As filed with the Securities and Exchange Commission on April 29, 1998
File No. 333-19725
File No. 811-08017
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ( X )
Pre-effective Amendment No. ( )
Post-effective Amendment No. 2 ( X )
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 ( X )
Pre-effective Amendment No. ( )
Post-effective Amendment No. 2 ( X )
(Check appropriate box or boxes)
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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: Effective date of this
Post-Effective Amendment
It is proposed that this filing will become effective:
/ / Immediately upon filing pursuant to paragraph (b) of Rule 485
--
/ X / On May 1, 1998 pursuant to paragraph (b) of Rule 485
--
/ / 60 days after filing pursuant to paragraph (a)(1) of Rule 485
--
/ / On pursuant to paragraph (a)(1) of Rule 485
--
Title of Securities being registered: Shares of beneficial interest.
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CROSS REFERENCE SHEET
Pursuant to Rule 495
(Commodore Navigator(SERVICEMARK))
Showing Location in Part A (Prospectus),
Part B (Statement of Additional Information) and Part C (Other Information)
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........ Condensed Financial Information
(b) Performance Data................ Performance Information
(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
(d) Commissions..................... Distribution of the Contract
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(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 Information................ Statement of Additional
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
Benefit; Variable Dollar
Benefit; (SAI) Annuity Payments
--Settlement Option Tables
23. Financial Statements.................. Financial Statements
PART C
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 Registrant........... Common 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
iv
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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, 408 and 457(g) 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 (other than 457(g)) 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 Separate Account invests. 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. The Separate Account uses its
assets to purchase, at their net asset value, shares of designated registered
investment companies or portfolios 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; (24) PBHG Insurance Series Fund, Inc.-PBHG Technology &
Communications Portfolio; and (25) The Timothy Plan Variable Series.
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Page 1
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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 Contracts is available free of charge by
writing to the Company's Administrative Office at P.O. Box 5423, Cincinnati,
Ohio 45201-5423. Alternatively, you may access the Statement of Additional
Information (as well as all other documents filed with the Securities and
Exchange Commission with respect to the Contracts or the Company) at the
Securities and Exchange Commission's Web site http://www.sec.gov. 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 SECURITIES AND EXCHANGE 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 May 1, 1998.
This Prospectus may be supplemented from time to time. The Company may make
the Prospectus and/or any supplements thereto available in one or more
formats at any given time, including in electronic format.
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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.
--------------------------------------------
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....................................................................6
HIGHLIGHTS.....................................................................9
THE CONTRACT.............................................................9
THE SEPARATE ACCOUNT.....................................................9
THE FIXED ACCOUNT.......................................................10
TRANSFERS BEFORE THE ANNUITY COMMENCEMENT DATE..........................10
SURRENDERS..............................................................10
CONTINGENT DEFERRED SALES CHARGE ("CDSC")...............................10
OTHER CHARGES AND DEDUCTIONS............................................10
ANNUITY BENEFITS........................................................11
DEATH BENEFIT...........................................................11
FEDERAL INCOME TAX CONSEQUENCES.........................................11
RIGHT TO CANCEL.........................................................11
CONTACTING THE COMPANY..................................................11
CONDENSED FINANCIAL INFORMATION...............................................12
SUMMARY OF EXPENSES...........................................................15
OWNER TRANSACTION EXPENSES..............................................15
ANNUAL EXPENSES.........................................................15
EXAMPLES................................................................21
FINANCIAL STATEMENTS FOR THE COMPANY..........................................22
THE FUNDS.....................................................................23
JANUS ASPEN SERIES......................................................23
AGGRESSIVE GROWTH PORTFOLIO.......................................23
WORLDWIDE GROWTH PORTFOLIO........................................23
BALANCED PORTFOLIO................................................23
GROWTH PORTFOLIO..................................................23
INTERNATIONAL GROWTH PORTFOLIO....................................23
DREYFUS FUNDS...........................................................23
CAPITAL APPRECIATION PORTFOLIO (Dreyfus Variable
Investment Fund)...............................................23
MONEY MARKET PORTFOLIO (Dreyfus Variable Investment
Fund)..........................................................24
GROWTH AND INCOME PORTFOLIO (Dreyfus Variable Investment
Fund)..........................................................24
SMALL CAP PORTFOLIO (Dreyfus Variable Investment Fund)............24
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.................24
DREYFUS STOCK INDEX FUND..........................................24
STRONG FUNDS............................................................24
STRONG OPPORTUNITY FUND II, INC...................................24
STRONG GROWTH FUND II (Strong Variable Insurance Funds, Inc.).....24
INVESCO VARIABLE INVESTMENT FUNDS, INC..................................25
INDUSTRIAL INCOME PORTFOLIO.......................................25
TOTAL RETURN PORTFOLIO............................................25
HIGH YIELD PORTFOLIO..............................................25
MORGAN STANLEY UNIVERSAL FUNDS, INC.....................................25
U.S. REAL ESTATE PORTFOLIO........................................25
VALUE PORTFOLIO...................................................25
EMERGING MARKETS EQUITY PORTFOLIO.................................25
FIXED INCOME PORTFOLIO............................................25
MID CAP VALUE PORTFOLIO...........................................26
PBHG INSURANCE SERIES FUND, INC.........................................26
PBHG GROWTH II PORTFOLIO..........................................26
PBHG LARGE CAP GROWTH PORTFOLIO...................................26
PBHG TECHNOLOGY & COMMUNICATIONS PORTFOLIO........................26
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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THE TIMOTHY PLAN VARIABLE SERIES........................................26
THE TIMOTHY PLAN VARIABLE SERIES..................................26
ADDITIONS, DELETIONS, OR SUBSTITUTIONS..................................28
PERFORMANCE INFORMATION.......................................................27
YIELD DATA..............................................................27
TOTAL RETURN DATA.......................................................28
ANNUITY INVESTORS LIFE INSURANCE COMPANY(REGISTERED) AND THE SEPARATE
ACCOUNT.....................................................................28
ANNUITY INVESTORS LIFE INSURANCE COMPANY................................28
PUBLISHED RATINGS.......................................................28
YEAR 2000...............................................................29
THE SEPARATE ACCOUNT....................................................29
THE FIXED ACCOUNT.............................................................29
FIXED ACCOUNT OPTIONS...................................................29
RENEWAL OF FIXED ACCOUNT OPTIONS........................................30
THE CONTRACTS.................................................................30
RIGHT TO CANCEL.........................................................30
PURCHASE PAYMENTS.............................................................31
PURCHASE PAYMENTS.......................................................31
ALLOCATION OF PURCHASE PAYMENTS.........................................31
ACCOUNT VALUE.................................................................31
FIXED ACCOUNT VALUE.....................................................31
VARIABLE ACCOUNT VALUE..................................................32
ACCUMULATION UNIT VALUE.................................................32
NET INVESTMENT FACTOR...................................................32
TRANSFERS.....................................................................33
TELEPHONE TRANSFERS.....................................................33
DOLLAR COST AVERAGING...................................................33
PORTFOLIO REBALANCING...................................................34
INTEREST SWEEP..........................................................34
PRINCIPAL GUARANTEE OPTION..............................................34
CHANGES BY THE COMPANY..................................................34
SURRENDERS....................................................................35
SURRENDER VALUE.........................................................35
SUSPENSION OR DELAY IN PAYMENT OF SURRENDER VALUE.......................35
FREE WITHDRAWAL PRIVILEGE...............................................35
SYSTEMATIC WITHDRAWAL...................................................35
CONTRACT LOANS................................................................37
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...........................................................41
REDUCTION OR ELIMINATION OF CONTRACT CHANGES (GROUP CONTRACTS ONLY).....41
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SETTLEMENT OPTIONS............................................................42
ANNUITY COMMENCEMENT DATE...............................................42
ELECTION OF SETTLEMENT OPTION...........................................42
BENEFIT PAYMENTS........................................................42
FIXED DOLLAR BENEFIT....................................................42
VARIABLE DOLLAR BENEFIT.................................................42
TRANSFERS AFTER THE COMMENCEMENT DATE...................................43
TRANSFER FORMULA........................................................43
SETTLEMENT OPTIONS......................................................44
MINIMUM AMOUNTS.........................................................44
SETTLEMENT OPTION TABLES................................................45
GENERAL PROVISIONS............................................................45
NON-PARTICIPATING.......................................................45
MISSTATEMENT............................................................45
PROOF OF EXISTENCE AND AGE..............................................45
DISCHARGE OF LIABILITY..................................................45
TRANSFER OF OWNERSHIP...................................................45
NON-QUALIFIED CONTRACT............................................45
QUALIFIED CONTRACT................................................45
ASSIGNMENT..............................................................45
NON-QUALIFIED CONTRACT............................................45
QUALIFIED CONTRACT................................................46
ANNUAL REPORT...........................................................46
INCONTESTABILITY........................................................46
ENTIRE CONTRACT.........................................................46
CHANGES -- WAIVERS......................................................46
NOTICES AND DIRECTIONS..................................................46
FEDERAL TAX MATTERS...........................................................46
INTRODUCTION............................................................46
TAXATION OF ANNUITIES IN GENERAL........................................47
SURRENDERS..............................................................47
QUALIFIED CONTRACTS...............................................47
NON-QUALIFIED CONTRACTS...........................................47
BENEFIT PAYMENTS........................................................47
PENALTY TAX.............................................................47
TAXATION OF DEATH BENEFIT PROCEEDS......................................47
TRANSFERS, ASSIGNMENTS, OR EXCHANGES OF CONTRACTS.......................47
QUALIFIED CONTRACTS - GENERAL...........................................48
INDIVIDUAL RETIREMENT ANNUITIES...................................48
TAX-SHELTERED ANNUITIES...........................................48
TEXAS OPTIONAL RETIREMENT PROGRAM.................................48
PENSION AND PROFIT SHARING PLANS..................................48
CERTAIN DEFERRED COMPENSATION PLANS.....................................48
WITHHOLDING.............................................................48
POSSIBLE CHANGES IN TAXATION............................................49
OTHER TAX CONSEQUENCES..................................................49
GENERAL.................................................................49
DISTRIBUTION OF THE CONTRACTS.................................................49
LEGAL PROCEEDINGS.............................................................50
VOTING RIGHTS.................................................................50
AVAILABLE INFORMATION.........................................................50
STATEMENT OF ADDITIONAL INFORMATION...........................................51
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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 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. The value of an
Accumulation Unit is referred to as an "Accumulation Unit Value" or
"Accumulation UV".
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. The value of a Benefit Unit is referred to as a "Benefit Unit Value."
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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<PAGE>
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 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 is
invested 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 (other than 457(g)) or non-qualified deferred
compensation plan, and are also available for arrangements that qualify for
favorable tax treatment under Section 401, 403, 408 or 457(g) of the Code.
Participation in a group Contract will be evidenced by the issuance of a
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 Sub-Accounts 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 Sub-Accounts 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 29.) The Separate 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 Contracts 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; (24) PBHG Insurance Series Fund, Inc.-PBHG Technology &
Communications Portfolio; and (25) The Timothy Plan Variable Series.
- --------------------------------------------------------------------------------
Page 9
<PAGE>
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 a Variable Dollar Benefit 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 23 and the accompanying Fund
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 29.)
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 33.)
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 33.)
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 46.)
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 that allow
the Company to incur 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
Sub-Account ("Enhanced Contract"). 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. The Contract Maintenance Fee is
not assessed against Fixed Account options. (See "CHARGES AND DEDUCTIONS," page
38.)
- --------------------------------------------------------------------------------
Page 10
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
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 46.)
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
30.)
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.
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. PLEASE REFER TO THE FUND PROSPECTUSES FOR DETAILED
INFORMATION ABOUT THE FUNDS. THE REQUIREMENTS OF A PARTICULAR RETIREMENT PLAN,
AN ENDORSEMENT TO A CONTRACT OR LIMITATIONS OR PENALTIES IMPOSED BY THE CODE OR
THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, 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 46.)
- --------------------------------------------------------------------------------
Page 11
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
CONDENSED FINANCIAL INFORMATION
The following table gives per unit information about the financial history of
each Sub-Account of the Separate Account from inception to December 31, 1997.
This information should be read in conjunction with the Separate Account
financial statements (including the notes thereto) included in the Statement of
Additional Information.
STANDARD ENHANCED
CONTRACTS CONTRACTS
1997 1997
---- ----
JANUS ASPEN SERIES:
AGGRESSIVE GROWTH PORTFOLIO
Accumulation UV - beginning 10.000000(1) 10.000000(1)
Accumulation UV - ending 10.723950 10.738659
Accumulated units at year end 2,830.076 0.000
WORLDWIDE GROWTH PORTFOLIO
Accumulation UV - beginning 10.000000(1) 10.000000(1)
Accumulation UV - ending 9.935860 9.949496
Accumulated units at year end 56,665.753 0.000
BALANCED PORTFOLIO
Accumulation UV - beginning 10.000000(1) 10.000000(1)
Accumulation UV - ending 10.604609 10.619159
Accumulated units at year end 30,519.754 0.000
GROWTH PORTFOLIO
Accumulation UV - beginning 10.000000(1) 10.000000(1)
Accumulation UV - ending 10.239960 10.254006
Accumulated units at year end 32,737.591 0.000
INTERNATIONAL GROWTH PORTFOLIO
Accumulation UV - beginning 10.000000(1) 10.000000(1)
Accumulation UV - ending 9.735841 9.749214
Accumulated units at year end 12,541.039 0.000
DREYFUS VARIABLE INVESTMENT FUND:
CAPITAL APPRECIATION PORTFOLIO
Accumulation UV - beginning 10.000000(1) 10.000000(1)
Accumulation UV - ending 10.103905 10.117776
Accumulated units at year end 18,347.666 0.000
MONEY MARKET PORTFOLIO
Accumulation UV - beginning 1.000000(1) 10.000000(1)
Accumulation UV - ending 1.016499 1.017876
Accumulated units at year end 0.000 0.000
GROWTH AND INCOME PORTFOLIO
Accumulation UV - beginning 10.000000(1) 10.000000(1)
Accumulation UV - ending 10.196538 10.210527
Accumulated units at year end 32,231.762 0.000
SMALL CAP PORTFOLIO
Accumulation UV - beginning 10.000000(1) 10.000000(1)
Accumulation UV - ending 10.362314 10.376538
Accumulated units at year end 41,359.506 0.000
(1) Effective July 15, 1997 on Separate Account commencement date.
- --------------------------------------------------------------------------------
Page 12
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
STANDARD ENHANCED
CONTRACTS CONTRACTS
1997 1997
---- ----
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH
FUND, INC.
Accumulation UV - beginning 10.000000(1) 10.000000(1)
Accumulation UV - ending 10.320883 10.335055
Accumulated units at year end 26,332.500 0.000
DREYFUS STOCK INDEX FUND
Accumulation UV - beginning 10.000000(1) 10.000000(1)
Accumulation UV - ending 10.479569 10.493943
Accumulated units at year end 69,510.645 0.000
STRONG OPPORTUNITY FUND II, INC.
Accumulation UV - beginning 10.000000(1) 10.000000(1)
Accumulation UV - ending 10.727356 10.742083
Accumulated units at year end 6,416.208 0.000
STRONG VARIABLE INSURANCE FUNDS, INC.:
STRONG GROWTH FUND II
Accumulation UV - beginning 10.000000(1) 10.000000(1)
Accumulation UV - ending 10.707133 10.721828
Accumulated units at year end 2,147.556 0.000
INVESCO VARIABLE INVESTMENT FUNDS, INC.:
INDUSTRIAL INCOME PORTFOLIO
Accumulation UV - beginning 10.000000(1) 10.000000(1)
Accumulation UV - ending 10.659157 10.673778
Accumulated units at year end 33,269.953 0.000
TOTAL RETURN PORTFOLIO
Accumulation UV - beginning 10.000000(1) 10.000000(1)
Accumulation UV - ending 10.503108 10.517508
Accumulated units at year end 14,641.934 0.000
HIGH YIELD PORTFOLIO
Accumulation UV - beginning 10.000000(1) 10.000000(1)
Accumulation UV - ending 10.687084 10.701757
Accumulated units at year end 10,260.821 0.000
MORGAN STANLEY UNIVERSAL FUNDS, INC.:
U.S. REAL ESTATE PORTFOLIO
Accumulation UV - beginning 10.000000(1) 10.000000(1)
Accumulation UV - ending 11.101269 11.116503
Accumulated units at year end 7,200.060 0.000
VALUE PORTFOLIO
Accumulation UV - beginning 10.000000(1) 10.000000(1)
Accumulation UV - ending 10.204064 10.218060
Accumulated units at year end 9,944.401 0.000
EMERGING MARKETS EQUITY PORTFOLIO
Accumulation UV - beginning 10.000000(1) 10.000000(1)
Accumulation UV - ending 7.911559 7.922446
Accumulated units at year end 9,042.956 0.000
- --------------------------------------------------------------------------------
Page 13
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
STANDARD ENHANCED
CONTRACTS CONTRACTS
1997 1997
---- ----
MORGAN STANLEY UNIVERSAL FUNDS, INC. (CONT'D):
FIXED INCOME PORTFOLIO
Accumulation UV - beginning 10.000000(1) 10.000000(1)
Accumulation UV - ending 10.412276 10.426565
Accumulated units at year end 4.653 0.000
MID CAP VALUE
Accumulation UV - beginning 10.000000(1) 10.000000(1)
Accumulation UV - ending 11.113227 11.128478
Accumulated units at year end 16,674.966 0.000
PBHG INSURANCE SERIES FUND, INC.:
PBHG GROWTH II PORTFOLIO
Accumulation UV - beginning 10.000000(1) 10.000000(1)
Accumulation UV - ending 9.511124 9.524184
Accumulated units at year end 6,195.935 0.000
PBHG LARGE CAP GROWTH PORTFOLIO
Accumulation UV - beginning 10.000000(1) 10.000000(1)
Accumulation UV - ending 10.150555 10.164489
Accumulated units at year end 11,415.131 0.000
PBHG TECHNOLOGY & COMMUNICATIONS PORTFOLIO
Accumulation UV - beginning 10.000000(1) 10.000000(1)
Accumulation UV - ending 9.057045 9.069487
Accumulated units at year end 20,974.008 0.000
- --------------------------------------------------------------------------------
Page 14
<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(2) $25
================================================================================
Annual Contract Maintenance Fee(3) $30
================================================================================
ANNUAL EXPENSES. The purpose of these tables 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 tables
reflect expenses of each Sub-Account as well as of the Fund in which the
Separate 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.
- ----------
(2) The first twelve transfers in a Contract Year are free. Thereafter, a $25
fee will be charged on each subsequent transfer.
(3) 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 15
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
=======================================================================================
SEPARATE ACCOUNT JANUS A.S. JANUS A.S. JANUS A.S. JANUS JANUS A.S.
ANNUAL EXPENSES(4) 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 0.15% 0.15% 0.15% 0.15% 0.15%
Charge
- ---------------------------------------------------------------------------------------
Other Fees and
Expenses of the
Separate Account 0.00% 0.00% 0.00% 0.00% 0.00%
- ---------------------------------------------------------------------------------------
Total Separate
Account Annual 1.40% 1.40% 1.40% 1.40% 1.40%
Expenses
- ---------------------------------------------------------------------------------------
FUND ANNUAL EXPENSES(6)
(as a percentage of Fund average net assets after fee waiver and/or expense
reimbursement, if any)
- ---------------------------------------------------------------------------------------
Management Fees 0.73% 0.66% 0.76% 0.65% 0.67%
- ---------------------------------------------------------------------------------------
Other Expenses 0.03% 0.08% 0.07% 0.05% 0.29%
- ---------------------------------------------------------------------------------------
Total Fund Annual
Expenses 0.76% 0.74% 0.83% 0.70% 0.96%
=======================================================================================
</TABLE>
- ----------
(4) Annual expenses are the same for each Sub-Account. These expenses are for
the fiscal year ended December 31, 1997.
(5) The management fee for each of these Portfolios reflects the new rate
applied to net assets as of December 31, 1997. Other expenses are based on gross
expenses of the Shares before expenses offset arrangements for the fiscal year
ended December 31, 1997. Fee reductions for Growth, Aggressive Growth, Worldwide
Growth, Balanced, and International Growth Portfolios reduce the management fee
to the level of the corresponding Janus retail fund. Without such reductions,
the Management Fee, Other Expenses and Total Operating Expenses for the Shares
would have been 0.74%, 0.04% and 0.78% for the Aggressive Growth Portfolio;
0.72%, 0.09% and 0.81% for the Worldwide Growth Portfolio; 0.77%, 0.06% and
0.83% for the Balanced Portfolio; 0.74%, 0.04% and 0.78% for Growth Portfolio
and 0.79%, 0.29% and 1.08% for the International Growth Portfolio, respectively.
Janus Capital may modify or terminate the waivers or reductions at any time upon
at least 90 days notice to the Trustees of Janus Aspen Series.
(6) Data for each Fund are for its fiscal year ended December 31, 1997. Actual
expenses in future years may be higher or lower.
- --------------------------------------------------------------------------------
Page 16
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
==========================================================================================
SEPARATE ACCOUNT DREYFUS DREYFUS DREYFUS DREYFUS THE DREYFUS DREYFUS
ANNUAL EXPENSES(4)(as V.I.F. V.I.F. V.I.F. V.I.F. SOCIALLY STOCK
a percentage of CAPITAL MONEY GROWTH SMALL RESPONSIBLE INDEX
average Separate APPRECIATION MARKET AND CAP GROWTH FUND
Account assets) PORTFOLIO PORTFOLIO INCOME PORTFOLIO FUND, INC.
PORTFOLIO
- ------------------------------------------------------------------------------------------
<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 0.15% 0.15% 0.15% 0.15% 0.15% 0.15%
Charge
- ------------------------------------------------------------------------------------------
Other Fees and
Expenses of the 0.00% 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% 1.40%
Expenses
- ------------------------------------------------------------------------------------------
FUND ANNUAL EXPENSES(6)
(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% 0.75% 0.25%
- ------------------------------------------------------------------------------------------
Other Expenses 0.05% 0.11% 0.05% 0.03% 0.07% 0.03%
- ------------------------------------------------------------------------------------------
Total Fund Annual
Expenses 0.80% 0.61% 0.80% 0.78% 0.82% 0.28%
==========================================================================================
</TABLE>
==================================================================
SEPARATE ACCOUNT STRONG OPPORTUNITY STRONG V.I.F.-
ANNUAL EXPENSES(4)(as FUND II, INC. STRONG GROWTH
a percentage of FUND II
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 1.40% 1.40%
Expenses
- ------------------------------------------------------------------
FUND ANNUAL EXPENSES(6)
(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 0.15% 0.20%
- ------------------------------------------------------------------
Total Fund Annual
Expenses 1.15% 1.20%
==================================================================
- --------------------------------------------------------------------------------
Page 17
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
==========================================================================
SEPARATE ACCOUNT INVESCO VIF- INVESCO VIF- INVESCO VIF-
ANNUAL EXPENSES(4)(as a INDUSTRIAL TOTAL RETURN HIGH YIELD
percentage of average INCOME FUND(7)(8) FUND(7)(8) Fund(7)(8)
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 0.00% 0.00% 0.00%
Separate Account
- --------------------------------------------------------------------------
Total Separate
Account Annual 1.40% 1.40% 1.40%
Expenses
- --------------------------------------------------------------------------
FUND ANNUAL EXPENSES(6)
(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 0.16% 0.17% 0.23%
- --------------------------------------------------------------------------
Total Fund Annual
Expenses 0.91% 0.92% 0.83%
==========================================================================
- ----------
(7) Various expenses of the Portfolios were voluntarily absorbed by INVESCO
Funds Group, Inc. for the year ended December 31, 1997. If such expenses had not
been voluntarily absorbed, the ratio of expenses to average net assets for High
Yield, Industrial Income, and Total Return Portfolios would have been 21.45%,
0.94% and 1.10%, respectively.
(8) It should be noted that the Portfolio's actual total fund annual expenses
were lower than the figures shown because the Portfolio's custodian and pricing
expenses were reduced under an expense offset arrangement. However, as a result
of a SEC requirement, the figures shown above do not reflect these reductions.
- --------------------------------------------------------------------------------
Page 18
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
=================================================================
SEPARATE ACCOUNT MORGAN STANLEY MORGAN STANLEY
ANNUAL EXPENSES(4)(as UNIVERSAL FUNDS, UNIVERSAL FUNDS,
a percentage of INC.-MID CAP VALUE INC.-U.S. REAL
average Separate PORTFOLIO ESTATE PORTFOLIO
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 1.40% 1.40%
Expenses
- -----------------------------------------------------------------
FUND ANNUAL EXPENSES(9)
(as a percentage of Fund average net assets after fee waiver
and/or expense reimbursement, if any)
- -----------------------------------------------------------------
Management Fees 0.00% 0.00%
- -----------------------------------------------------------------
Other Expenses 1.05% 1.10%
- -----------------------------------------------------------------
Total Fund Annual
Expenses 1.05% 1.10%
=================================================================
================================================================================
SEPARATE ACCOUNT ANNUAL MORGAN STANLEY MORGAN STANLEY MORGAN STANLEY
EXPENSES(4)(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 0.00% 0.00% 0.00%
Separate Account
- --------------------------------------------------------------------------------
Total Separate
Account Annual 1.40% 1.40% 1.40%
Expenses
- --------------------------------------------------------------------------------
FUND ANNUAL EXPENSES(9)
(as a percentage of Fund average net assets after fee waiver and/or expense
reimbursement, if any)
- --------------------------------------------------------------------------------
Management Fees 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------
Other Expenses 0.85% 1.75% 0.70%
- --------------------------------------------------------------------------------
Total Fund Annual
Expenses 0.85% 1.75% 0.70%
================================================================================
- ----------
9 The fees and expenses in the table above are based on gross expenses before
offset arrangements for the fiscal year ended December 31, 1997. The information
for each Portfolio is net of fee waivers or reduction from MSAM or MAS. Absent
such waivers and reductions, "Management Fees", "Other Expenses" and "Total Fund
Annual Expenses", respectively, would have been as follows: Mid Cap Value
Portfolio - 0.75%, 1.38%, 2.13%; U.S. Real Estate Portfolio - 0.80%, 1.52%,
2.32%; Value Portfolio - 0.55%, 1.32%, 1.87%; Emerging Markets Equity Portfolio
- - 1.25%, 2.87%, 4.12%; Fixed Income Portfolio - 0.40%, 1.31%, 1.71%. MSAM or MAS
may terminate this voluntary waiver at any time at their sole discretion.
- --------------------------------------------------------------------------------
Page 19
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
==============================================================================
SEPARATE ACCOUNT PBHG INSURANCE PBHG INSURANCE PBHG INSURANCE
ANNUAL EXPENSES(4)(as a SERIES FUND, SERIES FUND, SERIES FUND,
percentage of average INC.-PBHG INC.-PBHG LARGE INC.-PBHG
Separate Account GROWTH II CAP GROWTH TECHNOLOGY &
assets) PORTFOLIO(10) PORTFOLIO(10) COMMUNICATIONS
PORTFOLIO(10)
- ------------------------------------------------------------------------------
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 0.00% 0.00% 0.00%
Separate Account
- ------------------------------------------------------------------------------
Total Separate
Account Annual 1.40% 1.40% 1.40%
Expenses
- ------------------------------------------------------------------------------
FUND ANNUAL EXPENSES(6)
(as a percentage of Fund average net assets after fee waiver and/or expense
reimbursement, if any)
- ------------------------------------------------------------------------------
Management Fees 0.00% 0.00% 0.00%
- ------------------------------------------------------------------------------
Other Expenses 1.20% 1.10% 1.20%
- ------------------------------------------------------------------------------
Total Fund Annual
Expenses 1.20% 1.10% 1.20%
==============================================================================
========================================================================
SEPARATE ACCOUNT ANNUAL EXPENSES(4) THE TIMOTHY PLAN VARIABLE SERIES
(as a percentage of average
Separate Account assets)
- ------------------------------------------------------------------------
Mortality and Expense Risk Charge 1.25%
- ------------------------------------------------------------------------
Administration Charge 0.15%
- ------------------------------------------------------------------------
Other Fees and Expenses of the
Separate Account 0.00%
- ------------------------------------------------------------------------
Total Separate Account Annual 1.40%
Expenses
- ------------------------------------------------------------------------
FUND ANNUAL EXPENSES(11)
(as a percentage of Fund average net assets after fee waiver and/or
expense reimbursement, if any)
- ------------------------------------------------------------------------
Management Fees 1.00%
- ------------------------------------------------------------------------
Other Expenses 0.20%
- ------------------------------------------------------------------------
Total Fund Annual Expenses 1.20%
========================================================================
- ----------
(10) The adviser has voluntarily agreed to waive or limit advisory fees or
assume Other Expense 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 and 1.10% of the PBHG Insurance
Series Fund, Inc. - PBHG Large Cap Growth Portfolio through December 31, 1998.
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 Growth II Portfolio would have been 0.85% and 4.38%,
respectively; for the PBHG Insurance Series Fund, Inc. - PBHG Technology &
Communications Portfolio would have been 0.85% and 5.09%, Small respectively;
for the PBHG Insurance Series Fund, Inc. - PBHG Large Cap Growth Portfolio would
have been 0.75% and 1.13%, respectively.
(11) The Timothy Plan Variable Series became operational on May 1, 1998.
Therefore, Management Fees and Other Expenses are estimated. Timothy Partners,
Ltd. has agreed to waive or limit Management Fees or assume Other Expenses of
the Fund in order to limit Total Expenses to not more than 1.20% for the period
ending December 31, 1998.
- --------------------------------------------------------------------------------
Page 20
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
EXAMPLES. The purpose of the examples 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 examples reflect expenses of
the Separate Account as well as of the Funds in which the Separate Account
invests. See "CHARGES AND DEDUCTIONS" on page 38 of this Prospectus and the
accompanying prospectus for the applicable Fund for a more complete description
of the various costs and expenses.
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 $30 CONTRACT MAINTENANCE FEE IS REFLECTED IN THE EXAMPLES AS A
CHARGE OF $1.00.
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. The fee tables and examples do not include charges to the Owner for
premium taxes.
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 $93 $125
- ----------------------------------------------------------------------------
Janus A.S. Balanced Portfolio $94 $128
- ----------------------------------------------------------------------------
Janus A.S. Growth Portfolio $93 $123
- ----------------------------------------------------------------------------
Janus A.S. International Growth Portfolio $95 $132
- ----------------------------------------------------------------------------
Dreyfus V.I.F. Capital Appreciation Portfolio $94 $127
- ----------------------------------------------------------------------------
Dreyfus V.I.F. Money Market Portfolio $92 $120
- ----------------------------------------------------------------------------
Dreyfus V.I.F. Growth and Income Portfolio $94 $127
- ----------------------------------------------------------------------------
Dreyfus V.I.F. Small Cap Portfolio $94 $126
- ----------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund, Inc. $94 $127
- ----------------------------------------------------------------------------
Dreyfus Stock Index Fund $88 $110
- ----------------------------------------------------------------------------
Strong Opportunity Fund II, Inc. $97 $138
- ----------------------------------------------------------------------------
Strong Variable Insurance Funds, Inc.-Strong Growth Fund $98 $139
II
- ----------------------------------------------------------------------------
INVESCO VIF-Industrial Income Portfolio $95 $130
- ----------------------------------------------------------------------------
INVESCO VIF-Total Return Portfolio $95 $130
- ----------------------------------------------------------------------------
INVESCO VIF-High Yield Portfolio $98 $139
- ----------------------------------------------------------------------------
Morgan Stanley Universal Funds, Inc.-Mid-Cap Value $96 $135
Portfolio
- ----------------------------------------------------------------------------
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 $93 $123
Portfolio
- ----------------------------------------------------------------------------
PBHG Insurance Series Fund, Inc.-PBHG Growth II Portfolio $98 $139
- ----------------------------------------------------------------------------
PBHG Insurance Series Fund, Inc.-PBHG Large Cap Growth $97 $136
Portfolio
- ----------------------------------------------------------------------------
PBHG Insurance Series Fund, Inc.-PBHG Technology & $98 $139
Communications Portfolio
- ----------------------------------------------------------------------------
The Timothy Plan Variable Series $98 $139
============================================================================
- --------------------------------------------------------------------------------
Page 21
<PAGE>
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 $23 $75
- ----------------------------------------------------------------------------
Janus A.S. Balanced Portfolio $24 $78
- ----------------------------------------------------------------------------
Janus A.S. Growth Portfolio $23 $73
- ----------------------------------------------------------------------------
Janus A.S. International Growth Portfolio $25 $82
- ----------------------------------------------------------------------------
Dreyfus V.I.F. Capital Appreciation Portfolio $24 $77
- ----------------------------------------------------------------------------
Dreyfus V.I.F. Money Market Portfolio $22 $70
- ----------------------------------------------------------------------------
Dreyfus V.I.F. Growth and Income Portfolio $24 $77
- ----------------------------------------------------------------------------
Dreyfus V.I.F. Sm all Cap Portfolio $24 $76
- ----------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund, Inc. $24 $77
- ----------------------------------------------------------------------------
Dreyfus Stock Index Fund $18 $60
- ----------------------------------------------------------------------------
Strong Opportunity Fund II, Inc. $27 $88
- ----------------------------------------------------------------------------
Strong Variable Insurance Funds, Inc.-Strong Growth Fund $28 $89
II
- ----------------------------------------------------------------------------
INVESCO VIF-Industrial Income Portfolio $25 $80
- ----------------------------------------------------------------------------
INVESCO VIF-Total Return Portfolio $25 $80
- ----------------------------------------------------------------------------
INVESCO VIF-High Yield Portfolio $28 $89
- ----------------------------------------------------------------------------
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 Portfolio $28 $89
- ----------------------------------------------------------------------------
PBHG Insurance Series Fund, Inc.-PBHG Large Cap Growth $27 $86
Portfolio
- ----------------------------------------------------------------------------
PBHG Insurance Series Fund, Inc.-PBHG Technology & $28 $89
Communications Portfolio
- ----------------------------------------------------------------------------
The Timothy Plan Variable Series $28 $89
============================================================================
FINANCIAL STATEMENTS FOR THE COMPANY
The financial statements and reports of independent public accountants for the
Company and the Separate Account are contained in the Statement of Additional
Information.
- --------------------------------------------------------------------------------
Page 22
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
THE FUNDS
The Separate Account currently has twenty-five Funds that are available for
investment under the Contracts. 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.
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. International investing may present special risks,
including currency fluctuations and social and political developments. For
further discussion of the risks associated with international investing,
please see the attached Janus Aspen Series prospectus.
Janus Capital 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.
- --------------------------------------------------------------------------------
Page 23
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
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, and may also
invest in 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.
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 FUNDS:
STRONG OPPORTUNITY FUND II, INC. 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 GROWTH FUND II (Strong Variable Insurance Funds, Inc.). 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.
- --------------------------------------------------------------------------------
Page 24
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
INVESCO VARIABLE INVESTMENT FUNDS, INC.:
INDUSTRIAL INCOME PORTFOLIO. 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 PORTFOLIO. 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 PORTFOLIO. 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
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 Portfolios.
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 Dean Witter & Co.) 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 and Derivatives.
Miller Anderson & Sherrerd, LLP (an indirect wholly owned subsidiary of
Morgan Stanley Dean Witter & Co.) serves as the investment adviser to this
Portfolio.
- --------------------------------------------------------------------------------
Page 25
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
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, in the adviser's opinion, are considered to have an outlook
for strong earnings growth and potential for significant capital
appreciation.
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, in the
adviser's opinion, 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. Current income is incidental
to the Portfolio's objective.
Pilgrim Baxter & Associates, Ltd. serves as the investment advisor to each
of these Portfolios.
THE TIMOTHY PLAN VARIABLE SERIES
THE TIMOTHY PLAN VARIABLE SERIES. The primary investment objective of The
Timothy Plan Variable Series is to seek long-term capital growth, with a
secondary objective of current income. The Fund shall seek to achieve its
objectives while abiding by ethical standards established for investments
by the Fund. The securities in which the Fund shall be precluded from
investing, by virtue of the Funds ethical standards, are referred to as
excluded securities.
Timothy Partners, Ltd. serves as the investment advisor to this Fund.
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 may be 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
discontinuing investment in the particular Fund. See the Fund prospectuses for
greater detail.
- --------------------------------------------------------------------------------
Page 26
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
The current Fund prospectuses which accompany this Prospectus contain additional
information concerning the investment objectives and policies of each Fund, the
investment advisory services and administrative services of each Fund and the
charges of each Fund. THE APPROPRIATE FUND 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.
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 performance data and 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 with respect to that Contract.
- --------------------------------------------------------------------------------
Page 27
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
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., 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") 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., ("AAG") a publicly traded insurance holding company
(NYSE symbol: AAG). AAG is in turn indirectly controlled by American Financial
Group, Inc., a publicly traded holding company (NYSE symbol: AFG).
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.
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YEAR 2000. The Company is developing plans to modify or replace software used in
administering variable contracts so that its computer systems will function
properly with respect to dates in the year 2000 and beyond. Should software
modifications and new software installations not be completed on a timely basis,
there could be disruptions in the ability of the Company to administer the
Contracts.
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.
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 is invested
solely in a specific corresponding Fund. (See "THE FUNDS," page 23.) Changes to
the Sub-Accounts may be made at the discretion of the Company. (See "Additions,
Deletions, or Substitutions," page 27.)
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
a 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.
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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.
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 CONTRACTS
The Contracts described herein are individual and group flexible premium
deferred annuities. The rights and benefits are described below and in the
Contracts. References to "Contracts" 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 are
calculated separately for each Contract. The various administrative rules
described below 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, in which case 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
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. 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. The Company may require that Purchase Payment(s) be allocated to the
Money Market Sub-Account or to the Fixed Accumulation Account Option during the
Right to Cancel period.
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PURCHASE PAYMENTS
PURCHASE PAYMENTS. Currently, 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. Subsequent
Purchase Payments (Purchase Payments other than periodic payments or initial
Purchase Payments) must 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. The Company reserves the
right to increase the minimum allowable Purchase Payment under a periodic
payment program, or the minimum allowable subsequent Purchase Payment, at its
discretion and at any time, where permitted by law.
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 amount that can be allocated to the Fixed Accumulation Account Option or
to a Sub-Account is $10. The minimum amount that can be allocated to a Fixed
Account option other than the Fixed Accumulation Account Option is $2,000. The
Company may require that Purchase Payments be allocated to the Money Market
Sub-Account or to the Fixed Accumulation Account Option during the Right to
Cancel period.
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 a 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. The Variable Account Value for a Contract as of the end
of any given Valuation Period is the sum of the Accumulation Units allocated to
the Owner for each Sub-Account multiplied by the appropriate Accumulation Unit
Value. Purchase Payments may be allocated among, and amounts 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 Accumulation Unit Value 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 a 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 for the applicable 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 Accumulation Unit Value
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:
(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.
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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
to any other 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.
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 Option 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 Option)
must be at least $10,000, and the minimum amount that may be transferred is $500
per month.
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 Option) 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.
Currently, the Transfer Fee does not apply to Dollar Cost Averaging transfers,
and Dollar Cost Averaging transfers will not count toward the twelve transfers
permitted under the Contract without a Transfer Fee charge.
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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 or 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 Option, 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 Option 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 will not be available if the Dollar Cost
Averaging program or an Interest Sweep from the Fixed Accumulation Account
Option is being utilized.
Currently, the Transfer Fee does not apply to Portfolio Rebalancing transfers,
and 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 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 any Fixed Account option(s) to any
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 will reduce the 20% maximum transfer amount otherwise allowed.
Currently, the Transfer Fee does not apply to Interest Sweep transfers, and
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.
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PRINCIPAL GUARANTEE OPTION. The Owner may elect to have the Company allocate a
portion of a Purchase Payment to the Fixed Account Option Seven-Year Guarantee
Period Account 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 Option Seven-Year Guarantee Period Account such that, based on the
interest rate then in effect, the Seven-Year Guarantee Period 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 such
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 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 46.)
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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.
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 46.)
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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 outstanding 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.
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 his or her 80th birthday 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 on or after his or her 80th birthday 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 Owner's 80th birthday, less any
partial surrenders and any CDSC that applied to those amounts.
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In any event, if the Contract is issued on or after the eldest Owner's 80th
birthday, and any Owner dies before the Annuity Commencement Date, the amount of
the Death Benefit will be the greater of:
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 44.)
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.
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.
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================================================================================
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
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0 7%
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1 6%
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2 5%
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3 4%
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4 3%
- --------------------------------------------------------------------------------
5 2%
- --------------------------------------------------------------------------------
6 1%
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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.
The CDSC may be reduced or waived on partial or full surrenders to the extent
required to satisfy state law.
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MAINTENANCE AND ADMINISTRATION CHARGES. On each Contract Anniversary, the
Company deducts an annual Contract Maintenance Fee as partial compensation for
expenses relating to the issuance and maintenance of the Contracts and the
Separate Account. The annual Contract Maintenance Fee is $30. This Contract
Maintenance Fee is deducted pro-rata from the Sub-Accounts and 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 Dollar 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 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 after it has been issued.
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 incur 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 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 for these Contracts, 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 0.20%. The 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, or the initial Purchase Payment is large enough,
the Company anticipates that it will recognize administrative expense savings
from various economies of scale and routine operations. The Mortality and
Expense Risk Charge is imposed before the applicable Commencement Date and after
the applicable Commencement Date if a Variable Dollar Benefit is selected. The
Company guarantees that the Mortality and Expense Risk Charge will never
increase for a Contract after it has been issued. 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.
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The mortality risks assumed by the Company arise from its contractual
obligations to make Benefit Payments (determined in accordance with the annuity
tables and other provisions contained in the Contract).
The Company also bears substantial risk in connection with payment of 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. Currently, transfers associated with Dollar Cost
Averaging, Interest Sweep and Portfolio Rebalancing programs do not incur a
Transfer Fee and do not count toward the twelve annual transfers currently
permitted under the Contract without a Transfer Fee.
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 23.)
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 would be unfairly discriminatory to any
person.
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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 applied to a Variable Dollar Benefit 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 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
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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 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 "Net Investment Factor", 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 COMMENCEMENT DATE. After the applicable Commencement Date,
no transfers between the Fixed Account and the Separate Account are permitted.
However, after a Variable Dollar Benefit has been paid for at least twelve
months, the Participant may, by Written Request to the Administrative Office,
transfer Benefit Units between Sub-Accounts no more than once during a
twelve-month period.
TRANSFER FORMULA. Transfers after the applicable 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/BUV1
(2) Determine the number of Benefit Units remaining in such Sub-Account
(after the transfer):
= UNIT1 - AT/BUV1
(3) Determine the number of Benefit Units in the Transferee Sub-Account
(after the transfer):
= UNIT2 + AT/BUV2
(4) Subsequent Variable Dollar Benefit payments will reflect the changes
in Benefit Units in each Sub-Account as of the next Variable Dollar
Benefit payment's due date.
Where:
(BUV1) is the Benefit 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.
(BUV2) is the Benefit 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 Benefit Units in the Sub-Account that the
transfer is being made from, before the transfer.
(UNIT2) is the number of Benefit 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 Tables set forth in the
Statement of Additional Information (and in the Contracts)
apply 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 Tables set forth in the Statement of Additional
Information (and in the Contracts) 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 Tables set forth
in the Statement of Additional Information (and in the
Contracts) apply to this Option.
Option D: Life Annuity
The Company 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 Tables set forth in the
Statement of Additional Information (and in the Contracts)
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 it 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. In general, 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.
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 set forth in the
Statement of Additional Information and in the Contracts show the guaranteed
payments that the Company will make at sample Payment Intervals for each $1,000
applied at the guaranteed interest rate of three percent (3%) per year,
compounded annually.
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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 any 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.
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.
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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.
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 Contracts 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 a 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.
A 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, 408 or 457(g) 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 applicable 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 a
Contract for their situation, the applicable requirements, and the tax treatment
of the rights and benefits of a 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 taxed on increases in the value of an Account until
distribution occurs by withdrawing all or part of the Account Value (e.g.,
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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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, 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 partial surrender under a
Non-Qualified Contract, the amount recovered is taxable to the extent that
the Account Value immediately before the surrender exceeds the "investment
in the contract" at such time. In the case of a full surrender under a
Non-Qualified Contract, the amount recovered is taxable to the extent it
exceeds the "investment in the contract" at such time.
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 exceeds the allocable share of 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. Special allocation
rules apply if Benefit Payments are made for life with a minimum number of
payments guaranteed. In any 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 before full recovery of the "investment in the
contract," in some circumstances the unrecovered amount may be claimed as a tax
deduction.
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 for 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. The premature distribution penalty tax is increased to 25% for
distributions from a Savings Incentive Match Plan for Employees (SIMPLE) IRA
described in Section 408(p) of the Code during the first two years of
participation in the plan.
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
distributed under a settlement option, they are taxed as Benefit Payments, as
described above.
TRANSFERS, ASSIGNMENTS, OR EXCHANGES OF CONTRACTS. When permitted, 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.
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
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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.
TEXAS OPTIONAL RETIREMENT PROGRAM. The Texas Optional Retirement Program
("ORP") provides for the purchase of tax sheltered annuities. In addition
to the normal rules and restrictions of Section 403(b), Section 830.105 of
the Texas Government Code permits ORP participants to withdraw their
interests in a Contract 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 ORP benefits 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.
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. In
most cases, these plans are designed so that 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).
The federal administration's 1999 budget proposal contains provisions to tax the
exchange of a fixed annuity contract for a variable contract, the exchange of a
variable contract for a fixed annuity contract, or the reallocation of
investments within a variable annuity contract. While there has been
considerable opposition to this proposal in Congress, it is too early to predict
whether this proposal will be adopted.
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
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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 treatment of such Purchase Payment would be different from that of the
initial Purchase Payment.
DISTRIBUTION OF THE CONTRACTS
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
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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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.
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 applicable
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 applicable
Commencement Date, the number of votes decreases as 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., and may also be accessed at the Securities and Exchange Commission's Web
site http:\\www.sec.gov.
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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
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Page
ANNUITY INVESTORS LIFE INSURANCE COMPANY(REGISTERED)...........................3
General Information and History................................................3
State Regulation.........................................................3
SERVICES.......................................................................3
Safekeeping of Separate Account Assets...................................3
Records and Reports......................................................3
Experts..................................................................4
DISTRIBUTION OF THE CONTRACTS..................................................4
CALCULATION OF PERFORMANCE INFORMATION.........................................4
Money Market Sub-Account Standardized Yield Calculation..................4
Other Sub-Account Standardized Yield Calculation.........................5
Standardized Annual Total Return Calculation.............................6
Standardized Annual Total Return.........................................7
Other Performance Data...................................................8
Non-Standardized Annual Total Return....................................10
ANNUITY PAYMENTS-SETTLEMENT OPTION TABLES.....................................11
Individual Qualified Contracts..........................................11
Individual Non-Qualified Contracts......................................12
Group Contracts.........................................................15
FEDERAL TAX MATTERS...........................................................17
Taxation of the Company.................................................17
Tax Status of the Contract..............................................18
FINANCIAL STATEMENTS..........................................................18
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Copies of the Statement of Additional Information dated May 1, 1998 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:
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Address:
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City:
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State:
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Zip:
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES
ANNUITY INVESTORS(REGISTERED) VARIABLE ACCOUNT B
OF
ANNUITY INVESTORS LIFE INSURANCE COMPANY(REGISTERED)
P.O. BOX 5423, CINCINNATI, OHIO 45201-5423, (800) 789-6771
STATEMENT OF ADDITIONAL INFORMATION
FOR
THE COMMODORE NAVIGATOR(SERVICEMARK)
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). A copy of the Prospectus dated May
1, 1998, as supplemented from time to time, may be obtained free of charge by
writing to Annuity Investors Life Insurance Company, 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 May 1, 1998
<PAGE>
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TABLE OF CONTENTS
PAGE
ANNUITY INVESTORS LIFE INSURANCE COMPANY(REGISTERED)...........................3
GENERAL INFORMATION AND HISTORY..............................................3
STATE REGULATION.............................................................3
SERVICES.......................................................................3
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS.......................................3
RECORDS AND REPORTS..........................................................3
EXPERTS......................................................................4
DISTRIBUTION OF THE CONTRACTS..................................................4
CALCULATION OF PERFORMANCE INFORMATION.........................................4
MONEY MARKET SUB-ACCOUNT STANDARDIZED YIELD CALCULATION......................4
OTHER SUB-ACCOUNT STANDARDIZED YIELD CALCULATIONS............................5
STANDARDIZED ANNUAL TOTAL RETURN CALCULATION.................................6
STANDARDIZED ANNUAL TOTAL RETURN.............................................7
OTHER PERFORMANCE DATA.......................................................8
NON-STANDARDIZED ANNUAL TOTAL RETURN........................................10
ANNUITY PAYMENTS-SETTLEMENT OPTION TABLES.....................................11
INDIVIDUAL QUALIFIED CONTRACTS..............................................11
INDIVIDUAL NON-QUALIFIED CONTRACTS..........................................12
GROUP CONTRACTS.............................................................15
FEDERAL TAX MATTERS...........................................................17
TAXATION OF THE COMPANY.....................................................17
TAX STATUS OF THE CONTRACTS.................................................18
FINANCIAL STATEMENTS..........................................................18
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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)
GENERAL INFORMATION AND HISTORY
Annuity Investors Life Insurance Company(REGISTERED) (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) 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) 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.
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 of an Individual
Contract and to each Group Contract Owner semi-annually at the Owner's last
known address.
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EXPERTS
The financial statements of the Separate Account at December 31, 1997 and the
year then ended and the statutory-basis financial statements of the Company at
December 31, 1997 and 1996, and for the two years in the period ended December
31, 1997, appearing in this Statement of Additional Information have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon appearing elsewhere herein and are included in reliance upon
such reports 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. Although the Company
does not anticipate discontinuing the offering of the Contracts, the Company
reserves the right to discontinue offering any one or more of the Contracts.
During the fiscal year ended December 31, 1997, AAG Securities, Inc. ("AAG
Securities"), the principal underwriter and distributor of the Contracts,
received approximately $296,000 in commissions with respect to the Contracts, of
which approximately $18,000 was retained by AAG Securities.
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.
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) 365/7] - 1
The effective yield and yields for the Money Market Sub-Account for the
seven-day period ended December 31, 1997 are as follows:
......MONEY MARKET SUB-ACCOUNT YIELD EFFECTIVE YIELD
------------------------ ----- ---------------
......Standard Contracts 3.72% 3.80%
......Enhanced Contracts 4.02% 4.11%
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
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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") THAT MAY BE APPLICABLE ON SURRENDER UNDER ANY
CONTRACT.
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.
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. The CDSC is discussed in the Prospectus.
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.
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STANDARDIZED ANNUAL 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)SUPERSCRIPTn = 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 of that type 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 for that Contract.
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
STANDARDIZED ANNUAL TOTAL RETURN
STANDARD CONTRACT(1) ENHANCED CONTRACT(2)
1 Year (to Year (to
12/31/97) 12/31/97)
THE DREYFUS CORPORATION:
Small Cap Portfolio (VIF) 6.14% 6.48%
Capital Appreciation Portfolio (VIF) 17.29% 17.66%
The Dreyfus Socially Responsible Growth 17.66% 18.04%
Fund, Inc.
Dreyfus Stock Index Fund 22.12% 22.51%
Growth and Income Portfolio (VIF) 5.61% 5.95%
Money Market Account (VIF) -6.04% -5.85%
JANUS CAPITAL CORPORATION:
Janus Aspen Worldwide Growth Portfolio 11.47% 11.82%
Janus Aspen Aggressive Growth Portfolio 2.11% 2.44%
Janus Aspen Balanced Portfolio 11.42% 11.77%
Janus Aspen International Growth Portfolio 7.87% 8.22%
Janus Aspen Growth Portfolio 12.05% 12.41%
INVESCO FUNDS GROUP, INC.:
INVESCO Industrial Income Portfolio (VIF) 17.40% 17.77%
INVESCO Total Return Portfolio (VIF) 12.22% 12.58%
INVESCO High Yield Portfolio (VIF) 6.71% 7.05%
MORGAN STANLEY ASSET MANAGEMENT INC.:
Morgan Stanley Universal Funds U.S. Real
Estate Portfolio(3) N/A N/A
Morgan Stanley Universal Funds Fixed
Income Portfolio(3) N/A N/A
Morgan Stanley Universal Funds Value N/A N/A
Portfolio(3)
Morgan Stanley Universal Funds Emerging
Markets Equity Portfolio -10.08% -9.78%
Morgan Stanley Universal Funds Mid Cap
Value Portfolio(3) N/A N/A
PILGRIM BAXTER & ASSOCIATES, LTD.:
PBHG Insurance Series Fund, Inc. - PBHG
Technology & Communications Portfolio(3) N/A N/A
PBHG Insurance Series Fund, Inc. - PBHG
Growth II Portfolio(3) N/A N/A
PBHG Insurance Series Fund, Inc. - PBHG
Large Cap Growth Portfolio(3) N/A N/A
STRONG CAPITAL MANAGEMENT, INC.
Strong Opportunity Fund II, Inc. 14.72% 15.09%
Strong Growth Fund II (VIF) 17.96% 19.34%
THE TIMOTHY PLAN VARIABLE SERIES(3) N/A N/A
(1)Annual mortality and expense risk charge of 1.25% of daily net asset value.
(2)Annual mortality and expense risk charge of 0.95% of daily net asset value.
(3)Annual Total Return not available because Fund not in existence for one full
year.
- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
OTHER PERFORMANCE DATA
The Company may also disclose non-standardized performance data that depicts the
past performance of an underlying Fund of a Sub-Account, for periods BEFORE the
Sub-Account commenced operations with such historical Fund performance adjusted
for the fees and charges of the Contract. In other words, such performance
information for the Sub-Account will be calculated based on the performance of
the underlying Fund and the assumption that the Sub-Account had been 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 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 of a
CDSC, if applicable) or assuming that the Contract is surrendered at the end of
the applicable period (I.E., reflecting a deduction for any applicable CDSC).
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 and no Contract Maintenance Fee and
may present performance data for a period of time 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 $1,000 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 $1,000.
All non-standardized performance data will be advertised only if the requisite
standardized performance data is also disclosed.
Any of 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 to a
Sub-Account, are FDIC-insured.
- --------------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
Advertising materials for any of 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 any of 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 any of 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.
Advertising materials for any of 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.
- --------------------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
NON-STANDARDIZED ANNUAL TOTAL RETURN
STANDARD CONTRACT(1) ENHANCED CONTRACT(2)
1 Year (to 1 Year (to
12/31/97) 12/31/97)
THE DREYFUS CORPORATION:
Small Cap Portfolio (VIF) 15.14% 15.48%
Capital Appreciation Portfolio (VIF) 26.29% 26.66%
The Dreyfus Socially Responsible Growth 26.66% 27.04%
Fund, Inc.
Dreyfus Stock Index Fund 31.12% 31.51%
Growth and Income Portfolio (VIF) 14.61% 14.95%
Money Market Portfolio (VIF) 2.96% 3.15%
JANUS CAPITAL CORPORATION:
Janus Aspen Worldwide Growth Portfolio 20.47% 20.82%
Janus Aspen Aggressive Growth Portfolio 11.11% 11.44%
Janus Aspen Balanced Portfolio 20.42% 20.77%
Janus Aspen International Growth Portfolio 16.87% 17.22%
Janus Aspen Growth Portfolio 21.05% 21.41%
INVESCO FUNDS GROUP, INC.:
INVESCO Industrial Income Portfolio (VIF) 26.40% 26.77%
INVESCO Total Return Portfolio (VIF) 21.22% 21.58%
INVESCO High Yield Portfolio (VIF) 15.71% 16.05%
MORGAN STANLEY ASSET MANAGEMENT INC.:
Morgan Stanley Universal Funds U.S. Real
Estate Portfolio(3) N/A N/A
Morgan Stanley Universal Funds Fixed
Income Portfolio(3) N/A N/A
Morgan Stanley Universal Funds Value N/A N/A
Portfolio(3)
Morgan Stanley Universal Funds Emerging
Markets Equity Portfolio -1.08% -0.78%
Morgan Stanley Universal Funds Mid Cap
Value Portfolio(3) N/A N/A
PILGRIM BAXTER & ASSOCIATES, LTD.:
PBHG Insurance Series Fund, Inc. - PBHG
Technology & Communications Portfolio(3) N/A N/A
PBHG Insurance Series Fund, Inc. - PBHG
Growth II Portfolio(3) N/A N/A
PBHG Insurance Series Fund, Inc. - PBHG
Large Cap Growth Portfolio(3) N/A N/A
STRONG CAPITAL MANAGEMENT, INC.
Strong Opportunity Fund II, Inc. 23.72% 24.09%
Strong Growth Fund II (VIF) 27.96% 28.34%
THE TIMOTHY PLAN VARIABLE SERIES(3) N/A N/A
(1)Annual mortality and expense risk charge of 1.25% of daily net asset value.
(2)Annual mortality and expense risk charge of 0.95% of daily net asset value.
(3)Annual Total Return not available because Fund not in existence for one full
year.
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY PAYMENTS-SETTLEMENT OPTION TABLES
INDIVIDUAL QUALIFIED CONTRACTS
OPTION A TABLE -- INCOME FOR A FIXED PERIOD Payments for
fixed number of years for each $1,000 applied.
<TABLE>
<CAPTION>
ANNUITY PAYMENTS-SETTLEMENT OPTION TABLES
INDIVIDUAL QUALIFIED CONTRACTS
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 Annual Semi- Quarterly Monthly Terms Annual Semi- Quarterly Monthly
Payments Annual of Annual of Annual
Payments Payments
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Years Years Years
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
----------------------------------------------
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
INDIVIDUAL NON-QUALIFIED CONTRACTS
OPTION A TABLE - INCOME FOR A FIXED PERIOD
Payments for fixed number of years for each $1,000 applied.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Terms of Annual Semi- Quarterly Monthly Terms Annual Semi- Quarterly Monthly Terms of Annual Semi- Quarterly Monthly
Payments Annual of Annual Payments Annual
Payments
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Years Years Years
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>
- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
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
- ----------- --------- ---------- --------- ----------
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------
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.
</TABLE>
<TABLE>
<CAPTION>
Monthly payments for each $1,000 of proceeds by ages of persons named.*
------------------------------------------------------------------------------------
MALE FEMALE PRIMARY AGE
SECONDARY
AGE
-------------------------------------------------------------------------
60 61 62 63 64 65 66 67 68 69 70
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------
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.
</TABLE>
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
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.
GROUP CONTRACTS
OPTION A TABLE - INCOME FOR A FIXED PERIOD Payments for
fixed number of years for each $1,000 applied.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Terms of Semi- Terms of Semi- Terms of Semi-
Payments Annual Annual Quarterly Monthly Payments Annual Annual Quarterly Monthly Payments Annual Annual Quarterly Monthly
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Years Years Years
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>
- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
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
---------------------------------------------
OPTION C TABLE - JOINT AND ONE-HALF SURVIVOR ANNUITY Monthly
payments for each $1,000 of proceeds by ages of persons named.*
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Secondary Age
Primary
Age 60 61 62 63 64 65 66 67 68 69 70
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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.
</TABLE>
- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
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
------------------------------------------------------------------
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.
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.
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
TAX STATUS OF THE CONTRACTS
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 and
Participants under group 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 sub-accounts 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
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 audited financial statements of the Separate Account for the year ended
December 31, 1997 and the Company's audited statutory-basis financial statements
for the years ended December 31, 1997 and 1996 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.
- --------------------------------------------------------------------------------
19
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997
WITH REPORT OF INDEPENDENT AUDITORS
20
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY INVESTORS VARIABLE ACCOUNT B
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997
CONTENTS
Report of Independent Auditors........................21
Audited Financial Statements
Statement of Assets and Liabilities.................23
Statement of Operations.............................25
Statements of Changes in Net Assets.................26
Notes to Financial Statements.......................28
- --------------------------------------------------------------------------------
21
<PAGE>
ERNST & YOUNG LLP 1300 Chiquita Center Phone 513 621 6454
250 East Fifth Street
Cincinnati, Ohio 45202
Report of Independent Auditors
Contractholders of Annuity Investors Variable Account B
and
Board of Directors of Annuity Investors Life Insurance Company
We have audited the accompanying statement of assets and liabilities of the
Annuity Investors Variable Account B (comprised of the Dreyfus Variable
Investment Fund Capital Appreciation Portfolio, Dreyfus Variable Investment Fund
Growth and Income Portfolio, Dreyfus Variable Investment Fund Money Market
Portfolio, Dreyfus Variable Investment Fund Small Cap Portfolio, Dreyfus
Socially Responsible Growth Fund, Inc., Dreyfus Stock Index Fund, Strong Funds
Growth Fund II, Strong Funds Opportunity Fund II, Invesco Funds Group, Inc. High
Yield Fund, Invesco Funds Group, Inc. Industrial Income Fund, Invesco Funds
Group, Inc. Total Return Fund, Janus Aspen Series Aggressive Growth Portfolio,
Janus Aspen Series Balanced Portfolio, Janus Aspen Series Growth Portoflio,
Janus Aspen Series International Growth Portfolio, Janus Aspen Series Worldwide
Growth Portfolio, Morgan Stanley Universal Funds, Inc. Emerging Markets Equity
Portfolio, Morgan Stanley Universal Funds, Inc. Fixed Income Fund Portfolio,
Morgan Stanley Universal Funds, Inc. Mid-Cap Value Portfolio, Morgan Stanley
Universal Funds, Inc. U.S. Real Estate Portfolio, Morgan Stanley Universal
Funds, Inc. Value Portfolio, PBHG Insurance Series Fund, Inc. Growth II
Portfolio, PBHG Insurance Series Fund, Inc. Large Cap Growth Portfolio and PBHG
Insurance Series Fund, Inc. Technology & Communications Portfolio Sub-Accounts)
as of December 31, 1997, and the related statements of operations and changes in
net assets for the year 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 audit.
We conducted our audit 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. Our procedures included
confirmation of securities owned as of December 31, 1997, by correspondence with
the custodian. 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective
sub-accounts constituting the Annuity Investors Variable Account B as of
December 31, 1997, and the results of their operations and changes in
1
<PAGE>
their net assets for the year then ended in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
Cincinnati, Ohio
February 3, 1998
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<CAPTION>
Assets: Shares Cost
------ ----
<S> <C> <C> <C>
Investments in portfolio shares,
at net asset value (Note 2):
Dreyfus Variable Investment Fund:
Capital Appreciation Portfolio............ 6,644.554 $ 183,954 185,383
Growth and Income Portfolio............... 15,815.802 347,532 328,652
Money Market Portfolio.................... 0.000 0 0
Small Cap Portfolio....................... 7,500.528 453,312 428,580
Dreyfus Funds:
Socially Responsible Growth
Fund, Inc............................ 10,884.047 277,443 271,775
Stock Index Fund.......................... 28,288.994 730,922 728,442
Strong Funds:
Growth Fund II............................ 1,846.921 23,670 22,994
Opportunity Fund II....................... 3,171.842 68,178 68,829
Invesco Funds Group, Inc.:
High-Yield Fund........................... 8,800.823 116,406 109,658
Industrial Income Fund.................... 20,811.599 368,589 354,630
Total Return Fund......................... 9,727.123 154,346 153,786
Janus Aspen Series:
Aggressive Growth Portfolio............... 1,476.866 28,664 30,350
Balanced Portfolio........................ 18,526.048 319,353 323,650
Growth Portfolio.......................... 18,140.239 335,162 335,232
International Growth Portfolio............ 6,607.011 122,664 122,097
Worldwide Growth Portfolio................ 24,071.098 563,724 563,023
Morgan Stanley Universal Funds, Inc.:
Emerging Markets Equity Portfolio......... 7,586.839 85,562 71,544
Fixed Income Portfolio.................... 4.654 51 48
Mid-Cap Value Portfolio................... 13,912.363 192,769 185,313
U.S. Real Estate.......................... 7,005.241 76,971 79,930
Value Portfolio........................... 8,614.032 105,785 101,473
PBHG Insurance Series Fund, Inc.:
Growth II Portfolio....................... 5,481.888 59,564 58,930
Large Cap Growth Portfolio................ 9,802.870 114,392 115,870
Technology & Communications
Portfolio............................ 18,248.082 204,269 189,962
-----------
Total cost..................................... $ 4,933,282
- ---------------------------------------------------------------------------------------------------
Total assets.................................................................... 4,830,151
Liabilities:
Amounts due to Annuity Investors Life
Insurance Company (Note 4)................................................ 0
- ---------------------------------------------------------------------------------------------------
Net assets.................................................................. $ 4,830,151
===================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
December 31, 1997
<TABLE>
<CAPTION>
Net assets attributable to variable annuity contract
holders (Note 2): Units Unit Value
----- ----------
<S> <C> <C> <C>
Dreyfus Variable Investment Fund:
Capital Appreciation Portfolio - Basic contract............ 18,347.666 $10.103905 $ 185,383
Capital Appreciation Portfolio - Enhanced contract......... 0.000 10.117776 0
Growth and Income Portfolio - Basic contract............... 32,231.762 10.196538 328,652
Growth and Income Portfolio - Enhanced contract............ 0.000 10.210527 0
Money Market Portfolio - Basic contract.................... 0.000 1.016499 0
Money Market Portfolio - Enhanced contract................. 0.000 1.017876 0
Small Cap Portfolio - Basic contract....................... 41,359.506 10.362314 428,580
Small Cap Portfolio - Enhanced contract.................... 0.000 10.376538 0
Dreyfus Funds:
Socially Responsible Growth Fund, Inc. - Basic
contract................................................ 26,332.500 10.320883 271,775
Socially Responsible Growth Fund, Inc. - Enhanced
contract................................................ 0.000 10.335055 0
Stock Index Fund - Basic contract.......................... 69,510.645 10.479569 728,442
Stock Index Fund - Enhanced contract....................... 0.000 10.493943 0
Strong Funds:
Growth Fund II - Basic contract............................ 2,147.556 10.707133 22,994
Growth Fund II - Enhanced contract......................... 0.000 10.721828 0
Opportunity Fund II - Basic contract....................... 6,416.208 10.727356 68,829
Opportunity Fund II - Enhanced contract.................... 0.000 10.742083 0
Invesco Funds Group, Inc.:
High-Yield Fund - Basic contract........................... 10,260.821 10.687084 109,658
High-Yield Fund - Enhanced contract........................ 0.000 10.701757 0
Industrial Income Fund - Basic contract.................... 33,269.953 10.659157 354,630
Industrial Income Fund - Enhanced contract................. 0.000 10.673778 0
Total Return Fund - Basic contract......................... 14,641.934 10.503108 153,786
Total Return Fund - Enhanced contract...................... 0.000 10.517508 0
Janus Aspen Series:
Aggressive Growth Portfolio - Basic contract............... 2,830.076 10.723950 30,350
Aggressive Growth Portfolio - Enhanced contract............ 0.000 10.738659 0
Balanced Portfolio - Basic contract........................ 30,519.754 10.604609 323,650
Balanced Portfolio - Enhanced contract..................... 0.000 10.619159 0
Growth Portfolio - Basic contract.......................... 32,737.591 10.239960 335,232
Growth Portfolio - Enhanced contract....................... 0.000 10.254006 0
International Growth Portfolio - Basic contract............ 12,541.039 9.735841 122,097
International Growth Portfolio - Enhanced contract......... 0.000 9.749214 0
Worldwide Growth Portfolio - Basic contract................ 56,665.753 9.935860 563,023
Worldwide Growth Portfolio - Enhanced contract............. 0.000 9.949496 0
Morgan Stanley Universal Funds, Inc.:
Emerging Markets Equity Portfolio - Basic contract......... 9,042.956 7.911559 71,544
Emerging Markets Equity Portfolio - Enhanced
contract................................................ 0.000 7.922446 0
Fixed Income Portfolio - Basic contract.................... 4.653 10.412276 48
Fixed Income Portfolio - Enhanced contract................ 0.000 10.426565 0
Mid-Cap Value Portfolio - Basic contract................... 16,674.966 11.113227 185,313
Mid-Cap Value Portfolio - Enhanced contract................ 0.000 11.128478 0
U.S. Real Estate Portfolio - Basic contract................ 7,200.060 11.101269 79,930
U.S. Real Estate Portfolio - Enhanced contract............. 0.000 11.116503 0
Value Portfolio - Basic contract........................... 9,944.401 10.204064 101,473
Value Portfolio - Enhanced contract........................ 0.000 10.218060 0
PBHG Insurance Series Fund, Inc.:
Growth II Portfolio - Basic contract....................... 6,195.935 9.511124 58,930
Growth II Portfolio - Enhanced contract.................... 0.000 9.524184 0
Large Cap Growth Portfolio - Basic contract................ 11,415.131 10.150555 115,870
Large Cap Growth Portfolio - Enhanced contract............. 0.000 10.164489 0
Technology & Communications Portfolio - Basic
contract............................................... 20,974.008 9.057045 189,962
Technology & Communications Portfolio - Enhanced
contract............................................... 0.000 9.069487 0
- ----------------------------------------------------------------------------------------------------------------------------
Net assets attributable to variable annuity contract holders..... 4,830,151
- ----------------------------------------------------------------------------------------------------------------------------
Net assets....................................................... $ 4,830,151
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
================================================================================
<TABLE>
<CAPTION>
Dreyfus Variable Investment Fund Dreyfus Funds Strong Funds
-------------------------------- ------------- ------------
Growth Socially Oppor-
Capital and Money Small Responsible Stock Growth tunity
Appreciation Income Market Cap Growth Index Fund Fund
Portfolio Portfolio Portfolio Portfolio Fund, Inc. Fund II II
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends from investments
in portfolio shares..................... $ 1,218 $ 20,139 $ 0 $ 22,341 $ 8,121 $ 13,466 $ 900 $ 70
Expenses:
Mortality and expense risk
fees (Note 4)........................... 416 759 0 903 608 1,155 43 154
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss)......... 802 19,380 0 21,438 7,513 12,311 857 (84)
Net realized gain (loss) and unrealized
appreciation (depreciation) on investments:
Net realized gain (loss) on sale of
investments in portfolio shares........ 2 0 0 21 77 (13) (2) 2
Net change in unrealized appreciation
(depreciation) of investments in
portfolio shares...................... 1,429 (18,880) 0 (24,732) (5,668) (2,480) (676) 651
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments
in portfolio shares................ 1,431 (18,880) 0 (24,711) (5,591) (2,493) (678) 653
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets from operations........ $ 2,233 $ 500 $ 0 $(3,273) $ 1,922 $ 9,818 $ 179 $ 569
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
Invesco Funds Group, Inc. Janus Aspen Series
------------------------- ------------------------------------------
Inter- World-
High Industrial Total Aggressive national wide
Yield Income Return Growth Balanced Growth Growth Growth
Fund Fund Fund Portfolio Portfolio Portfolio Portfolio Portfolio
---- ---- ---- --------- --------- --------- -------------------
====================================================================================================================================
Investment income:
Dividends from investments in
portfolio shares...........................$ 10,266 $ 23,148 $ 3,585 $ 0 $ 2,572 $ 867 $ 132 $1,111
Expenses:
Mortality and expense risk fees (Note 4)........ 353 927 353 88 646 578 335 1,100
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss).............. 9,913 22,221 3,232 (88) 1,926 289 (203) 11
Net realized gain (loss) and unrealized
appreciation (depreciation) on investments:
Net realized gain (loss) on sale of
investments in portfolio shares........... 4 0 58 0 383 0 (5) 0
Net change in unrealized appreciation
(depreciation) of investments in
portfolio shares......................... (6,748) (13,959) (561) 1,686 4,297 69 (566) (701)
- -----------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in
portfolio shares....................... 6,744) (13,959) (503) 1,686 4,680 69 (571) (701)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets from operations............$ 3,169 $ 8,262 $ 2,729 $ 1,598 6,606 $ 358 $(774) $(690)
====================================================================================================================================
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B (continued)
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
================================================================================
Morgan Stanley Universal Funds, Inc. PBHG Insurance Series Fund, Inc.
----------------------------------------- --------------------------------
Technology
Emerging U.S. and
Markets Fixed Mid-Cap Real Large Communi-
Equity Income Value Estate Value Growth II Cap cations
Port- Port- Port- Port Port- Port- Port- Port-
folio folio folio folio folio folio folio folio
===================================================================================================================================
Investment income:
Dividends from investments in portfolio
shares................................... $ 2,377 $ 3 $ 8,589 $ 2,523 $ 2,517 $ 0 $ 0 $ 0
Expenses:
Mortality and expense risk fees
(Note 4)................................. 250 0 298 285 342 210 334 590
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss)........... 2,127 3 8,291 2,238 2,175 (210) (334) (590)
Net realized gain (loss) and unrealized
appreciation (depreciation) on investments:
Net realized gain (loss) on sale of
investments in portfolio shares.......... (13) 0 1 103 2 2 (28) (420)
Net change in unrealized appreciation
(depreciation) of investments in
portfolio shares....................... (14,018) (2) (7,457) 2,959 (4,311) (634) 1,478 (14,306)
- -----------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in
portfolio shares................... (14,031) (2) (7,456) 3,062 (4,309) (632) 1,450 (14,726)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets from operations....... $ (11,904) $ 1 $ 835 $ 5,300 $(2,134) $ (842) $ 1,116 $(15,316)
===================================================================================================================================
</TABLE>
Total
================================================================================
Investment income:
Dividends from investments in portfolio
shares................................. $ 123,945
Expenses:
Mortality and expense risk fees
(Note 4)............................... 10,727
- -------------------------------------------------------------------------------
Net investment income (loss)......... 113,218
Net realized gain (loss) and unrealized
appreciation (depreciation) on investments:
Net realized gain (loss) on sale of
investments in portfolio shares........ 174
Net change in unrealized appreciation
(depreciation) of investments in
portfolio shares...................... (103,130)
- -------------------------------------------------------------------------------
Net gain (loss) on investments in
portfolio shares.................. (102,956)
- -------------------------------------------------------------------------------
Net increase (decrease) in net
assets from operations....... $ 10,262
The accompanying notes are an integral part of these financial statements.
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Dreyfus Variable Investment Fund Dreyfus Funds
----------------------------------------------- ------------------------
Capital Growth Socially
Appre- and Money Small Responsible Stock
ciation Income Market Cap Growth Index
Portfolio Portfolio Portfolio Portfolio Fund, Inc. Fund
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Changes from operations:
Net investment income (loss)................... $ 802 $ 19,380 $ 0 $ 21,438 $ 7,513 $ 12,311
Net realized gain (loss) on sale of investments
in portfolio shares....................... 2 0 0 21 77 (13)
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares......... 1,429 (18,880) 0 (24,732) (5,668) (2,480)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
operations.............................. 2,233 500 0 (3,273) 1,922 9,818
Changes from principal transactions:
Contract purchase payments..................... 155,719 321,133 0 396,553 271,584 714,481
Contract redemptions........................... (846) (1,340) 0 0 0 (484)
Net transfers (to) from fixed account......... 28,277 8,359 0 35,300 (1,731) 4,627
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal
transactions............................. 183,150 328,152 0 431,853 269,853 718,624
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets............ 185,383 328,652 0 428,580 271,775 728,442
Net assets, beginning of period...................... 0 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period............................ $ 185,383 $ 328,652 $ 0 $ 428,580 $ 271,775 $ 728,442
====================================================================================================================================
Invesco Funds Group, Inc. Janus Aspen Series
------------------------- ------------------
High Industrial Total Aggressive
Yield Income Return Growth Balanced Growth
Fund Fund Fund Portfolio Portfolio Portfolio
====================================================================================================================================
Changes from operations:
Net investment income (loss)....................... $ 9,913 $ 22,221 $ 3,232 $ (88) 1,926 $ 289
Net realized gain (loss) on sale of investments
in portfolio shares............................. 4 0 58 0 383 0
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares.............. (6,748) (13,959) (561) 1,686 4,297 69
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
operations.................................. 3,169 8,262 2,729 1,598 6,606 358
Changes from principal transactions:
Contract purchase payments......................... 91,597 332,968 137,113 28,889 305,338 323,635
Contract redemptions............................... (846) (2,541) (2,260) 0 (564) (846)
Net transfers (to) from fixed account.............. 15,738 15,941 16,204 (137) 12,270 12,085
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal
transactions................................ 106,489 346,368 151,057 28,752 317,044 334,874
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets ............... 109,658 354,630 153,786 30,350 323,650 335,232
Net assets, beginning of period.......................... 0 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period................................ $109,658 $354,630 $ 153,786 $ 30,350 $ 323,650 $335,232
====================================================================================================================================
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS (continued)
YEAR ENDED DECEMBER 31, 1997
Morgan Stanley Universal Funds, Inc.
------------------------------------
Emerging
Markets Fixed Mid-Cap U.S.
Equity Income Value Real Estate Value
Portfolio Portfolio Portfolio Portfolio Portfolio
==============================================================================================================================
Changes from operations:
Net investment income (loss)......................... $ 2,127 $ 3 $ 8,291 $ 2,238 $ 2,175
Net realized gain (loss) on sale of investments (13) 0 1 103 2
in portfolio shares...............................
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares................ (14,018) (2) (7,457) 2,959 (4,311)
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from (11,904) 1 835 5,300 (2,134)
operations...................................
Changes from principal transactions:
Contract purchase payments........................... 53,465 48 170,534 70,145 98,978
Contract redemptions................................. 0 0 0 0 0
Net transfers (to) from fixed account................ 29,983 (1) 13,944 4,485 4,629
- ------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal
transactions................................. 83,448 47 184,478 74,630 103,607
- ------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets................. 71,544 48 185,313 79,930 101,473
Net assets, beginning of period........................... 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period.................................$ 71,544 $ 48 $ 185,313 $ 79,930 $ 101,473
==============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B (continued)
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Strong Funds
---------------------------
Growth Opportunity
Fund Fund
II II
==========================================================================================
<S> <C> <C>
Changes from operations:
Net investment income (loss)................... 857 (84)
Net realized gain (loss) on sale of investments
in portfolio shares....................... (2) 2
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares......... (676) 651
- --------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
operations.............................. 179 569
Changes from principal transactions:
Contract purchase payments..................... 22,776 68,117
Contract redemptions........................... 0 0
Net transfers (to) from fixed account......... 39 143
- --------------------------------------------------------------------------------------
Net increase in net assets from principal
transactions............................. 22,815 68,260
- --------------------------------------------------------------------------------------
Net increase in net assets............ 22,994 68,829
Net assets, beginning of period...................... 0 0
- --------------------------------------------------------------------------------------
Net assets, end of period............................ $ 22,994 $ 68,829
========================================================================================
International Worldwide
Growth Growth
Portfolio Portfolio
=========================================================================================
Changes from operations:
Net investment income (loss)....................... $ (203) $ 11
Net realized gain (loss) on sale of investments
in portfolio shares............................. (5) 0
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares.............. (566) (701)
- -----------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
operations.................................. (774) (690)
Changes from principal transactions:
Contract purchase payments......................... 119,873 530,453
Contract redemptions............................... 0 (1,919)
Net transfers (to) from fixed account.............. 2,998 35,179
- -----------------------------------------------------------------------------------------
Net increase in net assets from principal
transactions................................ 122,871 563,713
- -----------------------------------------------------------------------------------------
Net increase in net assets ............... 122,097 563,023
Net assets, beginning of period.......................... 0 0
- -----------------------------------------------------------------------------------------
Net assets, end of period................................ $122,097 $563,023
=========================================================================================
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B (continued)
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1997
PBHG Insurance Series Fund, Inc.
-------------------------------------------------
Technology
Large Cap and
Growth II Growth Communications
Portfolio Portfolio Portfolio Total
=================================================================================================================
Changes from operations:
Net investment income (loss)......................... $ (210) $ (334) $ (590) $ 113,218
Net realized gain (loss) on sale of investments 2 (28) (420) 174
in portfolio shares...............................
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares................ (634) 1,478 (14,306) (103,130)
- ------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from (842) 1,116 (15,316) 10,262
operations...................................
Changes from principal transactions:
Contract purchase payments........................... 41,695 110,081 196,258 4,561,433
Contract redemptions................................. 0 (1,297) 0 (12,943)
Net transfers (to) from fixed account................ 18,077 5,970 9,020 271,399
- ------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal
transactions................................. 59,772 114,754 205,278 4,819,889
- ------------------------------------------------------------------------------------------------------------------
Net increase in net assets................. 58,930 115,870 189,962 4,830,151
Net assets, beginning of period........................... 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------
Net assets, end of period................................. $ 58,930 $115,870 $189,962 $4,830,151
==================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
BASIC CONTRACTS
<TABLE>
<CAPTION>
=========================================================================================================================
Dreyfus Variable Investment Fund Dreyfus Funds
------------------------------------------------------- ----------------------------
Growth Socially
Capital and Money Small Responsible Stock
Appreciation Income Market Cap Growth Index
Portfolio Portfolio Portfolio Portfolio Fund, Inc. Fund
<S> <C> <C> <C> <C> <C> <C> <C>
Units outstanding, December 31, 0.000 0.000 0.000 0.000 0.000 0.000
Units purchased 18,431.382 32,365.225 0.000 41,359.506 26,523.695 69,726.369
Units redeemed (83.716) (133.463) 0.000 0.000 (191.195) (215.724)
------------ ------------- ------------- -------------- -------------- -------------
Units outstanding December 31, 1997 18,347.666 32,231.762 0.000 41,359.506 26,332.500 69,510.645
============ ============= ============= ============== ============== =============
================================================================================================================================
================================================================================================================================
Invesco Funds Group, Inc. Janus Aspen Series
---------------------------------------- --------------------------------------------
High Industrial Total Aggressive
Yield Income Return Growth Balanced Growth
Fund Fund Fund Portfolio Portfolio Portfolio
=========================================================================================================================
Units outstanding, December 31, 1996 0.000 0.000 0.000 0.000 0.000 0.000
Units purchased 10,339.969 33,509.762 14,857.849 2,843.016 30,746.037 32,820.195
Units redeemed (79.148) (239.809) (215.915) (12.940) (226.283) (82.604)
------------ ------------- ------------- -------------- -------------- -------------
Units outstanding December 31, 1997 10,260.821 33,269.953 14,641.934 2,830.076 30,519.754 32,737.591
============ ============= ============= ============== ============== =============
===================================================================================================================================
PBHG Insurance
Morgan Stanley Universal Funds, Inc Series Fund, Inc.
---------------------------------------------------------------------- -----------------
Emerging
Markets Fixed Mid-Cap U.S.
Equity Income Value Real Estate Value Growth II
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
Units outstanding, December 31, 1996 0.000 0.000 0.000 0.000 0.000 0.000
Units purchased 9,042.956 4.653 16,674.966 7,201.754 9,944.401 6,195.935
Units redeemed 0.000 0.000 0.000 (1.694) 0.000 0.000
------------ ------------- ------------- -------------- -------------- -------------
Units outstanding December 31, 1997 9,042.956 4.653 16,674.966 7,200.060 9,944.401 6,195.935
============ ============= ============= ============== ============== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
BASIC CONTRACTS
Strong Funds
-------------------------------
Growth Opportunity
Fund Fund
II II
Units outstanding, December 31, 0.000 0.000
1996
Units purchased 2,156.405 6,416.208
Units redeemed (8.849) 0.000
-------------- ---------------
Units outstanding December 31, 1997 2,147.556 6,416.208
============== ===============
-------------------------------
International Worldwide
Growth Growth
Portfolio Portfolio
Units outstanding, December 31, 0.000 0.000
1996
Units purchased 12,542.402 56,862.257
Units redeemed (1.363) (196.504)
-------------- ---------------
Units outstanding December 31, 1997 12,541.039 56,665.753
============== ===============
PBHG Insurance
Series Fund, Inc.
-------------------------------
Technology
Large Cap and
Growth Communications
Portfolio Portfolio
==========================================================================
Units outstanding, December 31, 1996 0.000 0.000
Units purchased 11,550.778 21,141.232
Units redeemed (135.647) (167.224)
------------- ---------------
Units outstanding December 31, 1997 11,415.131 20,974.008
============== ===============
============================================================================
The accompanying notes are an integral part of these financial statements.
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
(1) GENERAL
-------
Annuity Investors Variable Account B (the "Account") is registered
under the Investment Company Act of 1940, as amended, as a unit
investment trust. The Account was established on December 19, 1996 and
commenced operations on July 15, 1997 as a segregated investment
account for individual and group variable annuity contracts which are
registered under the Securities Act of 1933. The operations of the
Account are included in the operations of Annuity Investors Life
Insurance Company (the "Company") pursuant to the provisions of the
Ohio Insurance Code. The Company is an indirect wholly-owned subsidiary
of American Annuity Group, Inc., ("AAG"), a publicly traded insurance
holding company listed on the New York Stock Exchange. The Company is
licensed in 47 states.
Comparative financial statements are not presented as the Account did
not have any financial activity in 1996.
At December 31, 1997, the following investment options were available:
The Dreyfus Variable Investment Fund:
o Capital Appreciation Portfolio
o Growth and Income Portfolio
o Money Market Portfolio
o Small-Cap Portfolio
Dreyfus Funds:
o Socially Responsible Growth Fund, Inc.
o Stock Index Fund
Strong Funds:
o Growth Fund II
o Opportunity Fund II
Invesco Funds:
o High-Yield Fund
o Industrial Income Fund
o Total Return Fund
Janus Aspen Series:
o Aggressive Growth Portfolio
o Balanced Portfolio
o Growth Portfolio
o International Growth Portfolio
o Worldwide Growth Portfolio
Morgan Stanley Universal Funds, Inc.:
o Emerging Markets Equity Portfolio
o Fixed Income Portfolio
o Mid-Cap Value Portfolio
o U.S. Real Estate Portfolio
o Value Portfolio
PBHG Insurance Series Fund, Inc.:
o Growth II Portfolio
o Large Cap Growth Portfolio
o Technology & Communications Portfolio
8
ANNUITY INVESTORS VARIABLE ACCOUNT B
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1997
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Basis of Presentation
---------------------
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amount reported in the
financial statements and accompanying notes. Changes in circumstances
could cause actual results to differ materially from those estimates.
Investments
-----------
Investments are valued using the net asset value of the respective
portfolios at the end of each business day of the New York Stock
Exchange, with the exception of business holidays. Investment
transactions are accounted for on the trade date (the date the order to
buy or sell is executed). The cost of investments sold is determined on
a first-in, first-out basis. The Account does not hold any investments
which are restricted as to resale.
Net investment income (loss), net realized gain (loss) and unrealized
appreciation (depreciation) on investments are allocated to the
contracts on each valuation date based on each contract's pro rata
share of the assets of the Account as of the beginning of the valuation
date.
Federal Income Taxes
--------------------
No provision for federal income taxes has been made in the accompanying
financial statements because the operations of the Account are included
in the total operations of the Company, which is treated as a life
insurance company for federal income tax purposes under Subchapter L of
the Internal Revenue Code. Net investment income (loss) and realized
gains (losses) will be retained in the Account and will not be taxable
until received by the contract owner or beneficiary in the form of
annuity payments or other distributions.
Net Assets Attributable to Variable Annuity Contract Holders
------------------------------------------------------------
The variable annuity contract reserves are comprised of net contract
purchase payments less redemptions and benefits. These reserves are
adjusted daily for the net investment income (loss), net realized gain
(loss) and unrealized appreciation (depreciation) on investments.
9
ANNUITY INVESTORS VARIABLE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<PAGE>
December 31, 1997
(3) PURCHASES AND SALES OF INVESTMENTS IN PORTFOLIO SHARES
------------------------------------------------------
The aggregate cost of purchases and proceeds from sales of investments
in all portfolio shares for the year ended December 31, 1997 are as
follows:
1997
---------------------------
Proceeds
Cost of from
Purchases Sales
--------- ---------
Dreyfus Variable Investment Fund:
Capital Appreciation Portfolio $ 184,066 $ 114
Growth and Income Portfolio 347,539 7
Money Market Portfolio 0 0
Small Cap Portfolio 453,533 242
Dreyfus Funds:
Socially Responsible Growth Fund, Inc. 281,102 3,736
Stock Index Fund 732,154 1,219
Strong Funds:
Growth Fund II 23,723 52
Opportunity Fund II 68,218 41
Invesco Funds:
High-Yield Fund 116,516 114
Industrial Income Fund 368,589 0
Total Return Fund 155,706 1,416
Janus Aspen Series:
Aggressive Growth Portfolio 28,673 9
Balanced Portfolio 325,724 6,754
Growth Portfolio 335,162 0
International Growth Portfolio 122,980 311
Worldwide Growth Portfolio 563,789 65
Morgan Stanley Universal Funds, Inc.:
Emerging Markets Equity Portfolio 85,649 75
Fixed Income Portfolio 51 0
Mid-Cap Value Portfolio 192,812 44
U.S. Real Estate Portfolio 78,457 1,590
Value Portfolio 105,900 118
PBHG Insurance Series Fund, Inc.:
Growth II Portfolio 59,698 135
Large Cap Growth Portfolio 116,890 2,470
Technology & Communications Portfolio 208,284 3,595
---------- --------
Total $4,955,215 $22,107
========== =======
10
ANNUITY INVESTORS VARIABLE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1997
<PAGE>
(4) DEDUCTIONS AND EXPENSES
-----------------------
Although periodic annuitization payments to contract owners vary
according to the investment performance of the sub-accounts, such
payments are not affected by mortality or expense experience because
the Company assumes the mortality risk and expense risk under the
contracts.
The mortality risk assumed by the Company results from the life annuity
payment option in the contracts, in which the Company agrees to make
annuity payments regardless of how long a particular annuitant or other
payee lives. The annuity payments are determined in accordance with
annuity purchase rate provisions established at the time the contracts
are issued. Based on the actuarial determination of expected mortality,
the Company is required to fund any deficiency in the annuity payment
reserves from its general account assets.
The expense risk assumed by the Company is the risk that the deductions
for sales and administrative expenses may prove insufficient to cover
the actual sales and administrative expenses. Under the Basic Contract,
the Company deducts a fee from the Account each day for assuming the
mortality and expense risks. This fee is equal on an annual basis to
1.40% of the daily value of the total investments of the Account. These
fees aggregated $10,727 for the year ended December 31, 1997.
In connection with certain contracts in which 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 an Enhanced Contract. Under the
Enhanced Contract, the Company deducts a fee from the Account each day
for assuming the mortality and expense risks. This fee is equal on an
annual basis to 1.10% of the daily value of the total investments of
the Account. There were no Enhanced Contracts as of December 31, 1997.
Pursuant to an administrative agreement between AAG and the Company,
AAG subsidiaries provide sales and administrative services to the
Company and the Account. The Company may deduct a percentage of
purchase payments surrendered to cover sales expenses. The percentage
decreases to 0% from a maximum of 7.0% based upon the number of years
the purchase payment has been held.
In addition, the Company may deduct units from contracts annually and
upon full surrender to cover an administrative fee of $30. These
expenses totaled $0 for the year ended December 31, 1997.
(5) OTHER TRANSACTIONS WITH AFFILIATES
----------------------------------
AAG Securities, Inc., an affiliate of the Company, is the principal
underwriter and performs all variable annuity sales functions on behalf
of the Company.
11
ANNUITY INVESTORS VARIABLE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1997
<PAGE>
(6) NET ASSETS
----------
Net assets consisted of the following at December 31, 1997:
Proceeds from the sales of units since organization,
less cost of units redeemed $4,819,889
Undistributed net investment income 113,218
Undistributed net realized gains on sale of investments 174
Net unrealized depreciation of investments (103,130)
-----------
Net assets $4,830,151
===========
<PAGE>
ANNUITY INVESTORS LIFE
INSURANCE COMPANY
STATUTORY-BASIS FINANCIAL STATEMENTS
AND OTHER FINANCIAL INFORMATION
YEARS ENDED DECEMBER 31, 1997 AND 1996
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
STATUTORY-BASIS FINANCIAL STATEMENTS
AND OTHER FINANCIAL INFORMATION
YEARS ENDED DECEMBER 31, 1997 AND 1996
CONTENTS
Report of Independent Auditors................................................35
Audited Statutory-Basis Financial Statements
Balance Sheets - Statutory-Basis..............................................36
Statements of Operations - Statutory-Basis....................................37
Statements of Changes in Capital and Surplus - Statutory-Basis................38
Statements of Cash Flows - Statutory-Basis....................................39
Notes to Statutory-Basis Financial Statements.................................40
<PAGE>
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, 1997 and
1996, 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 I 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 I.
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, 1997 and 1996, or
the results of its operations or its cash flows for the years then ended.
However, 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, 1997 and 1996, 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.
/s/ ERNST & YOUNG LLP
Cincinnati, Ohio
March 2, 1998
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
BALANCE SHEETS
STATUTORY-BASIS
<TABLE>
<CAPTION>
DECEMBER 31
-----------
1997 1996
---------- ---------
<S> <C> <C>
ADMITTED ASSETS
Cash and investments
Fixed maturities - at amortized cost
(market value - $33,661,758 and $22,445,536) 33,176,305 $22,996,685
Policy loans 281,758 41,190
Short-term investments 7,612,000 841,000
Cash 1,021,733 475,770
Other invested assets - 75,000
---------- -------------
Total cash and investments 42,091,796 24,429,645
Investment income due and accrued 523,546 437,051
Federal income tax recoverable 148,476 392,995
Other admitted assets 22,691 -
---------- -----------------
Total General Account admitted assets 42,786,509 25,259,691
Separate Account assets 37,248,224 3,389,109
---------- ------------
TOTAL ADMITTED ASSETS 80,034,733 $28,648,800
========== ===========
LIABILITIES, CAPITAL AND SURPLUS
Annuity reserves 23,186,988 $ 3,676,377
Commissions due and accrued 109,180 53,746
General expenses due and accrued 201,989 26,759
Transfers to Separate Accounts due and accrued (net)
(contingent deferred sales charges -
($2,170,871) and ($198,353)) (2,170,871) (206,980)
Taxes, licenses and fees due and accrued 15,368 1,900
Asset valuation reserve 126,076 58,437
Payable to parent and affiliates 446,637 303,718
Other liabilities 976,052 9,402
---------- --------------
Total General Account liabilities 22,891,419 3,923,359
Separate Account liabilities 37,248,224 3,389,109
---------- ------------
TOTAL LIABILITIES 60,139,643 7,312,468
---------- ------------
Common stock, par value- $125:
- 25,000 shares authorized
- 20,000 shares issued and outstanding 2,500,000 2,500,000
Gross paid-in and contributed surplus 17,550,000 17,550,000
Unassigned surplus (deficit) (154,910) 1,286,332
---------- ------------
TOTAL CAPITAL AND SURPLUS 19,895,090 21,336,332
---------- -----------
TOTAL LIABILITIES, CAPITAL AND SURPLUS 80,034,733 $28,648,800
========== ===========
See notes to statutory-basis financial statements
2
</TABLE>
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
STATUTORY-BASIS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996
------------ --------
<S> <C> <C>
REVENUES
Premiums and annuity considerations $12,878,897 $ 38,838
Deposit-type funds 43,367,003 4,355,900
Net investment income 1,789,590 1,500,424
Amortization of interest maintenance reserve (2,195) (814)
Other income 31,884 175
------------- -------------
Total revenue 58,065,179 5,894,523
BENEFITS AND EXPENSES
Increase in aggregate reserves 19,510,611 834,364
Policyholders' benefits 1,207,596 408,089
Commissions 3,722,847 257,666
Commissions and expense allowances on reinsurance assumed - 48,353
General insurance expenses 2,928,646 1,138,281
Taxes, licenses and fees 213,167 103,174
Net transfers to Separate Accounts 29,300,569 3,090,948
Reserve adjustment on termination of reinsurance assumed 2,654,548 -
------------ ---------------
Total benefits and expenses 59,537,984 5,880,875
----------- ----------
Gain (loss) from operations before federal income taxes (1,472,805) 13,648
Provision (benefit) for federal income taxes (37,876) 2,280
------------- ------------
Gain (loss) from operations after federal income
taxes before net realized capital losses (1,434,929) 11,368
Net realized capital losses
Net realized capital losses before federal
income taxes and transfer to IMR (9,212) (26,813)
Capital loss tax benefit - -
Interest maintenance reserve transfer
(net of tax) 5,988 17,428
-------------- ------------
Net realized capital losses after transfer
to IMR (3,224) (9,385)
-------------- ------------
NET INCOME (LOSS) $(1,438,153) $ 1,983
=========== ============
</TABLE>
See notes to statutory-basis financial statements
3
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
STATUTORY-BASIS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996
------------ ----------
<S> <C> <C>
COMMON STOCK
Balance at beginning of year $ 2,500,000 $ 2,000,000
Transfer from gross paid in and contributed surplus - 500,000
------------ ------------
Balance at end of year $ 2,500,000 $ 2,500,000
============ ============
GROSS PAID-IN AND CONTRIBUTED SURPLUS
Balance at beginning of year $17,550,000 $18,050,000
Transfer to common stock - (500,000)
------------ ------------
Balance at end of year $17,550,000 $17,550,000
============ ============
UNASSIGNED FUNDS
Balance at beginning of year $ 1,286,332 $ 1,064,981
Net income (loss) (1,438,153) 1,983
Increase in non-admitted assets (31,801) (85,271)
Increase in asset valuation reserve (67,639) (55,589)
Adjustment for prior year taxes 96,351 360,228
------------ ------------
Balance at end of year $ (154,910) $ 1,286,332
============ ============
TOTAL CAPITAL AND SURPLUS $ 19,895,090 $21,336,332
</TABLE>
See notes to statutory-basis financial statements
4
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
STATUTORY-BASIS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996
------------- ----------
<S> <C> <C>
OPERATIONS:
Premiums and annuity considerations $ 12,878,897 $ 38,838
Deposit-type funds 43,367,003 4,355,900
Net investment income 1,788,231 1,365,858
Net increase in policy loans (240,568) (41,190)
Policyholder benefits paid (1,207,596) (408,089)
Commissions, expenses and premium and other taxes paid (6,614,922) (1,479,640)
Net transfers to Separate Accounts (31,264,460) (3,297,928)
Federal income taxes recovered (paid) 378,746 (44,000)
Other cash provided (used) (1,563,792) 186,214
----------- ------------
Net cash provided by operations 17,521,539 675,963
INVESTING ACTIVITIES:
Sale, maturity or repayment of bonds 2,491,585 2,383,321
Purchase of bonds (12,771,161) (16,931,028)
Cash provided (applied) from receivable for securities 75,000 (75,000)
------------ ------------
Net cash used in investment activities (10,204,576) (14,622,707)
------------ -----------
Net increase (decrease) in cash and short-term investments 7,316,963 (13,946,744)
Cash and short-term investments at beginning of year 1,316,770 15,263,514
------------ -----------
Cash and short-term investments at end of year $ 8,633,733 $ 1,316,770
============ ===========
</TABLE>
See notes to statutory-basis financial statements
5
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
A. GENERAL
Annuity Investors Life Insurance Company ("AILIC"), a stock 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
approximately 81%. On November 29, 1994, AILIC was purchased from Great American
Insurance Company, a wholly-owned subsidiary of AFG.
AILIC's primary product is variable annuities. These are reported as
deposit-type funds. The product is marketed to hospitals, educational
institutions and other qualified and non-qualified markets. During 1997, AILIC
also began writing individual fixed annuity products produced by one large
agency.
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) costs incurred in the acquisition of new business such as commissions,
underwriting and policy issuance costs are expensed at the time incurred
versus being capitalized;
(c) reserves established for future policy benefits are calculated using more
conservative assumptions for mortality and interest rates than would be
used under GAAP;
(d) an Interest Maintenance Reserve ("IMR") is provided whereby portions of
realized gains and losses from fixed income investments are deferred and
amortized into investment income as prescribed by the NAIC;
(e) investments in fixed maturity securities considered "available for sale"
(as defined by GAAP) are generally recorded at amortized cost versus
market;
(f) an Asset Valuation Reserve ("AVR") is provided which reclassifies a portion
of surplus to liabilities; and
(g) 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 with current year presentation.
INVESTMENTS Asset values are generally stated as follows: Bonds not backed by
other loans, where permitted, are carried at amortized cost using the interest
method; loan-backed bonds and structured securities, where permitted, are
carried at amortized cost using the interest method; short-term investments are
carried at cost; and policy loans are carried at the aggregate unpaid balance.
The Company uses dealer modeled prepayment assumptions to determine effective
yields for loan-backed bonds and structured securities. 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.
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.
6
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997 AND 1996
INVESTMENTS (CONTINUED)
Short-term investments having original maturities of three months or less when
purchased are considered to be cash equivalents for purposes of the
statutory-basis 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
received.
SEPARATE ACCOUNTS Separate account assets and liabilities reported in the
accompanying statutory-basis balance sheets represent funds that are separately
administered, principally for annuity contracts, and for which the
contractholder, rather than AILIC, bears the investment risk. Assets of the
Separate Accounts are not chargeable with liabilities incurred in any other
business operation of AILIC. Separate account assets are reported at market
value. The operations of the separate accounts are not included in the
accompanying statutory-basis 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.
The fair value of the liability for annuities in the payout phase is assumed to
be the present value of the anticipated cash flows, discounted at current
interest rates. Fair value of annuities in the accumulation phase is assumed to
be no more than the policyholders' cash surrender amount.
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. The reinsurance agreement with Great
American Life Insurance Company ("GALIC"), an affiliated Ohio domiciled
insurance company, was terminated on January 1, 1997 and reserves of
approximately $2.7 million were transferred back to GALIC along with assets
equal to the reserves transferred.
FEDERAL INCOME TAXES AILIC files a separate company federal income tax return.
BENEFIT PLAN All employees meeting minimum requirements are eligible to
participate in an Employee Stock Ownership Retirement Plan ("ESORP") established
by AAG. The ESORP is a noncontributory, trusteed plan which invests primarily in
securities of AAG for the benefit of the employees of AAG and its subsidiaries.
Contributions are discretionary by the Board of Directors of AAG and are charged
against earnings in the year for which they are declared. Qualified employees
having vested rights are entitled to benefit payments at age 60.
7
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997 AND 1996
C. INVESTMENTS
Fixed maturity investments at December 31 consisted of the following:
<TABLE>
<CAPTION>
--------------------------------------------------------------
1997
Carrying Market Gross Unrealized
Value Value Gains Losses
----- ----- ----- ------
<S> <C> <C> <C> <C>
U.S. Government and government
agencies and authorities $ 9,326,347 $ 9,345,879 $ 61,757 $ 42,225
All other corporate 23,849,958 24,315,879 546,439 80,518
----------- ----------- -------- ---------
Total fixed maturity investments $33,176,305 $33,661,758 $608,196 $122,743
=========== =========== ======== ========
1996
--------------------------------------------------------------
Carrying Market Gross Unrealized
Value Value Gains Losses
----- ----- ----- ------
U.S. Government and government
agencies and authorities $ 9,049,167 $ 8,730,379 $ 42,370 $361,158
All other corporate 13,947,518 13,715,157 111,747 344,108
----------- ----------- -------- --------
Total fixed maturity investments $22,996,685 $22,445,536 $154,117 $705,266
=========== =========== ======== ========
The table below sets forth the scheduled maturities of AILIC's fixed maturity investments as of December 31, 1997:
Carrying Market
Value Value
----- -----
Bonds by maturity:
Due within 1 year or less $ 2,005,027 $ 2,003,285
Over 1 year through 5 years 8,306,878 8,315,621
Over 5 years through 10 years 13,142,738 13,353,424
Over 10 years through 20 years 6,195,035 6,429,645
Over 20 years 3,526,627 3,559,783
------------ ------------
Total bonds by maturity $33,176,305 $33,661,758
=========== ===========
</TABLE>
The expected maturities in the foregoing table may differ from the contractual
maturities because certain borrowers have the right to call or prepay
obligations with or without call or prepayment penalties.
Proceeds from sales of fixed maturity investments were $2.5 million in 1997 and
$2.4 million in 1996. Gross realized gains of $17,374 and $3,525 and gross
realized losses of $26,586 and $30,338 were realized on those sales during 1997
and 1996, respectively.
U.S. Treasury Notes with a carrying value of $6.6 million and $6.1 million at
December 31, 1997 and 1996, respectively, were on deposit as required by the
insurance departments of various states.
8
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997 AND 1996
Net investment income consisted of the following:
<TABLE>
<CAPTION>
1997 1996
----------- --------
<S> <C> <C>
Bonds $1,642,923 $1,369,442
Short-term investments 182,085 159,533
Cash on hand and on deposit 837 1,250
Policy loans 7,605 1,153
Miscellaneous 6,648 54
------------ --------------
Gross investment income 1,840,098 1,531,432
Investment expenses (50,508) (31,008)
------------ ------------
Net investment income $1,789,590 $1,500,424
========== ==========
</TABLE>
D. FEDERAL INCOME TAXES
--------------------
AILIC has no federal income taxes available for recoupement in the event of
future losses. AILIC has approximately $1.1 million in loss carryforwards
derived from year ended December 31, 1997 to offset future year's taxable
income. These loss carryforwards will expire in the year 2012.
E. RELATED PARTY TRANSACTIONS
--------------------------
On December 30, 1993, AILIC entered into a reinsurance agreement with GALIC,
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 consisted of assumed
reinsurance from GALIC in accordance with the agreement. The reinsurance
agreement was terminated January 1, 1997 and reserves of $2.7 million were
transferred back to GALIC along with assets equal to the reserves transferred.
AILIC has an agreement with AAG, subject to the direction of the Finance
Committee of AILIC, whereby AAG, along with services provided by American Money
Management, Inc. (an affiliate), provides for management and accounting services
related to the investment portfolio. In 1997 and 1996, AILIC paid $41,743 and
$15,095, 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 1997 and 1996, AILIC paid $2.2 million and
$0.3 million, respectively, in commission to AAG Securities.
Certain administrative, management, accounting, actuarial, data processing,
collection and investment services are provided under agreements between AILIC
and affiliates at charges not unfavorable to AILIC or insurance affiliates. In
1997 and 1996, AILIC paid $678,717 and $277,505, 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 cannot pay dividends in 1998 based on capital and
surplus, without prior approval.
9
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997 AND 1996
G. ANNUITY RESERVES, EXCLUDING SEPARATE ACCOUNTS
---------------------------------------------
At December 31, 1997, $0.6 million or 2.7% of AILIC's annuity reserves,
excluding Separate Accounts, were subject to discretionary withdrawal without
adjustment, and $22.6 million or 97.3% were subject to discretionary withdrawal
at book value less surrender charges of 5% or more. 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.
H. SEPARATE ACCOUNT
----------------
The Company writes individual and group non-guaranteed variable annuities. In
1997, the General Account had net transfers to the Separate Accounts of
$29,300,569, consisting of transfers to the Separate Accounts of $32,220,256 and
transfers from the Separate Accounts of $2,919,687, including contingent
deferred sales charges of $1,972,518. 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.
All Separate Account reserves are non-guaranteed and subject to discretionary
withdrawal at market value. 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. In 1997, funds in the Separate Accounts had a
total market value of $37,248,224 and amortized cost of $35,412,702, resulting
in net unrealized gains of $1,835,522, consisting of gross unrealized gains of
$2,047,508 and gross unrealized losses of $211,986.
10
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997 AND 1996
I. 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, 1997 and 1996:
<TABLE>
<CAPTION>
NET INCOME CAPITAL AND SURPLUS
----------------------------- -----------------------------
1997 1996 1997 1996
------------ -------- ------------ -----------
<S> <C> <C> <C> <C>
As reported on a statutory basis $(1,438,153) $ 1,983 $19,895,090 $21,336,332
Commissions capitalized to DAC 3,722,847 257,666 3,722,847 257,666
General expenses capitalized to DAC 2,046,618 569,139 2,046,618 569,139
Taxes, licenses and fees capitalized to DAC 127,900 51,587 127,900 51,587
Amortization of DAC (169,695) (51,969) (169,695) (51,969)
Capital gains transferred to IMR, net of tax (5,988) (17,428) (5,988) (17,428)
Amortization of IMR, net of tax 2,195 814 2,195 814
Contingent deferred sales charge (3,693,287) (262,297) (3,693,287) (262,297)
Federal income taxes (226,161) (190,841) (226,161) (190,841)
Deferred gain on intercompany sales (17,011) - (17,011) -
Unrealized gain (loss) adjustment - - 578,256 (352,697)
AVR adjustment - - 67,639 55,589
Non-admitted assets adjustment - - 31,801 85,271
Prior year tax adjustment - - (96,351) (360,228)
Prior year stat to GAAP cumulative adjustments - - (176,526) 38,868
----------------- ------------- ------------- --------------
Total GAAP adjustments 1,787,418 356,671 2,192,237 (176,526)
------------ -------- ------------ -------------
GAAP basis $ 349,265 $358,654 $22,087,327 $21,159,806
============ ======== =========== ===========
</TABLE>
11
<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) authorizing establishment of Annuity
Investors(REGISTERED) Variable Account B.1/
(2) Not Applicable.
(3) (a) Distribution Agreement between Annuity Investors Life
Insurance Company (REGISTERED) and AAG Securities, Inc.2/
(b) Form of Selling Agreement between Annuity Investors Life
Insurance Company(REGISTERED), 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/
(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/
<PAGE>
(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/
(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/
(aa) Revised form of Individual Retirement Annuity Endorsement to
Individual Qualified Contract. 3/
(bb) Revised form of SIMPLE IRA Endorsement to Qualified
Individual Contract. 3/
(cc) Form of Roth IRA Endorsement to Qualified Individual
Contract. 3/
(dd) Revised form of Employer Plan Endorsement to Group Contract.
3/
(ee) Revised form of Employer Plan Endorsement to Certificate of
Participation under a Group Contract. 3/
- 2 -
<PAGE>
(ff) Revised form of Employer Plan Endorsement to Qualified
Individual Contract. 3/
(gg) Revised form of Tax Sheltered Annuity Endorsement to Group
Contract.3/
(hh) Revised form of Tax Sheltered Annuity Endorsement to
Certificate of Participation under a Group Contract. 3/
(ii) Revised form of Tax Sheltered Annuity Endorsement to
Qualified Individual Contract. 3/
(jj) Revised form of Qualified Pension, Profit Sharing and Annuity
Plan Endorsement to Group Contract. 3/
(kk) Revised form of Qualified Pension, Profit Sharing and Annuity
Plan Endorsement to Certificate of Participation under a
Group Contract. 3/
(ll) Revised form of Qualified Pension, Profit Sharing and Annuity
Plan Endorsement to Qualified Individual Contract. 3/
(mm) Form of Governmental Section 457 Plan Endorsement to Group
Contract. 3/
(nn) Form of Governmental Section 457 Plan Endorsement to
Certificate of Participation under a Group Contract. 3/
(oo) Form of Governmental Section 457 Plan Endorsement to
Qualified Individual Contract. 3/
(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/
(c) Revised form of Application for Individual Flexible Premium
Deferred Annuity Contract and Certificate of Participation
under a Group Contract (filed herewith).
(d) Revised form of Application for Group Flexible Premium
Deferred Annuity Contract (filed herewith).
(6) (a) Articles of Incorporation of Annuity Investors Life Insurance
Company(REGISTERED).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/
- 3 -
<PAGE>
(b) Code of Regulations of Annuity Investors Life Insurance
Company.(REGISTERED)1/
(7) Not Applicable.
(8) (a) Participation Agreement between Annuity Investors Life
Insurance Company(REGISTERED) and Dreyfus Variable Investment
Fund.2/
(i) Letter Agreement dated April 14, 1997 between Annuity
Investors Life Insurance Company (REGISTERED) and Dreyfus
Variable Investment Fund.2/
(b) Participation Agreement between Annuity Investors Life
Insurance Company(REGISTERED) 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) and Dreyfus Life
and Annuity Index Fund, Inc. (d/b/a Dreyfus Stock Index
Fund).2/
(c) Participation Agreement between Annuity Investors Life
Insurance Company(REGISTERED) and The Dreyfus Socially
Responsible Growth Fund, Inc.2/
(i) Letter Agreement dated April 14, 1997 between Annuity
Investors Life Insurance Company(REGISTERED) and The Dreyfus
Socially Responsible Growth Fund, Inc.2/
(d) Participation Agreement between Annuity Investors Life
Insurance Company(REGISTERED) and Janus Aspen Series.2/
(e) Participation Agreement between Annuity Investors Life
Insurance Company(REGISTERED) and Strong Variable Insurance
Funds, Inc. and Strong Special Fund II, Inc.2/
(f) Participation Agreement between Annuity Investors Life
Insurance Company(REGISTERED) and INVESCO Variable Investment
Funds, Inc.2/
(g) Participation Agreement between Annuity Investors Life
Insurance Company(REGISTERED) and Morgan Stanley Universal
Funds, Inc.2/
(h) Participation Agreement between Annuity Investors Life
Insurance Company(REGISTERED) and PBHG Insurance Series Fund,
Inc.2/
(i) Service Agreement between Annuity Investors Life Insurance
Company(REGISTERED) 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) and American Annuity
Group(SERVICEMARK), Inc. 1/
- 4 -
<PAGE>
(l) Service Agreement between Annuity Investors Life Insurance
Company(REGISTERED) and Strong Capital Management, Inc.2/
(m) Service Agreement between Annuity Investors Life Insurance
Company(REGISTERED) and Pilgrim Baxter & Associates, Ltd.2/
(n) Service Agreement between Annuity Investors Life Insurance
Company(REGISTERED) and Morgan Stanley Asset Management, Inc.
2/
(o) Amended and Restated Agreement between The Dreyfus
Corporation and Annuity Investors Life Insurance
Company(REGISTERED).2/
(p) Service Agreement between Annuity Investors Life Insurance
Company(REGISTERED) and Janus Capital Corporation.2/
(r) Service Agreement between INVESCO Funds Group, Inc. and
Annuity Investors Life Insurance Company (filed herewith).
(s) Participation Agreement between The Timothy Plan Variable
Series, Timothy Partners, Ltd. and Annuity Investors Life
Insurance Company (filed herewith).
(t) Service Agreement between The Timothy Plan Variable Series
and Annuity Investors Life Insurance Company (filed
herewith).
(9) Opinion and Consent of Counsel1/.
(10) Consent of Independent Auditors (filed herewith).
(11) No financial statements are omitted from Item 23.
(12) Not Applicable.
(13) Schedule for Computation of Performance Quotations (filed herewith).
(14) Financial Data Schedule (filed herewith).
- ------------------------
1/ Filed with Form N-4 on December 23, 1996.
2/ Filed with Pre-Effective Amendment No. 1 on June 3, 1997.
3/ Filed with Post-Effective Amendment No. 1 on February 27, 1998.
- 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
Lynn Edward Laswell (1) Vice President and
Controller
Vincent J. Graneri (1) Vice President and Chief
Actuary
David Shipley (1) Vice President
Thomsas E. Mischell (1) Assistant Treasurer
(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) is a wholly
owned subsidiary of Great American(REGISTERED) Life Insurance Company, which is
a wholly owned subsidiary of American Annuity Group,(SERVICEMARK) Inc. The
Registrant, Annuity Investors(REGISTERED) Variable Account B, is a segregated
asset account of Annuity Investors Life Insurance Company(REGISTERED).
The following chart shows the affiliations among Annuity Investors Life
Insurance Company(REGISTERED) and its parent, subsidiary and affiliated
entities.
- 6 -
<PAGE>
<TABLE>
<CAPTION>
AMERICAN FINANCIAL GROUP, INC. % OF STOCK OWNED(1)
| STATE OF DATE OF BY IMMEDIATE
| DOMICILE INCORPORATION PARENT COMPANY NATURE OF BUSINESS
-------- ------------- -------------- ------------------
<S> <C> <C> <C> <C>
|_AFC Holding Company Ohio 12/09/94 100 Holding Company
|_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 Corporation Delaware 11/02/94 100 Home Builder
| | |_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 Acquisition Corp. Ohio 06/26/97 100 Transitory 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 7/19/1983 100 Mgmt-River Transportation
Equipment
| |_American Financial Corporation Ohio 08/27/63 100 Inactive
| |_American Money Management Corporation Ohio 03/01/73 100 Investment Management
| |_American Money Management International, Netherland 05/10/85 100 Securities Management
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 Company New Jersey 11/10/1804 100 Inactive
| | |_Cal Coal, Inc. Illinois 05/30/79 100 Inactive
| | |_Canadian Lease Insurance Services, Ltd. Washington 02/28/91 100 Insurance Agency
| | |_The Indianapolis Union Railway Company Indiana 11/19/1872 100 Inactive
| | |_Leased Equipment Reinsurance Company, Ltd. Bermuda 09/18/89 100 Reinsurance Company
| | |_Lease Insurance Agency Services Washington 12/27/83 100 Insurance Agency
Corporation
| | |_Lease Insurance Services, Ltd. Washington 05/14/90 100 Insurance Agency
| | |_Lehigh Valley Railroad Company Pennsylvania 04/21/1846 100 Inactive
| | |_The New York and Harlem Railroad Company New York 04/25/1831 97 Inactive
| | |_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, L.P. Delaware 05/05/89 80 Real Estate Developer
| | |_Penn Central Energy Management Company Delaware 05/11/87 100 Energy Operations Manager
- 7 -
<PAGE>
| | |_Pennsylvania Company Delaware 12/05/58 100 Holding Company
| | | |_Atlanta Casualty Company Illinois 06/13/72 100(2) Property/Casualty Insurance
| | | | |_American Premier Insurance Company Indiana 11/30/89 100 Property/Casualty Insurance
| | | | |_Atlanta Specialty Insurance Company Ohio 02/06/74 100 Property/Casualty Insurance
| | | | |_Atlanta Casualty Group, Inc. Georgia 04/01/77 100 Insurance Agency
| | | | | |_Atlanta Casualty General Agency, Texas 03/15/61 100 Managing General Agency
Inc.
| | | | | |_Atlanta Insurance Brokers, Inc. Georgia 02/06/71 100 Insurance Agency
| | | | | |_Treaty House, Ltd. (d/b/a Mr. Nevada 11/02/71 100 Insurance Premium Finance
Budget)
</TABLE>
- 8 -
<PAGE>
<TABLE>
<CAPTION>
AMERICAN FINANCIAL GROUP, INC.
|_AFC Holding Company
|_American Financial Corporation % OF STOCK OWNED(1)
| |_American Premier Underwriters, Inc. STATE OF DATE OF BY IMMEDIATE
| | |_Pennsylvania Company DOMICILE INCORPORATION PARENT COMPANY NATURE OF BUSINESS
-------- ------------- -------------- ------------------
<S> <C> <C> <C> <C>
| | | | |_Penn Central U.K. Limited United 10/28/92 100 Insurance Holding Company
Kingdom
| | | | | |_Insurance (GB) Limited United 05/13/92 100 Property/Casualty Insurance
Kingdom
| | | |_Delbay Corporation Delaware 12/27/62 100 Inactive
| | | |_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 Indiana 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 Services Provider
| | | | |_Infinity National Insurance Company Indiana 08/05/92 100 Property/Casualty Insurance
| | | | |_Infinity Select Insurance Company Indiana 06/11/91 100 Property/Casualty Insurance
| | | | |_Leader National Insurance Company Ohio 03/20/63 100 Property/Casualty Insurance
| | | | | |_Budget Insurance Premiums, Inc. Ohio 02/14/64 100 Premium Finance Company
| | | | | |_Leader National Agency, Inc. Ohio 04/05-63 100 Brokering Agent
| | | | | |_Leader National Agency of Texas, Texas 01/25/94 100 Managing General Agency
Inc.
| | | | | |_Leader National Insurance Agency of Arizona 12/05/73 100 Brokering Agent
Arizona
| | | | | |_Leader Preferred Insurance Company Ohio 11/07/94 100 Property/Casualty Insurance
| | | | | |_Leader Specialty Insurance Company Indiana 03/10/94 100 Property/Casualty Insurance
| | | | | |_TALON Group, Inc. Ohio 12/12/97 100 Services Provider
| | | |_PCC Technical Industries, Inc. California 03/07/55 100 Holding Company
| | | | |_ESC, Inc. California 11/02/62 100 Connector Accessories
| | | | |_Marathon Manufacturing Companies, Inc. Delaware 11/18/83 100 Holding Company
| | | | | |_Marathon Manufacturing Company Delaware 12/07/79 100 Inactive
| | | | |_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 America California 12/05/72 100 Workers' Compensation Insurance
| | | | |_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 10/28/92 100 Investments
Kingdom
| | | |_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 Company Oklahoma 12/28/66 100 Property/Casualty Insurance
| | | | | |_Granite Finance Co., Inc. Texas 11/09/65 100 Premium Financing
- 9 -
<PAGE>
| | | | |_Coventry Insurance Company Ohio 09/05/89 100 Property/Casualty Insurance
| | | | |_El Aguila Compania de Seguros, S.A. Mexico 11/24/94 100(2) Property/Casualty Insurance
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, Inc. Louisiana 03/30/78 beneficial Insurance Agency
interest
| | | | | |_Hallmark General Insurance Agency, Oklahoma 06/16/72 beneficial Insurance Agency
Inc. interest
| | | | | |_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
</TABLE>
- 10 -
<PAGE>
<TABLE>
<CAPTION>
AMERICAN FINANCIAL GROUP, INC.
| |_AFC Holding Company
| |_American Financial Corporation
| | |_American Premier Underwriters, Inc. % OF STOCK OWNED(1)
| STATE OF DATE OF BY IMMEDIATE
| DOMICILE INCORPORATION PARENT COMPANY NATURE OF BUSINESS
-------- ------------- -------------- ------------------
<S> <C> <C> <C> <C>
| | |_Pennsylvania-Reading Seashore Lines New Jersey 06/14/01 66.67 Inactive
| | |_Pittsburgh and Cross Creek Railroad Pennsylvania 08/14/70 83 Inactive
Company
| | |_Terminal Realty Penn Co. District of 09/23/68 100 Inactive
| | |_United Railroad Corp. Delaware 11/25/81 100 Inactive
| | | |_Detroit Manufacturers Railroad Company Michigan 01/30/02 82 Inactive
| | |_Waynesburg Southern Railroad Company Pennsylvania 09/01/66 100 Inactive
| |_Chiquita Brands International, Inc. (and New Jersey 03/30/99 40.41(2) Production/Processing/Distribution
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
| | | |_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 Company Arizona 09/11/45 100 Property/Casualty Insurance
| | | |_American Annuity Group, Inc. Delaware 05/15/87 81.13(2) Holding Company
| | | | |_AAG Holding Company, Inc. Ohio 09/11/96 100 Holding Company
| | | | | |_American Annuity Group Capital Delaware 09/13/96 100 Financing Vehicle
Trust I
| | | | | |_American Annuity Group Capital Delaware 03/11/97 100 Financing Vehicle
Trust II
| | | | | |_American Annuity Group Capital Delaware 05/27/97 100 Financing Vehicle
Trust III
| | | | | |_Great American Life Insurance Ohio 12/15/59 100 Life Insurance Company
Company
| | | | | | |_Annuity Investors Life Insurance Ohio 11/31/81 100 Life Insurance Company
Company
| | | | | | |_Assured Security Life Insurance South 05/12/78 100 Life Insurance Company
Company, Inc. Dakota
| | | | | | |_CHATBAR, Inc. Massachusett 11/02/93 100 Hotel Operator
| | | | | | |_Driskill Holding, Inc. Texas 06/07/95 beneficial Hotel Management
interest
| | | | | | |_First Benefit Insurance Company Arizona 01/03/95 100 Life Insurance Company
| | | | | | |_GALIC Brothers, Inc. Ohio 11/12/93 80 Real Estate Management
| | | | | | |_Great American Life Assurance Ohio 08/10/67 100 Life Insurance Company
Company
| | | | | | |_Loyal American Life Insurance Alabama 05/18/55 100 Life Insurance Company
Company
| | | | | | | |_ADL Financial Services, Inc. North 09/10/70 100 Marketing Services
Carolina
| | | | | | | |_Purity Financial Corporation Florida 12/21/91 100 Marketing Services
- 11 -
<PAGE>
| | | | | | |_Prairie National Life Insurance South 02/11/76 100 Life Insurance Company
Company Dakota
| | | | | | | |_American Memorial Life South 03/18/59 100 Life Insurance Company
Insurance Company Dakota
| | | | | | | | |_Great Western Life Insurance Montana 05/01/80 100 Life Insurance Company
Company
| | | | | | | | |_Rushmore National Life South 04/16/37 100 Life Insurance Company
Insurance Company Dakota
| | | | |_AAG Insurance Agency, Inc. Kentucky 12/06/94 100 Life Insurance Agency Insurance
| | | | | |_AAG Insurance Agency of Massachusett 05/25/95 100 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 Services, Washington 06/19/80 100 Marketing Services
Inc.
</TABLE>
- 12 -
<PAGE>
<TABLE>
<CAPTION>
AMERICAN FINANCIAL GROUP, INC.
| |_AFC Holding Company
| |_American Financial Corporation
| | |_Great American Holding Corporation % OF STOCK OWNED(1)
| | | |_Great American Insurance Company STATE OF DATE OF BY IMMEDIATE
| | | | |_American Annuity Group, Inc. DOMICILE INCORPORATION PARENT COMPANY NATURE OF BUSINESS
-------- ------------- -------------- ------------------
<S> <C> <C> <C> <C>
| | | | |_CSW Management Services, Inc. Texas 06/27/85 100 Pre-need Trust Admin. Services
| | | | |_GALIC Disbursing Company Ohio 05/31/94 100 Payroll Servicer
| | | | |_General Accident Life Assurance Puerto Rico 07/01/64 99 Life Insurance Company
Company of Puerto Rico, Inc.
| | | | |_Keyes-Graham Insurance Agency, Inc. Massachusett 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 Ohio 03/07/94 beneficial Life Insurance Agency
Agency of 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 Minnesota 06/10/85 100 Insurance Agency
the Northwest, Inc.
| | | | | |_Lifestyle Financial Investments of North 07/13/94 100 Insurance Agency
the Southeast, Inc. Carolina
| | | | |_Loyal Marketing Services, Inc. Alabama 07/20/90 100 Marketing Services
| | | | |_New Energy Corporation Indiana 01/08/97 49 Holding Company
| | | | |_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. Alabama 09/22/95 100 Life Insurance Agency
| | | | | |_RRG of Ohio, Inc. Ohio 02/20/96 beneficial Insurance Agency
interest
| | | | | |_AAG Insurance Agency of Texas, Inc. Texas 06/02/95 100 Life Insurance Agency
| | | | |_SPELCO (UK) Ltd. United 00/00/00 99 Inactive
Kingdom
| | | | |_SWTC, Inc. Delaware 00/00/00 100 Inactive
| | | | |_SWTC Hong Kong Ltd. Hong Kong 00/00/00 100 Inactive
| | | | |_Technomil Ltd. Delaware 00/00/00 100 Inactive
| | | |_American Custom Insurance Services, Inc. Ohio 07/27/83 100 Management Holding Company
| | | | |_American Custom Insurance Services California 05/18/92 100 Insurance Agency & Brokerage
California, Inc.
| | | | |_Eden Park Insurance Brokers, Inc. California 02/13/90 100 Wholesale Brokerage for Surplus
Lines
| | | | |_Professional Risk Brokers, Inc. Illinois 03/01/90 100 Insurance Agency
| | | | |_Professional Risk Brokers Insurance, Massachusett 04/19/94 100 Surplus Lines Brokerage
Inc.
| | | | |_Professional Risk Brokers of Connecticut 07/09/92 100 Insurance Agency & Brokerage
Connecticut, Inc.
| | | | |_Professional Risk Brokers of Ohio, Inc. Ohio 12/17/86 100 Insurance Agency and Brokerage
- 13 -
<PAGE>
| | | |_American Custom Insurance Services Illinois 07/08/92 100 Underwriting Office
Illinois, Inc.
| | | |_American Dynasty Surplus Lines Insurance Delaware 01/12/82 100 Excess & Surplus Lines Insurance
Company
| | | |_American Empire Surplus Lines Insurance Delaware 07/15/77 100 Excess & Surplus Lines Insurance
Company
| | | | |_American Empire Insurance Company Ohio 11/26/79 100 Property/Casualty Insurance
| | | | | |_American Signature Underwriters, Inc. Ohio 04/08/96 100 Insurance Agency
| | | | | |_Specialty Underwriters, Inc. Texas 05/19/76 100 Insurance Agency
| | | | |_Fidelity Excess and Surplus Insurance Ohio 06/30/87 100 Property/Casualty Insurance
Company
</TABLE>
- 14 -
<PAGE>
<TABLE>
<CAPTION>
AMERICAN FINANCIAL GROUP, INC.
| |_AFC Holding Company
| |_American Financial Corporation
| | |_Great American Holding Corporation % OF STOCK OWNED(1)
| | | |_Great American Insurance Company STATE OF DATE OF BY IMMEDIATE
|_ DOMICILE INCORPORATION PARENT COMPANY NATURE OF BUSINESS
-------- ------------- -------------- ------------------
<S> <C> <C> <C> <C>
| | | |_American Financial Enterprises, Inc. Connecticut 1871 100(2) Closed End Investment Company
| | | |_American Insurance Agency, Inc. Kentucky 07/27/67 100 Insurance Agency
| | | |_American National Fire Insurance New York 08/22/47 100 Property/Casualty Insurance
Company
| | | |_American Special Risk, Inc. Illinois 12/29/81 100 Insurance Broker/Managing
General Agency
| | | | |_American Special Risk I of Arizona, Arizona 02/06/90 100 Inactive
Inc.
| | | |_American Spirit Insurance Company Indiana 04/05/88 100 Property/Casualty Insurance
| | | |_Brothers Property Corporation Ohio 09/08/87 80 Real Estate Investment
| | | | |_Brothers Barrington Corporation Oklahoma 03/18/94 100 Real Estate Holding Corporation
| | | | |_Brothers Cincinnatian Corporation Ohio 01/25/94 100 Hotel Manager
| | | | |_Brothers Columbine Corporation Oklahoma 03/18/94 100 Real Estate Holding Corporation
| | | | |_Brothers Landing Corporation Louisiana 02/24/94 100 Real Estate Holding Corporation
| | | | |_Brothers Pennsylvanian Corporation Pennsylvania 12/23/94 100 Real Estate Holding Corporation
| | | | |_Brothers Port Richey Corporation Florida 12/06/93 100 Apartment Manager
| | | | |_Brothers Property Management Ohio 09/25/87 100 Real Estate Management
Corporation
| | | | |_Brothers Railyard Corporation Texas 12/14/93 100 Apartment Manager
| | | |_Consolidated Underwriters, Inc. Texas 10/14/80 100 Inactive
| | | |_Contemporary American Insurance Company Illinois 04/16/96 100 Property/Casualty Insurance
| | | |_Crop Managers Insurance Agency, Inc. Kansas 08/09/89 100 Insurance Agency
| | | |_Dempsey & Siders Agency, Inc. Ohio 05/09/56 100 Insurance Agency
| | | |_Eagle American Insurance Company Ohio 07/01/87 100 Property/Casualty Insurance
| | | |_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 Insurance Texas 10/09/79 beneficial Lloyd's Plan Insurer
Company interest
| | | |_Great American Management Services, Ohio 12/05/74 100 Data Processing and Equipment
Inc. Leasing
| | | | |_American Payroll Services, Inc. Ohio 02/20/87 100 Payroll Services
| | | |_Great American Re Inc. Delaware 05/14/71 100 Reinsurance Intermediary
| | | |_Great American Risk Management, Inc. Ohio 04/21/80 100 Insurance Risk Management
| | | |_Great Texas County Mutual Insurance Texas 04/29/54 beneficial Property/Casualty Insurance
Company interest
| | | |_Grizzly Golf Center, Inc. Ohio 11/08/93 100 Operate Golf Courses
- 15 -
<PAGE>
| | | |_Homestead Snacks Inc. California 03/02/79 100(2) Meat Snack Distribution
| | | | |_Giant Snacks, Inc. Delaware 07/06/89 100 Meat Snack Distribution
| | | |_Key Largo Group, Inc. Florida 07/28/81 100 Land Developer &
Resort Operator
| | | | |_Key Largo Group Utility Company Florida 11/26/84 100 Water & Sewer Utility
| | | |_Mid-Continent Casualty Company Oklahoma 02/26/47 100 Property/Casualty
Insurance
| | | | |_Mid-Continent Insurance Company Oklahoma 08/13/92 100 Property/Casualty
Insurance
| | | | |_Oklahoma Surety Company Oklahoma 08/05/68 100 Property/Casualty
Insurance
| | | |_National Interstate Corporation Ohio 01/26/89 52.15 Holding Company
</TABLE>
- 16 -
<PAGE>
<TABLE>
<CAPTION>
AMERICAN FINANCIAL GROUP, INC.
| |_AFC Holding Company
| |_American Financial Corporation % OF STOCK OWNED(1)
| | |_Great American Holding Corporation STATE OF DATE OF BY IMMEDIATE
| | | |_Great American Insurance Company DOMICILE INCORPORATION PARENT COMPANY NATURE OF BUSINESS
-------- ------------- -------------- ------------------
<S> <C> <C> <C> <C>
| | | | |_American Highways Insurance Agency California 05/05/94 100 Insurance Agency
| | | | |_Explorer Insurance Agency, Inc. Ohio 07/17/97 beneficial Insurance Agency
interest
| | | | |_National Interstate Insurance Agency Texas 06/07/89 beneficial Insurance Agency
of Texas, Inc. interest
| | | | |_National Interstate Insurance Ohio 02/13/89 100 Insurance Agency
Agency, Inc.
| | | | |_National Interstate Insurance Company Ohio 02/10/89 100 Property/Casualty Insurance
| | | | |_Safety, Claims & Litigation Pennsylvania 06/23/95 100 Claims Third Party Administrator
Services, Inc.
| | | |_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 Agency, Inc. Ohio 12/22/97 100 Insurance Agency
| | | |_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 Liability Georgia 08/07/95 100 Insurance Agency
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 Development Texas 07/23/63 100 Real Estate 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 Agency, Texas 05/19/89 100 Managing General Agency
Inc.
| | | | |_Transport Insurance Agency, Inc. Texas 08/21/89 beneficial Insurance Agency
interest
| | | |_Transport Underwriters Association California 05/11/45 100 Holding Company/Agency
| | | |_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
|_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>
- 17 -
<PAGE>
ITEM 27. NUMBER OF CONTRACT OWNERS
As of March 31, 1998, there were 1,067 Individual Contract Owners, of which 988
were qualified and 79 were non-qualified. As of March 31, 1998, there were 15
Participants (Certificate Owners) in 3 Group Contracts, all of which were
qualified contracts.
ITEM 28. INDEMNIFICATION
(a) The Code of Regulations of Annuity Investors Life Insurance
Company(REGISTERED) 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) 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, 1999. 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").
- 18 -
<PAGE>
(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) Variable Account A and Annuity Investors(REGISTERED)
Variable Account B.
(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 (1) 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
Thomas E. Mischell (1) Assistant Treasurer
Fred J. Runk (1) Assistant 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, Vice President and
Controller 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.
- 19 -
<PAGE>
(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.
- 20 -
<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 Post-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 25th day of April,
1998.
ANNUITY INVESTORS(REGISTERED) 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)
ANNUITY INVESTORS LIFE INSURANCE
COMPANY(REGISTERED) (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 Post-Effective Amendment
No. 2 has been signed by the following persons in the capacities and on the
dates indicated.
/s/ Robert Allen Adams Principal Executive April 25, 1998
- ------------------------------ Officer, Director
Robert Allen Adams
/s/ Robert Eugene Allen Principal Financial April 25, 1998
- ------------------------------ Officer
Robert Eugene Allen
/s/ Lynn Edward Laswell Principal Accounting April 25, 1998
- ----------------------------- Officer
Lynn Edward Laswell
- 21 -
<PAGE>
/s/ Stephen Craig Lindner Director April 25, 1998
- ------------------------------
Stephen Craig Lindner
/s/ William Jack Maney, II Director April 25, 1998
- ------------------------------
William Jack Maney, II
/s/ James Michael Mortensen Director April 25, 1998
- -----------------------------
James Michael Mortensen
/s/ Mark Francis Muething Director April 25, 1998
- -----------------------------
Mark Francis Muething
/s/ Jeffrey Scott Tate Director April 25, 1998
- ------------------------------
Jeffrey Scott Tate
- 22 -
<PAGE>
Exhibit Index
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
(1) Resolution of the Board of Directors of Annuity Investors Life
Insurance Company(REGISTERED) authorizing establishment of Annuity
Investors(REGISTERED) Variable Account B.1/
(2) Not Applicable.
(3) (a) Distribution Agreement between Annuity Investors Life
Insurance Company (REGISTERED) and AAG Securities, Inc.2/
(b) Form of Selling Agreement between Annuity Investors Life
Insurance Company(REGISTERED), 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/
(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/
- 23 -
<PAGE>
(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/
(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/
(aa) Revised form of Individual Retirement Annuity Endorsement to
Individual Qualified Contract. 3/
(bb) Revised form of SIMPLE IRA Endorsement to Qualified
Individual Contract. 3/
(cc) Form of Roth IRA Endorsement to Qualified Individual
Contract. 3/
(dd) Revised form of Employer Plan Endorsement to Group Contract.
3/
- 24 -
<PAGE>
(ee) Revised form of Employer Plan Endorsement to Certificate of
Participation under a Group Contract. 3/
(ff) Revised form of Employer Plan Endorsement to Qualified
Individual Contract. 3/
(gg) Revised form of Tax Sheltered Annuity Endorsement to Group
Contract.3/
(hh) Revised form of Tax Sheltered Annuity Endorsement to
Certificate of Participation under a Group Contract. 3/
(ii) Revised form of Tax Sheltered Annuity Endorsement to
Qualified Individual Contract. 3/
(jj) Revised form of Qualified Pension, Profit Sharing and Annuity
Plan Endorsement to Group Contract. 3/
(kk) Revised form of Qualified Pension, Profit Sharing and Annuity
Plan Endorsement to Certificate of Participation under a
Group Contract. 3/
(ll) Revised form of Qualified Pension, Profit Sharing and Annuity
Plan Endorsement to Qualified Individual Contract. 3/
(mm) Form of Governmental Section 457 Plan Endorsement to Group
Contract. 3/
(nn) Form of Governmental Section 457 Plan Endorsement to
Certificate of Participation under a Group Contract. 3/
(oo) Form of Governmental Section 457 Plan Endorsement to
Qualified Individual Contract. 3/
(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/
(c) Revised form of Application for Individual Flexible Premium
Deferred Annuity Contract and Certificate of Participation
under a Group Contract (filed herewith).
(d) Revised form of Application for Group Flexible Premium
Deferred Annuity Contract (filed herewith).
(6) (a) Articles of Incorporation of Annuity Investors Life Insurance
Company(REGISTERED).1/
- 25 -
<PAGE>
(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)1/
(7) Not Applicable.
(8) (a) Participation Agreement between Annuity Investors Life
Insurance Company(REGISTERED) and Dreyfus Variable Investment
Fund.2/
(i) Letter Agreement dated April 14, 1997 between Annuity
Investors Life Insurance Company (REGISTERED) and Dreyfus
Variable Investment Fund.2/
(b) Participation Agreement between Annuity Investors Life
Insurance Company(REGISTERED) 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) and Dreyfus Life
and Annuity Index Fund, Inc. (d/b/a Dreyfus Stock Index
Fund).2/
(c) Participation Agreement between Annuity Investors Life
Insurance Company(REGISTERED) and The Dreyfus Socially
Responsible Growth Fund, Inc.2/
(i) Letter Agreement dated April 14, 1997 between Annuity
Investors Life Insurance Company(REGISTERED) and The Dreyfus
Socially Responsible Growth Fund, Inc.2/
(d) Participation Agreement between Annuity Investors Life
Insurance Company(REGISTERED) and Janus Aspen Series.2/
(e) Participation Agreement between Annuity Investors Life
Insurance Company(REGISTERED) and Strong Variable Insurance
Funds, Inc. and Strong Special Fund II, Inc.2/
(f) Participation Agreement between Annuity Investors Life
Insurance Company(REGISTERED) and INVESCO Variable Investment
Funds, Inc.2/
(g) Participation Agreement between Annuity Investors Life
Insurance Company(REGISTERED) and Morgan Stanley Universal
Funds, Inc.2/
(h) Participation Agreement between Annuity Investors Life
Insurance Company(REGISTERED) and PBHG Insurance Series Fund,
Inc.2/
- 26 -
<PAGE>
(i) Service Agreement between Annuity Investors Life Insurance
Company(REGISTERED) 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) and American Annuity
Group(SERVICEMARK), Inc. 1/
(l) Service Agreement between Annuity Investors Life Insurance
Company(REGISTERED) and Strong Capital Management, Inc.2/
(m) Service Agreement between Annuity Investors Life Insurance
Company(REGISTERED) and Pilgrim Baxter & Associates, Ltd.2/
(n) Service Agreement between Annuity Investors Life Insurance
Company(REGISTERED) and Morgan Stanley Asset Management, Inc.
2/
(o) Amended and Restated Agreement between The Dreyfus
Corporation and Annuity Investors Life Insurance
Company(REGISTERED).2/
(p) Service Agreement between Annuity Investors Life Insurance
Company(REGISTERED) and Janus Capital Corporation.2/
(r) Service Agreement between INVESCO Funds Group, Inc. and
Annuity Investors Life Insurance Company (filed herewith).
(s) Participation Agreement between The Timothy Plan Variable
Series, Timothy Partners, Ltd. and Annuity Investors Life
Insurance Company (filed herewith).
(t) Service Agreement between The Timothy Plan Variable Series
and Annuity Investors Life Insurance Company (filed
herewith).
(9) Opinion and Consent of Counsel1/.
(10) Consent of Independent Auditors (filed herewith).
(11) No financial statements are omitted from Item 23.
(12) Not Applicable.
(13) Schedule for Computation of Performance Quotations (filed herewith).
(14) Financial Data Schedule (filed herewith).
- ------------------------
1/ Filed with Form N-4 on December 23, 1996.
2/ Filed with Pre-Effective Amendment No. 1 on June 3, 1997.
3/ Filed with Post-Effective Amendment No. 1 on February 27, 1998.
- 27 -
<TABLE> <S> <C>
<ARTICLE> 6
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 4,933,282
<INVESTMENTS-AT-VALUE> 4,830,151
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,830,151
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 471,264,874
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 0
<DIVIDEND-INCOME> 123,945
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 10,727
<NET-INVESTMENT-INCOME> 113,218
<REALIZED-GAINS-CURRENT> 174
<APPREC-INCREASE-CURRENT> (103,180)
<NET-CHANGE-FROM-OPS> (102,956)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 473,256,952
<NUMBER-OF-SHARES-REDEEMED> 922,078
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,264,874
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
Exhibit (5)(c)
================================================================================
[GRAPHIC OMITTED]
Application for a Tax Qualified or Nonqualified variable annuity. Initial
payment or the original of our Transfer/Rollover/Exchange Request form must
accompany this application, if applicable. Please make check payable to ANNUITY
INVESTORS LIFE INSURANCE COMPANY(REGISTERED) and mail to P.O. BOX 5423,
CINCINNATI, OH 45201-5423.
================================================================================
1) ACCOUNT INFORMATION (please print) 3) ALLOCATION ELECTIONS
<TABLE>
<CAPTION>
<S> <C>
OWNER/PARTICIPANT Allocate my Purchase Payment(s) as
indicated below. Allocations must be
Name: John Doe in whole percentages and must total
------------------------------------ 100%.
Address: 123 Any Street ROLLOVER/
---------------------------------- SINGLE FLEXIBLE
PREMIUM PREMIUM PORTFOLIOS
City, State, Zip: Anytown, USA 99999 (%) (%)
-------------------------
[THE DREYFUS CORPORATION]
Daytime Phone #: (513) 555-1000
-------------------------- [Small Cap Portfolio-VIF]
---- ----
Evening Phone #: (513) 555-2000 25 [Capital Appreciation Portfolio-VIF]
-------------------------- ---- ----
[The Socially Responsible Growth Fund]
Date of Birth: 07/13/43 /X/ Male / / Female ---- ----
-------- [Dreyfus Stock Index Fund]
---- ----
Social Security #: 111-11-1111 [Growth and Income Portfolio-VIF]
------------------------ ---- ----
[Money Market Portfolio-VIF]
JOINT OWNER (If Applicable)
[INVESCO]
Name: Jane Doe
------------------------------------- [Industrial Income Fund-VIF]
---- ----
Date of Birth: 04/29/45 / / Male /X/ Female 25 [Total Return Fund-VIF]
-------- ---- ----
[High Yield Fund-VIF]
Social Security #: ###-##-#### ---- ----
------------------------ [JANUS CAPITAL CORPORATION (ASPEN SERIES)]
Relationship to Owner: Wife [International Growth Portfolio]
-------------------- ---- ----
25 [Worldwide Growth Portfolio]
ANNUITANT (If Other than Owner) ---- ----
[Aggressive Growth Portfolio]
Name: N/A ---- ----
------------------------------------- [Growth Portfolio]
---- ----
Date of Birth: / / Male / / Female [Balanced Portfolio]
------- ---- ----
[MORGAN STANLEY UNIVERSIAL FUNDS INC.]
Social Security #:
------------------------ [Emerging Markets Equity Portfolio]
---- ----
- ------------------------------------------ [Mid-Cap Value Portfolio]
---- ----
<PAGE>
2) BENEFICIARIES [Value Portfolio]
---- ----
PRIMARY [U.S. Real Estate Portfolio]
---- ----
Name: Jim Doe [Fixed Income Portfolio]
-------------------------------------
[PBHG INSURANCE SERIES FUND, INC.]
Relationship to Owner: Child
-------------------- 25 [Technology & Communications Portfolio]
---- ----
Name: Sally Doe [Growth II Portfolio]
------------------------------------- ---- ----
[Large-Cap Growth Portfolio]
Relationship to Owner: Child ---- ----
-------------------- [STRONG CAPITAL MANAGEMENT, INC.]
CONTINGENT [Strong Growth Fund II]
---- ----
Name: N/A [Strong Opportunity Fund II, Inc.]
------------------------------------- ---- ----
[TIMOTHY PARTNERS, LTD.]
Relationship to Owner:
-------------------- [The Timothy Plan (VS)]
---- ----
[FIXED ACCOUNT OPTIONS]
Enclose a signed letter of instruction ---- ----
if further designations are needed. [Fixed Accumulation Account]
---- ----
N/A [Fixed Option 1-Year Guarantee]
---- ----
N/A [Fixed Option 3-Year Guarantee]
---- ----
N/A [Fixed Option 5-Year Guarantee]
---- ----
N/A [Fixed Option 7-Year Guarantee]
---- ----
100% 100% TOTAL
---- ----
- ------------------------------------------ ----------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
4) PLAN INFORMATION
Tax Qualification
/ / IRA Tax Year / / TSA/403(b) / / 457
------------------
/ / IRA Transfer / / IRA Rollover / / 401
/ / Nonqualified OR / / SEP IRA Tax Year / / Other
------------ ------------
- --------------------------------------------------------------------------------
5) PURCHASE PAYMENTS
- --------------------------------------------------------------------------------
Single Premium: $50,000
- -------------- --------------------
Amount
Salary Reduction/Flexible Premiums: / / Check here and enclose a voided check,
if you would like to have payments
electronically transferred from your
checking account.
$
- ------------------ ----------------------- --------- ------------------------
First Payment Date Periodic Payment Amount Frequency Projected Annual Premium
Name of Employer (Salary Reduction Plan Only)
-----------------------------------
Replacement: Will the proposed contract replace any existing
annuity or life insurance contract or certificate? / / Yes /X/ No
Please include all state specific Replacement
forms with this application.
- --------------------------------------------------------------------------------
6) PRODUCT INFORMATION
The Application is for investment in the following
AILIC Contract: Commodore Independence
- --------------------------------------------------------------------------------
7) REMARKS
- --------------------------------------------------------------------------------
8) SIGNATURES
Owner's Statement:
I agree that the information provided is true and complete to the best of my
knowledge. I have read and understand each of the statements and answers on this
form. The contract I have applied for is suitable for my investment objectives
and financial situation. I also understand that the Annuity Commencement Date
will be the Contract (or Certificate) Anniversary following the 85th birthday of
the oldest owner or five years after the Contract (or Certificate) Effective
Date, whichever is later, unless otherwise requested in the Remarks section and
accepted by the Company. I HAVE RECEIVED A CURRENT COPY OF THE PROSPECTUS FOR
ANNUITY INVESTORS(R) VARIABLE ACCOUNT B. I UNDERSTAND THAT ANNUITY PAYMENTS OR
SURRENDER VALUES, WHEN BASED UPON THE INVESTMENT EXPERIENCE OF THE SEPARATE
ACCOUNT, ARE VARIABLE AND NOT GUARANTEED AS TO DOLLAR AMOUNT.
Please initial here if you wish to give the Registered Representative
identified below authorization to make transfers, on your behalf and
at your direction, on this contract.
- ---------
Signed at: Anytown, USA this 17 day of March in the year 1998.
--------------------- ---- --------- -----
City State Day Month Year
/s/ John Doe /s/ John Doe
- -------------------------------------- ----------------------------------------
Signature of Owner/Participant Signature of Joint Owner (If Applicable)
AGENT'S STATEMENT:
- -----------------
To the best of my knowledge and belief, the annuity applied for / / IS
/ / IS NOT intended to replace insurance or an annuity on the proposed
Owner/Participant with this or any other company. I also certify that an
appropriate exclusion allowance was calculated (if applicable) for the named
Owner/Participant, in accordance with current tax laws and regulations.
/s/ Dummy Agent Dummy Agent 03/17/98
- --------------------------------------------------------------------------------
Agent Signature Agent Name Printed Date
XYZ Brokerage 12345
- --------------------------------------------------------------------------------
Name of Broker/Dealer Firm Brokerage Account Number
00000 000-000-0000 54321
- --------------------------------------------------------------------------------
Agent Number Agent Phone Number Agent State License ID
For agent Use Only
/ / NT / / T1 / / T2 / / T3 / / T4 (Default: T1)
- --------------------------------------------------------------------------------
<PAGE>
ACCOUNT SERVICE OPTIONS (Please initial all desired options.)
- --------------------------------------------------------------------------------
PRINCIPAL GUARANTEE OPTION
(Minimum Payment of $5,000)
INITIAL HERE TO ENROLL IN THE PRINCIPAL GUARANTEE OPTION. This
- -------- authorizes the Company to allocate a portion of the initial Purchase
Payment to the Fixed 7-Year Guarantee option such that, at the end of the
7-Year Guarantee period, the amount allocated will grow to an amount equal
to at least the initial Purchase Payment. The remaining balance will be
allocated per your instructions on your application.
- --------------------------------------------------------------------------------
INTEREST SWEEP
(MINIMUM ACCOUNT VALUE REQUIRED FOR EACH
FIXED ACCOUNT SELECTED FOR INTEREST SWEEP IS $5,000.)
INITIAL HERE TO ACTIVATE INTEREST SWEEP. Interest Sweep transfers
- -------- will take place on the last valuation date of each calendar quarter,
from the following fixed accounts:
/ / [Fixed Accumulation Option] / / [1-Year Guarantee Option]
/ / [3-Year Guarantee Option] / / [5-Year Guarantee Option]
/ / [7-Year Guarantee Option]
Interest Sweep transfers are to be allocated among portfolio sub-accounts, as
indicated in the Allocation Instructions on page 4 of this application. NOTE:
Interest Sweep is not permitted into a sub-account from which Dollar Cost
Averaging transfers are currently taking place, nor from a Fixed Accumulation
Option from which Dollar Cost Averaging transfers are currently taking place.
- --------------------------------------------------------------------------------
DOLLAR COST AVERAGING
(MINIMUM ACCOUNT VALUE REQUIRED TO ACTIVATE DOLLAR COST AVERAGING IS $10,000.)
INITIAL HERE TO ACTIVATE DOLLAR COST AVERAGING. Please transfer
- -------- $_________ (minimum $500) on the last valuation date of each calendar
/ / MONTH / / QUARTER, as indicated in the Allocation Instructions on page 4 of
this application. If no selection is made, transfers will occur on a quarterly
basis. Dollar Cost Averaging will remain in effect until the selected source
sub-account is depleted, or until canceled. Automatic transfers are only
available from either the Money Market or Fixed Accumulation Account, but not
from both concurrently.
SOURCE ACCOUNT:
/ / [Fixed Accumulation Account] / / [Dreyfus Money Market Portfolio-VIF]
DESTINATION SUB-ACCOUNTS:
Please allocate the amount transferred to the sub-account(s) as listed on page
4. Allocations must be in whole percentages and must equal 100%. Dollar Cost
Averaging is not available for clients currently enrolled in Portfolio
Rebalancing.
- --------------------------------------------------------------------------------
PORTFOLIO REBALANCING
(MINIMUM ACCOUNT VALUE REQUIRED TO ACTIVATE PORTFOLIO REBALANCING IS $10,000.)
INITIAL HERE TO ACTIVATE PORTFOLIO REBALANCING. If this service
- -------- option is selected, the Owner/Participant's Account Value (excluding
amounts in all the Fixed Accounts) will be automatically rebalanced to maintain
the allocation percentage levels in the variable portfolios, as indicated in the
Allocation Instructions on page 4 of this application. Portfolio Rebalancing
will occur on the last valuation date of each calendar quarter. If Portfolio
Rebalancing is selected, the total value of all sub-accounts will be included in
the rebalancing process. Portfolio Rebalancing is not available for clients
currently enrolled in Dollar Cost Averaging.
- --------------------------------------------------------------------------------
CONSENT TO DELIVERY IN ELECTRONIC MEDIA
By initialing here, the applicant acknowledges receipt of the
- -------- applicable Commodore annuity prospectus in electronic format and
consents to the delivery of any prospectus, supplement thereto, statement of
additional information or any other information required to be furnished to
contract holders in electronic format, where available. Annuity Investors Life
Insurance Company is not required to make all such documents available in
electronic format, and may provide any document or supplement to a document
in paper format. Electronically formatted documents will be provided on diskette
and mailed to your address of record via U.S. Mail. System requirements for
electronic documents are 386, 486 or Pentium Class PC with Windows 3.1 or higher
and Windows Compatible Web Browser Software. YOU MAY REVOKE YOUR CONSENT TO
DELIVER IN ELECTRONIC MEDIA AT ANY TIME, OR RECEIVE A PAPER COPY OF ANY DOCUMENT
DELIVERED IN ELECTRONIC FORMAT, BY CONTACTING ANNUITY INVESTORS LIFE INSURANCE
COMPANY.
- --------------------------------------------------------------------------------
<PAGE>
ACCOUNT SERVICE OPTIONS (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PORTFOLIOS PORTFOLIO DOLLAR COST INTEREST
REBALANCING AVERAGING SWEEP
ALLOCATION % ALLOCATION % ALLOCATION %
- ------------------------------------------------------------------------------------------------
[THE DREYFUS CORPORATION]
[Small Cap Portfolio-VIF]
[Capital Appreciation Portfolio-VIF]
[The Socially Responsible Growth Fund, Inc.]
[Dreyfus Stock Index Fund]
[Growth and Income Portfolio-VIF]
[Money Market Portfolio-VIF]
[INVESCO]
[Industrial Income Fund-VIF]
[Total Return Fund-VIF]
[High Yield Fund-VIF]
[JANUS CAPITAL CORPORATION (ASPEN SERIES)]
[International Growth Portfolio]
[Worldwide Growth Portfolio]
[Aggressive Growth Portfolio]
[Growth Portfolio]
[Balanced Portfolio]
[MORGAN STANLEY UNIVERSAL FUNDS INC.]
[Emerging Markets Equity Portfolio]
[Mid-Cap Value Portfolio]
[Value Portfolio]
[U.S. Real Estate Portfolio]
[Fixed Income Portfolio]
[PBHG INSURANCE SERIES FUND, INC.]
[Technology & Communications Portfolio]
[Growth II Portfolio]
[Large-Cap Growth Portfolio]
[STRONG CAPITAL MANAGEMENT, INC.]
[Strong Growth Fund II]
[Strong Opportunity Fund II, Inc.]
[TIMOTHY PARTNERS, LTD.]
[The Timothy Plan (VS)]
- ------------------------------------------------------------------------------------------------
TOTAL 100% 100% 100%
- ------------------------------------------------------------------------------------------------
</TABLE>
SIGNATURE AUTHORIZATION
By signing my name to this form I hereby authorize Annuity Investors Life
Insurance Company(R) to make the elections as indicated on this form. I have
read this entire form and agree to hold harmless and indemnify Annuity Investors
Life Insurance Company as to any and all claims or demands which may be made by
reason of the elections so made. You may change your current instructions or
elect to discontinue your participation in these programs by calling the Annuity
Investors Life Insurance Company Variable Annuity Service Center at
1-800-789-6771.
/s/ John Doe 03/17/98 /s/ Jane Doe 03/17/98
- ----------------------------- ---------- ------------------------ ----------
Signature of Owner/ Date Signature of Joint Owner Date
Participant (If Applicable)
- --------------------------------------------------------------------------------
Exhibit (5)(d)
================================================================================
[GRAPHIC OMITTED]
PO Box 5423, Cincinnati, Ohio 45201-4523 (800) 789-6771
APPLICATION FOR GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY CONTRACT
================================================================================
- --------------------------------------------------------------------------------
1) OWNER INFORMATION
PROPOSED CONTRACT OWNER:
------------------------------------------------------
MAILING ADDRESS:
--------------------------------------------------------------
--------------------------------------------------------------
BILLING CONTACT:
--------------------------------------------------------------
Telephone Number ( ) Fax Number ( )
------------------------ ------------------------------------
MAIL BILLING STATEMENT TO (IF OTHER THAN THIRD PARTY ADMINISTRATOR (IF
ABOVE): APPLICABLE):
Name: Firm:
-------------------------------- ----------------------------
Address: Address:
-------------------------------- ----------------------------
City, State Zip: City, State Zip:
-------------------------- --------------------
Contact:
----------------------------
Telephone Number: ( )
-------------------
- --------------------------------------------------------------------------------
2) PRODUCT INFORMATION
The Application is for investment in the AILIC Contract:
------------------------
- --------------------------------------------------------------------------------
3) PLAN INFORMATION
PLAN NAME: PLAN NUMBER: / / / / / /
--------------------------------
TAX ID NUMBER: PLAN YEAR END: Month Day
---------------------------- --- ---
PLAN TYPE: / / 401(a) / / 401(k) / / ERISA 403(b)
/ / NonERISA 403(b) / / 457 / / Other (Specify)
-------------
PLAN ADMINISTRATOR/TRUSTEE TELEPHONE NUMBER: ( )
--------------- -----------------
- --------------------------------------------------------------------------------
4) AGREEMENT
Application is hereby made for a Group Flexible Premium Deferred Annuity
Contract. The Owner acknowledges that Annuity Investors Life Insurance Company
(REGISTERED) will provide the investment vehicle for, but will not be
responsible for the administration of the plan. The Owner hereby agrees that the
Contract shall not take effect and be in force unless and until the first
premium is received by the COMPANY. The Owner has read and understands this
entire application. The Owner has also received current copies of the
prospectuses for the Annuity Investors Variable Account and Funds which
correspond to the product selected in section 2 of this application.
IT IS FURTHER UNDERSTOOD THAT PAYMENTS AND VALUES PROVIDED UNDER EACH
CERTIFICATE, WHEN BASED ON THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT,
ARE VARIABLE AND ARE NOT GUARANTEED AS TO DOLLAR AMOUNT.
The information provided herein is true, correct, and complete to the best of my
knowledge and belief.
Signed at: this day of , in the year .
------------------------, --- ------- ------
City, State Day Month Year
Signature for Owner: Title:
---------------------- ------------------------------
Signature of COMPANY Representative:
--------------------------------------------
- --------------------------------------------------------------------------------
FOR HOME OFFICE USE ONLY:
- --------------------------------------------------------------------------------
EXHIBIT (8)(r)
[ON ANNUITY INVESTORS LETTERHEAD]
June __, 1997
James F. Lummanick
Vice President/Assistant General Counsel
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, Colorado 80237
RE: INVESCO Variable Investment Funds, Inc. - Participation Agreement
Dear Jim:
This purpose of this letter is to confirm certain financial arrangements between
INVESCO Funds Group, Inc. ("INVESCO"), the distributor for the INVESCO Variable
Investment Funds, Inc. (the "Company"), and Annuity Investors Life Insurance
Company ("Annuity") in connection with Annuity's investment in the Company
through three of its portfolios, INVESCO VIF-Industrial Income Portfolio,
INVESCO VIF-Total Return Portfolio and INVESCO VIF-High Yield Portfolio
(individually, a "Portfolio", collectively, the "Portfolios").
Administrative services to owners of variable annuity contracts offered by
Annuity which are allocated into subaccounts invested in the Company shall be
the responsibility of Annuity. Annuity on behalf of its separate accounts will
be the sole shareholder of record of Company shares. The Fund and INVESCO
recognize that they will derive a substantial savings in administrative expense
by virtue of having a sole shareholder rather than multiple shareholders.
In consideration of the administrative savings resulting from having a sole
shareholder rather than multiple shareholders, INVESCO or its affiliates will
pay an administrative service fee to Annuity equal, on an annual basis, to 0.20%
per annum of the average aggregate net assets of the INVESCO VIF-Industrial
Income and INVESCO VIF-Total Return Portfolios, and a service fee equal, on an
annual basis, equal to 0.15% per annum of the average aggregate net assets of
the INVESCO VIF-High Yield Portfolio, in each case on average aggregate net
assets attributable to variable annuity contracts offered by Annuity
(collectively, "Eligible Contracts").
Such fee will be paid on a monthly basis in arrears. In no event will such fee
be paid by the Company, its shareholders, or by the contract holders, and in no
event will INVESCO have any responsibility under the Participation Agreement
dated May 30, 1997 or this letter to pay any amounts to any third party with
respect to Annuity' or the Eligible Contracts' investments in the Portfolios.
Such payments, if any, shall be the responsibility of Annuity. INVESCO's
payments to Annuity are for administrative services only and do not constitute
payment in any manner for investment advisory services.
INVESCO shall have no obligation to make the above payments until such time as
the average net assets of a Portfolio reach $30 million. Beginning at such time,
INVESCO will make payments on the average aggregate net assets attributable to
the Eligible Contracts that hold investments in such Portfolio.
These financial arrangements shall continue so long as Annuity holds shares of
the Fund in its subaccounts and Annuity therefore continues to provide
administrative services as set forth above. Please confirm your understanding of
this arrangement by having a copy of this letter signed where indicated below by
an appropriate officer of INVESCO and return this duplicate copy to me.
Very truly yours,
[Annuity Investors Signator]
[Title]
INVESCO Funds Group, Inc.
BY:
Name: Ronald L. Grooms
Title: Senior Vice President and Treasurer
Exhibit (8)(s)
Participation Agreement
THIS AGREEMENT is made as of May 1, 1998, by and among Annuity Investors Life
Insurance Company ("Company"), on its own behalf and on behalf of each separate
account of the Company set forth on Exhibit A-1 to this Agreement as it may be
amended from time to time (collectively, "Account"), The Timothy Plan Variable
Series ("Fund") on its own behalf and on behalf of the portfolios listed on
Exhibit A to this Agreement as it may be amended from time to time
("Portfolios"), and Timothy Partners, Ltd. (the "Advisor" and "Distributor"),
who serves as both advisor and distributor for The Timothy Plan Variable Series
(each, a "Party" and collectively, the "Parties").
WHEREAS, to the extent permitted by applicable insurance laws and regulations,
the Company intends to purchase shares of the Fund, on behalf of the Account to
fund the variable annuity contracts that use the Fund as an underlying
investment medium (the "Contracts");
WHEREAS, the Company, Adviser and Distributor desires to facilitate the purchase
and redemption of shares of the Fund by the Company for the Account through one
account in the Fund (an "Omnibus Account") to be maintained of record by the
Company, subject to the terms and conditions of this Agreement;
WHEREAS, the Company desires to provide administrative services and functions
(the "Services") for purchasers of Contracts ("Owners") on the terms and
conditions set forth herein;
WHEREAS, the Company has registered or will register certain variable life
insurance policies and/or variable annuity contracts under the Securities Act of
1933, as amended (the "1933 Act");
WHEREAS, the Company has registered or will register the Account as a unit
investment trust under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Company desires to utilize the Fund and/or one or more Portfolios
as an investment vehicle of the Account.
NOW, THEREFORE, in consideration of the mutual promises set forth herein, the
Company, Fund, Adviser and Distributor agree as follows:
1. PERFORMANCE OF SERVICES. Company agrees to perform the administrative
functions and services specified in Exhibit B attached hereto with respect
to the shares of the Fund included in the Account.
2. THE OMNIBUS ACCOUNTS.
2:1 TheOmnibus Account will be opened based upon the information
contained in Exhibit C hereto: In connection with the Omnibus
Account, Company represents and warrants that it is authorized to
<PAGE>
act on behalf of each Owner effecting transactions in the Omnibus
Account and that the information specified on Exhibit C hereto is
correct.
2:2 The Fund shall designate the Omnibus Account with an account number.
This account number will be the means of identification when the
Parties are transacting in the Omnibus Account. The assets in the
Account are segregated from the Company's own assets. The Adviser
agrees to cause the Omnibus Account to be kept open on the Fund's
books, as applicable, regardless of a lack of activity or small
position size except to the extent the Company takes specific action
to close an Omnibus Account or to the extent the Fund's prospectus
reserves the right to close accounts which are inactive or of a
small position size. In the latter two cases, the Adviser will give
prior notice to the Company before closing an Omnibus Account.
2.3 The Company agrees to provide Adviser such information as Adviser or
Distributor may reasonably request concerning Owners as may be
necessary or advisable to enable Company and Distributor to comply
with applicable laws, including state "Blue Sky" laws relating to
the sales of shares of the Fund to the Accounts.
3. FUND SHARES TRANSACTIONS.
3:1 IN GENERAL. Shares of the Fund shall be sold on behalf of the Fund
by Distributor and purchased by Company for the Account and'
indirectly for the appropriate subaccount thereof at the net asset
value next computed after receipt by Distributor of each order of
the Company or its designee, in accordance with the provisions of
this Agreement, the then current prospectus of the Fund, and the
Contracts. The Board of Directors of the Fund ("Directors") may
refuse to sell shares of the applicable Fund to any person, or
suspend or terminate the offering of shares of the Fund if such
action is required by law or by regulatory authorities having
jurisdiction. Company agrees to purchase and redeem the shares of
the Fund in accordance with the provisions of this Agreement, of the
Contract and of the then current prospectus for the Contract and
Fund. Except as necessary to implement transactions as specified in
the Contracts or as initiated by the Owners, or as otherwise
permitted by state or federal laws or regulations, Company shall not
redeem shares of Fund attributable to the contract.
3.2 PURCHASE AND REDEMPTION ORDERS. On each day that the Fund is open
for business (a "Business Day"), the Company shall aggregate and
calculate the net purchase or redemption order resulting from
investment in and redemptions under the Contracts for shares of the
Fund that it received prior to the close of trading on the New York
Stock Exchange (the "NYSE") (i.e. 4:00 p.m., Eastern time, unless
the NYSE closes at an earlier time in which case such earlier time
shall apply) and communicate to Distributor, by telephone or
facsimile (or by such other means as the Parties hereto may agree to
in writing), the net aggregate purchase or redemption order (if any)
for the Omnibus Account for such Business Day (such Business Day is
sometimes referred to herein as the "Trade Date"). The Company will
communicate such orders to Distributor prior to 9:00 a.m., Eastern
Time, on the next Business Day following the Trade Date. All trades
communicated to Distributor by the foregoing deadline shall be
treated by Distributor as if they were received by Distributor prior
to the close of trading on the Trade Date.
2
<PAGE>
3.3 SETTLEMENT OF TRANSACTIONS.
(a) PURCHASES. Company will wire, or arrange for the wire of the
purchase price of each purchase order to the custodian for the
Fund in accordance with written instructions provided by
Distributor to the Company so that either (1) such funds are
received by the custodian for the Fund prior to 1:00 p.m.,
Eastern time, on the next Business Day following the Trade
Date, or (2) Distributor is provided with a Federal Funds wire
system reference number prior to such 1:00 p.m. deadline
evidencing the entry of the wire transfer of the purchase
price to the applicable custodian into the Federal Funds wire
system prior to such time. Company agrees that if it fails to
provide funds to the Fund's custodian by the close of business
on the next Business Day following the Trade Date, then, at
the option of Distributor, (i) the transaction may be
canceled, or (ii) the transaction may be processed at the
next-determined net asset value for the applicable Fund after
purchase order funds are received. In such event, the Company
shall indemnity and hold harmless Distributor, Adviser, and
the Fund from any liabilities, costs and damages either may
suffer as a result of such failure.
(b) REDEMPTIONS. The Adviser will use its best efforts to cause to
be transmitted to such custodial account as Company shall
direct in writing, the proceeds of all redemption orders
placed by Company by 9:00 a.m., Eastern time, on the Business
Day immediately following the Trade Date, by wire transfer on
that Business Day. Should Company need to extend the
settlement on a trade, it will contact Adviser to discuss the
extension. For purposes of determining the length of
settlement, Adviser agrees to treat the Account no less
favorably than other shareholders of the Fund. Each wire
transfer of redemption proceeds shall indicate, on the Federal
Funds wire system, the amount thereof attributable to the
Fund; provided, however, that if the number of entries would
be too great to be transmitted through the Federal Funds wire
system, the Adviser shall, on the day the wire is sent, fax
such entries to Company or, if possible, send via direct or
indirect systems access until otherwise directed by the
Company in writing.
(c) AUTHORIZED PERSONS. The following persons are each duly
authorized to act on behalf of the Company and the Account
under this Agreement. The Fund, Adviser and Distributor are
entitled to conclusively rely on verbal or written
instructions that Adviser or Distributor reasonably believes
were originated by any one of said persons. The Company shall
inform Adviser and Distributor of additions to or subtractions
from this list of authorized persons pursuant to Section 13,
hereof:
Lynn Laswell Laura Lally
John Burress Anniece Griece
Brian Sponaugle Todd Gayhart
Debbie Plummer
3.4 BOOK ENTRY ONLY. Issuance and transfer of shares of the Fund will be
by book entry only. Stock certificates will not be issued to the
Company or the Account. Shares of the Fund ordered from Distributor
3
<PAGE>
will he recorded in the appropriate book entry title for the
Account.
3.5 DISTRIBUTION INFORMATION. The Adviser or Distributor shall provide
the Company with all distribution announcement information as soon
as it is announced by the Fund. The distribution information shall
set forth, as applicable, ex-date, record date, payable date,
distribution rate per share, record date share balances, cash and
reinvested payment amounts and all other information reasonably
requested by the Company. Where possible, the Adviser or Distributor
shall provide the Company with direct or indirect systems access to
the Adviser's systems for obtaining such distribution information
3.6 REINVESTMENT. All dividends and capital gains distributions will be
automatically reinvested on the payable date in additional shares of
the Fund at net asset value in accordance with the Fund's then
current prospectus.
3.7 PRICING INFORMATION. Distributor shall use its best efforts to
furnish to the Company prior to 7:00 p.m., Eastern time, on each
Business Day the Fund's closing net asset value for that day, and if
appropriate, the daily accrual for interest rate factor, (mil rate).
Such information shall be communicated via fax, or indirect or
direct systems access acceptable to the Company.
3.8 PRICE ERRORS.
(a) In the event adjustments are required to correct any error in
the computation of the net asset value of shares of the Fund,
the Fund or Adviser shall promptly notify Company after
discovering the need for those adjustments which result in a
reimbursement to an Account in accordance with such Fund's
then current policies on reimbursement. Notification may be
made orally or via direct or indirect systems access. Any such
notification shall be promptly followed by a letter written on
Fund or Adviser letterhead and shall state for each day for
which an error occurred the incorrect price, the correct
price, and, to the extent communicated to the Fund's
shareholder, the reason for the price change. Fund and Adviser
agree that Company may send this writing, or derivation
thereof (so long as such derivation is approved in advance by
Fund or Adviser, which approval shall not be unreasonably
withheld) to Owners that are affected by the price change.
(b) If the Account received amounts in excess of the amounts to
which it otherwise would have been entitled prior to an
adjustment for an error, Company, when requested by Fund or
Adviser, will use its best efforts to collect such excess
amounts from the Account. In no event, however, shall Company
be liable to Fund or Adviser for any such amounts.
(c) If an adjustment is to be made in accordance with subsection
(a) above to correct an error which has caused the Account to
receive an amount less than that to which it is entitled, Fund
or Adviser shall make all necessary adjustments (within the
parameters specified in subsection (a)) to the number of
shares owned in the Account and distribute to the Company the
amount of such underpayment for credit to the Account.
4
<PAGE>
3.9 AGENCY. Distributor hereby appoints the Company as its agent for the
limited purpose of accepting purchase and redemption instructions
pursuant to Sections 3.1,3.2 and 3.3..
3.10 QUARTERLY REPORTS. Adviser agrees to provide Company a statement of
Fund assets as soon as practicable and in any event within 30 days
after the end of each fiscal year quarter, and a statement
certifying the compliance by the Fund during that fiscal quarter
with the diversification requirements and qualification as a
regulated investment company. In the event of a breach of Section
6.4(a), Adviser will take all reasonable steps (a) to notify Company
of such breach and (b) to adequately diversify the Fund so as to
achieve compliance within the grace period afforded by Treasury
Regulation 1.8 i 7-5.
4. PROXY SOLICITATIONS AND VOTING. The Company shall, at its expense,
distribute or arrange for the distribution of all proxy materials
furnished by the Fund to the Account and shall: (i) solicit voting
instructions from Owners; (ii) vote the Fund shares in accordance with
instructions received from Owners; and (iii) vote the Fund shares for
which no instructions have been received, as well as shares attributable
to it, in the same proportion as Fund shares for which instructions have
been received from Owners, so long as and to the extent that the
Securities and Exchange Commission (the "SEC") continues to interpret the
1940 Act, to require pass-through voting privileges for various contract
owners. The Company and its agents will not recommend action in connection
with, or oppose or interfere with, the solicitation of proxies for the
Fund shares held for Owners.
5. CUSTOMER COMMUNICATIONS.
5.1 PROSPECTUSES. "The Adviser or Distributor, at its expense, will
provide the Company with as many printed copies of the current
prospectus(es) for the Fund and/or Portfolios as the Company may
reasonably request for distribution to existing or prospective
Owners, and/or, at the Company's request, a single camera ready copy
of each such prospectus, which the Company will print at its
expense, and/or, at the Company's request, a single digital copy of
each such prospectus, which the Company will reproduce in digital
format at its expense. The Company will distribute the Fund and/or
Portfolio prospectus(es) to existing and prospective Owners at its
expense."
5.2 SHAREHOLDER MATERIALS. The Adviser and Distributor shall, as
applicable, provide in bulk to the Company or its authorized
representative, at a single address and at no expense to the
Company, the following shareholder communications materials prepared
for circulation to Owners in quantities requested by the Company
which are sufficient to allow mailing thereof by the Company and, to
the extent required by applicable law, to all Owners: proxy or
information statements, annual reports, semi-annual reports, and all
updated prospectuses, supplements and amendments thereof. Neither
the Fund, the Advisor nor Distributor shall be responsible for the
cost of distributing such materials to Owners.
5
<PAGE>
6. REPRESENTATIONS AND WARRANTIES.
6.1 THE COMPANY REPRESENTS AND WARRANTS THAT:
(a) It is an insurance company duly organized and in good standing
under the laws of the State of Ohio and that it has legally
and validly established the Account prior to any issuance or
sale thereof as a segregated asset account and that the
Company has and will maintain the capacity to issue all
Contracts that may be sold; and that it is and will remain
duly registered, licensed, qualified and in good standing to
sell the Contracts in all the jurisdictions in which such
Contracts are to be offered or sold;
(b) It is and will remain duly registered and licensed in all
material respects under all applicable federal and state
securities and insurance laws and shall perform its
obligations hereunder in compliance in all material respects
with any applicable state and federal laws;
(c) The Contracts are and will be registered under the 1933 Act,
and are and will be registered and qualified for sale in the
states where so required; and the Account is and will be
registered as a unit investment trust in accordance with the
1940 Act and shall be a segregated investment account for the
Contracts; (d)The Contracts are currently treated as annuity
contracts, under applicable provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), and the Company will
maintain such treatment and will notify Adviser, Distributor
and Fund promptly upon having a reasonable basis for believing
that the Contracts have ceased to be so treated or that they
might not be so treated in the future;
(e) It is registered as a transfer agent pursuant to Section 17A
of the Securities Exchange Act of 1934, as amended (the "1934
Act") unless it is not required to be registered as such.
(f) The arrangements provided for in this Agreement will be
disclosed to the Owners; and
(g) It or its subsidiary is registered as a broker-dealer under
the 1934 Act and any applicable state securities laws,
including as a result of entering into and performing the
Services set forth in this Agreement, unless it is not
required to be registered as such.
6.2 The Fund represents and warrants that Fund shares sold pursuant to
this Agreement are and will be registered under the 1933 Act and the
Fund is and will be registered as a registered investment company
under the Investment Company Act of 1940, in each case, except to
the extent the Company is so notified in writing.
6.3 DISTRIBUTOR REPRESENTS AND WARRANTS THAT:
(a) It is and will be a member in good standing of the NASD and is
and will be registered as a broker-dealer with the SEC; and
(b) It will sell and distribute Fund shares in accordance with all
applicable state and federal laws and regulations.
6
<PAGE>
6.4 ADVISER REPRESENTS AND WARRANTS THAT:
(a) It will cause each Fund to invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated
as variable annuity contracts under the Code and the
regulations issued thereunder, and that each Fund will comply
with Section 817(h) of the Code as amended from time to time
and with all applicable regulations promulgated thereunder;
(b) It is and will remain duly registered and licensed in all
material respects under all applicable federal and state
securities and insurance laws and shall perform its
obligations hereunder in compliance in all material respects
with any applicable state and federal laws; and
6.5 EACH OF THE PARTIES HERETO REPRESENTS AND WARRANTS TO THE OTHERS
THAT:
(a) It has full power and authority under applicable law and has
taken all action necessary, to enter into and perform this
Agreement and the person executing this Agreement on its
behalf is duly authorized and empowered to execute and deliver
this Agreement;
(b) This Agreement constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its
terms and it shall comply in all material respects with all
laws, rules and regulations applicable to it by virtue of
entering into this Agreement;
(c) Except for the effectiveness of the Registration Statement
filed by the Fund under the 1933 Act and 1940 Act, no consent
or authorization of, filing with, or other act by or in
respect of any governmental authority, is required in
connection with the execution, delivery, performance, validity
or enforceability of this Agreement.
(d) The execution, performance and delivery of this Agreement will
not result in it violating any applicable law or breaching or
otherwise impairing any of its contractual obligations;
(e) Each Party hereto is entitled to rely on any written records
or instructions provided to it by another Party; and
(f) Its directors, officers, employees. and investment advisers,
and other individuals/entities dealing with the money or
securities of the Fund are and shall continue to be at all
times covered by a blanket fidelity bond or similar coverage
for the benefit of the Fund in an amount not less than the
amount required by the applicable rules of the National
Association of Securities Dealers, Inc. ("NASD") and the
federal securities laws, which bond shall include coverage for
larceny and embezzlement and shall be issued by a reputable
bonding company.
7. SALES MATERIAL AND INFORMATION.
7.1 NASD FILINGS. The Company shall promptly inform Distributor as to
the status of all sales literature filings pertaining to the Fund
and shall promptly notify Distributor of all approvals or
disapprovals of sales literature filings with the NASD. For purposes
7
<PAGE>
of this Section 7, the phrase "sales literature or other promotional
material" shall be construed in accordance with all applicable
securities laws and regulations.
7.2 COMPANY REPRESENTATIONS. The Company shall not make any material
representations concerning the Adviser, the Distributor or the Fund
other than the information or representations contained in: (a) a
registration statement of the Fund or prospectus of the Fund, as
amended or supplemented from time to time; (b) published reports or
statements of the Fund which are in the public domain or approved by
Distributor or the Fund; or (c) sales literature or, other
promotional material of the Fund.
7.3 THE ADVISOR. DISTRIBUTOR AND FUND REPRESENTATIONS. None of Adviser,
Distributor or the Fund shall make any material representations
concerning the Company other than the information or representations
contained in: (a) a registration statement or prospectus for the
Contracts, as amended or supplemented from time to time; (b)
published reports or statements of the Contracts or the Account
which are in the public domain or are approved by the Company; or
(c) sales literature or other promotional material of the Company.
7.4 TRADEMARKS ETC. Except to the extent required by applicable law, no
Party shall use any other Party's names, logos, trademarks or
service marks, whether registered or unregistered, without the prior
consent of such Party.
7.5 INFORMATION FROM DISTRIBUTOR AND ADVISER. Upon request, Distributor
or Adviser will provide to Company at least one complete copy of all
registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, solicitations for voting
instructions, applications for exemptions, requests for no action
letters, and all amendments to any of the above, that relate to the
Fund, in final form as filed with the SEC, NASD and other regulatory
authorities.
7.6 INFORMATION FROM COMPANY. Company will provide to Distributor at
least one complete copy of all registration statements,
prospectuses, Statements of Additional Information, reports,
solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no
action letters and all amendments to any of the above, that relate
to the Fund and the Contracts, in final form as filed with the SEC,
NASD and other regulatory authorities.
7.7 REVIEW OF MARKETING MATERIALS. If so requested by Company, the
Adviser or Distributor will use its best efforts to review sales
literature and other marketing materials prepared by Company which
relate to the Fund, the Adviser or Distributor for factual accuracy
as to such entities, provided that the Adviser or Distributor is
provided at least five (5) Business Days to review such materials.
Neither the Adviser nor Distributor will review such materials for
compliance with applicable laws. Company shall provide the Adviser
with copies of all sales literature and other marketing materials
which refer to the Fund, the Company or Distributor within five (5)
Business Days after their first use, regardless of whether the
Adviser or Distributor has previously reviewed such materials. If so
requested by the Adviser or Distributor, Company shall cease to use
any sales literature or marketing materials which refer to the Fund,
the Adviser or Distributor that the Adviser or Distributor
determines to be inaccurate, misleading or otherwise unacceptable.
8
<PAGE>
8. FEES AND EXPENSES.
8.1 FUND REGISTRATION EXPENSES. Fund or Distributor shall bear the cost
of registration and qualification of Fund shares; preparation and
filing of Fund prospectuses and registration statements, proxy
materials and reports; preparation of all other statements and
notices relating to the Fund or Distributor required by any federal
or state law; payment of all applicable fees, including, without
limitation, any fees due under Rule 24f-2 of the 1940 Act, relating
to the Fund; and all taxes on the issuance or transfer of Fund
shares on the Fund's records.
8.2 CONTRACT REGISTRATION EXPENSES. The Company shall bear the expenses
for the costs of preparation and filing of the Company's prospectus
and registration statement with respect to the Contracts;
preparation of all other statements and notices relating to the
Account or the Contracts required by any federal or state law;
expenses for the solicitation and sale of the Contracts including
all costs of printing and distributing all copies of advertisements,
prospectuses, Statements of Additional Information, proxy materials,
and reports to Owners or potential purchasers of the Contracts as
required by applicable state and federal law; payment of all
applicable fees relating to the Contracts; all costs of drafting,
filing and obtaining approvals of the Contracts in the various
states under applicable insurance laws; filing of annual reports on
form N-SAR, and all other costs associated with ongoing compliance
with all such laws and its obligations hereunder.
9. INDEMNIFICATION.
9.1 INDEMNIFICATION BY COMPANY.
(a) Company agrees to indemnify and hold harmless the Fund,
Adviser and Distributor and each of their directors, officers,
employees and agents, and each person, if any, who controls
any of them within the meaning of Section 15 of the 1933 Act
(each, an "Indemnified Party" and collectively, the
"Indemnified Parties" for purposes of this Section 9.1) from
and against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent
of Company), and expenses (including reasonable legal fees and
expenses), to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise
(collectively, hereinafter "Losses"), insofar as such Losses:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained
in the registration statement, prospectus or sales
literature for the Contracts or contained in the
Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a
material fact required to be stated therein or necessary
to make the statements therein not misleading, provided
that this paragraph 9.1(a) shall not apply as to any
Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon
and in conformity with written information furnished to
9
<PAGE>
Company by or on behalf of the Fund, Distributor or
Adviser for use in the registration statement or
prospectus for the Contracts or in the Contracts (or any
amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Fund
shares; or
(ii) arise out of, or as a result of, statements or
representations or wrongful conduct of Company or its
agents, with respect to the sale or distribution of the
Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature covering the
Fund or any amendment thereof or supplement thereto, or
the omission or alleged omission to State therein a
material fact required to be stated therein, or
necessary to make the statements therein not misleading,
if such a statement or omission was made in reliance
upon written information furnished to the Fund, Adviser
or Distributor or on behalf of Company; or
(iv) arise out of, or as a result of, any failure by Company
or persons under its control to provide the Services and
furnish the materials contemplated under the terms of
this Agreement; or
(v) arise out of, or result from, any material breach of any
representation or warranty made by Company or persons
under its control in this Agreement or arise out of or
result from any other material breach of this Agreement
by Company or persons under its control: as limited by
and in accordance with the provisions of Sections 9.1(b)
and 9.1(c) hereof; or
(vi) arise out of, or as a result of, adherence by Adviser or
Distributor to instructions that it reasonably believes
were originated by persons specified in Section 32(c),
hereof
This indemnification provision is in addition to any
liability, which the Company may otherwise have.
(b) Company shall not be liable under this indemnification
provision with respect to any Losses to which an Indemnified
Party would otherwise be subject by reason of such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in
the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of
obligations or duties under this Agreement.
(c) Company shall not be liable under this indemnification
provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have
notified Company in writing within a reasonable time after the
summons or other first legal process giving information of the
nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but
failure to notify Company of any such claim shall not relieve
10
<PAGE>
Company from any liability which it may have to the
Indemnified Party otherwise than on account of this
indemnification provision. In case any such action is brought
against any Indemnified Party, and it notified the
Indemnifying Party of the commencement thereof, the
Indemnifying Party will be entitled to participate therein
and, to the extent that it may wish, assume the defense
thereof, with counsel satisfactory to such Indemnified Party.
After notice from the Indemnifying Party of its intention to
assume the defense of an action, the Indemnified Party shall
bear the expenses of any additional counsel obtained by it,
and the Indemnifying Party shall not be liable to such
Indemnified Party under this Section for any legal or other
expenses subsequently incurred by such Indemnified Party in
connection with the defense thereof other than reasonable
costs of investigation. The Indemnified Party may not settle
any action without the written consent of the Indemnifying
Party. The Indemnifying Party may not settle any action
without the written consent of the Indemnified Party unless
such settlement completely and finally releases the
Indemnified Party from any and all liability. In either event,
consent shall not be unreasonably withheld
(d) The Indemnified Parties will promptly notify Company of the
commencement of any litigation or proceedings against the
Indemnified Parties in connection with the issuance or sale of
Fund shares or the Contracts or the operation of the Fund.
9.2 INDEMNIFICATION BY ADVISER AND DISTRIBUTOR.
(a) Adviser and Distributor agrees to indemnify and hold harmless
Company and each of its directors, officers, employees and
agents and each person, if any, who controls Company within
the meaning of Section 15 of the 1933 Act ("Indemnified Party"
and collectively, the "Indemnified Parties" for purposes of
this Section 9.2) against any and all Losses to which the
Indemnified Parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such
Losses:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained
in the registration statement or prospectus or sales
literature of the Fund (or any amendment or supplement
to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading,
provided that this Section 9.2(a) shall not apply as to
any Indemnified Party if such statement or omission or
such alleged statement or omission was made in reliance
upon and in conformity with written information
furnished to the Fund, Adviser or Distributor by or on
behalf of Company for use in the registration statement
or prospectus for the Fund or in sales literature (or
any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Fund
shares; or
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<PAGE>
(ii) arise out of, or as a result of, statements or
representations or wrongful conduct of Adviser or
Distributor or persons under its control, with respect
to the sale or distribution of Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof or supplement
thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein,
or necessary to make the statements therein not
misleading, if such statement or omission was made in
reliance upon written information furnished to Company
by or on behalf of Adviser or Distributor; or
(iv) arise out of, or as a result of, any failure by Adviser
or Distributor or persons under its control to provide
the services and furnish the materials contemplated
under the terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation or warranty made by Adviser or
Distributor or persons under its control in this
Agreement or arise out of or result from any other
material breach of this Agreement by Adviser or
Distributor or persons under its control; as limited by
and in accordance with the provisions of Sections 9.2(b)
and 9.2(c) hereof.
This indemnification provision is in addition to any liability
which Adviser and Distributor may otherwise have.
(b) Adviser and Distributor shall not be liable under this
indemnification provision with respect to any Losses to which
an Indemnified Party would otherwise be subject by reason of
such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified
Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this
Agreement or to Company.
(c) Adviser and Distributor shall not be liable under this
indemnification provision with respect to any claim made
against an Indemnified Party unless such Indemnified Party
shall have notified Adviser and Distribution in writing within
a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall
have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service
on any designated agent), but failure to notify Adviser and
Distributor of any such claim shall not relieve Adviser and
Distributor from any liability which it may have to the
Indemnified Party otherwise than on account of this
indemnification provision. In case any such action is brought
against any Indemnified Party, and it notified the
Indemnifying Party of the commencement thereof, the
Indemnifying Party will be entitled to participate therein
and, to the extent that it may wish, assume the defense
thereof, with counsel satisfactory to such Indemnified Party.
After notice from the Indemnifying Party of its intention to
assume the defense of an action, the Indemnified Party shall
bear the expenses of any additional counsel obtained by it,
12
<PAGE>
and the Indemnifying Party shall not be liable to such
Indemnified Party under this Section for any legal or other
expenses subsequently incurred by such Indemnified Party in
connection with the defense thereof other than reasonable
costs of investigation. The Indemnified Party may not settle
any action without the written consent of the Indemnifying
Party. The Indemnifying Party may not settle any action
without the written consent of the Indemnified Party unless
such settlement completely and finally releases the
Indemnified Party from any and all liability. In either event,
consent shall not be unreasonably withheld.
(d) The Indemnified Parties will promptly notify Adviser and
Distributor of the commencement of any litigation or
proceedings against the Indemnified Parties in connection with
the issuance or sale of the Contracts or the operation of the
Account.
10. POTENTIAL CONFLICTS.
10.1 MONITORING BY DIRECTORS FOR CONFLICTS OF INTEREST. The Directors of
each Fund will monitor the Fund for any potential or existing
material irreconcilable conflict of interest between the interests
of the contract owners of all separate accounts investing in the
Fund. An irreconcilable material conflict may arise for a variety of
reasons, including: (a) an action by any state insurance regulatory
authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretive letter, or any similar
action by insurance, tax or securities regulatory authorities; (c)
an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of the Fund are being
managed; (e) a difference in voting instructions given by variable
annuity contract owners; or (f) a decision by Company to disregard
the voting instructions of Owners. The Directors shall promptly
inform the company, in writing, if they determine that an
irreconcilable material conflict exists and the implications
thereof.
10.2 MONITORING BY THE COMPANY FOR CONFLICTS OF INTEREST. The Company
will promptly notify the Directors, in writing, of any potential or
existing material irreconcilable conflicts of interest, as described
in Section 10.1 above, of which it is aware. The Company will assist
the Directors in carrying out their responsibilities under any
applicable provisions of the federal securities laws and any
exemptive orders granted by the SEC ("Exemptive Order") by providing
the Directors, in a timely manner, with all information reasonably
necessary for the Directors to consider any issues raised. This
includes, but is not limited to, an obligation by the Company to
inform the Directors whenever Owner voting instructions are
disregarded.
10.3 REMEDIES. If it is determined by a majority of the Directors, or a
majority of disinterested Directors, that a material irreconcilable
conflict exists, as described in Section 10.1 above, the Company
shall, at its own expense take whatever steps are necessary to
remedy or eliminate the irreconcilable material conflict, up to and
including, but not limited to: (a) withdrawing the assets allocable
to some or all of the separate accounts from the applicable Fund and
reinvesting such assets in a different investment medium, including
(but not limited to) another fund managed by the Adviser, or
13
<PAGE>
submitting the question whether such segregation should be
implemented to a vote of all affected owners and, as appropriate,
the assets of any particular group that votes in favor of such
segregation, or offering to the affected owners the option of making
such a change; and (b) establishing a new registered management
investment company or managed separate account.
10.4 CAUSES OF CONFLICTS OF INTEREST.
(a) STATE INSURANCE REGULATORS. If a material irreconcilable
conflict arises because a particular state insurance
regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will
withdraw the affected Account's investment in the applicable
Fund and terminate this Agreement with respect to such Account
within the period of time permitted by such decision, but in
no event later than six months after the Directors inform the
Company in writing that it has determined that such decision
has created an irreconcilable material conflict; provided
however, that such withdrawal and termination shall be limited
to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the
disinterested Directors. Until the end of the foregoing
period, the Distributor and Fund shall continue to accept and
implement orders by the Company for the purchase (and
redemption) of shares of the Fund to the extent such actions
do not violate applicable law.
(b) DISREGARD OF OWNER VOTING. If a material irreconcilable
conflict arises because of Company's decision to disregard
Owner voting instructions and that decision represents a
minority position or would preclude a majority vote, Company
may be required, at the applicable Fund's election, 10
withdraw the Account's investment in said Fund. No charge or
penalty will be imposed against the Account as a result of
such withdrawal.
10.5 LIMITATIONS ON CONSEQUENCES. For purposes of Sections 10.3 through
10.5 of this Agreement, a majority of the disinterested Directors
shall determine whether any proposed action adequately remedies any
irreconcilable material conflict. In no event will the Fund, the
Adviser or the Distributors be required to establish a new funding
medium for any of the Contracts. The Company shall not be required
by Section 10.3 to establish a new funding medium for the Contracts
if an offer to do so has been declined by vote of a majority of
Owners affected by the irreconcilable material conflict. In the
event that the Directors determine that any proposed action does not
adequately remedy any irreconcilable material conflict, then the
Company will withdraw the Account's investment in the applicable
Fund and terminate this Agreement as quickly as may be required to
comply with applicable law, but in no event later than six (6)
months after the Directors inform the Company in writing of the
foregoing determination, provided, however, that such withdrawal and
termination shall be limited to the extent required by any such
material irreconcilable conflict.
10.6 CHANGES IN LAWS. If and to the extent that Rule 6e-2 and Rule
6e-3(T) are amended, or Rule 6e-3 is adopted, to provide exemptive
relief from any provision of the Act or the rules promulgated
thereunder with respect to mixed or shared funding, (as defined in
the Exemptive Order, if any) on terms and conditions materially
14
<PAGE>
different from those contained in the Exemptive Order, if any, then
(a) the Funds and/or the Company, as appropriate, shall take such
steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as
amended, and Rule 6e-3, as adopted, to the extent such rules are
applicable; and (b) Sections 10.1, 10.2, 10.3 and 10.4 of this
Agreement shall continue in effect only to the extent that terms and
conditions substantially identical to such Sections are contained in
such Rule(s) as so amended or adopted.
11. MAINTENANCE OF RECORDS.
(a) Recordkeeping and other administrative services to Owners shall be
the responsibility of the Company and shall not be the
responsibility of the Fund, Adviser or Distributor. None of the
Fund, the Adviser or Distributor shall maintain separate accounts or
records for Owners. Company shall maintain and preserve all records
as required by law to be maintained and preserved in connection with
providing the Services and in making shares of the Fund available to
the Account.
(b) Upon the request of the Adviser or Distributor, the Company shall
provide copies of all the historical records relating to
transactions between the Fund and the Account, written
communications regarding the Fund to or from the Account and other
materials, in each case (1) as are maintained by the Company in the
ordinary course of its business and in compliance with applicable
law, and (2) as may reasonably be requested to enable the Adviser
and Distributor, or its representatives, including without
limitation its auditors or legal counsel, to (A) monitor and review
the Services, (B) comply with any request of a governmental body or
self-regulatory organization or the Owners, (C) verify compliance by
the Company with the terms of this Agreement, (D) make required
regulatory reports, or (E) perform general customer supervision. The
Company agrees that it will permit the Adviser and Distributor or
such representatives of either to have reasonable access to its
personnel and records in order to facilitate the monitoring of the
quality of the Services.
(c) Upon the request of the Company, the Adviser and Distributor shall
provide copies of all the historical records relating to
transactions between the Fund and the Account, written
communications regarding the Fund to or from the Account and other
materials, in each case (1) as are maintained by the Adviser and
Distributor, as the case may be, in the ordinary course of its
business and in compliance with applicable law, and (2) as may
reasonably be requested to enable the Company, or its
representatives, including without limitation its auditors or legal
counsel, to (A) comply with any request of a governmental body or
self-regulatory organization or the Owners, (B) verify compliance by
the Adviser and Distributor with the terms of this Agreement, (C)
make required regulatory reports, or (D) perform general customer
supervision.
(d) The Parties agree to cooperate in good faith in providing records to
one another pursuant to this Section 11.
12. TERM AND TERMINATION.
12.1 TERM AND TERMINATION WITHOUT CAUSE. The initial term of this
Agreement shall be for a period of one year from the date hereof.
Unless terminated by any Party upon not less than thirty (30) days
15
<PAGE>
prior written notice to the other Parties, this Agreement shall
thereafter automatically renew from year to year, subject to
termination at the next applicable renewal date upon not less than
30 days prior written notice. Any Party may terminate this Agreement
following the initial term upon six (6) months advance written
notice to the other Parties.
12.2 TERMINATION BY FUND, DISTRIBUTOR OR ADVISER FOR CAUSE. Adviser, Fund
or Distributor may terminate this Agreement immediately by written
notice to the Company, if any of them shall determine, in its sole
judgment exercised in good faith, that (a) the Company has suffered
a material adverse change in its business, operations, financial
condition or prospectus since the date of this Agreement or is the
subject of material adverse publicity; or (b) any of the Contracts
are not registered, issued or sold in accordance with applicable
state and federal law or such law precludes the use of Fund shares
as the underlying investment media of the Contracts issued or to be
issued by the Company.
12.3 TERMINATION BY COMPANY FOR CAUSE. Company may terminate this
Agreement by written notice to the Adviser, Fund and Distributor in
the event that (a) the Fund shares are not registered, issued or
sold in accordance with applicable state or federal law or such law
precludes the use of such shares as the underlying investment media
of the Contracts issued or to be issued by the Company; (b) the Fund
ceases to qualify as a Regulated Investment Company under Subchapter
M of the Code or under any successor or similar provision, or if the
Company reasonably believes that the Fund may fail to so qualify; or
(c) the Fund fails to meet the diversification requirements
specified in Section 6.4(a).
12.4 TERMINATION BY ANY PARTY. This Agreement may be terminated by any
Party at any time (A) by giving 30 days' written notice to the other
Parties in the event of an material breach of this Agreement by the
other Party or Parties that is not cured during such 30-day period,
and (B) (i) upon institution of formal proceedings relating to the
legality of the terms and conditions of this Agreement against the
Account, Company, Fund, Adviser or Distributor by the NASD, the SEC
or any other regulatory body provided that the terminating Patty has
a reasonable belief that the institution of formal proceedings is
not without foundation and will have a material adverse impact on
the terminating Party, (ii) by the non-assigning Party upon the
assignment of this Agreement in contravention of the terms hereof,
or (iii) as is required by law, order or instruction by a court of
competent jurisdiction or a regulatory body or self-regulatory
organization with jurisdiction over the terminating Party.
12.5 LIMIT ON TERMINATION. Notwithstanding the termination of this
Agreement with respect to the Fund, for so long as any Contracts
remain outstanding and Invested in the Fund each Party hereto shall
continue to perform such of its duties hereunder as are necessary to
ensure the continued tax deferred status thereof and the payment of
benefits thereunder, except to the extent proscribed by law, the SEC
or other regulatory body. Notwithstanding the foregoing, nothing in
this Section 12.5 obligates the Fund to continue in existence. In
the event that the Fund elects to terminate its operations, the
Company shall, as soon as practicable, obtain an exemptive order or
order of substitution from the SEC to remove all Owners from the
Fund.
16
<PAGE>
13. NOTICES.
All notices hereunder shall be given in writing (and shall be deemed to
have been duly given upon receipt) by delivery in person, by facsimile, by
registered or certified mail or by overnight delivery (postage prepaid,
return receipt requested) to the respective Parties as follows:
IF TO TIMOTHY VARIABLE:
The Timothy Plan Variable Series
1304 West Fairbanks Avenue
Winter Park, FL 32789
Facsimile: (407) 644-4574
e-mail: [email protected]
IF TO ADVISER:
Timothy Partners, Ltd.
1304 West Fairbanks Avenue
Winter Park, FL 32789
Facsimile: (407) 644-4574
e-mail: [email protected]
IF TO DISTRIBUTOR:
Timothy Partners, Ltd.
1304 West Fairbanks Avenue
Winter Park, FL 32789
Facsimile: (407) 644-4574
e-mail: [email protected]
IF TO COMPANY:
Annuity Investors Life Insurance Company
250 East Fifth Street
Cincinnati, OH 45202
Attention: Mark F. Muething
Facsimile No.: (513) 357-3397
14. MISCELLANEOUS.
14.1 CAPTIONS. The captions in this Agreement are included for
convenience of reference only and in no way affect the construction
or effect of any provisions hereof.
14.2 ENFORCEABILITY. If any portion of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the
remainder of the Agreement shall not be affected thereby.
17
<PAGE>
14.3 COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which taken together shall constitute
one and the same instrument.
14.4 REMEDIES NOT EXCLUSIVE. The rights, remedies and obligations
contained in this Agreement are cumulative and are in addition to
any and all rights, remedies and obligations, at law or in equity,
which the Parties hereto are entitled to under state and federal
jaws.
14.5 CONFIDENTIALITY. Subject to the requirements of legal process and
regulatory authority, the Fund and Distributor shall treat as
confidential the names and addresses of the owners of the Contracts
and all information reasonably identified as confidential in writing
by the Company hereto and, except as permitted by this Agreement,
shall not disclose, disseminate or utilize such names and addresses
and other confidential information without the express written
consent of the Company until such time as it may come into the
public domain.
14.6 GOVERNING LAW. This Agreement shall be governed by and interpreted
in accordance with the internal laws of the State of Ohio applicable
to agreements fully executed and to he performed therein; exclusive
of conflicts of laws.
14.7 SURVIVABILITY. Sections 6, 7.2, 7.3, 7.4, 9, 11 and 12.5 hereof
shall survive termination of this Agreement. In addition, all
provisions of this Agreement shall survive termination of this
Agreement in the event that any Contracts are invested in the Fund
at the time the termination becomes effective and shall survive for
so long as such Contracts remain so invested.
14.8 AMENDMENT AND WAIVER. No modification of any provision of this
Agreement will be binding unless in writing and executed by the
Party to be bound thereby. No waiver of any provision of this
Agreement will be binding unless in writing and executed by the
Party granting such waiver. Notwithstanding anything in this
Agreement to the contrary, the Company may unilaterally amend
Exhibit A hereto to add additional series of The Timothy Plan
Variable Funds ("New Funds") as Funds by sending to the Company a
written notice of the New Funds. Any valid waiver of a provision set
forth herein shall not constitute a waiver of any other provision of
this Agreement. In addition, any such waiver shall constitute a
present waiver of such provision and shall not constitute a
permanent fixture waiver of such provision.
14.9 ASSIGNMENT. This Agreement shall be binding upon and shall inure to
the benefit of the Parties and their respective successors and
assigns; provided however that neither this Agreement nor any
rights, privileges, duties or obligations of the Parties may be
assigned by any Party without the written consent of the other
Parties or as expressly contemplated by this Agreement.
14.10 ENTIRE AGREEMENT. This Agreement contains the full and complete
understanding between the Parties with respect to the transactions
covered and contemplated hereunder, and supersedes all prior
agreements and understandings between the Parties relating to the
subject matter hereof, whether oral or written, express or implied.
18
<PAGE>
14.11 RELATIONSHIP OF PARTIES: NO JOINT VENTURE, ETC. Except for the
limited purpose provided in Section 3.8, it is understood and agreed
that the Company shall be acting as an independent contractor and
not as an employee or agent of the Adviser, Distributor or the Fund,
and none of the Parties shall hold itself out as an agent of any
other Party with the authority to bind such Party. Neither the
execution nor performance of this Agreement shall be deemed to
create a partnership or joint venture by and among any of the
Company, Fund, Adviser, or Distributor.
14.12 EXPENSES. All expenses incident to the performance by each Party of
its respective duties under this Agreement shall be paid by that
Party.
14.13 TIME OF ESSENCE. Time shall be of the essence in this Agreement.
14.14 NON-EXCLUSIVITY. Each of the Parties acknowledges and agrees that
this Agreement and the arrangements described herein are intended to
be non-exclusive and that each of the Parties is free to enter into
similar agreements and arrangements with other entities.
14.15 OPERATIONS OF FUNDS. In no way shall the provisions of this
Agreement limit the authority of the Fund, the Company or
Distributor to take such action as it may deem appropriate or
advisable in connection with all matters relating to the operation
of such Fund and the sale of its shares. In no way shall the
provisions of this Agreement limit the authority of the Company to
take such action as it may deem appropriate or advisable in
connection with all matters relating to the provision of Services or
the shares of fund other than the Fund offered to the Account.
IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement to be
duly executed as of the date first above written.
Annuity Investor Life Insurance
Company
By:
---------------------------------
Name: Mark F. Muething
Title: Senior Vice President
Timothy Partners, Ltd. - Adviser
By:
---------------------------------
Name: Arthur D. Ally
Title: General Partner
19
<PAGE>
Timothy Partners, Ltd. - Distributor
By:
---------------------------------
Name: Arthur D. Ally
Title: General Partner
The Timothy Plan Variable Series
on behalf of the Fund
By:
---------------------------------
Name: Arthur D. Ally
Title: President
20
<PAGE>
Exhibit A
The Fund:
The Timothy Plan Variable Series
21
<PAGE>
Exhibit A-1
Separate Accounts:
Annuity Investors Variable Account B
22
<PAGE>
Exhibit B
The Services
Company shall perform the following services. Such services shall be the
responsibility of the Company and shall not be the responsibility of the Fund,
Adviser or Distributor.
1. Maintain separate records for each Account, which records shall reflect
Fund shares ("Shares") purchased and redeemed, including the date and
price for all transactions, Share balances, and the name and address of
each Owner, including zip codes and tax identification numbers.
2. Credit contributions to individual Owner accounts and invest such
contributions in shares of the Funds to the extent so designated by the
Owner.
3. Disburse or credit to the Owners, and maintain records of, all proceeds of
redemptions of Fund shares and all other distributions not reinvested in
shares.
4. Prepare and transmit to the Owners, periodic account statements showing,
among other things, the total number of Fund shares owned as of the
statement closing date, purchases and redemptions of shares during the
period covered by the statement, the net asset value of the Funds as of a
recent date, and the dividends and other distributions paid during the
Statement period (whether paid in cash or reinvested in shares).
5. Transmit to the Owners, as required by applicable law, prospectuses, proxy
materials, shareholder reports, and other information provided by the
Adviser, Distributor or Fund and required to be sent to shareholders under
the Federal securities laws.
6. Transmit to Distributor purchase orders and redemption requests placed by
the Account and arrange for the transmission of funds to and from the
Fund.
7. Transmit to Distributor such periodic reports as Distributor shall
reasonably conclude is necessary to enable the Fund to comply with
applicable Federal securities and state Blue-Sky requirements.
8. Transmit to the each Account confirmations of purchase orders and
redemption requests placed by each Account.
9. Maintain all account balance information for the Account and daily and
monthly purchase summaries expressed in shares and dollar amounts.
10. Prepare, transmit and file any Federal, state and local government reports
and returns as required by law with respect to each account maintained on
behalf of the Account.
11. Respond to Owners' inquiries regarding, among other things, share prices,
account balances, dividend options, dividend amounts, and dividend payment
dates.
23
<PAGE>
Exhibit C
Account Information
1. Entity in whose name each Account will be opened:
Annuity Investors Life Insurance Company
P.O. Box 5423
Cincinnati, OH 45201-5423
2. Employer ID number (For internal use only):
31 - 1021738
3. Authorized contact persons: The following persons are authorized on
behalf of the Company to effect transactions in each Account:
Lynn Laswell 513-412-2924 John Burress 513-412-3194
Brian Sponaugle 513-412-2931 Anniece Griece 513-412-2935
Todd Gayhart 513-412-2932 Debbie Plummer 513-412-2938
Laura Lally 513-412-2933
4. Will the Accounts have telephone exchange? [ ] Yes [ X ] No (This option
lets Company redeem shares by telephone and apply the proceeds for purchase
in another identically registered Timothy Funds account.)
5. Will the Accounts have telephone redemption? [ ] Yes [ X ] No
(This option lets Company sell shares by telephone. The proceeds will be
wired to the bank account specified below.)
6. All dividends and capital gains will be reinvested automatically.
7. Instructions for all outgoing wire transfers:
The Provident Bank
Cincinnati, OH 45202
ABA # 042000424
For the Account of Annuity Investors
Life Insurance Company Depository
Account
Account # 0697-394 Amount:
Attn.: Wire Transfer Department
8. If this Account information Form contains changed information, the
undersigned authorized officer has executed this amended Account
Information Form as of the date set forth below and acknowledges the
agreements and representations set forth in the Participation Agreement
between the Company, the Fund, Adviser and Distributor:
24
<PAGE>
---------------------------------- -----------------------
(Signature of Authorized Officer) (Date)
9. Company represents under penalty of perjury that:
(i) The employer ID number on this form is correct; and
(ii) Company is not subject to backup withholding because (a) Company is
exempt from backup withholding, (b) Company has not been notified by
the IRS that it is subject to backup withholding as a result of
failure to report all interest or dividends, or (c) the IRS has
notified the Company that it is no longer subject to backup
withholding. (Cross out (ii) if Company has been notified by the IRS
that it is subject to backup withholding because of underreporting
interest or dividends on its tax return.)
Please Note: Distributor employs reasonable procedures to confirm that
instructions communicated by telephone are genuine and may not be
liable for losses due to unauthorized or fraudulent instructions.
Please see the prospectus for the applicable Fund' for more
information on the telephone exchange and redemption privileges.
25
Exhibit (8)(t)
April 25, 1998
Annuity Investors Life insurance Company
250 East Fifth Street
Cincinnati, OH 45202
Attention: Mark F. Muething
Dear Mark:
Re: Fee letter relating to the Annuity Investors Life Insurance Company
Participation Agreement.
Pursuant to the Participation Agreement by and among The Timothy Plan Variable
Series (the "Fund"), and Annuity Investors Life Insurance Company (the
"Company") dated May 1, 1998 (the "Participation Agreement"), the Company will
provide certain administrative services on behalf of the registered investment
companies or series thereof specified in Exhibit A.
In recognition of the reduction in administrative expenses that derives from the
performance of said administrative services, The Timothy Plan Variable Series
Fund agrees to pay the Company the fee specified below.
(a) For average aggregate amounts (as calculated in paragraph (b), below)
invested through variable insurance products issued by the Company with
the Fund, the monthly fee shall equal the percentage (calculated
paragraph (b), below) of the applicable annual fee for each Fund
specified in Exhibit A.
(b) For purposes of computing the fee contemplated in paragraph (a) above,
the Fund shall calculate and pay to the Company an amount equal to the
product of: (a) the product of (i) the number of calendar days in the
applicable month divided by the number of calendar days in that year
(365 or 366 as applicable) and (ii) the applicable percentage specified
in Exhibit A, hereto, multiplied by (b) the average daily market value
of the investments held in such Fund pursuant to the Participation
Agreement computed by totaling the aggregate investment (share net asset
value multiplied by the total number of shares held) on each day during
the calendar month and dividing by the total number of days during such
month.
(c) The Fund shall calculate the amount of the payment to be made pursuant
to this Letter Agreement at the end of each calendar month and will make
such payment to the Company within 30 days after receiving the report
referenced in paragraph (e), below. Fees will be paid by wire transfer
or by check. All payments hereunder shall be considered final unless
disputed by the Company in writing within 60 days of receipt.
(d) The parties agree that the fees contemplated herein are solely for
shareholder servicing and other administrative services provided by the
Company and do not constitute payment in any manner for investment
advisory, distribution, trustee, or custodial services.
<PAGE>
(e) The Company agrees to provide the Fund by the 15th day of each month
with a report, which indicates the number of Owners that hold Contract
interests in each Account as of the last day of the prior month.
(f) If requested in writing by the Fund, and at the Fund's expense, the
Company shall provide to the Fund, by February 14th of each year a
"Special Report" from a nationally recognized accounting firm reasonably
acceptable to the Fund which substantiates for each month of the prior
calendar year: (a) the number of Owners that hold, through an Account,
interests in each Account maintained by the Company on the last day of
each month which held shares for which the fee provided or in this
Letter Agreement was received by the Company, (b) that any fees billed
to the Fund for such month were accurately determined in accordance with
this Letter Agreement, and (c) such other information in connection with
this Agreement and the Participation Agreement as may be reasonably
requested by the Fund.
(g) The parties hereto agree that the Fund may unilaterally amend Schedule A
hereto to add additional investment companies or series thereof ("New
Funds") as Funds subject to the provisions of this Letter Agreement by
sending to the Company a written notice of the New Funds and indicating
therein the fees to be paid to the Company with respect to the
administrative services provided pursuant to the Participation Agreement
in connection with such New Funds.
(h) This Letter Agreement shall terminate upon termination of the
Participation Agreement. Accordingly, all payments pursuant to this
Letter Agreement shall cease upon termination of the Participation
Agreement.
(i) Capitalized terns not otherwise defined herein shall have the meaning
assigned to herein in the Participation Agreement.
If you are in agreement with the foregoing, please sign and date below where
indicated and return one copy of this signed letter agreement to me.
Very truly yours,
Arthur D. Ally
President
Accepted and agreed as of May 1,
1998 by Annuity Investors Life
Insurance Company
By:
------------------------------
Name: Mark F. Muething
Title: Senior Vice President
2
<PAGE>
Exhibit A to Letter dated April 25, 1998
The Funds subject to this Agreement and applicable annual fees are as follows:
Fund Annual Fee
The Timothy Plan Variable Series .20%
3
Exhibit 10
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated February 3, 1998, with respect to the financial
statements of Annuity Investors Variable Account B, and March 2, 1998, with
respect to the statutory-basis financial statements of Annuity Investors Life
Insurance Company, in the Post-effective Amendment No. 2 of the Registration
Statement (Form N-4 File Nos. 333-19725 and 811-08017) and related Statement of
Additional Information of Annuity Investors Variable Account B.
/s/ Ernst & Young LLP
Cincinnati, Ohio
April 29, 1998
Exhibit (13)
ANNUITY INVESTORS LIFE INSURANCE COMPANY
Variable Account 'B'
Standardized Performance
"N-4, Part C, Exhibit 13"
"December 31, 1997"
Yield and Effective Yield for Dreyfus Variable Investment Fund Money Market
Portfolio
Yield
Basic contracts:
(((Ending UV-Beginning UV)/7)*365) (((1.251385-1.250670)/7*365)
((.000715/7)*365)
(.000102*365)
.0372
or 3.72%
Enhanced Contracts
(((Ending UV-Beginning UV)/7)*365) (((1.273133-1.272361)/7*365)
((.000772/7)*365)
(.000110*365)
.0402
or 4.02%
Effective Yield
Basic contracts
(((Ending UV-Beginning UV)+1)^(365/7)-1) (((1.251385-1.250670)+1)^(365/7)-1)
(((1.000715)^(52.143)-1)
((1.0380-1)
.0380
or 3.80%
Enhanced Contracts
(((Ending UV-Beginning UV)+1)^(365/7)-1) (((1.273133-1.272361)+1)^(365/7)-1)
(((1.000772)-1)^(52.143)-1)
((1.0411)-1)
0.0411
or 4.11%
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
Variable Account 'B'
Non-Standardized Performance
"N-4 Part C, Exhibit 13"
"December 31, 1997"
P(1+T)^n = ERV
"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-year period."
Morgan Stanley Asset Management Inc.
<TABLE>
<CAPTION>
Emerging Markets Fixed Mid-Cap U.S. Real Value
Basic contracts: Equity Income Value Estate Portfolio
<S> <C> <C> <C> <C> <C>
P(1+T)^n=ERV "1,000.00(1+T)^1=989.20" Not applicable Not applicable Not applicable Not applicable
(1+T)^n=ERV/P (1+T)^1=0.9892
T=(ERV/P)-1 T=0.9892-1
T= (0.0108)
or T= -1.08%
Enhanced contracts:
P(1+T)^n=ERV "1,000.00(1+T)^1=992.20" Not applicable Not applicable Not applicable Not applicable
(1+T)^n=ERV/P (1+T)^1=0.9922
T=(ERV/P)-1 T=0.9922-1
T= (0.0078)
or T= -0.78%
</TABLE>
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
Variable Account 'B'
Standardized Performance
"N-4 Part C, Exhibit 13"
"December 31, 1997"
P(1+T)^n = ERV
"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-year period."
<TABLE>
Morgan Stanley Asset Management Inc.
<CAPTION>
Emerging Markets Fixed Mid-Cap U.S. Real Value
Basic contracts: Equity Income Value Estate Portfolio
<S> <C> <C> <C> <C> <C>
P(1+T)^n=ERV "1,000.00(1+T)^1=899.20" NOT APPLICABLE NOT APPLICABLE NOT APPLICABLE NOT APPLICABLE
(1+T)^n=ERV/P (1+T)^1=0.8992
T=(ERV/P)-1 T=0.8992-1
T= (0.1008)
or T= -10.08%
Enhanced contracts:
P(1+T)^n=ERV "1,000.00(1+T)^1=902.20" NOT APPLICABLE NOT APPLICABLE NOT APPLICABLE NOT APPLICABLE
(1+T)^n=ERV/P (1+T)^1=0.9022
T=(ERV/P)-1 T=1.9022-1
T= (0.0978)
or T= -9.78%
</TABLE>
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
Variable Account 'B'
Standardized Performance
"N-4 Part C, Exhibit 13"
"December 31, 1997"
P(1+T)^n = ERV
"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-year period."
Pilgrim Baxter and Associates
Growth II Large Cap Technology and
Basic contracts: Fund Growth Communications
P(1+T)^n=ERV NOT APPLICABLE NOT APPLICABLE NOT APPLICABLE
(1+T)^n=ERV/P
T=(ERV/P)-1
T=
or T=
Enhanced contracts:
P(1+T)^n=ERV NOT APPLICABLE NOT APPLICABLE NOT APPLICABLE
(1+T)^n=ERV/P
T=(ERV/P)-1
T=
or T=
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
Variable Account 'B'
Non-Standardized Performance
"N-4 Part C, Exhibit 13"
"December 31, 1997"
P(1+T)^n = ERV
"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-year period."
Pilgrim Baxter and Associates
Growth II Large Cap Technology and
Basic contracts: Fund Growth Communications
P(1+T)^n=ERV Not applicable Not applicable Not applicable
(1+T)^n=ERV/P
T=(ERV/P)-1
T=
or T=
Enhanced contracts:
P(1+T)^n=ERV Not applicable Not applicable Not applicable
(1+T)^n=ERV/P
T=(ERV/P)-1
T=
or T=
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
Variable Account 'B'
Standardized Performance
"N-4 Part C, Exhibit 13"
"December 31, 1997"
P(1+T)^n = ERV
"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-year period."
"Strong Capital Management, Inc."
Growth Opportunity
Basic contracts: Fund II Fund II
P(1+T)^n=ERV "1,000.00(1+T)^1=1,179.60" "1,000.00(1+T)^1=1,147.20"
(1+T)^n=ERV/P (1+T)^1=1.1796 (1+T)^1=1.1472
T=(ERV/P)-1 T=1.1796-1 T=1.1472-1
T= 0.1796 0.1472
or T= 17.96% 14.72%
Enhanced contracts:
P(1+T)^n=ERV "1,000.00(1+T)^1=1,193.40" "1,000.00(1+T)^1=1,150.90"
(1+T)^n=ERV/P (1+T)^1=1.1934 (1+T)^1=1.1509
T=(ERV/P)-1 T=1.1934-1 T=1.1509-1
T= 0.1934 0.1509
or T= 19.34% 15.09%
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
Variable Account 'B'
Non-Standardized Performance
"N-4 Part C, Exhibit 13"
"December 31, 1997"
P(1+T)^n = ERV
"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-year period."
"Strong Capital Management, Inc."
Growth Opportunity
Basic contracts: Fund II Fund II
P(1+T)^n=ERV "1,000.00(1+T)^1=1,279.60" "1,000.00(1+T)^1=1,237.20"
(1+T)^n=ERV/P (1+T)^1=1.2796 (1+T)^1=1.2372
T=(ERV/P)-1 T=1.2796-1 T=1.2372-1
T= 0.2796 0.2372
or T= 27.96% 23.72%
Enhanced contracts:
P(1+T)^n=ERV "1,000.00(1+T)^1=1,283.40" "1,000.00(1+T)^1=1,240.90"
(1+T)^n=ERV/P (1+T)^1=1.2834 (1+T)^1=1.2409
T=(ERV/P)-1 T=1.2834-1 T=1.2409-1
T= 0.2834 0.2409
or T= 28.34% 24.09%
