INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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As filed with the Securities and Exchange Commission on July 2, 1997
File No. 333-19725
File No. 811-08017
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ( )
Pre-effective Amendment No. 2 ( X )
Post-effective Amendment No. ( )
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 ( )
Pre-effective Amendment No. 2 ( X )
Post-effective Amendment No. ( )
(Check appropriate box or boxes)
------------------------
ANNUITY INVESTORS(REGISTERED) VARIABLE ACCOUNT B
(Exact Name of Registrant)
ANNUITY INVESTORS LIFE INSURANCE COMPANY(REGISTERED)
(Name of Depositor)
P.O. Box 5423
Cincinnati, Ohio 45201-5423
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code:
(800) 789-6771
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Mark F. Muething, Esq.
Senior Vice President, Secretary and General Counsel
Annuity Investors Life Insurance Company
P.O. Box 5423
Cincinnati, Ohio 45201-5423
(Name and Address of Agent for Service)
Copy to:
Catherine S. Bardsley, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Second Floor
Washington, D.C. 20036-1800
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Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of the Registration Statement.
<PAGE>
DECLARATION REQUIRED BY RULE 24f-2 (a) (1)
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
Registrant declares that an indefinite number of its securities is being
registered under the Securities Act of 1933.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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CROSS REFERENCE SHEET
Pursuant to Rule 495
Showing Location in Part A (Prospectus),
Part B (Statement of Additional Information) and Part C
of Registration Statement Information Required by Form N-4
PART A
Item of Form N-4 Prospectus Caption
---------------- ------------------
1. Cover Page............................ Cover Page
2. Definitions........................... Definitions
3. Synopsis.............................. Highlights
4. Condensed Financial Information
(a) Accumulation Unit Values........ Not Applicable
(b) Performance Data................ Not Applicable
(c) Financial Statements............ Financial Statements for the
Company
5. General Description of Registrant,
Depositor and Portfolio
Companies
(a) Depositor....................... Annuity Investors Life Insurance
Company(REGISTERED)
(b) Registrant...................... The Separate Account
(c) Portfolio Company............... The Funds
(d) Fund Prospectus................. The Funds
(e) Voting Rights................... Voting Rights
6. Deductions and Expenses
(a) General......................... Charges and Deductions
(b) Sales Load %.................... Contingent Deferred Sales Charge
(c) Special Purchase Plan........... Contingent Deferred Sales Charge
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(d) Commissions..................... Distribution of the Contract
(e) Fund Expenses................... The Funds
(f) Operating Expenses.............. Summary of Expenses
7. Contracts
(a) Persons with Rights............. The Contract; Surrenders;
Contract Loans; Death
Benefit; Voting Rights
(b)(i) Allocation of Premium Payments Purchase Payments
(ii) Transfers .................... Transfers
(iii)Exchanges .................... Additions, Deletions or
Substitutions
(c) Changes......................... Not Applicable
(d) Inquiries....................... Contacting the Company
8. Annuity Period........................ Settlement Options
9. Death Benefit......................... Death Benefit
10. Purchases and Contract Values
(a) Purchases....................... Purchase Payments
(b) Valuation....................... Fixed Account Value; Variable
Account Value
(c) Daily Calculation............... Accumulation Unit Value; Net
Investment Factor
(d) Underwriter..................... Distribution of the Contract
11. Redemptions
(a) By Owner........................ Surrender Value; Systematic
Withdrawal Option
By Annuitant.................... Not Applicable
(b) Texas ORP....................... Texas Optional Retirement Program
(c) Check Delay..................... Suspension or Delay in Payment of
Surrender Value
(d) Free Look....................... Right to Cancel
12. Taxes................................. Federal Tax Matters
13. Legal Proceedings..................... Legal Proceedings
14. Table of Contents for the Statement of
Additional Statement of Additional
Information........................... Information
ii
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PART B
- ------
Statement of Additional
Item of Form N-4 Information Caption
---------------- -------------------
15. Cover Page............................ Cover Page
16. Table of Contents..................... Table of Contents
17. General Information and History....... General Information and History
18. Services
(a) Fees and Expenses of Registrant. (Prospectus) Summary of Expenses
(b) Management Contracts............ Not Applicable
(c) Custodian....................... Not Applicable
Independent Auditors............ Experts
(d) Assets of Registrant............ Not Applicable
(e) Affiliated Person............... Not Applicable
(f) Principal Underwriter........... Not Applicable
19. Purchase of Securities Being Offered.. (Prospectus) Distribution of the
Contract
Offering Sales Load................... (Prospectus) Contingent Deferred
Sales Charge
20. Underwriters.......................... Distribution of the Contract
21. Calculation of Performance Data
(a) Money Market Funded Sub-Accounts Money Market Sub-Account
Standardized Yield
Calculation
(b) Other Sub-Accounts.............. Other Sub-Account Standardized
Yield
Calculations
22. Annuity Payments...................... (Prospectus) Fixed Dollar Annuity
Benefit;
Variable Dollar Annuity Benefit
23. Financial Statements.................. Financial Statements
PART C - Other Information
- --------------------------
Item of Form N-4 Part C Caption
---------------- --------------
24. Financial Statements and Exhibits..... Financial Statements and Exhibits
(a) Financial Statements............ Financial Statements
(b) Exhibits........................ Exhibits
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25. Directors and Officers of the Depositor Directors and Officers of Annuity
Investors Life
Insurance Company(REGISTERED)
26. Persons Controlled By or Under Common Persons Controlled By Or Under
Control With the Common
Registrant............................ Control With the Depositor or
Registrant
27. Number of Owners...................... Number of Owners
28. Indemnification....................... Indemnification
29. Principal Underwriters................ Principal Underwriter
30. Location of Accounts and
Records............................... Location of Accounts and Records
31. Management Services................... Management Services
32. Undertakings.......................... Undertakings
Signature Page........................ Signature Page
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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ANNUITY INVESTORS(REGISTERED) VARIABLE ACCOUNT B
OF
ANNUITY INVESTORS LIFE INSURANCE COMPANY(REGISTERED)
PROSPECTUS
FOR
THE COMMODORE NAVIGATOR[SERVICEMARK]
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES
ISSUED BY
ANNUITY INVESTORS LIFE INSURANCE COMPANY
P.O. BOX 5423, CINCINNATI, OHIO 45201-5423, (800) 789-6771
This Prospectus describes The Commodore Navigator(SERVICEMARK) Individual and
Group Flexible Premium Deferred Annuity Contracts (the "Contracts") issued by
Annuity Investors Life Insurance Company(REGISTERED) (the "Company").
The Commodore Navigator(SERVICEMARK) is available in connection with
arrangements that qualify for favorable tax treatment ("Qualified Contract(s)")
under Sections 401, 403 and 408 of the Code and for non-tax-qualified annuity
purchases ("Non-Qualified Contract(s)"), including Contracts purchased by an
employer in connection with a Code Section 457 or non-qualified deferred
compensation plan.
The Contracts provide for the accumulation of an Account Value on a fixed or
variable basis, or a combination of both. The Contracts also provide for the
payment of periodic annuity payments on a fixed or variable basis, or a
combination of both. If the variable basis is chosen, Annuity Benefit values
will be held in Annuity Investors(REGISTERED) Variable Account B (the "Separate
Account") and will vary according to the investment performance of the mutual
funds in which the Sub-Accounts of the Separate Account invest. If the fixed
basis is chosen, periodic annuity payments from the Company's general account
will be fixed and will not vary.
The Separate Account is divided into Sub-Accounts. Each Sub-Account uses its
assets to purchase, at their net asset value, shares of a designated registered
investment company or portfolio thereof (each, a "Fund"). The Funds available
for investment in the Separate Account under the Contract are as follows: (1)
Janus Aspen Series Aggressive Growth Portfolio; (2) Janus Aspen Series Worldwide
Growth Portfolio; (3) Janus Aspen Series Balanced Portfolio; (4) Janus Aspen
Series Growth Portfolio; (5) Janus Aspen Series International Growth Portfolio;
(6) Dreyfus Variable Investment Fund-Capital Appreciation Portfolio; (7) Dreyfus
Variable Investment Fund-Money Market Portfolio; (8) Dreyfus Variable Investment
Fund-Growth and Income Portfolio; (9) Dreyfus Variable Investment Fund-Small Cap
Portfolio; (10) The Dreyfus Socially Responsible Growth Fund, Inc.; (11) Dreyfus
Stock Index Fund; (12) Strong Opportunity Fund II, Inc.; (13) Strong Variable
Insurance Funds, Inc.-Strong Growth Fund II; (14) INVESCO VIF-Industrial Income
Fund; (15) INVESCO VIF-Total Return Fund; (16) INVESCO VIF-High Yield Fund; (17)
Morgan Stanley Universal Funds Inc.-U.S. Real Estate Portfolio; (18) Morgan
Stanley Universal Funds Inc.-Value Portfolio; (19) Morgan Stanley Universal
Funds Inc.-Emerging Markets Equity Portfolio; (20) Morgan Stanley Universal
Funds Inc.-Fixed Income Portfolio; (21) Morgan Stanley Universal Funds Inc.-Mid
Cap Value Portfolio; (22) PBHG Insurance Series Fund, Inc.-PBHG Growth II
Portfolio; (23) PBHG Insurance Series Fund, Inc.-PBHG Large Cap Growth
Portfolio; and (24) PBHG Insurance Series Fund, Inc.-PBHG Technology &
Communications Portfolio.
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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This Prospectus sets forth the basic information that a prospective investor
should know before investing. A "Statement of Additional Information" containing
more detailed information about the Contract is available free of charge by
writing to the Company's Administrative Office at P.O. Box 5423, Cincinnati,
Ohio 45201-5423. The Statement of Additional Information, which has the same
date as this Prospectus, as it may be supplemented from time to time, has been
filed with the Securities and Exchange Commission and is incorporated herein by
reference. The table of contents of the Statement of Additional Information is
included at the end of this Prospectus.
* * *
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES REGULATORY AUTHORITIES
NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Please Read this Prospectus Carefully and
Retain It for Future Reference.
The Date of this Prospectus is July 14, 1997.
--------------------------------------------
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESPERSON, OR OTHER PERSON
IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
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VARIABLE ANNUITY CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR
GUARANTEED BY, ANY FINANCIAL INSTITUTION, NOR ARE THEY FEDERALLY INSURED OR
OTHERWISE PROTECTED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY; THEY ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL INVESTMENT.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUS FOR
EACH UNDERLYING FUND. BOTH THIS PROSPECTUS AND THE UNDERLYING FUND PROSPECTUSES
SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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TABLE OF CONTENTS
PAGE
DEFINITIONS....................................................................7
HIGHLIGHTS....................................................................10
THE CONTRACT...............................................................10
THE SEPARATE ACCOUNT.......................................................10
THE FIXED ACCOUNT..........................................................11
TRANSFERS BEFORE THE ANNUITY COMMENCEMENT DATE.............................11
SURRENDERS.................................................................11
CONTINGENT DEFERRED SALES CHARGE ("CDSC")..................................11
OTHER CHARGES AND DEDUCTIONS...............................................11
ANNUITY BENEFITS...........................................................12
DEATH BENEFIT..............................................................12
FEDERAL INCOME TAX CONSEQUENCES............................................12
RIGHT TO CANCEL............................................................12
CONTACTING THE COMPANY.....................................................12
SUMMARY OF EXPENSES...........................................................14
OWNER TRANSACTION EXPENSES.................................................14
ANNUAL EXPENSES...............................................................15
EXAMPLES...................................................................20
FINANCIAL STATEMENTS FOR THE COMPANY..........................................21
THE FUNDS.....................................................................21
JANUS ASPEN SERIES.........................................................22
AGGRESSIVE GROWTH PORTFOLIO..........................................22
WORLDWIDE GROWTH PORTFOLIO...........................................22
BALANCED PORTFOLIO...................................................22
GROWTH PORTFOLIO.....................................................22
INTERNATIONAL GROWTH PORTFOLIO.......................................22
DREYFUS FUNDS..............................................................22
CAPITAL APPRECIATION PORTFOLIO (Dreyfus Variable Investment Fund)....22
MONEY MARKET PORTFOLIO (Dreyfus Variable Investment Fund)............22
GROWTH AND INCOME PORTFOLIO (Dreyfus Variable Investment Fund).......22
SMALL CAP PORTFOLIO (Dreyfus Variable Investment Fund)...............22
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC....................23
DREYFUS STOCK INDEX FUND.............................................23
STRONG OPPORTUNITY FUND II, INC............................................23
STRONG OPPORTUNITY FUND II,..........................................23
STRONG VARIABLE INSURANCE FUNDS, INC.......................................23
STRONG GROWTH FUND II................................................23
INVESCO VARIABLE INVESTMENT FUNDS, INC.....................................23
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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INDUSTRIAL INCOME FUND...............................................23
TOTAL RETURN FUND....................................................23
HIGH YIELD FUND......................................................23
MORGAN STANLEY UNIVERSAL FUNDS INC.........................................24
U.S. REAL ESTATE PORTFOLIO...........................................24
VALUE PORTFOLIO......................................................24
EMERGING MARKETS EQUITY PORTFOLIO....................................24
FIXED INCOME PORTFOLIO...............................................24
MID CAP VALUE PORTFOLIO..............................................24
PBHG INSURANCE SERIES FUND, INC............................................24
PBHG GROWTH II PORTFOLIO.............................................24
PBHG LARGE CAP GROWTH PORTFOLIO......................................25
PBHG TECHNOLOGY & COMMUNICATIONS PORTFOLIO...........................25
ADDITIONS, DELETIONS, OR SUBSTITUTIONS.....................................25
PERFORMANCE INFORMATION.......................................................26
YIELD DATA.................................................................26
TOTAL RETURN DATA..........................................................26
ANNUITY INVESTORS LIFE INSURANCE COMPANY(REGISTERED) AND THE
SEPARATE ACCOUNT..............................................................27
ANNUITY INVESTORS LIFE INSURANCE COMPANY...................................27
PUBLISHED RATINGS..........................................................27
THE SEPARATE ACCOUNT.......................................................27
THE FIXED ACCOUNT.............................................................28
FIXED ACCOUNT OPTIONS......................................................28
RENEWAL OF FIXED ACCOUNT OPTIONS...........................................28
THE CONTRACT..................................................................29
RIGHT TO CANCEL............................................................29
PURCHASE PAYMENTS.............................................................30
PURCHASE PAYMENTS..........................................................30
ALLOCATION OF PURCHASE PAYMENTS............................................30
ACCOUNT VALUE.................................................................30
FIXED ACCOUNT VALUE........................................................30
VARIABLE ACCOUNT VALUE.....................................................31
ACCUMULATION UNIT VALUE....................................................31
NET INVESTMENT FACTOR......................................................31
TRANSFERS.....................................................................32
TELEPHONE TRANSFERS........................................................32
DOLLAR COST AVERAGING......................................................33
PORTFOLIO REBALANCING......................................................33
INTEREST SWEEP.............................................................34
PRINCIPAL GUARANTEE OPTION.................................................34
CHANGES BY THE COMPANY.....................................................34
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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SURRENDERS....................................................................34
SURRENDER VALUE............................................................34
SUSPENSION OR DELAY IN PAYMENT OF SURRENDER VALUE..........................35
FREE WITHDRAWAL PRIVILEGE..................................................36
SYSTEMATIC WITHDRAWAL......................................................36
CONTRACT LOANS................................................................36
DEATH BENEFIT.................................................................37
WHEN A DEATH BENEFIT WILL BE PAID..........................................37
DEATH BENEFIT VALUES.......................................................37
DEATH BENEFIT COMMENCEMENT DATE............................................38
FORM OF DEATH BENEFIT......................................................38
BENEFICIARY................................................................38
CHARGES AND DEDUCTIONS........................................................38
CONTINGENT DEFERRED SALES CHARGE ("CDSC")..................................38
MAINTENANCE AND ADMINISTRATION CHARGES.....................................40
MORTALITY AND EXPENSE RISK CHARGE..........................................40
PREMIUM TAXES..............................................................41
TRANSFER FEE...............................................................41
FUND EXPENSES..............................................................42
REDUCTION OR ELIMINATION OF CONTRACT CHARGES...............................42
SETTLEMENT OPTIONS............................................................42
ANNUITY COMMENCEMENT DATE..................................................42
ELECTION OF SETTLEMENT OPTION..............................................42
BENEFIT PAYMENTS...........................................................42
FIXED DOLLAR BENEFIT.......................................................43
VARIABLE DOLLAR BENEFIT....................................................43
TRANSFERS AFTER THE ANNUITY COMMENCEMENT DATE..............................44
ANNUITY TRANSFER FORMULA...................................................44
SETTLEMENT OPTIONS.........................................................45
MINIMUM AMOUNTS............................................................45
SETTLEMENT OPTION TABLES...................................................46
GENERAL PROVISIONS............................................................46
NON-PARTICIPATING..........................................................46
MISSTATEMENT...............................................................46
PROOF OF EXISTENCE AND AGE.................................................46
DISCHARGE OF LIABILITY.....................................................46
TRANSFER OF OWNERSHIP......................................................46
NON-QUALIFIED CONTRACT...............................................46
QUALIFIED CONTRACT...................................................47
ASSIGNMENT.................................................................47
NON-QUALIFIED CONTRACT...............................................47
QUALIFIED CONTRACT...................................................47
ANNUAL REPORT..............................................................47
INCONTESTABILITY...........................................................47
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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ENTIRE CONTRACT............................................................47
CHANGES -- WAIVERS.........................................................48
NOTICES AND DIRECTIONS.....................................................48
FEDERAL TAX MATTERS...........................................................48
INTRODUCTION...............................................................48
TAXATION OF ANNUITIES IN GENERAL...........................................48
SURRENDERS.................................................................49
QUALIFIED CONTRACTS..................................................49
NON-QUALIFIED CONTRACTS..............................................49
ANNUITY BENEFIT PAYMENTS...................................................49
PENALTY TAX................................................................49
TAXATION OF DEATH BENEFIT PROCEEDS.........................................49
TRANSFERS, ASSIGNMENTS, OR EXCHANGES OF THE CONTRACT.......................50
QUALIFIED CONTRACTS - GENERAL..............................................50
TEXAS OPTIONAL RETIREMENT PROGRAM..........................................50
INDIVIDUAL RETIREMENT ANNUITIES............................................50
TAX-SHELTERED ANNUITIES....................................................50
PENSION AND PROFIT SHARING PLANS...........................................51
CERTAIN DEFERRED COMPENSATION PLANS........................................51
WITHHOLDING................................................................51
POSSIBLE CHANGES IN TAXATION...............................................51
OTHER TAX CONSEQUENCES.....................................................51
GENERAL....................................................................51
DISTRIBUTION OF THE CONTRACT..................................................52
LEGAL PROCEEDINGS.............................................................52
VOTING RIGHTS.................................................................52
AVAILABLE INFORMATION.........................................................53
STATEMENT OF ADDITIONAL INFORMATION...........................................54
APPENDIX A....................................................................55
QUALIFIED CONTRACTS........................................................55
NON-QUALIFIED CONTRACTS....................................................56
GROUP CONTRACT.............................................................60
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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DEFINITIONS
ACCOUNT(S): The Sub-Account(s) and/or the Fixed Account options.
ACCOUNT VALUE: The aggregate value of the Owner's interest in the Sub-Account(s)
and the Fixed Account options as of the end of any Valuation Period. The value
of the Owner's interest in all Sub-Accounts is the "Variable Account Value," and
the value of the Owner's interest in all Fixed Account options is the "Fixed
Account Value."
ACCUMULATED EARNINGS: The Account Value in excess of Purchase Payments received
by the Company and which have not been returned to the Owner.
ACCUMULATION PERIOD: The period prior to the applicable Commencement Date.
ACCUMULATION UNIT: The unit of measure used to calculate the value of the
Sub-Account(s) prior to the applicable Commencement Date.
ADMINISTRATIVE OFFICE: The home office of the Company or any other place of
business the Company may designate for administration.
AGE: Age as of most recent birthday.
ANNUITANT: A natural person whose life is used to determine the duration of
annuity payments involving life contingencies.
ANNUITY BENEFIT: Periodic payments under a settlement option, which commence on
or after the Annuity Commencement Date.
ANNUITY COMMENCEMENT DATE: The first day of the first Payment Interval for which
an Annuity Benefit payment is to be made under a settlement option.
BENEFICIARY: A person entitled to the Death Benefit under the Contract upon the
death of an Owner. If there is a surviving joint Owner, that person will be
deemed the Beneficiary.
BENEFIT PAYMENT: The Annuity Benefit or Death Benefit payable under a settlement
option. Variable Dollar Benefit payments may vary in amount. Fixed Dollar
Benefit payments remain constant except under certain joint and survivor
settlement options.
BENEFIT PAYMENT PERIOD: The period starting with the Commencement Date during
which Benefit Payments are to be made under the Contract.
BENEFIT UNIT: The unit of measure used to determine the dollar value of any
Variable Dollar Benefit payments after the first Benefit Payment is made by the
Company.
CERTIFICATE: The document issued to a Participant evidencing his or her
participation under a group Contract.
CODE: The Internal Revenue Code of 1986, as amended, and the rules and
regulations issued thereunder.
COMMENCEMENT DATE: The Annuity Commencement Date if an Annuity Benefit is
payable under the Contract, or the Death Benefit Commencement Date if a Death
Benefit is payable under the Contract.
CONTRACT ANNIVERSARY: An annual anniversary of the Contract Effective Date.
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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CONTRACT EFFECTIVE DATE: The date shown on the Contract Specifications page.
CONTRACT YEAR: Any period of twelve months commencing on the Contract Effective
Date and on each Contract Anniversary thereafter.
DEATH BENEFIT: The benefit described in the Benefit on Death of Owner Section of
the Contract.
DEATH BENEFIT COMMENCEMENT DATE: The first day of the first Payment Interval for
which a Death Benefit payment is to be made under a settlement option, or the
date a Death Benefit is to be paid in a lump sum.
DEATH BENEFIT VALUATION DATE: The date that Due Proof of Death has been received
by the Company and the earlier to occur of:
(1) the Company's receipt of a Written Request with instructions as to the
form of Death Benefit; or
(2) the Death Benefit Commencement Date.
DUE PROOF OF DEATH: Any of the following: (1) a certified copy of a death
certificate; (2) a certified copy of a decree of a court of competent
jurisdiction as to the finding of death; or (3) any other proof satisfactory to
the Company.
FUND: A management investment company, or a portfolio thereof, registered under
the Investment Company Act of 1940, as amended, in which a Sub-Account of the
Separate Account invests.
NET ASSET VALUE: The amount computed by an investment company, no less
frequently than each Valuation Period, as the price at which its shares or
units, as the case may be, are redeemed in accordance with the rules of the
Securities and Exchange Commission.
OWNER: The person(s) identified as such on the Contract Specifications page.
PARTICIPANT: A person who participates in the benefits of a group Contract.
PAYMENT INTERVAL: A monthly, quarterly, annual or other regular interval during
the Benefit Payment Period.
PERSON CONTROLLING PAYMENTS:
NON-QUALIFIED CONTRACTS: The "Person Controlling Payments" means the
following, as the case may be:
(1) with respect to Annuity Benefit payments,
(a) the Owner, if the Owner has the right to change the payee; or
(b) in all other cases, the payee; and
(2) with respect to Death Benefit payments,
(a) the Beneficiary; or
(b) if the Beneficiary is deceased, the payee.
QUALIFIED CONTRACTS: The "Person Controlling Payments" means the following,
as the case may be:
(1) with respect to Annuity Benefit payments, the Owner; and
(2) with respect to Death Benefit payments,
(a) the Beneficiary; or
(b) if the Beneficiary is deceased, the payee.
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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PURCHASE PAYMENT: A contribution amount paid to the Company in consideration for
the Contract, after the deduction of any and all of the following that may
apply:
(1) any fee charged by the person remitting payments for the Owner;
(2) premium taxes; and/or
(3) other taxes.
SEPARATE ACCOUNT: An account, which may be an investment company, which is
established and maintained by the Company pursuant to the laws of the State of
Ohio.
SUB-ACCOUNT: The Separate Account is divided into Sub-Accounts, each of which
invests in the shares of a designated Fund.
SURRENDER VALUE: The amount payable under a Contract if the Contract is
surrendered.
VALUATION PERIOD: The period commencing at the close of regular trading on the
New York Stock Exchange on any Valuation Date and ending at the close of trading
on the next succeeding Valuation Date. "Valuation Date" means each day on which
the New York Stock Exchange is open for business.
WRITTEN REQUEST: Information provided, or a request made, that is complete and
satisfactory to the Company, that is sent to the Company on the Company's form
or in a manner satisfactory to the Company, which may, at the Company's
discretion, be telephonic, and that is received by the Company at the
Administrative Office. A Written Request is subject to any payment made or any
action the Company takes before the Written Request is acknowledged by the
Company. The Company will deem a Written Request a standing order which may be
modified or revoked only by a subsequent Written Request, when permitted by the
terms of the Contract. An Owner may be required to return his or her Contract to
the Company in connection with a Written Request.
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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HIGHLIGHTS
THE CONTRACT
The Commodore Navigator(SERVICEMARK) Contracts described in this
Prospectus are available for use in connection with certain
non-tax-qualified annuity purchases, including Contracts purchased by an
employer in connection with a Code Section 457 or non-qualified deferred
compensation plan, and are also available for arrangements that qualify
for favorable tax treatment under Section 401, 403 or 408 of the Code.
Participation in a group Contract will be evidenced by the issuance of a
participant Certificate describing the Participant's interest under the
group Contract. Participation in an individual Contract will be evidenced
by the issuance of an individual Contract. References to "Contract"
throughout this Prospectus shall also mean Certificates under group
Contracts except where noted. For such group Contracts, references to
"Owner" shall also mean the Participant unless the Contract and
Certificate otherwise require the Owner to exercise Contractual rights.
Unless changed by endorsement, or otherwise noted herein, group Contract
provisions are identical to Qualified Contract provisions described in
this Prospectus.
The Owner is the person or persons designated as such on the Contract
Specifications page. Subject to the terms of the Contract and unless the
Owner dies before the Annuity Commencement Date, the Account Value, after
certain adjustments, will be applied to the payment of an Annuity Benefit
under the Settlement Option elected by the Owner.
The Account Value will depend on the investment experience of the amounts
allocated to each Sub-Account of the Separate Account elected by the Owner
and/or interest credited on amounts allocated to the Fixed Account
option(s) elected. All Annuity Benefits and other values provided under
the Contract when based on the investment experience of the Separate
Account are variable and are not guaranteed as to dollar amount.
Therefore, the Owner bears the entire investment risk with respect to
amounts allocated to the Separate Account under the Contract.
THERE IS NO GUARANTEED OR MINIMUM SURRENDER VALUE WITH RESPECT TO AMOUNTS
ALLOCATED TO THE SEPARATE ACCOUNT, SO THE PROCEEDS OF A SURRENDER COULD BE
LESS THAN THE TOTAL PURCHASE PAYMENTS.
THE SEPARATE ACCOUNT
Annuity Investors(REGISTERED) Variable Account B is a Separate Account of
the Company that is divided into Sub-Accounts. (See "The Separate
Account," page 27.) Each Sub-Account uses its assets to purchase, at their
Net Asset Value, shares of a Fund. The Funds available for investment in
the Separate Account under the Contract are as follows: (1) Janus Aspen
Series Aggressive Growth Portfolio; (2) Janus Aspen Series Worldwide
Growth Portfolio; (3) Janus Aspen Series Balanced Portfolio; (4) Janus
Aspen Series Growth Portfolio; (5) Janus Aspen Series International Growth
Portfolio; (6) Dreyfus Variable Investment Fund-Capital Appreciation
Portfolio; (7) Dreyfus Variable Investment Fund-Money Market Portfolio;
(8) Dreyfus Variable Investment Fund-Growth and Income Portfolio; (9)
Dreyfus Variable Investment Fund-Small Cap Portfolio; (10) The Dreyfus
Socially Responsible Growth Fund, Inc.; (11) Dreyfus Stock Index Fund;
(12) Strong Opportunity Fund II, Inc.; (13) Strong Variable Insurance
Funds, Inc.-Strong Growth Fund II; (14) INVESCO VIF-Industrial Income
Fund; (15) INVESCO VIF-Total Return Fund; (16) INVESCO VIF-High Yield
Fund; (17) Morgan Stanley Universal Funds Inc.-U.S. Real Estate Portfolio;
(18) Morgan Stanley Universal Funds Inc.-Value Portfolio; (19) Morgan
Stanley Universal Funds Inc.-Emerging Markets Equity Portfolio; (20)
Morgan Stanley Universal Funds Inc.-Fixed Income Portfolio; (21) Morgan
Stanley Universal Funds Inc.-Mid Cap Value Portfolio; (22) PBHG Insurance
Series Fund, Inc.-PBHG Growth II Portfolio; (23) PBHG Insurance Series
Fund, Inc.-PBHG Large Cap Growth Portfolio; and (24) PBHG Insurance Series
Fund, Inc.-PBHG Technology & Communications Portfolio.
- --------------------------------------------------------------------------------
Page 10
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
Each Fund pays its investment adviser and other service providers certain
fees charged against the assets of the Fund. The Account Value of a
Contract and the amount of any Annuity Benefits will vary to reflect the
investment performance of all the Sub-Accounts elected by the Owner and
the deduction of the charges described under "CHARGES AND DEDUCTIONS,"
page 38. For more information about the Funds, see "THE FUNDS," page 21
and the accompanying Funds' prospectuses.
THE FIXED ACCOUNT
The Fixed Account is an account within the Company's general account.
There are currently five Fixed Account options available under the Fixed
Account: a Fixed Accumulation Account option and four fixed term options.
Purchase Payments allocated or amounts transferred to the Fixed Account
options are credited with interest at a rate declared by the Company's
Board of Directors, but in any event at a minimum guaranteed annual rate
of 3.0% corresponding to a daily rate of 0.0081%. (See "THE FIXED
ACCOUNT," page 28.)
TRANSFERS BEFORE THE ANNUITY COMMENCEMENT DATE
Prior to the Annuity Commencement Date, the Owner may transfer values
between the Separate Account and the Fixed Account, within the Fixed
Account and between the Sub-Accounts, by Written Request to the Company or
by telephone in accordance with the Company's telephone transfer rules.
(See "TRANSFERS," page 32.)
The Company currently charges a fee of $25 for each transfer ("Transfer
Fee") in excess of twelve made during the same Contract Year. (See
"TRANSFERS," page 32.)
SURRENDERS
All or part of the Surrender Value of a Contract may be surrendered by the
Owner on or before the Annuity Commencement Date by Written Request to the
Company. Purchase Payments surrendered may be subject to a Contingent
Deferred Sales Charge ("CDSC") depending upon how long the Purchase
Payments to be withdrawn have been held under the Contract. Amounts
withdrawn also may be subject to a premium tax or similar tax, depending
upon the jurisdiction in which the Owner lives. Surrenders may be subject
to a 10% premature distribution penalty tax if made before the Owner
reaches age 59 1/2. Surrenders may further be subject to federal, state or
local income taxes or significant tax law restrictions. (See "FEDERAL TAX
MATTERS," page 48.)
CONTINGENT DEFERRED SALES CHARGE ("CDSC")
A CDSC may be imposed on amounts surrendered. The maximum CDSC is 7% for
each Purchase Payment. That percentage decreases by 1% annually to 0%
after year seven.
The CDSC may be reduced or waived under certain circumstances. (See
"CHARGES AND DEDUCTIONS," page 38.)
OTHER CHARGES AND DEDUCTIONS
The Company deducts a daily charge ("Mortality and Expense Risk Charge")
at an effective annual rate of 1.25% of the daily Net Asset Value of each
Sub-Account. In connection with certain Contracts where the Company incurs
reduced sales and servicing expenses, such as Contracts offered to active
employees of the Company or any of its subsidiaries and/or affiliates, the
Company may offer a Contract with a Mortality and Expense Risk Charge at
an effective annual rate of 0.95% of the daily Net Asset Value of each
- --------------------------------------------------------------------------------
Page 11
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
Sub-Account. The Mortality and Expense Risk Charge is not assessed against
Fixed Account options. (See "CHARGES AND DEDUCTIONS," page 38.)
The Company also deducts a Contract maintenance charge each year
("Contract Maintenance Fee"). This Fee is currently $30 and is deducted
from an Owner's Variable Account Value on each Contract Anniversary. The
Contract Maintenance Fee may be waived under certain circumstances. This
Contract Maintenance Fee is not assessed against Fixed Account options.
(See "CHARGES AND DEDUCTIONS," page 38.)
Additionally, the Company deducts a charge to help cover the costs of
administering the Contracts and the Separate Account ("Administration
Charge"). The Administration Charge is computed at an effective annual
rate of 0.15% of the daily Net Asset Value of each Sub-Account. This
Administration Charge is not assessed against Fixed Account options.
Charges for premium taxes may be imposed in some jurisdictions. Depending
on the applicability of such taxes, the charges may be deducted from
Purchase Payments, from surrenders, and from other payments made under the
Contract. (See "CHARGES AND DEDUCTIONS," page 38.)
ANNUITY BENEFITS
Annuity Benefits are paid on a fixed or variable basis, or a combination
of both. (See "Benefit Payments," page 42.)
DEATH BENEFIT
The Contract provides for the payment of a Death Benefit if the Owner dies
prior to the Annuity Commencement Date. The Death Benefit may be paid in
one lump sum or pursuant to any available settlement option offered under
the Contract. (See "DEATH BENEFIT," page 37.)
FEDERAL INCOME TAX CONSEQUENCES
An Owner generally should not be taxed on increases in the Account Value
until a distribution under the Contract occurs (e.g., a surrender or
Annuity Benefit) or is deemed to occur (e.g., a loan in default).
Generally, a portion (up to 100%) of any distribution or deemed
distribution is taxable as ordinary income. The taxable portion of
distributions is generally subject to income tax withholding unless the
recipient elects otherwise. In addition, a 10% federal penalty tax may
apply to certain distributions. (See "FEDERAL TAX MATTERS," page 48.)
RIGHT TO CANCEL (INDIVIDUAL CONTRACTS ONLY, UNLESS OTHERWISE REQUIRED BY STATE
LAW)
An Owner may cancel the Contract by giving the Company written notice of
cancellation and returning the Contract before midnight of the twentieth
day (or longer if required by state law) after receipt. (See "Right to
Cancel," page 29.)
CONTACTING THE COMPANY
All Written Requests and any questions or inquiries should be directed to
the Company's Administrative Office, P.O. Box 5423, Cincinnati, Ohio
45201-5423, (800) 789-6771. All inquiries should include the Contract
Number and the Owner's name.
- --------------------------------------------------------------------------------
Page 12
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
NOTE: THE FOREGOING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED
INFORMATION IN THE REMAINDER OF THIS PROSPECTUS AND IN THE ACCOMPANYING
PROSPECTUSES FOR THE FUNDS WHICH SHOULD BE REFERRED TO FOR MORE DETAILED
INFORMATION. THE REQUIREMENTS OF AN ENDORSEMENT TO THE CONTRACT OR
LIMITATIONS OR PENALTIES IMPOSED BY THE CODE MAY IMPOSE ADDITIONAL LIMITS
OR RESTRICTIONS ON PURCHASE PAYMENTS, SURRENDERS, DISTRIBUTIONS, BENEFITS,
OR OTHER PROVISIONS OF THE CONTRACT. THIS PROSPECTUS DOES NOT DESCRIBE
SUCH LIMITATIONS OR RESTRICTIONS.
(SEE "FEDERAL TAX MATTERS," PAGE 48.)
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Page 13
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
SUMMARY OF EXPENSES
OWNER TRANSACTION EXPENSES
Sales Load Imposed on Purchase Payments NONE
Contingent Deferred Sales Charge (as a percentage of Purchase
Payments surrendered)
Contract Years elapsed since receipt of Purchase Payment
less than 1 year 7%
1 year but less than 2 years 6%
2 years but less than 3 years 5%
3 years but less than 4 years 4%
4 years but less than 5 years 3%
5 years but less than 6 years 2%
6 years but less than 7 years 1%
7 years or more 0%
Surrender Fees NONE
Transfer Fee(1) $25
Annual Contract Maintenance Fee(2) $30
- --------------------
1/ The first twelve transfers in a Contract Year are free. Thereafter, a $25 fee
will be charged on each subsequent transfer.
2/ The Company will waive the Contract Maintenance Fee if the Account Value is
equal to or greater than $40,000 on the date the Contract Maintenance Fee would
otherwise be assessed.
- --------------------------------------------------------------------------------
Page 14
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL EXPENSES
SEPARATE ACCOUNT JANUS A.S. JANUS A.S. JANUS A.S. JANUS JANUS A.S.
ANNUAL EXPENSES(3) AGGRESSIVE WORLDWIDE BALANCED A.S. INTERNATIONAL
(as a percentage of GROWTH GROWTH PORTFOLIO(5) GROWTH GROWTH
average Separate PORTFOLIO(5) PORTFOLIO(5) PORTFOLIO(5) PORTFOLIO(5)
Account assets)
<S> <C> <C> <C> <C> <C>
Mortality and
Expense Risk Charge 1.25% 1.25% 1.25% 1.25% 1.25%
Administration Charge 0.15% 0.15% 0.15% 0.15% 0.15%
Other Fees and
Expenses of the 0.00% 0.00% 0.00% 0.00% 0.00%
Separate Account
Total Separate
Account Annual 1.40% 1.40% 1.40% 1.40% 1.40%
Expenses
FUND ANNUAL EXPENSES(4)
(as a percentage of Fund average net assets after fee waiver and/or expense
reimbursement, if any)
Management Fees 0.72% 0.66% 0.79% 0.65% 0.05%
Other Expenses 0.04% 0.14% 0.15% 0.04% 1.21%
Total Fund Annual
Expenses 0.76% 0.80% 0.94% 0.69% 1.26%
</TABLE>
<TABLE>
<CAPTION>
SEPARATE ACCOUNT DREYFUS DREYFUS DREYFUS DREYFUS THE DREYFUS DREYFUS
ANNUAL EXPENSES(3)(as a V.I.F. V.I.F. V.I.F. V.I.F. SOCIALLY STOCK
percentage of average CAPITAL MONEY GROWTH & SMALL CAP RESPONSIBLE INDEX
Separate Account APPRECIATION MARKET INCOME PORTFOLIO GROWTH FUND
assets) PORTFOLIO PORTFOLIO PORTFOLIO FUND, INC.(6)
<S> <C> <C> <C> <C> <C> <C>
Mortality and Expense
Risk Charge 1.25% 1.25% 1.25% 1.25% 1.25% 1.25%
Administration Charge 0.15% 0.15% 0.15% 0.15% 0.15% 0.15%
Other Fees and
Expenses of the 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Separate Account
Total Separate Account
Annual Expenses 1.40% 1.40% 1.40% 1.40% 1.40% 1.40%
FUND ANNUAL EXPENSES(4)
(as a percentage of Fund average net assets after fee waiver and/or expense
reimbursement, if any)
Management Fees 0.75% 0.50% 0.75% 0.75% 0.72% 0.245%
Other Expenses 0.09% 0.12% 0.08% 0.04% 0.24% 0.055%
Total Fund Annual
Expenses 0.84% 0.62% 0.83% 0.79% 0.96% 0.30%
</TABLE>
- --------------------------------------------------------------------------------
Page 15
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT STRONG OPPORTUNITY STRONG V.I.F.-
ANNUAL EXPENSES(3) FUND II, INC. STRONG GROWTH
(as a percentage FUND II
of average
Separate Account
assets)
---------------------------------------------------------------
Mortality and
Expense Risk Charge 1.25% 1.25%
Administration 0.15% 0.15%
Charge
Other Fees and
Expenses of the
Separate Account 0.00% 0.00%
Total Separate
Account Annual
Expenses 1.40% 1.40%
FUND ANNUAL EXPENSES(7)
(as a percentage of Fund average net assets after fee waiver
and/or expense reimbursement, if any)
Management Fees 1.00% 1.00%
Other Expenses 0.17% 1.00%
Total Fund Annual
Expenses 1.17% 2.00%
SEPARATE ACCOUNT INVESCO VIF- INVESCO VIF- INVESCO VIF-
ANNUAL EXPENSES(3) INDUSTRIAL TOTAL HIGH YIELD
(as a percentage INCOME FUND(8)(9) RETURN Fund(8)(11)
of average Fund(8)(10)
Separate Account
assets)
--------------------------------------------------------------
Mortality and
Expense Risk
Charge 1.25% 1.25% 1.25%
Administration
Charge 0.15% 0.15% 0.15%
Other Fees and
Expenses of the
Separate Account 0.00% 0.00% 0.00%
Total Separate
Account Annual
Expenses 1.40% 1.40% 1.40%
FUND ANNUAL EXPENSES(4)
(as a percentage of Fund average net assets after fee waiver
and/or expense reimbursement, if any)
Management Fees 0.75% 0.75% 0.60%
Other Expenses 0.20% 0.19% 0.27%
Total Fund
Annual Expenses 0.95% 0.94% 0.87%
- --------------------------------------------------------------------------------
Page 16
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT MORGAN STANLEY MORGAN STANLEY
ANNUAL EXPENSES(3) UNIVERSAL FUNDS UNIVERSAL
as a percentage INC.-MID CAP VALUE FUNDS
of average PORTFOLIO INC.-U.S. REAL
Separate Account ESTATE
assets) PORTFOLIO
--------------------------------------------------------
Mortality and
Expense Risk 1.25% 1.25%
Charge
Administration 0.15% 0.15%
Charge
Other Fees and
Expenses of the
Separate Account 0.00% 0.00%
Total Separate
Account Annual
Expenses 1.40% 1.40%
FUND ANNUAL EXPENSES(12)
(as a percentage of Fund average net assets after fee
waiver and/or expense reimbursement, if any)
Management Fees 0.75% 0.80%
Other Expenses 0.30% 0.30%
Total Fund
Annual Expenses 1.05% 1.10%
SEPARATE ACCOUNT ANNUAL MORGAN STANLEY MORGAN STANLEY MORGAN STANLEY
EXPENSES(3) (as a UNIVERSAL UNIVERSAL UNIVERSAL
percentage of average FUNDS INC.- FUNDS FUNDS INC.-
Separate Account assets) VALUE PORTFOLIO INC.-EMERGING FIXED INCOME
MARKETS EQUITY PORTFOLIO
PORTFOLIO
- ------------------------------------------------------------------------------
Mortality and Expense
Risk Charge 1.25% 1.25% 1.25%
Administration Charge 0.15% 0.15% 0.15%
Other Fees and Expenses
of the Separate Account 0.00% 0.00% 0.00%
Total Separate Account
Annual Expenses 1.40% 1.40% 1.40%
FUND ANNUAL EXPENSES12
(as a percentage of Fund average net assets after fee waiver and/or expense
reimbursement, if any)
Management Fees 0.55% 1.25% 0.40%
Other Expenses 0.30% 0.50% 0.30%
Total Fund Annual
Expenses 0.85% 1.75% 0.70%
- --------------------------------------------------------------------------------
Page 17
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT ANNUAL PBHG INSURANCE PBHG INSURANCE PBHG INSURANCE
EXPENSES(3) (as a SERIES FUND, SERIES FUND, SERIES FUND,
percentage of average INC.-PBHG GROWTH INC.-PBHG LARGE INC.-PBHG
Separate Account assets) II PORTFOLIO(13) CAP GROWTH TECHNOLOGY &
PORTFOLIO(13) COMMUNICATIONS
PORTFOLIO(13)
- ------------------------------------------------------------------------------
Mortality and Expense
Risk Charge 1.25% 1.25% 1.25%
Administration Charge 0.15% 0.15% 0.15%
Other Fees and Expenses
of the Separate Account 0.00% 0.00% 0.00%
Total Separate Account
Annual Expenses 1.40% 1.40% 1.40%
FUND ANNUAL EXPENSES
(as a percentage of Fund average net assets after fee waiver and/or expense
reimbursement, if any)
Management Fees 0.85% 0.72% 0.61%
Other Expenses 0.30% 0.38% 0.59%
Total Fund Annual
Expenses 1.15% 1.10% 1.20%
The purpose of this table is to assist an Owner in understanding the various
costs and expenses that the Owner will bear directly and indirectly with respect
to investment in the Separate Account. The table reflects expenses of each
Sub-Account as well as of the Fund in which the Sub-Account invests. See
"CHARGES AND DEDUCTIONS," page 38 of this Prospectus and the accompanying
prospectus for the applicable Fund for a more complete description of the
various costs and expenses. Information regarding each underlying Fund has been
provided to the Company by each Fund, and the Company has not independently
verified such information. In addition to the expenses listed above, premium
taxes may be applicable. The dollar figures should not be considered a
representation of past or future expenses. Actual expenses may be greater or
less than those shown. The $30 Contract Maintenance Charge is included in the
Examples as $1.
__________________
3/ Annual expenses are anticipated to be the same for each Sub-Account. These
expenses are based on estimated amounts for the current fiscal year.
4/ Data for each Fund are for its fiscal year ended December 31, 1996. Actual
expenses in future years may be higher or lower.
5/ The fees and expenses in the table above are based on gross expenses before
expense offset arrangements for the fiscal year ended December 31, 1996. The
information for each Portfolio is net of fee waivers or reduction from Janus
Corporation. Fee reductions for the Aggressive Growth, Worldwide Growth and
Balanced, Growth and International Growth Portfolios reduce the management fee
to the level of the corresponding Janus retail fund. Other waivers, if
applicable, are first applied against the management fee and then against other
expenses. Without such waivers or reductions, the Management Fee, Other Expenses
and Total Operating Expenses would have been 1.00%, 1.21% and 2.21%,
respectively for the International Growth Portfolio; 0.79%, 0.04% and 0.83%,
respectively for the Growth Portfolio; 0.79%, 0.04%, and 0.83%, respectively for
Aggressive Growth Portfolio; 0.77%, 0.14% and 0.91%, respectively for Worldwide
Growth Portfolio and 0.92%, 0.15% and 1.07%, respectively for the Balanced
Portfolio. Janus Corporation may modify or terminate the waivers or reductions
at any time upon at least 90 days' notice to the Trustees.
6/ Fund expenses are net of management fees and other expenses waived and/or
reimbursed. In the absence of such fee waivers and/or expense reimbursements,
Management Fees, Other Expenses and Total Portfolio Expenses would have been as
follows for the fiscal year ended December 31, 1996: 0.75%, 0.24% and 0.99%,
respectively, for The Dreyfus Socially Responsible Growth Fund, Inc.
7/ There were no expense reimbursements applicable for any of these funds, nor
are there currently any expense reimbursement arrangements. With respect to the
Strong Growth Fund II, "Other Expenses" have been estimated because the Fund did
not commence operations until December 31, 1996. This estimate is based on the
projected growth of the Fund during its first year of operations. Please refer
to the Fund's unaudited financial highlights in its prospectus for the Fund's
- --------------------------------------------------------------------------------
Page 18
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
ratio of expenses to average net assets, which is annualized, based on the
Fund's first three months of operations.
8/ In accordance with a Sub-Advisory Agreement between INVESCO Funds Group, Inc.
("IFG") and INVESCO Trust Company ("ITC"), a wholly owned subsidiary of IFG,
investment decisions of High Yield and Industrial Income Funds are made by ITC.
A separate Sub-Advisory Agreement between IFG and INVESCO Capital Management,
Inc. ("ICM"), an affiliate of IFG, provides that investment decisions of Total
Return Fund are made by ICM. Fees for such sub-advisory services are paid by
IFG.
9/ Various expenses of the Portfolio were voluntarily absorbed by IFG for the
year ended December 31, 1996. If such expenses had not been voluntarily
absorbed, ratio of expenses to average net assets would have been 1.19%, and
ratio of net investment income to average net assets would have been 2.63%.
Expense ratio of 0.95% is based on Total Expenses of the Portfolio, less
Expenses Absorbed by Investment Adviser, which is before any expense offset
arrangements.
10/ Various expenses of the Portfolio were voluntarily absorbed by IFG for the
year ended December 31, 1996. If such expenses had not been voluntarily
absorbed, ratio of expenses to average net assets would have been 1.30% and
ratio of net investment income to average net assets would have been 3.08%.
Expense ratio of 0.94% is based on Total Expenses of the Portfolio, less
Expenses Absorbed by Investment Adviser, which is before any expense offset
arrangement.
11/ Various expenses of the Portfolio were voluntarily absorbed by IFG for the
year ended December 31, 1996. If such expenses had not been voluntarily
absorbed, ratio of expenses to average net assets would have been 1.32% and
ratio of net investment income to average net assets would have been 8.74%.
Expense ratio of 0.87% is based on Total Expenses of the Portfolio, less
Expenses Absorbed by Investment Adviser, which is before any expense offset
arrangements.
12/ Morgan Stanley Asset Management Inc. and Miller Anderson & Sherrerd, LLP
have agreed to a reduction in their management fees and to reimburse the
Portfolios for which they act as investment adviser if such fees would cause
"Total Fund Annual Expenses" to exceed the amounts set forth in the tables
above. The only Portfolio of Morgan Stanley Universal Funds that was operational
on December 31, 1996 is the Emerging Markets Portfolio, with respect to which
Morgan Stanley Asset Management Inc. has agreed to a reduction in its management
fee and to reimburse the Portfolio if such fees would cause "Total Fund Annual
Expenses" to exceed 1.75% of average daily net assets. Absent such reductions,
it is estimated that annualized "Management Fees" and "Total Fund Annual
Expenses" for the Emerging Markets Equity Portfolio would have been 1.25% and
6.17%, respectively for the period October 1, 1996 (commencement of the
Portfolio's operations) through December 31, 1996. "Other Expenses" for the
MidCap Value Portfolio, U.S. Real Estate Portfolio, Value Portfolio and Fixed
Income Portfolio are estimated.
13/ The Adviser has voluntarily agreed to waive or limit advisory fees or assume
Other Expenses of the Portfolios in order to limit total expenses to not more
than: 1.20% of the average daily net assets of the PBHG Insurance Series Fund,
Inc.-PBHG Growth II Portfolio, and PBHG Insurance Series Fund, Inc.-PBHG
Technology & Communications Portfolio through December 31, 1997; and 1.10% of
the PBHG Insurance Series Fund, Inc.-PBHG Large Cap Growth Portfolio. Such
waiver of advisory fees is subject to a possible reimbursement by the Portfolio
in future years if such reimbursement can be achieved within the foregoing
annual expense limits. Absent such fee waiver/expense reimbursements, the
advisory fees and estimated Total Operating Expenses for the PBHG Insurance
Series Fund, Inc.-PBHG Technology & Communications Portfolio would be 0.85% and
1.44%; for the PBHG Insurance Series Fund, Inc.-PBHG Large Cap Growth Portfolio
would be 0.75% and 1.13%. Given the projected asset size of the Growth II
Portfolio, it is not anticipated that a fee waiver or expense reimbursement will
be necessary with respect to that Portfolio.
- --------------------------------------------------------------------------------
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
EXAMPLES(14)
If the Owner surrenders his or her Contract at the end of the applicable time
period, the following expenses will be charged on a $1,000 investment, assuming
a 5% annual return on assets:
SUB-ACCOUNT 1 YEAR 3 YEARS
- -------------------------------------------------------------------------------
Janus A.S. Aggressive Growth Portfolio $ 93 $125
Janus A.S. Worldwide Growth Portfolio $ 94 $127
Janus A.S. Balanced Portfolio $ 95 $131
Janus A.S. Growth Portfolio $ 93 $123
Janus A.S. International Growth Portfolio $ 98 $141
Dreyfus V.I.F. Capital Appreciation Portfolio $ 94 $128
Dreyfus V.I.F. Money Market Portfolio $ 92 $121
Dreyfus V.I.F. Growth and Income Portfolio $ 94 $128
Dreyfus V.I.F. Small Cap Portfolio $ 94 $126
The Dreyfus Socially Responsible Growth Fund, Inc. $ 95 $132
Dreyfus Stock Index Fund $ 89 $110
Strong Opportunity Fund II, Inc. $ 97 $138
Strong Variable Insurance Funds, Inc.-Strong Growth Fund II $106 $164
INVESCO VIF-Industrial Income Fund $ 95 $129
INVESCO VIF-Total Return Fund $ 95 $129
INVESCO VIF-High Yield Fund $ 94 $127
Morgan Stanley Universal Funds Inc.-Mid-Cap Value Portfolio $ 96 $135
Morgan Stanley Universal Funds Inc.-U.S. Real Estate $ 97 $136
Portfolio
Morgan Stanley Universal Funds Inc.-Value Portfolio $ 94 $128
Morgan Stanley Universal Funds Inc.-Emerging Markets $103 $157
Equity Portfolio
Morgan Stanley Universal Funds Inc.-Fixed Income Portfolio $ 93 $123
PBHG Insurance Series Fund, Inc.-PBHG Growth II Portfolio $ 97 $138
PBHG Insurance Series Fund, Inc.-PBHG Large Cap Growth $ 97 $136
Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Technology & $ 98 $139
Communications Portfolio
- ------------------------
14/ The examples assume the reinvestment of all dividends and distributions, no
transfers among Sub-Accounts or between Accounts and a 5% annual rate of return
as mandated by Securities and Exchange Commission regulations. Annual Contract
Maintenance Fees are based on an estimated average Account Value for the current
fiscal year.
- --------------------------------------------------------------------------------
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
If the Owner does not surrender his or her Contract, or if it is annuitized, the
following expenses would be charged on a $1,000 investment at the end of the
applicable time period, assuming a 5% annual return on assets:
SUB-ACCOUNT 1 YEAR 3 YEARS
Janus A.S. Aggressive Growth Portfolio $ 23 $ 75
Janus Worldwide Growth Portfolio $ 24 $ 77
Janus A.S. Balanced Portfolio $ 25 $ 81
Janus A.S. Growth Portfolio $ 23 $ 73
Janus A.S. International Growth Portfolio $ 28 $ 91
Dreyfus V.I.F. Capital Appreciation Portfolio $ 24 $ 78
Dreyfus V.I.F. Money Market Portfolio $ 22 $ 71
Dreyfus V.I.F. Growth and Income Portfolio $ 24 $ 78
Dreyfus V.I.F. Small Cap Portfolio $ 24 $ 76
The Dreyfus Socially Responsible Growth Fund, Inc. $ 25 $ 82
Dreyfus Stock Index Fund $ 19 $ 60
Strong Opportunity Fund II, Inc. $ 27 $ 88
Strong Variable Insurance Funds, Inc.-Strong Growth $ 36 $114
Fund II
INVESCO VIF-Industrial Income Fund $ 25 $ 79
INVESCO VIF-Total Return Fund $ 25 $ 79
INVESCO VIF-High Yield Fund $ 24 $ 77
Morgan Stanley Universal Funds Inc.-Mid-Cap Value $ 26 $ 85
Portfolio
Morgan Stanley Universal Funds Inc.-U.S. Real Estate $ 27 $ 86
Portfolio
Morgan Stanley Universal Funds Inc.-Value Portfolio $ 24 $ 78
Morgan Stanley Universal Funds Inc.-Emerging Markets $ 33 $107
Equity Portfolio
Morgan Stanley Universal Funds Inc.-Fixed Income $ 23 $ 73
Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Growth II $ 27 $ 88
Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Large Cap Growth $ 27 $ 86
Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Technology & $ 28 $ 89
Communications Portfolio
The examples should not be considered a representation of past or future
expenses or annual rates of return of any Fund. Actual expenses and annual rates
of return may be more or less than those assumed for the purpose of the
examples.
The fee table and examples do not include charges to the Owner for premium
taxes.
FINANCIAL STATEMENTS FOR THE COMPANY
The financial statements and report of independent public accountants for the
Company are contained in the Statement of Additional Information. Because the
Contracts registered by this Prospectus had not yet been issued as of the date
of this Prospectus, no financial information for the Separate Account is
provided.
THE FUNDS
The Separate Account currently has twenty-four Funds that are available for
investment under the Contract. Each Fund has separate investment objectives and
policies. As a result, each Fund operates as a separate investment portfolio and
the investment performance of one Fund has no effect on the investment
performance of any other Fund. There is no assurance that any of these Funds
will achieve their stated objectives. The Securities and Exchange Commission
does not supervise the management or the investment practices and/or policies of
any of the Funds.
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The Separate Account invests exclusively in shares of the Funds listed below
(followed by a brief overview of each Fund's investment objective(s) and
policies):
JANUS ASPEN SERIES:
AGGRESSIVE GROWTH PORTFOLIO. A nondiversified portfolio that seeks
long-term growth of capital by investing primarily in common stocks with
an emphasis on securities issued by medium-sized companies.
WORLDWIDE GROWTH PORTFOLIO. A diversified portfolio that seeks long-term
growth of capital by investing primarily in common stocks of foreign and
domestic issuers.
BALANCED PORTFOLIO. A diversified portfolio that seeks long-term growth of
capital balanced by current income. The Fund normally invests 40-60% of
its assets in securities selected primarily for their growth potential and
40-60% of its assets in securities selected primarily for their income
potential.
GROWTH PORTFOLIO. A diversified portfolio that seeks long-term growth of
capital by investing primarily in common stocks, with an emphasis on
companies with larger market capitalizations.
INTERNATIONAL GROWTH PORTFOLIO. A diversified portfolio that seeks
long-term growth of capital by investing primarily in common stocks of
foreign issuers.
Janus Corporation serves as the investment adviser to each of these
Portfolios.
DREYFUS FUNDS:
CAPITAL APPRECIATION PORTFOLIO (Dreyfus Variable Investment Fund). The
Capital Appreciation Portfolio's primary investment objective is to
provide long-term capital growth consistent with the preservation of
capital. Current income is a secondary goal. It seeks to achieve its goals
by investing principally in common stocks of domestic and foreign issuers,
common stocks with warrants attached and debt securities of foreign
governments.
The Dreyfus Corporation serves as the investment adviser and Fayez Sarofim
& Co. serves as the sub-investment adviser to this Portfolio.
MONEY MARKET PORTFOLIO (Dreyfus Variable Investment Fund). The Money
Market Portfolio's goal is to provide as high a level of current income as
is consistent with the preservation of capital and the maintenance of
liquidity. This Portfolio invests in short-term money market instruments.
An investment in the Money Market Portfolio is neither insured nor
guaranteed by the U.S. Government. There can be no assurance that the
Money Market Portfolio will be able to maintain a stable net asset value
of $1.00 per share.
GROWTH AND INCOME PORTFOLIO (Dreyfus Variable Investment Fund). The Growth
and Income Portfolio's goal is to provide long-term capital growth,
current income and growth of income, consistent with reasonable investment
risk. This Portfolio invests primarily in equity securities, debt
securities and money market instruments of domestic and foreign issuers.
SMALL CAP PORTFOLIO (Dreyfus Variable Investment Fund). The Small Cap
Portfolio's goal is to maximize capital appreciation. This Portfolio
invests primarily in common stocks of domestic and foreign issuers. This
Portfolio will be particularly alert to companies that The Dreyfus
Corporation considers to be emerging smaller-sized companies which are
believed to be characterized by new or innovative products, services or
processes which should enhance prospects for growth in future earnings.
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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The Dreyfus Corporation serves as investment adviser to the Money Market,
Growth and Income, and Small Cap Portfolios.
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. The Dreyfus Socially
Responsible Growth Fund, Inc.'s primary goal is to provide capital growth.
It seeks to achieve this goal by investing principally in common stocks,
or securities convertible into common stock, of companies which, in the
opinion of the Fund's management, not only meet traditional investment
standards, but also show evidence that they conduct their business in a
manner that contributes to the enhancement of the quality of life in
America. Current income is a secondary goal.
The Dreyfus Corporation serves as the investment adviser and NCM Capital
Management Group, Inc. serves as the sub-investment adviser to this Fund.
DREYFUS STOCK INDEX FUND. The Dreyfus Stock Index Fund's investment
objective is to provide investment results that correspond to the price
and yield performance of publicly traded common stocks in the aggregate,
as represented by the Standard & Poor's 500 Composite Stock Price Index.
The Stock Index Fund is neither sponsored by nor affiliated with Standard
& Poor's Corporation.
The Dreyfus Corporation acts as the Fund manager and Mellon Equity
Associates, an affiliate of Dreyfus, is the index manager.
STRONG OPPORTUNITY FUND II, INC.
STRONG OPPORTUNITY FUND II. The investment objective of the Strong
Opportunity Fund II is to seek capital growth. It currently emphasizes
medium-sized companies that the Fund's adviser believes are
under-researched and attractively valued.
Strong Capital Management, Inc. serves as the investment adviser to this
Fund.
STRONG VARIABLE INSURANCE FUNDS, INC.
STRONG GROWTH FUND II. The investment objective of the Strong Growth Fund
II is to seek capital growth. It invests primarily in equity securities
that the Fund's adviser believes have above-average growth prospects.
Strong Capital Management, Inc. serves as the investment adviser to this
Fund.
INVESCO VARIABLE INVESTMENT FUNDS, INC.:
INDUSTRIAL INCOME FUND. The investment objective of the Industrial Income
Fund is to seek the best possible current income while following sound
investment practices. Capital growth potential is an additional, but
secondary, consideration in the selection of portfolio securities.
TOTAL RETURN FUND. The investment objective of the Total Return Fund is to
seek a high total return on investment through capital appreciation and
current income. The Total Return Fund seeks to accomplish its objective by
investing in a combination of equity securities (consisting of common
stocks and, to a lesser degree, securities convertible into common stock)
and fixed income securities.
HIGH YIELD FUND. The investment objective of the High Yield Fund is to
seek a high level of current income by investing substantially all of its
assets in lower rated bonds and other debt securities and in preferred
stock. The Fund pursues its investment objective through investment in a
variety of long-term, intermediate-term, and short-term bonds. Potential
capital appreciation is a factor in the selection of investments, but is
secondary to the Fund's primary objective. For further discussion of the
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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risks associated with investment in lower rated bonds, please see the
attached INVESCO Variable Investment Funds, Inc. prospectus.
INVESCO Funds Group, Inc. serves as the investment adviser to each of
these Funds.
MORGAN STANLEY UNIVERSAL FUNDS INC.:
U.S. REAL ESTATE PORTFOLIO. The investment objective of the U.S. Real
Estate Portfolio is above-average current income and long-term capital
appreciation by investing primarily in equity securities of U.S. and
non-U.S. companies principally engaged in the U.S. real estate industry,
including Real Estate Investment Trusts (REITs).
Morgan Stanley Asset Management Inc. serves as the investment adviser to
this Portfolio.
VALUE PORTFOLIO. The investment objective of the Value Portfolio is to
seek above-average total return over a market cycle of three to five years
by investing primarily in a diversified portfolio of common stocks and
other equity securities deemed by the adviser to be undervalued based on
various measures such as price-earnings ratios and price/book ratios.
Miller Anderson & Sherrerd, LLP (an indirect wholly owned subsidiary of
Morgan Stanley Group Inc.) serves as the investment adviser to this
Portfolio.
EMERGING MARKETS EQUITY PORTFOLIO. The investment objective of the
Emerging Markets Equity Portfolio is long-term capital appreciation by
investing primarily in equity securities of emerging market country
issuers with a focus on those in which the adviser believes the economies
are developing strongly and in which the markets are becoming more
sophisticated.
Morgan Stanley Asset Management Inc. serves as the investment adviser to
this Portfolio.
FIXED INCOME PORTFOLIO. The investment objective of the Fixed Income
Portfolio is to seek above-average total return over a market cycle of
three to five years by investing primarily in a diversified portfolio of
securities issued by the U.S. Government and its Agencies, Corporate
Bonds, Mortgage-Backed Securities, Foreign Bonds, and other Fixed Income
Securities.
Miller Anderson & Sherrerd, LLP (an indirect wholly owned subsidiary of
Morgan Stanley Group Inc.) serves as the investment adviser to this
Portfolio.
MID CAP VALUE PORTFOLIO. The Mid Cap Value Portfolio seeks above-average
total return over a market cycle of three to five years by investing in
common stocks and other equity securities of issuers with equity
capitalizations in the range of the companies represented in the S&P
MidCap 400 Index. Such range is currently $100 million to $8 billion but
the range fluctuates over time with changes in the equity market.
Miller Anderson & Sherrerd, LLP (an indirect wholly owned subsidiary of
Morgan Stanley Group Inc.) serves as the investment adviser to this
Portfolio.
PBHG INSURANCE SERIES FUND, INC.
PBHG GROWTH II PORTFOLIO. The investment objective of the PBHG Insurance
Series Growth II Portfolio is to seek capital appreciation by investing
primarily in common stocks and convertible securities of small and medium
sized growth companies (market capitalization or annual revenues up to $4
billion) that are considered to have an outlook for strong earnings
growth.
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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PBHG LARGE CAP GROWTH PORTFOLIO. The investment objective of the PBHG
Insurance Series Large Cap Growth Portfolio is to seek long-term growth of
capital by investing primarily in common stocks of large capitalization
companies (market capitalization in excess of $1 billion) that are
considered to have an outlook for strong growth in earnings and potential
for capital appreciation.
PBHG TECHNOLOGY & COMMUNICATIONS PORTFOLIO. The investment objective of
the PBHG Insurance Series Technology & Communications Portfolio is to seek
long-term growth of capital by investing primarily in common stocks of
companies which rely extensively on technology or communications in their
product development or operations, or which are expected to benefit from
technological advances and improvements, and that may be experiencing
exceptional growth in sales and earnings driven by technology or
communications-related products and services.
Pilgrim Baxter & Associates, Ltd. serves as the investment advisor to each
of these Portfolios.
THERE IS NO ASSURANCE THAT ANY OF THESE FUNDS WILL ACHIEVE THEIR STATED
OBJECTIVES.
INVESTMENTS IN THESE FUNDS ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT OR ANY OTHER ENTITY OR PERSON.
Since each of the Funds is available to separate accounts of other
insurance companies offering variable annuity and variable life products,
and certain Funds may be available to qualified pension and retirement
plans, there is a possibility that a material conflict may arise between
the interests of the Separate Account and one or more other separate
accounts or plans investing in the Fund. In the event of a material
conflict, the affected insurance companies and plans will take any
necessary steps to resolve the matter, including stopping their separate
accounts from investing in the particular Fund. See the Funds'
prospectuses for greater detail.
Additional information concerning the investment objectives and policies
of each Fund, the investment advisory services and administrative services
of each Fund and charges of each Fund can be found in the current
prospectus for each Fund which accompanies this Prospectus. THE
APPROPRIATE FUNDS' PROSPECTUSES SHOULD BE READ CAREFULLY BEFORE ANY
DECISION IS MADE CONCERNING THE ALLOCATION OF PURCHASE PAYMENTS TO, OR
TRANSFERS AMONG, THE SUB-ACCOUNTS.
ADDITIONS, DELETIONS, OR SUBSTITUTIONS
The Company does not control the Funds and cannot guarantee that any of
the Sub-Accounts or any of the Funds will always be available for
allocation of Purchase Payments or transfers. The Company retains the
right to make changes in the Separate Account and its investments.
The Company reserves the right to eliminate the shares of any Fund held by
a Sub-Account and to substitute shares of another investment company for
the shares of any Fund, if the shares of that Fund are no longer available
for investment or if, in the Company's judgment, investment in any Fund
would be inappropriate in view of the purposes of the Separate Account. To
the extent required by the Investment Company Act of 1940, as amended
("1940 Act"), or other applicable law, a substitution of shares
attributable to the Owner's interest in a Sub-Account will not be made
without prior notice to the Owner and the prior approval of the Securities
and Exchange Commission. Nothing contained herein shall prevent the
Separate Account from purchasing other securities for other series or
classes of variable annuity policies, or from effecting an exchange
between series or classes of variable policies on the basis of requests
made by Owners.
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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New Sub-Accounts may be established when, in the sole discretion of the
Company, marketing, tax, investment or other conditions so warrant. Any
new Sub-Accounts will be made available to existing Owners on a basis to
be determined by the Company. Each additional Sub-Account will purchase
shares in a Fund or in another mutual fund or investment vehicle. The
Company may also eliminate one or more Sub-Accounts, if in its sole
discretion, marketing, tax, investment or other conditions so warrant. In
the event any Sub-Account is eliminated, the Company will notify Owners
and request a re-allocation of the amounts invested in the eliminated
Sub-Account.
In the event of any substitution or change, the Company may make such
changes in the Contract as may be necessary or appropriate to reflect such
substitution or change. Furthermore, if deemed to be in the best interests
of persons having voting rights under the Contracts, the Separate Account
may be operated as a management company under the 1940 Act or any other
form permitted by law, may be de-registered under the 1940 Act in the
event such registration is no longer required, or may be combined with one
or more separate accounts.
PERFORMANCE INFORMATION
From time to time, the Company may advertise yields and/or total returns
for the Sub-Accounts. THESE FIGURES ARE BASED ON HISTORICAL INFORMATION
AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. For a description of
the methods used to determine yield and total return, see the Statement of
Additional Information.
YIELD DATA
The yield of the Money Market Sub-Account refers to the annualized income
generated by an investment in that Sub-Account over a specified seven-day
period. The Company may also advertise the effective yield of the Money
Market Sub-Account which is calculated similarly but, when annualized, the
income earned by an investment in that Sub-Account is assumed to be
reinvested. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment.
The yield of a Sub-Account other than the Money Market Sub-Account refers
to the annualized income generated by an investment in the Sub-Account
over a specified 30-day period. The yield calculations do not reflect the
effect of any CDSC or premium taxes that may be applicable to a particular
Contract which would reduce the yield of that Contract.
TOTAL RETURN DATA
The average annual total return of a Sub-Account refers to return
quotations assuming an investment has been held in the Sub-Account for
various periods of time including, but not limited to, a period measured
from the date the Sub-Account commenced operations. When a Sub-Account has
been in operation for one, five and ten years, respectively, the average
annual total return presented will be presented for these periods,
although other periods may also be provided. The standardized average
annual total return quotations reflect the deduction of all applicable
charges except for premium taxes. In addition to the standardized average
annual total return for a Sub-Account, the Company may provide cumulative
total return and/or other non-standardized total return for the
Sub-Account. Total return data that does not reflect the CDSC and other
charges will be higher than the total return realized by an investor who
incurs the charges.
Reports and promotional literature may contain the ranking of any
Sub-Account derived from rankings of variable annuity separate accounts or
their investment products tracked by Lipper Analytical Services, Inc.,
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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VARDS, IBC/Donoghue's Money Fund Report, Financial Planning Magazine,
Money Magazine, Bank Rate Monitor, Standard & Poor's Indices, Dow Jones
Industrial Average, and other rating services, companies, publications, or
other persons who rank separate accounts or other investment products on
overall performance or other criteria. The Company may compare the
performance of a Sub-Account with applicable indices and/or industry
averages. Performance information may present the effects of tax-deferred
compounding on Sub-Account investment returns, or returns in general,
which may be illustrated by graphs, charts, or otherwise, and which may
include comparisons of investment return on a tax-deferred basis with
currently taxable investment return.
The Company may also advertise performance figures for the Sub-Accounts
based on the performance of a Fund prior to the time the Separate Account
commenced operations.
ANNUITY INVESTORS LIFE INSURANCE COMPANY(REGISTERED) AND THE SEPARATE
ACCOUNT
ANNUITY INVESTORS LIFE INSURANCE COMPANY(REGISTERED)
Annuity Investors Life Insurance Company(REGISTERED) (the "Company"),
formerly known as Carillon Life Insurance Company, is a stock life
insurance company. It was incorporated under the laws of the State of Ohio
in 1981. The Company is principally engaged in the sale of fixed and
variable annuity policies.
The Company is a wholly owned subsidiary of Great American(REGISTERED)
Life Insurance Company which is a wholly owned subsidiary of American
Annuity Group(SERVICEMARK), Inc., a publicly traded insurance holding
company. That company is in turn indirectly controlled by American
Financial Group, Inc., a publicly traded holding company.
The home office of the Company is located at 250 East Fifth Street,
Cincinnati, Ohio 45202.
PUBLISHED RATINGS
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, Standard & Poor's, and Duff & Phelps. The purpose of
the ratings is to reflect the financial strength and/or claims-paying
ability of the Company and should not be considered as reflecting on the
investment performance of assets held in the Separate Account. Each year
the A.M. Best Company reviews the financial status of thousands of
insurers, culminating in the assignment of Best's Ratings. These ratings
reflect their current opinion of the relative financial strength and
operating performance of an insurance company in comparison to the norms
of the life/health insurance industry. In addition, the claims-paying
ability of the Company as measured by Standard & Poor's or Duff & Phelps
may be referred to in advertisements or sales literature or in reports to
Owners. These ratings are opinions of those agencies as to an operating
insurance company's financial capacity to meet the obligations of its
insurance and annuity policies in accordance with their terms. Such
ratings do not reflect the investment performance of the Separate Account
or the degree of risk associated with an investment in the Separate
Account.
THE SEPARATE ACCOUNT
Annuity Investors(REGISTERED) Variable Account B was established by the
Company as an insurance company separate account under the laws of the
State of Ohio on December 19, 1996, pursuant to resolutions of the
Company's Board of Directors. The Separate Account is registered with the
Securities and Exchange Commission under the 1940 Act as a unit investment
trust. However, the Securities and Exchange Commission does not supervise
the management or the investment practices or policies of the Separate
Account.
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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The assets of the Separate Account are owned by the Company but they are
held separately from the other assets of the Company. The Ohio Revised
Code provides that the assets of a separate account are not chargeable
with liabilities incurred in any other business operation of the Company.
Income, gains and losses incurred on the assets in the Separate Account,
whether or not realized, are credited to or charged against the Separate
Account, without regard to other income, gains or losses of the Company.
Therefore, the investment performance of the Separate Account is entirely
independent of the investment performance of the Company's general account
assets or any other separate account maintained by the Company.
Under Ohio law, the assets of the Separate Account will be held for the
exclusive benefit of Owners of, and the persons entitled to payment under,
the Contracts offered by this Prospectus and under all other contracts
which provide for accumulated values or dollar amount payments to reflect
investment results of the Separate Account. The obligations arising under
the Contracts are obligations of the Company.
The Separate Account is divided into Sub-Accounts, each of which invests
solely in a specific corresponding Fund. (See "THE FUNDS," page 21.)
Changes to the Sub-Accounts may be made at the discretion of the Company.
(See "Additions, Deletions, or Substitutions," page 25.)
THE FIXED ACCOUNT
The Fixed Account is a part of the Company's general account. Because of
exemptive and exclusionary provisions, interests in the general account
have not been registered under the Securities Act of 1933, nor is the
general account registered as an investment company under the 1940 Act.
Accordingly, neither the general account nor any interest therein is
generally subject to the provisions of these Acts, and the staff of the
Securities and Exchange Commission does not generally review the
disclosures in the prospectus relating to the Fixed Account. Disclosures
regarding the Fixed Account and the general account may, however, be
subject to certain generally applicable provisions of the federal
securities laws relating to the accuracy and completeness of statements
made in the Prospectus.
The Company has sole discretion to invest the assets of the Fixed Account,
subject to applicable law. The Company delegates the investment of the
assets of the Fixed Account to American Money Management Corporation.
Allocation of any amounts to the Fixed Account does not entitle Owners to
share directly in the investment experience of these assets. The Company
assumes the risk of investment gain or loss on the portion of the Account
Value allocated to the Fixed Account. All assets held in the general
account are subject to the Company's general liabilities from business
operations.
FIXED ACCOUNT OPTIONS
There are currently five options under the Fixed Account: the Fixed
Accumulation Account Option; and the guarantee period options referred to
in the Contract as the Fixed Account options One-Year, Three-Year,
Five-Year, and Seven-Year Guarantee Period, respectively. Different Fixed
Account options may be offered by the Company at any time. Purchase
Payments allocated and amounts transferred to the Fixed Account options
accumulate interest at the applicable current interest rate declared by
the Company's Board of Directors, and if applicable, for the duration of
the guarantee period selected.
The Company guarantees a minimum rate of interest for the Fixed Account
options. The guaranteed rate is 3% per year, compounded annually.
RENEWAL OF FIXED ACCOUNT OPTIONS
The following provisions apply to all Fixed Account options except the
Fixed Accumulation Account Option.
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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At the end of a guarantee period, and for the thirty days immediately
preceding the end of such guarantee period, the Owner may elect a new
option to replace the Fixed Account option that is then expiring. The
entire amount maturing may be reallocated to any of the then-current
options under the Contract (including the various Sub-Accounts within the
Separate Account), except that a Fixed Account option with a guarantee
period that would extend past the Annuity Commencement Date may not be
selected. In particular, in the case of renewals occurring within one year
of such Commencement Date, the only Fixed Account option available is the
Fixed Accumulation Account Option.
If the Owner does not specify a new Fixed Account option in accordance
with the preceding paragraph, the Owner will be deemed to have elected the
same Fixed Account option as is expiring, so long as the guarantee period
of such option does not extend beyond the Annuity Commencement Date. In
the event that such a period would extend beyond the Annuity Commencement
Date, the Owner will be deemed to have selected the Fixed Account option
with the longest available guarantee period that expires prior to the
Annuity Commencement Date, or, failing that, the Fixed Accumulation
Account Option.
THE CONTRACT
The Contracts described herein are individual and group flexible premium
deferred annuities. The rights and benefits are described below and in the
Contract. References to "Contract" throughout this Prospectus shall also
mean Certificates issued under group Contracts, except where noted. The
Company reserves the right to make any modification to conform the
Contracts to, or give the Owner the benefit of, any applicable law. The
obligations under the Contracts are obligations of the Company.
The Company is subject to the insurance laws and regulations of all the
jurisdictions where it is licensed to operate. The availability of certain
Contract rights and provisions depends on state approval and/or filing and
review processes in each such jurisdiction. Where required by law or
regulation, the Contracts will be modified accordingly.
Fixed Account Values, Variable Account Values, benefits and charges will
be calculated separately for each Contract. The various administrative
rules described below will apply separately to each Contract, unless
otherwise noted. The Company reserves the right to terminate any Contract
at any time the Surrender Value is less than $500. A surrender will be
deemed to have been made and the Company will pay the Owner the Surrender
Value. A group Contract may be terminated on 60 days advance notice, in
which case Participants will be entitled to continue their interests on a
deferred, paid-up basis, subject to the Company's right to terminate as
described above.
RIGHT TO CANCEL (INDIVIDUAL CONTRACTS ONLY UNLESS OTHERWISE REQUIRED BY STATE
LAW)
The Owner may cancel the Contract by giving the Company written notice of
cancellation and returning the Contract before midnight of the twentieth
day (or longer if required by state law) following the date the Owner
receives the Contract. The Contract must be returned to the Company, and
the required notice must be given in person, or to the agent who sold it
to the Owner, or by mail. If by mail, the return of the Contract or the
notice is effective on the date it is postmarked, with the proper address
and with postage paid. If the Owner cancels the Contract as set forth
above, the Contract will be void and the Company will refund the Purchase
Payment(s) plus or minus any investment gains or losses under the Contract
as of the end of the Valuation Period during which the returned Contract
is received by the Company, or as otherwise required by law. Where
required by state or federal law, the Right to Cancel provision of a
Contract will provide that the Company will refund Purchase Payment(s)
during the minimum refund period required. Where required by state law,
the right to cancel provision of a Contract may provide for refund of a
different amount or a right to cancel for a different time period than
described above.
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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PURCHASE PAYMENTS
PURCHASE PAYMENTS
The minimum initial Purchase Payment for Qualified Contracts purchased
under a periodic payment program is $50; for other Qualified Contracts,
$2,000; for Non-Qualified Contracts purchased under a periodic payment
program, $100; and for other Non-Qualified Contracts, $5,000. Under any
Contract, the Company requires each subsequent Purchase Payment to be at
least $50. Purchase Payments and tax-free transfers or rollovers may be
sent to the Company at its Administrative Office at any time before the
Annuity Commencement Date so long as the Contract has not been fully
surrendered and the Owner is still living.
Each Purchase Payment will be applied by the Company to the credit of the
Owner's Account. If the application form is in good order, the Company
will apply the initial Purchase Payment to an account for the Owner within
two business days of receipt of the Purchase Payment at the Administrative
Office. If the application form is not in good order, the Company will
attempt to get the application form in good order within five business
days. If the application form is not in good order at the end of this
period, the Company will inform the Owner of the reason for the delay and
that the Purchase Payment will be returned immediately unless he or she
specifically consents to the Company keeping the Purchase Payment until
the application form is in good order. Once the application form is in
good order, the Purchase Payment will be applied to the Owner's Account
within two business days.
Each additional Purchase Payment is credited to a Contract as of the next
Valuation Date following the receipt of such additional Purchase Payment.
No Purchase Payment for any Contract may exceed $500,000 without prior
approval of the Company.
ALLOCATION OF PURCHASE PAYMENTS
The Company will allocate Purchase Payments to the Fixed Account options
and/or to the Sub-Accounts according to instructions received by Written
Request. Allocations must be made in whole percentages. The minimum
Purchase Payment amount that can be allocated to a Fixed Account option
other than the Fixed Accumulation Account is $2,000.
ACCOUNT VALUE
The Account Value is equal to the aggregate value of the Owner's interest
in the Sub-Account(s) and the Fixed Account options as of the end of any
Valuation Period. The value of the Owner's interest in all Sub-Accounts is
the "Variable Account Value," and the value of the Owner's interest in all
Fixed Account options is the "Fixed Account Value."
FIXED ACCOUNT VALUE
The Fixed Account Value for the Contract at any time is equal to: (a) the
Purchase Payment(s) allocated to the Fixed Account; plus (b) amounts
transferred to the Fixed Account; plus (c) interest credited to the Fixed
Account; less (d) any charges, surrenders, deductions, amounts transferred
from the Fixed Account or other adjustments made in accordance with the
provisions of the Contract.
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VARIABLE ACCOUNT VALUE
Purchase Payments may be allocated among, and Account values may be
transferred to, the various Sub-Accounts within the Separate Account,
subject to the provisions of the Contract governing transfers. For each
Sub-Account, the Purchase Payment(s) or amounts transferred are converted
into Accumulation Units. The number of Accumulation Units credited is
determined by dividing the dollar amount directed to each Sub-Account by
the value of the Accumulation Unit for that Sub-Account at the end of the
Valuation Period on which the Purchase Payment(s) or transferred amount is
received.
The following events will result in the cancellation of an appropriate
number of Accumulation Units of a Sub-Account:
(1) transfer from a Sub-Account;
(2) full or partial surrender of the Variable Account Value;
(3) payment of a Death Benefit;
(4) application of the Variable Account Value to a Settlement
Option;
(5) deduction of the Contract Maintenance Fee; or
(6) deduction of any Transfer Fee.
Accumulation Units will be canceled as of the end of the Valuation Period
during which the Company receives a Written Request regarding the event
giving rise to such cancellation, or an applicable Commencement Date, or
the end of the Valuation Period on which the Contract Maintenance Fee or
Transfer Fee is due, as the case may be.
The Variable Account Value for a Contract at any time is equal to the sum
of the number of Accumulation Units for each Sub-Account attributable to
that Contract multiplied by the Accumulation Unit value ("Accumulation
Unit Value") for each Sub-Account at the end of the preceding Valuation
Period.
ACCUMULATION UNIT VALUE
The initial Accumulation Unit Value for each Sub-Account, with the
exception of the Money Market Sub-Account, was set at $10. The initial
Accumulation Unit Value for the Money Market Sub-Account was set at $1.00.
Thereafter, the Accumulation Unit Value at the end of each Valuation
Period is the Accumulation Unit Value at the end of the previous Valuation
Period multiplied by the Net Investment Factor, as described below.
NET INVESTMENT FACTOR
The Net Investment Factor is a factor applied to measure the investment
performance of a Sub-Account from one Valuation Period to the next. Each
Sub-Account has a Net Investment Factor for each Valuation Period which
may be greater or less than one. Therefore, the value of an Accumulation
Unit for each Sub-Account may increase or decrease. The Net Investment
Factor for any Sub-Account for any Valuation Period is determined by
dividing (1) by (2) and subtracting (3) from the result, where:
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(1) is equal to:
(a) the Net Asset Value per share of the Fund held in the
Sub-Account, determined at the end of the applicable
Valuation Period; plus
(b) the per share amount of any dividend or net capital gain
distributions made by the Fund held in the Sub-Account,
if the "ex-dividend" date occurs during the applicable
Valuation Period; plus or minus
(c) a per share charge or credit for any taxes reserved for,
which is determined by the Company to have resulted from
the investment operations of the Sub-Account;
(2) is the Net Asset Value per share of the Fund held in the
Sub-Account, determined at the end of the immediately preceding
Valuation Period; and
(3) is the factor representing the Mortality and Expense Risk
Charge and the Administration Charge deducted from the
Sub-Account for the number of days in the applicable Valuation
Period.
TRANSFERS
Prior to the applicable Commencement Date, the Owner may transfer amounts
in a Sub-Account to a different Sub-Account and/or one or more of the
Fixed Account options. After the first Contract Anniversary, and prior to
the applicable Commencement Date, the Owner may transfer amounts from any
Fixed Account option and/or one or more of the Sub-Accounts. If a transfer
is being made from a Fixed Account option pursuant to the "Renewal"
provision of the Contract, then the entire amount of that Fixed Account
option subject to renewal at that time may be transferred. In any other
case, transfers from a Fixed Account option are subject to a cumulative
limit during each Contract Year of twenty percent (20%) of the Fixed
Account option's value as of the most recent Contract Anniversary. Amounts
previously transferred from Fixed Account options to the Sub-Accounts may
not be transferred back to the Fixed Account options for a period of six
(6) months from the date of transfer. The minimum transfer amount for any
transfer is $500.
The Company currently charges a Transfer Fee of $25 for each transfer in
excess of twelve during the same Contract Year.
TELEPHONE TRANSFERS
An Owner may place a request for all or part of the Account Value to be
transferred by telephone. All transfers must be in accordance with the
terms of the Contract. Transfer instructions are currently accepted on
each Valuation Date between 9:30 a.m. and 4:00 p.m. Eastern Time at (800)
789-6771. Once instructions have been accepted, they may not be rescinded;
however, new telephone instructions may be given the following day.
The Company will not be liable for complying with telephone instructions
which the Company reasonably believes to be genuine, or for any loss,
damage, cost or expense in acting on such telephone instructions. The
Owner or person controlling payments will bear the risk of such loss. The
Company will employ reasonable procedures to determine that telephone
instructions are genuine. If the Company does not employ such procedures,
the Company may be liable for losses due to unauthorized or fraudulent
instructions. These procedures may include, among others, tape recording
telephone instructions.
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DOLLAR COST AVERAGING
Prior to the applicable Commencement Date, the Owner may establish
automatic transfers from the Money Market Sub-Account to any other
Sub-Account(s), or from the Fixed Accumulation Account to any
Sub-Account(s), on a monthly or quarterly basis, by submitting to the
Administrative Office a Dollar Cost Averaging Authorization Form. No
Dollar Cost Averaging transfers may be made to any of the Fixed Account
options. The Dollar Cost Averaging transfers will take place on the last
Valuation Date of each calendar month or quarter as requested by the
Owner.
In order to be eligible for Dollar Cost Averaging, the value of the source
of funds (the Money Market Sub-Account or the Fixed Accumulation Account)
must be at least $10,000, and the minimum amount that may be transferred
is $500.
Dollar Cost Averaging will automatically terminate if any Dollar Cost
Averaging transfer would cause the account balance of the source of the
funds (the Money Market Sub-Account or the Fixed Accumulation Account) to
fall below $500. At that time, the Company will then transfer the account
balance of the source of the funds to the designated Sub-Account(s) in the
same percentage distribution as directed in the Dollar Cost Averaging
Authorization Form.
Dollar Cost Averaging transfers will not count toward the twelve transfers
permitted under the Contract without a Transfer Fee charge.
Before electing Dollar Cost Averaging, an Owner should consider the risks
involved in switching between investments available under the Contract.
Dollar Cost Averaging requires regular investments regardless of
fluctuating price levels and does not guarantee profits nor prevent losses
in a declining market. An Owner should consider his or her financial
ability to continue Dollar Cost Averaging transfers through periods of
changing price levels.
The Owner may terminate Dollar Cost Averaging services at any time, but
must give the Company at least 30 days notice to change any automatic
transfer instructions that are currently in place. Termination and change
instructions will be accepted by telephone at (800) 789-6771. Currently,
the Company does not charge a fee for Dollar Cost Averaging services.
PORTFOLIO REBALANCING
In connection with the allocation of Purchase Payments to the
Sub-Accounts, and/or the Fixed Accumulation Account, the Owner may elect
to have the Company perform Portfolio Rebalancing services. The election
of Portfolio Rebalancing instructs the Company to automatically transfer
amounts between the Sub-Accounts and the Fixed Accumulation Account to
maintain the percentage allocations selected by the Owner.
Prior to the applicable Commencement Date, the Owner may elect Portfolio
Rebalancing, by submitting to the Administrative Office a Portfolio
Rebalancing Authorization Form. In order to be eligible for the Portfolio
Rebalancing program, the Owner must have a minimum Account Value of
$10,000. Portfolio Rebalancing transfers will take place on the last
Valuation Date of each calendar quarter.
Portfolio Rebalancing transfers will not count toward the twelve transfers
permitted under the Contract without a Transfer Fee charge.
The Owner may terminate Portfolio Rebalancing services at any time, but
must give the Company at least 30 days notice to change any automatic
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transfer instructions that are already in place. Termination and change
instructions will be accepted by telephone at (800) 789-6771. Currently,
the Company does not charge a fee for Portfolio Rebalancing services.
INTEREST SWEEP
Prior to the applicable Commencement Date, the Owner may elect automatic
transfers of the income from each Fixed Account option to the
Sub-Account(s), by submitting to the Administrative Office an Interest
Sweep Authorization Form. Interest Sweep transfers will take place on the
last Valuation Date of each calendar quarter.
In order to be eligible for the Interest Sweep program, the value of each
Fixed Account option selected must be at least $5,000. The maximum amount
that may be transferred from each Fixed Account option selected is 20% of
such Fixed Account option's value per year. Any amounts transferred under
the Interest Sweep program reduce the 20% maximum otherwise allowed.
Interest Sweep transfers will not count toward the twelve transfers
permitted under the Contract without a Transfer Fee charge.
The Owner may terminate the Interest Sweep program, at any time, but must
give the Company at least 30 days notice to change any automatic transfer
instructions that are already in place. Termination and change
instructions will be accepted by telephone at (800) 789-6771. Currently,
the Company does not charge a fee for Interest Sweep services.
PRINCIPAL GUARANTEE OPTION
The Owner may elect to have the Company allocate a portion of a Purchase
Payment to the Fixed Account Seven-Year Guarantee Period such that, at the
end of the Seven-Year Guarantee Period, that account will grow to an
amount equal to the total Purchase Payment. The Company determines the
portion of the Purchase Payment which must be allocated to the Fixed
Account Seven-Year Guarantee Period such that, based on the interest rate
then in effect, the Seven-Year Guarantee account will grow to equal the
full amount of the Purchase Payment after seven years. The remainder of
the Purchase Payment will be allocated according to the Owner's
instructions. The minimum Purchase Payment eligible for the Principal
Guarantee program is $5,000.
CHANGES BY THE COMPANY
The Company reserves the right, in the Company's sole discretion and at
any time, to terminate, suspend or modify any aspect of the privileges
described above without prior notice to Owners, as permitted by applicable
law. The Company may also impose an annual fee or increase the current
annual fee, as applicable, for any of the foregoing services in amount(s)
as the Company may then determine to be reasonable for participation in
the service.
SURRENDERS
SURRENDER VALUE
The Owner may surrender a Contract in full for the Surrender Value, or
partial surrenders may be made for a lesser amount, by Written Request at
any time prior to the Annuity Commencement Date. The amount of any partial
surrender must be at least $500. A partial surrender cannot reduce the
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Surrender Value to less than $500. Surrenders will be deemed to be
withdrawn first from the portion of the Account Value that represents
accumulated earnings and then from Purchase Payments. For purposes of the
Contract, Purchase Payments are deemed to be withdrawn on a "first-in,
first-out" basis.
The amount available for surrender will be the Surrender Value at the end
of the Valuation Period in which the Written Request is received.
The Surrender Value at any time is an amount equal to:
(1) the Account Value as of the end of the applicable Valuation
Period; less
(2) any applicable CDSC; less
(3) any outstanding loans; and less
(4) any applicable premium tax or other taxes not previously
deducted.
On full surrender, a full Contract Maintenance Fee will also be deducted
as part of the calculation of the Surrender Value. The Contract
Maintenance Fee will be deducted before the application of any CDSC.
A full or partial surrender may be subject to a CDSC as set forth in this
prospectus. (See "Contingent Deferred Sales Charge ("CDSC")," page 38.)
Surrenders will result in the cancellation of Accumulation Units from each
applicable Sub-Account(s) and/or a reduction of the Fixed Account Value.
In the case of a full surrender, the Contract will be terminated.
Surrenders may be subject to a 10% premature distribution penalty tax if
made before the Owner reaches age 59 1/2, and may further be subject to
federal, state or local income tax, as well as significant tax law
restrictions in the case of Qualified Contracts. (See "FEDERAL TAX
MATTERS," page 48.)
SUSPENSION OR DELAY IN PAYMENT OF SURRENDER VALUE
The Company has the right to suspend or delay the date of payment of a
partial or full surrender of the Variable Account Value for any period:
(1) when the New York Stock Exchange ("NYSE") is closed or trading
on the NYSE is restricted;
(2) when an emergency exists (as determined by the Securities and
Exchange Commission) as a result of which (a) the disposal of
securities in the Separate Account is not reasonably
practicable or (b) it is not reasonably practicable to
determine fairly the value of the net assets in the Separate
Account; or
(3) when the Securities and Exchange Commission so permits for the
protection of security holders.
The Company further reserves the right to delay payment of any partial or
full surrender of the Fixed Account Value for up to six months after the
receipt of a Written Request.
A surrender request will be effective when all appropriate surrender
request forms are received. Payments of any amounts derived from a
Purchase Payment paid by check may be delayed until the check has cleared.
SINCE THE OWNER ASSUMES THE INVESTMENT RISK AND BECAUSE CERTAIN SURRENDERS
ARE SUBJECT TO A CDSC, THE TOTAL AMOUNT PAID UPON SURRENDER OF THE
CONTRACT (TAKING INTO ACCOUNT ANY PRIOR SURRENDERS) MAY BE MORE OR LESS
THAN THE TOTAL PURCHASE PAYMENTS.
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When Contracts offered by this Prospectus are issued in connection with
retirement plans which meet the requirements of Sections 401, 403, 408 or
457 of the Code, as applicable, reference should be made to the terms of
the particular plans for any additional limitations or restrictions on
surrenders.
FREE WITHDRAWAL PRIVILEGE
Subject to the provisions of the Contract, the Company will waive the
CDSC, to the extent applicable, on full or partial surrenders as follows:
(1) during the first Contract Year, on an amount equal to not more
than 10% of all Purchase Payments received; and
(2) during the second and succeeding Contract Years, on an amount
equal to not more than the greater of: (a) Accumulated Earnings
(Account Value in excess of Purchase Payments); or (b) 10% of
the Account Value as of the last Contract Anniversary.
If the Free Withdrawal Privilege is not exercised during a Contract Year,
it does not carry over to the next Contract Year. The Free Withdrawal
Privilege may not be available under some group Contracts.
SYSTEMATIC WITHDRAWAL
Prior to the applicable Commencement Date, the Owner, by Written Request
to the Administrative Office, may elect to automatically withdraw money
from the Fixed Account and/or the Sub-Accounts. To be eligible for the
Systematic Withdrawal program, the Account Value must be at least $10,000
at the time of election. The minimum monthly amount that can be withdrawn
is $100. Systematic withdrawals will be subject to the CDSC to the extent
the amount withdrawn exceeds the Free Withdrawal Privilege (See "CHARGES
AND DEDUCTIONS," page 38.) The Owner may begin or discontinue systematic
withdrawals at any time by Written Request to the Company, but at least 30
days notice must be given to change any systematic withdrawal instructions
that are currently in place. The Company reserves the right to discontinue
offering systematic withdrawals at any time. Currently, the Company does
not charge a fee for Systematic Withdrawal services. However, the Company
reserves the right to impose an annual fee in such amount as the Company
may then determine to be reasonable for participation in the Systematic
Withdrawal program.
Systematic withdrawals may have tax consequences or may be limited by tax
law restrictions. (See "FEDERAL TAX MATTERS," page 48.)
CONTRACT LOANS
If permitted under the Contract, an Owner may obtain a loan using his or
her interest under such Contract as the only security for the loan. Loans
are subject to provisions of the Code. A tax adviser should be consulted
prior to exercising loan privileges. Loan provisions are described in the
loan endorsement to the Contract.
The amount of any loan will be deducted from any Death Benefit. In
addition, a loan, whether or not repaid, will have a permanent effect on
the Account Value because the investment results of the investment options
will only apply to the unborrowed portion of the Account Value. The longer
the loan is outstanding, the greater the effect is likely to be. The
effect could be favorable or unfavorable. If the investment results are
greater than the rate being credited on amounts held in the loan account
while the loan is outstanding, the Account Value will not increase as
rapidly as it would if no loan were outstanding. If investment results are
below that rate, the Account Value will be higher than it would have been
if no loan had been outstanding.
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DEATH BENEFIT
WHEN A DEATH BENEFIT WILL BE PAID
A Death Benefit will be paid under the Contract if:
(1) the Owner or the joint owner, if any, dies before the Annuity
Commencement Date and before the Contract is fully surrendered;
(2) the Death Benefit Valuation Date has occurred; and
(3) a spouse does not become the Successor Owner.
If a Death Benefit becomes payable:
(1) it will be in lieu of all other benefits under the Contract;
and
(2) all other rights under the Contract will be terminated except
for rights related to the Death Benefit.
Only one Death Benefit will be paid under the Contract.
DEATH BENEFIT VALUES
If the Owner dies before attaining Age 80 and before the Annuity
Commencement Date, the Death Benefit is an amount equal to the greatest
of:
(1) the Account Value on the Death Benefit Valuation Date;
(2) the total Purchase Payment(s), with interest at three percent
(3%) per year, compounded annually, less any partial surrenders
and any CDSC that applied to those amounts; or
(3) the largest Account Value on any Contract Anniversary after the
fourth Contract Anniversary and prior to the Death Benefit
Valuation Date, less any partial surrenders and any CDSC that
applied to those amounts.
If the Owner dies after attaining Age 80 and before the Annuity
Commencement Date, the Death Benefit is an amount equal to the greatest
of:
(1) the Account Value on the Death Benefit Valuation Date;
(2) the total Purchase Payment(s), with interest at 3% per year,
compounded annually, through the Contract Anniversary prior to
the Owner's 80th birthday, less any partial surrenders, and any
CDSC that applied to those amounts; or
(3) the largest Account Value on any Contract Anniversary after the
fourth Contract Anniversary and prior to the date on which the
Owner attained Age 80, less any partial surrenders and any CDSC
that applied to those amounts.
In any event, if the Contract is issued after any Owner has attained Age
80, and any Owner dies before the Annuity Commencement Date, the amount of
the Death Benefit will be the greater of:
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(1) the Account Value on the Death Benefit Valuation Date; or
(2) the total Purchase Payment(s), less any partial surrenders and
any CDSC that applied to those amounts.
Any applicable premium tax or other taxes not previously deducted, and any
outstanding loans, will be deducted from the Death Benefit amount
described above.
DEATH BENEFIT COMMENCEMENT DATE
The Beneficiary may designate the Death Benefit Commencement Date by
Written Request within one year of the Owner's death. If no designation is
made, then the Death Benefit Commencement Date will be one year after the
Owner's death.
FORM OF DEATH BENEFIT
Death Benefit payments will be Fixed Dollar Benefit payments made monthly
in accordance with the terms of Option A with a period certain of 48
months under the "SETTLEMENT OPTIONS" section of this prospectus. (See
page 42.)
In lieu of that, the Owner may elect at any time before his or her death
to have Death Benefit payments made in one lump sum or pursuant to any
available settlement option under the "SETTLEMENT OPTIONS" section of this
prospectus. If the Owner does not make any such election, the Beneficiary
may make that election at any time after the Owner's death and before the
Death Benefit Commencement Date.
BENEFICIARY
Non-Qualified Contracts may be jointly owned by two people. If there is a
joint owner and that joint owner survives the Owner, the joint owner is
the Beneficiary, regardless of any designation made by the Owner. If there
is no surviving joint owner, and in the case of Qualified Contracts, the
Beneficiary is the person or persons so designated in the application, if
any, or under the Change of Beneficiary provision of the Contract. If the
Owner has not designated a Beneficiary, or if no Beneficiary designated by
the Owner survives the Owner, then the Beneficiary will be the Owner's
estate.
CHARGES AND DEDUCTIONS
There are two types of charges and deductions. First, there are charges
assessed under the Contract. These charges include the CDSC, the
Administration Charge, the Mortality and Expense Risk Charge, Premium
Taxes and Transfer Fees. All of these charges are described below, and
some may not be applicable to every Contract. Second, there are Fund
expenses for fund management fees and administration expenses. These fees
are described in the prospectus and statement of additional information
for each Fund.
CONTINGENT DEFERRED SALES CHARGE ("CDSC")
No deduction for front-end sales charges is made from Purchase Payments.
However, the Company may deduct a CDSC of up to 7% of Purchase Payments on
certain surrenders to partially cover certain expenses incurred by the
Company relating to the sale of the Contract, including commissions paid,
the costs of preparation of sales literature and other promotional costs
and acquisition expenses.
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The CDSC applies to and is calculated separately for each Purchase
Payment. The CDSC percentage varies according to the number of full years
elapsed between the date of receipt of a Purchase Payment and the date a
Written Request for surrender is made. The amount of the CDSC is
determined by multiplying the amount withdrawn subject to the CDSC by the
CDSC percentage in accordance with the following table. Surrenders will be
deemed withdrawn first from Accumulated Earnings (which may be surrendered
without charge) and then to Purchase Payments on a first-in, first-out
basis.
Number of Full Years Elapsed Between Date Contingent Deferred Sales Charge
of Receipt of Purchase Payment and Date as a Percentage of Associated
Written Request for Surrender Received Purchase Payment Surrendered
------------------------------------------ --------------------------------
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 or more 0%
In no event shall the CDSC assessed against the Contract exceed 7% of the
aggregate Purchase Payment(s).
Any Purchase Payments that have been held by the Company for at least
seven years may be surrendered free of any CDSC. The CDSC will not be
imposed on amounts surrendered under the Free Withdrawal Privilege. (See
"Free Withdrawal Privilege," page 36.)
No CDSC is assessed upon payment of the Death Benefit.
The CDSC will be waived upon surrender if the Contract is modified by the
Long-Term Care Waiver Rider and the Owner is confined in a licensed
Hospital or Long-Term Care Facility, as those terms are defined in the
Rider, for at least 90 days beginning on or after the first Contract
Anniversary. This Rider may not be available in all jurisdictions. Also,
the CDSC will be waived if the Owner has been determined by the Social
Security Administration to be "disabled" as that term is defined in the
Social Security Act of 1935, as amended.
The CDSC may be reduced or waived in connection with certain Contracts
where the Company incurs reduced sales and servicing expenses, such as
Contracts offered to active employees of the Company or any of its
subsidiaries and/or affiliates.
The CDSC arising from a surrender of a Contract will be waived for
Contracts which are issued with an Employer Plan Endorsement or a Deferred
Compensation Endorsement if the Owner of an individual Contract or
Participant under a group Contract incurs a separation from service.
The CDSC arising from a surrender of a Contract will be waived for
Contracts which are issued with a Tax Sheltered Annuity Endorsement (and
without an Employer Plan Endorsement) if the Owner of an individual
Contract or Participant under a group Contract: (i) incurs a separation
from service, has attained age 55 and has held the Contract for at least
seven years; or (ii) has held the Contract for fifteen years or more.
The Company reserves the right to terminate, suspend or modify waivers of
the CDSC, without prior notice to Owners, as permitted by applicable law.
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The CDSC may be reduced or waived on partial or full surrenders from a
Fixed Account option to the extent required to satisfy state law.
MAINTENANCE AND ADMINISTRATION CHARGES
On each Contract Anniversary, the Company deducts an annual Contract
Maintenance Fee as partial compensation for expenses relating to the issue
and maintenance of the Contract, and the Separate Account. The annual
Contract Maintenance Fee is $30. This Contract Maintenance Fee is not
assessed against Fixed Account options. If the Contract is surrendered in
full on any day other than on the Contract Anniversary, the Contract
Maintenance Fee will be deducted in full at the time of such surrender. If
a Variable Annuity Benefit is elected, a portion of the $30 annual
Contract Maintenance Fee will be deducted from each Benefit Payment.
The Company will waive the Contract Maintenance Fee if the Account Value
is equal to or greater than $40,000 on the date of the assessment of the
charge. The Company will waive the Contract Maintenance Fee after the
applicable Commencement Date if the Annuity Benefit or Death Benefit
amount applied to a Variable Dollar Benefit exceeds $40,000. The Company
may waive the Contract Maintenance Fee in connection with Contracts
offered to active employees of the Company, or any of its subsidiaries
and/or affiliates. The Company may waive the Contract Maintenance Fee in
certain situations where the Company expects to realize significant
economies of scale with respect to sales of Contracts and Certificates.
This is possible because sales costs do not increase in proportion to the
Purchase Payments under the Contracts and Certificates sold; for example,
the per dollar transaction cost for a sale of a Contract and Certificates
with $500,000 of Purchase Payments is generally much higher than the per
dollar cost for a sale of a Contract and Certificates with $1,000,000 of
Purchase Payments. Thus, the applicable sales costs decline as a
percentage of the Purchase Payments as the amount of Purchase Payments
increases. In such a situation, the Company may be designated as a
preferred variable annuity contract provider by an employer or trustee of
an employee benefit plan.
The Company imposes an Administration Charge to reimburse the Company for
those administrative expenses attributable to the Contract and the
Separate Account which exceed the revenues received from the Contract
Maintenance Fee and any Transfer Fee. For this Administration Charge, the
Company makes a daily charge equal to .000411% corresponding to an
effective annual rate of 0.15% of the daily Net Asset Value of each
Sub-Account in the Separate Account. This Administration Charge is not
assessed against Fixed Account options.
The Company has set the Administration Charge and the Contract Maintenance
Fee at levels such that the Company will recover no more than the
anticipated and estimated costs associated with administering the Contract
and Separate Account. The Company does not expect to make a profit from
either the Administration Charge or the Contract Maintenance Fee. The
Company guarantees that it will not increase the Administration Charge or
the Contract Maintenance Fee for a Contract.
MORTALITY AND EXPENSE RISK CHARGE
The Company imposes a Mortality and Expense Risk Charge as compensation
for bearing certain mortality and expense risks under the Contract. For
assuming these risks, the Company makes a daily charge equal to .003403%
corresponding to an effective annual rate of 1.25% of the daily Net Asset
Value of each Sub-Account in the Separate Account. The Company estimates
that the mortality risk component of this charge is 0.75% of the daily Net
Asset Value of each Sub-Account and the expense risk component is 0.50%.
In connection with certain Contracts that allow the Company to reduce
administrative expenses, the Company will issue an Enhanced Contract with
a Morality and Expense Risk Charge equal to an effective annual rate of
0.95%. This is equal to a daily charge of 0.002590%. The Company estimates
that 0.20% is for expense risks and 0.75% is for mortality risks. The
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Company's decision to offer an Enhanced Contract will be based primarily
on whether the Company is designated as a preferred variable annuity
contract provider by an employer or by the trustee of an employee benefit
plan or on whether the initial purchase payment is large enough to
significantly reduce administrative expenses as a percentage of assets.
Where the Company is so designated, the Company anticipates that it will
recognize administrative expense savings from various economies of scale
and routine operations. In addition, the Company may offer an Enhanced
Contract to a group of employees of the Company, its subsidiaries and/or
affiliates. The Mortality and Expense Risk Charge is imposed before the
Annuity Commencement Date and after the Annuity Commencement Date if a
Variable Annuity Benefit is selected. The Company guarantees that the
Mortality and Expense Risk Charge will never increase for a Contract. The
Mortality and Expense Risk Charge is reflected in the Accumulation Unit
values for each Sub-Account. The Mortality and Expense Risk Charge is not
assessed against Fixed Account options.
The mortality risks assumed by the Company arise from its contractual
obligations to make annuity payments (determined in accordance with the
annuity tables and other provisions contained in the Contract) and to pay
Death Benefits prior to the Annuity Commencement Date.
The Company also bears substantial risk in connection with the Death
Benefit before the Annuity Commencement Date, since in certain
circumstances the Company may be obligated to pay a larger Death Benefit
amount than the then-existing Account Value of the Contract.
The expense risk assumed by the Company is the risk that the Company's
actual expenses in administering the Contracts and the Separate Account
will exceed the amount recovered through the Contract Maintenance Fees and
Transfer Fees.
If the Mortality and Expense Risk Charge is insufficient to cover actual
costs and risks assumed, the loss will fall on the Company. Conversely, if
this charge is more than sufficient, any excess will be profit to the
Company. Currently, the Company expects a profit from this charge.
The Company recognizes that the CDSC may not generate sufficient funds to
pay the cost of distributing the Contracts. To the extent that the CDSC is
insufficient to cover the actual cost of Contract distribution, the
deficiency will be met from the Company's general corporate assets which
may include amounts, if any, derived from the Mortality and Expense Risk
Charge.
PREMIUM TAXES
Certain state and local governments impose premium taxes. These taxes
currently range up to 5.0% depending upon the jurisdiction. The Company,
in its sole discretion and in compliance with any applicable state law,
will determine the method used to recover premium tax expenses incurred.
The Company will deduct any applicable premium taxes from the Account
Value either upon death, surrender, annuitization, or at the time Purchase
Payments are made to the Contract, but no earlier than when the Company
has a tax liability under state law.
TRANSFER FEE
The Company currently imposes a $25 fee for each transfer in excess of
twelve in a single Contract Year. The Company will deduct the charge from
the amount transferred. Transfers associated with Dollar Cost Averaging,
Interest Sweep and Automatic Rebalancing programs do not currently incur a
Transfer Fee and do not count toward the twelve annual transfers currently
permitted under the Contract without a Transfer Fee.
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FUND EXPENSES
The value of the assets in the Separate Account reflects the value of Fund
shares and therefore the fees and expenses paid by each Fund. The annual
expenses of each Fund are set out in the "Summary of Expenses" tables at
the front of this Prospectus. A complete description of the fees,
expenses, and deductions from the Funds are found in the respective
prospectuses for the Funds. (See "THE FUNDS," page 21.)
REDUCTION OR ELIMINATION OF CONTRACT CHARGES (GROUP CONTRACTS ONLY)
The CDSC and administrative charges under the Contract may be reduced or
eliminated when certain sales of the Contract result in savings or
reduction of sales expenses. The entitlement to such a reduction in the
CDSC or the administrative charges will be based on the following: (1) the
size and type of the group to which sales are to be made; (2) the total
amount of Purchase Payments to be received; and (3) any prior or existing
relationship with the Company. The CDSC and administrative charges may be
reduced or waived in connection with a Contract offered to a group of
employees of the Company, its subsidiaries and/or affiliates. There may be
other circumstances, of which the Company is not presently aware, which
could result in fewer sales expenses. In no event will reduction or
elimination of the CDSC or the administrative charge be permitted where
such reduction or elimination will be unfairly discriminatory to any
person.
SETTLEMENT OPTIONS
ANNUITY COMMENCEMENT DATE
The Annuity Commencement Date is shown on the Contract Specifications
page. The Owner may change the Annuity Commencement Date by Written
Request made at least 30 days prior to the date that Annuity Benefit
payments are scheduled to begin. Unless the Company agrees otherwise, the
Annuity Commencement Date cannot be later than the Contract Anniversary
following the 85th birthday of the eldest Owner, or five years after the
Contract Effective Date, whichever is later.
ELECTION OF SETTLEMENT OPTION
If the Owner is alive on the Annuity Commencement Date and unless
otherwise directed, the Company will apply the Account Value, less premium
taxes, if any, according to the Settlement Option elected.
If no election has been made on the Annuity Commencement Date, the Company
will begin payments based on Settlement Option B (Life Annuity with
Payments for at Least a Fixed Period), described below, with a fixed
period of 120 monthly payments assured.
BENEFIT PAYMENTS
Benefit Payments may be calculated and paid: (1) as a Fixed Dollar
Benefit; (2) as a Variable Dollar Benefit; or (3) as a combination of
both.
If only a Fixed Dollar Benefit is to be paid, the Company will transfer
all of the Account Value to the Company's general account on the
applicable Commencement Date, or on the Death Benefit Valuation Date (if
applicable). Similarly, if only a Variable Dollar Benefit is elected, the
Company will transfer all of the Account Value to the Sub-Accounts as of
the end of the Valuation Period immediately prior to the applicable
Commencement Date; the Company will allocate the amount transferred among
the Sub-Accounts in accordance with a Written Request. No transfers
between the Fixed Dollar Benefit and the Variable Dollar Benefit will be
allowed after the Commencement Date. However, after the Variable Dollar
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Benefit has been paid for at least twelve months, the Person Controlling
Payments may, no more than once each twelve months thereafter, transfer
all or part of the Benefit Units upon which the Variable Dollar Benefit is
based from the Sub-Account(s) then held, to Benefit Units in different
Sub-Account(s).
If a Variable Dollar Benefit is elected, the amount to be applied under
that benefit is the Variable Account Value as of the end of the Valuation
Period immediately preceding the applicable Commencement Date. If a Fixed
Dollar Benefit is to be paid, the amount to be applied under that benefit
is the Fixed Account Value as of the applicable Commencement Date, or as
of the Death Benefit Valuation Date (if applicable).
FIXED DOLLAR BENEFIT
Fixed Dollar Benefit payments are determined by multiplying the Fixed
Account Value (expressed in thousands of dollars and after deduction of
any fees and charges, loans, or applicable premium tax not previously
deducted) by the amount of the monthly payment per $1,000 of value
obtained from the Settlement Option Table for the settlement option
elected. Fixed Dollar Benefit payments will remain level for the duration
of the payment period.
If at the time a Fixed Dollar Benefit is elected, the Company has
available options or rates on a more favorable basis than those
guaranteed, the higher benefits shall be applied and shall not change for
as long as that election remains in force.
VARIABLE DOLLAR BENEFIT
The first monthly Variable Dollar Benefit payment is equal to the Owner's
Variable Account Value (expressed in thousands of dollars and after
deduction of any fees and charges, loans, or applicable premium tax not
previously deducted) as of the end of the Valuation Period immediately
preceding the applicable Commencement Date multiplied by the amount of the
monthly payment per $1,000 of value obtained from the Settlement Option
Table for the Benefit Payment option elected less the pro rata portion of
the Contract Maintenance Fee.
The number of Benefit Units in each Sub-Account held by the Owner is
determined by dividing the dollar amount of the first monthly Variable
Dollar Benefit payment from each Sub-Account by the Benefit Unit Value for
that Sub-Account as of the applicable Commencement Date. The number of
Benefit Units remains fixed during the Benefit Payment Period, except as a
result of any transfers among Sub-Accounts after the applicable
Commencement Date.
The dollar amount of the second and any subsequent Variable Dollar Benefit
payment will reflect the investment performance of the Sub-Account(s)
selected and may vary from month to month. The total amount of the second
and any subsequent Variable Dollar Benefit payment will be equal to the
sum of the payments from each Sub-Account less a pro rata portion of the
Contract Maintenance Fee. Where an Owner elects a Variable Dollar Benefit,
there is a risk that only one Benefit Payment will be made under any
settlement option, if: (i) at the end of the applicable Valuation Period,
the Owner's Variable Account Value has declined to zero; or (ii) the
person on whose life Benefit Payments are based dies prior to the second
Benefit Payment.
The payment from each Sub-Account is found by multiplying the number of
Benefit Units held in each Sub-Account by the Benefit Unit Value for that
Sub-Account as of the end of the fifth Valuation Period preceding the due
date of the payment.
The Benefit Unit Value for each Sub-Account is originally established in
the same manner as Accumulation Unit values. Thereafter, the Benefit Unit
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Value for a Sub-Account is determined by multiplying the Benefit Unit
Value as of the end of the preceding Valuation Period by the Net
Investment Factor, determined as set forth above under "Accumulation Unit
Value", for the Valuation Period just ended. The product is then
multiplied by the assumed daily investment factor (0.99991781), for the
number of days in the Valuation Period. The factor is based on the assumed
net investment rate of 3% per year, compounded annually, that is reflected
in the Settlement Option Tables.
TRANSFERS AFTER THE ANNUITY COMMENCEMENT DATE
After the Annuity Commencement Date, no transfers between the Fixed
Account and the Separate Account are permitted. However, after a Variable
Dollar Annuity Benefit has been paid for at least twelve months, the
Participant may, by Written Request to the Administrative Office, transfer
Annuity Units between Sub-Accounts no more than once during a twelve-month
period.
ANNUITY TRANSFER FORMULA
Transfers after the Annuity Commencement Date are implemented according to
the following formulas:
(1) Determine the number of units to be transferred from the Sub-Account
as follows:
=AT/AUV1
(2) Determine the number of Annuity Units remaining in such Sub-Account
(after the transfer):
= UNIT1 - AT/AUV1
(3) Determine the number of Annuity Units in the Transferee Sub-Account
(after the transfer):
= UNIT2 + AT/AUV2
(4) Subsequent Variable Dollar Annuity Benefit payments will reflect the
changes in Annuity Units in each Sub-Account as of the next Variable
Dollar Annuity Benefit payment's due date.
Where:
(AUV1) is the Annuity Unit Value of the Sub-Account that the transfer
is being made from as of the end of the Valuation Period in which the
transfer request was received.
(AUV2) is the Annuity Unit Value of the Sub-Account that the transfer
is being made to as of the end of the Valuation Period in which the
transfer request was received.
(UNIT1) is the number of Annuity Units in the Sub-Account that the
transfer is being made from, before the transfer.
(UNIT2) is the number of Annuity Units in the Sub-Account that the
transfer is being made to, before the transfer.
(AT) is the dollar amount being transferred from the Sub-Account.
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SETTLEMENT OPTIONS
OPTION A: Income for a Fixed Period
The Company will make periodic payments for a fixed period.
The first payment will be paid as of the last day of the
initial Payment Interval. The maximum time over which
payments will be made by the Company or money will be held
by the Company is 30 years. The Option A Table applies to
this Option.
OPTION B: Life Annuity with Payments for at Least a Fixed Period
The Company will make periodic payments for at least a
fixed period. If the person on whose life Benefit Payments
are based lives longer than the fixed period, then the
Company will make payments until his or her death. The
first payment will be paid as of the first day of the
initial Payment Interval. The Option B Table(s) apply to
this Option.
OPTION C: Joint and One-Half Survivor Annuity
The Company will make periodic payments until the death of
the primary person on whose life Benefit Payments are
based; thereafter, the Company will make one-half of the
periodic payment until the death of the secondary person on
whose life Benefit Payments are based. The Company will
require Due Proof of Death of the primary person on whose
life Benefit Payments are based. The first payment will be
paid as of the first day of the initial Payment Interval.
The Option C Table(s) apply to this Option.
OPTION D: Life Annuity
We will make periodic payments until the death of the
person on whose life Benefit Payments are based. The first
payment will be paid as of the first day of the initial
Payment Interval. The Option D Table(s) apply to this
option.
OPTION E: Any Other Form
The Company will make periodic payments in any other form
of settlement option which is acceptable to us at the time
of an election.
MINIMUM AMOUNTS
Presently, the minimum amount of a Benefit Payment under any settlement
option is $50. If an Owner selects a Payment Interval under which a
Benefit Payment would be less than $50, the Company will advise the Owner
that a new Payment Interval must be selected so that the Benefit Payment
will be at least $50. Generally, monthly, quarterly, semi-annual and
annual Payment Intervals are available. From time to time, the Company may
require Benefit Payments to be made by direct deposit or wire transfer to
the account of a designated payee.
Minimum amounts, Payment Intervals and other terms and conditions may be
modified by the Company at any time without prior notice to Owners, as
permitted by applicable law. If the Company changes the minimum amounts,
the Company may change any current or future payment amounts and/or
Payment Intervals to conform with the change. More than one settlement
option may be elected if the requirements for each settlement option
elected are satisfied. Once payment begins under a settlement option, the
settlement option may not be changed.
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All factors, values, benefits and reserves under the Contract will not be
less than those required by the law of the state in which the Contract is
delivered.
SETTLEMENT OPTION TABLES
The Settlement Option Tables in Appendix A show the payments that the
Company will make at sample Payment Intervals for each $1,000 applied at
the guaranteed interest rate.
Rates for monthly payments for ages or fixed periods not shown in the
Settlement Option Tables will be calculated on the same basis as those
shown and may be obtained from the Company. Fixed periods shorter than
five years are not available, except as a Death Benefit Settlement Option.
GENERAL PROVISIONS
NON-PARTICIPATING
The Contract does not pay dividends or share in the Company's divisible
surplus.
MISSTATEMENT
If the age and/or sex of a person on whose life Benefit Payments are based
is misstated, the payments or other benefits under the Contract shall be
adjusted to the amount which would have been payable based on the correct
age and/or sex. If the Company made any underpayments based on any
misstatement, the amount of any underpayment with interest shall be
immediately paid in one sum. In addition to any other remedies that may be
available at law or at equity, the Company may deduct any overpayments
made, with interest, from any succeeding payment(s) due under the
Contract.
PROOF OF EXISTENCE AND AGE
The Company may require proof of age and/or sex of any person on whose
life Benefit Payments are based. If payment under a settlement option
depends on whether a specified person is still alive, the Company may at
any time require proof that such person is still living.
DISCHARGE OF LIABILITY
Upon payment of any partial or full surrender, or any Benefit Payment, the
Company shall be discharged from all liability to the extent of each such
payment.
TRANSFER OF OWNERSHIP
NON-QUALIFIED CONTRACT
The Owner of a Non-Qualified Contract may transfer ownership at any time
during his or her lifetime. Any such transfer is subject to the following:
(1) it must be made by Written Request; and
(2) unless otherwise elected or required by law, it will not
cancel a designation of an Annuitant or Beneficiary or any
settlement option election previously made.
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QUALIFIED CONTRACT
The Owner of a Qualified Contract may not transfer ownership.
ASSIGNMENT
NON-QUALIFIED CONTRACT
The Owner of a Non-Qualified Contract may assign all or any part of his or
her rights under the Contract except rights to:
(1) designate or change a Beneficiary;
(2) designate or change an Annuitant;
(3) transfer ownership; and
(4) elect a settlement option.
The person to whom an assignment is made is called an assignee.
The Company is not responsible for the validity of any assignment. An
assignment must be in writing and must be received at the Administrative
Office of the Company. The Company will not be bound by an assignment
until the Company acknowledges it. An assignment is subject to any payment
made or any action the Company takes before the Company acknowledges it.
An assignment may be ended only by the assignee or as provided by law.
QUALIFIED CONTRACT
The Owner of a Qualified Contract may not assign or in any way alienate
his or her interest under the Contract.
ANNUAL REPORT
At least once each Contract Year, the Company will provide a report of the
Contract's current values and any other information required by law, until
the first to occur of the following:
(1) the date the Contract is fully surrendered;
(2) the Annuity Commencement Date; or
(3) the Death Benefit Commencement Date.
INCONTESTABILITY
No Contract shall be contestable by the Company.
ENTIRE CONTRACT
The Company issues the Contract in consideration and acceptance of the
payment of the initial Purchase Payment. In those states that require a
written application, a copy of the application will be attached to and
become part of the Contract. Only statements in the application, if any,
or made elsewhere by the Owner in consideration for the Contract will be
used to void the Owner's interest under the Contract, or to defend a claim
based on it. Such statements are representations and not warranties.
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CHANGES -- WAIVERS
No changes or waivers of the terms of the Contract are valid unless made
in writing by the Company's President, Vice President, or Secretary. The
Company reserves the right both to administer and to change the provisions
of the Contract to conform to any applicable laws, regulations or rulings
issued by a governmental agency.
NOTICES AND DIRECTIONS
The Company will not be bound by any authorization, election or notice
which is not made by Written Request.
Any written notice requirement by the Company to the Owner will be
satisfied by the mailing of any such required written notice, by
first-class mail, to the Owner's last known address as shown on the
Company's records.
FEDERAL TAX MATTERS
INTRODUCTION
The following discussion is a general description of federal tax
considerations relating to the Contract and is not intended as tax advice.
This discussion is not intended to address the tax consequences resulting
from all of the situations in which a person may be entitled to or may
receive a distribution under the Contract. Any person concerned about tax
implications should consult a competent tax advisor before initiating any
transaction. This discussion is based upon the Company's understanding of
the present federal income tax laws as they are currently interpreted by
the Internal Revenue Service. No representation is made as to the
likelihood of the continuation of the present federal income tax laws or
of the current interpretation by the Internal Revenue Service. Moreover,
no attempt has been made to consider any applicable state or other tax
laws.
The Contract may be purchased on a tax-qualified or non-tax-qualified
basis. Qualified Contracts are designed for use in connection with plans
entitled to special income tax treatment under Section 401, 403, or 408 of
the Code. The ultimate effect of federal income taxes on the amounts held
under a Contract, on Benefit Payments, and on the economic benefit to the
Owner or the Beneficiary may depend on the type of Contract and the tax
status of the individual concerned. Certain requirements must be satisfied
in purchasing a Qualified Contract and receiving distributions from such a
Contract in order to continue to receive favorable tax treatment. The
Company makes no attempt to provide more than general information about
use of Contracts with the various types of tax-qualified arrangements.
Owners and Beneficiaries are cautioned that the rights of any person to
any benefits may be subject to the terms and conditions of the
tax-qualified arrangement, regardless of the terms and conditions of the
Contract. Some tax-qualified arrangements are subject to distribution and
other requirements that are not incorporated in the administration of the
Contract. Owners are responsible for determining that contributions,
distributions and other transactions with respect to Qualified Contracts
satisfy applicable law. Therefore, purchasers of Qualified Contracts
should seek competent legal and tax advice regarding the suitability of
the Contract for their situation, the applicable requirements, and the tax
treatment of the rights and benefits of the Contract. The Statement of
Additional Information discusses the requirements for qualifying as an
annuity.
TAXATION OF ANNUITIES IN GENERAL
Section 72 of the Code governs taxation of annuities in general. The
Company believes that the Owner who is a natural person generally is not
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taxed on increases in the value of an Account until distribution occurs by
withdrawing all or part of the Account Value (e.g., surrenders or annuity
payments under the Settlement Option elected.) The taxable portion of a
distribution (in the form of a single sum payment or an annuity) is
generally taxable as ordinary income.
The following discussion generally applies to a Contract owned by a
natural person.
SURRENDERS
QUALIFIED CONTRACTS
In the case of a surrender under a Contract, other than Systematic
Withdrawal Option payments treated as Annuity Benefit payments for tax
purposes, a pro rata portion of the amount received is taxable, generally
based on the ratio of the "investment in the contract" to the individual's
total accrued benefit under the annuity. The "investment in the contract"
generally equals the amount of any non-deductible and/or non-excludable
Purchase Payments paid by or on behalf of any individual. Special tax
rules may be available for certain distributions from a Qualified
Contract.
NON-QUALIFIED CONTRACTS
In the case of a surrender under a Non-Qualified Contract, the amount
recovered is taxable to the extent that the Account Value immediately
before the surrender, reduced by any applicable charges, exceeds the
"investment in the contract" at such time.
ANNUITY BENEFIT PAYMENTS
Although the tax consequences may vary depending on the Settlement Option
elected under the Contract, in general, only the portion of a Benefit
Payment that represents the amount by which the Account Value exceeds the
"investment in the contract" will be taxed; after the "investment in the
contract" is recovered, the full amount of any additional Benefit Payments
is taxable. For Variable Dollar Benefit Payments, the taxable portion is
generally determined by an equation that establishes a specific dollar
amount of each payment that is not taxed. The dollar amount is determined
by dividing the "investment in the contract" by the total number of
expected periodic payments. For Fixed Dollar Benefit Payments, in general
there is no tax on the portion of each payment which represents the same
ratio that the "investment in the contract" bears to the total expected
value of the Benefit Payments for the term of the payments; however, the
remainder of each Benefit Payment is taxable. In either case, once the
"investment in the contract" has been fully recovered, the full amount of
any additional Benefit Payments is taxable. If Benefit Payments cease as a
result of an Owner's death before full recovery of the "investment in the
contract," consult a competent tax adviser regarding deductibility of the
unrecovered amount.
PENALTY TAX
In general, a 10% premature distribution penalty tax applies to the
taxable portion of a distribution from a Contract prior to Age 59 1/2.
Exceptions to this penalty tax are available to distributions made on
account of disability, death, and certain payments for life and life
expectancy. Certain other exceptions may apply depending on the
tax-qualification of the Contract involved. A 25% premature distribution
penalty tax applies to certain distributions from a Savings Incentive
Match Plan for Employees (SIMPLE) IRA described in Section 408(p) of the
Code.
TAXATION OF DEATH BENEFIT PROCEEDS
Amounts may be distributed under a Contract because of the death of an
Owner. Generally such amounts are includable in the income of the
recipient as follows: (1) if distributed in a lump sum, they are taxed in
the same manner as a full surrender as described above, or (2) if
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distributed under a Settlement Option, they are taxed in the same manner
as Annuity Benefit payments, as described above.
TRANSFERS, ASSIGNMENTS, OR EXCHANGES OF THE CONTRACT
A transfer of ownership or an assignment of a Contract, the designation of
an Annuitant who is not also the Owner, or the exchange of a Contract may
result in certain tax consequences to the Owner that are not discussed
herein.
QUALIFIED CONTRACTS - GENERAL
Qualified Contracts are designed for use with several types of retirement
plans. The tax rules applicable to Owner and Beneficiaries in retirement
plans vary according to the type of plan and the terms and conditions of
the plan.
TEXAS OPTIONAL RETIREMENT PROGRAM
Section 830.105 of the Texas Government Code permits participants in the
Texas Optional Retirement Program ("ORP") to withdraw their interests in a
variable annuity policy issued under the ORP only upon: (1) termination of
employment in the Texas public institutions of higher education; (2)
retirement; (3) attainment of Age 70 1/2; or (4) death. Section 830.205 of
the Texas Government Code provides that benefits under the optional
retirement program vest after one year of participation. Accordingly, an
Account Value cannot be withdrawn or distributed without written
certification from the employer of the ORP participant's vesting status
and, if the participant is living and under age 70 1/2, the participant's
retirement or other termination from employment.
INDIVIDUAL RETIREMENT ANNUITIES
Code Sections 219 and 408 permit individuals or their employers to
contribute to an individual retirement program known as an "Individual
Retirement Annuity" or "IRA". Under applicable limitations, certain
amounts may be contributed to an IRA that are deductible from an
individual's gross income. Employers also may establish a Simplified
Employee Pension (SEP) Plan or Savings Incentive Match Plan for Employees
(SIMPLE) to provide IRA contributions on behalf of their employees.
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. Subject to certain limits, such contributions
are not includable in the gross income of the employee until the employee
receives distributions under the Contract. Amounts attributable to
contributions made under a salary reduction agreement cannot be
distributed until the employee attains Age 59 1/2, separates from service,
becomes disabled, incurs a hardship, or dies.
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PENSION AND PROFIT SHARING PLANS
Code section 401 permits employers to establish various types of
retirement plans for employees, and permits self-employed individuals to
establish retirement plans for themselves and their employees. These
retirement plans may permit the purchase of the Contracts to accumulate
retirement savings under the plans.
Purchasers of a Contract for use with such plans should seek competent
advice regarding the suitability of the proposed plan documents and the
Contract to their specific needs.
CERTAIN DEFERRED COMPENSATION PLANS
Governmental and other tax-exempt employers may invest in annuity
contracts in connection with deferred compensation plans established for
the benefit of their employees under Section 457 of the Code. Other
employers may invest in annuity contracts in connection with non-qualified
deferred compensation plans established for the benefit of their
employees. Under these plans, contributions made for the benefit of the
employees generally will not be includable in the employees' gross income
until distributed from the plan.
WITHHOLDING
Pension and annuity distributions generally are subject to withholding for
the recipient's federal income tax liability at rates that vary according
to the type of distribution and the recipient's tax status. Federal
withholding at a flat 20% of the taxable part of the distribution is
required if the distribution is eligible for rollover and the distribution
is not paid as a direct rollover. In other cases, recipients generally are
provided the opportunity to elect not to have tax withheld from
distributions.
POSSIBLE CHANGES IN TAXATION
There is always the possibility that the tax treatment of annuities could
change by legislation or other means (such as IRS regulations, revenue
rulings, judicial decisions, etc.). Moreover, it is also possible that any
change could be retroactive (that is, effective prior to the date of the
change).
OTHER TAX CONSEQUENCES
As noted above, the foregoing discussion of the federal income tax
consequences is not exhaustive and special rules are provided with respect
to other tax situations not discussed in this Prospectus. Further, the
federal income tax consequences discussed herein reflect the Company's
understanding of current law and the law may change. Federal estate and
gift tax consequences and state and local estate, inheritance, and other
tax consequences of ownership or receipt of distributions under the
Contract depend on the circumstances of each Owner or recipient of the
distribution. A competent tax adviser should be consulted for further
information.
GENERAL
At the time the initial Purchase Payment is paid, a prospective purchaser
must specify whether the purchase is a Qualified Contract or a
Non-Qualified Contract. If the initial Purchase Payment is derived from an
exchange or surrender of another annuity contract, the Company may require
that the prospective purchaser provide information with regard to the
federal income tax status of the previous annuity contract. The Company
will require that persons purchase separate Contracts if they desire to
invest monies qualifying for different annuity tax treatment under the
Code. Each such separate Contract will require the minimum initial
Purchase Payment stated above. Additional Purchase Payments under a
Contract must qualify for the same federal income tax treatment as the
initial Purchase Payment under the Contract; the Company will not accept
an additional Purchase Payment under a Contract if the federal income tax
- --------------------------------------------------------------------------------
Page 51
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
treatment of such Purchase Payment would be different from that of the
initial Purchase Payment.
DISTRIBUTION OF THE CONTRACT
AAG Securities, Inc. ("AAG Securities"), an affiliate of the Company, is
the principal underwriter and distributor of the Contracts. AAG Securities
may also serve as an underwriter and distributor of other contracts issued
through the Separate Account and certain other Separate Accounts of the
Company and any affiliates of the Company. AAG Securities is a wholly
owned subsidiary of American Annuity Group(SERVICEMARK), Inc., a publicly
traded company which is an indirect subsidiary of American Financial
Group, Inc. AAG Securities is registered with the Securities and Exchange
Commission as a broker-dealer and is a member of the National Association
of Securities Dealers, Inc. ("NASD"). Its principal offices are located at
250 East Fifth Street, Cincinnati, Ohio 45202. The Company pays AAG
Securities for acting as underwriter under a distribution agreement.
AAG Securities sells Contracts through its registered representatives. In
addition, AAG Securities may enter into sales agreements with other
broker-dealers to solicit applications for the Contracts through
registered representatives who are licensed to sell securities and
variable insurance products. These agreements provide that applications
for the Contracts may be solicited by registered representatives of the
broker-dealers appointed by the Company to sell its variable life
insurance and variable annuities. These broker-dealers are registered with
the Securities and Exchange Commission and are members of the NASD. The
registered representatives are authorized under applicable state
regulations to sell variable annuities.
The Company or AAG Securities may pay commissions to registered
representatives of AAG Securities and other broker-dealers of up to 8.5%
of Purchase Payments made under the Contracts ("Commissions"). These
Commissions are reduced by one-half for Contracts issued to Owners over
age 75. When permitted by state law and in exchange for lower initial
Commissions, AAG Securities and/or the Company may pay trail commissions
to registered representatives of AAG Securities and to other
broker-dealers. Trail commissions are not expected to exceed 1% of the
Account Value of a Contract on an annual basis. To the extent permissible
under current law, the Company and/or AAG Securities may pay production,
persistency and managerial bonuses as well as other promotional
incentives, in cash or other compensation, to registered representatives
of AAG Securities and/or other broker-dealers.
LEGAL PROCEEDINGS
There are no pending legal proceedings affecting the Separate Account or
AAG Securities. The Company is involved in various kinds of routine
litigation which, in management's judgment, are not of material importance
to the Company's assets or the Separate Account.
VOTING RIGHTS
To the extent required by applicable law, all Fund shares held in the
Separate Account will be voted by the Company at regular and special
shareholder meetings of the respective Funds in accordance with
instructions received from persons having voting interests in the
corresponding Sub-Account. If, however, the 1940 Act or any regulation
thereunder should be amended, or if the present interpretation thereof
should change, or if the Company determines that it is allowed to vote all
shares in its own right, the Company may elect to do so.
- --------------------------------------------------------------------------------
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
The person with the voting interest is the Owner, or the Person
Controlling Payments, if different from the Owner. The number of votes
which are available will be calculated separately for each Sub-Account.
Before the Annuity Commencement Date, that number will be determined by
applying the Owner's percentage interest, if any, in a particular
Sub-Account to the total number of votes attributable to that Sub-Account.
The Owner, or the Person Controlling Payments, if different from the
Owner, holds a voting interest in each Sub-Account to which the Account
Value is allocated. After the Annuity Commencement Date, the number of
votes decreases as Annuity Benefit payments are made and as the number of
Accumulation Units for a Contract decreases.
The number of votes of a Fund will be determined as of the date coincident
with the date established by that Fund for shareholders eligible to vote
at the meeting of the Fund. Voting instructions will be solicited by
written communication prior to such meeting in accordance with procedures
established by the respective Funds.
Shares as to which no timely instructions are received and shares held by
the Company as to which Owners have no beneficial interest will be voted
in proportion to the voting instructions which are received with respect
to all Contracts participating in the Sub-Account. Voting instructions to
abstain on any item will be applied on a pro rata basis to reduce the
votes eligible to be cast.
Each person or entity having a voting interest in a Sub-Account will
receive proxy material, reports and other material relating to the
appropriate Fund.
It should be noted that the Funds are not required to hold annual or other
regular meetings of shareholders.
AVAILABLE INFORMATION
The Company has filed a registration statement (the Registration
Statement) with the Securities and Exchange Commission under the
Securities Act of 1933 relating to the Contracts offered by this
Prospectus. This Prospectus has been filed as a part of the Registration
Statement and does not contain all of the information set forth in the
Registration Statement and exhibits thereto, and reference is hereby made
to such Registration Statement and exhibits for further information
relating to the Company or the Contracts. Statements contained in this
Prospectus, as to the content of the Contracts and other legal
instruments, are summaries. For a complete statement of the terms thereof,
reference is made to the instruments filed as exhibits to the Registration
Statement. The Registration Statement and the exhibits thereto may be
inspected and copied at the office of the Commission, located at 450 Fifth
Street, N.W., Washington, D.C.
- --------------------------------------------------------------------------------
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information is available which contains more
details concerning the subjects discussed in this Prospectus. The
following is the Table of Contents for that Statement:
TABLE OF CONTENTS
--------------------------------------------
Page
ANNUITY INVESTORS LIFE INSURANCE COMPANY(REGISTERED)..........................3
General Information and History.........................................3
State Regulation........................................................3
SERVICES......................................................................4
Safekeeping of Separate Account Assets..................................4
Records and Reports.....................................................4
Experts.................................................................4
DISTRIBUTION OF THE CONTRACTS.................................................4
CALCULATION OF PERFORMANCE INFORMATION........................................5
Money Market Sub-Account Standardized Yield Calculation.................5
Other Sub-Account Standardized Yield Calculation........................6
Standardized Total Return Calculation...................................7
Hypothetical Performance Data...........................................7
Other Performance Data..................................................8
FEDERAL TAX MATTERS...........................................................10
Taxation of the Company.................................................10
Tax Status of the Contract..............................................11
FINANCIAL STATEMENTS..........................................................12
- --------------------------------------------------------------------------------
Copies of the Statement of Additional Information dated July 14, 1997 are
available without charge. To request a copy, please clip this coupon on the
dotted line above, enter your name and address in the spaces provided below, and
mail to: Annuity Investors Life Insurance Company(REGISTERED), P.O. Box 5423,
Cincinnati, Ohio 45201-5423.
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
City:
---------------------------------------------------------------------------
State:
--------------------------------------------------------------------------
Zip:
----------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 54
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
APPENDIX A
QUALIFIED CONTRACTS
<TABLE>
<CAPTION>
OPTION A TABLE -- INCOME FOR A FIXED PERIOD Payments for
fixed number of years for each $1,000 applied.
- ------------------------------------------------------------------------------------------------------------------------------------
Terms of Annual Semi- Quarterly Monthly Terms of Annual Semi- Quarterly Monthly Terms of Annual Semi- Quarterly Monthly
Payments Annual Payments Annual Payments Annual
- ------------------------------------------------------------------------------------------------------------------------------------
Years Years Years
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6 184.60 91.62 45.64 15.18 11 108.08 53.64 26.72 8.88 16 79.61 39.51 19.68 6.54
7 160.51 79.66 39.68 13.20 12 100.46 49.86 24.84 8.26 17 75.95 37.70 18.78 6.24
8 142.46 70.70 35.22 11.71 13 94.03 46.67 23.25 7.73 18 72.71 36.09 17.98 5.98
9 128.43 63.74 31.75 10.56 14 88.53 43.94 21.89 7.28 19 69.81 34.65 17.26 5.74
10 117.23 58.18 28.98 9.64 15 83.77 41.57 20.71 6.89 20 67.22 33.36 16.62 5.53
</TABLE>
OPTION B TABLE - LIFE ANNUITY
With Payments For At Least A Fixed Period
----------------------------------------------
60 120 180 240
MONTHS MONTHS MONTHS MONTHS
----------------------------------------------
Age
----------------------------------------------
55 $4.42 $4.39 $4.32 $4.22
56 4.51 4.47 4.40 4.29
57 4.61 4.56 4.48 4.35
58 4.71 4.65 4.56 4.42
59 4.81 4.75 4.64 4.49
60 4.92 4.86 4.73 4.55
61 5.04 4.97 4.83 4.62
62 5.17 5.08 4.92 4.69
63 5.31 5.20 5.02 4.76
64 5.45 5.33 5.12 4.83
65 5.61 5.46 5.22 4.89
66 5.77 5.60 5.33 4.96
67 5.94 5.75 5.43 5.02
68 6.13 5.91 5.54 5.08
69 6.33 6.07 5.65 5.14
70 6.54 6.23 5.76 5.19
71 6.76 6.41 5.86 5.24
72 7.00 6.58 5.96 5.28
73 7.26 6.77 6.06 5.32
74 7.53 6.95 6.16 5.35
----------------------------------------------
- --------------------------------------------------------------------------------
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
OPTION C TABLE - JOINT AND ONE-HALF SURVIVOR ANNUITY Monthly
payments for each $1,000 of proceeds by ages of persons named*.
- --------------------------------------------------------------------------------
PRIMARY SECONDARY AGE
AGE
------------------------------------------------------------------------
60 61 62 63 64 65 66 67 68 69 70
60 $4.56 $4.58 $4.61 $4.63 $4.65 $4.67 $4.69 $4.71 $4.73 $4.75 $4.76
61 4.63 4.66 4.69 4.71 4.73 4.76 4.78 4.80 4.82 4.84 4.86
62 4.71 4.74 4.77 4.80 4.82 4.85 4.87 4.90 4.92 4.94 4.96
63 4.79 4.82 4.85 4.88 4.91 4.94 4.97 5.00 5.02 5.05 5.07
64 4.88 4.91 4.94 4.98 5.01 5.04 5.07 5.10 5.13 5.15 5.18
65 4.96 5.00 5.03 5.07 5.11 5.14 5.17 5.20 5.24 5.27 5.30
66 5.05 5.09 5.13 5.17 5.21 5.24 5.28 5.32 5.35 5.38 5.42
67 5.14 5.18 5.23 5.27 5.31 5.35 5.39 5.43 5.47 5.51 5.54
68 5.23 5.28 5.33 5.37 5.42 5.46 5.50 5.55 5.59 5.63 5.67
69 5.33 5.38 5.43 5.48 5.53 5.57 5.62 5.67 5.72 5.76 5.81
70 5.43 5.48 5.53 5.59 5.64 5.69 5.74 5.80 5.85 5.90 5.95
- --------------------------------------------------------------------------------
*Payments after the death of the Primary Payee will be one-half of the amount
shown.
OPTION D TABLE - LIFE ANNUITY
Monthly payments for each $1,000 applied.
- --------------------------------------------------------------------------------
AGE AGE AGE AGE
- --------------------------------------------------------------------------------
55 $4.43 60 $4.94 65 $5.65 70 $6.64
56 4.52 61 5.07 66 5.82 71 6.89
57 4.62 62 5.20 67 6.00 72 7.15
58 4.72 63 5.34 68 6.20 73 7.43
59 4.83 64 5.49 69 6.41 74 7.74
- --------------------------------------------------------------------------------
NON-QUALIFIED CONTRACTS
<TABLE>
<CAPTION>
OPTION A TABLE - INCOME FOR A FIXED PERIOD
Payments for fixed number of years for each $1,000 applied.
- ------------------------------------------------------------------------------------------------------------------------------------
Terms of Annual Semi- Quarterly Monthly Terms of Annual Semi- Quarterly Monthly Terms of Annual Semi- Quarterly Monthly
Payments Annual Payments Annual Payments Annual
- ------------------------------------------------------------------------------------------------------------------------------------
Years Years Years
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6 184.60 91.62 45.64 15.18 11 108.08 53.64 26.72 8.88 16 79.61 39.51 19.68 6.54
7 160.51 79.66 39.68 13.20 12 100.46 49.86 24.84 8.26 17 75.95 37.70 18.78 6.24
8 142.46 70.70 35.22 11.71 13 94.03 46.67 23.25 7.73 18 72.71 36.09 17.98 5.98
9 128.43 63.74 31.75 10.56 14 88.53 43.94 21.89 7.28 19 69.81 34.65 17.26 5.74
10 117.23 58.18 28.98 9.64 15 83.77 41.57 20.71 6.89 20 67.22 33.36 16.62 5.53
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Page 56
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
OPTION B TABLES - LIFE ANNUITY
With Payments For At Least A Fixed Period
-----------------------------------------
MALE 60 120 180 240
MONTHS MONTHS MONTHS MONTHS
-----------------------------------------
Age
-----------------------------------------
55 $4.68 $4.62 $4.53 $4.39
56 4.78 4.72 4.61 4.45
57 4.89 4.82 4.69 4.51
58 5.00 4.92 4.78 4.58
59 5.12 5.03 4.87 4.64
60 5.25 5.14 4.96 4.71
61 5.39 5.26 5.06 4.78
62 5.53 5.39 5.16 4.84
63 5.69 5.52 5.26 4.90
64 5.85 5.66 5.36 4.96
65 6.03 5.81 5.46 5.02
66 6.21 5.96 5.56 5.08
67 6.41 6.11 5.66 5.13
68 6.62 6.28 5.76 5.18
69 6.84 6.44 5.86 5.23
70 7.07 6.61 5.96 5.27
71 7.32 6.78 6.05 5.31
72 7.58 6.96 6.14 5.34
73 7.85 7.14 6.23 5.37
74 8.14 7.32 6.31 5.40
------------------------------------------
FEMALE 60 120 180 240
MONTHS MONTHS MONTHS MONTHS
------------------------------------------
Age
------------------------------------------
55 $4.25 $4.22 $4.18 $4.10
56 4.33 4.30 4.25 4.17
57 4.41 4.38 4.32 4.23
58 4.50 4.47 4.40 4.30
59 4.60 4.56 4.48 4.37
60 4.70 4.66 4.57 4.44
61 4.81 4.76 4.66 4.51
62 4.93 4.86 4.75 4.58
63 5.05 4.98 4.85 4.65
64 5.18 5.10 4.95 4.72
65 5.32 5.22 5.05 4.79
66 5.47 5.36 5.16 4.86
67 5.63 5.50 5.26 4.93
68 5.80 5.65 5.37 5.00
69 5.98 5.80 5.49 5.06
70 6.18 5.96 5.60 5.12
71 6.39 6.14 5.71 5.18
72 6.62 6.31 5.83 5.23
73 6.86 6.50 5.94 5.28
74 7.12 6.69 6.04 5.32
- --------------------------------------------------------------------------------
Page 57
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
OPTION C TABLES - JOINT AND ONE-HALF SURVIVOR ANNUITY
Monthly payments for each $1,000 of proceeds by ages of persons named*.
- --------------------------------------------------------------------------------
MALE FEMALE SECONDARY AGE
PRIMARY
AGE
-------------------------------------------------------------------------
60 61 62 63 64 65 66 67 68 69 70
- --------------------------------------------------------------------------------
60 $4.70 $4.73 $4.76 $4.79 $4.82 $4.85 $4.88 $4.91 $4.94 $4.96 $4.99
61 4.78 4.81 4.84 4.88 4.91 4.94 4.97 5.00 5.03 5.06 5.09
62 4.86 4.89 4.93 4.96 5.00 5.03 5.07 5.10 5.13 5.16 5.19
63 4.94 4.97 5.01 5.05 5.09 5.13 5.16 5.20 5.24 5.27 5.31
64 5.02 5.06 5.10 5.14 5.18 5.23 5.27 5.31 5.34 5.38 5.42
65 5.10 5.15 5.19 5.24 5.28 5.33 5.37 5.41 5.46 5.50 5.54
66 5.19 5.24 5.28 5.33 5.38 5.43 5.48 5.52 5.57 5.62 5.66
67 5.28 5.33 5.38 5.43 5.48 5.53 5.59 5.64 5.69 5.74 5.79
68 5.37 5.42 5.48 5.53 5.59 5.64 5.70 5.75 5.81 5.86 5.92
69 5.46 5.52 5.57 5.63 5.69 5.75 5.81 5.87 5.93 5.99 6.05
70 5.55 5.61 5.67 5.74 5.80 5.86 5.93 5.99 6.06 6.12 6.19
- --------------------------------------------------------------------------------
*Payments after the death of the Primary Payee will be one-half of the amount
shown.
Monthly payments for each $1,000 of proceeds by ages of persons named*.
- --------------------------------------------------------------------------------
MALE FEMALE PRIMARY AGE
SCONDARY
AGE
------------------------------------------------------------------------
60 61 62 63 64 65 66 67 68 69 70
- --------------------------------------------------------------------------------
60 $4.46 $4.54 $4.62 $4.71 $4.79 $4.88 $4.98 $5.07 $5.17 $5.27 $5.38
61 4.48 4.56 4.65 4.73 4.82 4.91 5.01 5.11 5.21 5.31 5.42
62 4.50 4.58 4.67 4.75 4.85 4.94 5.04 5.14 5.25 5.36 5.47
63 4.52 4.60 4.69 4.78 4.87 4.97 5.07 5.17 5.28 5.40 5.51
64 4.53 4.62 4.71 4.80 4.90 5.00 5.10 5.21 5.32 5.44 5.56
65 4.55 4.63 4.72 4.82 4.92 5.02 5.13 5.24 5.35 5.48 5.60
66 4.56 4.65 4.74 4.84 4.94 5.05 5.16 5.27 5.39 5.51 5.64
67 4.57 4.66 4.76 4.86 4.96 5.07 5.18 5.30 5.42 5.55 5.68
68 4.59 4.68 4.78 4.88 4.98 5.09 5.21 5.33 5.45 5.59 5.72
69 4.60 4.69 4.79 4.89 5.00 5.11 5.23 5.36 5.48 5.62 5.76
70 4.61 4.70 4.80 4.91 5.02 5.13 5.25 5.38 5.51 5.65 5.80
- --------------------------------------------------------------------------------
*Payments after the death of the Primary Payee will be one-half of the amount
shown.
- --------------------------------------------------------------------------------
Page 58
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
OPTION D TABLES - LIFE ANNUITY
Monthly payments for each $1,000 applied.
Male
- --------------------------------------------------------------------------------
Age Age Age Age
- --------------------------------------------------------------------------------
55 $4.70 60 $5.28 65 $6.10 70 $7.23
56 4.80 61 5.42 66 6.29 71 7.51
57 4.91 62 5.57 67 6.50 72 7.80
58 5.03 63 5.74 68 6.73 73 8.12
59 5.15 64 5.91 69 6.97 74 8.45
- --------------------------------------------------------------------------------
Female
- --------------------------------------------------------------------------------
Age Age Age Age
- --------------------------------------------------------------------------------
55 $4.25 60 $4.72 65 $5.35 70 $6.25
56 4.34 61 4.83 66 5.51 71 6.47
57 4.42 62 4.95 67 5.67 72 6.71
58 4.52 63 5.07 68 5.85 73 6.97
59 4.61 64 5.21 69 6.04 74 7.26
- --------------------------------------------------------------------------------
Upon request, we will provide information on the payments that we will make for
other Payment Intervals, gender combinations, and ages.
- --------------------------------------------------------------------------------
Page 59
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
GROUP CONTRACT
<TABLE>
<CAPTION>
OPTION A TABLE - INCOME FOR A FIXED PERIOD
Payments for fixed number of years for each $1,000 applied.
- ------------------------------------------------------------------------------------------------------------------------------------
Terms of Annual Semi- Quarterly Monthly Terms of Annual Semi- Quarterly Monthly Terms of Annual Semi- Quarterly Monthly
Payments Annual Payments Annual Payments Annual
- ------------------------------------------------------------------------------------------------------------------------------------
Years Years Years
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6 184.60 91.62 45.64 15.18 11 108.08 53.64 26.72 8.88 16 79.61 39.51 19.68 6.54
7 160.51 79.66 39.68 13.20 12 100.46 49.86 24.84 8.26 17 75.95 37.70 18.78 6.24
8 142.46 70.70 35.22 11.71 13 94.03 46.67 23.25 7.73 18 72.71 36.09 17.98 5.98
9 128.43 63.74 31.75 10.56 14 88.53 43.94 21.89 7.28 19 69.81 34.65 17.26 5.74
10 117.23 58.18 28.98 9.64 15 83.77 41.57 20.71 6.89 20 67.22 33.36 16.62 5.53
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
OPTION B TABLE - LIFE ANNUITY
With Payments For At Least A Fixed Period
--------------------------------------------
60 120 180 240
Months Months Months Months
--------------------------------------------
Age
--------------------------------------------
55 $4.55 $4.51 $4.44 $4.33
56 4.65 4.61 4.52 4.39
57 4.76 4.71 4.61 4.46
58 4.87 4.81 4.70 4.53
59 4.99 4.92 4.79 4.60
60 5.12 5.04 4.89 4.67
61 5.25 5.16 4.99 4.74
62 5.40 5.29 5.09 4.81
63 5.55 5.42 5.19 4.87
64 5.72 5.56 5.30 4.94
65 5.89 5.71 5.40 5.00
66 6.08 5.86 5.51 5.06
67 6.27 6.02 5.62 5.11
68 6.48 6.19 5.72 5.17
69 6.71 6.36 5.83 5.22
70 6.95 6.54 5.93 5.26
71 7.20 6.72 6.03 5.30
72 7.46 6.90 6.12 5.34
73 7.75 7.08 6.21 5.37
74 8.04 7.27 6.30 5.40
--------------------------------------------
- --------------------------------------------------------------------------------
Page 60
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
OPTION C TABLE - JOINT AND ONE-HALF SURVIVOR ANNUITY
Monthly payments for each $1,000 of proceeds by ages of persons named*.
- --------------------------------------------------------------------------------
Secondary Age
- --------------------------------------------------------------------------------
Primary
Age 60 61 62 63 64 65 66 67 68 69 70
- --------------------------------------------------------------------------------
60 $4.73 $4.75 $4.78 $4.80 $4.83 $4.85 $4.87 $4.89 $4.92 $4.93 $4.95
61 4.81 4.84 4.87 4.90 4.92 4.95 4.97 5.00 5.02 5.04 5.06
62 4.90 4.93 4.96 4.99 5.02 5.05 5.08 5.11 5.13 5.16 5.18
63 4.99 5.03 5.06 5.09 5.13 5.16 5.19 5.22 5.25 5.28 5.30
64 5.09 5.12 5.16 5.20 5.23 5.27 5.30 5.34 5.37 5.40 5.43
65 5.18 5.22 5.26 5.31 5.35 5.38 5.42 5.46 5.49 5.53 5.56
66 5.28 5.33 5.37 5.42 5.46 5.50 5.54 5.58 5.62 5.66 5.70
67 5.38 5.43 5.48 5.53 5.58 5.62 5.67 5.72 5.76 5.80 5.84
68 5.49 5.54 5.59 5.65 5.70 5.75 5.80 5.85 5.90 5.95 5.99
69 5.60 5.65 5.71 5.77 5.82 5.88 5.93 5.99 6.04 6.10 6.15
70 5.71 5.77 5.83 5.89 5.95 6.01 6.07 6.13 6.19 6.25 6.31
- --------------------------------------------------------------------------------
*Payments after the death of the Primary Payee will be one-half (1/2) of the
amount shown.
OPTION D TABLE - LIFE ANNUITY
Monthly payments for each $1,000 applied.
------------------------------------------------------------------
Age Age Age Age
------------------------------------------------------------------
55 $4.56 60 $5.14 65 $5.95 70 $7.08
56 4.67 61 5.28 66 6.14 71 7.36
57 4.77 62 5.43 67 6.35 72 7.66
58 4.89 63 5.59 68 6.58 73 7.98
59 5.01 64 5.76 69 6.82 74 8.33
------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 61
<PAGE>
ANNUITY INVESTORS[REGISTERED TRADEMARK] VARIABLE ACCOUNT B
OF
ANNUITY INVESTORS LIFE INSURANCE COMPANY[REGISTERED TRADEMARK]
STATEMENT OF ADDITIONAL INFORMATION
FOR
THE COMMODORE NAVIGATOR[SERVICEMARK]
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES ISSUED BY
ANNUITY INVESTORS LIFE INSURANCE COMPANY[REGISTERED TRADEMARK]
P.O. BOX 5423, CINCINNATI, OHIO 45201-5423, (800) 789-6771
THIS STATEMENT OF ADDITIONAL INFORMATION EXPANDS UPON SUBJECTS DISCUSSED IN THE
CURRENT PROSPECTUS FOR THE COMMODORE NAVIGATOR[SERVICEMARK], INDIVIDUAL AND
GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY CONTRACTS (THE "CONTRACTS") OFFERED BY
ANNUITY INVESTORS LIFE INSURANCE COMPANY[REGISTERED TRADEMARK]. A COPY OF THE
PROSPECTUS DATED JULY 14, 1997, AS SUPPLEMENTED FROM TIME TO TIME, MAY BE
OBTAINED FREE OF CHARGE BY WRITING TO ANNUITY INVESTORS LIFE INSURANCE
COMPANY[REGISTERED TRADEMARK], ADMINISTRATIVE OFFICE, P.O. BOX 5423, CINCINNATI,
OHIO 45201-5423. TERMS USED IN THE CURRENT PROSPECTUS FOR THE CONTRACTS ARE
INCORPORATED IN THIS STATEMENT OF ADDITIONAL INFORMATION.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE CONTRACTS.
DATED July 14, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
ANNUITY INVESTORS LIFE INSURANCE COMPANY[REGISTERED TRADEMARK]...............3
GENERAL INFORMATION AND HISTORY............................................3
STATE REGULATION..........................................................3
SERVICES.....................................................................4
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS.....................................4
RECORDS AND REPORTS........................................................4
EXPERTS....................................................................4
DISTRIBUTION OF THE CONTRACTS................................................4
CALCULATION OF PERFORMANCE INFORMATION.......................................5
MONEY MARKET SUB-ACCOUNT STANDARDIZED YIELD CALCULATION....................5
OTHER SUB-ACCOUNT STANDARDIZED YIELD CALCULATIONS..........................6
STANDARDIZED TOTAL RETURN CALCULATION......................................7
HYPOTHETICAL PERFORMANCE DATA..............................................7
OTHER PERFORMANCE DATA.....................................................8
FEDERAL TAX MATTERS.........................................................10
TAXATION OF THE COMPANY...................................................10
TAX STATUS OF THE CONTRACT................................................11
FINANCIAL STATEMENTS........................................................12
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The following information supplements the information in the Prospectus about
the Contracts. Terms used in this Statement of Additional Information have the
same meaning as in the Prospectus.
ANNUITY INVESTORS LIFE INSURANCE COMPANY[REGISTERED TRADEMARK]
GENERAL INFORMATION AND HISTORY
Annuity Investors Life Insurance Company[REGISTERED TRADEMARK] (the "Company"),
formerly known as Carillon Life Insurance Company, is a stock life insurance
company incorporated under the laws of the State of Ohio in 1981. The name
change occurred in the state of domicile on April 12, 1995. The Company is
principally engaged in the sale of fixed and variable annuity policies.
The Company was acquired in November, 1994, by American Annuity
Group[SERVICEMARK], Inc. ("AAG") a Delaware corporation that is a publicly
traded insurance holding company. Great American[REGISTERED TRADEMARK] Insurance
Company ("GAIC"), an Ohio corporation, owns 80% of the common stock of AAG. GAIC
is a multi-line insurance carrier and a wholly owned subsidiary of Great
American[REGISTERED TRADEMARK] Holding Company ("GAHC"), an Ohio corporation.
GAHC is a wholly owned subsidiary of American Financial Corporation ("AFC"), an
Ohio corporation. AFC is a wholly owned subsidiary of American Financial Group,
Inc. ("AFG"), an Ohio corporation that owns 1% of the common stock of AAG. AFG
is a publicly traded holding company which is engaged, through its subsidiaries,
in financial businesses that include annuities, insurance and portfolio
investing, and non-financial businesses.
STATE REGULATION
The Company is subject to the insurance laws and regulations of all the
jurisdictions where it is licensed to operate. The availability of certain
Contract rights and provisions depends on state approval and/or filing and
review processes in each such jurisdiction. Where required by law or regulation,
the Contracts will be modified accordingly.
SERVICES
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS
Title to assets of the Separate Account is held by the Company. The Separate
Account assets are segregated from the Company's general account assets. Records
are maintained of all purchases and redemptions of Fund shares held by each of
the Sub-Accounts.
Title to assets of the Fixed Account is held by the Company together with the
Company's general account assets.
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RECORDS AND REPORTS
All records and accounts relating to the Fixed Account and the Separate Account
will be maintained by the Company. As presently required by the provisions of
the Investment Company Act of 1940, as amended ("1940 Act"), and rules and
regulations promulgated thereunder which pertain to the Separate Account,
reports containing such information as may be required under the 1940 Act or by
other applicable law or regulation will be sent to each Owner semi-annually at
the Owner's last known address.
EXPERTS
The statutory-basis financial statements of the Company included in this
Statement of Additional Information have been audited by Ernst & Young LLP,
independent auditors, to the extent indicated in their report thereon also
appearing elsewhere herein. Such statutory-basis financial statements have been
included herein in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
DISTRIBUTION OF THE CONTRACTS
The offering of the Contracts is expected to be continuous, and the Company does
not anticipate discontinuing the offering of the Contracts. However, the Company
reserves the right to discontinue the offering of the Contracts.
CALCULATION OF PERFORMANCE INFORMATION
MONEY MARKET SUB-ACCOUNT STANDARDIZED YIELD CALCULATION
In accordance with rules and regulations adopted by the Securities and Exchange
Commission, the Company computes the Money Market Sub-Account's current
annualized yield for a seven-day period in a manner which does not take into
consideration any realized or unrealized gains or losses on shares of the Money
Market Fund or on its portfolio securities. This current annualized yield is
computed by determining the net change (exclusive of realized gains and losses
on the sale of securities and unrealized appreciation and depreciation) in the
value of a hypothetical account having a balance of one unit of the Money Market
Sub-Account at the beginning of such seven-day period, dividing such net change
in the value of the hypothetical account by the value of the hypothetical
account at the beginning of the period to determine the base period return and
annualizing this quotient on a 365-day basis. The net change in the value of the
hypothetical account reflects the deductions for the Mortality and Expense Risk
and Administration Charges and income and expenses accrued during the period.
Because of these deductions, the yield for the Money Market Sub-Account of the
Separate Account will be lower than the yield for the Money Market Fund or any
comparable substitute funding vehicle.
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The Securities and Exchange Commission also permits the Company to disclose the
effective yield of the Money Market Sub-Account for the same seven-day period,
determined on a compounded basis. The effective yield is calculated according to
the following formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)[SUPERSCRIPT]365/7] - 1
The yield on amounts held in the Money Market Sub-Account normally will
fluctuate on a daily basis. Therefore, the disclosed yield for any given past
period is not an indication or representation of future yields. The Money Market
Sub-Account's actual yield is affected by changes in interest rates on money
market securities, average portfolio maturity of the Money Market Fund or
substitute funding vehicle, the types and quality of portfolio securities held
by the Money Market Fund or substitute funding vehicle, and operating expenses.
IN ADDITION, THE YIELD FIGURES DO NOT REFLECT THE EFFECT OF ANY CONTINGENT
DEFERRED SALES CHARGE ("CDSC") (OF UP TO 7% OF PURCHASE PAYMENTS) THAT MAY BE
APPLICABLE ON SURRENDER.
OTHER SUB-ACCOUNT STANDARDIZED YIELD CALCULATIONS
The Company may from time to time disclose the current annualized yield of one
or more of the Sub-Accounts (other than the Money Market Sub-Account) for 30-day
periods. The annualized yield of a Sub-Account refers to the income generated by
the Sub-Account over a specified 30-day period. Because this yield is
annualized, the yield generated by a Sub-Account during the 30-day period is
assumed to be generated each 30-day period. The yield is computed by dividing
the net investment income per Accumulation Unit earned during the period by the
price per unit on the last day of the period, according to the following
formula:
YIELD = 2[(a-b[OVER] cd + 1)[SUPERSCRIPT]6 - 1]
Where
a= net investment income earned during the period by the Portfolio
attributable to the shares owned by the Sub-Account.
b= expenses for the Sub-Account accrued for the period (net of
reimbursements).
c= the average daily number of Accumulation Units outstanding during
the period.
d= the maximum offering price per Accumulation Unit on the last day of
the period.
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Net investment income will be determined in accordance with rules and
regulations established by the Securities and Exchange Commission. Accrued
expenses will include all recurring fees that are charged to all Contracts. The
yield calculations do not reflect the effect of any CDSC that may be applicable
to a particular Contract. CDSCs range from 7% to 0% of the Purchase Payments
withdrawn depending on the elapsed time since the receipt of such Purchase
Payments.
Because of the charges and deductions imposed by the Separate Account, the yield
for a Sub-Account will be lower than the yield for the corresponding Fund. The
yield on amounts held in a Sub-Account normally will fluctuate over time.
Therefore, the disclosed yield for any given period is not an indication or
representation of future yields or rates of return. The Sub-Account's actual
yield will be affected by the types and quality of portfolio securities held by
the Fund and its operating expenses.
STANDARDIZED TOTAL RETURN CALCULATION
The Company may from time to time also disclose average annual total returns for
one or more of the Sub-Accounts for various periods of time. Average annual
total return quotations are computed by finding the average annual compounded
rates of return over one-, five- and ten-year periods that would equal the
initial amount invested to the ending redeemable value, according to the
following formula:
P(1 + T)[SUPERSCRIPT]n = ERV
Where
P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = "ending redeemable value" of a hypothetical $1,000 payment
made at the beginning of the one-, five- or ten-year period at
the end of the one-, five- or ten-year period (or fractional
portion thereof).
All recurring fees, such as the Contract Maintenance Fee and the Mortality and
Expense Risk Charge, which are charged to all Contracts are recognized in the
ending redeemable value. The average annual total return calculations will
reflect the effect of any CDSCs that may be applicable to a particular period.
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HYPOTHETICAL PERFORMANCE DATA
The Company may also disclose "hypothetical" performance data for a Sub-Account,
for periods BEFORE the Sub-Account commenced operations. Such performance
information for the Sub-Account will be calculated based on the performance of
the corresponding Fund and the assumption that the Sub-Account was in existence
for the same periods as those indicated for the Fund, with the level of Contract
charges currently in effect. The Fund used for these calculations will be the
actual Fund in which the Sub-Account invests.
This type of hypothetical performance data may be disclosed on both an average
annual total return and a cumulative total return basis. Moreover, it may be
disclosed assuming that the Contract is not surrendered (I.E., with no deduction
for a CDSC) or assuming that the Contract is surrendered at the end of the
applicable period (I.E., reflecting a deduction for any applicable CDSC).
OTHER PERFORMANCE DATA
The Company may from time to time disclose other non-standardized total return
in conjunction with the standardized performance data described above.
Non-standardized data may reflect no CDSC or present performance data for a
period other than that required by the standardized format. The Company may from
time to time also disclose cumulative total return calculated using the
following formula assuming that the CDSC percentage is 0%:
CTR = (ERV/P) - 1
Where:
CTR = the cumulative total return net of Sub-Account recurring
charges, other than the Contract Maintenance Fee, for the
period.
ERV = ending redeemable value of a hypothetical $10,000 payment at
the beginning of the one-, five- or ten-year period at the end
of the one-, five- or ten-year period (or fractional portion
thereof).
P = a hypothetical initial payment of $10,000.
All non-standardized performance data will be advertised only if the requisite
standardized performance data is also disclosed.
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The Contracts may be compared in advertising materials to Certificates of
Deposit ("CDs") or other investments issued by banks or other depository
institutions. Variable annuities differ from bank investments in several
respects. For example, variable annuities may offer higher potential returns
than CDs. However, unless you have elected to invest in only the Fixed Account
Options, the Company does not guarantee your return. Also, none of your
investments under the Contract, whether allocated to the Fixed Account or a
Sub-Account, are FDIC-insured.
Advertising materials for the Contracts may, from time to time, address
retirement needs and investing for retirement, the usefulness of a tax-qualified
retirement plan, saving for college, or other investment goals. Advertising
materials for the Contracts may discuss, generally, the advantages of investing
in a variable annuity and the Contract's particular features and their
desirability and may compare Contract features with those of other variable
annuities and investment products of other issuers. Advertising materials may
also include a discussion of the balancing of risk and return in connection with
the selection of investment options under the Contracts and investment
alternatives generally, as well as a discussion of the risks and attributes
associated with the investment options under the Contracts. A description of the
tax advantages associated with the Contracts, including the effects of
tax-deferral under a variable annuity or retirement plan generally, may be
included as well. Advertising materials for the Contracts may quote or reprint
financial or business publications and periodicals, including model portfolios
or allocations, as they relate to current economic and political conditions,
management and composition of the underlying Funds, investment philosophy,
investment techniques, the desirability of owning the Contract and other
products and services offered by the Company or AAG Securities, Inc. ("AAG
Securities").
The Company or AAG Securities may provide information designed to help
individuals understand their investment goals and explore various financial
strategies. Such information may include: information about current economic,
market and political conditions; materials that describe general principles of
investing, such as asset allocation, diversification, risk tolerance and goal
setting; questionnaires designed to help create a personal financial profile;
worksheets used to project savings needs based on assumed rates of inflation and
hypothetical rates of return; and alternative investment strategies and plans.
Ibbotson Associates of Chicago, Illinois ("Ibbotson"), provides historical
returns of the capital markets in the United States, including common stocks,
small capitalization stocks, long-term corporate bonds, intermediate-term
government bonds, long-term government bonds, Treasury bills, the U.S. rate of
inflation (based on the Consumer Price Index), and combinations of various
capital markets. The performance of these capital markets is based on the
returns of different indices.
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Advertising materials for the Contracts may use the performance of these capital
markets in order to demonstrate general risk-versus-reward investment scenarios.
Performance comparisons may also include the value of a hypothetical investment
in any of these capital markets. The risk associated with the security types in
any capital market may or may not correspond directly to those of the
Sub-Accounts and the Funds. Advertising materials may also compare performance
to that of other compilations or indices that may be developed and made
available in the future.
In addition, advertising materials may quote various measures of volatility and
benchmark correlations for the Sub-Accounts and the respective Funds and compare
these volatility measures and correlations with those of other separate accounts
and their underlying funds. Measures of volatility seek to compare a
sub-account's, or its underlying fund's, historical share price fluctuations or
total returns to those of a benchmark. Measures of benchmark correlation
indicate how valid a comparative benchmark may be. All measures of volatility
and correlation are calculated using averages of historical data.
FEDERAL TAX MATTERS
The Contracts and any Certificates thereunder are designed for use by
individuals as a non-tax-qualified annuity (including Contracts purchased by an
employer in connection with a Code Section 457 or non-qualified deferred
compensation plan), and with arrangements which qualify for special tax
treatment under Section 401, 403 or 408 of the Code. The ultimate effect of
federal taxes on the Account Value, on Annuity Benefits or on the Death Benefit,
and on the economic benefit to the Owner Participant, Annuitant and/or the
Beneficiary may depend on the type of retirement plan for which the Contract is
purchased, on the tax and employment status of the individual concerned and on
the Company's tax status. THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT
INTENDED AS TAX ADVICE. Any person concerned about tax implications should
consult a competent tax adviser. This discussion is based upon the Company's
understanding of the present federal income tax laws as they are currently
interpreted by the Internal Revenue Service. No representation is made as to the
likelihood of continuation of present federal income tax laws or of the current
interpretations by the Internal Revenue Service. Moreover, no attempt has been
made to consider any applicable state or other tax laws.
TAXATION OF THE COMPANY
The Company is taxed as a life insurance company under Part I of Subchapter L of
the Code. Since the Separate Account is not an entity separate from the Company,
and its operations form a part of the Company, it will not be taxed separately
as a "regulated investment company" under Subchapter M of the Code. Investment
income and realized capital gains are automatically applied to increase reserves
under the Contracts. Under existing federal income tax law, the Company believes
that it will not be taxed on the Separate Account investment income and realized
net capital gains to the extent that such income and gains are applied to
increase the reserves under the Contracts.
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Accordingly, the Company does not anticipate that it will incur any federal
income tax liability attributable to the Separate Account and, therefore, the
Company does not intend to make provisions for any such taxes. However, if
changes in the federal tax laws or interpretations thereof result in the Company
being taxed on income or gains attributable to the Separate Account, then the
Company may impose a charge against the Separate Account (with respect to some
or all Contracts) in order to set aside provisions to pay such taxes.
TAX STATUS OF THE CONTRACT
Section 817(h) of the Code requires that with respect to Non-Qualified
Contracts, the investments of the Funds be "adequately diversified" in
accordance with Treasury regulations in order for the Contracts to qualify as
annuity contracts under federal tax law. The Separate Account, through the
Funds, intends to comply with the diversification requirements prescribed by the
Treasury in Reg. Sec. 1.817-5, which affect how the Funds' assets may be
invested.
In certain circumstances, Owners of individual variable annuity contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate accounts used to support their contracts. In those circumstances,
income and gains from the separate account assets would be included in the
variable contract owner's gross income. The Internal Revenue Service has stated
in published rulings that a variable contract owner will be considered the owner
of separate account assets if the contract owner possesses incidents of
ownership in those assets, such as the ability to exercise investment control
over the assets. The Treasury Department has also announced, in connection with
the issuance of regulations concerning diversification, that those regulations
"do not provide guidance concerning the circumstances in which investor control
of the investments of a segregated asset account may cause the investor [I.E.,
the Owner or Participant], rather than the insurance company, to be treated as
the owner of the assets in the account." This announcement also stated that
guidance would be issued by way of regulations or rulings on the "extent to
which policyholders may direct their investments to particular subaccounts
without being treated as owners of the underlying assets." As of the date of
this Statement of Additional Information, no guidance has been issued.
The ownership rights under the Contracts are similar to, but different in
certain respects from, those described by the Internal Revenue Service in
rulings in which it was determined that contract owners were not owners of
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separate account assets. For example, the Owner or Participant has additional
flexibility in allocating Purchase Payments and Account Value. These differences
could result in an Owner's or Participant's being treated as the owner of a PRO
RATA portion of the assets of the Separate Account and/or Fixed Account. In
addition, the Company does not know what standards will be set forth, if any, in
the regulations or rulings which the Treasury Department has stated it expects
to issue. The Company therefore reserves the right to modify the Contracts as
necessary to attempt to prevent an Owner or Participant from being considered
the owner of a PRO RATA share of the assets of the Separate Account.
FINANCIAL STATEMENTS
The Company's audited statutory-basis financial statements for the years ended
December 31, 1996 and 1995 are included herein.
The financial statements of the Company included in this Statement of Additional
Information should be considered only as bearing on the ability of the Company
to meet its obligations under the Contracts. They should not be considered as
bearing on the investment performance of the assets held in the Separate
Account.
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ANNUITY INVESTORS LIFE INSURANCE COMPANY
STATUTORY-BASIS FINANCIAL STATEMENTS
AND OTHER FINANCIAL INFORMATION
YEARS ENDED DECEMBER 31, 1996 AND 1995
CONTENTS
Report of Independent Auditors
Audited Statutory-Basis Financial Statements
Balance Sheets - Statutory-Basis
Statements of Operations - Statutory-Basis
Statements of Changes in Capital and Surplus - Statutory-Basis
Statements of Cash Flows - Statutory-Basis
Notes to Statutory-Basis Financial Statements
Other Financial Information
Supplemental Schedule of Selected Statutory-Basis Financial Data
Note to Supplemental Schedule of Selected Statutory-Basis Financial Data
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ERNST & YOUNG LLP 1300 Chiquita Center Phone: 513-621-6450
250 East Fifth Street
Cincinnati, Ohio 45202
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Annuity Investors Life Insurance Company
We have audited the accompanying statutory-basis balance sheets of Annuity
Investors Life Insurance Company ("the Company") as of December 31, 1996 and
1995, and the related statutory-basis statements of operations, changes in
capital and surplus, and cash flows for the years then ended. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described in Notes B and J to the financial statements, the Company presents
its financial statements in conformity with the accounting practices prescribed
or permitted by the Ohio Insurance Department, which practices differ from
generally accepted accounting principles. The variances between such practices
and generally accepted accounting principles and the effects on the accompanying
financial statements are described in Notes B and J.
In our opinion, because of the effects of the matter described in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of Annuity Investors Life Insurance Company at December 31, 1996 and 1995, or
the results of its operations or its cash flows for the years then ended.
Also, in our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Annuity Investors Life
Insurance Company at December 31, 1996 and 1995, and the results of its
operations and its cash flows for the years then ended in conformity with
accounting practices prescribed or permitted by the Ohio Insurance Department.
Our audits were conducted for the purpose of forming an opinion on the
statutory-basis financial statements taken as a whole. The accompanying
supplemental schedule of selected statutory-basis financial data is presented to
comply with the National Association of Insurance Commissioners' Annual
Statement Instructions and is not a required part of the statutory-basis
financial statements. Such information has been subjected to the auditing
procedures applied in our audit of the statutory-basis financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
statutory-basis financial statements taken as a whole.
Cincinnati, Ohio ERNST & YOUNG LLP
February 28, 1997
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ANNUITY INVESTORS LIFE INSURANCE COMPANY
BALANCE SHEETS
STATUTORY-BASIS
DECEMBER 31
--------------------------
1996 1995
----------- -----------
ADMITTED ASSETS
Cash and investments:
Fixed maturities - at amortized cost
(market value - $22,445,536 and $8,648,412) $22,996,685 $ 8,554,641
Policy loans 41,190 --
Short-term investments 841,000 15,169,930
Cash 475,770 93,584
Other invested assets 75,000 --
----------- -----------
Total cash and investments 24,429,645 23,818,155
Investment income due and accrued 437,051 220,028
Federal income tax recoverable 392,995 --
Separate Account assets 3,389,109 --
----------- -----------
TOTAL ADMITTED ASSETS $28,648,800 $24,038,183
=========== ===========
LIABILITIES, CAPITAL AND SURPLUS
Annuity reserves $ 3,676,377 $ 2,842,013
Commissions due and accrued 53,746 966
General expenses due and accrued 26,759 7,000
Transfers to Separate Accounts due
and accrued (net) (206,980) --
Taxes, licenses and fees due and accrued 1,900 3,000
Federal income tax payable -- 8,952
Asset valuation reserve 58,437 2,848
Payable to parent and affiliates 303,718 58,423
Other liabilities 9,402 --
Separate Account liabilities 3,389,109 --
----------- -----------
TOTAL LIABILITIES 7,312,468 2,923,202
----------- -----------
Common stock, par value- $125 and $100:
- 25,000 shares authorized
- 20,000 shares issued and outstanding 2,500,000 2,000,000
Gross paid-in and contributed surplus 17,550,000 18,050,000
Unassigned surplus 1,286,332 1,064,981
----------- -----------
TOTAL CAPITAL AND SURPLUS 21,336,332 21,114,981
------------ ------------
TOTAL LIABILITIES, CAPITAL AND SURPLUS $ 28,648,800 $ 24,038,183
============ ============
See notes to statutory financial statements
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ANNUITY INVESTORS LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
STATUTORY-BASIS
YEAR ENDED DECEMBER 31
--------------------------
1996 1995
----------- -----------
REVENUES
Premiums and annuity considerations $ 38,838 $ 58,695
Deposit-type funds 4,355,900 16,107
Net investment income 1,500,424 552,141
Other income (expense) (639) --
----------- -----------
Total revenue 5,894,523 626,943
BENEFITS AND EXPENSES
Increase in aggregate reserves 834,364 157,637
Policyholders' benefits 408,089 109,607
Commissions on premiums, annuity
considerations and deposit-type funds 257,666 966
Commissions and expense allowances on
reinsurance assumed 48,353 48,689
General insurance expenses 1,138,281 34,588
Taxes, licenses and fees 103,174 53,577
Net transfers to Separate Accounts 3,090,948 --
----------- -----------
Total benefits and expenses 5,880,875 405,064
----------- -----------
Gain from operations before federal income taxes 13,648 221,879
Provision for federal income taxes 2,280 74,941
----------- -----------
Gain from operations after federal income
taxes before net realized capital gains 11,368 146,938
Net realized capital gains (losses)
Gross realized capital gains (losses) (26,813) 15
Capital gains tax expense -- (5)
Interest maintenance reserve transfer
(net of tax) 17,428 (8)
----------- -----------
Net realized capital gains (losses)
after transfer to IMR (9,385) 2
----------- -----------
NET INCOME $ 1,983 $ 146,940
=========== ===========
See notes to statutory financial statements
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ANNUITY INVESTORS LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
STATUTORY-BASIS
YEAR ENDED DECEMBER 31
-----------------------------
1996 1995
------------ -------------
COMMON STOCK
Balance at beginning of year $ 2,000,000 $ 2,000,000
Transfer from gross paid in and
contributed surplus 500,000 --
------------ ------------
Balance at end of year $ 2,500,000 $ 2,000,000
============ ============
GROSS PAID-IN AND CONTRIBUTED SURPLUS
Balance at beginning of year $ 18,050,000 $ 3,350,000
Capital contribution -- 14,700,000
Transfer to common stock (500,000) --
------------ ------------
Balance at end of year $ 17,550,000 $ 18,050,000
============ ============
UNASSIGNED FUNDS
Balance at beginning of year $ 1,064,981 $ 920,890
Net income 1,983 146,940
Increase in non-admitted assets (85,271) --
Increase in asset valuation reserve (55,589) --
Adjustment for prior year taxes 360,228 (2,849)
------------ ------------
Balance at end of year $ 1,286,332 $ 1,064,981
============ ============
TOTAL CAPITAL AND SURPLUS $ 21,336,332 $ 21,114,981
============ ============
See notes to statutory financial statements
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ANNUITY INVESTORS LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
STATUTORY-BASIS
YEAR ENDED DECEMBER 31
1996 1995
------------- -------------
OPERATIONS:
Premiums and annuity considerations $ 38,838 $ 58,695
Deposit-type funds 4,355,900 16,107
Net investment income 1,365,858 512,777
Net increase in policy loans (41,190) --
Policyholder benefits paid (408,089) (109,607)
Commissions, expenses and premium and
other taxes paid (1,479,640) (128,854)
Net transfers to Separate Accounts (3,297,928) --
Federal income taxes paid (44,000) (42,813)
Other cash provided 186,214 47,151
------------ ------------
Net cash provided by operations 675,963 353,456
INVESTING ACTIVITIES:
Sale, maturity or repayment of bonds 2,383,321 1,167,103
Purchase of bonds (16,931,028) (1,462,567)
Other cash applied (75,000) --
------------ ------------
Net cash used in investment activities (14,622,707) (295,464)
FINANCING AND MISCELLANEOUS ACTIVITIES:
Capital contribution -- 14,700,000
----------- ------------
Net cash provided by financing and
miscellaneous activities -- 14,700,000
------------- -----------
Net (decrease) increase in cash and
short-term investments $ (13,946,744) $ 14,757,992
============= ============
RECONCILIATION BETWEEN YEARS
Cash and short-term investments
at beginning of year $ 15,263,514 $ 505,522
Net (decrease) increase in cash
and short-term investments (13,946,744) 14,757,992
------------- ------------
Cash and short-term investments
at end of year $ 1,316,770 $ 15,263,514
============= ============
See notes to statutory financial statements
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ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
A. GENERAL
Annuity Investors Life Insurance Company ("AILIC"), a life insurance company
domiciled in the State of Ohio, is an indirectly owned subsidiary of American
Annuity Group, Inc., ("AAG"), a publicly traded financial services holding
company of which American Financial Group, Inc. ("AFG") owns 81%. On November
29, 1994, AILIC, formerly Carillon Life Insurance Company, was purchased from
Great American Insurance Company, a wholly-owned subsidiary of AFG.
AILIC's primary product is the variable annuity sold to both the individual and
group markets. This product is marketed to hospitals, 501(c)(3) organizations,
public education institutions and other qualified and non-qualified markets.
B. ACCOUNTING POLICIES
BASIS OF PRESENTATION The accompanying financial statements have been prepared
in conformity with accounting practices prescribed or permitted by the National
Association of Insurance Commissioners ("NAIC") and the Ohio Insurance
Department, which vary in some respects from generally accepted accounting
principles ("GAAP"). The more significant of these differences are as follows:
(a) annuity receipts and deposit-type funds are accounted for as revenues versus
liabilities;
(b) an Interest Maintenance Reserve ("IMR") is provided whereby interest related
realized gains and losses are deferred and amortized into investment income over
the expected remaining life of the security sold;
(c) Asset Valuation Reserves
("AVR") are provided which reclassify a portion of surplus to liabilities;
(d) investments in bonds considered "available for sale" (as defined by GAAP)
are generally recorded at amortized cost versus market;
(e) certain general expenses and commissions relating to the acquisition of new
business are capitalized to Deferred Acquisition Costs ("DAC") and amortized for
GAAP; and
(f) the cost of certain assets designated as "non-admitted assets" (principally
advance commissions paid to agents), is charged against surplus.
Preparation of the financial statements requires management to make estimates
and assumptions that affect amounts reported in the financial statements and
accompanying notes. Such estimates and assumptions could change in the future as
more information becomes known which could impact the amounts reported and
disclosed herein.
Certain reclassifications have been made to the prior year financial statements
to conform to the current year's presentation.
INVESTMENTS Asset values are generally stated as follows: Bonds not backed by
other loans, where permitted, at amortized cost using the interest method;
loan-backed bonds and structured securities, where permitted, at amortized cost
using the interest method; short-term investments at cost; and policy loans at
unpaid balances.
18
<PAGE>
Prepayment assumptions for loan-backed bonds and structured securities were
obtained from broker dealer survey values or internal estimates. These
assumptions are consistent with the current interest rate and economic
environment. Significant changes in estimated cash flows from the original
purchase assumptions are accounted for on a prospective basis.
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
As prescribed by the NAIC, the market value for investments in bonds is
determined by the values included in the Valuations of Securities manual
published by the NAIC's Securities Valuation Office. Those values generally
represent quoted market value prices for securities traded in the public
marketplace or analytically determined values by the Securities Valuation
Office.
Short-term investments having original maturities of three months or less when
purchased are considered to be cash equivalents for purposes of the financial
statements.
The carrying values of cash and short-term investments approximate their fair
values.
Gains or losses on sales of securities are recognized at the time of disposition
with the amount of gain or loss determined on the specific identification basis.
The IMR applies to interest-related realized capital gains and losses (net of
tax) and is intended to defer realized gains and losses resulting from changes
in the general level of interest rates. The IMR is amortized into investment
income over the approximate remaining life of the investments sold.
The AVR provides for possible credit-related losses on securities and is
calculated according to a specified formula as prescribed by the NAIC for the
purpose of stabilizing surplus against fluctuations in the market value of
investment securities. Changes in the required reserve balances are made by
direct credits or charges to surplus.
PREMIUMS Annuity premiums and deposit-type funds are recognized as revenue when
due.
SEPARATE ACCOUNTS Separate account assets and liabilities reported in the
accompanying balance sheets represent funds that are separately administered,
principally for annuity contracts, and for which the contractholder, rather than
AILIC, bears the investment risk. Separate account contractholders have no claim
against the assets of the general account of AILIC. Separate account assets are
reported at market value. The operations of the separate accounts are not
included in the accompanying financial statements. Fees charged on separate
account policyholder deposits are included in other income.
ANNUITY RESERVES Annuity reserves are developed by actuarial methods and are
determined based on published tables using statutory specified interest rates
and valuation methods that will provide, in the aggregate, reserves that are
greater than or equal to the minimum amounts required by law. The fair market
value of the reserves approximates the statement value.
REINSURANCE Reinsurance premiums, benefits and expenses are accounted for on a
basis consistent with those used in accounting for the original policies issued
and the terms of the reinsurance contracts.
19
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1996 AND 1995
C. INVESTMENTS
At December 31, 1996, fixed maturity investments in U.S. Government and
government agencies and authorities had a carrying value of $9.0 million and a
market value of $8.7 million, gross unrealized gains of $42,370 and gross
unrealized losses of ($361,158). All other corporate fixed maturity investments
at December 31, 1996, had a carrying value of $13.9 million, market value of
$13.7 million, gross unrealized gains of $111,747 and gross unrealized losses of
($344,107). At December 31, 1995, fixed maturity investments in U.S. Government
and government agencies and authorities had a carrying value and market value of
$7.3 million, gross unrealized gains of $74,700 and gross unrealized losses of
($45,100). All other corporate fixed maturity investments at December 31, 1995,
had a carrying value of $1.3 million, market value of $1.4 million, gross
unrealized gains of $64,700 and gross unrealized losses of ($600).
Proceeds from sales of fixed maturity investments were $2.4 million in 1996 and
$1.2 million in 1995. Gross realized gains of $3,525 and $18 and gross realized
losses of $30,338 and $3 were realized on those sales during 1996 and 1995,
respectively.
U.S. Treasury Notes with a carrying value of $6.1 million at December 31, 1996,
were on deposit as required by the insurance departments of various states.
The table below sets forth the scheduled maturities of AILIC's fixed maturity
investments as of December 31, 1996:
Carrying Market
Value Value
Bonds by maturity:
Due within 1 year or less $ 100,629 $ 102,406
Over 1 year through 5 years 5,968,341 5,886,647
Over 5 years through 10 years 12,735,872 12,421,027
Over 10 years through 20 years 3,655,618 3,500,404
Over 20 years 536,225 535,052
----------- -----------
Total bonds by maturity $22,996,685 $22,445,536
=========== ===========
Net investment income consisted
of the following:
1996 1995
---- ----
Bonds $ 1,369,442 $ 447,488
Short-term investments 159,533 72,980
Cash on hand and on deposit 1,250 41,582
Policy loans 1,153 -
Aggregate write-ins for investment
income 54 -
---------- -------------
Gross investment income 1,531,432 562,050
Investment expenses (31,008) (9,909)
---------- -------------
Net investment income $1,500,424 $ 552,141
========== =============
20
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1996 AND 1995
D. FEDERAL INCOME TAXES
AILIC's amount of federal income taxes incurred for recoupement in the event of
future losses is approximately $2,000 in 1996.
E. RELATED PARTY TRANSACTIONS
On December 30, 1993, AILIC entered into a reinsurance agreement with Great
American Life Insurance Company ("GALIC"), an affiliated Ohio domiciled
insurance company, which became AILIC's immediate parent in 1995. As a result of
the transaction, AILIC assumed $2.6 million in deferred annuity reserves and
received an equivalent amount of assets. Premiums of $38,838 in 1996 and $58,695
in 1995 consisted of assumed reinsurance from GALIC in accordance with the
agreement. The reinsurance agreement will be terminated as of January 1, 1997
and an equal amount of assets and annuity reserves will be transferred to GALIC.
AILIC has an agreement with American Money Management, Inc. (an affiliate),
subject to the direction of the Finance Committee of AILIC, whereby American
Money Management, Inc., provides investment management services. In 1996 and
1995, AILIC paid $15,095 and $11,666, respectively, in management fees.
AILIC has an agreement with AAG Securities, Inc., a wholly-owned subsidiary of
AAG, whereby AAG Securities is the principal underwriter and distributor of
AILIC's variable contracts. AILIC pays AAG Securities for acting as underwriter
under a distribution agreement. In 1996 and 1995, AILIC paid $257,666 and $966,
respectively, in commissions.
Certain administrative, management, accounting, data processing, underwriting,
claim, collection and investment services are provided under agreements between
AILIC and affiliates at charges not unfavorable to AILIC or insurance
affiliates. In 1996 and 1995, AILIC paid $277,505 and $0, respectively, in fees
to affiliates.
F. DIVIDEND RESTRICTIONS
The amount of dividends which can be paid by AILIC without prior approval of
regulatory authorities is subject to restrictions relating to capital and
surplus and net income. AILIC may pay approximately $1.3 million in dividends in
1997 based on capital and surplus, without prior approval.
G. ANNUITY RESERVES, EXCLUDING SEPARATE ACCOUNTS
At December 31, 1996, $2.7 million or 72.2% of AILIC's annuity reserves,
excluding Separate Accounts, were subject to discretionary withdrawal without
adjustment, and $1.0 million or 27.8% were subject to discretionary withdrawal
at book value less surrender charges of 5% or more. As of 1995, there were no
purchase payments allocated or investments held in the Separate Account.
21
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1996 AND 1995
H. SEPARATE ACCOUNT
The Company writes individual and group non-guaranteed variable annuities. In
1996, the General Account had net transfers to the Separate Account of
$3,090,948, consisting of transfers to the Separate Account of $3,337,987 and
transfers from the Separate Account of $247,039, including contingent deferred
sales charges of $198,353. In 1995, there were no transfers to or from the
Separate Account.
All Separate Account reserves are non-guaranteed and subject to discretionary
withdrawal at market value. In 1995, there were no reserves in the Separate
Account. In 1996, funds in the Separate Account had a total market value of
$3,389,109 and amortized cost of $3,335,765, resulting in net unrealized gains
of $53,344, consisting of gross unrealized gains of $57,307 and gross unrealized
losses of ($3,963).
I. OTHER ITEMS
The increase in the number of insurance companies that are under regulatory
supervision has resulted, and is expected to continue to result, in increased
assessments by state guaranty funds to cover losses to policyholders of
insolvent or rehabilitated insurance companies. Those mandatory assessments may
be partially recovered through deduction in future premium taxes in certain
states. GALIC is responsible for payment of all assessments relating to premiums
earned in accordance with the reinsurance agreement discussed in Note E.
The Company increased the par value on the authorized shares of common stock
from $100 a share to $125 a share during 1996. This resulted in a
reclassification between gross paid in and contributed surplus and common stock.
J. VARIANCES FROM GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The accompanying financial statements have been prepared in conformity with
accounting practices prescribed or permitted by the National Association of
Insurance Commissioners ("NAIC") and the Ohio Insurance Department, which vary
in some respects from generally accepted accounting principles ("GAAP"). The
following table summarizes the differences between net income and surplus as
determined in accordance with statutory accounting practices and GAAP for the
years ended December 31, 1996 and 1995:
22
<PAGE>
<TABLE>
<CAPTION>
NET INCOME CAPITAL AND SURPLUS
---------------------------- ---------------------------
1996 1995 1996 1995
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
As reported on a statutory basis $ 1,983 $ 146,940 $ 21,336,332 $ 21,114,981
Commissions capitalized to DAC 257,666 954 257,666 954
General expenses capitalized to DAC 569,139 -- 569,139 --
Taxes, licenses and fees capitalized to DAC 51,587 -- 51,587 --
Amortization of DAC (51,969) -- (51,969) --
Capital gains transferred to IMR, net of tax (17,428) 8 (17,428) 8
Amortization of IMR, net of tax 814 -- 814 --
Contingent deferred sales charge (262,297) -- (262,297) --
Federal income taxes (190,841) (3,051) (190,841) (3,051)
Unrealized gain (loss) adjustment -- -- (352,697) 38,109
AVR adjustment -- -- 55,589 2,848
Non-admitted assets adjustment -- -- 85,271 --
Prior year tax adjustment -- -- (360,228) --
Prior year stat to GAAP cumulative adjustments -- -- 38,868 --
------------ ------------ ------------
Total GAAP adjustments 356,671 (2,089) (176,526) 38,868
------------ ------------ ------------ ------------
GAAP basis $ 358,654 $ 144,851 $ 21,159,806 $ 21,153,849
============ ============ ============ ============
</TABLE>
23
<PAGE>
OTHER FINANCIAL INFORMATION
24
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
SUPPLEMENTAL SCHEDULE OF SELECTED STATUTORY-BASIS FINANCIAL DATA
DECEMBER 31, 1996
Investment income earned:
Bonds $ 1,369,442
Short-term investments 159,533
Cash on hand and on deposit 1,250
Policy loans 1,153
Aggregate write-ins for investment income 54
-------------
Gross investment income $ 1,531,432
============
Bonds and short-term investments by class (statement value):
Class "1" $19,566,716
Class "2" 2,334,053
Class "3" 1,126,918
Class "4" 809,998
-------------
Total bonds and short-term investments by class $23,837,685
===========
Bonds traded:
Publicly $22,665,384
Privately 331,301
Total bonds traded $22,996,685
Short-term investments (book value) $ 841,000
=============
Cash on deposit $ 475,770
=============
Group annuities not fully paid--account balance $ 3,676,377
============
Bonds and short-term investments by maturity (statement value):
Due within 1 year or less $ 941,629
Over 1 year through 5 years 5,968,341
Over 5 years through 10 years 12,735,872
Over 10 years through 20 years 3,655,618
Over 20 years 536,225
-------------
Total by maturity $23,837,685
NOTE--BASIS OF PRESENTATION
The accompanying schedule presents selected statutory-basis financial data as of
December 31, 1996 and for the year then ended for purposes of complying with
paragraph 9 of the Annual Audited Financial Reports in the General section of
the National Association of Insurance Commissioners' Annual Statement
Instructions and agrees to or is included in the amounts reported in AILIC's
1996 Statutory Annual Statement as filed with the Ohio Insurance Department.
25
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
All required financial statements are included in Parts A or B of this
Registration Statement.
(b) Exhibits
(1) Resolution of the Board of Directors of Annuity Investors Life
Insurance Company[REGISTERED TRADEMARK] authorizing establishment of
Annuity Investors[REGISTERED TRADEMARK] Variable Account B.1/
(2) Not Applicable.
(3) (a) Distribution Agreement between Annuity Investors Life
Insurance Company [REGISTERED TRADEMARK] and AAG Securities,
Inc.2/
(b) Form of Selling Agreement between Annuity Investors Life
Insurance Company[REGISTERED TRADEMARK], AAG Securities, Inc.
and another Broker-Dealer.1/
(4) Individual and Group Contract Forms and Endorsements.
(a) Form of Qualified Individual Flexible Premium Deferred
Variable Annuity Contract.2/
(b) Form of Non-Qualified Individual Flexible Deferred Variable
Annuity Contract.2/
(c) Form of Loan Endorsement to Individual Contract.2/
(d) Form of Tax Sheltered Annuity Endorsement to Individual
Contract.2/
(e) Form of Qualified Pension, Profit Sharing and Annuity Plan
Endorsement to Individual Contract.2/
(f) Form of Employer Plan Endorsement to Individual Contract.2/
(g) Form of Individual Retirement Annuity Endorsement to
Individual Contract.2/
(h) Form of Texas Optional Retirement Program Endorsement to
Individual Contract.2/
C-1
<PAGE>
(i) Form of Long-Term Care Waiver Rider to Individual Contract.2/
(j) Form of Simple IRA Endorsement to Individual Contract.2/
(k) Form of Group Flexible Premium Deferred Variable Annuity
Contract.2/
(l) Form of Certificate of Participation under a Group Flexible
Premium Deferred Variable Annuity Contract.2/
(m) Form of Loan Endorsement to Group Contract.2/
(n) Form of Loan Endorsement to Certificate of Participation
under a Group Contract.2/
(o) Form of Tax Sheltered Annuity Endorsement to Group
Contract.2/
(p) Form of Tax Sheltered Annuity Endorsement to Certificate
of Participation under a Group Contract.2/
(q) Form of Qualified Pension, Profit Sharing and Annuity Plan
Endorsement to Group Contract.2/
(r) Form of Qualified Pension, Profit Sharing and Annuity Plan
Endorsement to Certificate of Participation under a Group
Contract.2/
(s) Form of Employer Plan Endorsement to Group Contract.2/
(t) Form of Employer Plan Endorsement to Certificate of
Participation under a Group Contract.2/
(u) Form of Deferred Compensation Endorsement to Group
Contract.2/
(v) Form of Deferred Compensation Endorsement to Certificate of
Participation under a Group Contract.2/
(w) Form of Texas Optional Retirement Program Endorsement to
Group Contract.2/
C-2
<PAGE>
(x) Form of Texas Optional Retirement Program Endorsement to
Certificate of Participation under a Group Contract.2/
(y) Form of Long-Term Care Waiver Rider to Group Contract.2/
(z) Form of Long-Term Care Waiver Rider to Certificate of
Participation under a Group Contract.2/
(5) (a) Form of Application for Individual Flexible Premium Deferred
Annuity Contract and Certificate of Participation under a
Group Contract.2/
(b) Form of Application for Group Flexible Premium Deferred
Annuity Contract.2/
(6) (a) Articles of Incorporation of Annuity Investors Life
Insurance Company[REGISTERED TRADEMARK].1/
(i) Amendment to Articles of Incorporation, adopted April
9, 1996, and approved by the Secretary of State, State
of Ohio, on July 11, 1996.2/
(ii) Amendment to Articles of Incorporation, adopted August
9, 1996, and approved by the Secretary of State, State
of Ohio, on December 3, 1996.2/
(b) Code of Regulations of Annuity Investors Life Insurance
Company.[REGISTERED TRADEMARK]1/
(7) Not Applicable
(8) (a) Participation Agreement between Annuity Investors Life
Insurance Company[REGISTERED TRADEMARK] and Dreyfus Variable
Investment Fund.2/
(i) Letter Agreement dated April 14, 1997 between Annuity
Investors Life Insurance Company [REGISTERED TRADEMARK]
and Dreyfus Variable Investment Fund.2/
(b) Participation Agreement between Annuity Investors Life
Insurance Company[REGISTERED TRADEMARK] and Dreyfus Life and
Annuity Index Fund, Inc. (d/b/a Dreyfus Stock Index Fund).2/
(i) Letter Agreement dated April 14, 1997 between Annuity
Investors Life Insurance Company[REGISTERED TRADEMARK]
and Dreyfus Life and Annuity Index Fund, Inc. (d/b/a
Dreyfus Stock Index Fund).2/
C-3
<PAGE>
(c) Participation Agreement between Annuity Investors Life
Insurance Company[REGISTERED TRADEMARK] and The Dreyfus
Socially Responsible Growth Fund, Inc.2/
(i) Letter Agreement dated April 14, 1997 between Annuity
Investors Life Insurance Company[REGISTERED TRADEMARK]
and The Dreyfus Socially Responsible Growth Fund,
Inc.2/
(d) Participation Agreement between Annuity Investors Life
Insurance Company[REGISTERED TRADEMARK] and Janus Aspen
Series.2/
(e) Participation Agreement between Annuity Investors Life
Insurance Company[REGISTERED TRADEMARK] and Strong Variable
Insurance Funds, Inc. and Strong Opportunity Fund II, Inc.2/
(f) Participation Agreement between Annuity Investors Life
Insurance Company[REGISTERED TRADEMARK] and INVESCO Variable
Investment Funds, Inc.2/
(g) Participation Agreement between Annuity Investors Life
Insurance Company[REGISTERED TRADEMARK] and Morgan Stanley
Universal Funds, Inc.2/
(h) Participation Agreement between Annuity Investors Life
Insurance Company[REGISTERED TRADEMARK] and PBHG Insurance
Series Fund, Inc.2/
(i) Service Agreement between Annuity Investors Life Insurance
Company[REGISTERED TRADEMARK] and American Annuity
Group[SERVICEMARK], Inc.1/
(j) Agreement between AAG Securities, Inc. and AAG Insurance
Agency, Inc.1/
(k) Investment Service Agreement between Annuity Investors Life
Insurance Company[REGISTERED TRADEMARK] and American Annuity
Group[SERVICEMARK], Inc.1/
(l) Service Agreement between Annuity Investors Life Insurance
Company[REGISTERED TRADEMARK] and Strong Capital Management,
Inc.2/
(m) Service Agreement between Annuity Investors Life Insurance
Company[REGISTERED TRADEMARK] and Pilgrim Baxter &
Associates, Ltd.2/
(n) Service Agreement between Annuity Investors Life Insurance
Company[REGISTERED TRADEMARK] and Morgan Stanley Asset
Management, Inc.2/
(o) Amended and Restated Agreement between The Dreyfus
Corporation and Annuity Investors Life Insurance
Company[REGISTERED TRADEMARK].2/
C-4
<PAGE>
(p) Service Agreement between Annuity Investors Life Insurance
Company[REGISTERED TRADEMARK] and Janus Capital
Corporation.2/
(9) Opinion and Consent of Counsel.1/
(10) Consent of Independent Auditors.2/
(11) No financial statements are omitted from Item 23.
(12) Not Applicable.
(13) Not Applicable.
(14) Financial Data Schedules.2/
- ------------------------
1/ Filed on Form N-4 on December 23, 1996
2/ Filed in Pre-Effective Amendment No. 1 on June 3, 1997.
C-5
<PAGE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
PRINCIPAL POSITIONS AND OFFICES
NAME BUSINESS ADDRESS WITH THE COMPANY
---- ---------------- ---------------------
Robert Allen Adams (1) President, Director
Stephen Craig Lindner (1) Director
William Jack Maney, II (1) Assistant Treasurer and
Director
James Michael Mortensen (1) Executive Vice President,
Assistant Secretary and
Director
Mark Francis Muething (1) Senior Vice President,
Secretary, General Counsel
and Director
Jeffrey Scott Tate (1) Director
Thomas Kevin Liguzinski (1) Senior Vice President
Charles Kent McManus (1) Senior Vice President
Robert Eugene Allen (1) Vice President and Treasurer
Arthur Ronald Greene, III (1) Vice President
Betty Marie Kasprowicz (1) Vice President and Assistant
Secretary
Michael Joseph O'Connor (1) Senior Vice President and
Chief Actuary
Lynn Edward Laswell (1) Assistant Vice President
___________________________
(1) P.O. Box 5423, Cincinnati, Ohio 45201-5423.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR
OR REGISTRANT
The Depositor, Annuity Investors Life Insurance Company[REGISTERED TRADEMARK] is
a wholly owned subsidiary of Great American[REGISTERED TRADEMARK] Life Insurance
Company, which is a wholly owned subsidiary of American Annuity
Group,[SERVICEMARK] Inc. The Registrant, Annuity Investors[REGISTERED TRADEMARK]
Variable Account B, is a segregated asset account of Annuity Investors Life
Insurance Company[REGISTERED TRADEMARK].
The following chart shows the affiliations among Annuity Investors Life
Insurance Company[REGISTERED TRADEMARK] and its parent, subsidiary and affilited
entitites.
C-6
<PAGE>
<TABLE>
<CAPTION>
AMERICAN FINANCIAL GROUP, INC. % OF STOCK OWNED(1)
| STATE OF DATE OF BY IMMEDIATE
| DOMICILE INCORP. PARENT COMPANY NATURE OF BUSINESS
<S> <C> <C> <C> <C>
|_AHH Holdings, Inc. Florida 12/27/95 49 Holding Company
| |_Columbia Financial Company Florida 10/26/93 100 Real Estate Holding Company
| |_American Heritage Holding Delaware 11/02/94 100 Home Builder
| Corporation
| | |_Heritage Homes Realty, Inc. Florida 07/20/93 100 Home Sales
| | |_Southeast Title, Inc. Florida 05/16/95 100 Title Company
| |_Heritage Home Finance Corporation Florida 02/10/94 100 Finance Company
|_American Financial Capital Trust I Delaware 09/14/96 100 Statutory Business Trust
|_American Financial Corporation Ohio 11/15/55 100 Holding Company
| |_AFC Coal Properties, Inc. Ohio 12/18/96 100 Real Estate Holding Company
| |_American Barge & Towing Company Ohio 03/25/82 100 Inactive
| | |_Spartan Transportation
Corporation Ohio 07/19/83 100 Mgmt-River Transportation Equipment
| |_American Financial Corporation Ohio 08/27/63 100 Inactive
| |_American Money Management Ohio 03/01/73 100 Investment Management
Corporation
| |_American Money Management Netherland 05/10/85 100 Securities Management
International, N.V
| | Antilles
| |_American Premier Underwriters, Inc. Pennsylvania 1846 100(2) Diversified
| | |_The Ann Arbor Railroad Company Michigan 09/21/1895 99 Inactive
| | |_The Associates of the Jersey New Jersey 11/10/1804 100 Inactive
Company
| | |_Cal Coal, Inc. Illinois 05/30/79 100 Inactive
| | |_The Indianapolis Union Railway Indiana 11/19/1872 100 Inactive
Company
| | |_Lehigh Valley Railroad Company Pennsylvania 04/21/1846 100 Inactive
| | |_Millennium Dynamics, Inc. Ohio 07/31/95 100 Design, Marketing & Servicing of
Comp. Software
| | |_The New York and Harlem Railroad New York 04/25/1831 97 Inactive
Company
| | |_The Owasco River Railway, Inc. New York 06/02/1881 100 Inactive
| | |_PCC Real Estate, Inc. New York 12/15/86 100 Holding Company
| | | |_PCC Chicago Realty Corp. New York 12/23/86 100 Real Estate Developer
| | | |_PCC Gun Hill Realty Corp. New York 12/18/85 100 Real Estate Developer
| | | |_PCC Michigan Realty, Inc. Michigan 11/09/87 100 Real Estate Developer
| | | |_PCC Scarsdale Realty Corp. New York 06/01/86 100 Real Estate Developer
| | | | |_Scarsdale Depot Associates, Delaware 05/05/89 80 Real Estate Developer
L.P.
| | |_Penn Central Energy Management Delaware 05/11/87 100 Energy Operations Manager
Company
| | |_Pennsylvania Company Delaware 12/05/58 100 Holding Company
| | | |_Atlanta Casualty Company Illinois 06/13/72 100 (2) Property/Casualty Insurance
| | | | |_American Premier Insurance Indiana 11/30/89 100 Property/Casualty Insurance
Company
| | | | |_Atlanta Specialty Insurance Iowa 02/06/74 100 Property/Casualty Insurance
Company
| | | | |_Mr. Agency of Georgia, Inc. Georgia 04/01/77 100 Insurance Agency
| | | | | |_Atlanta Casualty General Texas 03/15/61 100 Managing General Agency
Agency, Inc.
| | | | | |_Atlanta Insurance Brokers, Georgia 02/06/71 100 Insurance Agency
Inc.
| | | | | |_Treaty House, Ltd. (d/b/a Nevada 11/02/71 100 Insurance Premium Finance
Mr. Budget)
| | | | |_Penn Central U.K. Limited United Kingdom 10/28/92 100 Insurance Holding Company
| | | | | |_Insurance (GB) Limited United Kingdom 05/13/92 100 Property/Casualty Insurance
| | | |_Delbay Corporation Delaware 12/27/62 100 Inactive
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
AMERICAN FINANCIAL GROUP, INC.
|_American Financial Corporation % OF STOCK OWNED(1)
| |_American Premier Underwriters, Inc. STATE OF DATE OF BY IMMEDIATE
| | |_Pennsylvania Company DOMICILE INCORP. PARENT COMPANY NATURE OF BUSINESS
|
<S> <C> <C> <C> <S>
| | | |_Great Southwest Corporation Delaware 10/25/78 100 Real Estate Developer
| | | | |_World Houston, Inc. Delaware 05/30/74 100 Real Estate Developer
| | | |_Hangar Acquisition Corp. Ohio 10/06/95 100 Aircraft Investment
| | | |_Infinity Insurance Company Florida 07/09/55 100 Property/Casualty Insurance
| | | | |_Infinity Agency of Texas, Inc. Texas 07/15/92 100 Managing General Agency
| | | | |_The Infinity Group, Inc. Indiana 07/22/92 100 Insurance Holding Company
| | | | |_Infinity Select Insurance Indiana 06/11/91 100 Property/Casualty Insurance
Company
| | | | |_Infinity Southern Insurance Alabama 08/05/92 100 Property/Casualty Insurance
Corporation
| | | | |_Leader National Insurance Ohio 03/20/63 100 Property/Casualty Insurance
Company
| | | | | |_Budget Insurance Premiums, Ohio 02/14/64 100 Premium Finance Company
Inc.
| | | | | |_Leader National Agency, Inc. Ohio 04/05-63 100 Brokering Agent
| | | | | |_Leader National Agency of Texas 01/25/94 100 Managing General Agency
Texas, Inc.
| | | | | |_Leader National Insurance Arizona 12/05/73 100 Brokering Agent
Agency of Arizona
| | | | | |_Leader Preferred Insurance Ohio 11/07/94 100 Property/Casualty Insurance
Company
| | | | | |_Leader Specialty Insurance Indiana 03/10/94 100 Property/Casualty Insurance
Company
| | | |_PCC Technical Industries, Inc. California 03/07/55 100 Holding Company
| | | | |_ESC, Inc. California 11/02/62 100 Connector Accessories
| | | | |_Marathon Manufacturing Delaware 11/18/83 100 Holding Company
Companies, Inc.
| | | | | |_Marathon Manufacturing Delaware 12/07/79 100 Inactive
Company
| | | | |_PCC Maryland Realty Corp. Maryland 08/18/93 100 Real Estate Holding Company
| | | | |_Penn Camarillo Realty Corp. California 11/24/92 100 Real Estate Holding Company
| | | |_Penn Towers, Inc. Pennsylvania 08/01/58 100 Inactive
| | | |_Republic Indemnity Company of California 12/05/72 100 Workers' Compensation Insurance
America
| | | | |_Republic Indemnity Company of California 10/13/82 100 Workers' Compensation Insurance
California
| | | | |_Republic Indemnity Medical California 03/25/96 100 Medical Bill Review
Management, Inc.
| | | | |_Timberglen Limited United Kingdom 10/28/92 100 Investments
| | | |_Risico Management Corporation Delaware 01/10/89 100 Risk Management
| | | |_Windsor Insurance Company Indiana 11/05/87 100(2) Property/Casualty Insurance
| | | | |_American Deposit Insurance Oklahoma 12/28/66 100 Property/Casualty Insurance
Company
| | | | | |_Granite Finance Co., Inc. Texas 11/09/65 100 Premium Financing
| | | | |_Coventry Insurance Company Ohio 09/05/89 100 Property/Casualty Insurance
| | | | |_El Aguila Compania de Mexico 11/24/94 100(2) Property/Casualty Insurance
Seguros, S.A. de C.V.
| | | | |_Moore Group Inc. Georgia 12/19/62 100 Insurance Holding Company/Agency
| | | | | |_Casualty Underwriters, Inc. Georgia 10/01/54 51 Insurance Agency
| | | | | |_Dudley L. Moore Insurance, Louisiana 03/30/78 beneficial Insurance Agency
Inc. interest
| | | | | |_Hallmark General Insurance Oklahoma 06/16/72 beneficial Insurance Agency
Agency, Inc. interest
| | | | | |_Middle Tennessee Tennessee 11/14/69 100 Insurance Agency
Underwriters, Inc.
| | | | | | |_Insurance Finance Company Tennessee 01/03/62 100 Premium Financing
| | | | | |_Windsor Group, Inc. Georgia 05/23/91 100 Insurance Holding Company
| | | | |_Regal Insurance Company Indiana 11/05/87 100 Property/Casualty Insurance
| | | | |_Texas Windsor Group, Inc. Texas 06/23/88 100 Insurance Agency
| | |_Pennsylvania-Reading Seashore New Jersey 06/14/01 66.67 Inactive
Lines
| | |_Pittsburgh and Cross Creek Pennsylvania 08/14/70 83 Inactive
Railroad Company
</TABLE>
C-8
<PAGE>
<TABLE>
<CAPTION>
AMERICAN FINANCIAL GROUP, INC.
| |_American Financial Corporation
| | |_American Premier Underwriters, Inc. % OF STOCK OWNED(1)
| STATE OF DATE OF BY IMMEDIATE
| DOMICILE INCORP. PARENT COMPANY NATURE OF BUSINESS
|- -------- ------- ------------------- ------------------
<S> <C> <C> <C> <C>
| | |_Terminal Realty Penn Co. District of 09/23/68 100 Inactive
| | |_United Railroad Corp. Delaware 11/25/81 100 Inactive
| | | |_Detroit Manufacturers Railroad Michigan 01/30/02 82 Inactive
Company
| | |_Waynesburg Southern Railroad Pennsylvania 09/01/66 100 Inactive
Company
| |_Chiquita Brands International, Inc. New Jersey 03/30/99 43.09(2) Production/Processing/Distribution
(and subsidiaries) | | of Food Products
| |_Dixie Terminal Corporation Ohio 04/23/70 100 Commercial Leasing
| |_Fairmont Holdings, Inc. Ohio 12/15/83 100 Holding Company
| |_FWC Corporation Ohio 03/16/83 100 Financial Services
| |_Great American Holding Corporation Ohio 11/30/77 100 Holding Company
| | |_Great American Insurance Company Ohio 3/7/1872 100 Property/Casualty Insurance
| | | |_A B I Group, Inc. Minnesota 07/27/78 100 Inactive
| | | | |_American Business Risk Minnesota 04/19/78 100 Inactive
Services, Inc.
| | | | |_American Insurance Management Minnesota 11/16/82 100 Inactive
Agency, Inc.
| | | | |_Consolidated Underwriters, Texas 10/14/80 100 Inactive
Inc.
| | | |_Agricultural Excess and Surplus Delaware 02/28/79 100 Excess & Surplus Lines Insurance
Insurance Company
| | | |_Agricultural Insurance Company Ohio 03/23/05 100 Property/Casualty Insurance
| | | |_American Alliance Insurance Arizona 09/11/45 100 Property/Casualty Insurance
Company
| | | |_American Annuity Group, Inc. Delaware 05/15/87 81.38(2) Holding Company
| | | | |_AAG Holding Company, Inc. Ohio 09/11/96 100 Holding Company
| | | | | |_American Annuity Group Delaware 09/13/96 100 Financing Vehicle
Capital Trust I
| | | | | |_American Annuity Group Delaware 03/11/97 100 Financing Vehicle
Capital Trust II
| | | | | |_Great American Life Ohio 12/15/59 100 Life Insurance Company
Insurance Company
| | | | | | |_Annuity Investors Life Ohio 11/31/81 100 Life Insurance Company
Insurance Company
| | | | | | |_Assured Security Life South Dakota 05/12/78 100 Life Insurance Company
Insurance Company, Inc.
| | | | | | |_CHATBAR, Inc. Massachusetts 11/02/93 100 Hotel Operator
| | | | | | |_Driskill Holding, Inc. Texas 06/07/95 beneficial Hotel Management
interest
| | | | | | |_GALIC Brothers, Inc. Ohio 11/12/93 80 Real Estate Management
| | | | | | |_GALIC Life Insurance Ohio 06/21/94 100 Life Ins. Co. (License Pending)
Company
| | | | | | |_Great American Life Ohio 08/10/67 100 Life Insurance Company
Assurance Company
| | | | | | |_Loyal American Life Alabama 05/18/55 100 Life Insurance Company
Insurance Company
| | | | | | | |_ADL Financial North Carolina 09/10/70 100 Marketing Services
Services, Inc.
| | | | | | | |_Purity Financial Florida 12/21/91 100 Marketing Services
Corporation
| | | | | | |_Prairie National Life South Dakota 02/11/76 100 Life Insurance Company
Insurance Company
| | | | | | | |_American Memorial Life South Dakota 03/18/59 100 Life Insurance Company
Insurance Company
| | | | | | | | |_Great Western Life Montana 05/01/80 100 Life Insurance Company
Insurance Company
| | | | | | | | |_Rushmore National South Dakota 04/16/37 100 Life Insurance Company
Life Insurance
Company
| | | | |_AAG Insurance Agency, Inc. Kentucky 12/06/94 100 Life Insurance Agency
| | | | | |_AAG Insurance Agency of Massachusetts 05/25/95 100 Insurance Agency
Massachusetts, Inc.
| | | | |_AAG Securities, Inc. Ohio 12/10/93 100 Broker-Dealer
| | | | |_American DataSource, Inc. Delaware 06/15/90 100 Pre-need Trust Services
| | | | |_American Memorial Marketing Washington 06/19/80 100 Marketing Services
Services, Inc.
</TABLE>
C-9
<PAGE>
<TABLE>
<CAPTION>
AMERICAN FINANCIAL GROUP, INC.
| |_American Financial Corporation % OF STOCK OWNED(1)
| | |_Great American Holding Corporation STATE OF DATE OF BY IMMEDIATE
| | | |_Great American Insurance Company DOMICILE INCORP. PARENT COMPANY NATURE OF BUSINESS
| | | |_American Annuity Group, Inc. -------- ------- ------------------- ------------------
<S> <C> <C> <C> <C>
|-
| | |_CSW Management Services, Inc.
| | |_GALIC Disbursing Company Texas 06/27/85 100 Pre-need Trust Admin. Services
| | | |_Keyes-Graham Insurance Ohio 05/31/94 100 Payroll Servicer
Agency, Inc. Massachusetts 12/23/87 100 Insurance Agency
| | | |_International Funeral
Associates, Inc. Delaware 05/07/86 100 Coop. Buying Funeral Dirs.
| | | |_Laurentian Credit Services
Corporation Delaware 10/07/94 100 Inactive
| | | |_Laurentian Marketing
Services, Inc. Delaware 12/23/87 100 Marketing Services
| | | |_Laurentian Securities
Corporation Delaware 01/30/90 100 Inactive
| | | |_Lifestyle Financial
Investments, Inc. Ohio 12/29/93 100 Marketing Services
| | | | |_Lifestyle Financial
Investments Agency of Ohio 03/07/94 beneficial Life Insurance Agency
Ohio, Inc. interest
| | | | |_Lifestyle Financial
Investments of Indiana 02/24/94 100 Life Insurance Agency
Indiana, Inc.
| | | | |_Lifestyle Financial
Investments of Kentucky 10/03/94 100 Insurance Agency
Kentucky, Inc.
| | | | |_Lifestyle Financial
Investments of the Minnesota 06/10/85 100 Insurance Agency
Northwest, Inc.
| | | | |_Lifestyle Financial
Investments of the North Carolina 07/13/94 100 Insurance Agency
Southeast, Inc.
| | | |_Loyal Marketing Services,
Inc. Alabama 07/20/90 100 Marketing Services
| | | |_Purple Cross Insurance
Agency, Inc. Delaware 11/07/89 100 Insurance Agency
| | | |_Retirement Resource Group,
Inc. Indiana 02/07/95 100 Insurance Agency
| | | | |_RRG of Alabama, Inc.
| | | | |_RRG of Ohio, Inc. Alabama 09/22/95 100 Life Insurance Agency
Ohio 02/20/96 beneficial Insurance Agency
| | | | |_RRG of Texas, Inc. interest
| | | |_SPELCO (UK) Ltd. Texas 06/02/95 100 Life Insurance Agency
| | | |_SWTC, Inc. United Kingdom 00/00/00 99 Inactive
| | | |_SWTC Hong Kong Ltd. Delaware 00/00/00 100 Inactive
| | | |_Technomil Ltd. Hong Kong 00/00/00 100 Inactive
| | |_American Custom Insurance Delaware 00/00/00 100 Inactive
Services, Inc. Ohio 07/27/83 100 Management Holding Company
| | | |_American Custom Insurance
Services California, Inc. California 05/18/92 100 Insurance Agency & Brokerage
| | | |_Eden Park Insurance Brokers,
Inc. California 02/13/90 100 Wholesale Brokerage for Surplus
| | | |_Professional Risk Brokers, Lines
Inc. Illinois 03/01/90 100 Insurance Agency
| | | |_Professional Risk Brokers
Insurance, Inc. Massachusetts 04/19/94 100 Surplus Lines Brokerage
| | | |_Professional Risk Brokers of
Connecticut, Inc. Connecticut 07/09/92 100 Insurance Agency & Brokerage
| | | |_Professional Risk Brokers of
Ohio, Inc. Ohio 12/17/86 100 Insurance Agency and Brokerage
| | | |_Utility Insurance Services,
Inc. Texas 04/06/95 100(2) Texas Local Recording Agency
| | | |_Utility Management Services,
Inc. Texas 09/07/65 100 Texas Managing General Agency
| | |_American Custom Insurance
Services Illinois, Inc. Illinois 07/08/92 100 Underwriting Office
| | |_American Dynasty Surplus Lines
Insurance Company Delaware 01/12/82 100 Excess & Surplus Lines Insurance
| | |_American Eagle Group, Inc.
| | | |_AE Insurance Agency, Inc. Delaware 10/03/86 48.6(3) Holding Company
| | | |_AOA Corporation California 12/17/91 100 Inactive
| | | |_American Eagle Insurance Texas 11/12/91 100 Inactive
Company Texas 12/07/84 100 Property/Casualty Insurer
| | | | |_American Eagle Reinsurance
Organization, Inc. Texas 08/31/70 100 Inactive
| | | | |_American Meridian Insurance
Company Limited Bermuda 01/01/81 100 Inactive
</TABLE>
C-10
<PAGE>
<TABLE>
<CAPTION>
AMERICAN FINANCIAL GROUP, INC. % of STOCK
| |_American Financial Corporation OWNED (1) BY
| | |_Great American Holding Corporation STATE OF DATE OF IMMEDIATE PARENT
| | | |_Great American Insurance Company DOMICILE INCORP. COMPANY NATURE OF BUSINESS
| | | | |_American Eagle Group, Inc. -------- -------- ---------------- ------------------
<S> <C> <C> <C> <C>
|-
| | | | |_Aviation Adjustment Bureau, Texas 05/08/79 100 Claims Servicing
Inc.
| | | | |_Aviation Elite Reinsurance Texas 11/22/72 100 Inactive
Organization, Inc.
| | | | |_Aviation Office of America, Texas 02/15/77 100 Insurance Agency
Inc.
| | | |_American Empire Surplus Lines Delaware 07/15/77 100 Excess & Surplus Lines Insurance
Insurance Company
| | | | |_American Empire Insurance Ohio 11/26/79 100 Property/Casualty Insurance
Company
| | | | | |_American Signature Ohio 04/08/96 100 Insurance Agency
Underwriters, Inc.
| | | | | |_Specialty Underwriters, Texas 05/19/76 100 Insurance Agency
Inc.
| | | | |_Fidelity Excess and Surplus Ohio 06/30/87 100 Property/Casualty Insurance
Insurance Company
| | | |_American Financial Connecticut 1871 82.62(2) Closed End Investment Company
Enterprises, Inc.
| | | |_American Insurance Agency, Inc. Kentucky 07/27/67 100 Insurance Agency
| | | |_American National Fire New York 08/22/47 100 Property/Casualty Insurance
Insurance Company
| | | |_American Special Risk, Inc. Illinois 12/29/81 100 Insurance Broker/Managing General Agency
| | | | |_American Special Risk I of Arizona 02/06/90 100 Inactive
Arizona, Inc.
| | | |_American Spirit Insurance Indiana 04/05/88 100 Property/Casualty Insurance
Company
| | | |_Brothers Property Corporation Ohio 09/08/87 80 Real Estate Investment
| | | | |_Brothers Barrington Oklahoma 03/18/94 100 Real Estate Holding Corporation
Corporation
| | | | |_Brothers Cincinnatian Ohio 01/25/94 100 Hotel Manager
Corporation
| | | | |_Brothers Columbine Oklahoma 03/18/94 100 Real Estate Holding Corporation
Corporation
| | | | |_Brothers Landing Corporation Louisiana 02/24/94 100 Real Estate Holding Corporation
| | | | |_Brothers Pennsylvanian Pennsylvania 12/23/94 100 Real Estate Holding Corporation
Corporation
| | | | |_Brothers Port Richey Florida 12/06/93 100 Apartment Manager
Corporation
| | | | |_Brothers Property Management Ohio 09/25/87 100 Real Estate Management
Corporation
| | | | |_Brothers Railyard Corporation Texas 12/14/93 100 Apartment Manager
| | | |_Contemporary American Illinois 04/16/96 100 Property/Casualty Insurance
Insurance Company
| | | |_Crop Managers Insurance Kansas 08/09/89 100 Insurance Agency
Agency, Inc.
| | | |_Dempsey & Siders Agency, Inc. Ohio 05/09/56 100 Insurance Agency
| | | |_Eagle American Insurance Ohio 07/01/87 100 Property/Casualty Insurance
Company
| | | |_Eden Park Insurance Company Indiana 01/08/90 100 Special Risk Surplus Lines
| | | |_FCIA Management Company, Inc. New York 09/17/91 79 Servicing Agent
| | | |_The Gains Group, Inc. Ohio 01/26/82 100 Marketing of Advertising
| | | |_Great American Lloyd's, Inc. Texas 08/02/83 100 Attorney-in-Fact - Texas Lloyd's Company
| | | |_Great American Lloyd's Texas 10/09/79 beneficial Lloyd's Plan Insurer
Insurance Company interest
| | | |_Great American Management Ohio 12/05/74 100 Data Processing and Equipment Leasing
Services, Inc.
| | | | |_American Payroll Services, Ohio 02/20/87 100 Payroll Services
Inc.
| | | |_Great American Re Inc. Delaware 05/14/71 100 Reinsurance Intermediary
| | | |_Great American Risk Ohio 04/21/80 100 Insurance Risk Management
Management, Inc.
| | | |_Great Texas County Mutual Texas 04/29/54 beneficial Property/Casualty Insurance
Insurance Company interest
| | | |_Grizzly Golf Center, Inc. Ohio 11/08/93 100 Operate Golf Courses
| | | |_Homestead Snacks Inc. California 03/02/79 100(2) Meat Snack Distribution
| | | | |_Giant Snacks, Inc. Delaware 07/06/89 100 Meat Snack Distribution
</TABLE>
C-11
<PAGE>
<TABLE>
<CAPTION>
AMERICAN FINANCIAL GROUP, INC. % OF STOCK
| |_American Financial Corporation OWNED (1) BY
| | |_Great American Holding Corporation STATE OF DATE OF IMMEDIATE PARENT
| | | |_Great American Insurance Company DOMICILE INCORP. COMPANY NATURE OF BUSINESS
-------- ------- ---------------- ------------------
<S> <C> <C> <C> <C>
|-
| | | |_Key Largo Group, Inc. Florida 07/28/81 100 Land Developer & Resort Operator
| | | | |_Key Largo Group Utility Florida 11/26/84 100 Water & Sewer Utility
Company
| | | |_Mid-Continent Casualty Company Oklahoma 02/26/47 100 Property/Casualty Insurance
| | | | |_Mid-Continent Insurance Oklahoma 08/13/92 100 Property/Casualty Insurance
Company
| | | | |_Oklahoma Surety Company Oklahoma 08/05/68 100 Property/Casualty Insurance
| | | |_National Interstate Corporation Ohio 01/26/89 52.15 Holding Company
| | | | |_American Highways Insurance California 05/05/94 100 Insurance Agency
Agency
| | | | |_National Interstate Texas 06/07/89 beneficial Insurance Agency
Insurance Agency of Texas, Inc. interest
| | | | |_National Interstate Ohio 02/13/89 100 Insurance Agency
Insurance Agency, Inc.
| | | | |_National Interstate Ohio 02/10/89 100 Property/Casualty Insurance
Insurance Company
| | | | |_Safety, Claims & Litigation Pennsylvania 06/23/95 90 Claims Third Party Administrator
Services, Inc.
| | | |_North America Livestock, Inc. Florida 12/03/82 100 Managing General Agency
| | | |_OBGC Corporation Florida 11/23/77 80 Real Estate Development
| | | |_Pointe Apartments, Inc. Minnesota 06/24/93 100 Real Estate Holding Corporation
| | | |_Seven Hills Insurance Company New York 06/30/32 100 Property/Casualty Reinsurance
| | | |_Stonewall Insurance Company Alabama 02/1866 100 Property/Casualty Insurance
| | | |_Stone Mountain Professional Georgia 08/07/95 100 Insurance Agency
Liability Agency, Inc.
| | | |_Tamarack American, Inc. Delaware 06/10/86 100 Management Holding Company
| | | |_Transport Insurance Company Ohio 05/25/76 100 Property/Casualty Insurance
| | | | |_American Commonwealth Texas 07/23/63 100 Real Estate Development
Development Company
| | | | | |_ACDC Holdings Corporation Texas 05/04/81 100 Real Estate Development
| | | | |_Instech Corporation Texas 09/02/75 100 Claim & Claim Adjustment Services
| | | | |_TICO Insurance Company Ohio 06/03/80 100 Property/Casualty Insurance
| | | | |_Transport Managing General Texas 05/19/89 100 Managing General Agency
Agency, Inc.
| | | | |_Transport Insurance Agency, Texas 08/21/89 beneficial Insurance Agency
Inc. interest
| | | |_Transport Underwriters California 05/11/45 100 Holding Company/Agency
Association
|_One East Fourth, Inc. Ohio 02/03/64 100 Commercial Leasing
|_PCC 38 Corp. Illinois 12/23/96 100 Real Estate Holding Company
|_Pioneer Carpet Mills, Inc. Ohio 04/29/76 100 Carpet Manufacturing
|_TEJ Holdings, Inc. Ohio 12/04/84 100 Real Estate Holdings
|_Three East Fourth, Inc. Ohio 08/10/66 100 Commercial Leasing
(1) Except Director's Qualifying Shares.
(2) Total percentage owned by parent shown and by other
affiliated company(ies).
(3) Convertible Preferred Stock.
</TABLE>
C-12
<PAGE>
ITEM 27. NUMBER OF CONTRACT OWNERS
Not Applicable.
ITEM 28. INDEMNIFICATION
(a) The Code of Regulations of Annuity Investors Life Insurance
Company[REGISTERED TRADEMARK] provides in Article V as follows:
The Corporation shall, to the full extent permitted by the General
Corporation Law of Ohio, indemnify any person who is or was a director or
officer of the Corporation and whom it may indemnify pursuant thereto. The
Corporation may, within the sole discretion of the Board of Directors,
indemnify in whole or in part any other persons whom it may indemnify
pursuant thereto.
Insofar as indemnification for liability arising under the Securities Act of
1933 ("1933 Act") may be permitted to directors, officers and controlling
persons of the Depositor pursuant to the foregoing provisions, or otherwise, the
Depositor has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Depositor of expenses incurred or paid by the director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Depositor will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue.
(b) The directors and officers of Annuity Investors Life Insurance
Company[REGISTERED TRADEMARK] are covered under a Directors and Officers
Reimbursement Policy. Under the Reimbursement Policy, directors and officers are
indemnified for loss arising from any covered claim by reason of any Wrongful
Act in their capacities as directors or officers, except to the extent the
Company has indemnified them. In general, the term "loss" means any amount which
the directors or officers are legally obligated to pay for a claim for Wrongful
Acts. In general, the term "Wrongful Acts" means any breach of duty, neglect,
error, misstatement, misleading statement, omission or act by a director or
officer while acting individually or collectively in their capacity as such
claimed against them solely by reason of their being directors and officers. The
limit of liability under the program is $20,000,000 for the policy year ending
September 1, 1997. The primary policy under the program is with National Union
Fire Insurance Company of Pittsburgh, PA. in the name of American Premier
Underwriters, Inc.
ITEM 29. PRINCIPAL UNDERWRITER
AAG Securities, Inc. is the underwriter and distributor of the Contracts as
defined in the Investment Company Act of 1940 ("1940 Act").
(a) AAG Securities, Inc. does not act as a principal underwriter, depositor,
sponsor or investment adviser for any investment company other than Annuity
Investors[REGISTERED TRADEMARK] Variable Account A and Annuity
Investors[REGISTERED TRADEMARK] Variable Account B.
C-13
<PAGE>
(b) Directors and Officers of AAG Securities, Inc.
NAME AND PRINCIPAL POSITION WITH
BUSINESS ADDRESS AAG SECURITIES, INC.
- ------------------ ---------------------
Thomas Kevin Liguzinski (1) Chief Executive Officer and Director
Charles Kent McManus Senior Vice President
Mark Francis Muething (1) Vice President, Secretary and
Director
William Jack Maney, II (1) Director
Jeffrey Scott Tate (1) Director
James Lee Henderson (1) President
Andrew Conrad Bambeck, III (1) Vice President
William Claire Bair, Jr. (1) Treasurer
______________________________
(1) 250 East Fifth Street, Cincinnati, Ohio 45202
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts and records required to be maintained by Section 31(a) of the 1940
Act and the rules under it are maintained by Lynn E. Laswell, Assistant Vice
President of the Company, at the Administrative Office.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(a) Registrant undertakes that it will file a post-effective amendment to this
registration statement as frequently as necessary to ensure that the audited
financial statements in the registration statement are never more than 16 months
old for so long as payments under the variable annuity contracts may be
accepted.
(b) Registrant undertakes that it will include either (1) as part of any
application to purchase a Contract offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
post card or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information.
(c) Registrant undertakes to deliver any Prospectus and Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request to the Company at the address or
phone number listed in the Prospectus.
(d) The Company represents that the fees and charges deducted under the
Contract, in the aggregate, are reasonable in relation to the services rendered,
the expenses expected to be incurred and the risks assumed by the Company.
C-14
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the Registrant certifies that it has caused this Pre-Effective
Amendment No. 2 to its Registration Statement to be signed on its behalf by the
undersigned in the City of Cincinnati, State of Ohio on the 30th day of June,
1997.
ANNUITY INVESTORS[REGISTERED TRADEMARK] VARIABLE
ACCOUNT B
(REGISTRANT)
By: /s/ Robert Allen Adams
-------------------------------------
Robert Allen Adams
Chairman of the Board, President
and Director, Annuity Investors
Life Insurance Company[REGISTERED TRADEMARK]
ANNUITY INVESTORS LIFE INSURANCE
COMPANY[REGISTERED TRADEMARK]
(DEPOSITOR)
By: /s/ Robert Allen Adams
--------------------------------------
Robert Allen Adams
Chairman of the Board, President
and Director
As required by the Securities Act of 1933, this Registration Statement has
been signed by the following persons in the capacities and on the dates
indicated.
/s/ Robert Allen Adams Principal Executive June 30, 1997
- ------------------------------ Officer, Director
Robert Allen Adams
/s/ Robert Eugene Allen Principal Financial June 30, 1997
- ------------------------------ Officer
Robert Eugene Allen
/s/ Lynn Edward Laswell Principal Accounting June 30, 1997
- ----------------------------- Officer
Lynn Edward Laswell
C-15
<PAGE>
/s/ Stephen Craig Lindner Director June 30, 1997
- --------------------------------
Stephen Craig Lindner
/s/ William Jack Maney, Ii Director June 30, 1997
- --------------------------------
William Jack Maney, II
/s/ James Michael Mortensen Director June 30, 1997
- ---------------------------
James Michael Mortensen
/s/ Mark Francis Muething Director June 30, 1997
- -----------------------------
Mark Francis Muething
/s/ Jeffrey Scott Tate Director June 30, 1997
- ---------------------------------
Jeffrey Scott Tate
C-16
