE"), and FIRST WESTERN LIFE INSURANCE COMPANY, an Arizona insurance corporation, (hereinafter sometimes referred to as "FIRST WESTERN"); W I T N E S S E T H: WHEREAS, ANCHOR LIFE has on the date hereof an authorized capital consisting of 100,000 shares of Common Stock, $15.00 par value, of which on the date hereof 20,000 shares are issued and outstanding, and 10,000 shares are reserved for issuance on the exercise of an option granted to ANCHOR CORPORATION, a Delaware corporation; and WHEREAS, FIRST WESTERN has, on the date hereof, an authorized capital of 20,000,000 shares of Class "A" (non-voting) Stock and 5,000,000 shares of Common (voting) Stock each having a par value of 21 cents per share, of which, on the date hereof, 707,650 shares of the Class "A' Stock are issued outstanding, and 225,000 shares of the Class "A" Stock are reserved for issuance on the exercise of options granted by FIRST WESTERN to its President and Executive Vice President, and 500,000 shares of the Common Stock are issued and outstanding; and WHEREAS, ANCHOR LIFE and FIRST WESTERN have the same officers and directors, said directors being five in number, and said officers consisting of a Chairman of the Board, President, Executive Vice President, Secretary-Treasurer, an Assistant Treasurer and two Assistant Secretaries; and WHEREAS, ANCHOR LIFE and FIRST WESTERN (herein sometimes collectively referred to as the "Constituent Corporations") are legal reserve, capital stock life insurance corporations, and are engaged generally in the business of writing life insurance, health, accident and sickness insurance, annuities and other lines of insurance connected therewith; and WHEREAS, it is proposed to merge FIRST WESTERN with and into ANCHOR LIFE; and WHEREAS, the Boards of Directors of the Constituent Corporations have concluded that it is to the mutual advantage of the Stockholders and Policyholders of the Constituent Corporations that such a merger be effected, and that the Plan and Agreement is fair, just and equitable and in the best interests of such Stockholders and Policyholders; and WHEREAS, the Plan and Agreement has been duly approved by the Boards of Directors of FIRST WESTERN and ANCHOR LIFE as required by law; NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth, and for other good and valuable consideration, it is hereby agreed that FIRST WESTERN shall be merged with and into ANCHOR LIFE as a single corporation (which shall be the surviving corporation and is hereinafter sometimes referred to as the "CORPORATION"), to be governed by the laws of the State of California, and that the terms and conditions of such merger and the mode of carrying it into effect shall be as follows: I. Submission to Stockholders. The Plan and Agreement shall promptly be submitted to the Stockholders of the Constituent Corporations in the manner provided by the laws of the States of Arizona and California, respectively, upon such notice and publication as shall be required under such laws, and if the votes of the Stockholders representing, in the case of 9 ANCHOR LIFE, not less than two thirds of the total number of shares of its Common Stock issued and outstanding and entitled to vote thereon and, in the case of FIRST WESTERN, not less than two-thirds of the total number of shares of Class "A" Stock issued and outstanding and entitled to vote thereon and not less than two-thirds of the total number of shares of Common Stock, issued and outstanding and entitled to vote thereon, shall be for the adoption of the Plan and Agreement, then the Plan and Agreement shall be certified, signed, sealed and acknowledged, as provided in the applicable laws of such States, and the further covenants hereof shall become immediately effective. Any notices required by applicable law shall be mailed to Stockholders promptly after such adoption. If the Stockholders of either of the Constituent Corporations do not so adopt the Plan and Agreement then the Plan and Agreement shall thereupon terminate, without further action by any person. II. Application for Governmental Approvals. The Constituent Corporations shall take every reasonable and necessary step and action, including the preparation and filing of all necessary documents and papers to comply with and to secure such approval as may be required by the statutes, rules and regulations of such States and agencies thereof, the approval of which is necessary or desirable in order to effect and facilitate the merger contemplated hereby. Ill. Terms and Conditions and Mode of Carrying, the Merger into Effect. The merger contemplated hereby shall become effective on the first day of the month following the later of the performance of the last act, or the obtaining of the last approval, required to complete the same under the applicable statutes, rules and regulations of California and Arizona. (such date being herein referred to as the "Effective Date"). On the Effective Date: (a) FIRST WESTERN shall be merged with and into ANCHOR LIFE, the separate existence of FIRST WESTERN shall cease, and the CORPORATION shall continue in existence as a corporation incorporated under the laws of California; (b) The CORPORATION shall thereupon and thereafter, without other transfers, to the extent permitted by law, possess all the rights, privileges, immunities, powers and franchises of a public as well as of a private nature of each of the Constituent Corporations, and all assets and property, real and personal and mixed, and all issued and outstanding insurance policies, and all debts due on whatever account, including subscriptions to shares of capital stock and all other chosen in action and all and every other interest, of or belonging to or due to each of the Constituent Corporations so merged shall be taken and deemed to be transferred to and vested in the CORPORATION without further act or deed; and title to any real estate, or any interest therein, vested in either of the Constituent Corporations shall not revert or be in my way impaired by reason of such merger. In furtherance, and not in limitation of the foregoing: (i) All leases, accounts receivable, agency balances, claims and credits of any and all kinds, as well as all books, records, claim files, application files, agency lists, policyholder lists and prospect lists of FIRST WESTERN shall become the absolute property of the CORPORATION, without the necessity of execution of assignments, deeds, conveyances, bills of sale or other documents transferring title; and (ii) The CORPORATION shall succeed to all rights in any and all outstanding contracts and franchises and licenses of FIRST WESTERN, and all property insurance policies and fidelity bonds covering FIRST WESTERN shall inure to the benefit of the CORPORATION and such policies shall be endorsed accordingly as requested; and (c) The CORPORATION shall thenceforth be responsible and liable for all the liabilities and obligations of each of the Constituent Corporations in the same manner and to the same extent as if the CORPORATION had itself incurred the same or contracted therefor; and any claim existing or action or proceeding pending by or against either of the Constituent Corporations, whether civil or criminal, may be prosecuted to judgment as if such merger had not taken place, or the CORPORATION may be substituted in its place. Neither the rights of creditors nor any liens upon the property of either of the Constituent, Corporations so merged shall be impaired by such 10 merger, but such liens shall be limited to the property upon which they were liens immediately prior to the time of such merger. (d) The assets and liabilities of FIRST WESTERN shall be taken up or continued an the books of the CORPORATION in the amounts at which such assets and liabilities shall be carried on the books of FIRST WESTERN as of the Effective Date, and the capital and surplus appearing on the books of FIRST WESTERN shall be entered and continued on the books of the CORPORATION as capital to the extent of the par value of the shares of stock of the CORPORATION issuable to the Stockholders of FIRST WESTERN as a result of the merger, and the balance as surplus; (e) On the Effective Date each issued and outstanding share of Common Stock of ANCHOR LIFE shall continue to be issued and outstanding Common Stock of the CORPORATION; and each share of issued and outstanding Class "A" (non-voting) Stock and Common Stock (voting) of FIRST WESTERN shall be converted into issued and outstanding shares of the Common Stock of the CORPORATION, on the basis described in Section IV hereof. IV. Conversion of Shares of Stock of First Western. The manner of converting the shares of FIRST WESTERN into shares of the CORPORATION shall be as follows: (a) Seventy-seven (77) shares of the issued and outstanding Common Stock (voting) and/or the Class "A" (non-voting) Stock of FIRST WESTERN shall, on the Effective Date, without any action on the part of the holder thereof and without any further action on the part of the CORPORATION or any officers thereof, automatically become and be converted into one share of the Common Stock of the CORPORATION; subject, however, to the provisions of paragraphs (b) and (c) of this Section IV. (b) No fractional shares of the capital stock of the CORPORATION shall be issued as a result of the merger contemplated hereby, and in the event the conversion of shares on the basis described herein results in any Stockholder of FIRST WESTERN being entitled to a fractional interest in the Common Stock of the CORPORATION, such Stockholder shall be given the option to sell such fractional interest or to purchase an additional fractional interest in the amount necessary to make a whole share. The CORPORATION shall act as Agent for such Stockholders in purchasing or selling such fractional interests, and any such Stockholder entitled to a fractional interest who shall not elect to purchase an additional fractional interest for consolidation, after the expiration of 10 days written notice from the CORPORATION of his right to do so, shall be deemed to have elected to sell his fractional interest. The Agent shall offset purchase and sell order with respect to fractional interests to the extent practicable. (c) After the Effective Date each holder of a Certificate representing outstanding shares of FIRST WESTERN Class "A" Stock (non-voting) or Common Stock (voting), (other than those to which Section VI hereof is applicable) shall be entitled, upon surrender of such Certificate or Certificates, to receive in exchange therefor a Certificate or Certificates issued by the CORPORATION representing the number of full shares of the Common Stock of the CORPORATION to which he is entitled in accordance with the Plan and Agreement. Until so surrendered, each outstanding Certificate which, prior to the Effective Date of the merger, represented shares of FIRST WESTERN stock, shall be deemed for all corporate purposes to evidence the ownership of such number of full shares of Common Stock of the CORPORATION to which the holder in entitled upon the exchange of such Certificate. (d) The CORPORATION shall be entitled to rely on the Stock Register of FIRST WESTERN to the same extent as if the same were its own Stock Register. V. Shares of Stock of the Corporation. Except as provided in Section VI, the shares of capital stock of ANCHOR LIFE which were outstanding immediately prior to the Effective Date shall remain outstanding, and shall not be affected by the merger. Stock options outstanding at the Effective Date which were previously granted by ANCHOR LIFE shall remain outstanding. VI. Dissenting Shareholders. On the Effective Date any Stockholder of FIRST WESTERN or of ANCHOR LIFE who properly shall have objected to the merger contemplated hereby in accordance with the applicable 11 provisions of the Arizona and California statutes, respectively, and who shall properly demand payment of the value of his shares as provided in said statute or statutes, shall thereafter have only such right; as are provided for such dissenting Stockholders in the applicable statute or statutes. VII. Stock Options. The outstanding Stock Options previously granted by FIRST WESTERN to its officers for the purchase of its Class "A" (non-voting) Stock shall be assumed by the CORPORATION at the Effective Date. The number of shares of Common Stock of the CORPORATION to which such assumed option agreements shall relate shall be the largest whole number obtained by dividing the number of shares of Class "A" (non-voting) Stock of FIRST WESTERN to which such option related immediately prior to the merger by seventy-seven (77) and the option price shall be the option price relating to such option immediately prior to the Effective Date multiplied by seventy-seven (77). VIII. Articles of Incorporation, By-Laws, Officers of the Surviving Corporation. On the Effective Date: (a) Article I of the Articles of Incorporation of ANCHOR LIFE, as amended. shall be amended on the Effective Date to read as follows: "1. ARTICLE I. The name of the Corporation shall be ANCHOR NATIONAL LIFE INSURANCE COMPANY." As so amended such Articles shall be the Articles of Incorporation of the CORPORATION until further amended. (b) The By-Laws of ANCHOR LIFE in effect immediately prior to the Effective Date shall continue to be the By-Laws of the CORPORATION until further amended. (c) The officers of ANCHOR LIFE in office immediately prior to the Effective Date shall continue to be the officers of the CORPORATION until its Board of Directors shall otherwise determine. (d) The directors of ANCHOR LIFE in office immediately prior to the Effective Date shall be the directors of the CORPORATION and all such directors shall serve as provided in the By-Laws of the CORPORATION. IX. Fees and Commissions. No director or officer of either FIRST WESTERN or ANCHOR LIFE shall receive any fee, commission or other compensation whatever, directly or indirectly, not herein specifically provided, for in any manner aiding, promoting or assisting in the merger contemplated, except for services actually rendered and only to the extent permitted by law. X. Assumption Certificate. The CORPORATION, as soon after the Effective Date as practicable, shall send to each Policyholder of FIRST WESTERN a Certificate of assumption, evidencing the obligation of the CORPORATION to assume the liabilities of FIRST WESTERN in accordance with the terms and conditions of the respective policies of insurance and the provisions hereof, said Certificate of assumption to be in such form and to contain such terms and conditions as approved by the insurance supervisory officials of California and Arizona. XI. Miscellaneous. (a) The Plan and Agreement may be executed in one more counterparts, each of which shall be considered an original; (b) Each of the Constituent Corporations shall cause to be executed and delivered such further and additional documents as may from time to time be required by law or which may be reasonably necessary or convenient for the purpose of consummating the merger contemplated hereby; (c) At any time before the Effective Date the merger contemplated hereby may be abandoned by resolution of the Board of Directors of either of the Constituent Corporations. In such event, the Plan and Agreement shall thereupon terminate without any further action by any person, and such termination shall be without liability on the part of either of the Constituent Corporations, their shareholders, directors or officers; 12 (d) For accounting purposes only, all accounting entries and adjustments necessitated by the merger contemplated hereby shall be made on the books of the CORPORATION as of the close of business on the day immediately preceding the Effective Date of merger. IN WITNESS WHEREOF, pursuant to authority duly given by the respective Boards of Directors of the Constituent Corporations, this Plan and Agreement of Merger is hereby executed this 19th day of September, 1966, on behalf of the Constituent Corporations, by their respective Chairmen of the Board or Presidents and attested to by their respective Secretaries, or one of their respective Assistant Secretaries. ANCHOR LIFE INSURANCE COMPANY By /s/ [unreadable] ---------------------------- Chairman of the Board By /s/ [unreadable] ---------------------------- President ATTEST: /s/ [unreadable] - ------------------- Secretary By /s/ [unreadable] ---------------------------- Assistant Secretary FIRST WESTERN LIFE INSURANCE COMPANY By /s/ [unreadable] ---------------------------- Chairman of the Board By /s/ [unreadable] ---------------------------- President ATTEST: /s/ [unreadable] - ------------------- Secretary By /s/ [unreadable] ---------------------------- Assistant Secretary 13 STATE OF ARIZONA ) ) ss County of Maricopa ) On the 19th day of September, 1966, before me, a Notary Public in and for said County and State, personally appeared EDWARD B. BURR, known to me to be the Chairman, JACK D. RICH, known to me to be the President, MELVIN INTRILIGATOR, known to me to be the Secretary, and RICHARDS D. BARGER, known to me to be the Assistant Secretary, of ANCHOR LIFE INSURANCE COMPANY, the Corporation that executed the within Plan and Agreement of Merger, known to me to be the persons who executed the within Certificate on behalf of the Corporation therein named, and acknowledged to me that such Corporation executed the same pursuant to its By-Laws or a resolution of its Board of Directors. WITNESS my hand and official seal. /s/ Jerry J. Moorhead -------------------------------- Jerry J. Moorhead Notary Public in and for said County and State My Commission Expires April 8, 1969 14 STATE OF ARIZONA ) ) ss County of Maricopa ) On the 19th day of September, 1966, before me, a Notary Public in and for said County and State, personally appeared EDWARD B. BURR, known to me to be the Chairman, JACK D. RICH, known to me to be the President, MELVIN INTRILIGATOR, known to me to be the Secretary, and RICHARDS D. BARGER, known to me to be the Assistant Secretary, of FIRST WESTERN LIFE INSURANCE COMPANY, the Corporation that executed the within Plan and Agreement of Merger, known to me to be the persons who executed the within Certificate on behalf of the Corporation therein named, and acknowledged to me that such Corporation executed the same pursuant to its By-Laws or a resolution of its Board of Directors. WITNESS my hand and official seal. /s/ Jerry J. Moorhead -------------------------------- Jerry J. Moorhead Notary Public in and for said County and State My Commission Expires April 8, 1969 15 BEFORE THE DEPARTMENT OF INVESTMENT DIVISION OF CORPORATIONS OF THE STATE OF CALIFORNIA In the matter of the application of ) CERTIFICATION OF LACK OF ) NECESSITY OF PERMIT FROM ANCHOR LIFE INSURANCE COMPANY ) THE COMMISSIONER OF for a certificate. ) CORPORATIONS FILE No. ALPHA Receipt No. LA 377581 I. JERALD S. SCHUTZBANK , Commissioner of Corporations of the state of California, do hereby certify that in my opinion a permit from the Commissioner of Corporations is not required under the provisions of the Corporate Securities Law in the matter of the proposed merger agreement, by and between FIRST WESTERN LIFE INSURANCE COMPANY, an Arizona corporation, and ANCHOR LIFE INSURANCE COMPANY, California corporation. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal this 16th day of November 1966, at Los Angeles, California. JERALD S. SCHUTZBANK Commissioner of Corporations By /s/ Michael J. Brody ----------------------------- MICHAEL J. BRODY Senior Corporations Counsel 16 Cap Stock cha fr $1,500,000 to $1,100,000 FILED 12/22/67 CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION MELVIN INTRILIGATOR and ROGER T. WICKERS certify: 1. That they are the Vice President and the Secretary, respectively, of ANCHOR NATIONAL LIFE INSURANCE COMPANY, a California Corporation. 2. That at a meeting of the Board of Directors of said Corporation, duly held at Elizabeth, New Jersey, on the 2nd day of November, 1967, the following resolution was adopted: NOW, THEREFORE, BE IT RESOLVED, that the first paragraph of the ARTICLES of INCORPORATION of this Corporation be amended to read as follows: ARTICLE IV "The Corporation is authorized to issue one class of stock, which shall be designated as Common Stock; the total number of shares which this Corporation shall have authority to issue is 100,000, and the aggregate par value of all shares that are to be issued shall be One Million One Hundred Thousand Dollars ($1,100,000.00), and the par value of each of said shares shall be Eleven Dollars ($11.00), and upon effective date of this Amendment each outstanding $15.00 share is converted into one $11.00 share." 3. That at a meeting of the shareholders of said Corporation, duly held at Elizabeth, New Jersey, an the 19th day of December, 1967, a resolution was adopted, which resolution is identical in form to the directors' resolution set forth in paragraph 2 above. 4. That the number of shares which voted affirmatively for the adoption of said resolution was 41,270; that no shares were voted against the adoption of said resolution; and that the total number of shares entitled to vote on or consent to said amendment was 48,221. 5. That upon the of Amendment of Articles of Incorporation as hereinabove set forth, each outstanding share of a par value of $15.00 is converted into and reconstituted as one share of Common Stock of a par value of $11.00. STATE OF NEW JERSEY ) ) ss. COUNTY OF UNION ) MELVIN INTRILIGATOR and ROGER T. WICKERS being each first duly sworn, depose and say: That they are the Vice President and Secretary, respectively, of ANCHOR NATIONAL LIFE INSURANCE COMPANY and that they have read the foregoing Certificate of Amendment of Articles of Incorporation of ANCHOR NATIONAL LIFE INSURANCE COMPANY and know the contents thereof, and that the same is true of their own knowledge. /s/ Melvin Intriligator ----------------------------------- Melvin Intriligator, Vice President /s/ Roger T. Wickers ----------------------------------- Roger T. Wickers, Secretary 17 Subscribed and sworn to before me this 19th day of December, 1967. /s/ Elizabeth A. Gallagher - ---------------------------------- Notary Public in and for said County and State My Commission expires on December 8, 1971 [SEAL] 18 FILED 6/20/68 Aggregate par value chg from $1,100,000 to $1,080,000 CERTIFICATE OF AMENDMENT OF ARTICLES OR INCORPORATION MELVIN INTRILIGATOR and ROGER T. WICKERS certify: 1. That they are the Vice President and the Secretary, respectively, of ANCHOR NATIONAL LIFE INSURANCE COMPANY, a California corporation. 2. That at a meeting of the Board of Directors of said Corporation held at Elizabeth, New Jersey on the 10th day of June, 1963, the following resolutions were adopted: "NOW, THEREFORE, BE IT RESOLVED, that this Board of Directors does hereby propose and declare it advisable that the first paragraph of Article IV of the Articles of Incorporation be amended to read as follows: 'The Corporation is authorized to issue one class of stock, which shall be designated as Common Stock; the total number of shares which this Corporation shall have authority to issue is 300,000, and the aggregate par value of all shares that are to be issued shall be One Million Eighty Thousand Dollars ($1,080,000.), and the par value of each of said a shares shall be Three Dollars and Sixty Cents ($3.60), and, upon the effective date of this Agreement, each outstanding share of the Common Stock of the par value of $11.00 per share is converted into three shares of the par value of Three Dollars and Sixty Cents ($3.60) per share.' "and be it further "RESOLVED, that the aforesaid amendment of the Article IV of the Articles of Incorporation be submitted to the stockholders of this Corporation, as hereinafter provided, for their approval, subject to approval by the California Insurance Commissioner." 3. That at a meeting of the stockholders of said Corporation held at Elizabeth, New Jersey, an the 20th day of June, 1968, a resolution was adopted, subject to the approval of the California Insurance Commissioner, amending the first paragraph of Article IV of the Articles of Incorporation of Anchor National Life Insurance Company in identical form as set forth in paragraph 2 above. 4. That the number of shares which voted affirmatively for the adoption of said resolutions was 36,795 shares; that no shares were voted against the adoption of said resolutions; and that the total number of shares entitled to vote on or consent to said amendment was 48,266. 5. That upon the Amendment of Articles of Incorporation as hereinabove set forth, each outstanding share of a par value of $11.00 is converted into and reconstituted as three shares of Common Stock of a par value of $3.60. /s/ Melvin Intriligator ---------------------------------------- Melvin Intriligator, Vice President /s/ Roger T. Wickers ---------------------------------------- Roger T. Wickers, Secretary 19 STATE OF NEW JERSEY ) ) ss. COUNTY OF UNION ) MELVIN INTRILIGATOR and ROGER T. WICKERS, being such first duly sworn, depose and say: That they are the Vice President and Secretary, respectively, of ANCHOR NATIONAL LIFE INSURANCE COMPANY and that they have read the foregoing Certificate of Amendment of Articles of Incorporation of ANCHOR NATIONAL LIFE INSURANCE COMPANY and know the contents thereof, and that the same is true of their own knowledge. /s/ Melvin Intriligator ----------------------------------- Melvin Intriligator, Vice President /s/ Roger T. Wickers ----------------------------------- Roger T. Wickers, Secretary Subscribed and sworn to before me this 20th day of June, 1968 /s/ [unreadable] - ---------------------------------- Notary Public in and for Union County, State of New Jersey. My Commission expires on September 22, 1972 [SEAL] 20 FILED 12/31/68 CERTIFICATE OF OFFICERS OF ANCHOR NATIONAL LIFE INSURANCE COMPANY AS TO MERGER PROCEDURES The undersigned, MELVIN INTRILIGATOR and ROGER T. WICKERS, do hereby certify that they are and have been at all times hereinafter mentioned the duly elected and acting Vice President-Treasurer and Secretary, respectively, of ANCHOR NATIONAL LIFE INSURANCE COMPANY, a California corporation, and do further hereby certify: (a) That a special meeting of the Board of Directors of said corporation was duly held at 10:00 o'clock a.m. on October 16, 1968, at 40 Parker Road, Elizabeth, New Jersey, at which time there was all times present and acting a quorum of said Board, to- wit, there (3) of the five (5) members thereof; (b) That at said meeting the following resolution was duly adopted: RESOLVED, that the Plan and Agreement of Merger, ("Plan") between this company and THE SELECTIVE LIFE INSURANCE COMPANY, in the form presented to this meeting and incorporated by this reference into this resolution as if fully set forth herein be, and the same hereby is, adopted and approved; and FURTHER RESOLVED, that the Plan, in the form submitted to this meeting, be submitted to the Shareholders of the company hereby calls a special meeting of the shareholders to be held at 40 Parker Road, Elizabeth, New Jersey, on Friday, November 22, 1968, at 10:00 a.m., local time, for the purpose, among other purposes, of voting upon the proposed Plan, and the proper officers of the company are hereby directed to send to each Shareholder entitled to vote at said meeting, a Notice of Special Meeting, Proxy Statement and Proxy, a copy of the form of Plan and Agreement of Merger and related Agreement between the company, ANCHOR CORPORATION and BANKERS UNITED LIFE ASSURANCE COMPANY, the unaudited Balance Sheet of the company as of June 30, 2968, the unaudited Balance Sheet of THE SELECTIVE LIFE INSURANCE COMPANY as of June 30, 1968, and the unaudited pro form Balance Sheet of the company and THE SELECTIVE LIFE INSURANCE COMPANY reflecting the combined balance sheets of the company and THE SELECTIVE LIFE INSURANCE COMPANY had the proposed merger taken effect on June 30, 1968, all substantially in the form submitted to this meeting and approved hereby, with such changes therein as the Chairman of the company shall approve; and FURTHER RESOLVED, that October 31, 1968, shall be fixed as the record date for the determination of holders of the $3.60 per value Common Stock of the company entitled to Notice of and to vote on such Plan, and that only such shareholders of record at the close of business on such date shall be entitled at; and FURTHER RESOLVED, that the Plan is the form approved by the shareholders be submitted to the Insurance Commissioner of the State of California, and any other state deemed appropriate by the officers of the company, for approval prior to its being filed with the Secretary of State of the State of California; and FURTHER RESOLVED, that the proper officers of the company be, and each of them hereby is, authorized and empowered to do or cause to be any act or thing, including the obtaining 21 of the approval or authority of any state regulatory body which may be requisite or proper in the premises, and to make, execute and deliver and file any contract, agreement, document, or other instrument which any such person may, is his sole discretion, deem necessary, proper or advisable to effectuate and carry out the purposes and of the foregoing resolutions. (c) That the vote in favor of said resolution was unanimous; (d) That a special meeting of the shareholders of said corporation was duly held at 10:00 o'clock a.m., on November 22, 1968, at 40 Parker Road, Elizabeth, New Jersey; that at said meeting the terms and conditions of said Plan and Agreement of Merger, refused to is said resolution of the Board of Directors, were approved by a vote of 165,021 common shares, constituting a vote of not less than 2/3rds of the issued and outstanding shares of each class of stock of said corporation: (e) That the total number of outstanding common shares of the corporation is 165,021, constituting the total number of outstanding shares of all classes of stock of said corporation; (f) That Notice of the time and place and purpose of said special meeting of shareholders was mailed to each shareholder not less than twenty (20) days prior to said meeting; that with such Notice there was mailed a statement of the general terms of the proposed Plan and Agreement of Merger, and a copy of said Plan and Agreement of Merger; (g) that the name of the surviving corporation is ANCHOR NATIONAL LIFE INSURANCE COMPANY; and (h) that the Plan and Agreement of Merger between ANCHOR NATIONAL LIFE INSURANCE COMPANY and THE SELECTIVE LIFE INSURANCE COMPANY, filed with the Secretary of State of the State of California concurrently with this Certificate, pursuant to the provisions of Sec. 4111 of the Corporation Code, is the Plan and Agreement of Merger heretoabove referenced to, and sets forth the terms and conditions approved by said resolution of the directors and vote of the shareholders. IN WITNESS WHEREOF, the undersigned have executed this Certificate this 18th day of December, 1968. /s/ Melvin Intriligator ----------------------------------- Melvin Intriligator Vice President and Treasurer /s/ Roger T. Wickers ----------------------------------- Roger T. Wickers, Secretary STATE OF NEW JERSEY ) ) ss: COUNTY OF UNION ) MELVIN INTRILIGATOR, being first duly sworn, deposes and says that he is the Vice President and Treasurer of ANCHOR NATIONAL LIFE INSURANCE COMPANY, executing the foregoing CERTIFICATE OF OFFICERS OF ANCHOR NATIONAL LIFE INSURANCE COMPANY AS TO MERGER PROCEEDINGS on behalf of said Company, and that all the statements contained is said Certificate are true. /s/ Melvin Intriligator ------------------------------- Melvin Intriligator Subscribed and sworn to before me this 18th day of December, 1968. 22 /s/ Elizabeth A. Gallegher - ---------------------------------- Elizabeth A. Gallegher Notary Public in and for said County and State [SEAL] STATE OF NEW JERSEY ) ) ss: COUNTY OF UNION ) ROGER T. WICKERS, being first duly sworn, deposes and says that he is the Secretary of ANCHOR NATIONAL LIFE INSURANCE COMPANY, executing the foregoing CERTIFICATE OF OFFICERS OF ANCHOR NATIONAL LIFE INSURANCE COMPANY AS TO MERGER PROCEDURES on behalf of said Company, and that all the statements contained in said Certificate are true. /s/ Roger T. Wickers -------------------------- Roger T. Wickers Subscribed and sworn to before me this 18th day of December, 1968. /s/ Elizabeth A. Gallegher - ---------------------------------- Elizabeth A. Gallegher Notary Public in and for said County and State 23 FILED 12/31/68 ANCHOR NATIONAL LIFE INSURANCE COMPANY THE SELECTIVE LIFE INSURANCE COMPANY PLAN AND AGREEMENT OF MERGER 24 ANCHOR NATIONAL LIFE INSURANCE COMPANY THE SELECTIVE LIFE INSURANCE COMPANY PLAN AND AGREEMENT OF MERGER PLAN AND AGREEMENT OF MERGER (hereinafter referred to as the "Agreement") entered into as of the 31st day of October, 1968, by and between ANCHOR NATIONAL LIFE INSURANCE COMPANY, a California insurance corporation, (hereinafter sometimes referred to as "Anchor Life") and THE SELECTIVE LIFE INSURANCE COMPANY, an Illinois insurance corporation, (hereinafter sometimes referred to as "Selective"). WHEREAS, Anchor Life and Selective are legal reserve capital stock life insurance corporations and are engaged generally in the business of writing life insurance, health, accident and sickness insurance, annuities and other lines of insurance connected therewith; and WHEREAS, it is proposed to merger Selective with and into Anchor Life; and WHEREAS, the boards of directors of Anchor Life and Selective have concluded that it is to the mutual advantage of the stockholders and policyholders of said corporations that such a merger be effected, and that the Agreement is fair, just and equitable, and in the best interests of such stockholders and policyholders; and WHEREAS, the Agreement has been duly approved by the boards of directors of Anchor Life and Selective as required by law; NOW, THEREFORE, this Agreement W I T N E S S E T H : that in consideration of the mutual promises hereinafter set forth end for other good and valuable considerations, it is hereby agreed that Selective shall be merged with and into Anchor Life, which shall be the surviving corporation (and is hereinafter sometimes referred to as the "Corporation"), to be governed by the laws of the State of California, and that the terms and conditions of such merger and the mode of carrying it into effect shall be as follows: FIRST: Representations of Selective. Selective represents and warrants as follows: 1. Selective is an insurance corporation duly organized and existing and in good standing under the laws of the State of Illinois, having an authorized capital consisting of 600,000 shares of Common Stock, of a par value of $1.00 per share, of which, on the date hereof, 413,075 shares are issued and outstanding, and there are not outstanding options of the purchase of such stock. 2. The unaudited financial statements of Selective as of June 30, 1968, heretofore furnished to Anchor Life, present fairly the financial condition of Selective as at the date hereof and the results of its operations for the period then ended, and are in conformity with the statutes of Illinois applicable to life insurance companies and the applicable rules and regulations thereunder; and the list of the assets and the location thereof as of September 30, 1968, heretofore or herewith furnished to Anchor Life, is in all respects true and correct. 3. Since June 30, 1968, there has been no material adverse change in the condition (financial or otherwise), or in the assets, liabilities or business of Selective from those set forth or reflected in the financial statements referred to in subparagraph (2) hereof; there has been no damage, destruction, extraordinary death claims, or any other loss materially and adversely affecting the business, prospects or property of Selective; and as of the Effective Date there will have been no such change; provided, however, that : (a) the transfer, assignment, assumption by another insurance company, or other removal of the insurance in force on the books of Selective shall not be deemed to be a material adverse change; and (b) not 25 change shall be deemed to be material and adverse if, notwithstanding such change, Selective shall have on the Effective Date assets of the amount and character described in paragraph 10 of this Article FIRST. 4. Since June 30, 1968, there has been no change in the capitalization of Selective; and between the date of this agreement and the Effective Date, Selective will not issue any additional shares of its Common Stock or grant options with respect thereto, and will not purchase any shares of its Common Stock. 5. At June 30, 1968, Selective did not have, and as of the Effective Date it will not have, any liability not included or provided for in the financial statements as at that date heretofore referred to or which shall have been thereafter incurred in the ordinary course of business and shall have no material adverse effect on the business or property of Selective; and the amounts set up as policy reserves and valuation reserves are sufficient and as of the Effective Date will be sufficient and as of the Effective Date will be sufficient for their respective purposes; and the reserves for federal taxes as of the same date, together with all refunds to be received, will be sufficient for the payment of all unpaid federal, state and local taxes, for all fiscal years and periods prior to the Effective Date. Selective has filed all federal, state, county and local tax returns which are required to be filed by it, and such returns are true and correct. 6. Selective has and will on the Effective Date have good title to all of its properties and assets, including those reflected in the financial statements hereinbefore referred to, and such properties and assets are subject to no mortgage, pledge, lien or other change or encumbrance except as shown in such financial statements. 7. There are not actions. proceedings or investigations pending against or affecting Selective in any court, tribunal or agency, and there are no orders, writs, injunctions, or decrees of any court, tribunal or agency pending against or affecting Selective, except as set forth in Exhibit A hereto annexed; and Selective agrees to notify Anchor Life in writing of any legal action instituted or threatened against it between the date of this agreement and the Effective Date, and that as of the Effective Date there will be no action, proceeding, investigation, order, decree or claim existing, pending or threatened which may adversely affect Selective. 8. Selective is not a party to any material written or oral contract except as set forth and described in Exhibit B hereto annexed, including, without limiting the foregoing, any employment contract which is not terminable without cost or expense to Selective, any contract with a labor union or association, any bonus, pension, profit sharing, retirement, stock purchase, hospitalization, insurance or similar plan providing employees' benefits, any distribution, sales, agency or advertising contract which is not terminable without cost to Selective or any successor, any leases with respect to any property, real or personal, or any contracts or commitments for capital expenditures; and Selective agrees that as of the Effective Date it will hold or be subject to no leases of real or personal property. 9. Selective has duly complied with all laws and regulations applicable to it in the State of Illinois, and in each other state in which it is authorized to do business, and it now and on the Effective Date will be fully authorized to do business and is and will be in good standing in the States of California, Florida, Illinois, Indiana, Iowa, Minnesota, Montana, Nebraska, North Dakota, Oregon and Washington. 10. (a) On the Effective Date, Selective shall have not less than $817,000 of capital and surplus based on convention statement values. All of the assets of Selective shall be admissible for insurance companies domiciled in the State of California, shall be readily marketable, shall not include any real estate, and shall have an aggregate fair market value of $817,000 after deducting all liabilities and reserves. (b) Securities shall be deemed to be marketable if they are freely traded on a national securities exchange or over-the- counter and if market quotations are readily available through normal financial channels. Securities listed or traded on an exchange shall be valued at the last sale price on the exchange on the last business day preceding the Effective Date, 26 and if there shall have been no sale on that date, then at the closing bid price. Securities traded over-the -counter shall be valued at the closing bid price on the day preceding the Effective Date. SECOND: Representations of Anchor Life. Anchor Life represents and warrants as follows: 1. Anchor Life is an insurance corporation duly organized and existing and in good standing under the laws of the State of California, having an authorized capital consisting of 300,000 shares of Common Stock, of the par value of $3.60 per share, of which, on the date hereof, 165,021 shares are issued and outstanding; and there are no outstanding options for the purchase of such stock. 2. The unaudited financial statements of Anchor Life as of June 30 1968, heretofore furnished to Selective, present daily the financial condition of Anchor Life as at the date thereof and the results of its operations for the period then ended, and are in conformity with the statutes of California applicable to life insurance companies and the applicable rules and regulations thereunder. 3. Since June 30, 1968, there has been no material adverse change in the condition (financial or otherwise) or in the assets, liabilities or business of Anchor Life from those set forth or reflected in the financial statements referred to in subparagraph (2) hereof; and there has been no damage, destruction or other loss materially and adversely affecting the business prospects or property of Anchor Life; and as of the Effective Date there will have been no such change; provided, however, that no reduction of surplus by reason of the additions to insurance in force on the books of Anchor Life shall be deemed a material adverse change. 4. Anchor Life has good title to all of its properties and assets, including those reflected in the financial statements hereinbefore referred to, and such properties and assets are subject to no mortgage, pledge, lien or other charge or encumbrance except as shown in such financial statements. 5. There are no actions, proceedings or investigations pending against or affecting Anchor Life in any court, tribunal or agency and there are no orders, writs, injunctions or decrees of any court, tribunal or agency pending against or affecting Anchor Life, except as set forth in Exhibit C hereto annexed; and Anchor Life agrees to notify Selective in writing of any legal action instituted or threatened against it between the date of this agreement and the Effective Date. 6. Anchor Life has duly complied with all laws and regulations applicable to it in the State of California, and in each other state in which it is authorized to do business, and it now and on the Effective Date will be fully authorized to do business and is and will be in good standing in the States of Alabama, Arizona, California, Hawaii, Idaho, Indiana, Montana, Nevada, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington and Wyoming. THIRD: (1) Submission to Stockholders. This Plan and Agreement shall as soon as practicable to submitted to the stockholders of Anchor Life and Selective (which are hereinafter sometimes referred to as "the constituent corporations") in the manner provided by the laws of the States of California and Illinois, respectively; and if the votes of stockholders representing in the case of each of the constituent corporations not less than two-thirds of the total number of shares of its Common Stock issued and outstanding and entitled to vote thereon, shall be in favor of the adoption of this Plan and Agreement, then this Plan and Agreement shall be certified as may be provided by the applicable law of each such state, any notices required by such laws shall be mailed to stockholders, and the further covenants hereof shall become effective as hereinafter provided. (2) Applications for Government Approvals. Each of the constituent corporations shall take every reasonable and necessary step, including the preparation, execution and filing of all necessary documents and applications, to secure such approval, licenses and permits as may be required by the laws, rules and regulations of the States of California and Illinois, respectively, and of such other states and agencies thereof, the approval of which Anchor Life shall deem to be necessary or desirable in 27 order to effect and facilitate the merger hereby contemplated. Selective hereby authorized Anchor Life, its officers and counsel, to act on behalf of Selective in taking any action which Anchor Life, its officers and counsel, to act on behalf of Selective in taking any action which Anchor Life shall deem desirable to obtain such approvals, licenses and permits, and agrees that its officers and directors will sign, seal and otherwise execute and file such instruments and documents for the purpose as Anchor Life may request. FOURTH: Manner and Basis of Converting Shares of Stock. 1. On the Effective Date, without any action on the part of the holder thereof, each twenty (20) shares of the issued and outstanding Common Stock of Selective shall automatically become and be converted into on (1) share of Common Stock of Anchor Life, the continuing corporation. 2. No fractional shares of the capital stock of the corporation shall be issued, and in the event that the conversion of shares on the basis described in the foregoing paragraph 1, results in any stockholder of Selective being entitled to a fractional interest in the Common Stock of the corporation, Anchor Life will purchase such interest for an amount in cash based upon a price of $60. for one full share. 3. After the Effective Date each holder of a certificate representing outstanding shares of Selective (other than those to which paragraph 6 of this Article is applicable) shall be entitled, upon surrender of such certificates issued by Anchor Life as the continuing corporation, representing the number of full shares of the Common Stock of the corporation to which he is entitled. Until so surrendered, each outstanding certificate of stock of Selective (other than those to which said paragraph 6 is applicable) shall be deemed for all corporate purposes to evidence the ownership of the number of full shares of Common Stock of the corporation to which the holder thereof shall be entitled upon exchange thereof. 4. The corporation shall be entitled to rely on the stock register of Selective to determine the names of its stockholders and the number of shares held by each as of the Effective Date. 5. Except as provided in paragraph 6 of this Article, the shares of Common Stock of Anchor Life which were outstanding immediately prior to the Effective Date, shall remain outstanding and shall not be affected by the merger. 6. Any stockholder of Anchor Life or of Selective, who shall have objected to the merger hereby contemplated in accordance with the applicable provisions of the laws of California and Illinois, respectively, and who shall make proper demand for the payment of the value of his shares as provided in said respective laws shall, after the Effective Date, have only such rights as are provided for such dissenting stockholders by the applicable laws of said states. FIFTH: Mode of Carrying Merger Into Effect. On the Effective Date, as hereinafter defined, and subject to the further conditions hereinafter set forth: 1. Selective shall be merged with into Anchor Life, the separate existence of Selective shall cease, and Anchor Life (the "Corporation") shall continue in existence as an insurance corporation organized and existing under the laws of California. 2. To the extent permitted by law, the Corporation shall thereupon and thereafter, without other transfers or conveyances, possess all of the rights, privileges, immunities, powers and franchises of each of the constituent corporations, all assets and property, real, personal and mixed, all insurance policies, all debts and accounts receivable, and other cases in action, and all and every other interest of or belonging to each of the constituent corporations shall be deemed to be transferred to and vested in the corporation. Without limiting the foregoing, all leases, agency balances, claims and credits, books, records, files, agency lists, policyholder lists and prospect lists of Selective, shall become the property of the corporation without the necessity of execution of assignments, conveyances, bills of sales or other documents transferring title; and the 28 corporation shall succeed to all rights in any and all outstanding contracts, franchises and licenses of Selective, and all property, insurance policies and fidelity bonds covering Selective shall inure to the benefit of the corporation. 3. The corporation shall further be responsible for and be subject to all the liabilities and obligations of each of the constituent corporations, and neither the rights of creditors nor any liens upon the property of either of the constituent corporations shall be impaired by such merger, but any such liens shall be limited to the property upon which they were liens immediately prior to the Effective Date. 4. The corporation shall assume the liabilities of Selective on any policies of insurance outstanding at the Effective Date or shall cause the same to be assumed by another insurance company acceptable to Selective; and as soon after the Effective Date, as practicable, the corporations shall send or shall cause to be sent, to each policy holder of Selective as of the Effective Date, a certificate of assumption, in such form an containing such terms and conditions as may be approved by the insurance supervisory authorized of the States of California and Illinois. SIXTH: (a) The articles of incorporation of Anchor National Life Insurance Company, as amended to the Effective Date, shall be the articles of Incorporation of the surviving corporation until further amendment. (b) The by-laws of Anchor Life, in effect immediately prior to the Effective Date, shall continue to be the by-laws of the surviving corporation until further amended. (c) The directors and officers of Anchor Life, in office immediately prior to the Effective Date, shall continue to be the directors and officers of the surviving corporation to serve as provided in the by-laws of that corporation. SEVENTH: Effective Date, Conditions and Termination. 1. The Effective Date of the merger hereby contemplated shall be the day of the month on which shall occur the later of the performance of the last act or the obtaining of the last approval required to complete the same under the applicable laws, rules and regulations of the States of California and Illinois, provided that said Effective Date shall in no event be later than March 31, 1969, and that on or before the Effective Date as herein defined, the following conditions shall have been fulfilled: (a) The Plan and Agreement of Merger shall have been duly approved by the vote of two-thirds of the stockholders of each of the constituent corporations in compliance with the law of state of its incorporation. (b) All necessary approvals, licenses and permits shall have been issued by and received from the regulatory authorities of the States of california and Illinois, respectively, including, without limitation, permission of the Commissioner of Corporations of the State of California to issue and distribute the stock herein provided to be issued to the Stockholders of Selective, and approval by the Commissioner of Insurance of Illinois of the admission of Anchor Life (the surviving corporation) to conduct its insurance business in Illinois. (c) All representations made by Selective in Article FIRST hereof or elsewhere in this Agreement, shall be true and correct as of the Effective Date except to the extent that changes have occurred which are contemplated by this agreement, or which are the results of transactions entered into in the ordinary course of business from the date hereof to the Effective Date and which shall not materially and adversely affect the business and finances of Selective, as such terms are defined in paragraph 3 of Article FIRST hereof, and Selective shall have delivered to Anchor Life a certificate to that effect, signed by each of the executive officers of Selective under the corporate seal. (d) All representations made by anchor Life in Article SECOND hereof or elsewhere in this Agreement, shall be true and correct as of the Effective Date except to the extent that changes have occurred which are contemplated by this agreement, or which are the results of transactions entered into in 29 the ordinary course of business from the date hereof to the Effective Date, and Anchor Life shall have delivered to Selective a certificate to that effect, signed by each of the executive officers of Anchor Life, under the corporate seal. (e) Anchor Life shall have received the opinion of Messrs. McBride, Baker, Wienke & Schlosser as counsel to Selective, or of other counsel acceptable to Anchor Life, to the effect that as of the Effective Date: (1) Selective is an insurance corporation duly organized and existing and authorized to do business under the laws of the State of Illinois, having authorized capital of 600,000 shares of common stock of the par value of $1 per share, which 413,075 shares are issued and outstanding, and the are no outstanding options for the purchase of such stock; (2) Selective has good title of all of the properties and assets to be acquired by the continuing corporation pursuant to paragraph 10 of Article FIRST hereof, and such properties and assets are subject to no mortgage, pledge, lien or other charge or encumbrance; (3) there is no action, proceeding, investigation, order, decree or claim existing, pending or threatened which may materially and adversely affect Selective; and (4) Selective has taken al corporate steps necessary to authorize and effectuate this merger in accordance with the laws of the State of Illinois, and has duly filed the necessary documents and obtained from the regulatory authorities of the State of Illinois valid and effective approvals, licenses and permits as contemplated by paragraph 1(b) of this Article SEVENTH. (f) Selective shall have received an opinion of Messrs. Poindexter & Barger or their successors as counsel to Anchor Life, verifying the representations made by Anchor Life in paragraphs 1, 4, 5 and 6 of said Article SECOND, and further to the effect that Anchor Life has duly taken all corporate steps necessary to effectuate this merger in accordance with the laws of the State of California, and has duly filed the necessary documents and obtained valid and effective permits or approval thereof by the appropriate authorities of the State of California. In giving their opinion with respect to states other than California, counsel may rely upon the opinions of counsel practicing in such other states. (g) Anchor Life shall have received an opinion of Messrs. McBride, Baker, Wienke & Schlosser, or of other counsel satisfactory to it, to the effect that the agreement between Anchor Corporation, Anchor Life and Bankers United Life Assurance Company, executed simultaneously herewith, has been duly authorized and executed by said Bankers United Life Assurance Company within its corporate powers and in accordance with the laws of the state of its incorporation, and is a valid and binding obligation of said corporation. 2. (a) In the event that the foregoing conditions shall not have been fulfilled on or before March 31, 1969, the parties may by mutual agreement in writing extend said date and defer the Effective Date accordingly; but it there shall be no such extension, this agreement shall automatically terminate and be deemed to be abandoned, without any obligation on the part of either party to the other. (b) If, on the Effective Date, the conditions set forth in subparagraphs (a), (b), (c), (e) and (g) of the foregoing paragraph 1, shall not have been fulfilled, this agreement may be terminated by Anchor Life at its option and upon written notice to Selective and the same shall thereupon be deemed to have been terminated and abandoned, without liability or obligation of either party to the other. (c) If, on the Effective Date, the conditions set forth in subparagraphs (a), (b), (d) and (f) of the foregoing paragraph 1, shall not have been fulfilled, this agreement may be terminated by Selective at tits option and upon written notice to Anchor Life and the same shall thereupon be deemed to have been terminated and abandoned, without liability or obligation of wither party to the other. EIGHTH: Miscellaneous. 1. This Plan and Agreement may be executed in one or more counterparts, each of which shall be considered an original. 2. Each of the constituent corporations shall cause to be executed and delivered such additional documents and instruments of further assurance 30 as may from time to time be required by law or which may be reasonably required by the other party for the purpose of consummating the merger hereby contemplated. 3. For accounting purposes only, all accounting entries and adjustments necessitated by the merger contemplated hereby, shall be made on the books of the surviving corporation as of the close of business on the Effective Date. 4. Each of the parties hereto agrees to indemnify and hold the other harmless against any claim for brokerage commissions or finders' fees which such indemnifying party may have incurred in connection with this Agreement. 5. Any notice required or permitted to be given hereunder shall be deemed to be sufficiently given if addressed and sent by registered mail or by telegram to: Anchor National Life Insurance Company 2146 Towne House Tower 100 W. Clarendon Street Phoenix, Ariz. 85013 The Selective Life Insurance Company 222 W. Adams Street Chicago, Illinois 60606 IN WITNESS WHEREOF, Pursuant to the authority of their respective boards of directors, the constituent corporations have caused this Plan and Agreement to Merger to be executed by their respective corporate seals to be affixed as of the day and year first above written. ANCHOR NATIONAL LIFE INSURANCE COMPANY By /s/ [unreadable] BY: ------------------------------------ /s/ [unreadable] - ---------------- THE SELECTIVE LIFE INSURANCE COMPANY By /s/ [unreadable] ------------------------------------ ATTEST: /s/ [unreadable] - ---------------- STATE OF ARIZONA ) ) ss. COUNTY OF MARICOPA ) On this 27th day of December, 1968, personally appeared before me Jack D. Rich and Carroll E. Dietie, II, known to me to be President and Assistant Secretary respectively, of Anchor National Life Insurance Company, the Corporation which executed the Plan and Agreement of Merger with The Selective Life Insurance Company, dated October 31, 1968, and acknowledged to me that said Corporation executed the same. Subscribed and sworn to before me this 27th day of December, 1968. /s/ [unreadable] --------------------- Notary Public My Commission expires: 31 February 6, 1971 32 STATE OF ILLINOIS ss: COUNTY OF COOK I, Jeri A. Henrich, a Notary Public, do hereby certify that on the 31st day of October, A.D. 1968, personally appeared before me David J. Elmore, who declared that he is the President of THE SELECTIVE LIFE INSURANCE COMPANY, one of the corporations executing the foregoing document, and being first duly sworn, acknowledged that he signed the foregoing articles of merger in the capacity therein set forth and declared that the statements therein contained are true. IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year before written. /s/ Jeri A. Henrich ------------------- Notary Public 33 EXHIBIT "A" 1. Internal Revenue Service Proceeding (Midwest Region- Reference: The Selective Life Insurance Company AP:CHI:TAC): covering various items for the taxable years 1958 through 1964. 34 EXHIBIT "B" 1. Agreement between The Selective Life Insurance Company and Group Association Plans, Inc. dated October 1, 1968. 2. Commission Agreement between The Selective Live Insurance Company and Interstate Brokerage dated February 1, 1966. 3. Reinsurance Agreement between Bankers United Life Assurance Company and The Selective Life Insurance Company. 4. Reinsurance Agreement between Bankers United Life Assurance Company and The Selective Life Insurance Company with respect to Group Life Insurance Policy No. 100 and the Rider thereto and Group Life Insurance Policy No. 101, issued by The Selective Life Insurance Company to the Jewish War Veterans of the Unites States of America. 5. Group Life Insurance Policy No. 100 issued by The Selective Life Insurance Company to the Jewish Veterans of the United States of America. 6. Group Life Insurance Policy No. 101 issued by The Selective Life Insurance Company to the Jewish War Veterans of the United States of America. 35 ADMINISTRATION AGREEMENT Policyholder: Life Insurance on members of the Jewish War Veterans of the United States, Inc. Policy Number(s): Master Group Policy #100 and #101 issued by certificates Effective Date: on form #GP-23, GP-22, and GP-23D. The following Agreement entered into by and between Group Association Plan, Inc. (herein call First Party) of_____________________________ and The Selective Life Insurance Company (herein called Company) of Chicago, Illinois on this 1st day of October, 1968. WITNESSETH: IT IS MUTUALLY AGREED AS FOLLOWS: 1. The First Party agrees to assume responsibility for the performance of all "Administration" as such term is hereinafter defined, with respect to the Policy (or policies) hereinbefore described: and the Company agrees to pay to the First Party, as compensation for services rendered in the performance of this function 12-1/2% of Adjusted premiums of the premium paid in cash to and accepted by the Company on such Policy (or policies) during the period this Agreement continue in force. 2. The term "Administration" as used in this Agreement, shall mean the performance of any one or more of the following functions as are from time to time to time required by the Company: (a) Maintenance of all records necessary to enable the Company to determine at any time, the true and accurate status of the insurance in force. (b) Preparation and delivery of Certificates or Individual Policies of Insurance to all Insurance to all insured persons. (c) Preparation of all premium statements. (d) Collection of premiums and reporting of same to the Home Office of Company. (e) Furnishing to the Home Office of the Company any and all required data necessary in connection with underwriting view for renewal of said Policy (or policies). (f) Any other duties which the Company might reasonably require to be performed in connection with said Policy (or policies). 3. Any compensation accruing hereunder shall be payable as the premium on the hereinbefore described Policy (or policies) is paid in cash to and accepted by the Company. Compensation received hereunder based upon any premium or portion thereof returned by the Company shall be immediately repaid to the Company. If any Policy covered by this Agreement is terminated either by the Company or the Policyholder all right to compensation for services rendered on such Policy shall be immediately terminated. * Adjusted Premiums which shall mean the gross premium developed during such policy year, minus any premium refunds due to cancellations L-407-076 occurring during such policy years. 4. This Agreement shall take effect as of January 1, 1969 for a term of one year from that date, and shall automatically be renewed from year to year thereafter so long as the above described Policy (or policies) continues in full force and effect, unless either Party hereto notifies the other, in writing, not less than thirty (30) days prior to the end of a term of their intention not to renew and provided (a) the First Party is a licensed agent or broker during such renewal year and (b) the First Party has 36 the permission of the Policyholder to service its interests under the Agreement hereto and to solicit for new insurance during such renewal year, and (c) the First Party shall perform such service and solicitation in a manner satisfactory to the Company. 5. This Agreement or any renewal thereof may be canceled by either Party at any time and without cause upon the giving of not less than thirty (30) days prior written notice to the other party. 6. All Obligations of the Company to compensate the First Party for services rendered, with respect to functions performed after termination of this Agreement, and all obligations of the First Party to perform requested functions, in behalf of the Company, for periods subsequent to such termination, shall be canceled as of the effective date of such termination. 7. The Company's sole payment to the First Party, as compensation for performing functions defined in paragraph two (2) above, shall be the sum specified in paragraph on (1) hereof. No other payments shall be made to the First Party respecting g such functions. 8. This Agreement constitutes the entire contract between the Parties hereto. Any amendments or modifications shall be in writing and jointly signed by both parties. IN WITNESS WHEREOF this Agreement has been executed in duplicate by the undersigned parties on the date first above mentioned. ----------------------------------- First Party ----------------------------------- ----------------------------------- Company ----------------------------------- 37 THE SELECTIVE LIFE INSURANCE COMPANY a legal reserve stock company 222 West Adams Street Chicago, Illinois 60606 Telephone 346-9079 COMMISSION AGREEMENT February 1, 1966 INTERSTATE BROKERAGE WASHINGTON, D.C. Soliciting Agent City and State THE SELECTIVE LIFE INSURANCE COMPANY hereby agrees to pay you commissions on the regular premiums as paid in cash to said Company on Policy No. AG 100 and AG 101 issued by said Company on the Group Life Insurance plan on the life of Members of the Jewish War Veterans of the U.S. as follows: TWO PERCENT (2%) percent of the first year's premium, and TWO PERCENT (2%) percent of the second and subsequent years' premiums, not exceeding a total renewal period of N/A years, provided said policy remains continuously in force and premiums are paid in cash at the Home Office of the Company during said period. No assignment of this agreement or of commissions hereunder shall be valid unless authorized in advance in writing by the Agent any by the Company. No authority is granted to make, after or discharge contracts for Company or waive forfeitures, grant permits, name special rates, or bind company in any way or under any circumstances to receipt for deferred or renewal premiums, or make any endorsements on the policies of Company, or to receive any monies due or to become due Company. Should Company for any reason refund any premium on any policy covered hereunder, any commission received on such premium shall be refunded upon demand. Payment of any commissions hereunder shall be expressly subject to any indebtedness due the Company by the Agent, a first lien in their favor with all offset rights being reserved to them. Under no circumstances whatsoever shall the be paid or allowed, or offered to be paid or allowed, any rebate of premium in any manner whatsoever, directly or indirectly. No renewal commissions will be paid on premiums waived or paid by Company under the disability provision of any policy. This agreement will take effect only when approved in writing by said Company. /s/ [unreadable] ---------------- Agent Approved this 1st day of February, 1966. THE SELECTIVE LIFE INSURANCE COMPANY By: /s/ [unreadable] --------------------------------- 38 ENDORSED FILED 7/24/69 RESTATED ARTICLES OF INCORPORATION OF ANCHOR NATIONAL LIFE INSURANCE COMPANY (As Amended Through June 20, 1968) The undersigned, Melvin Intriligator and Roger T. Wickers hereby certify that they are, respectively, the duly elected and acting Vice President and Secretary of Anchor National Life Insurance Company, a California corporation, and that the following correctly sets forth the text of the Articles of Incorporation of said corporation, as amended to the date of this certificate: RESTATED ARTICLES OF INCORPORATION OF ANCHOR NATIONAL LIFE INSURANCE COMPANY KNOW ALL MEN BY THESE PRESENTS: That we, the undersigned, have this day voluntarily associated ourselves together for the purpose of forming a corporation under the laws of the State of California, and WE HEREBY CERTIFY: ARTICLE I The name of the corporation shall be: ANCHOR NATIONAL LIFE INSURANCE COMPANY. ARTICLE II That the primary purpose for which the corporation is formed is: To engage in the business of insurance as principal, and make contracts of life and endowment insurance, and grant, purchase or dispose of annuities or endowments of any kind; and in such contracts, or in contracts supplemental thereto, to provide additional benefits in the event of death of the insured by accidental means, total and permanent disability to the insured, or specified dismemberment or disablement suffered by the insured; to insure against loss or damage by the sickness, bodily injury or death by accident of the insured. In addition, to the specific lines herein provided, the corporation shall also be empowered to transact any kind or class of insurance which may now or hereafter be permitted to be written, insured or assumed by the corporation of this class and character. The corporation shall also have the following general powers: (a) To enter into contracts or treaties of reinsurance and coinsurance; (b) To purchase, rent, or otherwise acquire real estate and personal property; to sell, lease, mortgage, exchange or otherwise dispose of the same, in whole or in part; to take, hold, and manage every kind of property, real, personal or mixed; to convey or otherwise transfer the same or any part thereof; to rent and lease buildings and lands and all kinds of property from any and to any person whomsoever; 39 (c) To purchase or otherwise acquire real and personal property of any and all kinds that may be lawfully held by a California insurance corporation, including, but not limited to, lands, leaseholds, shares of stock, bonds, mortgages, debentures, and other securities; (d) To lend money and take as security for loans, mortgages and deeds of trust, or either, of real property and pledges of personal property, as may be permitted by law. (e) To borrow money, and from time to time, accept, endorse, execute and issue bonds, debentures, promissory notes, bills of exchange and other obligations of the corporation for moneys borrowed or in payment for property acquired, or for any of the other objects or purposes of the corporation or its business and to secure the payment of any such obligation by mortgage, pledge, deed, indenture, agreement, or other instrument of trust, or by lien upon, assignment of, or agreement in regard to all or any part of the property rights or privileges of the corporation wherever situated, whether now owned or hereafter to be acquired. (f) To make, enter into, carry out and perform contracts of every kind and character with any person, firm, association, corporation, either public or private, municipal or body politic, and with the Government of the United States or any State thereof or any foreign country. (g) The foregoing clauses shall be liberally construed as to purposes and powers, and shall not be construed or held as limiting or restricting any purposes and powers of this corporation which are authorized, or granted, or which may be authorized or granted by the laws of the State of California. ARTICLE III That Los Angeles County is the County in this State where the corporation shall maintain its principal office for the transaction of business. The corporation may, when deemed expedient by the Board of Directors, establish offices and transact business anywhere in the United States of America, the Dominion of Canada, the territories of either, and in foreign countries. ARTICLE IV The corporation is authorized to issue one class of stock, which shall be designated as common stock; the total number of shares which this corporation shall have authority to issue is 300,000, and the aggregate par value of all shares that are to be issued shall be One Million Eighty Thousand Dollars ($1,080,000.), and the par value of each of said shares shall be Three Dollars and Sixty Cents ($3.60), and, upon the effective date of this Amendment, each outstanding share of the common stock of the par value of $11.00 per share is converted into three shares of the par value of Three Dollars and Sixty Cents ($3.60) per share. No holders of stock of the corporation shall have any preferential, pre-emptive or other rights to subscribe for or to purchase from the corporation any stock in the corporation of any class, whether or not now authorized, or other securities which the corporation may at any time issue. The common stock of the corporation shall not be assessed by any set of the corporation or its directors or officers, and when issued, shall be fully paid, and no holder of such stock shall be liable for any debts or liabilities of the corporation. ARTICLE V The Board of Directors shall consist of not less than five (5) members and not more than seven (7) members, the exact number of which shall be fixed by a by-law adopted by the shareholders or by the Board of Directors. 40 The minimum and maximum number of Directors may be changed by a by-law duly adopted by the shareholders, provided, however, that the maximum number of Directors shall in no event exceed the minimum by more than two (2); the shareholders may also adopt a by-law; providing for a definite number of Directors without provision for an indefinite number. The names and addresses of the persons who are hereby appointed to act as the first Directors of the corporation are:
Name Address - ------------------ ------------------------------ RICHARDS D. BARGER 2161 Adair Street San Marino, California 91108 ALFRED B. DOUTRE' 5471 Keats Street Los Angeles, California 90032 AGNES JOHNSON 611 Normandie Avenue Los Angeles, California 90005 HAUN CHAMBERLAIN 1015 East Lexington Glendale, California 91206 GERRIE RUE 804 North Garfield Avenue Montebello, California 90640
41 IN WITNESS WHEREOF, the undersigned have executed this certificate this 10th day of July, 1969. /s/ Melvin Intriligator --------------------------------- Melvin Intriligator Vice President of Anchor National Life Insurance Company /s/ Roger T. Wickers --------------------------------- Roger T. Wickers Secretary of Anchor National Life Insurance Company 42 AFFIDAVIT OF OFFICERS STATE OF NEW JERSEY ) ) SS COUNTY OF UNION ) MELVIN INTRILIGATOR, and ROGER T. WICKERS and each of them, being first duly sworn, depose and say: That we are the Vice President and Secretary respectively of ANCHOR NATIONAL LIFE INSURANCE COMPANY, a California corporation; That at a Special Meeting of the Board of Directors of said corporation duly held at TowneHouse Tower, Suite 2146, Phoenix, Arizona at 10:00 A.M. on the 1st day of March, 1969, at which meeting there was at all times present and acting a quorum of the members of said Board, they were duly authorized by resolution of said Board of Directors adopted on said date to execute and file or cause to be filed with the Secretary of State of the State of California the certificate of Restated Articles of Incorporation annexed hereto; and That the certificate of Restated Articles of Incorporation of said corporation annexed hereto correctly sets forth the text of the Articles of Incorporation of Anchor National Life Insurance Company as amended to the date of said certificate. /s/ Melvin Intriligator ----------------------- Melvin Intriligator, Vice President Subscribed and sworn to before me this 10th day of July, 1969. /s/ Elizabeth A. Gallagher - ----------------------------------- Notary Public in and/for said State My Commission Expires 12/8/71 [SEAL] 43 ENDORSED FILED 12/29/70 CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION Jack D. Rich and Carroll E. Dietle, II, certify: 1. That they are the President and the Assistant Secretary respectively, of ANCHOR NATIONAL LIFE INSURANCE COMPANY, a California corporation. 2. That at a meeting of the Board of Directors of said corporation held at Elizabeth, New Jersey on the 18th day of November, 1970, the following resolutions were adopted: "NOW, THEREFORE, BE IT RESOLVED, that this Board of Directors does hereby propose and declare it advisable that subject to the approval of the California Insurance Commissioner of a change in the par value of this corporation's common stock from $3.60 per share to $5.20 per share and to the sale and issuance to Washington National Corporation of 26,147 shares of the corporation's $5.20 per share par value stock at a price of $57.37.per share, that the first paragraph of Article IV of the Articles of Incorporation, which reads as follows: 'The corporation is authorized to issue one class of stock, which shall be designated as common stock; the total number of shares which this corporation shall have authority to issue is 300,000, and the aggregate par value of all shares that are to be issued shall be One Million Eighty Thousand Dollars ($1,080,000), and the par value of each of said shares shall be Three Dollars and Sixty Cents ($3.60), and upon the effective date of this Amendment, each outstanding share of the common stock of the par value of $11.00 per share is converted into three shares of the par value of Three Dollars and Sixty Cents ($3.60) per share.' is hereby stricken and the following language is hereby substituted therefore: 'The corporation is authorized to issue one class of stock, which shall be designated as common stock; the total number of shares which this corporation shall have authority to issue is 300,000, and the aggregate par value of all shares that are to be issued shall be One Million Five Hundred Sixty Thousand Dollars ($1,560,000) and the par value of each of said shares shall be Five Dollars and Twenty Cents ($5.20); and upon the effective date of this Amendment, each outstanding $3.60 par value share is converted into a $5.20 par value share.' "and be it further "RESOLVED: That the aforementioned amendment to Article IV of the Articles of Incorporation be submitted to the stockholders of this corporation, as hereinafter provided, for their approval, subject to the approval by the California Insurance Commissioner as aforesaid; and be it further "RESOLVED: That this Board of Directors does propose and declare it advisable that the first sentence of Article V of the Articles of Incorporation, which reads as follows: 44 'The Board of Directors shall consist of not less than five (5) members and not more than seven (7) members, the exact number of which shall be fixed by a by-law adopted by the shareholders or by the Board of Directors.' is hereby stricken and the following language is hereby substituted therefore: 'The Board of Directors shall consist of not less than six (6) members and not more than eight (8) members, the exact number of which shall be fixed by a by-law adopted by the stockholders or by the Board of Directors.' "and be it further "RESOLVED: That the aforementioned amendment to Article V of the Articles of Incorporation be submitted to the stockholders as hereinafter provided." 3. That at a meeting of the stockholders of said corporation held at Elizabeth, New Jersey, on the 14th day of December, 1970, resolutions were adopted, subject to the approval of the California Insurance Commissioner, amending the first paragraph of Article IV and the first sentence of Article V of the Articles of Incorporation of Anchor National Life Insurance Company in identical form as set forth in Paragraph 2 above. 4. That the number of shares which voted affirmatively for the adoption of said resolutions was 156,581 shares; that no shares were voted against the adoption of said resolutions; and that the total number of shares entitled to vote on or consent to said amendment was $185,669. 5. That upon the Amendment of Articles of Incorporation as hereinabove set forth, each outstanding share of a par value of $3.60 is converted into and reconstituted as one share of common stock of a par value of $5.20. /s/ Jack D. Rich --------------------------- Jack D. Rich, President /s/ Carroll E. Dietle --------------------------- Carroll E. Dietle, II, Assistant Secretary State of Arizona ) ) SS County of Maricopa ) Jack D. Rich, first being duly sworn, deposes and says that he is the President of Anchor National Life Insurance Company, and that he has read the foregoing Certificate of Amendment of Articles of Incorporation of Anchor National Life Insurance Company and knows the contents thereof and the same are true of his own knowledge. Subscribed and sworn to before me this 25 day of December, 1970. /s/ [unreadable] - --------------------------------- Notary Public in and for said County and State My commission expires November 15, 1973. State of Arizona ) ) SS County of Maricopa ) 45 Carroll E. Dietle, II, first being duly sworn, deposes and says that he is the Assistant Secretary of Anchor National Life Insurance Company, and that he has read the foregoing, Certificate of Amendment of Articles of Incorporation of Anchor National Life Insurance Company and knows the contents thereof and the same are true of his own knowledge. /s/ Carroll E. Dietle ------------------------------------------ Carroll E. Dietle, II, Assistant Secretary Subscribed and sworn to before me this 25th of December, 1970. /s/ [unreadable] - ------------------------------- Notary Public in and for said County and State My commission expires Nov. 13, 1973 [SEAL] 46 ENDORSED FILED 12/29/71 CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION Jack D. Rich and Carroll E. Dietle, II, certify: 1. That they are the President and Secretary respectively, of ANCHOR NATIONAL LIFE INSURANCE COMPANY, a California corporation. 2. That at a meeting of the Board of Directors of said corporation held at Phoenix, Arizona on the 12th day of November 1971, the following resolutions were adopted: "NOW THEREFORE, BE IT RESOLVED, that this Board of Directors does hereby propose and declare it advisable that subject to the approval of the California Insurance Commissioner of an increase in the authorized shares of common stock of the corporation from 300,000 shares to 400,000 shares and of a change in the par value of this corporation's common stock from $5.20 per share to $5.70 per share and to the sale and issuance to Washington National Corporation of 139,446 shares of the corporation's $5.70 per share par value stock at a price of $57.37 per share, that the first paragraph of Article IV of the Articles of Incorporation, which reads as follows; 'The corporation is authorized to issue one class of stock, which shall be designated as common stock; the total number of shares which this corporation shall have authority to issue is 300,000, and the aggregate par value of all shares that are to be issued shall be One Million Five Hundred Sixty Thousand Dollars ($1,560,000), and the par value of each of said shares shall be Five Dollars and Twenty Cents ($5.20), and upon the effective date of this Amendment, each outstanding $3.60 par value share is converted into a Five Dollar and Twenty Cents ($5.20) par value share. is hereby stricken and the following language is hereby substituted therefore: 'The corporation is authorized to issue one class of stock, which shall be designated as common stock; the total number of shares which this corporation shall have authority to issue is 400,000, and the aggregate par value of all shares that are to be issued Two Million Two Hundred Eighty Thousand Dollars ($2,280,000) and the par value of each of said shares shall be Five Dollars and Seventy Cents ($5.70); and upon the effective date of this Amendment, each outstanding $5.20 par value share is converted into a $5.70 par value share.' "and be it further "RESOLVED: That the aforementioned amendment to Article IV of the Articles of Incorporation be submitted to the stockholders of this corporation, as hereinafter provided, for their approval, subject to the approval by the California Insurance Commissioner as aforesaid. 3. That at a meeting of the stockholders of said corporation held at Phoenix, Arizona on the 20th day of December, 1971 a resolution was adopted, subject to the approval of the California Insurance Commissioner, amending the first paragraph of Article IV of the Articles of Incorporation of Anchor National Life Insurance Company in identical form as set forth in Paragraph 2 above. 4. That the number of shares which voted affirmatively for the 47 adoption of said resolutions was 211,677 shares; that no shares were voted against the adoption of said resolutions; and that the total number of shares entitled to vote on or consent to said amendment was 211,816. 5. That upon the Amendment of Articles of Incorporation as hereinabove set forth, the number of authorized shares of common stock of the corporation is increased from 300,000 shares to 400,000 shares and each outstanding share of a par value of $5.20 is converted into and reconstituted as one share of common stock of a par value of $5.70. /s/ Jack D. Rich -------------------------------- Jack D. Rich, President /s/ Carroll E. Dietle -------------------------------- Carroll E. Dietle, II, Secretary STATE OF ARIZONA ) ) SS COUNTY OF MARICOPA ) Jack D. Rich, first being duly sworn, deposes and says that he is the President of Anchor National Life Insurance Company, and that he has read the foregoing Certificate of Amendment of Articles of Incorporation of Anchor National Life Insurance Company and knows the contents thereof and the same are true of his own knowledge. /s/ Jack D. Rich -------------------------------- Jack D. Rich Subscribed and sworn to before me this 20th day of December, 1971 /s/ [unreadable] - ------------------------------- Notary Public in and for said County and State My Commission Expires: 8/17/73 STATE OF ARIZONA ) ) SS COUNTY OF MARICOPA ) Carroll E. Dietle, II, first being duly sworn, deposes and says that he is the Secretary of Anchor National Life Insurance Company and that he has read the foregoing Certificate of Amendment of Articles of Incorporation of Anchor National Life Insurance Company and knows the contents thereof and the same are true of his own knowledge. /s/ Carroll E. Dietle -------------------------------- Carroll E. Dietle, II Subscribed and sworn to before me this 20th day of December, 1971 /s/ Margaret L. Martin - ------------------------------- Notary Public in and for said County and State My Commission Expires: 48 8/17/73 [SEAL] 49 ENDORSED FILED 1/16/75 CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION Carroll E. Dietle, II, and Crystal A. Russell, certify: 1. That they are Vice President and Assistant Secretary respectively, of Anchor National Life Insurance Company, a California corporation. 2. That at a meeting of the Board of Directors of said corporation held at Phoenix, Arizona, on the 18th day of October, 1974, the following resolution was adopted: "NOW, THEREFORE, BE IT RESOLVED, that this Board of Directors does hereby propose and declare it advisable to Amend its Articles of Incorporation so that the first sentence of Article V of its Articles of Incorporation, which now reads as follows: 'The Board of Directors shall consist of not less than six (6) members and not more than eight (8) members, the exact number of which shall be fixed by a By-Law adopted by the Stockholder or by the Board of Directors.' be hereby stricken and the following language shall be hereby substituted therefor: 'The Board of Directors shall consist of not less than seven (7) members and not more than nine (9) members, the exact number of which shall be fixed by a By-Law adopted by the Stockholders or by the Board of Directors.' "RESOLVED: that the aforementioned Amendment to Article V of the Articles of Incorporation be submitted to the Stockholders as hereinafter provided." 3. That at a meeting of the Stockholders of said corporation held at Phoenix, Arizona, on the 27th day of November, 1974, the resolution was adopted, with 351,163 shares out of 351,262 shares issued and outstanding voting in favor of the amendment, subject to the approval of the California Insurance Commissioner, amending the first sentence of Article V of the Articles of Incorporation of Anchor National Life Insurance Company in the identical form as set forth above. /s/ Carroll E. Dietle ----------------------------------------- Carroll E. Dietle, II, Vice President /s/ Crystal A. Russell ----------------------------------------- Crystal A. Russell, Assistant Secretary 50 AFFIDAVIT State of ARIZONA ) ) SS County of Maricopa ) Carroll E. Dietle, II, first duly sworn, deposes and says that he is the Vice President of Anchor National Life Insurance Company, and that he has read the foregoing certificate of Amendment of Articles of incorporation of Anchor National Life Insurance Company and knows the contents thereof and the same are true to the best of his own knowledge. /s/ Carroll E. Dietle, II ---------------------------------------- Carroll E. Dietle, II, Vice President Subscribed and sworn to before me this 31st day of December, 1974. /s/ Margaret L. Martin ---------------------------------------- Notary (My Commission Expires: Oct. 28, 1978) Crystal A. Russell, first being duly sworn, deposes and says that she is the Assistant Secretary of Anchor National Life Insurance Company and that she has read the foregoing certificate of Amendment of the Articles of Incorporation of Anchor National Life Insurance Company and knows the contents thereof and the same are true to the best of her knowledge. /s/ Crystal A. Russell ---------------------------------------- Crystal Russell, Assistant Secretary Subscribed and sworn to before me this 31st day of December, 1974. /s/ Margaret L. Martin ---------------------------------------- Notary (My Commission Expires: Oct. 28, 1978) 51 Endorsed Filed November 8, 1977 by James E. Harris, Deputy CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION Carroll E. Dietle, II, and James A. Deer, certify: 1. That they are Vice President and Assistant Secretary, respectively, of Anchor National Life Insurance Company, a California corporation. 2. That at a meeting of the Board of Directors of said corporation held at Phoenix, Arizona, on the 4th day of March, 1976, the following resolution was adopted: "NOW, THEREFORE, BE IT RESOLVED, that subject to the approval of the California Insurance Commissioner and the shareholders of the corporation Article IV of the Articles of Incorporation of this corporation, as previously amended and which now reads: 'The corporation is authorized to issue one class of stock, which shall be designated as common stock; the total number of shares which this corporation shall have authority to issue is 400,000 and the aggregate par value of all shares that are to be issued shall be Two Million, Two Hundred and Eighty Thousand Dollars ($2,280,000) and the par value of each of said shares shall be Five Dollars and Seventy Cents ($5.70); and upon the effective date of this Amendment, each outstanding $5.20 par value share is converted into a $5.70 par value share.' is hereby stricken, and the following language is hereby substituted therefore: 'The corporation is authorized to issue one class of stock, which shall be designated as common stock; the total number of shares which this corporation shall have authority to issue is 4,000 shares and the aggregate par value of all shares that are to be issued shall be Two Million, Two Hundred and Eighty Thousand Dollars ($2,280,000), and the par value shall be Five Hundred and Seventy Dollars and No Cents ($570.00). Upon the effective date of this Amendment, each 100 outstanding $5.70 par value shares shall be converted to one $570.00 par value share, and provided further that nothing in this Amendment shall authorize the conversion of outstanding shares of par value of Five Dollars and Seventy Cents ($5.70) into outstanding fractional shares with a par value of less than Five Hundred and Seventy Dollars and No Cents. 3. That at a meeting of the Stockholders of said corporation held at Phoenix, Arizona, on the 3rd day of May, 1976, the resolution was adopted with 351,163 shares out of 351,262 shares issued and outstanding voting in favor of the Amendment, subject to the approval of the California Insurance Commissioner, amending Article IV of the Articles of Incorporation of Anchor National Life Insurance Company in the identical form as set forth above. /s/ Carroll E. Dietle ---------------------------------------- Carroll E. Dietle, II, Vice President /s/ James A. Deer ---------------------------------------- James A. Deer, Assistant Secretary 52 AFFIDAVIT State of ARIZONA ) ) SS County of Maricopa ) Carroll E. Dietle, II, first duly sworn, deposes and says that he is the Vice President of Anchor National Life Insurance Company, and that he has read the foregoing certificate of Amendment of Articles of Incorporation of Anchor National Life Insurance Company and knows the contents thereof and the same are true to the best of his own knowledge. /s/ Carroll E. Dietle -------------------------------------- Carroll E. Dietle, II, Vice President Subscribed and sworn to before me this 2nd day of November, 1977. /s/ Patricia Smith - ------------------------------------- [SEAL] Notary (My Commission expires Feb. 13, l98l) James A. Deer, first being duly sworn, deposes and says that he is the Assistant Secretary of Anchor National Life Insurance Company and that he has read the foregoing certificate of Amendment of the Articles of Incorporation of Anchor National Life Insurance Company and knows the contents thereof and the same are true to the best of his knowledge. /s/ James A. Deer -------------------------------------- James A. Deer, Assistant Secretary Subscribed and sworn to before me this 2nd day of November, 1977. /s/ Patricia Smith - ------------------------------------- [SEAL] Notary (My Commission expires Feb. 13, l98l) 53 FILED 7/27/78 CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION Carroll E. Dietle, II, and James A. Deer, certify: 1. That they are Senior Vice President and Assistant Secretary respectively, of Anchor National Life Insurance Company, a California corporation. 2. That at a Special meeting of the Stockholders of said corporation held at Phoenix, Arizona, on the 23rd day of June, 1978, the following resolution was adopted: "RESOLVED, that the first sentence of ARTICLE V of the ARTICLES OF INCORPORATION of this corporation, which reads as follows: 'The Board of Directors shall consist of not less than seven (7) members and not more than nine (9) members, the exact number of which shall be fixed by a bylaw adopted by the stockholders or by the Board of Directors.' is hereby stricken and the following language is hereby substituted therefore: 'The Board of Directors shall consist of not less than eleven (11) members and not more than thirteen (13) members, the exact number of which shall be fixed by a by-law adopted by the stockholders or by the Board of Directors.' 3. That at the Special meeting of the Stockholders of said corporation held at Phoenix, Arizona, on the 23rd day of June, 1978, the resolution was adopted, with 3,511 shares out of 3,511 shares issued and outstanding voting in favor of the amendment, subject to the approval of the California Insurance Commissioner, amending the first sentence of Article V of the Articles of Incorporation of Anchor National Life Insurance Company in the identical form as set forth above. 4. That at the Board of Director's Meeting of Anchor National Life Insurance Company on June 23, 1978, held immediately following the Special Meeting of the Stockholders the amendment of Article 5 of the Articles of Incorporation as adopted by the Stockholders was approved and ratified. /s/ Carroll E. Dietle ------------------------ Carroll E. Dietle, II Senior Vice President /s/ James A. Deer ------------------------ James A. Deer Assistant Secretary 54 AFFIDAVIT STATE OF ARIZONA ) ) SS COUNTY OF MARICOPA ) Carroll E. Dietle, II, first duly sworn, deposes and says that he is the Senior Vice President of Anchor National Life Insurance Company, and that he has read the foregoing certificate of Amendment of Articles of Incorporation of Anchor National Life Insurance Company, and knows the contents thereof and the same are true to the best of his own knowledge. /s/ Carroll E. Dietle -------------------------- Carroll E. Dietle, II Senior Vice President Subscribed and sworn to before me this 20th day of July, 1978. /s/ Margaret L. Martin - ------------------------------ Notary James A. Deer, first being duly sworn, deposes and says that he is the Assistant Secretary of Anchor National Life Insurance Company and that he has read the foregoing certificate of Amendment of the Articles of Incorporation of Anchor National Life Insurance Company and knows the contents thereof and the same are true to the best of his knowledge. /s/ James A. Deer -------------------------- James A. Deer Assistant Secretary Subscribed and sworn to before me this 20th day of July, 1978. /s/ Margaret L. Martin - ------------------------------ Notary 55 FILED 10/1/84 CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION OF ANCHOR NATIONAL LIFE INSURANCE COMPANY William G. Stalnaker and James A. Deer hereby certify: 1. That they are the President and Secretary respectively of Anchor National Life Insurance Company, a California corporation. 2. That the Shareholders of the corporation adopted and approved the amendment of Article V of the Articles of Incorporation of the corporation by resolution at a meeting held at Anchor National Life Plaza, 2202 E. Camelback Rd., Phoenix Arizona, on March 24, 1983 by the required vote of shareholders as prescribed by section 902 of the corporation code of the state of California. The resolution setting forth the amendment of the Articles of Incorporation reads as follows: "RESOLVED, that the first sentence of ARTICLE V of the ARTICLES OF INCORPORATION of this corporation, which reads as follows: 'The Board of Directors shall consist of not less than eleven (11) members and not more than thirteen (13) members, the exact number of which shall be fixed by a By-law adopted by the stockholders or by the Board of Directors.' is hereby stricken and the following language is hereby substituted therefore: 'The Board of Directors shall consist of not less than fourteen (14) members and not more than sixteen members, the exact number of which shall be fixed by a By-law adopted by the stockholders or by the Board of Directors.' 3. That the number of shares entitled to vote on or consent to the amendment is 3,511 shares. 4. That the number of shares voting in favor of the resolution was 3,511 shares, or 100%, which exceeded the required vote, which is 50% plus one. 5. That at a duly held meeting of the Board of Directors of the corporation held at Anchor National Life Plaza, 2202 E. Camelback Rd., Phoenix, Arizona, 85016, on March 24, 1983, at which a quorum of the members was present and voting, the Directors approved, ratified and confirmed the resolution of the shareholders in the form set forth above. In Witness Whereof, the undersigned have executed this Certificate of Amendment on September 20, 1984. /s/ William G. Stalnaker ---------------------------- William G. Stalnaker President /s/ James A. Deer ---------------------------- James A. Deer Vice President, Secretary and Associate General Counsel Subscribed and sworn to before me this 20th day of September, 1984. /s/ Nancy R. Greenleaf - ------------------------ Notary Public (My Commission Expires Feb. 29, 1988) 56 AFFIDAVIT State of ARIZONA ) ) SS County of Maricopa ) William G. Stalnaker, first duly sworn, deposes and says that he is President of Anchor National Life Insurance Company, and that he has read the foregoing certificate of Amendment of Articles of Incorporation of Anchor National Life Insurance Company and knows the contents thereof and the same are true and correct of affiant's own knowledge. /s/ William G. Stalnaker ------------------------------- William G. Stalnaker President Subscribed and sworn to before me this 20th day of September, 1984. /s/ Nancy R. Greenleaf - ------------------------ Notary (My Commission Expires Feb. 29, 1988) James A. Deer, first being duly sworn, deposes and says that he is the Secretary of Anchor National Life Insurance Company and that he has read the foregoing certificate of Amendment of the Articles of Incorporation of Anchor National Life Insurance Company and knows the contents thereof and the same are true and correct of affiant's own knowledge. /s/ James A. Deer ------------------------------- James A. Deer Vice President, Secretary and Associate General Counsel Subscribed and sworn to before me this 20th day of September, 1984. /s/ Nancy R. Greenleaf - ------------------------ Notary (My Commission Expires Feb. 29, 1988) 57 ENDORSED FILED 10/11/84 by James E. Harris, Deputy CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION OF ANCHOR NATIONAL LIFE INSURANCE COMPANY William G. Stalnaker and James A. Deer hereby certify: 1. That they are the President and Vice President, Secretary and Associate General Counsel respectively of Anchor National Life Insurance Company, a California corporation. 2. That the Shareholders of the corporation adopted and approved an amendment of Article IV of the Articles of Incorporation of this corporation by resolution at a meeting held at Anchor Centre One, 2201 E. Camelback Road, Phoenix, Arizona, 85016 on September 21, 1984, by the required vote of shareholders as prescribed by section 902 of the Corporation Code of the state of California. The resolution setting forth the amendment of the Articles of Incorporation reads as follows: WHEREAS, the corporation is currently doing business pursuant to a certificate of authority issued by the state of Maine which permits it to transact life, health and variable annuity insurance, and WHEREAS, the state of Maine has recently adopted new requirements for Paid-Up Capital set forth in Title 24-A, M.R.S.A. Section 410 requiring a minimum Paid-Up Capital of $2,500,000 for the transaction of business in the lines in which the corporation is currently authorized, and WHEREAS, it is deemed desirable for the corporation to continue doing business under its certificate of authority as currently constituted in the state of Maine; RESOLVED, that Article IV of the Articles of Incorporation of this corporation, as previously amended and which now reads: "The corporation is authorized to issue one class of stock, which shall be designated as common stock; the total number of shares which this corporation shall have authority to issue is 4,000 shares and the aggregate par value of all shares that are to be issued shall be Two Million, Two Hundred and Eighty Thousand Dollars ($2,280,000), and the par value of each of said shares shall be Five Hundred Seventy Dollars and No Cents ($570.00). Upon the effective date of this amendment, each one hundred outstanding $5.70 par value shares shall be converted to one $570.00 par value share, and provided further that nothing in this amendment shall authorize the conversion of outstanding shares of par value of Five Dollars Seventy Cents ($5.70) into outstanding fractional shares with a par value of less than Five Hundred and Seventy Dollars and No Cents." is hereby stricken and the following language is hereby substituted therefore: "The corporation is authorized to issue one class of stock, which shall be designated as common stock; the total number of shares which this corporation shall have authority to issue is 4,000 shares and the aggregate par value of all shares that are to be issued shall be Four Million Dollars ($4,000,000), and the par value of each of said shares shall be One Thousand Dollars ($1,000). Upon the effective date of this amendment, each one hundred outstanding Five Hundred Seventy Dollar par value share shall be converted to One Thousand Dollar par value share, and upon the conversion of each outstanding share, funds shall be transferred from Gross paid-in and contributed surplus to Capital Paid-Up equal to the aggregate par value of the issued and 58 outstanding shares." 3. That the number of shares entitled to vote on or consent to the amendment is 3,511 shares. 4. That the number of shares voting in favor of the resolution was 3,511 shares, or 100%, which exceeded the required vote, which is 50% plus one. 5. That at a duly held special meeting of the Board of Directors of the corporation held by telephone conference on September 21, 1984, at which a quorum of the board was present and voting, the board approved, ratified and confirmed the resolution of the shareholders. 59 In witness whereof, the undersigned have executed this certificate of amendment on October 8, 1984. /s/ William G. Stalnaker --------------------------- William G. Stalnaker President /s/ James A. Deer --------------------------- James A. Deer Vice President, Secretary and Associate General Counsel Subscribed and sworn to before me this 8th day of October, 1984. /s/ [unreadable] - ------------------------------------- Notary Public (My Commission Expires Oct. 13, 1987) 60 AFFIDAVIT State of ARIZONA ) ) SS County of Maricopa ) William G. Stalnaker, first duly sworn, deposes and says that he is President of Anchor National Life Insurance Company, and that he has read the foregoing certificate of Amendment of Articles of Incorporation of Anchor National Life Insurance Company and knows the contents thereof and the same are true and correct of affiant's own knowledge. /s/ William G. Stalnaker --------------------------- William G. Stalnaker President Subscribed and sworn to before me this 8th day of October, 1984. /s/ [unreadable] - ----------------------------- Notary (My Commission Expires Oct. 13, 1987) James A. Deer, first being duly sworn, deposes and says that he is the Secretary of Anchor National Life Insurance Company and that he has read the foregoing certificate of Amendment of the Articles of Incorporation of Anchor National Life Insurance Company and knows the contents thereof and the same are true and correct of affiant's own knowledge. /s/ James A. Deer --------------------------- James A. Deer Vice President, Secretary and Associate General Counsel Subscribed and sworn to before me this 8th day of October, 1984. /s/ [unreadable] - ----------------------------- Notary (My Commission Expires Oct. 13, 1987) 61 CERTIFICATE OF OWNERSHIP MERGING ANCHOR NATIONAL PROPERTIES, INC., an Arizona corporation INTO ANCHOR NATIONAL LIFE INSURANCE COMPANY, a California corporation We, THOMAS B. PHILLIPS, the Senior Vice President and General Counsel, and JAMES A. DEER, the Secretary, of Anchor National Life Insurance Company, a corporation organized and existing under the laws of the State of California, DO HEREBY CERTIFY: 1. That Thomas B. Phillips is the Senior Vice President and General Counsel and James A. Deer is the Secretary of this corporation. 2. This corporation owns 100 percent of the outstanding shares of each class of Anchor National Properties, Inc., and Arizona corporation the laws of which permit a merger in the manner provided by Section 1110 of the California Corporations Code. 3. The board of directors of Anchor National Life Insurance Company duly adopted the following resolution: RESOLVED that this corporation merge into itself Anchor National Properties, Inc., an Arizona corporation, its wholly-owned subsidiary. and assumes all of the obligations of Anchor National Properties, Inc., pursuant to Section 1110 of the California Corporation Code. 4. This certificate shall become effective on June 30, 1985. Each of the undersigned declares under penalty of perjury that the statements contained in the foregoing certificate are true of their own knowledge. Executed at Phoenix, Arizona, on June 26, 1985. /s/ Thomas B. Phillips --------------------------------- THOMAS B. PHILLIPS, Senior Vice President and General Counsel /s/ James A. Deer --------------------------------- JAMES A. DEER, Secretary 62 FILED 2/18/86 CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION OF ANCHOR NATIONAL LIFE INSURANCE COMPANY William G. Stalnaker and James A. Deer hereby certify: 1. That they are the President and Secretary respectively of Anchor National Life Insurance Company, a California corporation. 2. That the Shareholders of the corporation adopted and approved the amendment of Article V of the Articles of Incorporation of the corporation by resolution at a meeting held at Anchor Centre One, 2201 East Camelback Road, Phoenix, Arizona, on November 18, 1985, by the required vote of shareholders as prescribed by section 902 of the corporation code of the State of California. The resolution setting forth the amendment of the Articles of Incorporation reads as follows: "RESOLVED, that the first sentence of ARTICLE V of the ARTICLES OF INCORPORATION of this corporation, which reads as follows: 'The Board of Directors shall consist of not less than fourteen (14) members and not more than sixteen (16) members, the exact number of which shall be fixed by a By-Law adopted by the stockholders or by the Board of Directors.' is hereby stricken and the following language is hereby substituted therefore: "The Board of Directors shall consist of not less than sixteen (16) members and not more than seventeen (17) members, the exact number of which shall be fixed by a By-Law adopted by the stockholders or by the Board of Directors." 3. That the number of shares entitled to vote on or consent to the amendment is 3,511 shares. 4. That the number of shares voting in favor of the resolution was 3,511 shares, or 100%, which exceeded the required vote, which is 50% plus one. 5. That at a duly held meeting of the Board of Directors of the corporation held at Anchor Centre One, 2201 East Camelback Road, Phoenix, Arizona 85016 on November 18, 1985 at which a quorum of the members were present and voting, the Directors approved, ratified and confirmed the resolution of the shareholders in the form set forth above. In witness Whereof, the undersigned have executed this Certificate of Amendment on February 11, 1986. /s/ William G. Stalnaker ---------------------------- William G. Stalnaker President /s/ James A. Deer ---------------------------- James A. Deer Vice President, Secretary and Associate General Counsel Subscribed and sworn to before me this llth day of February, 1986. /s/ Nancy Greenleaf - ---------------------------- Notary Public My Commission Expires Feb. 29, 1988 63 AFFIDAVIT State of ARIZONA ) ) SS County of Maricopa ) William G. Stalnaker, first duly sworn, deposes and says that he is President of Anchor National Life Insurance Company, and that he has read the foregoing certificate of Amendment of Articles of Incorporation of Anchor National Life Insurance Company and knows the contents thereof and the same are true and correct of affiant's own knowledge. /s/ William G. Stalnaker ------------------------------- William G. Stalnaker President Subscribed and sworn to before me this 20th day of September, 1984. /s/ Nancy R. Greenleaf - ------------------------ Notary (My Commission Expires Feb. 29, 1988) James A. Deer, first being duly sworn, deposes and says that he is the Secretary of Anchor National Life Insurance Company and that he has read the foregoing certificate of Amendment of the Articles of Incorporation of Anchor National Life Insurance Company and knows the contents thereof and the same are true and correct of affiant's own knowledge. /s/ James A. Deer ------------------------------- James A. Deer Vice President, Secretary and Associate General Counsel Subscribed and sworn to before me this 20th day of September, 1984. /s/ Nancy R. Greenleaf - ------------------------ Notary (My Commission Expires Feb. 29, 1988) 64 ENDORSED FILED 12/3/86 March Fong Eu, Secretary of State CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION OF ANCHOR NATIONAL LIFE INSURANCE COMPANY Howard R. Fricke and Janet E. Jackim hereby certify: 1. That they are the Chairman of the Board and Secretary respectively of Anchor National Life Insurance Company, a California corporation. 2. That the Shareholders of the corporation adopted and approved the amendment of Article V of the Articles of Incorporation of the corporation by resolution at a meeting held at Anchor Centre One, 2201 E. Camelback Rd., Phoenix, Arizona, on June 19, 1986 by the required vote of shareholders as prescribed by section 902 of the corporation code of the state of California. The resolution setting forth the amendment of the Articles of Incorporation reads as follows: "RESOLVED, that the first sentence of ARTICLE V of the ARTICLES OF INCORPORATION of this corporation, which reads as follows: The Board of Directors shall consist of not less than sixteen (16) members and not more than seventeen (17) members, the exact number of which shall be fixed by a By-law adopted by the stockholders or by the Board of Directors." is hereby stricken and the following language is hereby substituted therefore: "The Board of Directors shall consist of not less than nine (9) members and not more than twelve (12) members, the exact number of which shall be fixed by a By-law adopted by the stockholders or by the Board of Directors." 3. That the number of shares entitled to vote on or consent to the amendment is 3,511 shares. 4. That the number of shares voting in favor of the resolution was 3,511 shares, or 100%, which exceeded the required vote, which is 50% plus one. 5. That at a duly held meeting of the Board of Directors of the corporation held at Anchor Centre One, 2201 E. Camelback Rd., Phoenix, Arizona, 85016, on June 19, 1986, at which a quorum of the members was present and voting, the Directors approved, ratified and confirmed the resolution of the shareholders in the form set forth above. In Witness Whereof, the undersigned have executed this Certificate of Amendment on August 27, 1986. /s/ Howard R. Fricke --------------------------- Howard R. Fricke Chairman of the Board /s/ Janet E. Jackim --------------------------- Janet E. Jackim Second Vice President, Secretary and Assistant General Counsel Subscribed and sworn to before me this 14th day of November, 1986. /s/ DonnaSue Martin [SEAL] --------------------------- 65 Notary Public My Commission Expires Mar. 7, 1988 66 AFFIDAVIT State of ARIZONA ) ) SS County of Maricopa ) Howard R. Fricke, first being duly sworn, deposes and says that he is Chairman of the Board of Anchor National Life Insurance Company, and that he has read the foregoing Certificate of Amendment of Articles of Incorporation of Anchor National Life Insurance Company and knows the contents thereof and the same are true and correct of affiant's own knowledge. /s/ Howard R. Fricke ------------------------------- Howard R. Fricke Chairman of the Board Subscribed and sworn to before me this 14th day of November, 1986. /s/ DonnaSue Martin ------------------------------- Notary Public My Commission Expires Mar. 7, 1988 Janet E. Jackim, first being duly sworn, deposes and says that she is the Secretary of Anchor National Life Insurance Company and that she has read the foregoing Certificate of Amendment of the Articles of Incorporation of Anchor National Life Insurance Company and knows the contents thereof and the same are true and correct of affiant's own knowledge. /s/ Janet E. Jackim ------------------------------- Janet E. Jackim Second Vice President, Secretary and Assistant General Counsel Subscribed and sworn to before me this 14th day of November, 1986. /s/ DonnaSue Martin ------------------------------- Notary Public My Commission Expires Mar. 7, 1988 67 ENDORSED FILED 3/31/89 March Fong Eu, Secretary of State CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION OF ANCHOR NATIONAL LIFE INSURANCE COMPANY Robert P. Saltzman and Gail A. Lione hereby certify: 1. That they are the President and Secretary, respectively, of Anchor National Life Insurance Company, a California corporation. 2. That by unanimous written consent of the Board of Directors of the corporation on December 1, 1988, the Board adopted the following resolutions approving the amendment of Article V of the Articles of Incorporation: RESOLVED, that the first sentence of Article V of the Articles of Incorporation of this Corporation, which reads as follows: "The Board of Directors shall consist of not less than nine (9) members and not more than twelve (12) members, the exact number of which shall be fixed by a by-law adopted by the stockholders or by the Board of Directors." is hereby stricken and the following language is substituted therefor: "The Board of Directors shall consist of not less than five (5) members and not more than nine (9) members, the exact number of which shall be fixed by a Bylaw adopted by the shareholders or by the Board of Directors." RESOLVED, FURTHER, that the second sentence of Article V of the Articles of Incorporation of this Corporation, which reads as follows: "The minimum and maximum number of Directors may be changed by a by-law duly adopted by the shareholders, provided, however, that the maximum number of Directors shall in no event exceed the minimum by more than two (2); the shareholders may also adopt a by-law providing for a definite number of Directors without provision for an indefinite number." is hereby stricken and the following language is substituted therefor: "The minimum and maximum number of Directors may be changed by a Bylaw duly adopted by the shareholders; the shareholders may also adopt a Bylaw providing for a definite number of Directors without provision for an indefinite number." 3. That the sole shareholder of the corporation adopted and approved the same amendment to the Articles of Incorporation by unanimous written consent of the sole shareholder on December 1, 1988, by the required vote of the sole shareholder as prescribed by Section 902 of the Corporations Code of the State of California. IN WITNESS WHEREOF, the undersigned have executed this Certificate of Amendment on December 1, 1988. /s/ Robert P. Saltzman --------------------------- Robert P. Saltzman President /s/ Gail A. Lione --------------------------- 68 Gail A. Lione Senior Vice President, Secretary and General Counsel Subscribed and sworn to before me this 1st day of December, 1988. /s/ Frances S. Booker -------------------------------------- Notary Public (Notary Public, Fulton County, Georgia My commission Expires Nov. 22, 1992) [SEAL] 69 AFFIDAVIT State of GEORGIA ) ) SS County of Fulton ) Robert P. Saltzman, first being duly sworn, deposes and says that he is President of Anchor National Life Insurance Company, and that he has read the foregoing Certificate of Amendment of Articles of Incorporation of Anchor National Life Insurance Company and knows the contents thereof and the same are true and correct of affiant's own knowledge. /s/ Robert P. Saltzman ------------------------------- Robert P. Saltzman President Subscribed and sworn to before me this 1st day of December, 1988. /s/ Frances S Booker -------------------------------------- Notary Public (Notary Public, Fulton County, Georgia My commission Expires Nov. 22, 1992) Gail A. Lione, first being duly sworn, deposes and says that she is the Secretary of Anchor National Life Insurance Company and that she has read the foregoing Certificate of Amendment of the Articles of Incorporation of Anchor National Life Insurance Company and knows the contents thereof and the same are true and correct of affiant's own knowledge. /s/ Gail A. Lione ------------------------------- Gail A. Lione Senior Vice President, Secretary and General Counsel Subscribed and sworn to before me this 1st day of December, 1988. /s/ Frances S. Booker -------------------------------------- Notary Public (Notary Public, Fulton County, Georgia My commission Expires Nov. 22, 1992) 70 ENDORSED FILED 3/1/94 Tony Miller, Acting Secretary of State CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION Eli Broad and Susan L. Harris certify that: 1. They are the president and the secretary, respectively, of Anchor National Life Insurance Company, a California corporation. 2. The first sentence of Article V of the articles of incorporation of this corporation is amended to read as follows: "The Board of Directors shall consist of not less than Nine (9) members and not more than Seventeen (17) members, the exact number of which shall be fixed by a Bylaw adopted by the shareholders or by the Board of Directors." 3. The foregoing amendment of articles of incorporation has been duly approved by the board of directors. 4. The foregoing amendment of articles of incorporation has been duly approved by the required vote of shareholders in accordance with Section 902 of the Corporations Code. The total number of outstanding shares of the corporation is 3,511. The number of shares voting in favor of the amendment equaled or exceeded the vote required. The percentage vote required was more than 50%. We further declare under penalty of perjury under the laws of the State of California that the matters set forth in this certificate are true and correct of our own knowledge. Dated: January 26, 1994 /s/ Eli Broad ------------------------ Eli Broad /s/ Susan L. Harris ------------------------ Susan L. Harris EX-3.(B) 4 BY LAWS 1 EXHIBIT (3)(B) BY-LAWS ANCHOR NATIONAL LIFE INSURANCE COMPANY ARTICLE I OFFICES Section 1. The name of the Corporation shall be: ANCHOR NATIONAL LIFE INSURANCE COMPANY as amended 12/5/66 Section 2. The principal office shall be located in Los Angeles, California. Section 3. The Corporation may also have offices at such other places both within and without the State of California as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II MEETINGS OF SHAREHOLDERS Section 1. Annual meetings of Shareholders may be held within or without the State of California at such place as may be fixed from time to time by the Board of Directors and as shall be stated in the Notice of the meeting or as stated in a duly executed Waiver of Notice thereof. Special meetings of Shareholders may be held within or without the State of California at such times and at such places as shall be stated in the Notice of meeting or as stated in a duly executed Waiver of Notice thereof. Section 2. An annual meeting of shareholders, commencing with the year 1973, shall be held on the Third Thursday of March of each year, or at such other date and time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting, at which they shall elect by a plurality vote a Board of Directors, and transact such other business as may properly come before the meeting. Section 3. Written Notice of the annual meeting shall be given to each Shareholder entitled to vote thereat not less than ten (10) days before the date of the meeting. Section 4. Special meetings of the Shareholders for any purpose or purposes may be called by the Chairman of the Board and shall be called by the Chairman of the Board or Secretary at the request, in writing, of a majority of the Board of Directors, or at the request, in writing, of Shareholders owning two-fifths (2/5ths) of all of the outstanding shares of the Corporation entitled to vote. Such request shall state the purpose or purposes of the proposed meeting, and business transacted at any special meeting of Shareholders shall be limited to the purposes stated in the Notice or in the Waiver thereof. Section 5. Written Notice of a special meeting of Shareholders, stating the time, place and purpose thereof, shall be given to each Shareholder entitled to vote thereat, at least ten (10) days before the date fixed for the meeting. Section 6. The holders of a majority of the outstanding shares, represented in person or by proxy, shall constitute a quorum at al meetings of the Shareholders for the transaction of business except as otherwise provided by statute or by the Articles of Incorporation. If, however, such quorum shall not be present or represented at any meeting of the Shareholders, the Shareholders present in person or represented by proxy shall have power to adjourn the meeting from time to time, without Notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or 2 represented, any business may be transacted which might have been transaction at the meeting as originally notified. Section 7. If a quorum is present, the affirmative votes of a majority of the shares represented at the meeting and entitled to vote shall be the act of the Shareholders unless the vote of a greater number of shares is required by law or the Articles of Incorporation. October 28, 1965, Amendment: Section 8. Each outstanding share of stock shall be entitled to one (1) vote on each matter submitted to a vote at a meeting of the Shareholders. A Shareholder may vote either in person or by proxy executed in writing by the Shareholder or by his duly authorized attorney-in-fact. No proxy shall be valid after eleven (11) months from the date of its execution, unless otherwise provided in the proxy or fixed by statute. In all elections for Directors, every holder of stock entitled to vote shall have the right to vote, in person or by proxy, the number of shares entitled to vote owned by him, for as many persons as there are Directors to be elected, or to cumulate said shares and give one candidate as many votes as the number of Directors multiplied by the number of his shares entitled to vote shall equal, or to distribute them on the same principle among as many candidates as he shall think fit. ARTICLE III DIRECTORS Section 1. The number of Directors shall be ten (10). Directors need not be residents of the State of California or Shareholders of the corporation. The Directors shall be elected at the Annual Meeting of Shareholders, and each Director elected shall serve until the next succeeding annual meeting and until his successor shall have been elected and qualified. (As amended 3/17/95.) Section 2. Vacancies and newly created directorships resulting from any increase from the authorized number of Directors may be filled by a majority of the Directors then in office, although less than a quorum, and the Directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify. Section 3. The business of the Corporation shall be managed by its Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Articles of Incorporation or by these By-Laws directed or required to be exercised or done by the Shareholders. Section 4. The Directors may keep the books of the Corporation, except such as are required by law to be kept within the State outside of the State of California, at such place or places as they may from time to time determine. MEETINGS OF THE BOARD OF DIRECTORS Section 5. Meetings of the Board of Directors, regular or special, may be held either within or without the State of California. Section 6. The first meeting of each newly elected Board of Directors shall be held at such time and place as shall be fixed by the vote of the Shareholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected Directors or order legally to constitute the meeting, provided a quorum shall be present, or it may convene at such place and time as shall be specified in a notice for special meetings of the Board of Directors or fixed by the consent in writing of all the Directors. Section 6(a). The Executive Vice President, or if there be more than one, the Executive Vice President in the order determined by the Board of Directors shall, in the absence or disability of the President, perform the duties and exercise the powers of the President and, in the absence of disability of both the Chairman of the Board and the President, perform the duties and exercise the powers of the Chairman of the Board; and shall 3 perform such other duties and exercise such other powers as the Board of Directors shall prescribe. In the event of the temporary absence or temporary disability of either the President or the Chairman of the Board, the Chairman or acting Chairman, in the absence of an order previously determined by the Board of Directors, shall set the order or succession subject to further action by the Board of Directors. Section 7. Regular meetings of the Board of Directors may be held upon such notice, or without notice, and at such time and at such place as shall from time to time be determined by the Board. Section 8. Special meeting of the Board of Directors shall be held on two (2) days notice to each Director, either by mail or by telegram. Special meetings may be called by the Chairman of the Board and shall be called by the Chairman of the Board or Secretary on the written request of two (2) Directors. Section 9. Attendance of a Director at any meeting shall constitute a Waiver of Notice of such meeting, except where a Director attends for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need to be specified in the notice or waiver of notice of such meeting. Section 10. A majority of the Directors shall constitute a quorum for the transaction of business unless a greater number is required by law or by the Articles of Incorporation. The act of a majority of the Directors present at any meeting at which a quorum is present shall be the act of the Board of Directors, unless the act of a greater number is required by statute or by the Articles of Incorporation or by these By-Laws. If a quorum shall not be present at any meeting of Directors, the Directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. COMMITTEES OF DIRECTORS Section 11(a). The Board of Directors, may appoint from among its members, by resolution adopted by a majority of the whole Board, an executive committee which shall consist of three (3) or more Directors. The executive committee shall have and exercise all of the rights and powers of the Board of Directors during the intervals between meetings of the Board of Directors. Meetings of the executive committee shall be held on two (2) days' notice to each of the members, any two of whom shall constitute a quorum for the transaction of business. Any vacancy on the executive committee shall be filled by the Board of Directors at any regular or special meeting. Section 11(b). The Board of Directors, by resolution adopt by a majority of the whole board, may designate and elect one or more committees in addition to the executive committee, each such committee to consist of two or more Directors of the Corporation. The additional committees shall have and exercise such of the rights and powers of the Board of Directors and shall transact business in such manner as shall be specified in the resolutions providing for their creation. Vacancies in the membership of any such committee shall be filled by the Board of Directors at any regular or special meeting. COMPENSATION OF DIRECTORS Section 12. The Board of Directors, by the affirmative vote of a majority of the Directors then in office, and irrespective of any personal interest of any of its members, shall have authority to establish reasonable compensation of all Directors for services to the Corporation as Directors, officers or otherwise. ARTICLE IV NOTICES Section 1. Whenever, under the provisions of the statutes or of the Articles of Incorporation or of these By-Laws, notice is required to be given to any Director or Shareholder, it shall not be construed to mean 4 personal notice, but such notice may be given, in writing, by mail, addressed to such Director or Shareholder, at his address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to Directors may also be given by telegram. Section 2. Whenever any Notice whatever is required to be given under the provisions of the statutes or under the provisions of the Articles of Incorporation or these By-Laws, a Waiver thereof, in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such Notice. ARTICLE V OFFICERS December 23, 1968, Amendment: Section 1. The officers of the Corporation shall be chosen by the Board of Directors and shall be a Chairman of the Board, a President, a Secretary, a Treasurer and one or more Vice Presidents any one or more of whom may be designated Executive Vice President. None of the officers, except the Chairman of the Board, need be a director. Two or more offices may be held by the same person, except the offices of President and Secretary. Section 2. The Board of Directors may appoint such other officers, assistant officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors. Section 3. The salaries of all officers and agents of the Corporation shall be fixed by or in the manner prescribed by the Board of Directors. Section 4. The officers of the Corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors. Section 5(a). The Chairman of the Board shall be the chief executive officer of the Corporation; he shall preside at all meetings of the stockholders and the Directors, and of the executive committee if there be one, shall have general and active management of the business of the Corporation, and shall see to it that all orders and resolutions of the Board of Directors are carried into effect. He shall have authority to execute insurance policies, bonds, mortgages and other instruments requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed or executed or where the signing and execution thereof shall be exclusively delegated by the Board of Directors to some other officer or agent of the Corporation. THE PRESIDENT Section 5(b). The President shall be the executive officer of the Corporation next in authority to the Chairman of the Board. In the absence or disability of the Chairman, he shall preside at all meetings of the stockholders and the Directors, and of the executive committee if there be one, and shall exercise all other functions of the Chairman of the Board; and he shall perform such other duties and exercise such other powers as the Board of Directors shall prescribe. THE EXECUTIVE VICE-PRESIDENT AND Section 6(a). The Executive Vice President, or if there be more than one, the Executive Vice Presidents in the order determined by the Board of Directors shall, in the absence or disability of the President, perform the duties and exercise the powers of the President and, in the absence or disability of both the Chairman of the Board and the President, perform the 5 duties and exercise the powers of the Chairman of the Board; and shall perform such other duties and exercise such other powers as the Board of Directors shall prescribe. In the event of the temporary absence or temporary disability of either the President or the Chairman of the Board, the Chairman or acting Chairman, in the absence of an order previously determined by the Board of Directors, shall set the order of succession subject to further action of the Board of Directors. (As amended March 24, 1983.) Section 6(b). The Vice-President, or if there be more than one, the Vice-Presidents in the order determined by the Board of Directors, shall, in the absence or disability of the executive Vice-President perform the duties and exercise the powers of the executive Vice-President and shall perform, such other duties and exercise such other powers as the Board of Directors shall prescribe. THE SECRETARY AND ASSISTANT SECRETARIES Section 7. The Secretary shall attend all meetings of the Board of Directors and all meetings of the Shareholders and records all the proceedings of the meetings of the Shareholders and of the Board of Directors in a book to be kept for that purpose and shall perform like duties for committees of the Board of Directors when required. He shall give, or cause to be given, notice of all meetings of the Shareholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or the Chairman of the Board. He shall have custody of the corporate seal of the Corporation and he, or an Assistant Secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature of such Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest thereto by his signature. Section 8. The Assistant Secretary, or if there be more than one, the assistant secretaries in the order determined by the Board of Directors, shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. THE TREASURER AND ASSISTANT TREASURERS Section 9. Except as otherwise prescribed by law or by the Board of Directors, the Treasurer shall have the custody of the corporate funds and securities. He shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositaries as may be designated by or in the manner prescribed by the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Chairman of the Board and the Board of Directors, at its regular meetings, or when the Chairman of the Board or the Board of Directors so requires, an account of all his transactions as Treasurer and of the financial condition of the Corporation. Section 10. The Assistant Treasurer or, if there shall be more than one, the assistant treasurers in the order determined by the Board of Directors, shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. ARTICLE VI CERTIFICATES FOR SHARES Section 1. The shares of the Corporation shall be represented by the Certificates signed by the Chairman of the Board, the President, the executive Vice-President, or any other Vice-President, and by the Secretary or an assistant secretary, or the Treasurer or an assistant treasurer of the Corporation, and may be sealed with the seal of the Corporation or a 6 facsimile thereof. Section 2. The signature of any officer or officers upon a Certificate may be facsimiles if the Certificate is countersigned by a transfer agent, or registered by a registrar, other than the Corporation itself, or an employee of the Corporation. In case any officer who has signed or whose facsimile signature has been placed upon such Certificate shall have ceased to be such officer before such Certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer of the Corporation at the date of its issue. LOST CERTIFICATES Section 3. The Board of Directors may direct a new Certificate to be issued in place of any Certificate theretofore issued by the Corporation alleged to have been lost, mutilated or destroyed. When authorizing such issue of a new Certificate, the Board of Directors, in its discretion and as a condition precedent to the issuance thereof, may prescribe such terms and conditions as it deems expedient, and may require such indemnities as it deems adequate, to protect the Corporation from any claim that may be made against it with respect to any such Certificate alleged to have been lost, mutilated or destroyed. TRANSFER OF SHARES Section 4. Upon surrender to the Corporation or the transfer agent of the Corporation of a Certificate representing shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, authenticated in such manner as the officers authorized to sign Certificates or the transfer agent may require, a new Certificate shall be issued to the person entitled thereto, and the old Certificate canceled and the transaction recorded upon the books of the Corporation. CLOSING OF TRANSFER BOOKS; RECORD DATE Section 5. For the purpose of determining Shareholders entitled to notice or to vote at any meeting of Shareholders, or Shareholders entitled to receive payment of any dividend, or in order to make a determination of Shareholders for any other proper purpose, the Board of Directors may provide that the stock transfer books shall be closed for a stated period but not to exceed, in any case, forth (40) days. If the stock transfer books shall be closed for the purpose of determining Shareholders entitled to notice of or to vote at a meeting of Shareholders, such books shall be closed for at least ten (10) days, immediately preceding such meeting. In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of Shareholders, such date in any case to be not more than forty (40) days and, in case of a meeting of Shareholders, not less than ten (10) days prior to the date on which the particular action requiring such determination of Shareholders is to be taken. If the stock transfer books are not closed and no record date is fixed, the record date for the determination of Shareholders entitled to notice of or to vote at a meeting, or to receive payment of a dividend, shall be the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be. REGISTERED SHAREHOLDERS Section 6. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of California. ARTICLE VII GENERAL PROVISIONS DIVIDENDS Section 1. Subject to the provisions of the Articles of 7 Incorporation relating thereto, if any, dividends may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property or in shares of the capital stock, subject to any provisions of the Articles of Incorporation. Section 2. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for such other purpose as the Directors shall think conducive to the interests of the Corporation, and the Directors may modify or abolish any such reserve in their discretion. CHECKS Section 3. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers, or such other person or persons as may from time to time be designated by or in the manner prescribed by the Board of Directors. FISCAL YEAR Section 4. The fiscal year of the Corporation shall commence on January 1st and end on December 31st. SEAL Section 5. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization, and the words, "Corporate Seal, California". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced. ARTICLE VIII AMENDMENTS Section 1. These By-Laws may be altered, amended or repealed by the Shareholders or by the Board of Directors at any regular or special meeting if Notice of such alteration, amendment or repeal be contained in the Notice of such meeting, and provided further that the wishes of the Shareholders shall prevail in the event of any conflict. KNOW ALL MEN BY THESE PRESENTS: That we, the undersigned, being all of the persons appointed in the Articles of Incorporation to act as the first Board of Directors of SIERRA-NEVADA LIFE INSURANCE COMPANY, hereby assent to the foregoing By-Laws, and adopt the same as the By-Laws of said Corporation. IN WITNESS WHEREOF, we have hereunto set our hands this 16th day of April, 1965. /s/ RICHARD D. BARGER - ----------------------------------- ) Richard D. Barger ) ) /s/ ALFRED B. DOUTRE ) - ----------------------------------- ) Alfred B. Doutre ) ) /s/ AGNES JOHNSON ) DIRECTORS - ----------------------------------- ) Agnes Johnson ) ) /s/HAUN CHAMBERLAIN ) - ----------------------------------- ) Haun Chamberlain ) ) /s/ GERRIE RUE ) - ----------------------------------- ) Gerrie Rue THIS IS TO CERTIFY: 8 That I am the duly elected, qualified and acting Secretary of SIERRA-NEVADA LIFE INSURANCE COMPANY, and that the above and foregoing By-Laws were adopted as the By-Laws of said Corporation on the 16th day of April, 1965, by the persons appointed in the Articles of Incorporation to act as the first Directors of said Corporation. IN WITNESS WHEREOF, I have hereunto set my hand this 16th day of April, 1965. /S/ [unreadable] ------------------------ Secretary EX-4.(A) 5 VISTA CAP. ADVAN. ADVISOR IND.FIXED & VAR CONTRACT 1 EXHIBIT (4)(A) Anchor National Life Insurance Company A STOCK COMPANY LOS ANGELES, CALIFORNIA CERTIFICATE NUMBER P9999999999 PARTICIPANT JOHN DOE EXECUTIVE OFFICE ANNUITY SERVICE CENTER 1 SUNAMERICA CENTER P.O. BOX 54299 CENTURY CITY LOS ANGELES, CA 90054-0299 LOS ANGELES, CA 90067 ANCHOR NATIONAL LIFE INSURANCE COMPANY ("We", "Us" or the "Company" or "Anchor National") agrees to provide benefits to the Participant in the Group Contract, subject to the provisions set forth in this Certificate and in consideration of the Participant's Enrollment Form and Purchase Payments We receive. This Certificate is evidence of coverage under the Group Contract if a Participant Enrollment Form is attached. The coverage will begin as of the Certificate Date, shown on the Certificate Data Page. The value of amounts allocated to the Separate Account during the accumulation and annuity periods is not guaranteed, and will increase or decrease based upon the investment experience of the Fund underlying the Separate Account. The value of the cash surrender benefit increases or decreases based on the application of the Market Value Adjustment. The unadjusted cash surrender benefit is available for 30 days after the end of the Guarantee Period. TEN DAY RIGHT TO EXAMINE CERTIFICATE - You may return this Certificate to Our Annuity Service Center within 10 days after You receive it. The Company will refund the Certificate Value for the valuation period in which the Certificate is received. Upon such refund, the Certificate shall be void. THIS IS A LEGAL CONTRACT. READ IT CAREFULLY. /s/ SUSAN L. HARRIS /s/ ELI BROAD -------------------------- ---------------------- Susan L. Harris Eli Broad Secretary President ALLOCATED FIXED AND VARIABLE GROUP ANNUITY CERTIFICATE Nonparticipating 2 TABLE OF CONTENTS Certificate Data Page Page 3 Definitions Page 5 General Provisions Page 8 Conformity With State Laws; Changes in Law; Assignment; Misstatement of Age or Sex; Written Notice; Proof of Age, Sex or Survival; Non-Participating; Periodic Reports; Premium Taxes; Death of Annuitant; Change of Annuitant; Deferment of Payments; Suspension of Payments; Purchase Payments; Substitution of Fund; Separate Account Accumulation Provisions Page 11 Separate Account Accumulation Value; Number of Accumulation Units; Accumulation Unit Value (AUV); Fixed Account Accumulation Value; Fixed Account Guarantee Period Options; Market Value Adjustment Charges and Deductions Page 13 Expense Risk Charge; Distribution Expense Charge; Mortality Risk Charge Transfer Provision Page 14 Transfers of Accumulation Units Between Variable Accounts; Transfers of Accumulation Units To and From the Fixed Account Withdrawal Provision Page 15 Death Benefit Provision Page 16 Proof of Death; Amount of Death Benefit; Death of Participant or Annuitant On Or After the Annuity Date; Death of Participant Before the Annuity Date; Non-Natural Participant; Beneficiary Annuity Provisions Page 18 Annuity Date; Payments to Participant; Fixed Annuity Payments; Amount of Fixed Annuity Payments; Amount of Variable Annuity Payments Annuity Options Page 20
3 Certificate Data Page Certificate Number Annuity Service Center: P9999999999 P.O. BOX 54299 LOS ANGELES, CA 90054-0299 Participant: JOHN DOE Annuitant: JOHN DOE Beneficiary: Date of Issue: DECEMBER 09, 1992 Annuity Date: First Purchase Price SEPTEMBER 01, 2048 $75,000.00 Age at Issue: Fixed Account - 35 Subsequent Guarantee Rate: (3.0%) Funds Underlying Variable Separate Account: MUTUAL FUND VARIABLE ANNUITY TRUST For Inquiries Call: (800) 445-7862 Separate Accounts: VARIABLE ANNUITY ACCOUNT TWO-T MARKET VALUE ADJUSTMENT All payments and values based on the Fixed Account are subject to a Market Value Adjustment formula, the operation of which may result in upward and downward adjustments in amounts payable. The Market Value Adjustment formula will not be applied: (1) for the payment of the Death Benefit, (2) for the amounts withdrawn to pay fees or charges, (3) for amounts withdrawn within 30 days after the end of the Guarantee Period, (4) for annuitizations on the latest Annuity Date, (5) for amounts withdrawn from a one year Guarantee Period 4 PURCHASE PAYMENT ALLOCATION
Variable Account Options Fixed Account Options Mutual Fund Variable Guarantee Annuity Trust Period 100.00% International Equity 0.00% 1 Year Fixed 0.00% Capital Growth 0.00% 3 Year Fixed 0.00% Growth and Income 0.00% 5 Year Fixed 0.00% Asset Allocation 0.00% 7 Year Fixed 0.00% U.S. Treasury Income 0.00% 10 Year Fixed 0.00% Money Market
5 DEFINITIONS ACCUMULATION UNIT A unit of measurement used to compute the Certificate Value in a Variable Account prior to the Annuity Date. ANNUITANT The natural person on whose life the annuity benefit for the Certificate is based. ANNUITY DATE The date on which annuity payments to the Payee are to start. The latest possible Annuity Date will be set by Us. ANNUITY SERVICE CENTER As specified on the Certificate Data Page. ANNUITY UNIT A unit of measurement used to compute annuity payments in a Separate Account. AUTOMATIC DOLLAR COST AVERAGING PROGRAM A program under which the Participant may authorize the automatic transfer of a fixed dollar amount of his or her choice at regular intervals from a source account to one or more portfolios (other than the source account) at the unit values determined on the dates of transfers. The Company reserves the right to change the terms and conditions. CERTIFICATE This form which describes Your interest in the Group Contract. CERTIFICATE DATE The date Your Certificate is issued, shown on the Certificate Data Page. CERTIFICATE VALUE The sum of Your share of the Variable Accounts' Accumulation Values and Fixed Account Accumulation Values. CERTIFICATE YEAR A year starting from the Certificate Date in one calendar year and ending on the Certificate Date in the succeeding calendar year. CURRENT INTEREST RATE The sum of the Subsequent Guarantee Rate and the Excess Interest Rate declared by Us for any Guarantee Period. DEFERRED ANNUITY An annuity contract under which the start of annuity payments is deferred to a future date. EXCESS INTEREST RATE A rate of interest declared by Us in excess of the Subsequent Guarantee Rate for any Guarantee Period. FIXED ANNUITY A series of periodic payments for the benefit of the Participant of predetermined amounts that do not vary with investment experience. Such payments are made out of the general account assets of the Company. FIXED ACCOUNT The Fixed Account is the Company's general asset account. It contains all of the assets of the Company except for the Separate Account and other segregated asset accounts. Amounts in the Fixed Account are guaranteed by the Company. FUND A collective term used to represent an investment entity, a portfolio of which may be selected by the Participant to be an underlying investment of the Participant's Certificate. GUARANTEE PERIOD The period for which the Current Interest Rate is credited. 6 IRC The Internal Revenue Code of 1986, as amended, as the same may be amended or superseded. PARTICIPANT The person named in the Certificate who is entitled to exercise all rights and privileges of ownership under the Certificate. PAYEE Any person receiving payment of annuity benefits under this Certificate during the Annuity Period. PORTFOLIO A separate investment portfolio of a Fund which has distinct investment objectives. Each Portfolio serves as an underlying investment medium for Purchase Payments and allocations made to one of the Variable Accounts of the Separate Account. PURCHASE PAYMENTS Payments made by or on behalf of the Participant to the Company for the Certificate. SEPARATE ACCOUNT A segregated asset account named on the Certificate Data Page, established by the Company in accordance with California law. The Separate Account consists of several Variable Accounts, each investing in a Portfolio of a Fund. The Prospectus should be read for complete details regarding Separate Account contracts. SUBSEQUENT GUARANTEE RATE The rate of interest established by the Company for the applicable subsequent Guarantee Period, but in no event less than the rate specified on the Certificate Data Page. VALUATION PERIOD The period beginning at the close of the New York Stock Exchange on each day that the New York Stock Exchange is open for regular trading and ending at the close of the next succeeding business day of the New York Stock Exchange. VARIABLE ACCOUNT A division of the Separate Account, the assets of which consist of shares of a specified Portfolio of a Fund. The available Variable Accounts are shown on the Certificate Data Page. VARIABLE ANNUITY A series of periodic payments which vary in amount according to the investment experience of a one or more Variable Accounts. WE, OUR, US, THE COMPANY Anchor National Life Insurance Company. YOU, YOUR The Participant. 7 GENERAL PROVISIONS CONFORMITY WITH STATE LAWS This Certificate will be interpreted under the law of the state in which it is delivered. Any provision which, on the Certificate Date, is in conflict with the law of such state is amended to conform to the minimum requirements of such law. CHANGES IN LAW If laws governing this Certificate or the taxation of benefits under the Certificate change, We will amend the Group Contract and this Certificate to comply with these changes. ASSIGNMENT The Participant may assign this Certificate before the Annuity Date, but We will not be bound by an assignment unless it is in writing and We have received it. Participant's rights and those of any other person referred to in this Certificate will be subject to the assignment. We assume no responsibility for the validity or tax consequences of any assignment. MISSTATEMENT OF AGE OR SEX If the age or sex of any Annuitant has been misstated, future payments will be adjusted using the correct age and sex, according to Our rates in effect on the date that annuity payments were determined. Any overpayment from the Fixed Account, plus interest at the rate of 4% per year, will be deducted from the next payment(s) due. Any underpayment from the Fixed Account, plus interest at the rate of 4% per year, will be paid in full with the next payment due. Any overpayment from the Variable Accounts will be deducted from the next payment(s) due. Any underpayment from the Variable Accounts will be paid in full with the next payment due. WRITTEN NOTICE Any notice We send to the Participant will be sent to the Participant's address shown in the Application unless the Participant requests otherwise. Any written request or notice to Us must be sent to Our Annuity Service Center, as specified on the Certificate Data Page. PROOF OF AGE, SEX OR SURVIVAL The Company may require satisfactory proof of correct age or sex at any time. If any payment under this Certificate depends on the Annuitant being alive, the Company may require satisfactory proof of survival. NON-PARTICIPATING This Certificate does not share in Our surplus. PERIODIC REPORTS The Company will furnish the Participant with a statement of the Variable and Fixed Account balances periodically. PREMIUM TAXES The Company may deduct from the Certificate Value any premium or other taxes payable to a state or other government entity. Should We advance any amount so due, We are not waiving any right to collect such amounts at a later date. The Company will deduct any withholding taxes required by applicable law. DEATH OF ANNUITANT If the Participant and Annuitant are different and the Annuitant dies before the Annuity Date, the Participant becomes the Annuitant until such time as the Participant elects a new Annuitant. The preceding sentence shall not apply if the Participant is not an individual. CHANGE OF ANNUITANT The Participant may change the Annuitant at any time prior to the Annuity Date. If the Participant is not an individual, the Participant may not change the Annuitant at any time. DEFERMENT OF PAYMENTS We may defer making payments from the Fixed Account for up to 6 months. Interest, subject to state requirements, will be credited during the deferral period. 8 SUSPENSION OF PAYMENTS We may suspend or postpone any payments from the Variable Accounts if any of the following occur: (a) the New York Stock Exchange is closed, (b) trading on the New York Stock Exchange is restricted, (c) an emergency exists such that it is not reasonably practical to dispose of securities in the Separate Account or to determine the value of its assets, or (d) the Securities and Exchange Commission, by order, so permits for the protection of security holders. Conditions in (b) and (c) will be decided by or in accordance with rules of the Securities and Exchange Commission. PURCHASE PAYMENTS Purchase Payments are flexible. This means that You, subject to Company declared minimums and maximums, may change the amounts, frequency or timing of Purchase Payments. Purchase Payments may be allocated to the Fixed Account and one or more Variable Accounts in accordance with instructions from You. We reserve the right to specify the minimum that may be allocated to a Variable Account under the Certificate. SUBSTITUTION OF FUND If the shares of any of the Funds or any Portfolio of a Fund should no longer be available for investment by the Separate Account or if, in the judgment of the Company's Board of Directors, further investment in the shares of a Fund is no longer appropriate in view of the purpose of the contract, the Company may substitute shares of another mutual fund or separate investment series thereof, for Fund shares already purchased or to be purchased in the future by Purchase Payments under the contract. No substitution of securities may take place without prior approval of the Securities and Exchange Commission and under such requirements as it may impose. SEPARATE ACCOUNT The Separate Account is a separate investment account of the Company. It is shown on the Certificate Data Page. The assets of the Separate Account are the property of the Company. However, they are not chargeable with the liabilities arising out of any other business the Company may conduct. Each Variable Account is not chargeable with liabilities arising out of any other Variable Account. ACCUMULATION PROVISIONS SEPARATE ACCOUNT ACCUMULATION VALUE The Separate Account Accumulation Value under the Certificate shall be the sum of the values of the Accumulation Units held in the Variable Accounts for the Participant. NUMBER OF ACCUMULATION UNITS For each Variable Account, the number of Accumulation Units is the sum of: Each Purchase Payment and transfer allocated to the Variable Account, reduced by applicable premium taxes, if any: Divided by The Accumulation Unit Value for that Variable Account as of the Valuation Period in which the Purchase Payment or transfer amount is received. The number of Accumulation Units will be similarly adjusted for withdrawals, annuitizations, transfers, and charges. Adjustments will be made as of the end of the Valuation Period in which We receive all requirements for the transaction, as appropriate. ACCUMULATION UNIT VALUE (AUV) The AUV of a Variable Account for any Valuation Period is calculated by subtracting (2) from (1) and dividing the result by (3) where: (1) is the total value at the end of the given Valuation Period of the 9 assets attributable to the Accumulation Units of the Variable Account minus the total liabilities; (2) is the cumulative unpaid charge for assumption of mortality expense and distribution expense risks (See CHARGES AND DEDUCTIONS); (3) is the number of Accumulation Units outstanding at the end of the given Valuation Period. FIXED ACCOUNT ACCUMULATION VALUE Under a Certificate, the Fixed Account Accumulation Value shall be the sum of all monies allocated or transferred to the Fixed Account, reduced by any applicable premium taxes, plus all interest credited on the Fixed Account during the period that the Certificate has been in effect. This amount shall be adjusted for withdrawals, annuitizations, transfers, and charges. FIXED ACCOUNT GUARANTEE PERIOD OPTIONS For any amounts allocated to the Fixed Account, the Participant will select the duration of the Guarantee Period(s) from those listed on the Certificate Data Page. Such amounts will earn interest at the Current Interest Rate for the chosen duration, compounded annually during the entire Guarantee Period. In no event will the Current Interest Rate be less than the Subsequent Guarantee Rate specified on the Certificate Data Page. You may allocate Purchase Payments, or make transfers from the Variable Account Options, to the Fixed Account at any time prior to the Annuity Date. However, no Guarantee Period other than one year may be chosen which extends beyond the Annuity Date. For thirty (30) days following the date of expiration of the current Guarantee Period, You may renew for the same or any other Guarantee Period at the then Current Interest Rate or may transfer all or a portion of the amount to the Variable Accounts. Transfers from the Fixed Account for Guarantee Periods greater than one year may take place thirty (30) days following the end of a Guarantee Period without being subject to a Market Value Adjustment (MVA). Transfers from the Fixed Account from a one year Guarantee Period are not subject to a Market Value Adjustment (MVA). If the Participant does not specify a Guarantee Period at the time of renewal, We will select the same Guarantee Period as has just expired, so long as such Guarantee Period does not extend beyond the Annuity Date. If a renewal occurs within one year of the latest Annuity Date We will credit interest up to the Annuity Date at the then Current Interest Rate for the one year Guarantee Period. MARKET VALUE ADJUSTMENT Any amount withdrawn, transferred or annuitized prior to the end of that Guarantee Period may be subject to a MVA. The MVA will be calculated by multiplying the amount withdrawn, transferred or annuitized by the formula described below: {(1 + I)/(1+J+0.0050)}(caret)N/12 - 1 I = The interest rate currently in effect for that Guarantee Period. J = The Current Interest Rate available for the Guarantee Period equal to the number of years (rounded up to an integer) remaining in the current Guarantee Period at the time of withdrawal, transfer or annuitization. In the determination of J, if the Company currently does not offer the applicable Guarantee Period, then the rate will be determined by linear interpolation of the current rates for the nearest two Guarantee Periods that are available. N = The number of full months remaining in the current Guarantee Period at the time the withdrawal or annuitization request is processed. There will be no Market Value Adjustment on withdrawals from the Fixed Account in the following situations: (1) Death Benefit paid upon death of the Participant; (2) amounts withdrawn to pay fees or charges; (3) amounts withdrawn from the Fixed Account within thirty (30) days after the end of the Guarantee Period; (4) annuitizations on the latest Annuity Date; (5) amounts withdrawn with a one year Guarantee Period. CHARGES AND DEDUCTIONS 10 We will deduct the following charges from the Certificate: EXPENSE RISK CHARGE On an annual basis this charge equals 0.25% of the average daily total net asset value of the Variable Accounts. This charge is to compensate Us for assuming the expense risks under the Certificate. DISTRIBUTION EXPENSE CHARGE On an annual basis this charge equals 0.15% of the average daily total net asset value of the Variable Accounts. This charge is to compensate Us for all distribution expenses associated with the Certificate. MORTALITY RISK CHARGE On an annual basis this charge equals 0.55% of the average daily total net asset value of the Variable Accounts. This charge is to compensate Us for assuming the mortality risks under the Certificate. TRANSFER PROVISION Prior to the Annuity Date, You may transfer all or part of Your Certificate Value to any of the Variable Accounts or the Fixed Account, subject to certain restrictions. We reserve the right to charge a fee for transfers if the number of transfers exceeds the limit specified by Us. Transfers will be effected at the end of the Valuation Period in which We receive Your request for the transfer. TRANSFERS OF ACCUMULATION UNITS BETWEEN VARIABLE ACCOUNTS Both prior to and after the Annuity Date, You may transfer all or a portion of Your investment in one Variable Account to another Variable Account. A transfer will result in the purchase of Accumulation Units in a Variable Account and the redemption of Accumulation Units in the other Variable Account. The minimum amount which can be transferred between Variable Accounts and the amount that can remain in the Variable Account is subject to Company limits. TRANSFERS OF ACCUMULATION UNITS TO AND FROM THE FIXED ACCOUNT Both prior to and after the Annuity Date, You may transfer all or any part of the Certificate Value from the Variable Account(s) to the Fixed Account of the Certificate. After the Annuity Date no transfers from the Fixed Account to the Variable Account are allowed. For transfers from the Fixed Account prior to the Annuity Date see ACCUMULATION PROVISIONS - FIXED ACCOUNT ACCUMULATION VALUE. During the Annuity Period, the amount transferred to the Fixed Account from a Variable Account will be equal to the annuity reserve for the Payee's interest in that Variable Account. The annuity reserve is the product of (a) multiplied by (b) multiplied by (c), where (a) is the number of Annuity Units representing the Participant's interest in the Variable Account; (b) is the Annuity Unit Value for the Variable Account; and (c) is the present value of $1.00 per payment period as of the age of the Annuitant at the time of transfer for the Annuity Option, determined using the 1983a Annuity Mortality Tables with interest at 3.5% per year. Amounts transferred to the Fixed Account will be applied under the Annuity Option at the age of the Annuitant at the time of the transfer. All amounts and Annuity Unit Values will be determined as of the end of the Valuation Period preceding the effective date of the transfer. WITHDRAWAL PROVISION 11 Prior to the Annuity Date while the Annuitant is living, You may withdraw all or part of the Certificate Value amounts under this Certificate by informing Us at Our Annuity Service Center. For full withdrawal, this Certificate must be returned to Our Annuity Service Center. Absent written notification to the contrary, withdrawals and any applicable charge will be deducted from the Certificate Value in proportion to its allocation among the Fixed Account and the Variable Accounts. Withdrawals will be based on values at the end of the valuation Period in which the request for withdrawal and the Certificate (in the case of a full withdrawal), are received at the Annuity Service Center. Unless the SUSPENSION OF PAYMENTS or DEFERMENT OF PAYMENTS sections are in effect, payment of withdrawals will be made within seven days. DEATH BENEFIT PROVISION We will pay a Death Benefit to the Beneficiary upon Our receiving due proof that the Participant died prior to the Annuity Date. The Death Benefit shall be reduced by premium taxes incurred by the Company, if any. The Beneficiary may elect to receive a single sum distribution or to receive annuity payments. If a single sum payment is requested, payment will be in accordance with any applicable laws and regulations governing payments on death. If an Annuity Option is desired, an Option must be elected within 60 days of Our receipt of due proof of the Participant's death at Our Annuity Service Center; otherwise a single sum payment will be made at the end of such 60 day period. Funds will remain allocated pursuant to the last allocation and instructions in effect at the Participant's death until Our Annuity Service Center receives new written instructions. PROOF OF DEATH Due Proof of Death means: 1. a certified copy of a 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 Participant at the time of death; OR 4. any other proof satisfactory to Us. AMOUNT OF DEATH BENEFIT The Death Benefit shall be the Certificate Value at the end of the Valuation Period during which We receive at Our Annuity Service Center due proof of the Participant's death and an election of the type of payment to be made. DEATH OF PARTICIPANT OR ANNUITANT ON OR AFTER THE ANNUITY DATE If the Participant or Annuitant dies on or after the Annuity Date and before the entire interest in the contract has been distributed, We will pay the remaining portion of the interest in the contract, at least as rapidly as under the method of payment being used on the date of death. DEATH OF PARTICIPANT BEFORE THE ANNUITY DATE We will pay the Death Benefit to the Beneficiary upon Our receiving due proof that the Participant died before the Annuity Date and an election form as to the Settlement Option to be elected. The Beneficiary must select one of the following options: 1. Immediately collect the Death Benefit in a lump sum payment. If a lump sum payment is elected, payment will be in accordance with any applicable laws and regulations governing payments and death. If no election is received within 60 days of Our Annuity Service Center, a lump sum payment will be automatically elected, Or 2. Collect the Death Benefit in the form of one of the Annuity Options. The payments must be over the life of the Beneficiary or over a period not extending beyond the life expectancy of the Beneficiary. This option must be elected within 60 days of Our receipt of Due Proof of Death at Our Annuity Service Center and payment must commence within one year after the Participant's death. Otherwise, a lump sum payment will be made at the end of such 60 day period, Or 12 3. If the Beneficiary is the Participant's spouse, the Beneficiary may elect to become the Participant and continue the contract in force. Upon the new Participant's subsequent death, the entire proceeds must be distributed immediately. Unless Option 2 or 3 applies, the entire interest in the contract must be distributed within 5 years of the Participant's death. In no event will payment of the Death Benefit be deferred for a period which exceeds the requirements of IRC Code section 72(s). NON-NATURAL PARTICIPANT If the Participant is not an individual, the death of the Annuitant will be treated as the death of the Participant and the Death Benefit will be paid as described in this section. BENEFICIARY The Beneficiary is as stated in the Application unless later changed by the Participant. While the Participant is living and before the Annuity Date, the Participant may change the Beneficiary by written notice in a form satisfactory to Us. The change will take effect in the date We receive the proper notice subject to any payments We have made. If two or more persons are named, those surviving the Participant will share equally unless otherwise stated, and the Beneficiaries must elect to receive their respective portions of the Death Benefit according to Option 1, 2 or 3 above. If the Annuitant survives the Participant, and there are no surviving Beneficiaries, the Annuitant will be deemed the Beneficiary. If the Participant is also the Annuitant and there are no surviving Beneficiaries at the death of the Participant, the Death Benefit will be paid to the estate of the Participant in accordance with Option 1 above. ANNUITY PROVISIONS ANNUITY DATE The Participant selects an Annuity Date (the date on which the payments are to begin) at the time of application. The Annuity Date must always be the first day of the calendar month and must be at least two years after the Issue Date, but in any event will be no later than the Latest Annuity Date. Annuity payments will begin no later than the latest Annuity Date, as set by the Company. If no Annuity Date is selected, the Annuity Date will be the latest Annuity Date, as set by the Company. The Participant may change the Annuity Date at any time at least seven days prior to the Annuity Date then indicated on the Company's records by written notice to the Company at its Annuity Service Center. PAYMENTS TO PARTICIPANT Unless otherwise requested by the Participant, the Company will make annuity payments to the Participant. If the Participant wants the annuity payments to be made to some other Payee, We will make such payments subject to the following: (a) A written request must be filed at the Annuity Service Center. (b) Such request must be filed not later than thirty (30) days before the due date of the first annuity payment. Any such request is subject to the rights of any assignee. No payments available to or being paid to the Payee while the Annuitant is alive can be transferred, commuted, anticipated or encumbered. FIXED ANNUITY PAYMENTS To the extent a fixed annuity option has been elected, the proceeds payable under this Certificate less any applicable premium taxes, shall be applied to the payment of the Annuity Option elected at whichever of the following is more favorable to the Payee: (a) the annuity rates based upon the applicable tables in the Certificate; or (b) the then current rates provided by the Company on Certificates of this type on the Annuity Date. In no event will the fixed annuity payments be changed once they begin. AMOUNT OF FIXED ANNUITY PAYMENTS The amount of each Fixed Annuity payment will be determined by applying the portion of the Certificate Value allocated to Fixed Annuity payments less any 13 applicable premium taxes or other charges to the annuity table applicable to the Annuity Option chosen. AMOUNT OF VARIABLE ANNUITY PAYMENTS (a) FIRST VARIABLE PAYMENT: The dollar amount of the first monthly annuity payment will be determined by applying the portion of the Certificate Value allocated to Variable Annuity payments, less any applicable premium taxes or other charges, to the annuity table applicable to the Annuity Option chosen. If more than one Variable Account has been selected, the value of the Participant's interest in each Variable Account is applied separately to the annuity table to determine the amount of the first annuity payment attributable to the Variable Account. (b) NUMBER OF VARIABLE ANNUITY UNITS: The number of Annuity Units for each applicable Variable Account is the amount of the first annuity payment attributable to that Variable Account divided by the value of the applicable Annuity Unit for that Variable Account as of the Annuity Date. The number will not change as a result of investment experience. (c) VALUE OF EACH VARIABLE ANNUITY UNIT: The initial value of an Annuity Unit of each Variable Account was arbitrarily set at $10 when the Variable Accounts were established. The value may increase or decrease from one Valuation Period to the next. For any Valuation Period, the value of an Annuity Unit of a particular Variable Account is the value of that Annuity Unit during the last Valuation Period, multiplied by the Net Investment Factor for that Variable Account for the current Valuation Period. The Net Investment Factor for any Variable Account for any Valuation Period is determined by dividing (a) by (b) and then subtracting (c) from the result where: (a) is the net result of: (1) the net asset value of a Portfolio of the Fund share held in the Variable Account determined as of the end of the Valuation Period, plus (2) the per share amount of a dividend or other distribution declared by the Portfolio of the Fund on the shares held in the Variable Account if the "ex-dividend" date occurs during the Valuation Period, plus or minus (3) a per share credit or charge with respect to any taxes paid or reserved for by the Company during the Valuation Period which are determined by the Company to be attributable to the operation of the Variable Account (no federal income taxes are applicable under present law); (b) is the net asset value of a Portfolio of the Fund share held in the Variable Account determined as of the end of the preceding Valuation Period; and (c) is the asset charge factor determined by the Company for the Valuation Period to reflect the Expense Risk Charge, Distribution Expense Charge and Mortality Risk Charge. The result is then multiplied by a factor that neutralizes the Assumed Investment Rate. (d) SUBSEQUENT VARIABLE ANNUITY PAYMENTS: After the first Variable Annuity payment, payments will vary in amount according to the investment performance of the applicable Variable Accounts. The amount may change from month to month. The amount of each subsequent payment is the sum of: The number of Annuity Units for each Variable Account as determined for the first annuity payment Multiplied by The value of an Annuity Unit for that Variable Account at the end of the 14 Valuation Period immediately preceding in which payment is due. The Company guarantees that the amount of each Variable Annuity payment will not be affected by variations in expenses or mortality experience. ANNUITY OPTIONS Upon written election filed with the Company at its Annuity Service Center, all or part of the Certificate Value may be applied to provide one of the following options or any Annuity Option that is mutually agreeable. If Annuity Option is elected, the Payee will automatically receive Option 4 (Life Annuity with 120 monthly payments. ) OPTION 1 - LIFE ANNUITY, LIFETIME MONTHLY PAYMENTS GUARANTEED Monthly payments payable to the Payee during the lifetime of the Annuitant. No further payments are payable after the death of the Annuitant and there is no provision for a Death Benefit payable to the Beneficiary. OPTION 2 - JOINT AND SURVIVOR LIFE ANNUITY Monthly payments payable to the Payee during the joint lifetime of the Annuitant and a designated second person and during the lifetime of the survivor. If a reduced payment to the survivor is desired, Variable Annuity payments to the survivor will be determined using either one-half or two-thirds of the number of each type of Annuity Unit credited to the Certificate. Fixed monthly payments to the survivor will be equal to either one-half or two-thirds of the fixed monthly payment payable during the joint lifetime of the Annuitant and the designated second person. OPTION 3 - JOINT AND SURVIVOR LIFE ANNUITY - 120 MONTHLY PAYMENTS GUARANTEED Monthly payments payable to the Payee during the joint lifetime of the Annuitant and designated second person and continuing during the remaining lifetime of the survivor, with the guarantee that if, at the death of the survivor, payments have been made for less than 120 monthly periods, any remaining guaranteed annuity payments will be continued to the Beneficiary named on the Annuity Option Selection Form. In the event of death of the Annuitant and the designated second person under this option, the Company shall in most instances, calculate the discounted value of the remaining guaranteed annuity payments and pay them in one sum. OPTION 4 - LIFE ANNUITY WITH 120 OR 240 MONTHLY PAYMENTS GUARANTEED An annuity payable monthly to the Payee during the lifetime of the Annuitant with the guarantee that if, at the death of the Annuitant, payments have been made for less than the 120 or 240 monthly periods, as selected, payments will be made in the same manner as provided under OPTION 3 above. In the event of death of the Annuitant under this option, the Company shall in most instances, calculate the discounted value of the remaining guaranteed annuity payments and pay them in one sum. OPTION 5 - FIXED PAYMENTS FOR A SPECIFIED PERIOD CERTAIN Fixed monthly payments payable to the Payee for any specified period of time (five (5) years or more, but not exceeding thirty (30) years), as elected. The election must be made for full twelve month periods. In the event of death of the Payee under this option, the Company shall in most instances, calculate the discounted value of the remaining guaranteed annuity payments and pay them in one sum. BASIS OF COMPUTATION The actuarial basis for the Table of Guaranteed Annuity Rates is the 1983a Annuity Mortality Table, without projection with interest at 3.5%. The Table of Guaranteed Annuity Rates does not include any applicable premium tax. 15 OPTIONS 1 & 4 - TABLE OF MONTHLY INSTALLMENTS PER $1,000 (Monthly installments for ages not shown will be furnished upon request.)
Option 1 Option 4 Option 4 Age of Life Annuity Life Annuity Payee Life Annuity (w/120 payments (w/240 payments guaranteed) guaranteed) Male Female Male Female Male Female 55 4.99 4.54 4.91 4.51 4.66 4.38 56 5.09 4.62 5.00 4.58 4.72 4.44 57 5.20 4.71 5.10 4.66 4.78 4.51 58 5.32 4.80 5.20 4.75 4.85 4.57 59 5.44 4.90 5.31 4.84 4.91 5.64 60 5.57 5.00 5.42 4.93 4.97 4.70 61 5.71 5.11 5.54 5.03 5.04 4.77 62 5.86 5.23 5.67 5.14 5.10 4.84 63 6.02 5.36 5.80 5.25 5.16 4.91 64 6.20 5.49 5.94 5.37 5.22 4.98 65 6.38 5.64 6.08 5.50 5.28 5.05 66 6.58 5.79 6.23 5.63 5.33 5.12 67 6.79 5.95 6.38 5.77 5.38 5.19 68 7.02 6.13 6.54 5.91 5.43 5.25 69 7.26 6.32 6.71 6.07 5.48 5.32 70 7.52 6.53 6.87 6.23 5.52 5.37 71 7.80 6.75 7.04 6.40 5.55 5.43 72 8.09 6.99 7.22 6.58 5.59 5.48 73 8.41 7.26 7.39 6.76 5.62 5.52 74 8.75 7.54 7.57 6.95 5.64 5.56 75 9.12 7.85 7.75 7.14 5.66 5.60 76 9.51 8.18 7.92 7.34 5.68 5.63 77 9.92 8.54 8.09 7.54 5.70 5.66 78 10.37 8.94 8.26 7.74 5.71 5.68 79 10.85 9.36 8.42 7.94 5.72 5.70 80 11.37 9.82 8.57 8.13 5.73 5.71 81 11.92 10.32 8.71 8.32 5.74 5.72 82 12.50 10.87 8.85 8.50 5.74 5.73 83 13.12 11.46 8.97 8.67 5.75 5.74 84 13.78 12.09 9.09 8.83 5.75 5.74 85 14.47 12.78 9.20 8.97 5.75 5.75
16 OPTION 2 - TABLE OF MONTHLY INSTALLMENTS (Monthly installments for ages not shown will be furnished upon request.) Joint and Survivor Life Annuity
Age of Male Payee Age of Female Payee 55 60 65 70 75 80 85 55 4.16 4.34 4.51 4.66 4.78 4.86 4.92 60 4.27 4.51 4.76 4.99 5.19 5.33 5.44 65 4.35 4.66 4.99 5.34 5.66 5.92 6.11 70 4.42 4.78 5.20 5.67 6.16 6.60 6.96 75 4.47 4.86 5.35 5.95 6.63 7.33 7.95 80 4.50 4.92 5.46 6.17 7.04 8.04 9.02 85 4.52 4.95 5.53 6.31 7.34 8.63 10.05
OPTION 3 - TABLE OF MONTHLY INSTALLMENTS PER $1,000 (Monthly installments for ages not shown will be furnished upon request.) Joint & 100% Survivor Life Annuity (w/120 payments guaranteed)
Age of Male Payee Age of Female Payee 55 60 65 70 75 80 85 55 4.15 4.34 4.51 4.65 4.76 4.84 4.88 60 4.26 4.51 4.75 4.98 5.16 5.29 5.37 65 4.35 4.65 4.98 5.31 5.61 5.84 5.98 70 4.41 4.76 5.17 5.62 6.07 6.44 6.68 75 4.46 4.84 5.32 5.88 6.48 7.03 7.42 80 4.48 4.89 5.41 6.05 6.79 7.52 8.07 85 4.50 4.92 5.46 6.15 6.99 7.85 8.53
OPTION 5 - TABLE OF MONTHLY INSTALLMENTS Fixed Payment For Specified Period
No. Mo. No. Mo. No. Mo. No. Mo. of Yrs. Payment of Yrs. Payment of Yrs. Payment of Yrs. Payment - ------- ------- ------- ------- ------- ------- ------- ------- 5 18.12 12 8.46 19 5.97 26 4.84 6 15.35 13 7.94 20 5.75 27 4.73 7 13.38 14 7.49 21 5.56 28 4.63 8 11.90 15 7.10 22 5.39 29 4.53 9 10.75 16 6.76 23 5.24 30 4.45 10 9.83 17 6.47 24 5.09 11 9.09 18 6.20 25 4.96
EX-4.(B) 6 APPLICATION FOR CONTRACT 1 EXHIBIT (4)(B) Anchor National Life New Business Documents New Business Documents Insurance Company with checks: without checks: 1 Sun America Center P. O. Box 100330 P. O. Box 54299 Los Angeles, CA Pasadena, CA 91189 Los Angeles, CA 90067-6022 91189-0330 90054-0299 - -------------------------------------------------------------------------------- PARTICIPANT ENROLLMENT FORM R-5427CMB(10/95) DO NOT USE HIGHLIGHTER. Please print or type. A. PARTICIPANT - -------------------------------------------------------------------------------- LAST NAME/CUSTODIAN/TRUST/PLAN NAME FIRST NAME MIDDLE INITIAL - -------------------------------------------------------------------------------- STREET ADDRESS - -------------------------------------------------------------------------------- CITY STATE ZIP CODE TELEPHONE NUMBER MO______ DAY______ YR______ M____ F____ _________________________ DATE OF BIRTH SEX SOCIAL SECURITY OR TAX ID NUMBER JOINT ----------------------------------------------------------- PARTICIPANT LAST NAME FIRST NAME MIDDLE INITIAL (if applicable) (must be MO____ DAY____ YR____ M____ F____ __________________ spouse of DATE OF BIRTH SEX SOCIAL SECURITY OR participant) TAX ID NUMBER B. ANNUITANT ----------------------------------------------------------- (Complete only LAST NAME FIRST NAME MIDDLE INITIAL if different from ----------------------------------------------------------- participant. STREET ADDRESS This product does not ----------------------------------------------------------- provide for CITY STATE ZIP CODE TELEPHONE NUMBER joint annuitants.) MO____ DAY____ YR____ M____ F____ __________________ DATE OF BIRTH SEX SOCIAL SECURITY OR TAX ID NUMBER C. BENEFICIARY(IES) Primary ___ ----------------------------------------------------------- Contingent___ LAST NAME FIRST NAME MIDDLE INITIAL Relationship Primary ___ ----------------------------------------------------------- Contingent___ LAST NAME FIRST NAME MIDDLE INITIAL Relationship D. TYPE OF CONTRACT Nonqualified. - ----- Is this a 1035 Exchange? ______YES ______NO Is this a Transfer of Assets (funds to be transferred from a mutual fund, CD, etc.) ______YES ______NO If either of the above is yes, please complete a "Request for Transfer or 1035 Exchange" (G-2500NB). 2 ______ Qualified, as indicated below. Is this a direct transfer? ______YES ______NO If yes, please complete a "Request for Transfer or 1035 Exchange" (G- 2500NB). _____SEP _____403(b) _____Terminal funding _____457 plan _____401 retirement plan _____IRA Tax year_____ _____IRA Rollover _____IRA Transfer _____Other_______________________________________ PLEASE SPECIFY E. ANNUITY DATE MO______ DAY______ YR______ Date annuity payout will begin. (Note: Maximum age 85. If left blank, the date will default to age 85 for nonqualified and 70 1/2 for qualified contracts.) F. PURCHASE _____INITIAL PAYMENT: $________________________ PAYMENT(S) Minimum initial payment is $75,000 for nonqualified contracts and qualified contracts. Payments may be wired or mailed. Make check payable to Anchor National Life Insurance Company. _____AUTOMATIC PAYMENTS: $_____________________ To establish automatic bank drafts, include a completed "Automatic Payment Authorization" (G-2233POS), a voided check and initial premium for the policy. G. SPECIAL _____SYSTEMATIC WITHDRAWAL: Check the box at left and FEATURES include a completed "Systematic Withdrawal Application" (B-5550CMB _____AUTOMATIC DOLLAR COST AVERAGING: Check the box at left and include a completed "Dollar Cost Averaging" application (B-5551CMB) _____PRINCIPAL ADVANTAGE: Check the box at left. In Section H, indicate the fixed account desired and specify other allocations as percentages. H. INVESTMENT Fixed Account Options Variable Portfolio Options INSTRUCTIONS ______% 1 yr. ______% International Equity (Allocations must be expressed in ______% 3 yr. ______% Capital Growth whole percentages and total ______% 5 yr. ______% Growth and Income allocations must equal 100%) ______% 7 yr. ______% Asset Allocation ______% 10 yr. ______% U.S. Treasury Income ______% Money Market I. TELEPHONE Do you wish to authorize telephone transfers, subject to the TRANSFERS conditions set forth below? ______YES ______NO AUTHORIZATIONS (If no election is indicated the Company will default to yes for transfers and no for withdrawals.) If indicated above, I authorize the Company to accept telephone instructions for transfers in any amount among sub-accounts from anyone providing proper identification subject to restrictions and limitations contained in the contract and related prospectus, if any. I understand that I bear the risk 3 of loss in the event of a telephone instruction not authorized by me. The Company will not be responsible for any losses resulting from unauthorized transactions if it follows reasonable procedures designed to verify the identity of the caller and therefore, the Company will record telephone conversations containing transaction instructions, request personal identification information before acting upon telephone instructions and send written confirmation statements of transactions to the address of record. J. SPECIAL REQUESTS_____________________________________________________________ K. STATEMENT OF I certify that this Certificate ___WILL ___ WILL NOT replace PARTICIPANT in whole or in part any existing life insurance or annuity contract. (If so, please indicate name of issuing company and contract number below.) ______________________________________ __________________ COMPANY NAME CERTIFICATE NUMBER I hereby represent my answers to the above questions to be correct and true to the best of my knowledge and belief and agree that this Enrollment Form shall be a part of any Certificate issued by the Company. I verify my understanding that all payments and values provided by the Certificate, when based on investment experience of a variable account(s), are variable and not guaranteed as to dollar amount. I understand that all payments and values based on the General Account are subject to a Market Value Adjustment formula, which may result in upward and downward adjustments in amounts payable. I further verify that I (1) was not offered any advice or recommendation on investing in the Certificate by any commercial bank; and (2) understand that (i) the Certificate is not insured by the FDIC or Federal Reserve Board or any other agency; (ii) the Certificate is not a deposit or obligation of, or endorsed, nor guaranteed by, Chase or any commercial bank. I acknowledge receipt of the current prospectus for the Vista Advantage Advisor and its underlying funds. I have read it carefully and understand its contents. Signed at______________________________________________ ___________________ CITY STATE DATE ______________________________________________ ___________________________ PARTICIPANT'S SIGNATURE REGISTERED REPRESENTATIVE'S SIGNATURE _________________________________________________ JOINT PARTICIPANT'S SIGNATURE(IF APPLICABLE) L. REGISTERED Will this Certificate replace in whole or in part REPRESENTATIVE any existing life insurance or annuity Certificate? INFORMATION ______YES ______NO ________________________________________________________________________________ REPRESENTATIVE'S LAST NAME FIRST NAME MIDDLE INITIAL SOC.SEC. NUMBER ________________________________________________________________________________ REPRESENTATIVE'S STREET ADDRESS CITY STATE ZIP CODE ________________________ ________________________________ _______________ BRANCH OFFICE REPRESENTATIVE'S AGENT ID NUMBER TELEPHONE NO. FRAUD WARNING: ANY PERSON WHO WITH INTENT TO DEFRAUD OR KNOWING THAT HE IS FACILITATING A FRAUD AGAINST AN INSURER, SUBMITS AN APPLICATION OR FILES A CLAIM CONTAINING A FALSE OR DECEPTIVE STATEMENT MAY BE GUILTY OF INSURANCE FRAUD. R-5427CMB(10/95) EX-21 7 SUBSIDIARIES OF REGISTRANT 1 EXHIBIT 21 SunAmerica Inc. (a Maryland corporation) owns 100% of SunAmerica Funding Corp. (a Delaware corporation); SunAmerica Financial, Inc. (a Georgia corporation); Resources Trust Company (a Colorado corporation); SunAmerica Life Insurance Company (an Arizona corporation); Imperial Premium Finance, Inc. (a Delaware corporation); IPF Funding Corp. (a Delaware corporation); SA Investment Group, Inc. (a California corporation); SunAmerica Capital Trust I (a Delaware business trust); SunAmerica Capital Trust II (a Delaware business trust); SunAmerica Capital Trust III (a Delaware business trust); and SunAmerica Capital Trust IV (a Delaware business trust). In addition, SunAmerica Inc. owns 80% of AMSUN Realty Holdings (a California corporation). SunAmerica Financial, Inc. owns 100% of SunAmerica Marketing, Inc. (a Maryland corporation); SunAmerica Advertising, Inc. (a Georgia corporation); SunAmerica Investments, Inc. (a Delaware corporation) which owns 100% of Accelerated Capital Corp. (a Florida corporation; 1401 Sepulveda Corp. (a California corporation); SunAmerica Louisiana Properties, Inc. (a California corporation); SunAmerica Real Estate and Office Administration, Inc. (a Delaware corporation); SunAmerica Affordable Housing Partners, Inc. (a California corporation); SUN-PLA, Inc. (a California corporation); Hampden I & II Corp. (a California corporation); SUN-PENN, Inc. (a California corporation); Sun-Duke, Inc. (a California corporation); Sunport Holdings, Inc. (a California corporation) which owns 100% of Sunport Property Co. (a Florida corporation); Sun Chino Property, Inc. (a California corporation); SunAmerica Mortgages, Inc. (a Delaware corporation); Sun Riverchase, Inc. (a California corporation); Sun Princeton II, Inc. (a California corporation) which owns 100% of Sun Princeton I (a California corporation); SunAmerica Planning, Inc. (a Maryland corporation); Sun Mexico Holdings, Inc. (a Delaware corporation) which owns 100% of Sun Cancun I, Inc. (a Delaware corporation), Sun Cancun II, Inc. (a Delaware corporation), Sun Ixtapa I, Inc. (a Delaware corporation) and Sun Ixtapa II, Inc. (a Delaware corporation); Sun Hechs, Inc. (a California corporation); and KBHS, Inc. (a California corporation) which owns 100% of Kaufman and Broad Home Systems of Texas, Inc. (a Texas corporation) and 70% of Home Systems Partners (a California limited partnership) which owns 100% of Extraneous Holdings Corp. (a Delaware corporation). SunAmerica Planning, Inc. owns 100% of SunAmerica Securities, Inc. (a Delaware corporation) which owns 100% of Anchor Insurance Services, Inc. (a Hawaii corporation) which owns The Producers' Edge Insurance Agency Inc. (a California corporation). SunAmerica Life Insurance Company owns 100% of First SunAmerica Life Insurance Company (a New York corporation); SunAmerica National Life Insurance Company (an Arizona corporation); Anchor National Life Insurance Company (a California corporation) which owns 100% of Anchor Pathway Fund, Anchor Series Trust, SunAmerica Series Trust (all Massachusetts business trusts); UG Corporation (a Georgia corporation); Export Leasing FSC, Inc. (a U.S. Virgin Islands corporation); SunAmerica Virginia Properties, Inc. (a California corporation); SAL Investment Group (a California corporation); and Saamsun Holding Corporation (a Delaware corporation). Saamsun Holding Corporation owns 100% of SAM Holdings Corporation (a California corporation) which owns 100% of SunAmerica Asset Management Corp. (a Delaware corporation), Anchor Investment Adviser, Incorporated (a Maryland corporation), SunAmerica Capital Services, Inc. (a Delaware corporation); SunAmerica Fund Services, Inc. (a Delaware corporation), ANF Property Holdings, Inc. (a California corporation), Capitol Life Mortgage Corp. (a Delaware corporation) and Sun Royal Holdings Corporation (a California corporation). Sun Royal Holdings Corporation and Anchor Insurance Services, Inc. each owns 50% of Royal Alliance Associates, Inc. (a Delaware corporation). In addition, SunAmerica Life Insurance Company owns 80% of SunAmerica Realty Partners (a California corporation) and 33% of New California Life Holdings, Inc. (a Delaware corporation) which owns 100% of Aurora National Life Assurance Company (a California corporation) and Premier Life Insurance Company (a Pennsylvania corporation). Imperial Premium Finance, Inc. (Delaware) owns 100% of Imperial Premium Finance, Inc. (a California corporation); Imperial Premium Funding, Inc. (a Delaware corporation); and SunAmerica Financial Resources, Inc. (a Delaware corporation). EX-23.(A) 8 CONSENT OF INDEPENDENT ACCOUNTANTS 1 EXHIBIT (23)(A) CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in the Prospectus constituting part of this Registration Statement on Form S-1 and Form N-4 for Variable Annuity Account Two-T of Anchor National Life Insurance Company, of our report dated November 9, 1994 relating to the consolidated financial statements of Anchor National Life Insurance Company, which appears in such Prospectus. We also consent to the reference to us under the heading "Independent Accountants" in such Prospectus. In addition, we consent to the reference to us under the heading "Financial Statements" in the Statement of Additional Information. PRICE WATERHOUSE LLP Los Angeles, California November 6, 1995 -----END PRIVACY-ENHANCED MESSAGE-----