ANCHOR NATIONAL LIFE INSURANCE CO
424B3, 1995-07-11
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<PAGE>   1
                                         As filed pursuant to Rule 424(b)(3)
                                         under Securities Act of 1933
                                         Registration No. 33-81476.


          ANCHOR NATIONAL LIFE INSURANCE COMPANY
               VARIABLE ANNUITY ACCOUNT TWO
     ____________________________________________________

       SUPPLEMENT TO THE PROSPECTUS DATED MARCH 1, 1995



As of the date of this Supplement, the Company is not accepting
telephone withdrawal requests.  A written request or Systematic
Withdrawal Program enrollment form must be sent to the
Company at its Annuity Service Center.

Delete the third sentence of the first paragraph in the section
entitled "Company"  on page 13 and replace with the following:

The Company is a wholly owned subsidiary of SunAmerica Life
Insurance Company, an Arizona corporation which is wholly
owned by SunAmerica Inc., a Maryland corporation. 

Delete the first sentence of the second paragraph in the section
entitled "Company" on page 13 and replace with the following:

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.



Date: July 11, 1995








        Please keep this Supplement with your Prospectus 
<PAGE>   2
 
- --------------------------------------------------------------------------------
 
                            VISTA CAPITAL ADVANTAGE
                        FLEXIBLE PAYMENT GROUP DEFERRED
                               ANNUITY CONTRACTS
- --------------------------------------------------------------------------------
 
                                   ISSUED BY
                     ANCHOR NATIONAL LIFE INSURANCE COMPANY
                               IN CONNECTION WITH
                          VARIABLE ANNUITY ACCOUNT TWO
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) 90VISTA
     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 33).
 
     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 of from one to ten years 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 Fixed Account prior to the end of the
applicable Guarantee Period(s), other than withdrawals from the one year Fixed
Account option, 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 March 1, 1995.
<PAGE>   3
 
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 March 1, 1995, appears on page 53 of this prospectus.
 
                                        2
<PAGE>   4
 
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
ITEM                                                                                   PAGE
                                                                                       ----
<S>                                                                                    <C>
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...............................................    19
     Administrative Charges..........................................................    19
       Contract Administration Charge................................................    19
       Transfer Fee..................................................................    19
     Sales Charges...................................................................    19
       Withdrawal Charge.............................................................    19
       Distribution Expense Charge...................................................    21
     Premium Taxes...................................................................    21
     Deduction for Separate Account Income Taxes.....................................    21
     Other Expenses..................................................................    21
     Reduction of Charges for Sales to Certain Groups................................    21
DESCRIPTION OF THE CONTRACTS.........................................................    22
     Summary.........................................................................    22
     Participant.....................................................................    22
     Annuitant.......................................................................    22
     Modification of the Contract....................................................    22
     Assignment......................................................................    22
     Death Benefit...................................................................    23
     Beneficiary.....................................................................    23
PURCHASES, WITHDRAWALS AND CONTRACT VALUE............................................    23
     Minimum Purchase Payment........................................................    23
       Automatic Payment Plan........................................................    24
       Automatic Dollar Cost Averaging Program.......................................    24
       Asset Allocation Rebalancing Program..........................................    24
       Principal Advantage Program...................................................    25
     Participants' Accounts..........................................................    25
     Allocation of Purchase Payments.................................................    25
     Transfer During Accumulation Period.............................................    26
     Separate Account Accumulation Unit Value........................................    26
     Fixed Account Accumulation Value................................................    27
     Distribution of Contracts.......................................................    27
     Withdrawals (Redemptions).......................................................    27
       Systematic Withdrawal Program.................................................    28
       ERISA Plans...................................................................    28
       Deferment of Fixed Account Withdrawal Payments................................    29
     Minimum Contract Value..........................................................    29
ANNUITY PERIOD.......................................................................    29
     Annuity Date....................................................................    29
       Deferment of Payments.........................................................    29
       Payments to Participant.......................................................    29
     Allocation of Annuity Payments..................................................    29
</TABLE>
 
                                        3
<PAGE>   5
 
<TABLE>
<CAPTION>
ITEM                                                                                   PAGE
                                                                                       ----
<S>                                                                                    <C>
     Annuity Options.................................................................    30
     Other Options...................................................................    31
     Transfer During Annuity Period..................................................    31
     Death Benefit During Annuity Period.............................................    31
     Annuity Payments................................................................    31
       Initial Monthly Annuity Payment...............................................    31
       Subsequent Monthly Payments...................................................    32
     Annuity Unit Value..............................................................    32
       Net Investment Factor.........................................................    32
ADMINISTRATION.......................................................................    33
TAXES................................................................................    33
     General.........................................................................    33
     Withholding Tax on Distributions................................................    34
     Diversification -- Separate Account Investments.................................    34
     Multiple Contracts..............................................................    35
     Tax Treatment of Assignments....................................................    35
     Qualified Plans.................................................................    35
     Tax Treatment of Withdrawals....................................................    37
       Qualified Plans...............................................................    37
       Nonqualified Plans............................................................    37
ADDITIONAL INFORMATION ABOUT THE COMPANY.............................................    38
     Selected Consolidated Financial Information.....................................    38
     Management's Discussion and Analysis of Financial Condition and Results of
      Operations.....................................................................    39
     The Company's Directors and Executive Officers..................................    50
     Executive Compensation..........................................................    51
STATE REGULATION.....................................................................    51
CUSTODIAN............................................................................    52
LEGAL PROCEEDINGS....................................................................    52
LEGAL MATTERS........................................................................    52
REGISTRATION STATEMENTS..............................................................    53
INDEPENDENT ACCOUNTANTS..............................................................    53
ADDITIONAL INFORMATION ABOUT THE SEPARATE ACCOUNT....................................    53
FINANCIAL STATEMENTS.................................................................    53
APPENDIX A -- WITHDRAWALS, WITHDRAWAL CHARGES AND THE MARKET VALUE ADJUSTMENT........   A-1
</TABLE>
 
- --------------------------------------------------------------------------------
 
                                  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) 90VISTA. 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.
 
                                        4
<PAGE>   6
 
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.
 
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
 
                                        5
<PAGE>   7
 
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.
 
MARKET VALUE ADJUSTMENT -- An adjustment applied, with certain exceptions, to
amounts withdrawn, transferred or annuitized from the Fixed Account 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."
 
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 CHARGE -- The contingent deferred sales charge assessed against
certain withdrawals.
 
WITHDRAWAL VALUE -- Contract Value, minus any Contract Administration Charge,
minus any premium tax payable, minus any applicable Withdrawal Charge, and plus
or minus any applicable Market Value Adjustment.
 
                                        6
<PAGE>   8
 
- --------------------------------------------------------------------------------
 
                                    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 23).
 
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 Fixed
Account prior to the end of their respective Guarantee Periods, other than
withdrawals from the one year Fixed Account option, could result in the
Participant's receiving less than the Purchase Payments so allocated (See "Fixed
Account Options -- Market Value Adjustment," page 17).
 
                                        7
<PAGE>   9
 
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                        *ASSET ALLOCATION
* CAPITAL GROWTH                              *U.S. TREASURY INCOME
* GROWTH AND 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 26).
 
MAY WITHDRAWALS BE MADE BEFORE ANNUITIZATION?
 
     Except as explained below, Contract Value may be withdrawn at any time
during the Accumulation Period. In addition to potential losses due to
investment risks, withdrawals may be reduced by a Withdrawal Charge, and a
penalty tax and income tax may apply. Contracts in connection with Qualified
Plans may be subject to additional withdrawal restrictions imposed by the Plan.
Earnings under a Certificate may be withdrawn at any time during such period
free of Withdrawal Charge (although withdrawals from the Fixed Account other
than at the end of the applicable Guarantee Periods are generally subject to a
Market Value Adjustment, page 17). Alternatively, there is a Free Withdrawal
Amount which applies to the first withdrawal during a Contract Year after the
first Contract Year. (See "Contract Charges -- Sales Charges -- Withdrawal
Charge," page 19). Certain Owners of Nonqualified Plan Contracts and Contracts
issued in connection with Individual Retirement Annuities ("IRAs") may choose to
withdraw amounts which in the aggregate add up to 10% of their Purchase Payments
annually pursuant to a systematic withdrawal program without charge. (See
"Purchases, Withdrawals and Contract Value -- Withdrawals
(Redemptions) -- Systematic Withdrawal Program," page 28.) 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 1.25%. A distribution expense charge is
assessed daily against the assets of each Portfolio at an annual rate of 0.15%.
The Contracts also provide for certain deductions and charges, including a
contract administration charge of $30 annually, which is guaranteed not to
increase and
 
                                        8
<PAGE>   10
 
which under certain circumstances may be waived. 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. Additionally,
a Withdrawal Charge may be assessed against the Contract Value during the first
seven Contribution Years (6%-6%-5%-5%-4%-3%-2%-0%) when a withdrawal is made.
(See "Contract Charges," page 18.)
 
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. If the Participant was less than age 70 on the
Certificate Date, the Death Benefit is equal to the greater of:
 
          (1) the total of Purchase Payments made prior to the death of the
     Participant, reduced by any partial withdrawals and partial annuitizations;
     or
 
          (2) 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; or
 
          (3) where permitted by state law, the Contract Value on that
     anniversary of the Certificate Date preceding the date of death, increased
     by any Purchase Payments made since that anniversary and reduced by any
     partial withdrawals and partial annuitizations since that anniversary,
     which results in the greatest value.
 
     If the Participant was age 70 or older on the Certificate Date, the Death
Benefit will equal 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 23.)
 
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 30.)
 
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
<PAGE>   11
 
- --------------------------------------------------------------------------------
 
                                   FEE TABLES
- --------------------------------------------------------------------------------
 
                           OWNER TRANSACTION EXPENSES
 
WITHDRAWAL CHARGE (AS A PERCENTAGE OF PURCHASE PAYMENTS):
 
<TABLE>
<CAPTION>
    CONTRIBUTION YEAR
<S>                                                                                                       <C>
      Zero..............................................................................................      6%
      One...............................................................................................      6%
      Two...............................................................................................      5%
      Three.............................................................................................      5%
      Four..............................................................................................      4%
      Five..............................................................................................      3%
      Six...............................................................................................      2%
      Seven and later...................................................................................      0%
ANNUAL CONTRACT ADMINISTRATION CHARGE...................................................................     $30
TRANSFER FEE............................................................................................     $25
  (applies solely to transfers in excess of fifteen in a Contract Year)
</TABLE>
 
- ---------------
 
The Owner Transaction Expenses apply 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)
 
<TABLE>
<S>                                                                                                      <C>
MORTALITY RISK CHARGE..................................................................................  0.90%
EXPENSE RISK CHARGE....................................................................................  0.35%
DISTRIBUTION EXPENSE CHARGE............................................................................  0.15%
                                                                                                         ----
      TOTAL EXPENSE CHARGE.............................................................................  1.40%
                                                                                                         ====
</TABLE>
 
- ---------------
 
                             *ANNUAL TRUST EXPENSES
                    (AS A PERCENTAGE OF AVERAGE NET ASSETS):
 
<TABLE>
<CAPTION>
                                                                                                           TOTAL ANNUAL
                                                      ADVISORY FEE   ADMINISTRATION FEE   OTHER EXPENSES     EXPENSES
                                                      ------------   ------------------   --------------   ------------
<S>                                                   <C>            <C>                  <C>              <C>
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%
</TABLE>
 
- ---------------
 
*The Trust has no prior operating history. The estimated Advisory and
 Administration Fees are based on the initial level of fees to be paid under the
 investment advisory and administration agreements. "Other Expenses" is based on
 estimated amounts for the current fiscal year.
 
                                       10
<PAGE>   12
 
- --------------------------------------------------------------------------------
 
                                    EXAMPLES
- --------------------------------------------------------------------------------
 
<TABLE>
<S>                                                <C>                                  <C>
                                                   IF YOU SURRENDER YOUR CONTRACT       IF YOU DO NOT SURRENDER YOUR
                                                   AT THE END OF THE APPLICABLE         CONTRACT: You would pay the
                                                   TIME PERIOD: You would pay the       following expenses on a $1,000
                                                   following expenses on a $1,000       investment, assuming a 5% an-
                                                   investment, assuming a 5%            nual return on assets:
                                                   annual return on assets:
                                                   1 Year     3 Years                   1 Year     3 Years
International Equity                               $86      $131                        $26       $81
Capital Growth                                     $84      $125                        $24       $75
Growth and Income                                  $84      $125                        $24       $75
Asset Allocation                                   $84      $123                        $24       $73
U.S. Treasury Income                               $83      $122                        $23       $72
Money Market                                       $81      $114                        $21       $64
</TABLE>
 
- ---------------
 
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 Expenses at the beginning of the table are 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 "Administrative Charges -- Transfer Fee," Page
   19). Premium taxes are not reflected. (See "Sales Charges -- Premium Taxes,"
   Page 21). Transfers from the Fixed Account may be subject to a Market Value
   Adjustment even if they are not subject to a transfer fee.
 
3. For purposes of the amounts reported in the Examples, the contract
   administration charge is reflected by applying a percentage equivalent
   charge, obtained by dividing the total amount of such charges anticipated to
   be collected during the year by the total estimated average net assets of the
   Portfolios and the Fixed Account attributable to the Contracts.
 
4. 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
<PAGE>   13
 
- --------------------------------------------------------------------------------
 
                        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 or any Withdrawal
Charges. The impact of other recurring charges on both yield figures is,
however, reflected in them to the same extent it would affect the yield (or
effective yield) for a Contract of average size.
 
     In addition, the Separate Account may advertise "total return" data for its
other 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 effect of applicable Withdrawal Charges due to the assumed
redemption will be reflected in the return figures, but may be omitted in
additional return figures given for comparison.
 
     The Separate Account may also advertise an annualized 30-day (or one month)
yield figure for 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
Withdrawal Charges or premium taxes). The yield figure is derived from net
investment gain (or loss) over the period expressed as a fraction of the
investment's value at the end of the period.
 
     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
<PAGE>   14
 
- --------------------------------------------------------------------------------
 
                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 Sun Life Insurance Company of America, an
Arizona corporation, which is wholly-owned by SunAmerica Inc.
 
     The Company and its affiliates, Sun Life Insurance Company of America,
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 December 31, 1994 the Company had approximately $6.5 billion in assets while
SunAmerica Inc., the Company's ultimate parent, together with its subsidiaries,
held approximately $24.0 billion of assets, consisting of over $14.8 billion of
assets owned, approximately $2.0 billion of assets managed in mutual funds and
private accounts, and approximately $7.6 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 the 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 38.
 
SEPARATE ACCOUNT
 
     Variable Annuity Account Two was originally established by the Company on
May 24, 1994, 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
<PAGE>   15
 
     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 of the establishment of a Participant's Account.
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 26,
and "Annuity Period -- Transfer During Annuity Period," page 31. 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 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
<PAGE>   16
 
- --------------------------------------------------------------------------------
 
                          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                         *ASSET ALLOCATION
* CAPITAL GROWTH                               *U.S. TREASURY INCOME
* GROWTH AND 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, N.Y. 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
<PAGE>   17
 
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
<PAGE>   18
 
- --------------------------------------------------------------------------------
 
                             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, compounded
annually, at the 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.) However, any such amounts withdrawn may nevertheless be subject to
the Withdrawal Charge.
 
     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
 
     Other than as described below, if Contract Value is withdrawn, transferred
or, prior to the Annuity Date, annuitized from the Fixed Account under one of
the Fixed Account options described above 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
 
                                       17
<PAGE>   19
 
Account option under the Automatic Dollar Cost Averaging Program or Asset
Allocation Rebalancing Program, or withdrawals made to pay Contract 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
Fixed Account under the affected option unless a complete withdrawal, transfer
or annuitization of amounts allocated under the option has been requested. Some
examples of how the MVA is computed and its impact on Contract Value appear in
Appendix A.
 
     The Company will waive any negative MVA under any Contract for amounts
allocated to the one year Fixed Account option, including any negative MVA for
withdrawals under the Automatic Dollar Cost Averaging Program and the Asset
Allocation Rebalancing Program. (See "Purchases, Withdrawals and Contract
Values -- Automatic Dollar Cost Averaging Program" and "Purchases, Withdrawals
and Contract Values -- Asset Allocation Rebalancing Program", page 24).
 
     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 deductions for administrative
expenses and, if applicable, for premium taxes; (2) as charges against the
assets of the Separate Account for the assumption of mortality and expense risks
and as distribution expense charges; and (3) as Withdrawal Charges (contingent
 
                                       18
<PAGE>   20
 
deferred sales charges). 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 1.25% of the net asset value of each Portfolio
(approximately .90% is for mortality risks and approximately 0.35% 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); (2) to waive the Withdrawal Charge in the event of
the death of the Participant; and (3) 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 is that the costs of administering
the Contracts and the Separate Account will exceed the amount received from the
Contract Administration Charge. (See "Administrative Charges" below). The
expense risk charge is guaranteed by the Company and cannot be increased.
 
ADMINISTRATIVE CHARGES
 
     CONTRACT ADMINISTRATION CHARGE
 
     An annual Contract Administration Charge of $30 is charged against each
Certificate. The amount of this charge is guaranteed and cannot be increased by
the Company. This charge reimburses the Company for expenses incurred in
establishing and maintaining records relating to a Contract. The Contract
Administration Charge will be assessed on each anniversary of the Certificate
Date that occurs on or prior to the Annuity Date. In the event that a total
surrender of Contract Value is made, the Charge will be assessed as of the date
of surrender without proration. This Charge is not assessed during the Annuity
Period.
 
     The total Contract Administration Charge is allocated between the
Portfolios and the Fixed Account in proportion to the respective Contract Values
similarly allocated. The Contract Administration Charge is at cost with no
margin included for profit.
 
     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.
 
SALES CHARGES
 
     WITHDRAWAL CHARGE
 
     Federal tax 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 37.)
 
                                       19
<PAGE>   21
 
     A contingent deferred sales charge, which is referred to as the Withdrawal
Charge, may be imposed upon certain withdrawals. Withdrawal Charges will vary in
amount depending upon the Contribution Year of the purchase payment at the time
of withdrawal in accordance with the Withdrawal Charge table shown below.
 
                            WITHDRAWAL CHARGE TABLE
 
<TABLE>
<CAPTION>
                                                                 APPLICABLE WITHDRAWAL
                           CONTRIBUTION YEAR                       CHARGE PERCENTAGE
        -------------------------------------------------------  ---------------------
        <S>                                                      <C>
        Zero...................................................            6%
        One....................................................            6%
        Two....................................................            5%
        Three..................................................            5%
        Four...................................................            4%
        Five...................................................            3%
        Six....................................................            2%
        Seven and later........................................            0%
</TABLE>
 
     The Withdrawal Charge is deducted from remaining Contract Value so that the
actual reduction in Contract Value as a result of the withdrawal will be greater
than the withdrawal amount requested and paid. For purposes of determining the
Withdrawal Charge, withdrawals will be allocated first to investment income, if
any (which may generally be withdrawn free of Withdrawal Charge), and then to
Purchase Payments on a first-in, first-out basis so that all withdrawals are
allocated to Purchase Payments to which the lowest (if any) Withdrawal Charge
applies.
 
     Purchase Payments that are no longer subject to the Withdrawal Charge (and
not previously withdrawn) and earnings in the Participant's Account may be
withdrawn free of Withdrawal Charges at any time.
 
     In addition, for the first withdrawal during a Contract Year after the
first Contract Year, no Withdrawal Charge is applied to that part of the
withdrawal which does not exceed the greater of (a) earnings in the
Participant's Account or (b) the Free Corridor. The Free Corridor is equal to
10% of Purchase Payments made more than one year prior to the date of withdrawal
that remain subject to the Withdrawal Charge and that have not previously been
withdrawn. The portion of a free withdrawal which exceeds the sum of earnings in
the Participant's Account and premiums which are both no longer subject to a
Withdrawal Charge and not yet withdrawn, is assumed to be a withdrawal against
future earnings. Although amounts withdrawn free of a Withdrawal Charge reduce
principal in a Participant's Account, they do not reduce Purchase Payments for
purposes of calculating the Withdrawal Charge. As a result, a Participant will
not receive the benefit of a free withdrawal in a full surrender.
 
     If the withdrawal request does not specify from which Portfolio(s) or
Guarantee Amount(s) the withdrawal is to be made, the request will be processed
by reducing the Contract Values in each category in proportion to their
allocations. Therefore, FAILURE TO SPECIFY AN ALLOCATION MAY RESULT IN THE
IMPOSITION OF A MARKET VALUE ADJUSTMENT IN CASES WHERE AMOUNTS ARE ALLOCATED TO
THE FIXED ACCOUNT.
 
     For examples of how the Withdrawal Charge is applied, see Appendix A.
 
     The Company will waive the Withdrawal Charge on any withdrawal necessary to
satisfy the minimum distribution requirements of the Code or upon payment of a
Death Benefit. Where legally permitted, the Withdrawal Charge may be eliminated
when a Certificate is issued to an officer, director or employee of the Company
or its affiliates.
 
     For Certificates issued with an appropriate endorsement, if the Owner is
confined to a nursing care facility (as defined in the endorsement) for sixty
(60) consecutive days or longer, the Company will also waive the Withdrawal
Charge on certain withdrawals prior to the Annuity Date. Such confinement must
begin after the Certificate Date and the Company must receive satisfactory
written evidence of such confinement. The Company will waive the Withdrawal
Charge under the endorse-
 
                                       20
<PAGE>   22
 
ment only for withdrawals made during such confinement or within ninety (90)
days after the confinement ends. The endorsement is not available in all states.
Participants should contact the Company or the financial representative from
which this prospectus was obtained as to the availability of this endorsement.
 
     The amounts obtained from the Withdrawal Charge will be used to pay sales
commissions and other promotional or distribution expenses associated with the
marketing of the Contracts. To the extent that the Withdrawal Charge is
insufficient to cover all sales commissions and other promotional or
distribution expenses, the Company may use any of its corporate assets,
including potential profit which may arise from the Mortality and Expense Risk
Charge and the Distribution Expense Charge, to make up any difference.
 
     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 the Portfolio. This charge is designed to compensate the
Company for assuming the risk that the cost of distributing the Contracts will
exceed the revenues from the Withdrawal Charge (a contingent deferred sales
charge). 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. Moreover, the sum of all Withdrawal Charges
described above and the Distribution Expense Charges assessed will at no time
exceed 9% of all Purchase Payments previously made. 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, 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 3.0%.
 
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 33.)
 
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.
 
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
 
                                       21
<PAGE>   23
 
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 23. 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 30.)
 
PARTICIPANT
 
     The Participant is the person normally entitled to exercise all rights of
ownership under the Contracts. 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.
 
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, or 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.
 
                                       22
<PAGE>   24
 
     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 Withdrawal Charge and 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.
 
     If the Participant was less than age 70 at the Certificate Date, the death
benefit is equal to the greater of:
 
          (1) the total dollar amount of Purchase Payments made prior to the
     death of the Participant, reduced by any partial withdrawals and partial
     annuitizations; or
 
          (2) 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; or
 
          (3) where permitted by state law, the Contract Value on that
     anniversary of the Certificate Date preceding the date of death, increased
     by the dollar amount of any Purchase Payments made since that anniversary
     and reduced by the dollar amount of any partial withdrawals and partial
     annuitizations since that anniversary, which results in the greatest value.
 
     If the Participant was age 70 or more at the Certificate Date, the death
benefit will equal 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.
 
- --------------------------------------------------------------------------------
 
                   PURCHASES, WITHDRAWALS AND CONTRACT VALUE
- --------------------------------------------------------------------------------
 
MINIMUM PURCHASE PAYMENT
 
     The minimum initial Purchase Payment for Contracts issued pursuant to a
Nonqualified Plan is $5,000 and the maximum is $500,000. The minimum initial
Purchase Payment for Contracts issued pursuant to a Qualified Plan is $2,000 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
 
                                       23
<PAGE>   25
 
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 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,
the Money Market and U.S. Treasury Income Portfolios and the one-year Fixed
Account options 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 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 either from the Money Market and U.S. Treasury Income
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 P.O. Box for correspondence
accompanied by payments. 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 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 options are 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
 
                                       24
<PAGE>   26
 
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.
 
     For Contracts sold prior to June 30, 1995 in which the Owner has elected to
participate in AAR on a quarterly basis, the first rebalancing will occur on
June 30, 1995.
 
     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
Capital Advantage application or (2) at the time of a subsequent purchase or by
reallocating 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.
 
PARTICIPANTS' ACCOUNTS
 
     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 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.
 
                                       25
<PAGE>   27
 
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 -- Administrative
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.
Assessments of Withdrawal Charges, transfer fees and Contract Administration
Charges are made separately for each Certificate. They are effected by
redemption of Accumulation Units and do not affect Accumulation Unit value.
 
     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
 
                                       26
<PAGE>   28
 
          (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 initial Purchase Payments paid to
registered representatives may vary, but are not anticipated to exceed 6.25% of
any Purchase Payment (including any promotional sales incentives). All such
commissions, incentives and bonuses 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)
 
     Except as explained below, an Owner may redeem a Certificate for all or a
portion of its Contract Value during the Accumulation Period. Withdrawal Charges
may be applicable, however, which would reduce the Contract Value upon
redemption. A Market Value Adjustment may also be applied, in the case of
redemptions from the Fixed Account, which would also affect Contract Value. (See
"Contract Charges -- Sales Charges -- Withdrawal Charge" and "Fixed Account
Options -- Market Value Adjustment" on pages 19 and 17, respectively, for
additional information.)
 
     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 34.)
 
     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 Section 403(b) Qualified Plans,
all Participants should seek competent tax advice regarding any withdrawals or
distributions. (See "Taxes," beginning at page 33.)
 
     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).
 
                                       27
<PAGE>   29
 
     The Company may also accept telephone requests for certain partial
withdrawals from Participants who elect this option either through the Contract
application or by completing a Telephone Redemption Authorization Form provided
by the Company. 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 withdrawal which was not properly authorized by the
Participant. However, if the Company fails to employ reasonable procedures to
ensure that all telephone withdrawals are properly authorized, the Company may
be held liable for such losses. The proceeds of a telephone withdrawal will be
sent by check to the Participant at the address of record only. Telephone calls
authorizing withdrawals 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. The
Company reserves the right to terminate or modify the telephone withdrawal
service at any time.
 
     A written withdrawal request, Telephone Redemption Authorization Form 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 which in the aggregate add
up to a maximum of 10% of their Purchase Payments annually pursuant to a
Systematic Withdrawal Program without charge. 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.) Systematic
withdrawals will not be limited to 10% of Purchase Payments once the Withdrawal
Charge is no longer applicable. 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.
 
                                       28
<PAGE>   30
 
     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 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
 
                                       29
<PAGE>   31
 
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 Withdrawals,"
page 37.) 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 option 4 below, a life annuity with a 120-month period
certain (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.
 
                                       30
<PAGE>   32
 
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.
 
OPTION 5 -- INCOME FOR A SPECIFIED PERIOD
 
     Under this option, a payee can elect an annuity payable monthly for any
period of years from 3 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 19.) 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 Withdrawal Charges would otherwise apply
to a withdrawal or termination, the identical Withdrawal Charge 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 26, 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.
 
                                       31
<PAGE>   33
 
     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.
 
     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
 
                                       32
<PAGE>   34
 
        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.
 
- --------------------------------------------------------------------------------
 
                                 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) 90VISTA.
 
     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
 
                                       33
<PAGE>   35
 
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.
 
     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
 
                                       34
<PAGE>   36
 
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 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 Owners 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
 
                                       35
<PAGE>   37
 
     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.
 
     (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.
 
                                       36
<PAGE>   38
 
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).
 
     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 27.
 
     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 34) 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.
 
                                       37
<PAGE>   39
 
- --------------------------------------------------------------------------------
 
                    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 for the three months ended December 31, 1993 and 1994
has been derived from unaudited financial information also appearing herein and
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 39 and the consolidated financial statements and notes thereto
included in this prospectus beginning on page 54.
 
<TABLE>
<CAPTION>
                                                                                                            THREE MONTHS ENDED
                                                           YEARS ENDED SEPTEMBER 30,                           DECEMBER 31,
                                         --------------------------------------------------------------   -----------------------
                                            1990         1991         1992         1993         1994         1993         1994
                                         ----------   ----------   ----------   ----------   ----------   ----------   ----------
<S>                                      <C>          <C>          <C>          <C>          <C>          <C>          <C>
RESULTS OF OPERATIONS
Net investment income..................  $   28,710   $   31,882   $   36,499   $   48,912   $   58,996   $   12,327   $   10,968
Net realized investment losses.........     (14,907)     (12,744)     (22,749)     (22,247)     (33,713)     (12,792)      (4,791)
Fee income.............................      59,002       74,735       95,482      116,443      129,583       32,465       32,008
General and administrative expenses....     (56,031)     (58,364)     (55,615)     (55,142)     (52,636)     (13,312)     (12,686)
Provision for future guaranty fund
  assessments..........................          --           --           --       (4,800)          --           --           --
Amortization of deferred acquisition
  costs................................     (12,911)     (19,010)     (18,224)     (30,825)     (43,992)      (9,433)     (11,942)
Other income and expenses..............      11,496       14,473       10,741       11,171        9,082        1,935        2,637
                                         ----------   ----------   ----------   ----------   ----------   ----------   ----------
PRETAX INCOME..........................      15,359       30,972       46,134       63,512       67,320       11,190       16,194
Income tax expense.....................      (6,792)     (11,847)     (15,361)     (21,794)     (22,705)      (4,075)      (5,607)
                                         ----------   ----------   ----------   ----------   ----------   ----------   ----------
Income from continuing operations......       8,567       19,125       30,773       41,718       44,615        7,115       10,587
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        7,115       10,587
Cumulative effect of change in
  accounting for income taxes..........          --           --           --           --      (20,463)     (20,463)          --
                                         ----------   ----------   ----------   ----------   ----------   ----------   ----------
NET INCOME (LOSS)......................  $   13,311   $   26,125   $   32,085   $   41,718   $   24,152   $  (13,348)  $   10,587
                                         ==========   ==========   ==========   ==========   ==========   ==========   ==========
</TABLE>
 
<TABLE>
<CAPTION>
                                                                AT SEPTEMBER 30,                              AT DECEMBER 31,
                                         --------------------------------------------------------------   -----------------------
                                            1990         1991         1992         1993         1994         1993         1994
                                         ----------   ----------   ----------   ----------   ----------   ----------   ----------
<S>                                      <C>          <C>          <C>          <C>          <C>          <C>          <C>
FINANCIAL POSITION
Investments............................  $2,012,805   $1,917,719   $2,126,899   $2,093,100   $1,632,072   $1,992,630   $1,700,489
Variable annuity assets................   2,145,196    2,746,685    3,284,507    4,170,275    4,486,703    4,406,549    4,333,408
Deferred acquisition costs.............     185,628      226,192      288,264      336,677      416,289      348,030      422,880
Other assets...........................     159,330      162,855       91,588       71,337       67,062       70,707       70,376
                                         ----------   ----------   ----------   ----------   ----------   ----------   ----------
TOTAL ASSETS...........................  $4,502,959   $5,053,451   $5,791,258   $6,671,389   $6,602,126   $6,817,916   $6,527,153
                                         ==========   ==========   ==========   ==========   ==========   ==========   ==========
Reserves for fixed annuity contracts...  $2,100,972   $1,957,116   $1,735,565   $1,562,136   $1,437,488   $1,508,210   $1,476,962
Variable annuity liabilities...........   2,145,196    2,746,685    3,284,507    4,170,275    4,486,703    4,406,549    4,333,408
Other reserves, payables and accrued
  liabilities..........................      88,522      105,694      398,045      495,740      195,846      444,582      229,667
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       66,145       61,762
Shareholder's equity...................     127,822      227,420      322,478      371,093      383,522      358,430      391,354
                                         ----------   ----------   ----------   ----------   ----------   ----------   ----------
TOTAL LIABILITIES AND SHAREHOLDER'S
  EQUITY...............................  $4,502,959   $5,053,451   $5,791,258   $6,671,389   $6,602,126   $6,817,916   $6,527,153
                                         ==========   ==========   ==========   ==========   ==========   ==========   ==========
</TABLE>
 
                                       38
<PAGE>   40
 
- --------------------------------------------------------------------------------
 
               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
 
                                       39
<PAGE>   41
 
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.
 
                                       40
<PAGE>   42
 
     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 $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. These payments
represent 12.5%, 10.7% and 13.5%, respectively, 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
 
                                       41
<PAGE>   43
 
Company's ultimate exposure to future assessments anticipated as a result of
certain large insurance 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
 
                                       42
<PAGE>   44
 
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 following table summarizes the Company's rated bonds by rating
classification as of September 30, 1994.
 
                      RATED BONDS BY RATING CLASSIFICATION
                             (Dollars in thousands)
 
<TABLE>
<CAPTION>
                                                        ISSUES NOT RATED BY S&P
                                                               (MOODY'S)                              TOTAL
          ISSUES RATED BY S&P (MOODY'S)                     BY NAIC CATEGORY           -----------------------------------
- -------------------------------------------------   --------------------------------                 PERCENT
                                        ESTIMATED     NAIC                 ESTIMATED                   OF
      S&P (MOODY'S)         AMORTIZED     FAIR      CATEGORY   AMORTIZED     FAIR      AMORTIZED    INVESTED    ESTIMATED
       CATEGORY (1)           COST        VALUE       (2)        COST        VALUE        COST      ASSETS(3)   FAIR VALUE
- --------------------------  ---------   ---------   --------   ---------   ---------   ----------   ---------   ----------
<S>                         <C>         <C>         <C>        <C>         <C>         <C>          <C>         <C>
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
                            ========    ========              =========   =========    ==========               ==========
</TABLE>
 
- -------------------------
 
(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.
 
     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
 
                                       43
<PAGE>   45
 
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 2
loans with outstanding balances of $20 million or more, which 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 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.
 
                                       44
<PAGE>   46
 
     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 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.
 
                                       45
<PAGE>   47
 
     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 THREE MONTHS OF FISCAL 1995
 
     INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES
totaled $10.6 million for the first three months of 1995 ("Fiscal 1995"),
compared with $7.1 million in the first three 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
$20.4 million in Fiscal 1994. Accordingly, the Company had a net loss of 13.3
million in Fiscal 1994.
 
     PRETAX INCOME totaled $16.2 million in Fiscal 1995 and $11.2 million in
Fiscal 1994. The $5.0 million improvement in Fiscal 1995 primarily resulted from
decreased net realized investment losses, partially offset by a decline in net
investment income and an increase in amortization of deferred acquisition costs.
 
     NET INVESTMENT INCOME decreased to $11.0 million in Fiscal 1995 from $12.3
million in Fiscal 1994. These amounts represent net investment spreads of 2.78%
on average invested assets (computed on a daily basis) of $1.58 billion in
Fiscal 1995 and 3.07% on average invested assets of $1.60 billion in Fiscal
1994. This decline primarily resulted from declines in investment yield,
partially offset by declines in the average rate paid on fixed annuities.
 
     Investment income totaled $28.2 million in Fiscal 1995, compared with $31.4
million in Fiscal 1994. This $3.2 million decline resulted primarily from
decreased investment yields. The yield on average invested assets totaled 7.17%
in Fiscal 1995, compared with 7.83% in Fiscal 1994. The decrease in yield in
Fiscal 1995 primarily resulted from decreased earnings on various limited
partnerships and a reduction of yield enhancement on Dollar Rolls. Yields are
computed without
 
                                       46
<PAGE>   48
 
subtracting net realized investment losses. If net realized investment losses
were included in the computation, the yields would be 5.96% in Fiscal 1995 and
4.64% in Fiscal 1994. There can be no assurance that the Company will achieve
similar yields in future periods.
 
     The Company continues to enhance investment yield through Dollar Rolls, and
has recorded $0.3 million of enhanced yield on a weighted average volume of
$130.4 million of such transactions during Fiscal 1995 compared with $1.8
million of enhanced yield on weighted average volume of $410.4 million during
Fiscal 1994. The decline in yield enhancement relative to the volume of Dollar
Rolls in Fiscal 1995 is primarily due to a narrowing of market spreads on such
transactions.
 
     Total interest expense aggregated $17.3 million in Fiscal 1995 and $19.1
million in Fiscal 1994. The average rate paid on all interest-bearing
liabilities fell to 4.66% (4.60% on fixed annuities) in Fiscal 1995 from 4.87%
(4.82% on fixed annuities) in Fiscal 1994. This decline in rate was 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 the 1994 fiscal year. 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 $1.48 billion
during Fiscal 1995, compared with $1.57 billion during Fiscal 1994.
 
     NET REALIZED INVESTMENT LOSSES totaled $4.8 million in Fiscal 1995 and
$12.8 million in Fiscal 1994 and include impairment writedowns of $1.8 million
in Fiscal 1995 and $6.6 million in Fiscal 1994. Therefore, net losses from sales
of investments totaled $3.0 million in Fiscal 1995, compared with $6.2 million
in Fiscal 1994.
 
     Net losses in Fiscal 1995 include $4.2 million of net losses realized on
$46.3 million in sales of bonds. These bond sales include approximately $18.5
million of sales of certain CMOs and asset-backed securities, $17.6 million of
sales of high-yield investments and $10.0 million of sales of U.S. Treasury
securities, all which were primarily made to maximize total return.
 
     Net losses in Fiscal 1994 include $6.1 million of net losses realized on
$222.8 million of sales of bonds. These bond sales include approximately $128.4
million of sales of MBSs made primarily to acquire other MBSs that were then
used in Dollar Rolls. In addition, bond sales included $38.0 million of sales of
high-yield investments that were made primarily to maximize total return.
 
     Impairment writedowns in Fiscal 1995 include $1.8 million of additional
provisions applied to certain IOs. At December 31, 1994, the amortized cost,
which is net of impairment writedowns, of the IOs held by the Company was $8.7
million and their fair value was $9.1 million.
 
     Impairment writedowns in Fiscal 1994 reflect $6.6 million of additional
provisions applied to bonds, primarily made in response to the adverse impact of
declining interest rates on certain MBSs.
 
     VARIABLE ANNUITY FEES totaled $20.4 million in Fiscal 1995 and $19.5
million in Fiscal 1994. This increase reflects growth in average variable
annuity assets, principally from the receipt of variable annuity premiums.
Variable annuity assets averaged $4.41 billion during Fiscal 1995 and $4.27
billion during Fiscal 1994. Variable annuity premiums, which exclude premiums
allocated to the fixed accounts of variable annuity products, declined to $101.8
million in Fiscal 1995 from $228.3 million in Fiscal 1994.
 
     ASSET MANAGEMENT FEES, totaled $7.0 million on average assets managed of
$2.10 billion in Fiscal 1995 and $8.3 million on average assets managed of $2.54
billion in Fiscal 1994. Sales of mutual funds, excluding sales of money market
funds, totaled $29.5 million in Fiscal 1995, compared with $112.2 million in
Fiscal 1994. Mutual fund sales in Fiscal 1995 were impacted by adverse market
conditions for fixed income and equity securities which can be attributed, in
part, to rising interest rates.
 
     NET RETAINED COMMISSIONS totaled $4.6 million in both Fiscal 1995 and
Fiscal 1994. Sales of nonproprietary products (mainly mutual funds and general
securities) totaled $0.93 billion in Fiscal 1995 and $1.17 billion in Fiscal
1994. Net retained commissions are not proportionate to sales primarily due to
differences in sales mix.
 
                                       47
<PAGE>   49
 
     SURRENDER CHARGES on fixed and variable annuities totaled $1.5 million in
Fiscal 1995, compared with $1.2 million in Fiscal 1994. Withdrawal payments,
which include surrenders and lump-sum annuity benefits, totaled $212.5 million
in Fiscal 1995 and $142.9 million in Fiscal 1994. These payments represent
14.68% and 9.96% respectively, of average fixed and variable annuity reserves.
Withdrawals include variable annuity payments from the separate accounts
totaling $144.0 million in Fiscal 1995 and $88.4 million in Fiscal 1994.
Variable annuity surrenders have increased during Fiscal 1995 primarily due to
surrenders on a closed block of business and increased competition in the
marketplace, while fixed annuity surrenders have increased largely due to
policies coming off surrender charge restrictions. Management anticipates that
withdrawal rates will remain relatively stable, and the Company's investment
portfolio has been structured to provide sufficient liquidity for anticipated
withdrawals.
 
     GENERAL AND ADMINISTRATIVE EXPENSES totaled $12.7 million in Fiscal 1995,
compared with $13.3 million in Fiscal 1994, and represent 0.8% of average total
assets for both Fiscal 1995 and Fiscal 1994.
 
     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 of all deferred
acquisition costs totaled $11.9 million in Fiscal 1995 and $9.4 million in
Fiscal 1994.
 
     INCOME TAX EXPENSE totaled $5.6 million in Fiscal 1995 and $4.1 million in
Fiscal 1994, representing effective tax rates of 35% in Fiscal 1995 and 36% in
Fiscal 1994.
 
FINANCIAL CONDITION AND LIQUIDITY AT DECEMBER 31, 1994
 
     SHAREHOLDER'S EQUITY increased by $7.8 million to $391.3 million at
December 31, 1994 from $383.5 million at September 30, 1994. This increase
primarily reflects $10.6 million of net income recorded in Fiscal 1995,
partially offset by a $2.8 million increase in net unrealized losses on debt and
equity securities available for sale charged directly to shareholder's equity.
 
     TOTAL ASSETS decreased by $75.0 million to $6.53 billion at December 31,
1994 from $6.60 billion at September 30, 1994, principally due to a decrease in
variable annuity assets, partially offset by an increase in invested assets.
 
     INVESTED ASSETS at December 31, 1994 totaled $1.70 billion, compared with
$1.63 billion in September 30, 1994. The increase in invested assets in Fiscal
1995 resulted primarily from an increase in amounts payable to brokers for
purchases of securities and an increase in fixed annuity reserves, due to a
rising demand for fixed-rate investment options.
 
     The Bond Portfolio at December 31, 1994, had an aggregate amortized cost
that exceeded its fair value by $88.7 million (including net unrealized losses
of $91.0 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 increase in unrealized losses on the Bond Portfolio since
September 30, 1994 principally resulted from increases in prevailing interest
rates and the corresponding effect on the Bond Portfolio.
 
     Approximately $1.30 billion or 99.9% of the Bond Portfolio (at amortized
cost) at December 31, 1994 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 December 31, 1994, approximately $1.17 billion (at
amortized cost) was rated investment grade by one or both of these agencies or
under the NAIC guidelines, including $887.0 million of U.S. government/agency
securities and MBSs.
 
     At December 31, 1994, the Bond Portfolio included $123.8 million (fair
value, $114.3 million) of bonds not rated investment grade by S&P, Moody's or
the NAIC. Based on their December 31, 1994 amortized cost, these bonds accounted
for 1.89% of the Company's total assets and 6.91% of invested
 
                                       48
<PAGE>   50
 
assets. The Company had no material concentrations of non-investment grade
securities at December 31, 1994.
 
     Defaulted Investments, comprising all investments (at amortized cost) that
are in default as to the payment of principal or interest, totaled $4.6 million
at December 31, 1994, all of which are unsecured non-investment grade bonds and
$4.4 million at September 30, 1994. At both December 31, 1994 and 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
December 31, 1994, approximately $308.0 million of the Company's Bond Portfolio
had an aggregate unrealized gain of $6.9 million, while approximately $992.2
million had an aggregate unrealized loss of $95.6 million. In addition, the
Company's investment portfolio also currently provides approximately $16.5
million of monthly cash flow from scheduled principal and interest payments.
 
     The Company has undertaken to dispose of $57.3 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 Atlanta, Georgia 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.
 
                                       49
<PAGE>   51
 
- --------------------------------------------------------------------------------
 
                        DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
 
     The directors and principal officers of Anchor National Life Insurance
Company (the "Company") as of December 31, 1994 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).
 
<TABLE>
<CAPTION>
                                                              YEAR           OTHER POSITIONS AND
                                                             ASSUMED      OTHER BUSINESS EXPERIENCE
         NAME            AGE       PRESENT POSITION(S)     POSITION(S)     WITHIN LAST FIVE YEARS**        FROM-TO
- -----------------------  ---   ---------------------------------------   ----------------------------  ----------------
<S>                      <C>   <C>                         <C>           <C>                           <C>
Eli Broad*               61    Chairman, Chief Executive      1994       Cofounded SunAmerica Inc.
                                 Officer and President of                  ("SAI") in 1957
                                 the Company
                               Chairman, Chief Executive      1986
                                 Officer and President of
                                 SAI
Jay S. Wintrob*          37    Executive Vice President of    1991       Senior Vice President         1989-1991
                                 the Company and SAI                       (Joined SAI in 1987)
James R. Belardi*        37    Senior Vice President and      1992       Vice President and Treasurer  1989-1992
                                 Treasurer of the Company                  (Joined SAI in 1986)
                                 and SAI
Jana W. Greer*           42    Senior Vice President of the   1994       Vice President (Joined SAI    1981-1991
                                 Company and SAI                           in 1974)
Peter McMillan, III*     36    Executive Vice President and   1994       Senior Vice President,        1989-1994
                                 Chief Investment Officer                  SunAmerica Investments,
                                 of SunAmerica Investments,                Inc.
                                 Inc.
Gary W. Krat*            47    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.
Clark P. Manning, Jr.*   36    Senior Vice President and      1993       Consulting Actuary, Milliman  1992-1993
                                 Actuary of the Company                    & Robertson, Inc.
                               Senior Vice President of SAI   1994       Vice President and Actuary,   1991-1992
                                                                           SunAmerica Life Companies
                                                                         Consulting Actuary, Milliman  1988-1991
                                                                           & Robertson, Inc.
Scott L. Robinson*       48    Senior Vice President of the   1991       Vice President and            1986-1991
                                 Company and Senior Vice                   Controller (Joined SAI in
                                 President and Controller                  1978)
                                 of SAI
Lorin M. Fife*           41    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*         37    Senior Vice President and      1994       Vice President, Associate     1989-1994
                                 Secretary of the Company                  General Counsel and
                                 and Vice President,                       Secretary of SAI
                                 General Counsel --                        (Joined SAI in 1985)
                                 Corporate Affairs and
                                 Secretary of SAI
N. Scott Gillis          41    Senior Vice President and      1994       Vice President and            1989-1994
                                 Controller of the Company                 Controller, SunAmerica
                                                                           Life Companies
                                                                         Director of Controls          1985-1989
                                                                           Evaluation and Audit
                                                                           (Joined SAI in 1985)
</TABLE>
 
- ---------------
 
 * Also serves as a director
 
** Unless otherwise indicated, officers and positions are with SunAmerica Inc.
 
                                       50
<PAGE>   52
 
- --------------------------------------------------------------------------------
 
                             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:
 
<TABLE>
<CAPTION>
  NAME OF INDIVIDUAL OR                        CAPACITIES IN                      ALLOCATED CASH
     NUMBER IN GROUP                            WHICH SERVED                       COMPENSATION
- --------------------------    ------------------------------------------------    --------------
<S>                           <C>                                                 <C>
Eli Broad                     Chairman, Chief Executive Officer and President       $  906,341
Jay S. Wintrob                Executive Vice President                                 527,357
Gary W. Krat                  Senior Vice President                                    287,192
James R. Belardi              Senior Vice President and Treasurer                      199,581
Clark P. Manning, Jr.         Senior Vice President and Actuary                        188,946
All Executive Officers as
  a Group (10)                                                                      $2,823,262
</TABLE>
 
     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 December 1,
1994, Mr. Broad was the beneficial owner of 1,127,504 shares of Common Stock
(approximately 3.9% of the class outstanding) and 5,865,106 shares of Class B
Common Stock (approximately 85.9% 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
639,900 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 December 1, 1994, all directors and officers as a group
beneficially owned 1,730,459 shares of Common Stock (approximately 6.0% of the
class outstanding) and 5,865,106 shares of Class B Common Stock (approximately
85.9% 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, 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
 
                                       51
<PAGE>   53
 
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
- --------------------------------------------------------------------------------
 
     State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, serves as the custodian of the assets of the Separate
Account. The custodian is remunerated by the Company based on a schedule of fees
under an agreement between the custodian and the Company.
 
- --------------------------------------------------------------------------------
 
                               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.
 
- --------------------------------------------------------------------------------
 
                                 LEGAL MATTERS
- --------------------------------------------------------------------------------
 
     Legal matters relating to the federal securities laws in connection with
the Contracts described herein are being passed upon by the law firm of Routier,
Mackey and Johnson, P.C., 1700 K Street, N.W., Suite 1003, Washington D.C.
20006.
 
                                       52
<PAGE>   54
 
- --------------------------------------------------------------------------------
 
                            REGISTRATION STATEMENTS
- --------------------------------------------------------------------------------
 
     Registration statements have been filed with the Securities and Exchange
Commission, Washington, D.C., 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 Contract 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 Anchor National Life Insurance
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 or oral request addressed to the Company at its Annuity
Service Center, P.O. Box 54299, Los Angeles, California 90054-0299 or (800)
90VISTA. The contents of the Statement of Additional Information are tabulated
below.
 
                      STATEMENT OF ADDITIONAL INFORMATION
 
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
                                                                                        PAGE
                                                                                        ----
<S>                                                                                     <C>
Performance Data......................................................................     3
Annuity Unit Values; Annuity Payments.................................................     5
Distribution of Contracts.............................................................     7
Financial Statements..................................................................     7
</TABLE>
 
- --------------------------------------------------------------------------------
 
                              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 and the risk that the Withdrawal Charge will be
insufficient to cover the cost of distributing the Contracts. 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.
 
                                       53
<PAGE>   55
 
                       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
 
                                       54
<PAGE>   56
 
                     ANCHOR NATIONAL LIFE INSURANCE COMPANY
 
                           CONSOLIDATED BALANCE SHEET
 
<TABLE>
<CAPTION>

                                                                        
                                           SEPTEMBER 30,      SEPTEMBER 30,       DECEMBER 31,
                                                1993               1994              1994
                                           --------------     --------------     --------------
                                                                                  (UNAUDITED)
<S>                                        <C>                <C>                <C>
ASSETS
Investments:
  Cash and short-term investments........  $  500,624,000     $  157,438,000     $  255,136,000
  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; December 1994,
       $1,126,573,000)...................   1,085,695,000      1,026,120,000      1,035,587,000
     Held for investment, at amortized
       cost (fair value: September 1993,
       $225,057,000; September 1994,
       $180,274,000; December 1994,
       $173,651,000).....................     210,878,000        175,885,000        171,367,000
  Mortgage loans.........................     112,493,000        108,332,000        108,156,000
  Common stocks, at fair value (cost:
     September 1993, $6,450,000;
     September 1994, $8,789,000; December
     1994, $8,538,000)...................       5,964,000          7,550,000          6,597,000
  Real estate............................     118,108,000         89,539,000         59,447,000
  Other invested assets..................      59,338,000         67,208,000         64,199,000
                                           --------------     --------------     --------------
  Total investments......................   2,093,100,000      1,632,072,000      1,700,489,000
Variable annuity assets..................   4,170,275,000      4,486,703,000      4,333,408,000
Accrued investment income................      16,255,000         17,565,000         18,700,000
Deferred acquisition costs...............     336,677,000        416,289,000        422,880,000
Other assets.............................      55,082,000         49,497,000         51,676,000
                                           --------------     --------------     --------------
TOTAL ASSETS.............................  $6,671,389,000     $6,602,126,000     $6,527,153,000
                                           ==============     ==============     ==============
LIABILITIES AND
  SHAREHOLDER'S EQUITY
Reserves, payables and accrued
  liabilities:
  Reserves for fixed annuity contracts...  $1,562,136,000     $1,437,488,000     $1,476,962,000
  Payable to brokers for purchases of
     securities..........................     428,167,000        124,624,000        153,423,000
  Income taxes currently payable.........       5,772,000         12,331,000         19,732,000
  Other liabilities......................      61,801,000         58,891,000         56,512,000
                                           --------------     --------------     --------------
  Total reserves, payables and accrued
     liabilities.........................   2,057,876,000      1,633,334,000      1,706,629,000
                                           --------------     --------------     --------------
Variable annuity liabilities.............   4,170,275,000      4,486,703,000      4,333,408,000
                                           --------------     --------------     --------------
Subordinated notes payable to Parent.....      34,000,000         34,000,000         34,000,000
                                           --------------     --------------     --------------
Deferred income taxes....................      38,145,000         64,567,000         61,762,000
                                           --------------     --------------     --------------
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        162,675,000
  Net unrealized losses on debt and
     equity securities available for
     sale................................     (13,230,000)       (24,953,000)       (27,708,000)
                                           --------------     --------------     --------------
  Total shareholder's equity.............     371,093,000        383,522,000        391,354,000
                                           --------------     --------------     --------------
TOTAL LIABILITIES AND SHAREHOLDER'S
  EQUITY.................................  $6,671,389,000     $6,602,126,000     $6,527,153,000
                                           ==============     ==============     ==============
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       55
<PAGE>   57
 
                     ANCHOR NATIONAL LIFE INSURANCE COMPANY
 
                         CONSOLIDATED INCOME STATEMENT
 
<TABLE>
<CAPTION>
                                                                                   THREE MONTHS ENDED
                                          YEARS ENDED SEPTEMBER 30,                   DECEMBER 31,
                                 -------------------------------------------   ---------------------------
                                     1992            1993           1994           1993           1994
                                 -------------   ------------   ------------   ------------   ------------
                                                                                       (UNAUDITED)
<S>                              <C>             <C>            <C>            <C>            <C>
Investment income..............  $ 156,805,000   $137,591,000   $127,758,000   $ 31,396,000   $ 28,245,000
Interest expense on:
  Fixed annuity contracts......   (119,781,000)   (87,479,000)   (66,311,000)   (18,474,000)   (16,666,000)
  Senior indebtedness..........       (134,000)       (34,000)       (71,000)            --        (16,000)
  Subordinated notes payable to
     Parent....................       (391,000)    (1,166,000)    (2,380,000)      (595,000)      (595,000)
                                 -------------   ------------   ------------   ------------   ------------
  Total interest expense.......   (120,306,000)   (88,679,000)   (68,762,000)   (19,069,000)   (17,277,000)
                                 -------------   ------------   ------------   ------------   ------------
NET INVESTMENT INCOME..........     36,499,000     48,912,000     58,996,000     12,327,000     10,968,000
                                 -------------   ------------   ------------   ------------   ------------
NET REALIZED INVESTMENT
  LOSSES.......................    (22,749,000)   (22,247,000)   (33,713,000)   (12,792,000)    (4,791,000)
                                 -------------   ------------   ------------   ------------   ------------
Fee income:
  Variable annuity fees........     57,050,000     67,222,000     79,101,000     19,492,000     20,357,000
  Asset management fees........     25,269,000     32,293,000     31,302,000      8,349,000      7,025,000
  Net retained commissions.....     13,163,000     16,928,000     19,180,000      4,624,000      4,626,000
                                 -------------   ------------   ------------   ------------   ------------
TOTAL FEE INCOME...............     95,482,000    116,443,000    129,583,000     32,465,000     32,008,000
                                 -------------   ------------   ------------   ------------   ------------
Other income and expenses:
  Surrender charges............      7,201,000      5,306,000      5,034,000      1,152,000      1,457,000
  General and administrative
     expenses..................    (55,615,000)   (55,142,000)   (52,636,000)   (13,312,000)   (12,686,000)
  Provision for future guaranty
     fund assessments..........             --     (4,800,000)            --             --             --
  Amortization of deferred
     acquisition costs.........    (18,224,000)   (30,825,000)   (43,992,000)    (9,433,000)   (11,942,000)
  Other, net...................      3,540,000      5,865,000      4,048,000        783,000      1,180,000
                                 -------------   ------------   ------------   ------------   ------------
TOTAL OTHER INCOME AND
  EXPENSES.....................    (63,098,000)   (79,596,000)   (87,546,000)   (20,810,000)   (21,991,000)
                                 -------------   ------------   ------------   ------------   ------------
PRETAX INCOME..................     46,134,000     63,512,000     67,320,000     11,190,000     16,194,000
Income tax expense.............    (15,361,000)   (21,794,000)   (22,705,000)    (4,075,000)    (5,607,000)
                                 -------------   ------------   ------------   ------------   ------------
INCOME FROM CONTINUING
  OPERATIONS...................     30,773,000     41,718,000     44,615,000      7,115,000     10,587,000
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      7,115,000     10,587,000
Cumulative effect of change in
  accounting for income
  taxes........................             --             --    (20,463,000)   (20,463,000)            --
                                 -------------   ------------   ------------   ------------   ------------
NET INCOME (LOSS)..............  $  32,085,000   $ 41,718,000   $ 24,152,000   $(13,348,000)  $ 10,587,000
                                 =============   ============   ============   ============   ============
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                       56
<PAGE>   58
 
                     ANCHOR NATIONAL LIFE INSURANCE COMPANY
 
                      CONSOLIDATED STATEMENT OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                                                                         THREE MONTHS ENDED
                                                        YEARS ENDED SEPTEMBER 30,                           DECEMBER 31,
                                          -----------------------------------------------------    ------------------------------
                                               1992               1993               1994              1993             1994
                                          ---------------    ---------------    ---------------    -------------    -------------
                                                                                                                     (UNAUDITED)
<S>                                       <C>                <C>                <C>                <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income (losses)...................   $    32,085,000    $    41,718,000    $    24,152,000    $ (13,348,000)   $ 10,587,000
 Adjustments to reconcile net income
   (loss) to net cash provided by
   operating activities:
   Interest credited to fixed annuity
     contracts.........................       119,781,000         87,479,000         66,311,000       18,474,000      16,666,000
   Net realized investment losses......        22,749,000         22,247,000         33,713,000       12,792,000       4,791,000
   Accretion of net discounts on
     investments.......................       (14,090,000)        (9,149,000)        (2,050,000)      (1,915,000)     (1,658,000 )
   Amortization of goodwill............         1,173,000          1,167,000          1,169,000          292,000         292,000
   Provision for deferred income
     taxes.............................        18,779,000          2,982,000         19,395,000        4,081,000      (1,323,000 )
   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)     (11,353,000)     (1,291,000 )
     Other assets......................           384,000          3,017,000          5,133,000         (621,000)     (4,568,000 )
     Income taxes receivable/payable...        (2,408,000)        23,479,000          6,559,000       (1,127,000)      7,401,000
     Other liabilities.................        (6,199,000)        11,596,000             46,000       (1,698,000)        (51,000 )
   Other, net..........................         5,553,000            466,000           (950,000)      (1,023,000)       (982,000 )
                                          ---------------    ---------------    ---------------    -------------    -------------
NET CASH PROVIDED BY OPERATING
 ACTIVITIES............................       115,735,000        136,589,000        139,329,000       25,017,000      29,864,000
                                          ---------------    ---------------    ---------------    -------------    -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchases of:
   Bonds, notes and redeemable
     preferred stocks available for
     sale..............................                --     (1,254,755,000)    (1,197,743,000)    (519,146,000)    (82,598,000 )
   Bonds, notes and redeemable
     preferred stocks held for
     investment........................                --                 --           (209,000)      (1,808,000)             --
   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)      (4,687,000)             --
   Investment in real estate separate
     account...........................       (10,152,000)                --                 --               --              --
   Other investments, excluding
     short-term investments............       (11,196,000)       (31,674,000)       (26,108,000)      (2,735,000)     (4,102,000 )
 Sales of:
   Bonds, notes and redeemable
     preferred stocks available for
     sale..............................                --        874,966,000        877,068,000      263,129,000      43,732,000
   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       29,823,000      31,269,000
   Other investments, excluding
     short-term investments............        41,119,000         21,616,000          2,353,000          853,000         269,000
 Redemptions and maturities of:
   Bonds, notes and redeemable
     preferred stocks available for
     sale..............................                --        160,035,000        139,691,000       37,562,000      15,400,000
   Bonds, notes and redeemable
     preferred stocks held for
     investment........................                --                 --         34,072,000        9,547,000       5,313,000
   Other bonds, notes and redeemable
     preferred stocks..................       261,710,000        259,860,000                 --               --              --
 Investment in real estate separate
   account.............................                --         92,130,000                 --               --              --
 Other investments, excluding
   short-term investments..............        18,701,000         24,576,000         23,587,000       10,151,000       7,328,000
 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)    (177,311,000)     16,611,000
                                          ---------------    ---------------    ---------------    -------------    -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Premium receipts on fixed annuity
   contracts...........................        86,577,000         63,796,000        140,741,000       12,665,000      59,979,000
 Net exchanges to (from) the fixed
   accounts of variable annuity
   contracts...........................       (46,361,000)       (45,516,000)       (29,286,000)     (23,538,000)     38,242,000
 Withdrawal payments on fixed annuity
   contracts...........................      (345,955,000)      (245,250,000)      (267,197,000)     (54,495,000)    (68,459,000 )
 Claims and annuity payments on fixed
   annuity contracts...................       (35,593,000)       (33,938,000)       (31,146,000)      (7,156,000)     (7,106,000 )
 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)      73,272,000      28,567,000
 Capital contributions received........        80,000,000                 --                 --               --              --
                                          ---------------    ---------------    ---------------    -------------    -------------
NET CASH PROVIDED (USED) BY FINANCING
 ACTIVITIES............................        (2,243,000)      (203,551,000)      (358,003,000)         748,000      51,223,000
                                          ---------------    ---------------    ---------------    -------------    -------------
NET INCREASE (DECREASE) IN CASH AND
 SHORT-TERM INVESTMENTS................       303,288,000        106,750,000       (343,186,000)    (151,546,000)     97,698,000
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    $ 349,078,000    $255,136,000
                                           ==============     ==============     ==============     ============    ============
SUPPLEMENTAL CASH FLOW INFORMATION:
 Interest paid on indebtedness.........   $       134,000    $        34,000    $     1,175,000    $      79,000    $    340,000
                                           ==============     ==============     ==============     ============    ============
 Income taxes paid (recovered).........   $      (181,000)   $    (6,736,000)   $    (3,328,000)   $   1,121,000    $   (537,000 )
                                           ==============     ==============     ==============     ============    ============
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                       57
<PAGE>   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 subsidiary of Sun Life Insurance Company of America ("Sun Life of
America"), which in turn is a wholly-owned 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
 
                                       58
<PAGE>   60
 
                     ANCHOR NATIONAL LIFE INSURANCE COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
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.
 
     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 investmenttype 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 Sun Life of America for cash equal to its
book value of $52,750,000.
 
                                       59
<PAGE>   61
 
                     ANCHOR NATIONAL LIFE INSURANCE COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
 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:
 
<TABLE>
<CAPTION>
                                                           AMORTIZED          ESTIMATED
                                                              COST            FAIR VALUE
                                                         --------------     --------------
    <S>                                                  <C>                <C>
    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
                                                         ==============     ==============
    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
                                                         ==============     ==============
</TABLE>
 
                                       60
<PAGE>   62
 
                     ANCHOR NATIONAL LIFE INSURANCE COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
     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:
 
<TABLE>
<CAPTION>
                                                            AMORTIZED          ESTIMATED
                                                              COST            FAIR VALUE
                                                         ---------------    ---------------
    <S>                                                  <C>                <C>
    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............       36,351,000         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
                                                          ==============     ==============
</TABLE>
 
     Actual maturities of bonds, notes and redeemable preferred stocks will
differ from those shown above because of prepayments and redemptions.
 
                                       61
<PAGE>   63
 
                     ANCHOR NATIONAL LIFE INSURANCE COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
     Gross unrealized gains and losses on bonds, notes and redeemable preferred
stocks available for sale and held for investment by major category follow:
 
<TABLE>
<CAPTION>
                                                                GROSS           GROSS
                                                             UNREALIZED       UNREALIZED
                                                                GAINS           LOSSES
                                                             -----------     ------------
    <S>                                                      <C>             <C>
    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     $         --
                                                             ===========     ============
</TABLE>
 
     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.
 
                                       62
<PAGE>   64
 
                     ANCHOR NATIONAL LIFE INSURANCE COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
     Gross realized investment gains and losses on sales of all types of
investments are as follows:
 
<TABLE>
<CAPTION>
                                                      YEARS ENDED SEPTEMBER 30,
                                            ----------------------------------------------
                                                1994             1993             1992
                                            ------------     ------------     ------------
    <S>                                     <C>              <C>              <C>
    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)
                                            ============     ============     ============
</TABLE>
 
     The sources and related amounts of investment income are as follows:
 
<TABLE>
<CAPTION>
                                                      YEARS ENDED SEPTEMBER 30,
                                            ----------------------------------------------
                                                1994             1993             1992
                                            ------------     ------------     ------------
    <S>                                     <C>              <C>              <C>
    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
                                            ============     ============     ============
</TABLE>
 
     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
 
                                       63
<PAGE>   65
 
                     ANCHOR NATIONAL LIFE INSURANCE COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
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.
 
     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.
 
                                       64
<PAGE>   66
 
                     ANCHOR NATIONAL LIFE INSURANCE COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
          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.
 
          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:
 
<TABLE>
<CAPTION>
                                                            CARRYING             FAIR
                                                             VALUE              VALUE
                                                         --------------     --------------
    <S>                                                  <C>                <C>
    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
                                                         ==============     ==============
</TABLE>
 
 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.
 
                                       65
<PAGE>   67
 
                     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:
 
<TABLE>
<CAPTION>
                                                      YEARS ENDED SEPTEMBER 30,
                                            ----------------------------------------------
                                                1994             1993             1992
                                            ------------     ------------     ------------
    <S>                                     <C>              <C>              <C>
    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)
                                            ============     ============     ============
</TABLE>
 
     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.
 
                                       66
<PAGE>   68
 
                     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:
 
<TABLE>
<CAPTION>
                                              NET REALIZED
                                               INVESTMENT
                                                 GAINS
                                                (LOSSES)       OPERATIONS         TOTAL
                                              ------------     -----------     -----------
    <S>                                       <C>              <C>             <C>
    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
                                              ============     ===========     ===========
</TABLE>
 
     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:
 
<TABLE>
<CAPTION>
                                                        YEARS ENDED SEPTEMBER 30,
                                               -------------------------------------------
                                                  1994            1993            1992
                                               -----------     -----------     -----------
    <S>                                        <C>             <C>             <C>
    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
                                               ===========     ===========     ===========
</TABLE>
 
     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.
 
                                       67
<PAGE>   69
 
                     ANCHOR NATIONAL LIFE INSURANCE COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
     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 reporting purposes. The significant
components of the liability for deferred income taxes are as follows:
 
<TABLE>
<CAPTION>
                                                                SEPTEMBER 30,     SEPTEMBER 30,
                                                                    1994              1993
                                                                -------------     -------------
<S>                                                             <C>               <C>
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
                                                                 ============      ============
</TABLE>
 
 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 Sun Life of America 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).
 
                                       68
<PAGE>   70
 
                     ANCHOR NATIONAL LIFE INSURANCE COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
     During the year ended September 30, 1993, the Company sold to Sun Life of
America various invested assets with carrying values of $46,332,000 for cash of
$46,334,000 and recorded net gains of $2,000.
 
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:
 
<TABLE>
<CAPTION>
                                                         TOTAL
                                                      DEPRECIATION
                                                          AND
                                          TOTAL       AMORTIZATION     PRETAX          TOTAL
                                         REVENUES       EXPENSE        INCOME          ASSETS
                                       ------------   ------------   -----------   --------------
<S>                                    <C>            <C>            <C>           <C>
1994:
Annuity operations...................  $157,453,000   $ 26,298,000   $41,374,000   $6,472,642,000
Asset management.....................    46,781,000     19,330,000    18,795,000      102,615,000
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...................  $166,705,000   $ 23,634,000   $31,676,000   $6,545,005,000
Asset management.....................    47,807,000      8,853,000    25,619,000       99,098,000
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...................  $181,690,000   $ 14,769,000   $26,298,000   $5,661,433,000
Asset management.....................    33,074,000      5,141,000    14,503,000      106,351,000
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
                                       ============    ===========   ===========   ==============
</TABLE>
 
                                       69
<PAGE>   71
 
                                   APPENDIX A
        WITHDRAWALS, WITHDRAWAL CHARGES AND THE MARKET VALUE ADJUSTMENT
 
PART 1 -- SEPARATE ACCOUNT (THE MARKET VALUE ADJUSTMENT DOES NOT APPLY TO THE
          SEPARATE ACCOUNT)
 
     These examples assume the following:
 
          (1) The Initial Purchase Payment was $10,000, allocated solely to one
     Portfolio;
 
          (2) The date of full surrender or partial withdrawal occurs during the
     3rd Contribution Year;
 
          (3) The Owner's Contract Value at the time of surrender or withdrawal
     is $12,000; and
 
          (4) No other Purchase Payments or previous partial withdrawals have
     been made.
 
     EXAMPLE A -- FULL SURRENDER:
 
          (1) Earnings in the Portfolio ($12,000 - $10,000 = $2,000) are not
     subject to the Withdrawal Charge.
 
          (2) The balance of the full surrender ($12,000 - $2,000 = $10,000) is
     subject to the Withdrawal Charge applicable during the 3rd Contribution
     Year (5%, from the Withdrawal Charge Table on page 20).
 
          (3) The amount of the Withdrawal Charge is .05 X $10,000 = $500.
 
          (4) The amount of the full surrender is $12,000 - $500 = $11,500.
 
     EXAMPLE B -- PARTIAL WITHDRAWAL (IN THE AMOUNT OF $3,000):
 
          (1) For the same reasons as given in Steps 1 and 2 of Example A,
     above, $2,000 can be withdrawn free of the Withdrawal Charge.
 
          (2) Although 10% of the Purchase Payment is available without
     imposition of a Withdrawal Charge (.10 X $10,000 = $1,000), this free
     withdrawal amount is, like the Withdrawal Charge, applied first to
     earnings. Since the earnings exceed the free withdrawal amount, only the
     earnings can be withdrawn free of the scheduled Withdrawal Charge.
 
          (3) The balance of the requested partial withdrawal
     ($3,000 - $2,000 = $1,000) is subject to the Withdrawal Charge applicable
     during the 3rd Contribution Year (5%).
 
          (4) The amount of the Withdrawal Charge is equal to the amount
     required to complete the partial withdrawal ($3,000 - $2,000 = $1,000)
     divided by (1 - .05) = 0.95, less the amount required to complete the
     partial withdrawal.
 
          Withdrawal Charge = ($1,000/0.95) - $1,000
                         = $52.63
 
     In this example, in order for the Owner to receive the amount requested
($3,000), a gross withdrawal of $3,052.63 must be processed with $52.63
representing the Withdrawal Charge calculated above.
 
     Examples C and D assume the following:
 
          (1) The Initial Purchase Payment was $20,000, allocated solely to one
     Portfolio;
 
          (2) The full surrender or partial withdrawal occurs during the 2nd
     Contribution Year;
 
                                       A-1
<PAGE>   72
 
          (3) The Owner's Contract Value at the time of surrender or withdrawal
     is $21,500; and
 
          (4) No other Purchase Payments or partial withdrawals have been made.
 
     EXAMPLE C -- PARTIAL WITHDRAWAL (IN THE MAXIMUM AMOUNT AVAILABLE WITHOUT
                  WITHDRAWAL CHARGE):
 
          (1) Earnings in the Portfolio ($21,500 - $20,000 = $1,500) are not
     subject to the Withdrawal Charge.
 
          (2) An Additional Free Withdrawal of 10% of the Purchase Payments less
     earnings (.10 X $20,000 - $1,500 = $500) is also available free of the
     Withdrawal Charge, so that
 
          (3) The maximum partial withdrawal without Withdrawal Charge is the
     sum of the Earnings and the Additional Free Withdrawal
     ($1,500 + $500 = $2,000).
 
     EXAMPLE D -- FULL SURRENDER IMMEDIATELY FOLLOWING THE PARTIAL WITHDRAWAL IN
                  EXAMPLE C:
 
          (1) The Owner's Contract Value after the partial withdrawal in Example
     C is $21,500 - $2,000 = $19,500.
 
          (2) The Purchase Payment amount for calculating the Withdrawal Charge
     is the original $20,000 (Additional Free Withdrawal amounts do not reduce
     the Purchase Payment amount for purposes of calculating the Withdrawal
     Charge).
 
          (3) The amount of the Withdrawal Charge is .05 X $20,000 = $1,000.
 
          (4) The amount of the full surrender is $19,500 - $1,000 = $18,500.
 
PART 2 -- GENERAL ACCOUNT -- EXAMPLES OF THE MARKET VALUE ADJUSTMENT (MVA)
 
     The Market Value Adjustment Factor appearing on page 18 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 $10,000 was made and allocated to a
     ten year Guarantee Period with a Guarantee Rate of 7.25% (.0725);
 
          (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 $16,632.69; and
 
          (4) no transfers, additional Purchase Payments, or other withdrawals
     have been made.
 
     The Guarantee Amount of $16,632.69 reflects deductions for Contract
Administration Charges at each anniversary. Since the withdrawal is effected in
the Purchase Payment's 7th Contribution Year, no Withdrawal Charge is applicable
(See the table on page 20 of the prospectus).
 
                                       A-2
<PAGE>   73
 
    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 8.25%:
 
          The MVA factor =  [(1 + I)/(1 + J + .005)]N/12 -1
 
                       =  [(1.0725)/(1.0825 + .005)](30/12) -1
 
                       =  (0.986207)2.5 -1
 
                       =  0.965873 -1
 
                       =  -0.034127
 
          The requested withdrawal amount is multiplied by the MVA factor to
     determine the MVA:
 
                     MVA = $4,000 X (-0.034127) = -$136.51
 
          $136.51 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 6.25%:
 
          The MVA factor =  [(1 + I)/(1 + J + .005)]N/12 -1
 
                       =  [(1.0725)/(1.0625 +.005)](30/12) -1
 
                       =  (1.004684)2.5 -1
 
                       =  1.011751 -1
 
                       =  0.011751
 
          The requested withdrawal amount is multiplied by the MVA factor to
     determine the MVA:
 
                          $4,000 X 0.011751 = +$47.00
 
          $47.00 represents the MVA that would be added to the remaining
     accumulated value.
 
PART 3 -- GENERAL ACCOUNT -- EXAMPLE OF FULL WITHDRAWAL WITH MVA AND WITHDRAWAL
          CHARGE
 
     Assume the same facts as in Part 2, above, except that under assumption (2)
a complete withdrawal is requested with 4 1/2 years (54 months) remaining in the
Guarantee Period (i.e., N = 54). The Guarantee Amount on the date of withdrawal
is $14,515.97 (after reduction of the Contract Administration Charge of $30,
since the withdrawal is not on a Certificate anniversary). As was the case with
the Examples in Part 1, above, the earnings may be withdrawn free of Withdrawal
Charge, leaving the initial Purchase Payment of $10,000 subject to the Charge.
The applicable Withdrawal Charge, from the table on page 20 of the prospectus,
is 3% or $300.
 
     EXAMPLE OF A NEGATIVE MVA:
 
          Assume that on the date of withdrawal the Current Interest Rate for a
     new Guarantee Period of 5 years is 8.25%:
 
          The MVA factor = [(1 + I)/(1 + J + .005)]N/12 -1
                       = [(1.0725)/(1.0825 + .005)](54/12) -1
                       = (0.986207)4.5 -1
                       = 0.939412 -1
                       = -0.060588
 
                                       A-3
<PAGE>   74
 
          The Withdrawal Charge of $300 is applied first; the MVA factor is
     applied against the remaining Guarantee Amount:
 
          MVA = ($14,515.97 - $300) X (-0.060588) = -$861.32
 
          The net amount available upon withdrawal is the Guarantee Amount
     reduced by both the Withdrawal Charge, the MVA and the Contract
     Administration Charge:
 
          $14,515.97 - $300 - $861.32 - $30 = $13,324.65
 
     EXAMPLE OF A POSITIVE MVA:
 
          Assume that on the date of withdrawal the Current Interest Rate for a
     new Guarantee Period of 5 years is 6.25%:
 
          The MVA factor = [(1 + I)/(1 + J + .005)]N/12 -1
                         = [(1.0725)/(1.0625 + .005)](54/12) -1
                       = (1.004684)4.5 -1
                       = 1.021251 -1
                       = +0.021251
 
          The MVA is:
 
           ($14,515.97 - $300) X (+0.021251) = +$302.10
 
          And the net amount available upon surrender is:
 
           $14,515.97 - $300 + $302.10 - $30 = $14,488.07
 
                                       A-4
<PAGE>   75
 
<TABLE>
<S>                              <C>                                  <C>
- ------------------------------
- ------------------------------
- ------------------------------                                           Stamp
</TABLE>
 
                       ANCHOR NATIONAL LIFE INSURANCE COMPANY
                       SERVICE CENTER
                       P.O. BOX 54299
                       LOS ANGELES, CA 90054-0299
<PAGE>   76
 
Please forward a copy, without charge, of the Statement of Additional
Information concerning the Vista Capital Advantage issued by Anchor National
Life Insurance Company to:
 
              (Please print or type and fill in all information.)
 
- ------------------------------------------------------------------------------
  Name
 
- ------------------------------------------------------------------------------
  Address
 
- ------------------------------------------------------------------------------
  City/State/Zip
 
- ------------------------------------------------------------------------------
Date:                            Signed:


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