As filed with the Securities and Exchange Commission on May 6, 1998
File No.
File No. 811-08017
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ( X )
Pre-effective Amendment No. _ ( )
Post-effective Amendment No. ( )
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 ( )
Pre-effective Amendment No. ( )
Post-effective Amendment No. 4 ( 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: As soon as practicable after the
effective date of the Registration Statement.
<PAGE>
It is proposed that this filing will become effective.
/_/ Immediately upon filing pursuant to paragraph (b) of Rule 485
/_/ On _____ pursuant to paragraph (b) of Rule 485
/X/ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
/_/ On ______ pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following box:
/_/ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Title of Securities being registered: shares of beneficial interest
ii
<PAGE>
CROSS REFERENCE SHEET
Pursuant to Rule 495
(Commodore AdvantageSERVICEMARK)
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
<TABLE>
<CAPTION>
PART A
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ITEM OF FORM N-4 PROSPECTUS CAPTION
---------------- ------------------
<S> <C>
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
(e) Fund Expenses................................... The Funds
i
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(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
iii
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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 Control With the Persons Controlled By Or Under Common
Registrant.............................................. Control With the Depositor or Registrant
27. Number of Owners........................................ Number of Owners
28. Indemnification......................................... Indemnification
29. Principal Underwriters.................................. Principal Underwriter
30. Location of Accounts and
Records ................................................ Location of Accounts and Records
31. Management Services..................................... Management Services
32. Undertakings............................................ Undertakings
Signature Page.......................................... Signature Page
</TABLE>
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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 ADVANTAGE[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 Advantage(SERVICEMARK) Individual and
Group Flexible Premium Deferred Annuity Contracts (the "Contracts") issued by
Annuity Investors Life Insurance Company(REGISTERED) (the "Company").
The Commodore Advantage(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 _______, 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.
--------------------------------------------
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
Purchase Payment Bonus................................................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.......................................................14
Owner Transaction Expenses............................................14
Annual Expenses.......................................................15
Examples .............................................................19
FINANCIAL STATEMENTS FOR THE COMPANY......................................21
THE FUNDS.................................................................22
Janus Aspen Series....................................................22
Aggressive Growth Portfolio..................................22
Worldwide Growth Portfolio...................................22
Balanced Portfolio...........................................22
Growth Portfolio.............................................22
International Growth Portfolio...............................22
Dreyfus Funds.........................................................22
Capital Appreciation Portfolio (Dreyfus Variable
Investment Fund)...........................................22
Money Market Portfolio (Dreyfus Variable Investment Fund)....23
Growth and Income Portfolio (Dreyfus Variable
Investment Fund)...........................................23
Small Cap Portfolio (Dreyfus Variable Investment Fund).......23
The Dreyfus Socially Responsible Growth Fund, Inc............23
Dreyfus Stock Index Fund.....................................23
Strong Funds..........................................................23
Strong Opportunity Fund II, Inc..............................23
Strong Growth Fund Ii (Strong Variable Insurance
Funds, Inc.)...............................................23
INVESCO Variable Investment Funds, Inc................................24
Industrial Income Portfolio..................................24
Total Return Portfolio.......................................24
High Yield Portfolio.........................................24
Morgan Stanley Universal Funds, Inc...................................24
U.S. Real Estate Portfolio...................................24
Value Portfolio..............................................24
Emerging Markets Equity Portfolio............................24
Fixed Income Portfolio.......................................24
Mid Cap Value Portfolio......................................25
PBHG Insurance Series Fund, Inc.......................................25
PBHG Growth II Portfolio.....................................25
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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PBHG Large Cap Growth Portfolio..............................25
PBHG Technology & Communications Portfolio...................25
The Timothy Plan Variable Series......................................25
The Timothy Plan Variable Series.............................25
Additions, Deletions, or Substitutions................................26
PERFORMANCE INFORMATION...................................................26
Yield Data............................................................26
Total Return Data.....................................................27
ANNUITY INVESTORS LIFE INSURANCE COMPANY(REGISTERED) AND THE SEPARATE
ACCOUNT...................................................................27
Annuity Investors Life Insurance Company..............................27
Published Ratings.....................................................27
Year 2000.............................................................28
The Separate Account..................................................28
THE FIXED ACCOUNT.........................................................28
Fixed Account Options.................................................28
Renewal of Fixed Account Options......................................29
THE CONTRACTS.............................................................29
Right to Cancel.......................................................29
PURCHASE PAYMENTS.........................................................30
Purchase Payments.....................................................30
Purchase Payment Bonus................................................30
Allocation of Purchase Payments.......................................30
ACCOUNT VALUE.............................................................30
Fixed Account Value...................................................31
Variable Account Value................................................31
Accumulation Unit Value...............................................31
Net Investment Factor.................................................31
TRANSFERS.................................................................33
Telephone Transfers...................................................33
Dollar Cost Averaging.................................................33
Portfolio Rebalancing.................................................34
Interest Sweep........................................................34
Principal Guarantee Option............................................34
Changes by the Company................................................35
SURRENDERS................................................................35
Surrender Value.......................................................35
Suspension or Delay in Payment of Surrender Value.....................35
Free Withdrawal Privilege.............................................36
Systematic Withdrawal.................................................36
DEATH BENEFIT.............................................................37
When A Death Benefit Will Be Paid.....................................37
Death Benefit Values..................................................37
Death Benefit Commencement Date.......................................37
Form Of Death Benefit.................................................37
Beneficiary...........................................................37
CHARGES AND DEDUCTIONS....................................................39
Contingent Deferred Sales Charge ("CDSC").............................39
Maintenance and Administration Charges................................40
Mortality and Expense Risk Charge.....................................41
Premium Taxes.........................................................41
Transfer Fee..........................................................41
Reduction or Elimination of Contract Charges..........................42
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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SETTLEMENT OPTIONS........................................................42
Annuity Commencement Date.............................................42
Election of Settlement Option.........................................42
Benefit Payments......................................................42
Fixed Dollar Benefit..................................................43
Variable Dollar Benefit...............................................43
Transfers after the Commencement Date.................................43
Transfer Formula......................................................44
Settlement Options....................................................44
Minimum Amounts.......................................................45
Settlement Option Tables..............................................45
GENERAL PROVISIONS........................................................45
Non-participating.....................................................45
Misstatement..........................................................45
Proof of Existence and Age............................................45
Discharge of Liability................................................46
Transfer of Ownership.................................................46
Non-Qualified Contract.......................................46
Qualified Contract...........................................46
Assignment............................................................46
Non-Qualified Contract.......................................46
Qualified Contract...........................................46
Incontestability......................................................46
Entire Contract.......................................................46
Changes -- Waivers....................................................47
Notices and Directions................................................47
FEDERAL TAX MATTERS.......................................................47
Introduction..........................................................47
Taxation of Annuities in General......................................47
Surrenders............................................................48
Qualified Contracts..........................................48
Non-qualified Contracts......................................48
Benefit Payments......................................................48
Penalty Tax...........................................................48
Taxation of Death Benefit Proceeds....................................48
Transfers, Assignments, or Exchanges of The Contract..................48
Qualified Contracts - General.........................................48
Individual Retirement Annuities..............................48
Tax-sheltered Annuities......................................49
Texas Optional Retirement Program............................49
Pension and Profit Sharing Plans.............................49
Certain Deferred Compensation Plans...................................49
Withholding...........................................................49
Possible Changes in Taxation..........................................49
Other Tax Consequences................................................49
General ..............................................................50
DISTRIBUTION OF THE CONTRACTS.............................................50
LEGAL PROCEEDINGS.........................................................50
VOTING RIGHTS.............................................................51
AVAILABLE INFORMATION.....................................................51
STATEMENT OF ADDITIONAL INFORMATION.......................................52
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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 on 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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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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CONTRACT EFFECTIVE DATE: The date shown on the Contract Specifications page.
CONTRACT YEAR: Any period of twelve consecutive 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. A Written Request 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 Advantage(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 ____.) 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 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.
- --------------------------------------------------------------------------------
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 ____. For more
information about the Funds, see "THE FUNDS," page ____ 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 ____.)
PURCHASE PAYMENT BONUS. A bonus will be credited to each Purchase Payment
received by the Company in the amount of 3% of the Purchase Payment. The bonus
amounts will be forfeited if a Contract is canceled during the Right to Cancel
period of the Contract, if any, or if the Contract is surrendered in full during
the first Contract Year. (See "Purchase Payment Bonus," page ____.)
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 ____.)
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
____.)
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 ____.)
CONTINGENT DEFERRED SALES CHARGE ("CDSC"). A CDSC may be imposed on amounts
surrendered. The maximum CDSC is 8% for each Purchase Payment. That percentage
decreases over eight years to 0% after year eight. (See "CHARGES AND
DEDUCTIONS," page ____.)
The CDSC may be reduced or waived under certain circumstances. (See "CHARGES AND
DEDUCTIONS," page ____.)
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. The Mortality and Expense Risk Charge is not
assessed against Fixed Account options. (See "CHARGES AND DEDUCTIONS," page
____.)
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
___.)
- --------------------------------------------------------------------------------
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 ____.)
ANNUITY BENEFITS. Annuity Benefits are paid on a fixed or variable basis, or a
combination of both. (See "Benefit Payments," page ____.)
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 ____.)
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 ____.)
RIGHT TO CANCEL (INDIVIDUAL CONTRACTS ONLY, UNLESS OTHERWISE REQUIRED BY STATE
LAW). (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
____.)
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 ____.)
- --------------------------------------------------------------------------------
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. No Commodore Advantage Contracts were issued as of
December 31, 1997.
1997
----
JANUS ASPEN SERIES:
AGGRESSIVE GROWTH PORTFOLIO
Accumulation UV - beginning 10.000000 1/
Accumulation UV - ending 10.723950
Accumulated units at year end 2,830.076
WORLDWIDE GROWTH PORTFOLIO
Accumulation UV - beginning 10.000000 1/
Accumulation UV - ending 9.935860
Accumulated units at year end 56,665.753
BALANCED PORTFOLIO
Accumulation UV - beginning 10.000000 1/
Accumulation UV - ending 10.604609
Accumulated units at year end 30,519.754
GROWTH PORTFOLIO
Accumulation UV - beginning 10.000000 1/
Accumulation UV - ending 10.239960
Accumulated units at year end 32,737.591
INTERNATIONAL GROWTH PORTFOLIO
Accumulation UV - beginning 10.000000 1/
Accumulation UV - ending 9.735841
Accumulated units at year end 12,541.039
DREYFUS VARIABLE INVESTMENT FUND:
CAPITAL APPRECIATION PORTFOLIO
Accumulation UV - beginning 10.000000 1/
Accumulation UV - ending 10.103905
Accumulated units at year end 18,347.666
MONEY MARKET PORTFOLIO
Accumulation UV - beginning 1.000000 1/
Accumulation UV - ending 1.016499
Accumulated units at year end 0.000
GROWTH AND INCOME PORTFOLIO
Accumulation UV - beginning 10.000000 1/
Accumulation UV - ending 10.196538
Accumulated units at year end 32,231.762
SMALL CAP PORTFOLIO
Accumulation UV - beginning 10.000000 1/
Accumulation UV - ending 10.362314
Accumulated units at year end 41,359.506
- -------------------
1/ Effective July 15, 1997, on Separate Account commencement date.
- --------------------------------------------------------------------------------
Page 12
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- -------------------------------------------------------------------------------
1997
----
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
Accumulation UV - beginning 10.000000 1/
Accumulation UV - ending 10.320883
Accumulated units at year end 26,332.500
DREYFUS STOCK INDEX FUND
Accumulation UV - beginning 10.000000 1/
Accumulation UV - ending 10.479569
Accumulated units at year end 69,510.645
STRONG OPPORTUNITY FUND II, INC.
Accumulation UV - beginning 10.000000 1/
Accumulation UV - ending 10.727356
Accumulated units at year end 6,416.208
STRONG VARIABLE INSURANCE FUNDS, INC.:
STRONG GROWTH FUND II
Accumulation UV - beginning 10.000000 1/
Accumulation UV - ending 10.707133
Accumulated units at year end 2,147.556
INVESCO VARIABLE INVESTMENT FUNDS, INC.:
INDUSTRIAL INCOME PORTFOLIO
Accumulation UV - beginning 10.000000 1/
Accumulation UV - ending 10.659157
Accumulated units at year end 33,269.953
TOTAL RETURN PORTFOLIO
Accumulation UV - beginning 10.000000 1/
Accumulation UV - ending 10.503108
Accumulated units at year end 14,641.934
HIGH YIELD PORTFOLIO
Accumulation UV - beginning 10.000000 1/
Accumulation UV - ending 10.687084
Accumulated units at year end 10,260.821
MORGAN STANLEY UNIVERSAL FUNDS, INC.:
U.S. REAL ESTATE PORTFOLIO
Accumulation UV - beginning 10.000000 1/
Accumulation UV - ending 11.101269
Accumulated units at year end 7,200.060
VALUE PORTFOLIO
Accumulation UV - beginning 10.000000 1/
Accumulation UV - ending 10.204064
Accumulated units at year end 9,944.401
EMERGING MARKETS EQUITY PORTFOLIO
Accumulation UV - beginning 10.000000 1/
Accumulation UV - ending 7.911559
Accumulated units at year end 9,042.956
FIXED INCOME PORTFOLIO
Accumulation UV - beginning 10.000000 1/
Accumulation UV - ending 10.412276
Accumulated units at year end 4.653
- --------------------------------------------------------------------------------
Page 13
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- -------------------------------------------------------------------------------
MORGAN STANLEY UNIVERSAL FUNDS, INC. (CONT'D): 1997
----
MID CAP VALUE PORTFOLIO
Accumulation UV - beginning 10.000000 1/
Accumulation UV - ending 11.113227
Accumulated units at year end 16,674.966
PBHG INSURANCE SERIES FUND, INC.:
PBHG GROWTH II PORTFOLIO
Accumulation UV - beginning 10.000000 1/
Accumulation UV - ending 9.511124
Accumulated units at year end 6,195.935
PBHG LARGE CAP GROWTH PORTFOLIO
Accumulation UV - beginning 10.000000 1/
Accumulation UV - ending 10.150555
Accumulated units at year end 11,415.131
PBHG TECHNOLOGY & COMMUNICATIONS PORTFOLIO
Accumulation UV - beginning 10.000000 1/
Accumulation UV - ending 9.057045
Accumulated units at year end 20,974.008
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 8%
- ---------------------------------------------------------------- ---------------
1 year but less than 2 years 8%
- ---------------------------------------------------------------- ---------------
2 years but less than 3 years 8%
- ---------------------------------------------------------------- ---------------
3 years but less than 4 years 7%
- ---------------------------------------------------------------- ---------------
4 years but less than 5 years 6%
- ---------------------------------------------------------------- ---------------
5 years but less than 6 years 5%
- ---------------------------------------------------------------- ---------------
6 years but less than 7 years 3%
- ---------------------------------------------------------------- ---------------
7 years but less than 8 years 2%
- ---------------------------------------------------------------- ---------------
8 years or more 0%
- ---------------------------------------------------------------- ---------------
Surrender Fees NONE
- ---------------------------------------------------------------- ---------------
Transfer Fee 2/ $25
- ---------------------------------------------------------------- ---------------
Annual Contract Maintenance Fee 3/ $30
================================================================ ===============
- -----------------
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 14
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- -------------------------------------------------------------------------------
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 Funds in which the
Separate Account invests. See "CHARGES AND DEDUCTIONS," page ____ 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.
<TABLE>
<CAPTION>
============================================================================================================================
SEPARATE ACCOUNT ANNUAL JANUS A.S. JANUS A.S. JANUS A.S. JANUS A.S. JANUS A.S.
EXPENSES 4/ as a percentage of AGGRESSIVE WORLDWIDE BALANCED GROWTH INTERNATIONAL
average Separate Account assets) GROWTH GROWTH PORTFOLIO 5/ PORTFOLIO 5/ GROWTH
PORTFOLIO 5/ PORTFOLIO 5/ PORTFOLIO 5/
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Mortality and Expense Risk
Charge 1.25% 1.25% 1.25% 1.25% 1.25%
- ----------------------------------------------------------------------------------------------------------------------------
Administration Charge 0.15% 0.15% 0.15% 0.15% 0.15%
- ----------------------------------------------------------------------------------------------------------------------------
Other Fees and Expenses of
the Separate Account 0.00% 0.00% 0.00% 0.00% 0.00%
- ----------------------------------------------------------------------------------------------------------------------------
Total Separate Account Annual
Expenses 1.40% 1.40% 1.40% 1.40% 1.40%
- ----------------------------------------------------------------------------------------------------------------------------
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% 0.29% 0.05%
- ----------------------------------------------------------------------------------------------------------------------------
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 expense offset arrangements for the fiscal year
ended December 31, 1997. Fee reductions for the 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 15
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
===================================================================================================================================
SEPARATE ACCOUNT ANNUAL DREYFUS V.I.F. DREYFUS DREYFUS DREYFUS THE DREYFUS DREYFUS
Expenses 4/ (as a percentage of CAPITAL V.I.F. V.I.F. V.I.F. SMALL SOCIALLY STOCK INDEX
average Separate Account assets) APPRECIATION MONEY GROWTH AND CAP PORTFOLIO RESPONSIBLE FUND
PORTFOLIO MARKET INCOME GROWTH FUND,
PORTFOLIO PORTFOLIO INC.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mortality and Expense Risk
Charge 1.25% 1.25% 1.25% 1.25% 1.25% 1.25%
- -----------------------------------------------------------------------------------------------------------------------------------
Administration Charge 0.15% 0.15% 0.15% 0.15% 0.15% 0.15%
- -----------------------------------------------------------------------------------------------------------------------------------
Other Fees and Expenses of the
Separate Account 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Total Separate Account Annual
Expenses 1.40% 1.40% 1.40% 1.40% 1.40% 1.40%
- --------------------------------------------------------------------------------
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 ANNUAL STRONG OPPORTUNITY STRONG V.I.F.-
EXPENSES 4/ (as a percentage of FUND II, INC. STRONG GROWTH
average Separate Account FUND II
assets)
================================================================================
Mortality and Expense Risk
Charge 1.25% 1.25%
- --------------------------------------------------------------------------------
Administration Charge 0.15% 0.15%
- --------------------------------------------------------------------------------
Other Fees and Expenses of
the Separate Account 0.00% 0.00%
- --------------------------------------------------------------------------------
Total Separate Account
Annual Expenses 1.40% 1.40%
- --------------------------------------------------------------------------------
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 16
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
======================================================================================================
SEPARATE ACCOUNT ANNUAL EXPENSES 4/ INVESCO VIF- INVESCO VIF- INVESCO VIF-
(as a percentage of average INDUSTRIAL INCOME TOTAL RETURN HIGH YIELD
Separate Account assets) PORTFOLIO 7,8/ PORTFOLIO 7,8/ Portfolio 7,8/
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Mortality and Expense Risk
Charge 1.25% 1.25% 1.25%
- -------------------------------------------------------------------------------------------------------
Administration Charge 0.15% 0.15% 0.15%
Other Fees and Expenses of the
Separate Account 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------------------------------------
Total Separate Account Annual
Expenses 1.40% 1.40% 1.40%
- -------------------------------------------------------------------------------------------------------
FUND ANNUAL EXPENSES 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%
=======================================================================================================
=======================================================================================================
SEPARATE ACCOUNT ANNUAL MORGAN STANLEY UNIVERSAL FUNDS, MORGAN STANLEY UNIVERSAL FUNDS,
EXPENSES 4/ (as a percentage of INC.-MID CAP VALUE PORTFOLIO INC.-U.S. REAL ESTATE PORTFOLIO
average Separate Account
assets)
- -------------------------------------------------------------------------------------------------------
Mortality and Expense Risk
Charge 1.25% 1.25%
- -------------------------------------------------------------------------------------------------------
Administration Charge 0.15% 0.15%
- -------------------------------------------------------------------------------------------------------
Other Fees and Expenses of
the Separate Account 0.00% 0.00%
- -------------------------------------------------------------------------------------------------------
Total Separate Account
Annual Expenses 1.40% 1.40%
- -------------------------------------------------------------------------------------------------------
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%
=======================================================================================================
</TABLE>
- --------------------
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 Portfolios 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.
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 17
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
=================================================================================================================
SEPARATE ACCOUNT ANNUAL EXPENSES 4/ MORGAN STANLEY MORGAN STANLEY MORGAN STANLEY UNIVERSAL
(as a percentage of average UNIVERSAL UNIVERSAL FUNDS, INC.-
Separate Account assets) FUNDS, INC.- FUNDS, INC.-EMERGING FIXED INCOME PORTFOLIO
VALUE PORTFOLIO MARKETS EQUITY
PORTFOLIO
<S> <C> <C> <C>
Mortality and Expense Risk Charge 1.25% 1.25% 1.25%
- ------------------------------------------------------------------------------------------------------------------
Administration Charge 0.15% 0.15% 0.15%
- ------------------------------------------------------------------------------------------------------------------
Other Fees and Expenses of the
Separate Account 0.00% 0.00% 0.00%
- ------------------------------------------------------------------------------------------------------------------
Total Separate Account Annual
Expenses 1.40% 1.40% 1.40%
- ------------------------------------------------------------------------------------------------------------------
FUND ANNUAL EXPENSES 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%
==================================================================================================================
==================================================================================================================
SEPARATE ACCOUNT ANNUAL PBHG INSURANCE SERIES PBHG INSURANCE SERIES PBHG INSURANCE SERIES
Expenses 4/ (as a percentage of FUND, INC.-PBHG GROWTH FUND, INC.-PBHG LARGE FUND, INC.-PBHG
average Separate Account assets) II PORTFOLIO10 CAP GROWTH PORTFOLIO10 TECHNOLOGY &
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
Separate Account 0.00% 0.00% 0.00%
- ------------------------------------------------------------------------------------------------------------------
Total Separate Account Annual
Expenses 1.40% 1.40% 1.40%
- ------------------------------------------------------------------------------------------------------------------
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%
==================================================================================================================
</TABLE>
- -----------------------
10/ The Adviser has voluntarily agreed to waive or limit advisory fees or assume
Other Expenses of the Portfolios in order to limit total expenses to not more
than: 1.20% of the average daily net assets of the PBHG Insurance Series Fund,
Inc. - PBHG Growth II Portfolio and PBHG Insurance Series Fund, Inc.-PBHG
Technology & Communications Portfolio 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 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%, respectively; for the PBHG Insurance
Series Fund, Inc.-PBHG Large Cap Growth Portfolio would have been 0.75% and
1.13%.
- --------------------------------------------------------------------------------
Page 18
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- -------------------------------------------------------------------------------
================================================================================
SEPARATE ACCOUNT ANNUAL EXPENSES4 (as a percentage THE TIMOTHY PLAN VARIABLE
of average Separate Account assets) SERIES
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 Expenses 1.40%
===============================================================================
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%
================================================================================
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 ____ 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 CHARGE IS INCLUDED IN THE EXAMPLES AS $1.
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 table and examples do not include charges to the Owner for
premium taxes.
- --------------------
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 19
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- -------------------------------------------------------------------------------
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:
<TABLE>
<CAPTION>
=============================================================================================
SUB-ACCOUNT 1 YEAR 3 YEARS
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Janus A.S. Aggressive Growth Portfolio $103 $155
- ---------------------------------------------------------------------------------------------
Janus A.S. Worldwide Growth Portfolio $103 $155
- ---------------------------------------------------------------------------------------------
Janus A.S. Balanced Portfolio $104 $158
- ---------------------------------------------------------------------------------------------
Janus A.S. Growth Portfolio $103 $153
- ---------------------------------------------------------------------------------------------
Janus A.S. International Growth Portfolio $105 $162
- ---------------------------------------------------------------------------------------------
Dreyfus V.I.F. Capital Appreciation Portfolio $104 $157
- ---------------------------------------------------------------------------------------------
Dreyfus V.I.F. Money Market Portfolio $102 $150
- ---------------------------------------------------------------------------------------------
Dreyfus V.I.F. Growth and Income Portfolio $104 $157
- ---------------------------------------------------------------------------------------------
Dreyfus V.I.F. Small Cap Portfolio $104 $156
- ---------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund, Inc. $104 $157
- ---------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund $98 $140
- ---------------------------------------------------------------------------------------------
Strong Opportunity Fund II, Inc. $107 $168
- ---------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, Inc.-Strong Growth Fund II $108 $169
- ---------------------------------------------------------------------------------------------
INVESCO VIF-Industrial Income Portfolio $105 $160
- ---------------------------------------------------------------------------------------------
INVESCO VIF-Total Return Portfolio $105 $160
- ---------------------------------------------------------------------------------------------
INVESCO VIF-High Yield Portfolio $108 $169
- ---------------------------------------------------------------------------------------------
Morgan Stanley Universal Funds, Inc.-Mid Cap Value Portfolio $106 $165
- ---------------------------------------------------------------------------------------------
Morgan Stanley Universal Funds, Inc.-U.S. Real Estate Portfolio $107 $166
- ---------------------------------------------------------------------------------------------
Morgan Stanley Universal Funds, Inc.-Value Portfolio $104 $158
- ---------------------------------------------------------------------------------------------
Morgan Stanley Universal Funds, Inc.-Emerging Markets
Equity Portfolio $113 $187
- ---------------------------------------------------------------------------------------------
Morgan Stanley Universal Funds, Inc.-Fixed Income Portfolio $103 $153
- ---------------------------------------------------------------------------------------------
PBHG Insurance Series Fund, Inc.-PBHG Growth II Portfolio $108 $169
- ---------------------------------------------------------------------------------------------
PBHG Insurance Series Fund, Inc.-PBHG Large Cap Growth Portfolio $107 $166
- ---------------------------------------------------------------------------------------------
PBHG Insurance Series Fund, Inc.-PBHG Technology &
Communications Portfolio $108 $169
- ---------------------------------------------------------------------------------------------
The Timothy Plan Variable Series $108 $169
- ---------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Page 20
<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:
<TABLE>
<CAPTION>
=============================================================================================
SUB-ACCOUNT 1 YEAR 3 YEARS
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
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. Small 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 II $28 $89
- ---------------------------------------------------------------------------------------------
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 Portfolio $26 $85
- ---------------------------------------------------------------------------------------------
Morgan Stanley Universal Funds, Inc.-U.S. Real Estate Portfolio $27 $86
- ---------------------------------------------------------------------------------------------
Morgan Stanley Universal Funds, Inc.-Value Portfolio $24 $78
- ---------------------------------------------------------------------------------------------
Morgan Stanley Universal Funds, Inc.-Emerging Markets
Equity Portfolio $33 $107
- ---------------------------------------------------------------------------------------------
Morgan Stanley Universal Funds, Inc.-Fixed Income Portfolio $23 $73
- ---------------------------------------------------------------------------------------------
PBHG Insurance Series Fund, Inc.-PBHG Growth II Portfolio $28 $89
- ---------------------------------------------------------------------------------------------
PBHG Insurance Series Fund, Inc.-PBHG Large Cap Growth Portfolio $27 $86
- ---------------------------------------------------------------------------------------------
PBHG Insurance Series Fund, Inc.-PBHG Technology &
Communications Portfolio $28 $89
- ---------------------------------------------------------------------------------------------
The Timothy Plan Variable Series $28 $89
=============================================================================================
</TABLE>
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 21
<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 ndiversified 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. 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 22
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- -------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO. 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. 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. 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 RESPONSIVE 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. 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 23
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- -------------------------------------------------------------------------------
INVESCO VARIABLE INVESTMENT FUNDS, INC.:
INDUSTRIAL INCOME PORTFOLIO. The investment objective of the Industrial
Income Portfolio 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
Portfolio is to seek a high total return on investment through capital
appreciation and current income. The Total Return Portfolio 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
Portfolio 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 Portfolio 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
Portfolio'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 24
<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 Dean Witter & Co.) serves as the investment adviser to
this Portfolio.
PBHG INSURANCE SERIES FUND, INC.:
PBHG INSURANCE SERIES FUND, INC.: 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 adviser 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 is available to separate accounts of other insurance
companies offering variable annuity and variable life products, and certain
Funds may be available to qualified pension and retirement plans, there is a
possibility that a material conflict may arise between the interests of the
Separate Account and one or more other separate accounts or plans investing in
the Fund. In the event of a material conflict, the affected insurance companies
and plans will take any necessary steps to resolve the matter, including
discontinuing investment in the particular Fund. See the Fund prospectuses for
greater detail.
- --------------------------------------------------------------------------------
Page 25
<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. For each additional Sub-Account, the Separate 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 26
<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.
- --------------------------------------------------------------------------------
Page 27
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- -------------------------------------------------------------------------------
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 resolution 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 ____.) Changes
to the Sub-Accounts may be made at the discretion of the Company. (See
"Additions, Deletions, or Substitutions," page ____.)
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 "Contract(s)" throughout this Prospectus shall also
mean Certificates issued under group Contracts, except where noted. The Company
reserves the right to make any modification to conform the Contracts to, or give
the Owner the benefit of, any applicable law. The obligations under the
Contracts are obligations of the Company.
The Company is subject to the insurance laws and regulations of all the
jurisdictions where it is licensed to operate. The availability of certain
Contract rights and provisions depends on state approval and/or filing and
review processes in each such jurisdiction. Where required by law or regulation,
the Contracts will be modified accordingly.
Fixed Account Values, Variable Account Values, benefits and charges will be
calculated separately for each Contract. The various administrative rules
described below will apply separately to each Contract, unless otherwise noted.
The Company reserves the right to terminate any Contract at any time the
Surrender Value is less than $500, 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, and
less the bonus amount(s) credited to the Purchase Payment(s), 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 Company will refund
Purchase Payment(s), less the bonus amount(s) credited to the Purchase
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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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. In any event, the Owner will bear the risk of investment gains or losses
on any bonus amount(s) allocated to a Sub-Account during the Right to Cancel
period. 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.
PURCHASE PAYMENTS
PURCHASE PAYMENTS. Currently, the minimum initial Purchase Payment is $5,000.
Subsequent Purchase Payments must be at least $50 for Qualified Contracts and
$100 for Non-Qualified Contracts. 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 initial Purchase Payment or the minimum allowable
subsequent Purchase Payment, at its discretion and at any time, when 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.
PURCHASE PAYMENT BONUS. A bonus in the amount of 3% of the Purchase Payment will
be credited to each Purchase Payment received by the Company. The bonus will be
added to and will be deemed part of the Purchase Payment for all purposes under
a Contract and this Prospectus except where otherwise specifically noted. For
example, the bonus will be allocated as part of the Purchase Payment allocation.
If the bonus is returned to the Owner on a full or partial surrender, a CDSC, to
the extent applicable, will be deducted from the bonus amount.
ALLOCATION OF PURCHASE PAYMENTS. Notwithstanding the foregoing, the bonus will
not be returned to an Owner if a Contract is canceled under the Right to Cancel
provision, if any, or if a Contract is surrendered in full during the first
Contract Year. In either case the bonus will be forfeited but the Owner will
bear the risk of investment gains or losses on the amount of the bonus which was
allocated to a Sub-Account.
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
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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.
VARIABLE ACCOUNT VALUE. 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. 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.
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 INVESTOR 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
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(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.
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
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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.
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 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 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
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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 Surrender 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) during the first Contract Year, the amount of the bonus(es)
credited to Purchase Payment(s); less
3) any applicable CDSC; less
4) any outstanding loans; and less
5) 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. Upon payment of the Surrender Value
to the Owner, the Contract will be terminated. Any bonus amounts which were
credited to the Account Value will be forfeited upon a full surrender of the
Surrender Value during the first Contract Year. The Owner will bear the risk of
investment gains or losses on the bonus amounts which are forfeited.
A full or partial surrender may be subject to a CDSC as set forth in this
Prospectus. (See "Contingent Deferred Sales Charge ("CDSC")," page ____.)
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 ___.)
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;
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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 (including the bonuses
thereon); 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 ____.) 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 ----.)
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.
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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. The Death Benefit will be an amount equal to the greater
of:
1) the Account Value as of the Death Benefit Valuation Date; or
2) one hundred percent (100%) of the Purchase Payment(s) received by
the Company, including the Purchase Payment bonus(es) credited
thereto, less any amounts returned to the Owner and any CDSCs
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 ____.)
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
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not designated a Beneficiary, or if no Beneficiary designated by the Owner
survives the Owner, then the Beneficiary will be the Owner's estate.
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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 8% of Purchase Payments (including the bonuses thereon) which are
returned to the Owner 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
(including the bonus thereon). 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 (including the bonuses thereon) on a
first-in, first-out basis.
============================================================================
Number of Full Years Contingent Deferred Sales
Elapsed Between Date of Receipt of Charge as a Percentage of
Purchase Payment and Date Written Associated Purchase
Request for Surrender Received Payment Surrendered
=============================== ======================================
0 8%
=============================== ======================================
1 8%
=============================== ======================================
2 8%
=============================== ======================================
3 7%
=============================== ======================================
4 6%
=============================== ======================================
5 5%
=============================== ======================================
6 3%
=============================== ======================================
7 2%
=============================== ======================================
8 or more 0%
=============================== ======================================
In no event shall the CDSC assessed against the Contract exceed 8% of the
aggregate Purchase Payment(s) (including bonus(es) thereon).
Any Purchase Payments (including bonuses thereon) that have been held by the
Company for at least eight 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 ___.)
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.
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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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 eight 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.
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 Contract, 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.
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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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%. 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.
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 ____.)
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REDUCTION OR ELIMINATION OF CONTRACT CHARGES (GROUP CONTRACTS ONLY). The CDSC
and administrative charges under the Contract may be reduced or eliminated when
certain sales of the Contract result in savings or reduction of sales expenses.
The entitlement to such a reduction in the CDSC or the administrative charges
will be based on the following: (1) the size and type of the group to which
sales are to be made; (2) the total amount of Purchase Payments to be received;
and (3) any prior or existing relationship with the Company. The CDSC and
administrative charges may be reduced or waived in connection with a Contract
offered to a group of employees of the Company, its subsidiaries and/or
affiliates. There may be other circumstances, of which the Company is not
presently aware, which could result in fewer sales expenses. In no event will
reduction or elimination of the CDSC or the administrative charge be permitted
where such reduction or elimination will be unfairly discriminatory to any
person.
SETTLEMENT OPTIONS
ANNUITY COMMENCEMENT DATE. The Annuity Commencement Date is shown on the
Contract Specifications page. The Owner may change the Annuity Commencement Date
by Written Request made at least 30 days prior to the date that Annuity Benefit
payments are scheduled to begin. Unless the Company agrees otherwise, the
Annuity Commencement Date cannot be later than the Contract Anniversary
following the 85th birthday of the eldest Owner, or five years after the
Contract Effective Date, whichever is later.
ELECTION OF SETTLEMENT OPTION. If the Owner is alive on the Annuity Commencement
Date and unless otherwise directed, the Company will apply the Account Value,
less premium taxes, if any, according to the settlement option elected.
(Notwithstanding the foregoing, for Qualified Contracts, a surrender will be
deemed to have been made, and an amount equal to the Surrender Value as of the
Annuity Commencement Date will be used to provide Annuity Benefit payments
commencing on or after the Annuity Commencement Date if the payee is a
non-natural person, unless the non-natural person payee is the Owner of the
Individual Contract or Group Contract and has an immediate obligation to make
corresponding payments of an Annuity Benefit to the Annuitant.)
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).
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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FIXED DOLLAR BENEFIT. Fixed Dollar Benefit payments are determined by
multiplying the Fixed Account Value (expressed in thousands of dollars and after
deduction of any fees and charges, loans, or applicable premium tax not
previously deducted) by the amount of the monthly payment per $1,000 of value
obtained from the Settlement Option Table for the settlement option elected.
Fixed Dollar Benefit payments will remain level for the duration of the payment
period.
If at the time a Fixed Dollar Benefit is elected, the Company has available
options or rates on a more favorable basis than those guaranteed, the higher
benefits shall be applied and shall not change for as long as that election
remains in force.
VARIABLE DOLLAR BENEFIT. The first monthly Variable Dollar Benefit payment is
equal to the Owner's Variable Account Value (expressed in thousands of dollars
and after deduction of any fees and charges, loans, or applicable premium tax
not previously deducted) as of the end of the Valuation Period immediately
preceding the applicable Commencement Date multiplied by the amount of the
monthly payment per $1,000 of value obtained from the Settlement Option Table
for the Benefit Payment option elected less the pro rata portion of the Contract
Maintenance Fee.
The number of Benefit Units in each Sub-Account held by the Owner is determined
by dividing the dollar amount of the first monthly Variable Dollar Benefit
payment from each Sub-Account by the Benefit Unit Value for that Sub-Account as
of the applicable Commencement Date. The number of Benefit Units remains fixed
during the Benefit Payment Period, except as a result of any transfers among
Sub-Accounts after the applicable Commencement Date.
The dollar amount of the second and any subsequent Variable Dollar Benefit
payment will reflect the investment performance of the Sub-Account(s) selected
and may vary from month to month. The total amount of the second and any
subsequent Variable Dollar Benefit payment will be equal to the sum of the
payments from each Sub-Account less a pro rata portion of the Contract
Maintenance Fee. Where an Owner elects a Variable Dollar Benefit, there is a
risk that only one Benefit Payment will be made under any settlement option, if:
(i) at the end of the applicable Valuation Period, the Owner's Variable Account
Value has declined to zero; or (ii) the person on whose life Benefit Payments
are based dies prior to the second Benefit Payment.
The payment from each Sub-Account is found by multiplying the number of Benefit
Units held in each Sub-Account by the Benefit Unit Value for that Sub-Account as
of the end of the fifth Valuation Period preceding the due date of the payment.
The Benefit Unit Value for each Sub-Account is originally established in the
same manner as Accumulation Unit Values. Thereafter, the Benefit Unit 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.
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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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.
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.
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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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.
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.
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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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.
ANNUAL RE0PORT. At least once each Contract Year, the Company will provide a
report of the Contract's current values and any other information required by
law, until the first to occur of the following:
1) the date the Contract is fully surrendered;
2) the Annuity Commencement Date; or
3) the Death Benefit Commencement Date.
INCONTESTABILITY. No Contract shall be contestable by the Company.
ENTIRE CONTRACT. The Company issues the Contract in consideration and acceptance
of the payment of the initial Purchase Payment. In those states that require a
written application, a copy of the application will be attached to and become
part of the Contract. Only statements in the application, if any, or made
elsewhere by the Owner in consideration for the Contract will be used to void
the Owner's interest under the Contract, or to defend a claim based on it. Such
statements are representations and not warranties.
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CHANGES -- WAIVERS. No changes or waivers of the terms of the Contract are
valid unless made in writing by the Company's President, Vice President, or
Secretary. The Company reserves the right both to administer and to change the
provisions of the Contract to conform to any applicable laws, regulations or
rulings issued by a governmental agency.
NOTICES AND DIRECTIONS. The Company will not be bound by any authorization,
election or notice which is not made by Written Request.
Any written notice requirement by the Company to the Owner will be satisfied by
the mailing of any such required written notice, by first-class mail, to the
Owner's last known address as shown on the Company's records.
FEDERAL TAX MATTERS
INTRODUCTION. The following discussion is a general description of federal tax
considerations relating to the 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
Contract. Some tax-qualified arrangements are subject to distribution and other
requirements that are not incorporated in the administration of the Contract.
Owners are responsible for determining that contributions, distributions and
other transactions with respect to Qualified Contracts satisfy applicable law.
Therefore, purchasers of Qualified Contracts should seek competent legal and tax
advice regarding the suitability of the Contract for their situation, the
applicable requirements, and the tax treatment of the rights and benefits of the
Contract. The Statement of Additional Information discusses the requirements for
qualifying as an annuity.
TAXATION OF ANNUITIES IN GENERAL. Section 72 of the Code governs taxation of
annuities in general. The Company believes that the Owner who is a natural
person generally is not taxed on increases in the value of an Account until
distribution occurs by withdrawing all or part of the Account Value (E.G.,
surrenders or annuity payments under the settlement option elected.) The taxable
portion of a distribution (in the form of a single sum payment or an annuity) is
generally taxable as ordinary income.
The following discussion generally applies to a Contract owned by a natural
person.
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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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 THE CONTRACT. 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 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.
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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TAX-SHELERTED 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) of
the Code, 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
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
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- -------------------------------------------------------------------------------
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 GroupSM, 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.
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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VOTING RIGHTS
To the extent required by applicable law, all Fund shares held in the Separate
Account will be voted by the Company at regular and special shareholder meetings
of the respective Funds in accordance with instructions received from persons
having voting interests in the corresponding Sub-Account. If, however, the 1940
Act or any regulation thereunder should be amended, or if the present
interpretation thereof should change, or if the Company determines that it is
allowed to vote all shares in its own right, the Company may elect to do so.
The person with the voting interest is the Owner, or the Person Controlling
Payments, if different from the Owner. The number of votes which are available
will be calculated separately for each Sub-Account. Before the Annuity
Commencement Date, that number will be determined by applying the Owner's
percentage interest, if any, in a particular Sub-Account to the total number of
votes attributable to that Sub-Account. The Owner, or the Person Controlling
Payments, if different from the Owner, holds a voting interest in each
Sub-Account to which the Account Value is allocated. After the Annuity
Commencement Date, the number of votes decreases as 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 Securities and Exchange Commission, located at 450 Fifth
Street, N.W., Washington, D.C., and may also be accessed at the Commission's Web
site http:\\www.sec.gov.
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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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
--------------------------------------------
Page
----
ANNUITY INVESTORS LIFE INSURANCE COMPANY(REGISTERED)..................__
General Information and History..............................__
State Regulation.............................................__
SERVICES..............................................................__
Safekeeping of Separate Account Assets.......................__
Records and Reports..........................................__
Experts......................................................__
DISTRIBUTION OF THE CONTRACTS.........................................__
CALCULATION OF PERFORMANCE INFORMATION................................__
Money Market Sub-Account Standardized Yield Calculation......__
Other Sub-Account Standardized Yield Calculation.............__
Standardized Annual Total Return Calculation.................__
Standardized Annual Total Return.............................
Other Performance Data.......................................__
Nonstandardized Annual Total Return..........................
ANNUITY PAYMENTS-SETTLEMENT OPTION TABLES.............................__
FEDERAL TAX MATTERS...................................................__
Taxation of the Company......................................__
Tax Status of the Contract...................................__
FINANCIAL STATEMENTS..................................................__
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - --
- - - - - - - - - - - - - - - - - - - -
Copies of the Statement of Additional Information dated ________, 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: _____________________________________________________________________
Address: _____________________________________________________________________
City: _____________________________________________________________________
State: _____________________________________________________________________
Zip: _____________________________________________________________________
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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NOTES
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<PAGE>
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 INDEPENDENCE[SERVICEMARK]; THE COMMODORE ADVANTAGE[SERVICEMARK]
This Statement of Additional Information expands upon subjects discussed in the
current Prospectuses for The Commodore AdvantageSERVICEMARK Individual and Group
Flexible Premium Deferred Annuity Contracts and The Commodore
IndependenceSERVICEMARK Individual Flexible Premium Deferred Annuity Contracts
(collectively, the "Contracts") offered by Annuity Investors Life Insurance
Company[REGISTERED]. A copy of either Prospectus dated May ___, 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 Prospectuses 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 APPLICABLE CONTRACT.
Dated May ___, 1998
<PAGE>
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............................6
STANDARDIZED ANNUAL TOTAL RETURN CALCULATION.................................7
STANDARDIZED ANNUAL TOTAL RETURN.............................................8
OTHER PERFORMANCE DATA.......................................................9
NON-STANDARDIZED ANNUAL TOTAL RETURN........................................11
ANNUITY PAYMENTS-SETTLEMENT OPTION TABLES.....................................12
INDIVIDUAL QUALIFIED CONTRACTS..............................................12
INDIVIDUAL NON-QUALIFIED CONTRACTS..........................................13
GROUP CONTRACTS.............................................................16
FEDERAL TAX MATTERS...........................................................18
TAXATION OF THE COMPANY.....................................................18
TAX STATUS OF THE CONTRACTS.................................................18
FINANCIAL STATEMENTS..........................................................19
________________________________________________________________________________
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<PAGE>
________________________________________________________________________________
The following information supplements the information in the Prospectuses about
the Contracts. Terms used in this Statement of Additional Information have the
same meaning as in the Prospectuses.
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
GroupSERVICEMARK, 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.
No Commodore Advantage or Commodore Independence Contracts were sold as of
December 31, 1997.
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:
YIELD EFFECTIVE YIELD
----- ---------------
3.72% 3.80%
________________________________________________________________________________
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<PAGE>
________________________________________________________________________________
The yield on amounts held in the Money Market Sub-Account normally will
fluctuate on a daily basis. Therefore, the disclosed yield for any given past
period is not an indication or representation of future yields. The Money Market
Sub-Account's actual yield is affected by changes in interest rates on money
market securities, average portfolio maturity of the Money Market Fund or
substitute funding vehicle, the types and quality of portfolio securities held
by the Money Market Fund or substitute funding vehicle, and operating expenses.
IN ADDITION, THE YIELD FIGURES DO NOT REFLECT THE EFFECT OF ANY CONTINGENT
DEFERRED SALES CHARGE ("CDSC") 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, if applicable to a particular Contract, is
discussed in the Prospectus for that Contract.
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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<PAGE>
________________________________________________________________________________
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)[SUPERSCRIPT]n = ERV
Where:
P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = "ending redeemable value" of a hypothetical $1,000 payment made
at the beginning of the one-, five- or ten-year period at the
end of the one-, five- or ten-year period (or fractional
portion thereof).
All recurring fees, such as the Contract Maintenance Fee and the Mortality and
Expense Risk Charge, which are charged to all Contracts 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 type of Contract.
________________________________________________________________________________
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<PAGE>
________________________________________________________________________________
<TABLE>
<CAPTION>
STANDARDIZED ANNUAL TOTAL RETURN
COMMODORE COMMODORE
INDEPENDENCE ADVANTAGE
1 YEAR 1 YEAR
(TO 12/31/97) (TO 12/31/97)
<S> <C> <C>
THE DREYFUS CORPORATION:
Small Cap Portfolio (VIF) 11.14% 4.14%
Capital Appreciation Portfolio (VIF) 22.29% 15.29%
The Dreyfus Socially Responsible Growth Fund, Inc. 22.66% 15.66%
Dreyfus Stock Index Fund 27.12% 20.12%
Growth and Income Portfolio (VIF) 10.61% 3.61%
Money Market Account (VIF) -1.04% -8.04%
JANUS CAPITAL CORPORATION:
Janus Aspen Worldwide Growth Portfolio 16.47% 9.47%
Janus Aspen Aggressive Growth Portfolio 7.11% 0.11%
Janus Aspen Balanced Portfolio 16.42% 9.42%
Janus Aspen International Growth Portfolio 12.87% 5.87%
Janus Aspen Growth Portfolio 17.05% 10.05%
INVESCO FUNDS GROUP, INC.:
INVESCO Industrial Income Portfolio (VIF) 22.40% 15.40%
INVESCO Total Return Portfolio (VIF) 17.22% 10.22%
INVESCO High Yield Portfolio (VIF) 11.71% 4.71%
MORGAN STANLEY ASSET MANAGEMENT INC.:
Morgan Stanley Universal Funds U.S. Real Estate Portfolio1(1) N/A N/A
Morgan Stanley Universal Funds Fixed Income Portfolio(1) N/A N/A
Morgan Stanley Universal Funds Value Portfolio(1) N/A N/A
Morgan Stanley Universal Funds Emerging Markets Equity Portfolio -5.08% -12.08%
Morgan Stanley Universal Funds Mid Cap Value Portfolio1(1) N/A N/A
PILGRIM BAXTER & ASSOCIATES, LTD.:
PBHG Insurance Series Fund, Inc. - PBHG Technology
& Communications Portfolio1(1) N/A N/A
PBHG Insurance Series Fund, Inc. - PBHG Growth II Portfolio1(1) N/A N/A
PBHG Insurance Series Fund, Inc. - PBHG Large Cap Growth Portfolio1(1) N/A N/A
STRONG CAPITAL MANAGEMENT, INC.
Strong Opportunity Fund II, Inc. 19.72% 12.72
Strong Growth Fund II (VIF) 23.96% 16.96
THE TIMOTHY PLAN VARIABLE SERIES1(1) N/A N/A
(1) Annual Total Return not available because Fund not in existence for one
full year.
</TABLE>
________________________________________________________________________________
Page 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 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.
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
________________________________________________________________________________
Page 9
<PAGE>
________________________________________________________________________________
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.
________________________________________________________________________________
Page 10
<PAGE>
________________________________________________________________________________
NON-STANDARDIZED ANNUAL TOTAL RETURN
COMMODORE INDEPENDENCE
AND
COMMODORE ADVANTAGE
1 YEAR
(TO 12/31/97)
THE DREYFUS CORPORATION:
Small Cap Portfolio (VIF) 15.14%
Capital Appreciation Portfolio (VIF) 26.29%
The Dreyfus Socially Responsible Growth Fund, Inc. 26.66%
Dreyfus Stock Index Fund 31.12%
Growth and Income Portfolio (VIF) 14.61%
Money Market Portfolio (VIF) 2.96%
JANUS CAPITAL CORPORATION:
Janus Aspen Worldwide Growth Portfolio 20.47%
Janus Aspen Aggressive Growth Portfolio 11.11%
Janus Aspen Balanced Portfolio 20.42%
Janus Aspen International Growth Portfolio 16.87%
Janus Aspen Growth Portfolio 21.05%
INVESCO FUNDS GROUP, INC.:
INVESCO Industrial Income Portfolio (VIF) 26.40%
INVESCO Total Return Portfolio (VIF) 21.22%
INVESCO High Yield Portfolio (VIF) 15.71%
MORGAN STANLEY ASSET MANAGEMENT INC.:
Morgan Stanley Universal Funds U.S. Real Estate Portfolio(1) N/A
Morgan Stanley Universal Funds Fixed Income Portfolio1(1) N/A
Morgan Stanley Universal Funds Value Portfolio1(1) N/A
Morgan Stanley Universal Funds Emerging Markets
Equity Portfolio -1.08%
Morgan Stanley Universal Funds Mid Cap Value Portfolio1(1) N/A
PILGRIM BAXTER & ASSOCIATES, LTD.:
PBHG Insurance Series Fund, Inc. - PBHG Technology &
Communications Portfolio(1) N/A
PBHG Insurance Series Fund, Inc. - PBHG Growth II
Portfolio(1) N/A
PBHG Insurance Series Fund, Inc. - PBHG Large Cap
Growth Portfolio(1) N/A
STRONG CAPITAL MANAGEMENT, INC.
Strong Opportunity Fund II, Inc. 23.72%
Strong Growth Fund II (VIF) 27.96%
THE TIMOTHY PLAN VARIABLE SERIES(1) N/A
(1) Annual Total Return not available because Fund not in existence for one
full year.
________________________________________________________________________________
Page 11
<PAGE>
________________________________________________________________________________
ANNUITY PAYMENTS-SETTLEMENT OPTION TABLES
INDIVIDUAL QUALIFIED CONTRACTS
<TABLE>
<CAPTION>
OPTION A TABLE -- INCOME FOR A FIXED PERIOD
Payments for fixed number of years for each $1,000 applied.
- ----------------------------------------------------------------------------------------------------------------------------------
Terms Terms Terms
of Semi- of Semi- of Semi-
Payments Annual Annual Quarterly Monthly Payments Annual Annual Quarterly Monthly Payments Annual Annual Quarterly Monthly
- ----------------------------------------------------------------------------------------------------------------------------------
Years Years Years
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6 184.60 91.62 45.64 15.18 11 108.08 53.64 26.72 8.88 16 79.61 39.51 19.68 6.54
7 160.51 79.66 39.68 13.20 12 100.46 49.86 24.84 8.26 17 75.95 37.70 18.78 6.24
8 142.46 70.70 35.22 11.71 13 94.03 46.67 23.25 7.73 18 72.71 36.09 17.98 5.98
9 128.43 63.74 31.75 10.56 14 88.53 43.94 21.89 7.28 19 69.81 34.65 17.26 5.74
10 117.23 58.18 28.98 9.64 15 83.77 41.57 20.71 6.89 20 67.22 33.36 16.62 5.53
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
OPTION B TABLE - LIFE ANNUITY
With Payments For At Least A Fixed Period
----------------------------------------------
60 120 180 240
MONTHS MONTHS MONTHS MONTHS
----------------------------------------------
Age
----------------------------------------------
55 $4.42 $4.39 $4.32 $4.22
56 4.51 4.47 4.40 4.29
57 4.61 4.56 4.48 4.35
58 4.71 4.65 4.56 4.42
59 4.81 4.75 4.64 4.49
60 4.92 4.86 4.73 4.55
61 5.04 4.97 4.83 4.62
62 5.17 5.08 4.92 4.69
63 5.31 5.20 5.02 4.76
64 5.45 5.33 5.12 4.83
65 5.61 5.46 5.22 4.89
66 5.77 5.60 5.33 4.96
67 5.94 5.75 5.43 5.02
68 6.13 5.91 5.54 5.08
69 6.33 6.07 5.65 5.14
70 6.54 6.23 5.76 5.19
71 6.76 6.41 5.86 5.24
72 7.00 6.58 5.96 5.28
73 7.26 6.77 6.06 5.32
74 7.53 6.95 6.16 5.35
----------------------------------------------
________________________________________________________________________________
Page 12
<PAGE>
<TABLE>
<CAPTION>
________________________________________________________________________________
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
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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.
</TABLE>
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
<TABLE>
<CAPTION>
OPTION A TABLE - INCOME FOR A FIXED PERIOD
Payments for fixed number of years for each $1,000 applied.
- ----------------------------------------------------------------------------------------------------------------------------------
Terms Terms Terms
of Semi- of Semi- of Semi-
Payments Annual Annual Quarterly Monthly Payments Annual Annual Quarterly Monthly Payments Annual Annual Quarterly Monthly
- ----------------------------------------------------------------------------------------------------------------------------------
Years Years Years
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6 184.60 91.62 45.64 15.18 11 108.08 53.64 26.72 8.88 16 79.61 39.51 19.68 6.54
7 160.51 79.66 39.68 13.20 12 100.46 49.86 24.84 8.26 17 75.95 37.70 18.78 6.24
8 142.46 70.70 35.22 11.71 13 94.03 46.67 23.25 7.73 18 72.71 36.09 17.98 5.98
9 128.43 63.74 31.75 10.56 14 88.53 43.94 21.89 7.28 19 69.81 34.65 17.26 5.74
10 117.23 58.18 28.98 9.64 15 83.77 41.57 20.71 6.89 20 67.22 33.36 16.62 5.53
- ----------------------------------------------------------------------------------------------------------------------------------
________________________________________________________________________________
Page 13
</TABLE>
<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
------------------------------------------------
________________________________________________________________________________
Page 14
<PAGE>
________________________________________________________________________________
OPTION C TABLES - JOINT AND ONE-HALF SURVIVOR ANNUITY
Monthly payments for each $1,000 of proceeds by ages of persons named.*
- --------------------------------------------------------------------------------
MALE FEMALE SECONDARY AGE
PRIMARY
AGE
-------------------------------------------------------------------------
60 61 62 63 64 65 66 67 68 69 70
- --------------------------------------------------------------------------------
60 $4.70 $4.73 $4.76 $4.79 $4.82 $4.85 $4.88 $4.91 $4.94 $4.96 $4.99
61 4.78 4.81 4.84 4.88 4.91 4.94 4.97 5.00 5.03 5.06 5.09
62 4.86 4.89 4.93 4.96 5.00 5.03 5.07 5.10 5.13 5.16 5.19
63 4.94 4.97 5.01 5.05 5.09 5.13 5.16 5.20 5.24 5.27 5.31
64 5.02 5.06 5.10 5.14 5.18 5.23 5.27 5.31 5.34 5.38 5.42
65 5.10 5.15 5.19 5.24 5.28 5.33 5.37 5.41 5.46 5.50 5.54
66 5.19 5.24 5.28 5.33 5.38 5.43 5.48 5.52 5.57 5.62 5.66
67 5.28 5.33 5.38 5.43 5.48 5.53 5.59 5.64 5.69 5.74 5.79
68 5.37 5.42 5.48 5.53 5.59 5.64 5.70 5.75 5.81 5.86 5.92
69 5.46 5.52 5.57 5.63 5.69 5.75 5.81 5.87 5.93 5.99 6.05
70 5.55 5.61 5.67 5.74 5.80 5.86 5.93 5.99 6.06 6.12 6.19
- --------------------------------------------------------------------------------
*Payments after the death of the Primary Payee will be one-half of the amount
shown.
Monthly payments for each $1,000 of proceeds by ages of persons named.*
- --------------------------------------------------------------------------------
MALE FEMALE PRIMARY AGE
SECONDARY
AGE
-------------------------------------------------------------------------
60 61 62 63 64 65 66 67 68 69 70
- --------------------------------------------------------------------------------
60 $4.46 $4.54 $4.62 $4.71 $4.79 $4.88 $4.98 $5.07 $5.17 $5.27 $5.38
61 4.48 4.56 4.65 4.73 4.82 4.91 5.01 5.11 5.21 5.31 5.42
62 4.50 4.58 4.67 4.75 4.85 4.94 5.04 5.14 5.25 5.36 5.47
63 4.52 4.60 4.69 4.78 4.87 4.97 5.07 5.17 5.28 5.40 5.51
64 4.53 4.62 4.71 4.80 4.90 5.00 5.10 5.21 5.32 5.44 5.56
65 4.55 4.63 4.72 4.82 4.92 5.02 5.13 5.24 5.35 5.48 5.60
66 4.56 4.65 4.74 4.84 4.94 5.05 5.16 5.27 5.39 5.51 5.64
67 4.57 4.66 4.76 4.86 4.96 5.07 5.18 5.30 5.42 5.55 5.68
68 4.59 4.68 4.78 4.88 4.98 5.09 5.21 5.33 5.45 5.59 5.72
69 4.60 4.69 4.79 4.89 5.00 5.11 5.23 5.36 5.48 5.62 5.76
70 4.61 4.70 4.80 4.91 5.02 5.13 5.25 5.38 5.51 5.65 5.80
- --------------------------------------------------------------------------------
*Payments after the death of the Primary Payee will be one-half of the amount
shown.
________________________________________________________________________________
Page 15
<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
<TABLE>
<CAPTION>
OPTION A TABLE - INCOME FOR A FIXED PERIOD
Payments for fixed number of years for each $1,000 applied.
- ----------------------------------------------------------------------------------------------------------------------------------
Terms Terms Terms
of Semi- of Semi- of Semi-
Payments Annual Annual Quarterly Monthly Payments Annual Annual Quarterly Monthly Payments Annual Annual Quarterly Monthly
- ----------------------------------------------------------------------------------------------------------------------------------
Years Years Years
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6 184.6 91.62 45.64 15.18 11 108.08 53.64 26.72 8.88 16 79.61 39.51 19.68 6.54
7 160.5 79.66 39.68 13.20 12 100.46 49.86 24.84 8.26 17 75.95 37.70 18.78 6.24
8 142.4 70.70 35.22 11.71 13 94.03 46.67 23.25 7.73 18 72.71 36.09 17.98 5.98
9 128.4 63.74 31.75 10.56 14 88.53 43.94 21.89 7.28 19 69.81 34.65 17.26 5.74
10 117.2 58.18 28.98 9.64 15 83.77 41.57 20.71 6.89 20 67.22 33.36 16.62 5.53
- ---------------------------------------------------------------------------------------------------------------------------------
________________________________________________________________________________
Page 16
</TABLE>
<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
---------------------------------------------
<TABLE>
<CAPTION>
OPTION C TABLE - JOINT AND ONE-HALF SURVIVOR ANNUITY
Monthly payments for each $1,000 of proceeds by ages of persons named.*
- -------------------------------------------------------------------------------------
Secondary Age
Primary
Age 60 61 62 63 64 65 66 67 68 69 70
<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>
________________________________________________________________________________
Page 17
<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.
________________________________________________________________________________
Page 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.
________________________________________________________________________________
Page 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, 1996 0.000 0.000
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, 1996 0.000 0.000
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/
(i) Amended Schedule 1 to Distribution Agreement (filed
herewith).
(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 Bonus Group Flexible Premium Deferred Annuity
Contract (filed herewith).
(b) Form of Certificate of Participation under Bonus Group
Contract (filed herewith).
(c) Form of Bonus Qualified Individual Flexible Premium Deferred
Annuity Contract (filed herewith).
(d) Form of Bonus Non-Qualified Individual Flexible Premium
Deferred Annuity Contract (filed herewith).
(e) Form of Loan Endorsement to Individual Contract.2/
(f) Form of Texas Optional Retirement Program Endorsement to
Individual Contract.2/
(g) Form of Long-Term Care Waiver Rider to Individual
CONTRACT.2/
(h) Form of Loan Endorsement to Group Contract.2/
(i) Form of Loan Endorsement to Certificate of Participation
under a Group Contract. 2/
(j) Form of Deferred Compensation Endorsement to Group
Contract.2/
<PAGE>
(k) Form of Deferred Compensation Endorsement to Certificate of
Participation under a Group Contract.2/
(l) Form of Texas Optional Retirement Program Endorsement to
Group Contract.2/
(m) Form of Texas Optional Retirement Program Endorsement to
Certificate of Participation under a Group Contract.2/
(n) Form of Long-Term Care Waiver Rider to Group Contract.2/
(o) Form of Long-Term Care Waiver Rider to Certificate of
Participation
under a Group Contract.2/
(p) Form of Individual Retirement Annuity Endorsement to
Individual Qualified Contract (filed herewith).
(q) Form of SIMPLE IRA Endorsement to Qualified Individual
Contract (filed herewith).
(r) Form of Roth IRA Endorsement to Qualified Individual Contract
(filed herewith).
(s) Form of Employer Plan Endorsement to Group Contract (filed
herewith).
(t) Form of Employer Plan Endorsement to Certificate of
Participation under a Group Contract (filed herewith).
(u) Form of Employer Plan Endorsement to Qualified Individual
Contract (filed herewith).
(v) Form of Tax Sheltered Annuity Endorsement to Group
Contract (filed herewith).
(w) Form of Tax Sheltered Annuity Endorsement to Certificate of
Participation under a Group Contract (filed herewith).
(x) Form of Tax Sheltered Annuity Endorsement to Qualified
Individual Contract (filed herewith).
(y) Form of Qualified Pension, Profit Sharing and Annuity Plan
Endorsement to Group Contract (filed herewith).
(z) Form of Qualified Pension, Profit Sharing and Annuity Plan
Endorsement to Certificate of Participation under a Group
Contract (filed herewith).
(aa) Form of Qualified Pension, Profit Sharing and Annuity Plan
Endorsement to Qualified Individual Contract (filed
herewith).
-2-
<PAGE>
(bb) Form of Governmental Section 457 Plan Endorsement to Group
Contract (filed herewith).
(cc) Form of Governmental Section 457 Plan Endorsement to
Certificate of Participation under a Group Contract (filed
herewith).
(dd) Form of Governmental Section 457 Plan Endorsement to
Qualified Individual Contract (filed herewith).
(5) (a) Form of Application for Individual Flexible Premium Deferred
Annuity Contract and Certificate of Participation under a
Group Contract (filed herewith).
(b) 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/
(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/
-3-
<PAGE>
(d) Participation Agreement between Annuity Investors Life
Insurance Company[REGISTERED] and Janus Aspen Series.2/
(i) Amended Schedule A to Participation Agreement between
Annuity Investors Life Insurance Company and Janus
Aspen Series (filed herewith).
(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/
(i) Amended Schedule B to Participation Agreement between
Annuity Investors Life Insurance Company and INVESCO
Variable Investment Funds, Inc. (filed herewith).
(g) Participation Agreement between Annuity Investors Life
Insurance Company[REGISTERED] and Morgan Stanley Universal
Funds, INC.2/
(i) Amended Schedule B to Participation Agreement between
Annuity Investors Life Insurance Company and Morgan
Stanley Universal Funds, Inc. (filed herewith).
(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/
(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/
-4-
<PAGE>
(q) Service Agreement between INVESCO Funds Group, Inc. and
Annuity Investors Life Insurance Company (filed herewith).
(r) Participation Agreement between The Timothy Plan Variable
Series, Timothy Partners, Ltd. and Annuity Investors Life
Insurance Company (filed herewith).
(s) Service Agreement between The Timothy Plan Variable Series
and Annuity Investors Life Insurance Company (filed
herewith).
(9) Opinion and Consent of Counsel (filed herewith).
(10) Consent of Independent Auditors (to be filed).
(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/ Incorporated by reference to Form N-4, filed on behalf of Annuity Investors
Variable Account B, SEC File No. 333-19725 on December 23, 1996.
2/ Incorporated by reference to Pre-Effective Amendment No. 1, filed on behalf
of Annuity Investors Variable Account B, SEC File No. 333-19725 on June 3, 1997
and incorporated herein by reference.
<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
Thomas 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, no Commodore Advantage Contracts had been issued.
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.
(c) Registrant undertakes to deliver any Prospectus and Statement of
Additional Information and any financial statements required to be made
-19-
<PAGE>
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 Registration Statement
to be signed on its behalf by the undersigned in the City of Cincinnati, State
of Ohio on the 31st day of March, 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 Registration Statement has
been signed by the following persons in the capacities and on the dates
indicated.
/s/ Robert Allen Adams Principal Executive March 31, 1998
- ------------------------------ Officer, Director
Robert Allen Adams
/s/ Robert Eugene Allen Principal Financial March 31, 1998
- ------------------------------ Officer
Robert Eugene Allen
/s/ Lynn Edward Laswell Principal Accounting March 31, 1998
- ----------------------------- Officer
Lynn Edward Laswell
-21-
<PAGE>
/s/ Stephen Craig Lindner Director March 31, 1998
- --------------------------------
Stephen Craig Lindner
/s/ William Jack Maney, II Director March 31, 1998
- --------------------------------
William Jack Maney, II
/s/ James Michael Mortensen Director March 31, 1998
- ---------------------------
James Michael Mortensen
/s/ Mark Francis Muething Director March 31, 1998
- ----------------------------
Mark Francis Muething
/s/ Jeffrey Scott Tate Director March 31, 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/
(i) Amended Schedule 1 to Distribution Agreement (filed
herewith).
(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 Bonus Group Flexible Premium Deferred Annuity
Contract (filed herewith).
(b) Form of Certificate of Participation under Bonus Group
Contract (filed herewith).
(c) Form of Bonus Qualified Individual Flexible Premium
Deferred Annuity Contract (filed herewith).
(d) Form of Bonus Non-Qualified Individual Flexible Premium
Deferred Annuity Contract (filed herewith).
(e) Form of Loan Endorsement to Individual Contract.2/
(f) Form of Texas Optional Retirement Program Endorsement to
Individual Contract.2/
(g) Form of Long-Term Care Waiver Rider to Individual
Contract.2/
(h) Form of Loan Endorsement to Group Contract.2/
(i) Form of Loan Endorsement to Certificate of Participation
under a Group Contract. 2/
(j) Form of Deferred Compensation Endorsement to Group
Contract.2/
-23-
<PAGE>
(k) Form of Deferred Compensation Endorsement to Certificate
of Participation under a Group Contract.2/
(l) Form of Texas Optional Retirement Program Endorsement to
Group Contract.2/
(m) Form of Texas Optional Retirement Program Endorsement to
Certificate of Participation under a Group Contract.2/
(n) Form of Long-Term Care Waiver Rider to Group Contract.2/
(o) Form of Long-Term Care Waiver Rider to Certificate of
Participation under a Group Contract.2/
(p) Form of Individual Retirement Annuity Endorsement to
Individual Qualified Contract (filed herewith).
(q) Form of SIMPLE IRA Endorsement to Qualified Individual
Contract (filed herewith).
(r) Form of Roth IRA Endorsement to Qualified Individual
Contract (filed herewith).
(s) Form of Employer Plan Endorsement to Group Contract
(filed herewith).
(t) Form of Employer Plan Endorsement to Certificate of
Participation under a Group Contract (filed herewith).
(u) Form of Employer Plan Endorsement to Qualified
Individual Contract (filed herewith).
(v) Form of Tax Sheltered Annuity Endorsement to Group
Contract (filed herewith).
(w) Form of Tax Sheltered Annuity Endorsement to Certificate
of Participation under a Group Contract (filed
herewith).
(x) Form of Tax Sheltered Annuity Endorsement to Qualified
Individual Contract (filed herewith).
(y) Form of Qualified Pension, Profit Sharing and Annuity
Plan Endorsement to Group Contract (filed herewith).
(z) Form of Qualified Pension, Profit Sharing and Annuity
Plan Endorsement to Certificate of Participation under a
Group Contract (filed herewith).
-24-
<PAGE>
(aa) Form of Qualified Pension, Profit Sharing and Annuity
Plan Endorsement to Qualified Individual Contract (filed
herewith).
(bb) Form of Governmental Section 457 Plan Endorsement to
Group Contract (filed herewith).
(cc) Form of Governmental Section 457 Plan Endorsement to
Certificate of Participation under a Group Contract
(filed herewith).
(dd) Form of Governmental Section 457 Plan Endorsement to
Qualified Individual Contract (filed herewith).
(5) (a) Form of Application for Individual Flexible Premium
Deferred Annuity Contract and Certificate of
Participation under a Group Contract (filed herewith).
(b) 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/
(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/
-25-
<PAGE>
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/
(i) Amended Schedule A to Participation Agreement
between Annuity Investors Life Insurance Company
and Janus Aspen Series (filed herewith).
(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/
(i) Amended Schedule B to Participation Agreement
between Annuity Investors Life Insurance Company
and INVESCO Variable Investment Funds, Inc. (filed
herewith).
(g) Participation Agreement between Annuity Investors Life
Insurance Company[REGISTERED] and Morgan Stanley
Universal Funds, Inc.2/
(i) Amended Schedule B to Participation Agreement
between Annuity Investors Life Insurance Company
and Morgan Stanley Universal Funds, Inc. (filed
herewith).
(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/
-26-
<PAGE>
(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/
(q) Service Agreement between INVESCO Funds Group, Inc. and
Annuity Investors Life Insurance Company (filed
herewith).
(r) Participation Agreement between The Timothy Plan
Variable Series, Timothy Partners, Ltd. and Annuity
Investors Life Insurance Company (filed herewith).
(s) Service Agreement between The Timothy Plan Variable
Series and Annuity Investors Life Insurance Company
(filed herewith).
(9) Opinion and Consent of Counsel (filed herewith).
(10) Consent of Independent Auditors (to be filed).
(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).
-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 (3)(a)(i)
SCHEDULE 1
CONTRACTS SUBJECT TO DISTRIBUTION AGREEMENT
- ---------------------------------------------------------------------------
CONTRACT MARKETING NAME POLICY FORM NOS. SEC REGISTRATION NO.
- ---------------------------------------------------------------------------
Commodore Nauticus G800(95)-3 811-07299/33-59861
- ---------------------------------------------------------------------------
Commodore Americus A800(Q96)-3 811-07299/33-65409
- ---------------------------------------------------------------------------
Commodore Mariner A800(NQ96)-3 811-07299/33-65409
- ---------------------------------------------------------------------------
Commodore Navigator A801-BD(NQRev.3/97)-3 811-08017/333-19725
- ---------------------------------------------------------------------------
Commodore Navigator A801-BD(QRev.3/97)-3 811-08017/333-19725
- ---------------------------------------------------------------------------
Commodore Navigator G801-BD(97)-3 811-08017/333-19725
- ---------------------------------------------------------------------------
Commodore Independence A802(Q98)-3 811-08017/333-19725
- ---------------------------------------------------------------------------
Commodore Independence A802(NQ98)-3 811-08017/333-19725
- ---------------------------------------------------------------------------
Commodore Advantage A803(NQ98)-3 811-08017/333-19725
- ---------------------------------------------------------------------------
Commodore Advantage A803(Q98)-3 811-08017/333-19725
- ---------------------------------------------------------------------------
Commodore Advantage G803(98)-3 811-08017/333-19725
- ---------------------------------------------------------------------------
EFFECTIVE DATE: MAY 1, 1998
EXHIBIT (4)(a)
[GRAPHIC OMITTED]
A Stock Insurance Company
Domicile Address: 580 Walnut Street, Cincinnati, Ohio 45202
Administrative Office:
P. O. Box 5423, Cincinnati, Ohio 45201-5423
GROUP FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
In consideration of the application, if any, the enrollment forms, if any, of
participants hereunder ("Participants"), and the payment of Purchase Payments
for the benefit of Participants, we have issued this Group Flexible Premium
Deferred Variable Annuity Contract ("Contract") to the Contract Owner identified
on the Contract Specifications page, effective as of the Contract Effective Date
and subject to all of the terms and conditions set out on the following pages.
As you read through this Contract, please note that the words "we", "us", "our",
and "Company" refer to Annuity Investors Life Insurance Company. The words "you"
and "your" refer to the Contract Owner.
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
Nonparticipating - No Dividends
BENEFIT PAYMENTS AND OTHER VALUES DESCRIBED IN THIS CONTRACT, WHEN BASED ON THE
INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT, MAY INCREASE OR DECREASE AND ARE
NOT GUARANTEED AS TO FIXED DOLLAR AMOUNTS. NO MINIMUM CONTRACT VALUE IS
GUARANTEED, EXCEPT FOR AMOUNTS IN THE FIXED ACCOUNT.
<PAGE>
CONTRACT SPECIFICATIONS
CONTRACT OWNER:
CONTRACT NUMBER:
CONTRACT EFFECTIVE DATE:
PURCHASE PAYMENT BONUS RATE: [3%]
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT: Annuity Investors Variable Account B
Following is a list of the currently available Funds in which the Separate
Account invests:
[Janus Aspen Series Aggressive Growth Portfolio]
[Janus Aspen Series Worldwide Growth Portfolio]
[Janus Aspen Series Balanced Portfolio]
[Janus Aspen Series Growth Portfolio]
[Janus Aspen Series International Growth Portfolio]
[Dreyfus Variable Investment Fund-Capital Appreciation Portfolio]
[Dreyfus Variable Investment Fund-Money Market Portfolio]
[Dreyfus Variable Investment Fund-Growth and Income Portfolio]
[Dreyfus Variable Investment Fund-Small Cap Portfolio]
[The Dreyfus Socially Responsible Growth Fund, Inc.]
[Dreyfus Stock Index Fund]
[Strong Opportunity Fund II, Inc.]
[Strong Growth Fund II]
[INVESCO VIF-Industrial Income Fund]
INVESCO VIF-Total Return Fund]
[INVESCO VIF-High Yield Fund]
[Morgan Stanley Universal Funds Inc. U.S. Real Estate Portfolio]
[Morgan Stanley Universal Funds Inc. Value Portfolio]
[Morgan Stanley Universal Funds Inc. Emerging Markets Equity Portfolio]
[Morgan Stanley Universal Funds Inc. Fixed Income Portfolio]
[Morgan Stanley Universal Funds Inc. Mid-Cap Value Portfolio]
[Pilgrim Baxter PBHG Insurance Series Fund, Inc.-Growth II Fund]
[Pilgrim Baxter PBHG Insurance Series Fund, Inc.-Large Cap Growth Fund]
[Pilgrim Baxter PBHG Insurance Series Fund, Inc.-Technology & Communications
Fund]
FIXED ACCOUNT:
Following is a list of the currently available Fixed Account options, with
guarantee periods as may be applicable:
Fixed Accumulation Account Option
[Fixed Account Option One-Year Guarantee Period]
[Fixed Account Option Three-Year Guarantee Period]
-2-
<PAGE>
[Fixed Account Option Five-Year Guarantee Period]
[Fixed Account Option Seven-Year Guarantee Period]
Minimum guaranteed interest rate credited to the Fixed Account: Three percent
(3%) effective annual rate.
TRANSFER FEE: [$25] per transfer in excess of twelve (12) in any Certificate
Year.
CONTINGENT DEFERRED SALES CHARGE: An amount deducted on each partial or full
surrender of a Purchase Payment, as follows:
Number of full years elapsed CONTINGENT DEFERRED SALES CHARGE
between as
the date of receipt of a a percentage of the associated
PUrchase Payment Purchase Payment
and date Written Request For Surrendered
Surrender Is Received
--------------------------------- ----------------------------------
0 8%
1 8%
2 8%
3 7%
4 6%
5 5%
6 3%
7 2%
8+ 0%
CERTIFICATE MAINTENANCE FEE: [$30] Annually
MORTALITY AND EXPENSE RISK CHARGE: A charge equal to an effective annual
rate of [1.25%] of the daily Net Asset Value of the Sub-Accounts.
ADMINISTRATION CHARGE: A charge equal to an effective annual rate of [0.15%]
of the daily Net Asset Value of the Sub-Accounts.
TERMINATION: We reserve the right to terminate any Participant's participation
interest under this Contract, if at any time the Surrender Value of his/her
Certificate is less than $500. A surrender will be deemed to have been made and
we will pay the Participant the Surrender Value of his or her participation
interest.
[The following terms and conditions apply to termination of this Contract:
- ---------------------]
INQUIRIES: FOR INFORMATION, OR TO MAKE A COMPLAINT, CALL OR WRITE:
Variable Annuity Service Center
Annuity Investors Life Insurance Company
Post Office Box 5423
Cincinnati, Ohio 45201-5423
[1-800-789-6771]
-3-
<PAGE>
TABLE OF CONTENTS PAGE
- ----------------- ----
DEFINITIONS..................................................................6
GENERAL PROVISIONS...........................................................9
Entire Contract...........................................................9
Participant Certificate...................................................9
Changes -- Waivers........................................................9
Nonparticipating..........................................................9
Misstatement..............................................................9
Required Reports..........................................................9
Exclusive Benefit........................................................10
State Law................................................................10
Claims of Creditors......................................................10
Company Liability........................................................10
Voting Rights............................................................10
Incontestability.........................................................10
Discharge of Liability...................................................10
Transfer By the Company..................................................10
Termination..............................................................10
PURCHASE PAYMENTS...........................................................10
Purchase Payments........................................................10
Purchase Payment Bonus...................................................11
Allocation of Purchase Payments..........................................11
No Termination...........................................................11
FIXED ACCOUNT...............................................................11
Fixed Account............................................................11
FIXED ACCOUNT OPTIONS.................................................11
INTEREST CREDITED.....................................................11
RENEWAL...............................................................12
Fixed Account Value......................................................12
SEPARATE ACCOUNT............................................................12
General Description......................................................12
Sub-Accounts of the Separate Account.....................................13
Valuation of Assets......................................................13
Variable Account Value...................................................13
Accumulation Unit Value..................................................13
TRANSFERS...................................................................14
FEES AND CHARGES............................................................14
Mortality and Expense Risk Charge........................................14
Administration Charge....................................................15
Certificate Maintenance Fee..............................................15
SURRENDERS..................................................................15
Surrenders...............................................................15
Surrender Value..........................................................15
Contingent Deferred Sales Charge.........................................16
Deferral of Payment......................................................17
-4-
<PAGE>
OWNERSHIP PROVISIONS........................................................17
Ownership of Separate Account............................................17
Ownership of Group Contract and Participant Account......................17
Transfer and Assignment..................................................17
Successor Owner..........................................................17
Community Property.......................................................17
BENEFICIARY PROVISIONS......................................................18
Beneficiary..............................................................18
Change of Beneficiary....................................................18
BENEFIT ON ANNUITY COMMENCEMENT DATE........................................18
Annuity Commencement Date................................................18
Annuity Benefit Payments.................................................18
Form of Annuity Benefit..................................................19
BENEFIT ON DEATH OF PARTICIPANT DEATH BENEFIT...............................19
Death Benefit............................................................19
Death Benefit Amount.....................................................20
Transfers After Death....................................................20
Form of Death Benefit....................................................20
SETTLEMENT OPTIONS..........................................................20
Conditions...............................................................20
Benefit Payments.........................................................21
Fixed Dollar Benefit.....................................................21
Variable Dollar Benefit..................................................21
Limitation on Election of Settlement Option..............................22
Settlement Option Computations...........................................22
Available Settlement Options.............................................22
Settlement Option Tables.................................................23
-5-
<PAGE>
DEFINITIONS
ACCOUNT(S): The Sub-Account(s) and/or the Fixed Account options.
ACCOUNT VALUE: The aggregate value of a Participant's interest in the
Sub-Account(s) and the Fixed Account options as of the end of any Valuation
Period. The value of a Participant's interest in all Sub-Accounts is his or her
"Variable Account Value," and the value of a Participant's interest in all Fixed
Account options is his or her "Fixed Account Value."
ACCUMULATED EARNINGS: A Participant's Account Value in excess of Purchase
Payments received by us and which have not been returned to the Participant.
ACCUMULATION PERIOD: The period prior to the applicable Commencement Date
under a Certificate.
ACCUMULATION UNIT: A unit of measurement used to calculate the value(s) 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."
ADMINISTRATIVE OFFICE: The home office of the Company or any other place of
business which we may designate for administration.
AGE: Age as of most recent birthday.
ANNUITANT: For each participation interest under this Contract, the
Annuitant is the Participant, and is the person on whose life Annuity Benefit
payments are based.
ANNUITY BENEFIT: Periodic payments made under a settlement option, which
commence on or after the Annuity Commencement Date.
ANNUITY COMMENCEMENT DATE: For each Participant, 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 a Certificate.
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 on the Commencement Date during
which Benefit Payments are to be made under a Certificate.
BENEFIT UNIT: A unit of measure used to determine the dollar value of any
Variable Dollar Benefit payments after the first Benefit Payment is made by
us. The value of a Benefit Unit is referred to as a "Benefit Unit Value."
CERTIFICATE ANNIVERSARY: An annual anniversary of a Participant's
Certificate Effective Date.
CERTIFICATE EFFECTIVE DATE: The date shown on a Participant's Certificate
Specifications page.
CERTIFICATE YEAR: For a Participant's Certificate, any period of twelve (12)
consecutive months commencing on the Certificate Effective Date and on each
Certificate Anniversary thereafter.
CODE: The Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder.
-6-
<PAGE>
COMMENCEMENT DATE: The Annuity Commencement Date if an Annuity Benefit is
payable under a Certificate, or the Death Benefit Commencement Date if a Death
Benefit is payable under a Certificate.
DEATH BENEFIT: The benefit described in the Benefit on Death of Participant
section of this Contract.
DEATH BENEFIT COMMENCEMENT DATE: For each Participant, 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 us and the earlier to occur of:
1) our 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 us.
FUND: A management investment company or portfolio thereof, registered under
the Investment Company Act of 1940, 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 identified as such on the Contract Specifications page.
PARTICIPANT: A person who participates in the benefits of this Contract
pursuant to the enrollment form for such person, if any, as evidenced by a
Certificate.
PAYMENT INTERVAL: A monthly, quarterly, annual or other regular interval
during a Benefit Payment Period.
PERSON CONTROLLING PAYMENTS: The "Person Controlling Payments" means the
following, as the case may be:
1) with respect to Annuity Benefit payments, the Participant; and
2) with respect to Death Benefit payments,
a) the Beneficiary; or
b) if the Beneficiary is deceased, the payee.
PURCHASE PAYMENT: A contribution amount paid to us in consideration for a
Participant's participation interest under this Contract, after the deduction of
any and all of the following which may apply:
1) any fee charged by the person remitting payments for you;
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.
-7-
<PAGE>
SUB-ACCOUNT: The Separate Account is divided into Sub-Accounts, each of
which is invested in the shares of a designated Fund.
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 us, that is sent to us on our form or in a manner satisfactory
to us, which may, at our discretion, be telephonic, and that is received by us
at our Administrative Office. A Written Request is subject to any payment made
or any action we take before we acknowledge it. A Written Request may be
modified or revoked only by a subsequent Written Request, when permitted by the
terms of this Contract. A Participant may be required to return his or her
Certificate to us in connection with a Written Request.
-8-
<PAGE>
GENERAL PROVISIONS
ENTIRE CONTRACT
We have issued this Contract to the Contract Owner identified on the Contract
Specifications page. This Contract is a group flexible premium deferred variable
annuity contract. This Contract is restricted by endorsement as required to
obtain favorable tax treatment under the Code, and is not valid without the
requisite endorsement(s) being attached. This Contract, its endorsements, the
application, if any, and the enrollment forms, if any, of all Participants under
it, form the entire Contract between you and us. Certificates are not contracts
and are not a part of this Contract.
Only statements in the application, if any, or in a Participant's enrollment
form, if any, will be used to void a Participant's participation interest
hereunder, or to defend a claim based on it. Such statements are representations
and not warranties.
PARTICIPANT CERTIFICATE
A Certificate of Participation ("Certificate") is evidence of a Participant's
participation interest under this Contract.
CHANGES -- WAIVERS
No changes or waivers of the terms of this Contract are valid unless made in
writing by our President, Vice President, or Secretary. No agent or other person
not named above has authority to change or waive any provision of this Contract.
We reserve the right both to administer and to change the provisions of this
Contract to conform to any applicable laws, regulations or rulings issued by a
governmental agency.
In any event, the Company reserves the right to add or delete Fixed Account
options and Sub-Accounts, to substitute shares of a different Fund or different
class or series of a Fund for shares held in a Sub-Account, to merge or combine
Sub-Accounts, to merge or combine the Separate Account with any other separate
account of the Company, to transfer the assets of the Separate Account to
another life insurance company by means of a merger or reinsurance, to convert
the Separate Account into a managed separate account, and to de-register the
Separate Account under the Investment Company Act of 1940. Any such change will
be made in accordance with applicable insurance and securities laws and after
obtaining any necessary federal and/or state regulatory approvals.
NONPARTICIPATING
This Contract does not pay dividends or share in the Company's divisible
surplus.
MISSTATEMENT
If the age or sex of a person on whose life Benefit Payments are based is
misstated, the payments or other benefits under this Contract shall be adjusted
to the amount which would have been payable based on the correct age or sex. If
we 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, we may deduct any
overpayments made, with interest, from any succeeding payments due.
REQUIRED REPORTS
At least once each Certificate Year, we will send a report of a Participant's
current values and any other information required by law, until the first to
occur of the following:
1) the date the Participant's participation interest under this Contract
is fully surrendered;
2) the Participant's Annuity Commencement Date; or
3) the Participant's Death Benefit Commencement Date.
-9-
<PAGE>
The report will be mailed to the last known address of the Participant. The
reported values will be based on the information in our possession at the time
the report is prepared by us. We may adjust the reported values at a later date
if that information proves to be incorrect or has changed.
EXCLUSIVE BENEFIT
This Contract is for the exclusive benefit of Participants and their
Beneficiaries. Their interests under this Contract are nonforfeitable by us.
STATE LAW
All factors, values, benefits and reserves under this Contract will not be less
than those required by the law of the state in which this Contract is delivered.
CLAIMS OF CREDITORS
To the extent allowed by law, this Contract and all values and benefits under it
are not subject to the claims of creditors or to legal process.
COMPANY LIABILITY
We will not incur any liability or be responsible for any failure, in whole or
in part, by you or by any person having rights or benefits arising out of or
related to this Contract, to comply with any applicable laws, regulations or
rulings issued by a governmental agency.
VOTING RIGHTS
To the extent required by law, we will vote all shares of the Funds held in the
Separate Account, at regular and special shareholder meetings of the Funds, in
accordance with instructions received from the Participant, or, if applicable,
from the Person Controlling Payments. If there is a change in the law which
permits us to vote the shares of the Funds without such instructions, then we
reserve the right to do so.
INCONTESTABILITY
This Contract, and the participation interests of Participants under it, shall
not be contestable by us.
DISCHARGE OF LIABILITY
Upon payment of any partial or full surrender, or any Benefit Payment, we shall
be discharged from all liability to the extent of each such payment.
TRANSFER BY THE COMPANY
We reserve the right to transfer our obligations under this Contract to another
qualified life insurance company under an assumption reinsurance arrangement
without your prior consent.
TERMINATION
Either we or you may terminate this Contract by giving sixty (60) days advance
notice in writing. Refer to the Contract Specifications page for information
regarding the benefits and charges, if any, in the event of termination of this
Contract. If this Contract is terminated, a Participant may continue his or her
participation interest under it on a deferred paid-up basis, subject to all of
the terms and conditions of this Contract, unless he or she surrenders his or
her participation as a whole. Termination of this Contract will not affect
Benefit Payments being made by us.
PURCHASE PAYMENTS
PURCHASE PAYMENTS
One or more Purchase Payments may be paid to us for a Participant at any time
before the Participant's Annuity Commencement Date, so long as:
-10-
<PAGE>
1) the Participant is still living; and
2) the Participant's participation interest has not been fully
surrendered.
The initial Purchase Payment for a Participant must be paid to us on or before
the Participant's Certificate Effective Date. Each Purchase Payment must be paid
to us at our Administrative Office, and is subject to any minimums or maximums
that we set for such from time to time. Upon request, we will provide you with a
receipt as proof of payment.
PURCHASE PAYMENT BONUS
A bonus in the amount of the Purchase Payment bonus rate set forth on the
Contract Specifications page multiplied by the amount of the Purchase Payment
will be credited to each Purchase Payment received by us for a Participant. The
amount of a Purchase Payment will be determined, solely for purposes of
determining the amount of the bonus, without deduction of premium taxes or other
taxes. The bonus will be added to and will be deemed part of the Purchase
Payment for all purposes under this Contract. Notwithstanding the foregoing, the
bonus will not be returned to a Participant if he or she surrenders his or her
participation interest under this Contract in full during his or her first
Certificate Year.
ALLOCATION OF PURCHASE PAYMENTS
We will allocate Purchase Payments to the Fixed Account options and/or to the
Sub-Accounts according to the instructions we receive in the Participant's
enrollment form, if any, or subsequent 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 $2000.
You shall be responsible to collect Purchase Payment(s) by payroll deduction or
otherwise and to remit Purchase Payment(s) to us in the proper amount, together
with all information necessary to apply such amounts properly under the terms of
this Contract and with respect to the participation interests of Participants
hereunder.
NO TERMINATION
Except as stated elsewhere in this Contract, neither this Contract nor the
participation interest of a Participant under it will be terminated by us due to
failure to make additional Purchase Payments.
FIXED ACCOUNT
FIXED ACCOUNT
The Fixed Account is part of the Company's general account. The values of the
Fixed Account are not dependent upon the investment performance of the
Sub-Accounts.
FIXED ACCOUNT OPTIONS. The Fixed Account options available as of the
Contract Effective Date are listed on the Contract Specifications page.
Different Fixed Account options may be offered by us at any time.
INTEREST CREDITED. The guaranteed rate of interest for the Fixed Account options
is three percent (3%) per year, compounded annually. We may, at any time, pay a
current interest rate as declared by our Board of Directors for any of the Fixed
Account options that is higher than the guaranteed rate.
The interest rate initially credited to each Purchase Payment allocated to the
Fixed Accumulation Account Option will not be changed any sooner than twelve
(12) months following the date on which that Purchase Payment was received;
thereafter, the interest rate credited will not be changed more frequently than
once per calendar quarter. In the case of transfers from other Fixed Account
options or the Sub-Accounts to the Fixed Accumulation Account Option, the
-11-
<PAGE>
interest rate will not be changed more frequently than once per calendar
quarter.
The interest rate credited to amounts allocated to the Fixed Account options
other than the Fixed Accumulation Account Option will not be changed during the
duration of the applicable guarantee period.
RENEWAL. The following RENEWAL provisions apply to all Fixed Account
options except the Fixed Accumulation Account Option.
At the end of a guarantee period, and for the thirty (30) days immediately
preceding the end of such guarantee period, a Participant may elect a new option
to replace the Fixed Account option that is then expiring. The entire amount
maturing may be re-allocated 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 Participant's Annuity Commencement Date may not be selected. In
particular, in the case of renewals occurring within one (1) year of such
Commencement Date, the only Fixed Account option available to the Participant is
the Fixed Accumulation Account Option.
If a new Fixed Account option is not specified in accordance with the preceding
paragraph, the Participant will be deemed to have selected the same Fixed
Account option as is expiring, so long as the guarantee period of such option
does not extend beyond the Participant's Annuity Commencement Date. In the event
that such a period would extend beyond that date, the Participant will be deemed
to have selected the Fixed Account option with the longest available guarantee
period that expires prior to that date, or, failing that, the Fixed Accumulation
Account Option.
Any renewal of a Fixed Account option under this RENEWAL provision will be
effective on the day after the expiration of the guarantee period that is then
expiring.
FIXED ACCOUNT VALUE
A Participant's Fixed Account Value at any time is equal to:
1) Purchase Payment(s) received by us for him or her which are allocated
to the Fixed Account; plus
2) amounts transferred to the Fixed Account for him or her; plus
3) interest credited to the Participant's participation interest in the
Fixed Account; less
4) any charges, surrenders, deductions, amounts transferred from the
Fixed Account or other adjustments made as described elsewhere in this
Contract, which relate to his or her participation interest.
SEPARATE ACCOUNT
GENERAL DESCRIPTION
The variable benefits under this Contract are provided through the Separate
Account. The Separate Account is registered with the Securities and Exchange
Commission as a unit investment trust under the Investment Company Act of 1940.
The income, if any, and any gains or losses, realized or unrealized, on the
Separate Account will be credited to or charged against the amounts allocated to
such account without regard to other income, gains, or losses of the Company.
The amounts allocated to the Separate Account and the accumulations thereon
remain the property of the Company, but that portion of the assets of the
Separate Account that is equal to the reserves and other contractual liabilities
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under all policies, annuities, and other contracts identified with the Separate
Account, is not chargeable with liabilities arising out of any other business of
the Company. The Company is not, and does not hold itself out to be, a trustee
in respect of such amounts.
We have the right to transfer to our general account, in our sole discretion and
at any time without prior written notice, any assets of the Separate Account
which are in excess of the required reserves and other contractual liabilities
under all policies, annuities, and other contracts identified with the Separate
Account.
SUB-ACCOUNTS OF THE SEPARATE ACCOUNT
The assets of the Separate Account are divided into Sub-Accounts. The
Sub-Accounts available as of the Contract Effective Date are listed on the
Contract Specifications page. Each Sub-Account invests exclusively in shares of
an underlying Fund as shown on the Contract Specifications page. Any amounts of
income and any gains on the shares of a Fund will be reinvested in additional
shares of that Fund at its Net Asset Value.
VALUATION OF ASSETS
Shares of Funds held for each Sub-Account will be valued at their Net Asset
Value at the end of each Valuation Period, as reported by each such Fund.
VARIABLE ACCOUNT VALUE
Purchase Payment(s) may be allocated among and, as described elsewhere in this
Contract, Account values may be transferred to the various Sub-Accounts within
the Separate Account. For each Sub-Account, the Purchase Payment(s) or amounts
transferred are converted into Accumulation Units. The number of Accumulation
Units credited is determined by dividing the dollar amount directed to each
Sub-Account by the value of the Accumulation Unit for that Sub-Account at the
end of the Valuation Period on which the Purchase Payment(s) or transferred
amount is received.
The following events will result in the cancellation of an appropriate number of
Accumulation Units of a Sub-Account:
1) transfer from a Sub-Account;
2) full or partial surrender of a Participant's Variable Account Value;
3) payment of a Death Benefit;
4) application of a Participant's Variable Account Value to a settlement
option;
5) deduction of a Certificate 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 a Certificate Maintenance Fee or Transfer Fee is due,
as the case may be.
A Participant's Variable Account Value at any time is equal to the sum of the
number of Accumulation Units for each Sub-Account attributable to his or her
participation multiplied by the Accumulation Unit Value for each Sub-Account at
the end of the preceding Valuation Period.
ACCUMULATION UNIT VALUE
The initial Accumulation Unit Value for each Sub-Account, with the exception of
the Money Market Sub-Account, was set at $10.00. 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.
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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 that 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 that 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 that Sub-Account,
determined at the end of the immediately preceding Valuation Period;
and
3) is the factor representing the Mortality and Expense Risk Charge and
the Administration Charge deducted from the Sub-Account for the number
of days in the applicable Valuation Period.
TRANSFERS
Prior to his or her applicable Commencement Date, a Participant 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 Certificate Anniversary, and prior to the applicable
Commencement Date, a Participant 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 this 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 any Fixed Account option are subject to a cumulative limit for each
Participant during each Certificate Year of twenty percent (20%) of the Fixed
Account option's value for that Participant as of the most recent Certificate
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 number of transfers
per year for each Participant, over which we will charge a Transfer Fee on each
additional transfer, and the amount of the Transfer Fee, are shown on the
Contract Specifications page.
We reserve the right, in our sole discretion and at any time without prior
notice, to terminate, suspend or modify the transfer privileges described above.
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FEES AND CHARGES
MORTALITY AND EXPENSE RISK CHARGE
The Mortality and Expense Risk Charge is shown on the Contract Specifications
page and is deducted daily from each Sub-Account. This deduction is made to
compensate the Company for assuming the mortality and expense risks under this
Contract.
ADMINISTRATION CHARGE
The Administration Charge is shown on the Contract Specifications page and is
deducted daily from each Sub-Account. This deduction is made to reimburse the
Company for expenses incurred in the administration of this Contract, the
Certificates thereunder, and the Separate Account.
CERTIFICATE MAINTENANCE FEE
The Certificate Maintenance Fee ("Fee") is shown on the Contract Specifications
page and is deducted for each Participant as of the Valuation Period next
following each Certificate Anniversary prior to the applicable Commencement
Date. In addition, the full annual Fee will be charged at the time of a full
surrender of a Participant's participation interest. The Fee will be allocated
to each Sub-Account in the same proportion as each Sub-Account's value is to the
Participant's total Variable Account Value as of the end of such Valuation
Period. The Fee does not apply to the Fixed Account.
After his or her applicable Commencement Date, if a Variable Dollar Benefit is
elected by a Participant, the Fee will be deducted pro-rata from each Benefit
Payment and will result in a reduction in the amount of such payment.
The Fee may be waived in whole or in part in our sole discretion.
SURRENDERS
SURRENDERS
A surrender in full may be made for a Participant's Surrender Value, or partial
surrenders may be made for a lesser amount, by Written Request at any time prior
to the Participant's Annuity Commencement Date. The amount of any partial
surrender must be at least $500. A partial surrender cannot reduce a
Participant's Surrender Value to less than $500. Surrenders will be deemed to be
withdrawn first from the portion of the Surrender Value that represents a
Participant's Accumulated Earnings and then from Purchase Payments. For purposes
of this Contract, Purchase Payments are deemed to be withdrawn on a "first-in,
first-out" (FIFO) 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 by us.
SURRENDER VALUE
A Participant's Surrender Value at any time is an amount equal to:
1) his or her Account Value as of the end of the applicable Valuation
Period; less
2) during his or her first Certificate Year, the amount of the bonus(es)
credited to Purchase Payment(s) received by us for him or her; less
3) any applicable Contingent Deferred Sales Charge; less 4) any
outstanding loans; and less 5) any applicable premium tax or other
taxes not previously deducted.
On full surrender, a full Certificate Maintenance Fee will also be deducted as
part of the calculation of the Surrender Value. Upon payment of the Surrender
Value to a Participant, the Participant's participation interest under this
Contract will be terminated. Any bonus amounts which were credited to the
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Participant's Account Value will be forfeited upon a full surrender of the
Surrender Value during the first Certificate Year.
CONTINGENT DEFERRED SALES CHARGE
A full or partial surrender of a Participant's participation interest may be
subject to a Contingent Deferred Sales Charge as set forth on the Contract
Specifications page. The Contingent Deferred Sales Charge applies to and is
calculated separately for each Purchase Payment.
Surrenders will result in the cancellation of Accumulation Units from each
applicable Sub-Account(s) and/or a reduction of the Participant's Fixed Account
Value. In the case of a full surrender, a Participant's participation interest
under this Contract will be terminated. The Contingent Deferred Sales Charge may
be waived in whole or in part in our sole discretion.
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DEFERRAL OF PAYMENT
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 is closed, or when trading on the New
York Stock Exchange is restricted; or
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 a partial or full
surrender of the Fixed Account Value for up to six (6) months after we receive a
Written Request.
OWNERSHIP PROVISIONS
OWNERSHIP OF SEPARATE ACCOUNT
The Company has absolute ownership of the assets in the Separate Account.
However, the Company is not, and does not hold itself out to be, a trustee in
respect of any amounts under the Separate Account.
OWNERSHIP OF CONTRACT AND PARTICIPANT ACCOUNT
The Contract Owner must be an employer or the trustee for an employer's
retirement plan. The Contract Owner is shown on the Contract Specifications
page. This Contract is held by the Contract Owner for the benefit of the
Participants and Beneficiaries.
Each participant for whom Purchase Payment(s) are made will participate in this
Contract as a Participant. A participant account will be established for each
Participant.
TRANSFER AND ASSIGNMENT
Neither you nor a Participant may transfer, sell, assign, pledge, charge,
encumber or in any way alienate an interest under this Contract.
SUCCESSOR OWNER
By Written Request, a Participant's spouse may, in some cases, succeed to the
ownership of a Participant's participation interest under this Contract after
the Participant's death. Specifically, if a Participant dies and his or her
spouse is the sole surviving Beneficiary of the Participant's participation
interest, he or she will become the Successor Owner of the Participant's
participation interest if:
1) the Participant makes that Written Request before his or her death; or
2) after the Participant's death, his or her spouse makes that Written
Request within one (1) year of the Participant's death and before the
Death Benefit Commencement Date.
As Successor Owner, the Participant's spouse will then succeed to all the
Participant's rights of ownership under this Contract except the right to name
another Successor Owner.
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COMMUNITY PROPERTY
If a Participant lives in a community property state and has a spouse at any
time while he or she participates under this Contract, the laws of that state
may vary his or her ownership rights.
BENEFICIARY PROVISIONS
BENEFICIARY
A Participant's Beneficiary is the person or persons so designated on his or her
enrollment form, if any, or under the CHANGE OF BENEFICIARY provision of this
Contract. If a Participant has not designated a Beneficiary, or if no
Beneficiary designated survives the Participant, then the Beneficiary will be
the Participant's estate.
A Beneficiary will be deemed not to have survived a Participant if he or she
dies within thirty (30) days after the Participant's death.
A Beneficiary designation may be joint or contingent or both. Unless otherwise
stated, joint Beneficiaries will be entitled to equal shares. A contingent
Beneficiary will be entitled to a benefit only if there is no surviving primary
Beneficiary.
CHANGE OF BENEFICIARY
Unless a Participant has designated an irrevocable Beneficiary, he or she may
change his or her designation of a Beneficiary at any time before the Annuity
Commencement Date.
Any such change 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 any
settlement option election previously made.
BENEFIT ON ANNUITY COMMENCEMENT DATE
ANNUITY COMMENCEMENT DATE
The Annuity Commencement Date for a Participant is shown on the Participant's
Certificate Specifications page. A Participant may change his or her Annuity
Commencement Date by Written Request made at least thirty (30) days prior to the
date that Annuity Benefit payments are scheduled to begin. Unless the Company
agrees otherwise, a Participant's Annuity Commencement Date cannot be later than
the Certificate Anniversary following his or her 85th birthday, or five (5)
years after his or her Certificate Effective Date, whichever is later.
ANNUITY BENEFIT PAYMENTS
An amount equal to the Participant's Account Value (after deduction of any fees
and charges, loans, or applicable premium tax or other taxes not previously
deducted) will be used to provide Annuity Benefit payments to Participants under
this Contract commencing on or after a Participant's Annuity Commencement Date.
Notwithstanding the foregoing, a surrender will be deemed to have been made, and
an amount equal to the Participant's Surrender Value as of the Annuity
Commencement Date will be used to provide Annuity Benefit payments to a
Participant commencing on or after the Participant's Annuity Commencement Date
if the payee is a non-natural person, unless the non-natural person payee is the
Contract Owner and has an immediate obligation to make corresponding payments of
an Annuity Benefit to the Participant.
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Annuity Benefit payments will be made to the Participant as payee. Any Annuity
Benefit amounts remaining payable on his or her death will be paid to the
contingent payee designated by the Participant by Written Request. We may reject
the naming of a non-natural payee. The Participant will be the person on whose
life any Annuity Benefit payments are based.
If no contingent payee designated by the Participant is surviving at the time
payment is to be made, then after the Participant's death any Annuity Benefit
amounts remaining payable will be paid to the person or persons designated as
contingent payee by Written Request by the last payee who received payments.
Failing that, any such amounts will be paid to the estate of the last payee who
received payments.
FORM OF ANNUITY BENEFIT
Annuity Benefit payments will be Fixed Dollar Benefit payments, made monthly in
accordance with the terms of Option B with a fixed period of one hundred twenty
(120) months under the SETTLEMENT OPTIONS section of this Contract.
In lieu of that, a Participant may elect to have Annuity Benefit payments made
pursuant to any other available settlement option under the SETTLEMENT OPTIONS
section of this Contract. Any such election must be made by Written Request
before the Annuity Commencement Date. A Participant may change his or her
election of a settlement option by Written Request made at least thirty (30)
days prior to the date that Annuity Benefit payments are scheduled to begin.
BENEFIT ON DEATH OF PARTICIPANT
DEATH BENEFIT
A Death Benefit will be paid under this Contract if:
1) a Participant dies before his or her Annuity Commencement Date and
before his or her participation interest is fully surrendered;
2) the Participant's Death Benefit Valuation Date has occurred; and 3)
the Participant's spouse does not become the Successor Owner of the
Participant's participation interest.
If a Death Benefit becomes payable with respect to a Participant:
1) it will be in lieu of all other benefits with respect to that
Participant under this Contract; and
2) all other rights with respect to that Participant under this Contract
will be terminated except for rights related to the Death Benefit.
Death Benefit payments shall be made to the Participant's Beneficiary as payee.
The Participant's Beneficiary will be the person on whose life any Death Benefit
payments under a settlement option are based.
Any Death Benefit amounts remaining payable on the death of a Beneficiary will
be paid:
1) to any contingent payee designated by the Participant as part of any
Death Benefit settlement option election made by the Participant, or
if none is surviving at the time payment is to be made; then
2) to any contingent payee designated by the Beneficiary by Written
Request, or if none is surviving at the time payment is to be made;
then
3) to the estate of the last payee who received payments.
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Only one Death Benefit will be paid with respect to a Participant's
participation interest under this Contract.
DEATH BENEFIT AMOUNT
The Death Benefit will be an amount equal to the greater of:
1) the Participant's Account Value as of the Death Benefit Valuation
Date; or
2) one hundred percent (100%) of the Purchase Payment(s) received by us
for him or her, including the Purchase Payment bonus(es) credited
thereto, less any amounts returned to you and any Contingent Deferred
Sales Charges that applied to those amounts.
As of the Death Benefit Valuation Date for a Participant, the amount of the
Death Benefit will be allocated among the Sub-Accounts and Fixed Account options
in the same proportion as each Account's value is to the total Account Value for
that Participant as of the end of the Valuation Period immediately preceding the
Death Benefit Valuation Date.
Any applicable premium tax or other taxes not previously deducted, and any
outstanding loans, will be deducted from the Death Benefit amount described
above.
TRANSFERS AFTER DEATH
Between the Death Benefit Valuation Date and the Death Benefit Commencement
Date, a Beneficiary may transfer funds among Sub-Accounts and Fixed Account
options as described under the TRANSFERS section of this Contract.
FORM OF DEATH BENEFIT
Payments under the DEATH BENEFIT provision of this Contract will be Fixed Dollar
Benefit payments made monthly in accordance with the terms of Option A with a
period certain of forty-eight (48) months under the SETTLEMENT OPTIONS section
of this Contract.
In lieu of that, a Participant may elect at any time before his or her death to
have payments under the DEATH BENEFIT provision of this Contract made in one
lump sum or pursuant to any available settlement option under the SETTLEMENT
OPTIONS section of this Contract. If a Participant does not make any such
election, the Beneficiary may make that election at any time after the
Participant's death and before the Death Benefit Commencement Date.
A Participant may change his or her election of a settlement option at any time
before his or her death.
If a Beneficiary elects a settlement option as noted above, he or she may change
his or her own election of a settlement option by Written Request made at least
thirty (30) days prior to the date that Death Benefit payments are scheduled to
begin.
Any election or change of election must be made by Written Request.
SETTLEMENT OPTIONS
CONDITIONS
Benefit Payments under a settlement option are subject to any minimum amounts,
Payment Intervals, and other terms or conditions that we may from time to time
require. If we change our minimums, we may change any current or future payment
amounts and/or Payment Intervals to conform with the change. More than one
settlement option may be elected if the requirements for each settlement option
elected are satisfied. Once payment begins under a settlement option, the
settlement option may not be changed.
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All elected settlement options must comply with current applicable laws,
regulations and rulings issued by any governmental agency.
If more than one person is the payee under a settlement option, payments will be
made to the payees jointly. No more than two persons may be initial payees under
any joint and survivor settlement options.
If payment under a settlement option depends on whether a specified person is
still alive, we may at any time require proof that such person is still living.
We will require proof of the age and/or sex of any person on whose life Benefit
Payments are based.
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, we will transfer all of the
Participant's 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, we will transfer all of
the Participant's Account Value to the Sub-Accounts as of the end of the
Valuation Period immediately prior to the applicable Commencement Date; we 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 (12) months, the Person Controlling Payments may, no more than once each
twelve (12) 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
the 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 Participant's
Fixed Account Value (expressed in thousands of dollars and after deduction of
any fees and charges, loans, or applicable premium tax or other taxes 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 Benefit
Payment Period.
If at the time a Fixed Dollar Benefit is elected, we have 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 Participant's
Variable Account Value (expressed in thousands of dollars and after deduction of
any fees and charges, loans, or applicable premium tax or other taxes 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 elected less the pro-rata portion of the Certificate Maintenance Fee.
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The number of Benefit Units in each Sub-Account held by a Participant is
determined by dividing the dollar amount of the first monthly Variable Dollar
Benefit payment from each Sub-Account by the Benefit Unit Value for that
Sub-Account as of the applicable Commencement Date. The number of Benefit Units
remains fixed during the Benefit Payment Period, except as a result of any
transfers among Sub-Accounts after the applicable Commencement Date.
The dollar amount of the second and 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 Certificate Maintenance Fee.
The payment from each Sub-Account is found by multiplying the number of Benefit
Units held in each Sub-Account by a Participant 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 value of a Benefit Unit
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 under the ACCUMULATION UNIT VALUE provision of this Contract, 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 three percent
(3%) per year, compounded annually, that is reflected in the Settlement Option
Tables.
LIMITATION ON ELECTION OF SETTLEMENT OPTION
Fixed periods shorter than five (5) years are not available, except as a Death
Benefit settlement option.
SETTLEMENT OPTION COMPUTATIONS
The 1983 Group Annuity Mortality Table with interest at three percent (3%) per
year, compounded annually, is used to compute all guaranteed settlement option
factors, values, and benefits under this Contract.
AVAILABLE SETTLEMENT OPTIONS
The available settlement options are set out below.
OPTION A Income for a Fixed Period
We 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 us or money will be held by us is
thirty (30) years. The Option A Table applies to this Option.
OPTION B Life Annuity with Payments for at Least a Fixed Period
We will make monthly payments for at least a fixed period. If the person
on whose life Benefit Payments are based lives longer than the fixed
period, then we will make payments until his or her death. The first
payment will be paid as of the first day of the initial Payment Interval.
The Option B Table applies to this Option.
OPTION C Joint and One-half Survivor Annuity
We will make periodic payments until the death of the primary person on
whose life Benefit Payments are based; thereafter, we will make one-half
(1/2) of the periodic payment until the death of the secondary person on
whose life Benefit Payments are based. The first payment will be paid as
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of the first day of the initial Payment Interval. The Option C Table
applies to this Option.
OPTION D Life Annuity
We will make periodic payments until the death of the person on whose life
Benefit Payments are based. The first payment will be paid as of the first
day of the initial Payment Interval. The Option D Table applies to this
Option.
OPTION E Any Other Form
We will make periodic payments in any other form of settlement option
which is acceptable to us at the time of election.
SETTLEMENT OPTION TABLES
The Option Tables show the payments we will make at sample Payment Intervals for
each $1,000 applied at the guaranteed interest rate. Amounts may vary with the
Payment Interval and the age of the person on whose life Benefit Payments are
based.
OPTION A TABLE - INCOME FOR A FIXED PERIOD
Payments for fixed number of years for each $1,000 applied.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Terms Semi- Terms Semi- Terms Semi-
Of Annual Annual Quarterly Monthly Of Annual Annual Quarterly Monthly Of Annual Annual Quarterly Monthly
Payments Payments 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>
OPTION B TABLE - LIFE ANNUITY
With Payments For At Least A Fixed Period
------- ---------------- --------------- ---------------- ----------------
60 MONTHS 120 MONTHS 180 MONTHS 240 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
------- ---------------- --------------- ---------------- ----------------
-23-
<PAGE>
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
- ------------ --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
</TABLE>
*Payments after the death of the Primary Payee will be one-half (1/2) of the
amount shown.
OPTION D TABLE - LIFE ANNUITY
Monthly payments for each $1,000 applied.
<TABLE>
<CAPTION>
- ---------- ------------------ ---------- ------------------ ---------- ----------------- --------- ------------------
AGE AGE AGE AGE
- ---------- ------------------ ---------- ------------------ ---------- ----------------- --------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
55 $4.65 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
- ---------- ------------------ ---------- ------------------ ---------- ----------------- --------- ------------------
</TABLE>
-24-
EXHIBIT 4(b)
ANNUITY INVESTORS(SERVICEMARK)
A Stock Insurance Company
Domicile Address: 580 Walnut Street, Cincinnati, Ohio 45202
Administrative Office:
P. O. Box 5423, Cincinnati, Ohio 45201-5423
CERTIFICATE OF PARTICIPATION
UNDER A GROUP FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
This is your Certificate of Participation ("Certificate"). It is evidence of
your participation interest in the Group Flexible Premium Deferred Variable
Annuity Contract ("the Contract"), as identified on the Certificate
Specifications page, which has been issued by Annuity Investors Life Insurance
Company to the Contract Owner. As you read through this Certificate, please note
that the words "we", "us", "our", and "Company" refer to Annuity Investors Life
Insurance Company. The words "you" and "your" refer to the Participant.
/s/ Betty Kaspronig /s/ James M. Martenson
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
Nonparticipating - No Dividends
BENEFIT PAYMENTS AND OTHER VALUES DESCRIBED IN THIS CERTIFICATE, WHEN BASED ON
THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT, MAY INCREASE OR DECREASE AND
ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNTS. NO MINIMUM CONTRACT VALUE IS
GUARANTEED, EXCEPT FOR AMOUNTS IN THE FIXED ACCOUNT.
<PAGE>
CERTIFICATE SPECIFICATIONS
--------------------------
PARTICIPANT: JOHN DOE
AGE OF PARTICIPANT AS OF CERTIFICATE EFFECTIVE DATE: 35
GROUP CONTRACT OWNER: ANYTOWN TRUCKING COMPANY
GROUP CONTRACT NUMBER: 000000000
CERTIFICATE NUMBER: 000000000
CERTIFICATE EFFECTIVE DATE: JUNE 01, 1995
ANNUITY COMMENCEMENT DATE: JUNE 01, 2030
PURCHASE PAYMENT BONUS RATE: [3%]
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT: Annuity Investors Variable Account B
- ----------------
Following is a list of the currently available Funds in which the Separate
Account invests:
[Janus Aspen Series Aggressive Growth Portfolio]
[Janus Aspen Series Worldwide Growth Portfolio]
[Janus Aspen Series Balanced Portfolio]
[Janus Aspen Series Growth Portfolio]
[Janus Aspen Series International Growth Portfolio]
[Dreyfus Variable Investment Fund-Capital Appreciation Portfolio]
[Dreyfus Variable Investment Fund-Money Market Portfolio]
[Dreyfus Variable Investment Fund-Growth and Income Portfolio]
[Dreyfus Variable Investment Fund-Small Cap Portfolio]
[The Dreyfus Socially Responsible Growth Fund, Inc.]
[Dreyfus Stock Index Fund]
[Strong Opportunity Fund II, Inc.]
[Strong Growth Fund II]
[INVESCO VIF-Industrial Income Fund]
[INVESCO VIF-Total Return Fund]
[INVESCO VIF- High Yield Fund]
[Morgan Stanley Universal Funds Inc. U.S. Real Estate Portfolio]
[Morgan Stanley Universal Funds Inc. Value Portfolio]
[Morgan Stanley Universal Funds Inc. Emerging Markets Equity Portfolio]
[Morgan Stanley Universal Funds Inc. Fixed Income Portfolio]
[Morgan Stanley Universal Funds Inc. Mid-Cap Value Portfolio]
[Pilgrim Baxter PBHG Insurance Series Fund, Inc.-Growth II Fund]
[Pilgrim Baxter PBHG Insurance Series Fund, Inc.-Large Cap Growth Fund]
[Pilgrim Baxter PBHG Insurance Series Fund, Inc.-Technology & Communications
Fund]
-2-
<PAGE>
FIXED ACCOUNT:
- -------------
Following is a list of the currently available Fixed Account options, with
guarantee periods as may be applicable:
Fixed Accumulation Account Option
[Fixed Account Option One-Year Guarantee Period]
[Fixed Account Option Three-Year Guarantee Period]
[Fixed Account Option Five-Year Guarantee Period]
[Fixed Account Option Seven-Year Guarantee Period]
Minimum guaranteed interest rate credited to the Fixed Account: Three percent
(3%) effective annual rate.
TRANSFER FEE: [$25] per transfer in excess of twelve (12) in any Certificate
Year.
CONTINGENT DEFERRED SALES CHARGE: An amount deducted on each partial or full
surrender of a Purchase Payment, as follows:
NUMBER OF FULL YEARS ELAPSED BETWEEN CONTINGENT DEFERRED SALES CHARGE AS
THE DATE OF RECEIPT OF A PURCHASE PAYMENT A PERCENTAGE OF THE ASSOCIATED
AND DATE WRITTEN REQUEST FOR PURCHASE PAYMENT
SURRENDER IS RECEIVED SURRENDERED
- -------------------------------------------- -----------------------------------
0 8%
1 8%
2 8%
3 7%
4 6%
5 5%
6 3%
7 2%
8+ 0%
CERTIFICATE MAINTENANCE FEE: [$30] Annually
- ---------------------------
MORTALITY AND EXPENSE RISK CHARGE: A charge equal to an effective annual rate of
[1.25%] of the daily Net Asset Value of the Sub-Accounts.
ADMINISTRATION CHARGE: A charge equal to an effective annual rate of [0.15%] of
the daily Net Asset Value of the Sub-Accounts.
TERMINATION: We reserve the right to terminate your participation interest under
the Contract, and this Certificate, at any time the Surrender Value is less than
$500. A surrender will be deemed to have been made and we will pay you the
Surrender Value of your participation interest under the Contract.
INQUIRIES: FOR INFORMATION, OR TO MAKE A COMPLAINT, CALL OR WRITE:
Variable Annuity Service Center
Annuity Investors Life Insurance Company
Post Office Box 5423
Cincinnati, Ohio 45201-5423
[1-800-789-6771]
-3-
<PAGE>
TABLE OF CONTENTS PAGE
- --------------------------------------------------------------------------------
DEFINITIONS....................................................................6
GENERAL PROVISIONS.............................................................9
Entire Contract...........................................................9
Participant Certificate...................................................9
Changes--Waivers..........................................................9
Nonparticipating..........................................................9
Misstatement..............................................................9
Required Reports..........................................................9
Exclusive Benefit........................................................10
State Law................................................................10
Claims of Creditors......................................................10
Company Liability........................................................10
Voting Rights............................................................10
Incontestability.........................................................10
Discharge of Liability...................................................10
Transfer By the Company..................................................10
Termination..............................................................10
PURCHASE PAYMENTS.............................................................10
Purchase Payments........................................................10
Purchase Payment Bonus...................................................11
Allocation of Purchase Payments..........................................11
No Termination...........................................................11
FIXED ACCOUNT.................................................................11
Fixed Account............................................................11
Fixed Account Options................................................11
Interest Credited....................................................11
Renewal..............................................................13
Fixed Account Value......................................................13
SEPARATE ACCOUNT..............................................................13
General Description......................................................13
Sub-Accounts of the Separate Account.....................................14
Valuation of Assets......................................................14
Variable Account Value...................................................14
Accumulation Unit Value..................................................14
TRANSFERS.....................................................................15
FEES AND CHARGES..............................................................15
Mortality and Expense Risk Charge........................................15
Administration Charge....................................................15
Certificate Maintenance Fee..............................................15
SURRENDERS....................................................................16
Surrenders...............................................................16
Surrender Value..........................................................16
Contingent Deferred Sales Charge.........................................16
Deferral of Payment......................................................16
OWNERSHIP PROVISIONS..........................................................17
-4-
<PAGE>
Ownership of Separate Account............................................17
Ownership of Contract and Participant Account............................17
Transfer and Assignment..................................................17
Successor Owner..........................................................17
Community Property.......................................................17
BENEFICIARY PROVISIONS........................................................18
Beneficiary..............................................................18
Change of Beneficiary....................................................18
BENEFIT ON ANNUITY COMMENCEMENT DATE..........................................18
Annuity Commencement Date................................................18
Annuity Benefit Payments.................................................18
Form of Annuity Benefit..................................................19
BENEFIT ON DEATH OF PARTICIPANT...............................................19
Death Benefit............................................................19
Death Benefit Amount.....................................................19
Transfers After Death....................................................20
Form of Death Benefit....................................................20
SETTLEMENT OPTIONS............................................................20
Conditions...............................................................20
Benefit Payments.........................................................21
Fixed Dollar Annuity Benefit.............................................21
Variable Dollar Benefit..................................................21
Limitation on Election of Settlement Option..............................22
Settlement Option Computations...........................................22
Available Settlement Options.............................................22
Settlement Option Tables.................................................23
-5-
<PAGE>
DEFINITIONS
ACCOUNT(S): The Sub-Account(s) and/or the Fixed Account options.
ACCOUNT VALUE: The aggregate value of your interest in the Sub-Account(s) and
the Fixed Account options as of the end of any Valuation Period. The value of
your interest in all Sub-Accounts is the "Variable Account Value," and the value
of your interest in all Fixed Account options is the "Fixed Account Value."
ACCUMULATED EARNINGS: The Account Value in excess of Purchase Payments received
by us and which have not been returned to you.
ACCUMULATION PERIOD: The period prior to the applicable Commencement Date.
ACCUMULATION UNIT: A unit of measurement used to calculate the value(s) 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."
ADMINISTRATIVE OFFICE: The home office of the Company or any other place of
business which we may designate for administration.
AGE: Age as of most recent birthday.
ANNUITANT: The Annuitant is the Participant and is the person on whose life
Annuity Benefit payments are based.
ANNUITY BENEFIT: Periodic payments made 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.
-6-
<PAGE>
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 on the Commencement Date during
which Benefit Payments are to be made.
BENEFIT UNIT: A unit of measure used to determine the dollar value of any
Variable Dollar Benefit payments after the first Benefit Payment is made by us.
The value of a Benefit Unit is referred to as a "Benefit Unit Value."
CERTIFICATE ANNIVERSARY: An annual anniversary of the Certificate Effective
Date.
CERTIFICATE EFFECTIVE DATE: The date shown on the Certificate Specifications
page.
CERTIFICATE YEAR: Any period of twelve (12) consecutive months commencing on the
Certificate Effective Date and on each Certificate Anniversary thereafter.
CODE: The Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder.
COMMENCEMENT DATE: The Annuity Commencement Date if an Annuity Benefit is
payable under this Certificate, or the Death Benefit Commencement Date if a
Death Benefit is payable under this Certificate.
DEATH BENEFIT: The benefit described in the Benefit on Death of Participant
section of this Certificate.
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 us and the earlier to occur of:
1) our 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 us.
FUND: A management investment company or portfolio thereof, registered under the
Investment Company Act of 1940, 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.
-7-
<PAGE>
OWNER: The person identified as such on the Contract Specifications page.
PARTICIPANT: The person identified on the Certificate Specifications page who
participates in the benefits of the Contract as evidenced by this Certificate.
PAYMENT INTERVAL: A monthly, quarterly, annual or other regular interval during
the Benefit Payment Period.
PERSON CONTROLLING PAYMENTS: The "Person Controlling Payments" means the
following, as the case may be:
1) with respect to Annuity Benefit payments, you; and
2) with respect to Death Benefit payments,
a) the Beneficiary; or
b) if the Beneficiary is deceased, the payee.
PURCHASE PAYMENT: A contribution amount paid to us in consideration for your
participation under the Contract, after the deduction of any and all of the
following which may apply:
1) any fee charged by the person remitting payments for you;
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.
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 us, that is sent to us on our form or in a manner satisfactory
to us, which may, at our discretion, be telephonic, and that is received by us
at our Administrative Office. A Written Request is subject to any payment made
or any action we take before we acknowledge it. A Written Request may be
modified or revoked only by a subsequent Written Request, when permitted by the
terms of the Contract. You may be required to return this Certificate to us in
connection with a Written Request.
-8-
<PAGE>
GENERAL PROVISIONS
ENTIRE CONTRACT
We have issued the Contract to the Contract Owner identified on the Certificate
Specifications page. The Contract is a group flexible premium deferred variable
annuity contract. The Contract and this Certificate are restricted by
endorsement as required to obtain favorable tax treatment under the Code, and
neither is valid without the requisite endorsement(s) being attached. The
Contract, its endorsement(s), the application, if any, and the enrollment forms,
if any, of all participants under it, form the entire contract between the
Contract Owner and us. This Certificate is not a contract and is not a part of
the Contract.
Only statements in the application for the Contract, if any, or in your
enrollment form, if any, will be used to void your participation interest under
the Contract, or to defend a claim based on it. Such statements are
representations and not warranties.
PARTICIPANT CERTIFICATE
This Certificate is evidence of your participation interest under the Contract.
When the term "Certificate" is used herein to describe values, benefits, terms
or conditions under the Contract, it means your participation interest under the
Contract.
CHANGES -- WAIVERS
No changes or waivers of the terms of the Contract or this Certificate, are
valid unless made in writing by our President, Vice President, or Secretary. No
agent or other person not named above has authority to change or waive any
provision of the Contract. We reserve 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.
In any event, the Company reserves the right to add or delete Fixed Account
options and Sub-Accounts, to substitute shares of a different Fund or different
class or series of a Fund for shares held in a Sub-Account, to merge or combine
Sub-Accounts, to merge or combine the Separate Account with any other separate
account of the Company, to transfer the assets of the Separate Account to
another life insurance company by means of a merger or reinsurance, to convert
the Separate Account into a managed separate account, and to de-register the
Separate Account under the Investment Company Act of 1940. Any such change will
be made in accordance with applicable insurance and securities laws and after
obtaining any necessary federal and/or state regulatory approvals.
NONPARTICIPATING
The Contract does not pay dividends or share in the Company's divisible surplus.
MISSTATEMENT
If the age or sex of a person on whose life Benefit Payments are based is
misstated, the payments or other benefits under this Certificate shall be
adjusted to the amount which would have been payable based on the correct age or
sex. If we 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, we may deduct any
overpayments made, with interest, from any succeeding payments due under this
Certificate.
REQUIRED REPORTS
At least once each Certificate Year, we will send a report of your current
values and any other information required by law, until the first to occur of
the following:
1) the date your participation interest under the Contract is fully
surrendered;
2) the Annuity Commencement Date; or
-9-
<PAGE>
3) the Death Benefit Commencement Date.
The report will be mailed to your last known address. The reported values will
be based on the information in our possession at the time the report is prepared
by us. We may adjust the reported values at a later date if that information
proves to be incorrect or has changed.
EXCLUSIVE BENEFIT
Your participation interest under the Contract is for the exclusive benefit of
you and your Beneficiaries. Your participation interest under the Contract is
nonforfeitable by us.
STATE LAW
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.
CLAIMS OF CREDITORS
To the extent allowed by law, the Contract and all values and benefits under it
are not subject to the claims of creditors or to legal process.
COMPANY LIABILITY
We will not incur any liability or be responsible for any failure, in whole or
in part, by you or by any person having rights or benefits arising out of or
related to the Contract, to comply with any applicable laws, regulations or
rulings issued by a governmental agency.
VOTING RIGHTS
To the extent required by law, we will vote all shares of the Funds held in the
Separate Account, at regular and special shareholder meetings of the Funds, in
accordance with instructions received from you, or, if applicable, from the
Person Controlling Payments. If there is a change in the law which permits us to
vote the shares of the Funds without such instructions, then we reserve the
right to do so.
INCONTESTABILITY
This Certificate shall not be contestable by us.
DISCHARGE OF LIABILITY
Upon payment of any partial or full surrender, any Benefit Payment, we shall be
discharged from all liability to the extent of each such payment.
TRANSFER BY THE COMPANY
We reserve the right to transfer our obligations under the Contract to another
qualified life insurance company under an assumption reinsurance arrangement
without your prior consent.
TERMINATION
Either we or the Contract Owner may terminate the Contract by giving advance
notice in writing. The Contract describes the benefits and charges, if any, in
the event of termination of the Contract. Refer to the Contract for information
regarding these benefits and charges. If the Contract is terminated, this
Certificate and your participation interest under the Contract may be continued
on a deferred paid-up basis, subject to all of the terms and conditions of the
Contract, unless you surrender your participation as a whole. Termination of the
Contract will not affect Benefit Payments being made by us.
PURCHASE PAYMENTS
PURCHASE PAYMENTS
-10-
<PAGE>
One or more Purchase Payments may be paid to us for you at any time before the
Annuity Commencement Date, so long as:
1) you are still living; and
2) your participation interest has not been fully surrendered.
The initial Purchase Payment for you must be paid to us on or before the
Certificate Effective Date. Each Purchase Payment must be paid to us at our
Administrative Office, and is subject to any minimums or maximums that we set
for such from time to time. Upon request, we will provide the Contract Owner
with a receipt as proof of payment.
PURCHASE PAYMENT BONUS
A bonus in the amount of the Purchase Payment bonus rate set forth on the
Contract Specifications page multiplied by the amount of the Purchase Payment
will be credited to each Purchase Payment received by us. The amount of a
Purchase Payment will be determined, solely for purposes of determining the
amount of the bonus, without deduction of premium taxes or other taxes. The
bonus will be added to and will be deemed part of the Purchase Payment for all
purposes under this Certificate. Notwithstanding the foregoing, the bonus will
not be returned to you if you surrender your participation interest under the
Contract in full during the first Certificate Year.
ALLOCATION OF PURCHASE PAYMENT(S)
We will allocate Purchase Payments to the Fixed Account options and/or to the
Sub-Accounts according to the instructions we receive in your enrollment form,
if any, or subsequent 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 $2000.
NO TERMINATION
Except as stated elsewhere in this Certificate, your participation interest will
not be terminated by us due to failure to make additional Purchase Payments.
FIXED ACCOUNT
FIXED ACCOUNT
The Fixed Account is part of the Company's general account. The values of the
Fixed Account are not dependent upon the investment performance of the
Sub-Accounts.
FIXED ACCOUNT OPTIONS. The Fixed Account options available as of the Certificate
Effective Date are listed on the Certificate Specifications page. Different
Fixed Account options may be offered by us at any time.
INTEREST CREDITED. The guaranteed rate of interest for the Fixed Account options
is three percent (3%) per year, compounded annually. We may, at any time, pay a
current interest rate as declared by our Board of Directors for any of the Fixed
Account options that is higher than the guaranteed rate.
The interest rate initially credited to each Purchase Payment allocated to the
Fixed Accumulation Account Option will not be changed any sooner than twelve
(12) months following the date on which that Purchase Payment was received;
thereafter, the interest rate credited will not be changed more frequently than
once per calendar quarter. In the case of transfers from other Fixed Account
options or the Sub-Accounts to the Fixed Accumulation Account Option, the
interest rate will not be changed more frequently than once per calendar
quarter.
The interest rate credited to amounts allocated to the Fixed Account options
other than the Fixed Accumulation Account Option will not be changed during the
duration of the applicable guarantee period.
-11-
<PAGE>
RENEWAL. The following RENEWAL provisions apply to all Fixed Account options
except the Fixed Accumulation Account Option.
At the end of a guarantee period, and for the thirty (30) days immediately
preceding the end of such guarantee period, you may elect a new option to
replace the Fixed Account option that is then expiring. The entire amount
maturing may be re-allocated to any of the then-current options under the
Certificate (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 (1) year of such Commencement Date, the
only Fixed Account option available is the Fixed Accumulation Account Option.
If you do not specify a new Fixed Account option in accordance with the
preceding paragraph, you will be deemed to have selected 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 that date, you will be deemed to have selected the Fixed
Account option with the longest available guarantee period that expires prior to
that date, or, failing that, the Fixed Accumulation Account Option.
Any renewal of a Fixed Account option under this RENEWAL provision will be
effective on the day after the expiration of the guarantee period that is then
expiring.
FIXED ACCOUNT VALUE
The Fixed Account Value for this Certificate at any time is equal to:
1) the Purchase Payment(s) allocated to the Fixed Account; plus
2) amounts transferred to the Fixed Account; plus
3) interest credited to the Fixed Account; less
4) any charges, surrenders, deductions, amounts transferred from the
Fixed Account or other adjustments made as described elsewhere in this
Certificate.
SEPARATE ACCOUNT
GENERAL DESCRIPTION
The variable benefits under this Certificate are provided through the Separate
Account. The Separate Account is registered with the Securities and Exchange
Commission as a unit investment trust under the Investment Company Act of 1940.
The income, if any, and any gains or losses, realized or unrealized, on the
Separate Account will be credited to or charged against the amounts allocated to
such account without regard to other income, gains, or losses of the Company.
The amounts allocated to the Separate Account and the accumulations thereon
remain the property of the Company, but that portion of the assets of the
Separate Account that is equal to the reserves and other contractual liabilities
under all policies, annuities, and other contracts identified with the Separate
Account, is not chargeable with liabilities arising out of any other business of
the Company. The Company is not, and does not hold itself out to be, a trustee
in respect of such amounts.
We have the right to transfer to our general account, in our sole discretion and
at any time without prior written notice, any assets of the Separate Account
which are in excess of the required reserves and other contractual liabilities
-13-
<PAGE>
under all policies, annuities, and other contracts identified with the Separate
Account.
SUB-ACCOUNTS OF THE SEPARATE ACCOUNT
The assets of the Separate Account are divided into Sub-Accounts. The
Sub-Accounts available as of the Certificate Effective Date are listed on the
Certificate Specifications page. Each Sub-Account invests exclusively in shares
of an underlying Fund as shown on the Certificate Specifications page. Any
amounts of income and any gains on the shares of a Fund will be reinvested in
additional shares of that Fund at its Net Asset Value.
VALUATION OF ASSETS
Shares of Funds held for each Sub-Account will be valued at their Net Asset
Value at the end of each Valuation Period, as reported by each such Fund.
VARIABLE ACCOUNT VALUE
Purchase Payment(s) may be allocated among and, as described elsewhere in this
Certificate, Account values may be transferred to the various Sub-Accounts
within the Separate Account. For each Sub-Account, the Purchase Payment(s) or
amounts transferred are converted into Accumulation Units. The number of
Accumulation Units credited is determined by dividing the dollar amount directed
to each Sub-Account by the value of the Accumulation Unit for that Sub-Account
at the end of the Valuation Period on which the Purchase Payment(s) or
transferred amount is received.
The following events will result in the cancellation of an appropriate number of
Accumulation Units of a Sub-Account:
1) transfer from a Sub-Account;
2) full or partial surrender of your Variable Account Value;
3) payment of a Death Benefit;
4) application of your Variable Account Value to a settlement option;
5) deduction of the Certificate 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 Certificate Maintenance Fee or Transfer Fee is
due, as the case may be.
The Variable Account Value for this Certificate at any time is equal to the sum
of the number of Accumulation Units for each Sub-Account attributable to this
Certificate multiplied by the Accumulation Unit Value for each Sub-Account at
the end of the preceding Valuation Period.
ACCUMULATION UNIT VALUE
The initial Accumulation Unit Value for each Sub-Account, with the exception of
the Money Market Sub-Account, was set at $10.00. 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.
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 that Sub-
Account, determined at the end of the applicable Valuation
Period; plus
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b) the per share amount of any dividend or net capital gain
distributions made by the Fund held in that 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 that
Sub-Account, determined at the end of the immediately preceding
Valuation Period; and
3) is the factor representing the Mortality and Expense Risk Charge
and the Administration Charge deducted from the Sub-Account for
the number of days in the applicable Valuation Period.
TRANSFERS
Prior to the applicable Commencement Date, you 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 Certificate Anniversary, and prior to the applicable
Commencement Date, you 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
this Certificate, then the entire amount of that Fixed Account option subject to
renewal at that time may be transferred. In any other case, transfers from any
Fixed Account option are subject to a cumulative limit during each Certificate
Year of twenty percent (20%) of the Fixed Account option's value as of the most
recent Certificate 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 number of transfers
per year over which we will charge a Transfer Fee on each additional transfer,
and the amount of the Transfer Fee, are shown on the Certificate Specifications
page.
We reserve the right, in our sole discretion and at any time without prior
notice, to terminate, suspend or modify the transfer privileges described above.
FEES AND CHARGES
MORTALITY AND EXPENSE RISK CHARGE
The Mortality and Expense Risk Charge is shown on the Certificate Specifications
page and is deducted daily from each Sub-Account. This deduction is made to
compensate the Company for assuming the mortality and expense risks under the
Contract.
ADMINISTRATION CHARGE
The Administration Charge is shown on the Certificate Specifications page and is
deducted daily from each Sub-Account. This deduction is made to reimburse the
Company for expenses incurred in the administration of the Contract, the
Certificates thereunder, and the Separate Account.
CERTIFICATE MAINTENANCE FEE
The Certificate Maintenance Fee ("Fee") is shown on the Certificate
Specifications page and is deducted as of the Valuation Date next following each
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Certificate Anniversary prior to the applicable Commencement Date. In addition,
the full annual Fee will be charged at the time of a full surrender. The Fee
will be allocated to each Sub-Account in the same proportion as each
Sub-Account's value is to the total Variable Account Value for this Certificate
on the end of such Valuation Period. The Fee does not apply to the Fixed
Account.
After the applicable Commencement Date, if a Variable Dollar Benefit is elected,
the Fee will be deducted pro-rata from each Benefit Payment and will result in a
reduction in the amount of such payment.
The Fee may be waived in whole or in part in our sole discretion.
SURRENDERS
SURRENDERS
A surrender in full may be made 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
Surrender Value that represents the Accumulated Earnings for this Certificate
and then from Purchase Payments. For purposes of this Certificate, Purchase
Payments are deemed to be withdrawn on a "first-in, first-out" (FIFO) 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 by us.
SURRENDER VALUE
The Surrender Value for this Certificate at any time is an amount equal to:
1) the Account Value as of the end of the applicable Valuation Period;
less
2) during the first Certificate Year, the amount of the bonus(es)
credited to Purchase Payment(s) received by us for you; less
3) any applicable Contingent Deferred Sales Charge; less
4) any outstanding loans; and less 5) any applicable premium tax
or other taxes not previously deducted.
On full surrender, a full Certificate Maintenance Fee will also be deducted as
part of the calculation of the Surrender Value. Upon payment of the Surrender
Value to you, your participation interest under the Contract and this
Certificate will be terminated. Any bonus amounts which were credited to your
Account Value will be forfeited upon a full surrender of the Surrender Value
during the first Certificate Year.
CONTINGENT DEFERRED SALES CHARGE
A full or partial surrender may be subject to a Contingent Deferred Sales Charge
as set forth on the Certificate Specifications page. The Contingent Deferred
Sales Charge applies to and is calculated separately for each Purchase Payment.
Surrenders will result in the cancellation of Accumulation Units from each
applicable Sub-Account(s) and/or a reduction of your Fixed Account Value. In the
case of a full surrender, your participation interest under the Contract and
this Certificate will be terminated. The Contingent Deferred Sales Charge may be
waived in whole or in part in our sole discretion.
DEFERRAL OF PAYMENT
16
<PAGE>
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 is closed, or when trading on
the New York Stock Exchange is
restricted; or
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 a partial or full
surrender of the Fixed Account Value for up to six (6) months after we receive
your Written Request.
OWNERSHIP PROVISIONS
OWNERSHIP OF SEPARATE ACCOUNT
The Company has absolute ownership of the assets in the Separate Account.
However, the Company is not, and does not hold itself out to be, a trustee in
respect of any amounts under the Separate Account.
OWNERSHIP OF CONTRACT AND PARTICIPANT ACCOUNT
The owner of the Contract (the "Contract Owner") is your employer or the trustee
for your employer's retirement plan, as shown on your enrollment form, if any,
and on the Certificate Specifications page. The Contract is held by the Contract
Owner for the benefit of the participants and Beneficiaries.
Each participant for whom Purchase Payment(s) are made will participate in the
Contract as a Participant. A participant account will be established for each
Participant.
TRANSFER AND ASSIGNMENT
Neither you nor the Contract Owner may transfer, sell, assign, pledge, charge,
encumber or in any way alienate an interest under this Certificate or the
Contract.
SUCCESSOR OWNER
By Written Request, your spouse may, in some cases, succeed to the ownership of
your participation interest under the Contract after your death. Specifically,
if you die and your spouse is the sole surviving Beneficiary of your
participation interest, he or she will become the Successor Owner of your
participation interest if:
1) you make that Written Request before your death; or
2) after your death, your spouse makes that Written Request within
one (1) year of your death and
before the Death Benefit Commencement Date.
As Successor Owner, your spouse will then succeed to all rights of ownership
under this Certificate except the right to name another Successor Owner.
COMMUNITY PROPERTY
If you live in a community property state and have a spouse at any time while
you participate under the Contract, the laws of that state may vary your
ownership rights.
17
<PAGE>
BENEFICIARY PROVISIONS
BENEFICIARY
The Beneficiary is the person or persons so designated on your enrollment form,
if any, or under the CHANGE OF BENEFICIARY provision of this Certificate. If you
have not designated a Beneficiary, or if no Beneficiary designated survives you,
then the Beneficiary will be your estate.
A Beneficiary will be deemed not to have survived you if he or she dies within
thirty (30) days after your death.
A Beneficiary designation may be joint or contingent or both. Unless otherwise
stated, joint Beneficiaries will be entitled to equal shares. A contingent
Beneficiary will be entitled to a benefit only if there is no surviving primary
Beneficiary.
CHANGE OF BENEFICIARY
Unless you have designated an irrevocable Beneficiary, you may change your
designation of a Beneficiary at any time before the Annuity Commencement Date.
Any such change 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 any
settlement option election previously made.
BENEFIT ON ANNUITY COMMENCEMENT DATE
ANNUITY COMMENCEMENT DATE
The Annuity Commencement Date is shown on the Certificate Specifications page.
You may change the Annuity Commencement Date by Written Request made at least
thirty (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 Certificate Anniversary following your 85th birthday,
or five (5) years after the Certificate Effective Date, whichever is later.
ANNUITY BENEFIT PAYMENTS
An amount equal to the Account Value (after deduction of any fees and charges,
loans, or applicable premium tax or other taxes not previously deducted) will be
used to provide Annuity Benefit payments commencing on or after the Annuity
Commencement Date.
Notwithstanding the foregoing, a surrender will be deemed to have been made, and
an amount equal to the Surrender Value as of the Annuity Commencement Date will
be used to provide Annuity Benefit payments commencing on or after the Annuity
Commencement Date if the payee is a non-natural person, unless the non-natural
person payee is the Contract Owner and has an immediate obligation to make
corresponding payments of an Annuity Benefit to the Participant.
Annuity Benefit payments will be made to you as payee. Any Annuity Benefit
amounts remaining payable on your death will be paid to the contingent payee
designated by you by Written Request. We may reject the naming of a non-natural
payee. You will be the person on whose life any Annuity Benefit payments are
based.
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If no contingent payee designated by you is surviving at the time payment is to
be made, then after your death any Annuity Benefit amounts remaining payable
will be paid to the person or persons designated as contingent payee by Written
Request by the last payee who received payments. Failing that, any such amounts
will be paid to the estate of the last payee who received payments.
FORM OF ANNUITY BENEFIT
Annuity Benefit payments will be Fixed Dollar Benefit payments, made monthly in
accordance with the terms of Option B with a fixed period of one hundred twenty
(120) months under the SETTLEMENT OPTIONS section of this Certificate.
In lieu of that, you may elect to have Annuity Benefit payments made pursuant to
any other available settlement option under the SETTLEMENT OPTIONS section of
this Certificate. Any such election must be made by Written Request before the
Annuity Commencement Date. You may change your election of a settlement option
by Written Request made at least thirty (30) days prior to the date that Annuity
Benefit payments are scheduled to begin.
BENEFIT ON DEATH OF PARTICIPANT
DEATH BENEFIT
A Death Benefit will be paid under this Certificate if:
1) you die before the Annuity Commencement Date and before your
participation interest is fully surrendered;
2) the Death Benefit Valuation Date has occurred; and
3) your spouse does not become the Successor Owner of your participation
interest.
If a Death Benefit becomes payable:
1) it will be in lieu of all other benefits under this Certificate; and
2) all other rights under this Certificate will be terminated except for
rights related to the Death Benefit.
Death Benefit payments shall be made to the Beneficiary as payee.
The Beneficiary shall be the person on whose life any Death Benefit payments
under a settlement option election are based.
Any Death Benefit amounts remaining payable on the death of the Beneficiary will
be paid:
1) to any contingent payee designated as part of any Death Benefit
settlement option election made by you, or if none is surviving at the
time payment is to be made; then
2) to any contingent payee designated by the Beneficiary by Written
Request, or if none is surviving at the time payment is to be made;
then
3) to the estate of the last payee who received payments.
Only one Death Benefit will be paid with respect to your participation interest
under the Contract.
DEATH BENEFIT AMOUNT
The Death Benefit will be an amount equal to the greater of:
1) the Account Value as of the Death Benefit Valuation Date; or
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2) one hundred percent (100%) of the Purchase Payment(s) received by
us, including the Purchase Payment bonus(es) credited thereto,
less any amounts returned to you and any Contingent Deferred Sales
Charges that applied to those amounts.
As of the Death Benefit Valuation Date, the amount of the Death Benefit will be
allocated among the Sub-Accounts and Fixed Account options in the same
proportion as each Account's value is to the total Account Value as of the end
of the Valuation Period immediately preceding the Death Benefit Valuation Date.
Any applicable premium tax or other taxes not previously deducted, and any
outstanding loans, will be deducted from the Death Benefit amount described
above.
TRANSFERS AFTER DEATH
Between the Death Benefit Valuation Date and the Death Benefit Commencement
Date, a Beneficiary may transfer funds among Sub-Accounts and Fixed Account
options as described under the TRANSFERS section of this Certificate.
FORM OF DEATH BENEFIT
Payments under the DEATH BENEFIT provision of this Certificate will be Fixed
Dollar Benefit payments made monthly in accordance with the terms of Option A
with a period certain of forty-eight (48) months under the SETTLEMENT OPTIONS
section of this Certificate.
In lieu of that, you may elect at any time before your death to have payments
under the DEATH BENEFIT provision of this Certificate made in one lump sum or
pursuant to any available settlement option under the SETTLEMENT OPTIONS section
of this Certificate. If you do not make any such election, the Beneficiary may
make that election at any time after your death and before the Death Benefit
Commencement Date.
You may change your election of a settlement option at any time before your
death.
If a Beneficiary elects a settlement option as noted above, he or she may change
his or her own election of a settlement option by Written Request made at least
thirty (30) days prior to the date that Death Benefit payments are scheduled to
begin.
Any election or change of election must be made by Written Request.
SETTLEMENT OPTIONS
CONDITIONS
Benefit Payments under a settlement option are subject to any minimum amounts,
Payment Intervals, and other terms or conditions that we may from time to time
require. If we change our minimums, we 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 elected settlement options must comply with current applicable laws,
regulations and rulings issued by any governmental agency.
If more than one person is the payee under a settlement option, payments will be
made to the payees jointly. No more than two persons may be initial payees under
any joint and survivor settlement options.
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If payment under a settlement option depends on whether a specified person is
still alive, we may at any time require proof that such person is still living.
We will require proof of the age and/or sex of any person on whose life Benefit
Payments are based.
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, we 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, we 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; we 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 (12) months, the Person
Controlling Payments may, no more than once each twelve (12) 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 the 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 Benefits 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 or other taxes 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 Benefit Payment
Period.
If at the time a Fixed Dollar Benefit is elected, we have 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 your Variable
Account Value (expressed in thousands of dollars and after deduction of any fees
and charges, loans, or applicable premium tax or other taxes 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 elected less the pro-rata portion of the Certificate Maintenance Fee.
The number of Benefit Units in each Sub-Account held by you is determined by
dividing the dollar amount of the first monthly Variable Dollar Benefit payment
for each Sub-Account by the Benefit Unit Value for that Sub-Account as of the
applicable Commencement Date. The number of Benefit Units remains fixed during
the Benefit Payment Period, except as a result of any transfers among
Sub-Accounts after the applicable Commencement Date.
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The dollar amount of the second and 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 Certificate Maintenance Fee.
The payment from each Sub-Account is found by multiplying the number of Benefit
Units held in each Sub-Account by you 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 value of a Benefit Unit
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 under the ACCUMULATION UNIT VALUE provision of this Certificate,
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
three percent (3%) per year, compounded annually, that is reflected in the
Settlement Option Tables.
LIMITATION ON ELECTION OF SETTLEMENT OPTION
Fixed periods shorter than five (5) years are not available, except as a Death
Benefit settlement option.
SETTLEMENT OPTION COMPUTATIONS
The 1983 Group Annuity Mortality Table with interest at three percent (3%) per
year, compounded annually, is used to compute all guaranteed settlement option
factors, values, and benefits under this Certificate.
AVAILABLE SETTLEMENT OPTIONS
The available settlement options are set out below.
OPTION A Income for a Fixed Period
We 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 us or money will be
held by us is thirty (30) years. The Option A Table applies to this
Option.
OPTION B Life Annuity with Payments for at Least a Fixed Period
We will make monthly payments for at least a fixed period. If the
person on whose life Benefit Payments are based lives longer than the
fixed period, then we will make payments until his or her death. The
first payment will be paid as of the first day of the initial Payment
Interval. The Option B Table applies to this Option.
OPTION C Joint and One-half Survivor Annuity
We will make periodic payments until the death of the primary person on
whose life Benefit Payments are based; thereafter, we will make
one-half (1/2) of the periodic payment until the death of the secondary
person on whose life Benefit Payments are based. The first payment will
be paid as of the first day of the initial Payment Interval. The Option
C Table applies to this Option.
OPTION D Life Annuity
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We will make periodic payments until the death of the person on whose
life Benefit Payments are based. The first payment will be paid as of
the first day of the initial Payment Interval. The Option D Table
applies to this Option.
OPTION E Any Other Form
We will make periodic payments in any other form of settlement option
which is acceptable to us at the time of election.
SETTLEMENT OPTION TABLES
The Option Tables show the payments we will make at sample Payment Intervals for
each $1,000 applied at the guaranteed interest rate. Amounts may vary with the
Payment Interval and the age of the person on whose life Benefit Payments are
based.
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 PAYMENT 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>
OPTION B TABLE - LIFE ANNUITY
With Payments For At Least A Fixed Period
------- ---------------- --------------- ---------------- ----------------
60 MONTHS 120 MONTHS 180 MONTHS 240 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
------- ---------------- --------------- ---------------- ----------------
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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>
OPTION D TABLE - LIFE ANNUITY
Monthly payments for each $1,000 applied.
- --------------------------------------------------------------------------------
AGE AGE AGE AGE
- --------------------------------------------------------------------------------
55 $4.65 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
- --------------------------------------------------------------------------------
-24-
EXHIBIT (4)(c)
[GRAPHIC OMITTED]
A Stock Insurance Company
Domicile Address: 580 Walnut Street, Cincinnati, Ohio 45202
Administrative Office:
P. O. Box 5423, Cincinnati, Ohio 45201-5423
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
TWENTY DAY EXAMINATION-RIGHT TO CANCEL
You may cancel this contract ("Contract") by returning it and giving us written
notice of cancellation. You have until midnight of the twentieth day following
the date you receive this Contract. This Contract must be returned to us and the
required notice must be given in person, or to the agent who sold it to you, 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 you
cancel this Contract as set forth above, the Contract will be void and we will
refund the Purchase Payments, plus or minus any investment gains or losses under
the Contract, and less the bonus amounts credited to the Purchase Payments, as
of the end of the Valuation Period during which the returned Contract is
received by the Company, or as otherwise required by law.
As you read through this Contract, please note that the words "we", "us", "our",
and "Company" refer to Annuity Investors Life Insurance Company. The words "you"
and "your" refer to the Owner.
This is a deferred variable annuity contract. It is a legally binding agreement
between you and us.
PLEASE READ YOUR CONTRACT WITH CARE.
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
Nonparticipating - No Dividends
TAX-QUALIFIED
BENEFIT PAYMENTS AND OTHER VALUES DESCRIBED IN THIS CONTRACT, WHEN BASED ON THE
INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT, MAY INCREASE OR DECREASE AND ARE
NOT GUARANTEED AS TO FIXED DOLLAR AMOUNTS. NO MINIMUM CONTRACT VALUE IS
GUARANTEED, EXCEPT FOR AMOUNTS IN THE FIXED ACCOUNT.
<PAGE>
CONTRACT SPECIFICATIONS
OWNER: JOHN DOE
AGE OF OWNER AS OF CONTRACT EFFECTIVE DATE: 35
CONTRACT NUMBER: 000000000
CONTRACT EFFECTIVE DATE: APRIL 01, 1996
ANNUITY COMMENCEMENT DATE: APRIL 01, 2031
PURCHASE PAYMENT BONUS RATE: [3%]
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT: Annuity Investors Variable Account B
Following is a list of the currently available Funds in which the Separate
Account invests:
[Janus Aspen Series Aggressive Growth Portfolio]
[Janus Aspen Series Worldwide Growth Portfolio]
[Janus Aspen Series Balanced Portfolio]
[Janus Aspen Series Growth Portfolio]
[Janus Aspen Series International Growth Portfolio]
[Dreyfus Variable Investment Fund-Capital Appreciation Portfolio]
[Dreyfus Variable Investment Fund-Money Market Portfolio]
[Dreyfus Variable Investment Fund-Growth and Income Portfolio]
[Dreyfus Variable Investment Fund-Small Cap Portfolio]
[The Dreyfus Socially Responsible Growth Fund, Inc.]
[Dreyfus Stock Index Fund]
[Strong Opportunity Fund II, Inc.]
[Strong Growth Fund II]
[INVESCO VIF-Industrial Income Fund]
[INVESCO VIF-Total Return Fund]
[INVESCO VIF-High Yield Fund]
[Morgan Stanley Universal Funds Inc. U.S. Real Estate Portfolio]
[Morgan Stanley Universal Funds Inc. Value Portfolio]
[Morgan Stanley Universal Funds Inc. Emerging Markets Equity Portfolio]
[Morgan Stanley Universal Funds Inc. Fixed Income Portfolio]
[Morgan Stanley Universal Funds Inc. Mid-Cap Value Portfolio]
[Pilgrim Baxter PBHG Insurance Series Fund, Inc.-Growth II Fund]
[Pilgrim Baxter PBHG Insurance Series Fund, Inc.-Large Cap Growth Fund]
[Pilgrim Baxter PBHG Insurance Series Fund, Inc.-Technology & Communications
Fund]
-2-
<PAGE>
FIXED ACCOUNT:
Following is a list of the currently available Fixed Account options, with
guarantee periods as may be applicable:
Fixed Accumulation Account Option
[Fixed Account Option One-Year Guarantee Period]
[Fixed Account Option Three-Year Guarantee Period]
[Fixed Account Option Five-Year Guarantee Period]
[Fixed Account Option Seven-Year Guarantee Period]
The guaranteed rate of interest for the Fixed Account options is three percent
(3%) per year, compounded annually.
TRANSFER FEE: [$25] per transfer in excess of twelve (12) in any Contract Year.
CONTINGENT DEFERRED SALES CHARGE: An amount deducted on each partial or full
surrender of a Purchase Payment, as follows:
NUMBER OF FULL YEARS ELAPSED
BETWEEN THE DATE OF RECEIPT OF CONTINGENT DEFERRED SALES CHARGE
A PURCHASE PAYMENT AND DATE WRITTEN AS A PERCENTAGE OF THE ASSOCIATED
REQUEST FOR SURRENDER IS RECEIVED PURCHASE PAYMENT SURRENDERED
----------------------------------- ---------------------------------
0 8%
1 8%
2 8%
3 7%
4 6%
5 5%
6 3%
7 2%
8+ 0%
Please see the SURRENDERS section of this Contract for additional information.
FREE WITHDRAWAL PRIVILEGE:
CONTRACT YEAR APPLICABLE PERCENTAGE
1 10% of all Purchase Payments received
2 and thereafter Greater of: (a) Accumulated Earnings;
or (b) 10% of Account Value as of
last Contract Anniversary
Please see the SURRENDERS section of this Contract for additional information.
CONTRACT MAINTENANCE FEE: [$30] Annually
MORTALITY AND EXPENSE RISK CHARGE: A charge equal to an effective annual rate of
[1.25%] of the daily Net Asset Value of the Sub-Accounts.
ADMINISTRATION CHARGE: A charge equal to an effective annual rate of [0.15%] of
the daily Net Asset Value of the Sub-Accounts.
-3-
<PAGE>
TERMINATION: We reserve the right to terminate this Contract at any time the
Surrender Value is less than $500. A surrender will be deemed to have been made
and we will pay you the Surrender Value of this Contract.
INQUIRIES: FOR INFORMATION, OR TO MAKE A COMPLAINT, CALL OR WRITE:
Variable Annuity Service Center
Annuity Investors Life Insurance Company
Post Office Box 5423
Cincinnati, Ohio 45201-5423
[1-800-789-6771]
-4-
<PAGE>
TABLE OF CONTENTS PAGE
- ------------------------------------------------------------------
DEFINITIONS......................................................7
GENERAL PROVISIONS...............................................9
Entire Contract................................................9
Changes -- Waivers.............................................9
Nonparticipating...............................................9
Misstatement...................................................9
Required Reports...............................................9
Exclusive Benefit..............................................9
State Law.....................................................10
Claims of Creditors...........................................10
Company Liability.............................................10
Voting Rights.................................................10
Incontestability..............................................10
Discharge of Liability........................................10
Transfer By the Company.......................................10
PURCHASE PAYMENTS...............................................10
Purchase Payments.............................................10
Purchase Payment Bonus........................................10
Allocation of Purchase Payments...............................10
No Termination................................................11
FIXED ACCOUNT...................................................11
Fixed Account.................................................11
Fixed Account Options.......................................11
Interest Credited...........................................11
Renewal.....................................................11
Fixed Account Value...........................................11
SEPARATE ACCOUNT................................................12
General Description...........................................12
Sub-Accounts of the Separate Account..........................12
Valuation of Assets...........................................12
Variable Account Value........................................12
Accumulation Unit Value.......................................13
TRANSFERS.......................................................13
FEES AND CHARGES................................................13
Mortality and Expense Risk Charge.............................13
Administration Charge.........................................14
Contract Maintenance Fee......................................14
SURRENDERS......................................................14
Surrenders....................................................14
Surrender Value...............................................14
Contingent Deferred Sales Charge..............................14
Free Withdrawal Privilege.....................................14
Deferral of Payment...........................................15
OWNERSHIP PROVISIONS............................................15
Ownership of Separate Account.................................15
Owner.........................................................15
Transfer and Assignment.......................................15
Successor Owner...............................................15
Community Property............................................15
-5-
<PAGE>
BENEFICIARY PROVISIONS..........................................16
Beneficiary...................................................16
Change of Beneficiary.........................................16
BENEFIT ON ANNUITY COMMENCEMENT DATE............................16
Annuity Commencement Date.....................................16
Annuity Benefit Payments......................................16
Form of Annuity Benefit.......................................16
BENEFIT ON DEATH OF OWNER.......................................17
Death Benefit.................................................17
Death Benefit Amount..........................................17
Transfers After Death.........................................17
Death Benefit Commencement Date...............................17
Form of Death Benefit.........................................18
SETTLEMENT OPTIONS..............................................18
Conditions....................................................18
Benefit Payments..............................................18
Fixed Dollar Benefit..........................................19
Variable Dollar Benefit.......................................19
Limitation on Election of Settlement Option...................19
Settlement Option Computations................................19
Available Settlement Options..................................19
Settlement Option Tables......................................20
-6-
<PAGE>
DEFINITIONS
ACCOUNT(S): The Sub-Account(s) and/or the Fixed Account options.
ACCOUNT VALUE: The aggregate value of your interest in the Sub-Account(s) and
the Fixed Account options as of the end of any Valuation Period. The value of
your interest in all Sub-Accounts is the "Variable Account Value," and the value
of your interest in all Fixed Account options is the "Fixed Account Value."
ACCUMULATED EARNINGS: The Account Value in excess of Purchase Payments received
by us and which have not been returned to you.
ACCUMULATION PERIOD: The period prior to the applicable Commencement Date.
ACCUMULATION UNIT: A unit of measure used to calculate the value(s) 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."
ADMINISTRATIVE OFFICE: The home office of the Company or any other place of
business which we 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.
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 on the Commencement Date during
which Benefit Payments are to be made under this Contract.
BENEFIT UNIT: A unit of measure used to determine the dollar value of any
Variable Dollar Benefit payments after the first Benefit Payment is made by us.
The value of a Benefit Unit is referred to as a "Benefit Unit Value."
CODE: The Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder.
COMMENCEMENT DATE: The Annuity Commencement Date if an Annuity Benefit is
payable under this Contract, or the Death Benefit Commencement Date if a Death
Benefit is payable under this Contract.
CONTRACT ANNIVERSARY: An annual anniversary of the Contract Effective Date.
CONTRACT EFFECTIVE DATE: The date shown on the Contract Specifications page.
CONTRACT YEAR: Any period of twelve (12) consecutive 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
this Contract.
-7-
<PAGE>
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 us and the earlier to occur of:
1) our 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) certified copy of a death certificate;
2) certified copy of a decree of a court of competent jurisdiction as to
the finding of death; or
3) any other proof satisfactory to us.
FUND: A management investment company or portfolio thereof, registered under the
Investment Company Act of 1940, in which the Separate 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 identified as such on the Contract Specifications page.
PAYMENT INTERVAL: A monthly, quarterly, annual or other regular interval during
the Benefit Payment Period.
PERSON CONTROLLING PAYMENTS: The "Person Controlling Payments" means the
following, as the case may be:
1) with respect to Annuity Benefit payments, you
as Owner; and
2) with respect to Death Benefit payments,
a) the Beneficiary; or
b) if the Beneficiary is deceased, the payee.
PURCHASE PAYMENT: A contribution amount paid to us in consideration for this
Contract, after the deduction of any and all of the following which may apply:
1) any fee charged by the person remitting payments for you;
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.
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 us, that is sent to us on our form or in a manner satisfactory
to us, which may, at our discretion, be telephonic, and that is received by us
at our Administrative Office. A Written Request is subject to any payment made
or any action we take before we acknowledge it. A Written Request may be
modified or revoked only by a subsequent Written Request, when permitted by the
terms of this Contract. You may be required to return this Contract to us in
connection with a Written Request.
-8-
<PAGE>
GENERAL PROVISIONS
ENTIRE CONTRACT
We have issued this Contract to the Owner identified on the Contract
Specifications page. This Contract is an individual flexible premium deferred
variable annuity contract. This Contract is restricted by endorsement as
required to obtain favorable tax treatment under the Code, and is not valid
without the requisite endorsement(s) being attached. This Contract, its
endorsements, and the application, if any, form the entire Contract between you
and us.
Only statements in the application, if any, or statements made elsewhere by you
in consideration for this Contract will be used to void your interest under this
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 this Contract are valid unless made in
writing by our President, Vice President, or Secretary. No agent or other person
not named above has authority to change or waive any provision of this Contract.
We reserve the right both to administer and to change the provisions of this
Contract to conform to any applicable laws, regulations or rulings issued by a
governmental agency.
In any event, the Company reserves the right to add or delete Fixed Account
options and Sub-Accounts, to substitute shares of a different Fund or different
class or series of a Fund for shares held in a Sub-Account, to merge or combine
Sub-Accounts, to merge or combine the Separate Account with any other separate
account of the Company, to transfer the assets of the Separate Account to
another life insurance company by means of a merger or reinsurance, to convert
the Separate Account into a managed separate account, and to de-register the
Separate Account under the Investment Company Act of 1940. Any such change will
be made in accordance with applicable insurance and securities laws and after
obtaining any necessary federal and/or state regulatory approvals.
NONPARTICIPATING
This Contract does not pay dividends or share in the Company's divisible
surplus.
MISSTATEMENT
If the age or sex of a person on whose life Benefit Payments are based is
misstated, the payments or other benefits under this Contract shall be adjusted
to the amount which would have been payable based on the correct age or sex. If
we 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, we may deduct any
overpayments made, with interest, from any succeeding payment(s) due under this
Contract.
REQUIRED REPORTS
At least once each Contract Year, we will send you a report of your current
values and any other information required by law, until the first to occur of
the following:
1) the date this Contract is fully surrendered;
2) the Annuity Commencement Date; or
3) the Death Benefit Commencement Date.
The report will be mailed to your last known address. The reported values will
be based on the information in our possession at the time the report is prepared
by us. We may adjust the reported values at a later date if that information
proves to be incorrect or has changed.
EXCLUSIVE BENEFIT
This Contract is for the exclusive benefit of you and your Beneficiaries. Your
interest under this Contract is nonforfeitable by us.
-9-
<PAGE>
STATE LAW
All factors, values, benefits and reserves under this Contract will not be less
than those required by the law of the state in which this Contract is delivered.
CLAIMS OF CREDITORS
To the extent allowed by law, your Contract and all values and benefits under it
are not subject to the claims of creditors or to legal process.
COMPANY LIABILITY
We will not incur any liability or be responsible for any failure, in whole or
in part, by you or by any person having rights or benefits arising out of or
related to this Contract, to comply with any applicable laws, regulations or
rulings issued by a governmental agency.
VOTING RIGHTS
To the extent required by law, we will vote all shares of the Funds held in the
Separate Account, at regular and special shareholder meetings of the Funds. The
shares will be voted in accordance with instructions received from you, or if
applicable, from the Person Controlling Payments. If there is a change in the
law which permits us to vote the shares of the Funds without such instructions,
then we reserve the right to do so.
INCONTESTABILITY
This Contract shall not be contestable by us.
DISCHARGE OF LIABILITY
Upon payment of any partial or full surrender, or any Benefit Payment, we shall
be discharged from all liability to the extent of each such payment.
TRANSFER BY THE COMPANY
We reserve the right to transfer our obligations under this Contract to another
qualified life insurance company under an assumption reinsurance arrangement
without your prior consent.
PURCHASE PAYMENTS
PURCHASE PAYMENTS
One or more Purchase Payments may be paid to us at any time before the Annuity
Commencement Date, so long as:
1) you are still living; and
2) this Contract has not been fully surrendered.
The initial Purchase Payment must be paid to us on or before the Contract
Effective Date. Each Purchase Payment must be paid to us at our Administrative
Office, and is subject to any minimums or maximums that we set for such from
time to time. Upon request, we will provide you with a receipt as proof of
payment.
PURCHASE PAYMENT BONUS
A bonus in the amount of the Purchase Payment bonus rate set forth on the
Contract Specifications page multiplied by the amount of the Purchase Payment
will be credited to each Purchase Payment received by us. The amount of a
Purchase Payment will be determined, solely for purposes of determining the
amount of the bonus, without deduction of premium taxes or other taxes. The
bonus will be added to and will be deemed part of the Purchase Payment for all
purposes under this Contract. Notwithstanding the foregoing, the bonus will not
be returned to you if you cancel this Contract under the Right to Cancel
provision of this Contract, or if you surrender this Contract in full during the
first Contract Year.
ALLOCATION OF PURCHASE PAYMENTS
We will allocate Purchase Payments to the Fixed Account options and/or to the
Sub-Accounts according to the instructions we receive 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
-10-
<PAGE>
the Fixed Accumulation Account Option is $2000. 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.
NO TERMINATION
Except as stated elsewhere in this Contract, this Contract will not be
terminated by us due to failure to make additional Purchase Payments.
FIXED ACCOUNT
FIXED ACCOUNT
The Fixed Account is part of the Company's general account. The values of the
Fixed Account are not dependent upon the investment performance of the
Sub-Accounts.
FIXED ACCOUNT OPTIONS. The Fixed Account options available as of the Contract
Effective Date are listed on the Contract Specifications page. Different Fixed
Account options may be offered by us at any time.
INTEREST CREDITED. The guaranteed rate of interest for the Fixed Account options
is three percent (3%) per year, compounded annually. We may, at any time, pay a
current interest rate as declared by our Board of Directors for any of the Fixed
Account options that is higher than the guaranteed rate.
The interest rate initially credited to each Purchase Payment allocated to the
Fixed Accumulation Account Option will not be changed any sooner than twelve
(12) months following the date on which that Purchase Payment was received;
thereafter, the interest rate credited will not be changed more frequently than
once per calendar quarter. In the case of transfers from other Fixed Account
options or the Sub-Accounts to the Fixed Accumulation Account Option, the
interest rate will not be changed more frequently than once per calendar
quarter.
The interest rate credited to amounts allocated to the Fixed Account options
other than the Fixed Accumulation Account Option will not be changed during the
duration of the applicable guarantee period.
RENEWAL. The following RENEWAL provisions apply to all Fixed Account options
except the Fixed Accumulation Account Option.
At the end of a guarantee period, and for the thirty (30) days immediately
preceding the end of such guarantee period, you may elect a new option to
replace the Fixed Account option that is then expiring. The entire amount
maturing may be re-allocated to any of the then-current options under this
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 (1) year of such Commencement Date, the
only Fixed Account option available is the Fixed Accumulation Account Option.
If you do not specify a new Fixed Account option in accordance with the
preceding paragraph, you will be deemed to have selected 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, you 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.
Any renewal of a Fixed Account option under this RENEWAL provision will be
effective on the day after the expiration of the guarantee period that is then
expiring.
FIXED ACCOUNT VALUE
The Fixed Account Value for this Contract at any time is equal to:
1) the Purchase Payment(s) allocated to the Fixed Account; plus
2) amounts transferred to the Fixed Account; plus
3) interest credited to the Fixed Account; less
4) any charges, surrenders, deductions, amounts transferred from the
Fixed Account or other adjustments made as described elsewhere in this
Contract.
-11-
<PAGE>
SEPARATE ACCOUNT
GENERAL DESCRIPTION
The variable benefits under this Contract are provided through the Separate
Account. The Separate Account is registered with the Securities and Exchange
Commission as a unit investment trust under the Investment Company Act of 1940.
The income, if any, and any gains or losses, realized or unrealized, on the
Separate Account will be credited to or charged against the amounts allocated to
such account without regard to other income, gains, or losses of the Company.
The amounts allocated to the Separate Account and the accumulations thereon
remain the property of the Company, but that portion of the assets of the
Separate Account that is equal to the reserves and other contractual liabilities
under all policies, annuities, and other contracts identified with the Separate
Account is not chargeable with liabilities arising out of any other business of
the Company. The Company is not, and does not hold itself out to be, a trustee
in respect of such amounts.
We have the right to transfer to our general account, in our sole discretion and
at any time without prior written notice, any assets of the Separate Account
which are in excess of the required reserves and other contractual liabilities
under all policies, annuities, and other contracts identified with the Separate
Account.
SUB-ACCOUNTS OF THE SEPARATE ACCOUNT
The assets of the Separate Account are divided into Sub-Accounts. The
Sub-Accounts available as of the Contract Effective Date are listed on the
Contract Specifications page. Each Sub-Account is invested exclusively in shares
of an underlying Fund as shown on the Contract Specifications page. Any amounts
of income and any gains on the shares of a Fund will be reinvested in additional
shares of that Fund at its Net Asset Value.
VALUATION OF ASSETS
Shares of Funds held by each Sub-Account will be valued at their Net Asset Value
at the end of each Valuation Period, as reported by each such Fund.
VARIABLE ACCOUNT VALUE
Purchase Payment(s) may be allocated among and, as described elsewhere in this
Contract, Account values may be transferred to the various Sub-Accounts within
the Separate Account. For each Sub-Account, the Purchase Payment(s) or amounts
transferred are converted into Accumulation Units. The number of Accumulation
Units credited is determined by dividing the dollar amount directed to each
Sub-Account by the value of the Accumulation Unit for that Sub-Account at the
end of the Valuation Period during which the Purchase Payment(s) or transferred
amount is received.
The following events will result in the cancellation of an appropriate number of
Accumulation Units of a Sub-Account:
1) transfer from a Sub-Account;
2) full or partial surrender of the Variable Account Value;
3) payment of a Death Benefit;
4) application of the Variable Account Value to a settlement option;
5) deduction of the Contract Maintenance Fee; or
6) deduction of any Transfer Fee.
Accumulation Units will be canceled as of the end of the Valuation Period during
which the Company receives a Written Request regarding the event giving rise to
such cancellation, or an applicable Commencement Date, or the end of the
Valuation Period on which the Contract Maintenance Fee or Transfer Fee is due,
as the case may be.
The Variable Account Value for this Contract at any time is equal to the sum of
the number of Accumulation Units for each Sub-Account attributable to this
Contract multiplied by the Accumulation Unit Value for each Sub-Account at the
end of the preceding Valuation Period.
-12-
<PAGE>
ACCUMULATION UNIT VALUE
The initial Accumulation Unit Value for each Sub-Account, with the exception of
the Money Market Sub-Account, was set at $10.00. 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.
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.
TRANSFERS
Prior to the applicable Commencement Date, you 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, you 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 this
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 any 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 number of transfers
per year over which we will charge a Transfer Fee on each additional transfer,
and the amount of the Transfer Fee, are shown on the Contract Specifications
page.
We reserve the right, in our sole discretion and at any time without prior
notice, to terminate, suspend or modify the transfer privileges described above.
FEES AND CHARGES
MORTALITY AND EXPENSE RISK CHARGE
The Mortality and Expense Risk Charge is shown on the Contract Specifications
page and is deducted daily from each Sub-Account. This deduction is made to
compensate the Company for assuming the mortality and expense risks under this
Contract.
-13-
<PAGE>
ADMINISTRATION CHARGE
The Administration Charge is shown on the Contract Specifications page and is
deducted daily from each Sub-Account. This deduction is made to reimburse the
Company for expenses incurred in the administration of this Contract and the
Separate Account.
CONTRACT MAINTENANCE FEE
The Contract Maintenance Fee (iFeei) is shown on the Contract Specifications
page and is deducted as of the Valuation Period next following each Contract
Anniversary prior to the applicable Commencement Date. In addition, the full
annual Fee will be deducted at the time of a full surrender. The Fee will be
allocated to each Sub-Account in the same proportion as each Sub-Account's value
is to the total Variable Account Value as of the end of such Valuation Period.
The Fee does not apply to the Fixed Account.
After the applicable Commencement Date, if a Variable Dollar Benefit is elected,
the Fee will be deducted pro-rata from each Benefit Payment and will result in a
reduction in the amount of such payment.
The Fee may be waived in whole or in part in our sole discretion.
SURRENDERS
SURRENDERS
You may surrender this 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 your Surrender Value to less than
$500. Surrenders will be deemed to be withdrawn first from the portion of the
Surrender Value that represents your Accumulated Earnings and then from Purchase
Payments. For purposes of this Contract, Purchase Payments are deemed to be
withdrawn on a "first-in, first-out" (FIFO) 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.
SURRENDER VALUE
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) during the first Contract Year, the amount of the bonus(es) credited
to Purchase Payment(s); less
3) any applicable Contingent Deferred Sales Charge; less
4) any outstanding loans; and less
5) 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. Upon payment of the Surrender Value
to you this Contract will be terminated. Any bonus amounts which were credited
to your Account Value will be forfeited upon a full surrender of the Surrender
Value during the first Contract Year.
CONTINGENT DEFERRED SALES CHARGE
A full or partial surrender may be subject to a Contingent Deferred Sales Charge
as set forth on the Contract Specifications page. The Contingent Deferred Sales
Charge applies to and is calculated separately for each Purchase Payment.
Surrenders will result in the cancellation of Accumulation Units from each
applicable Sub-Account(s) and/or a reduction of your Fixed Account Value. In the
case of a full surrender, this Contract will be terminated. The Contingent
Deferred Sales Charge may be waived in whole or in part in our sole discretion.
FREE WITHDRAWAL PRIVILEGE
Subject to the provisions of this Contract, we will waive the Contingent
Deferred Sales Charge, to the extent applicable, on full or partial surrenders
as follows:
-14-
<PAGE>
1) during the first Contract Year, on an amount equal to not more than
the applicable percentage (shown on the Contract Specifications page)
of all Purchase Payments received; and
2) during the second and succeeding Contract Years, on an amount equal to
the greater of:
a) Accumulated Earnings; or
b) not more than the applicable percentage (shown on the Contract
Specifications page) of the Account Value as of the last Contract
Anniversary.
The Free Withdrawal Privilege will be applied in each case to monies in the
order in which they are deemed withdrawn, as described in the SURRENDERS
provision of this Contract.
DEFERRAL OF PAYMENT
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 is closed, or when trading on the New
York Stock Exchange is restricted; or
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 a partial or full
surrender of the Fixed Account Value for up to six (6) months after we receive
your Written Request.
OWNERSHIP PROVISIONS
OWNERSHIP OF SEPARATE ACCOUNT
The Company has absolute ownership of the assets in the Separate Account. The
Company is not, and does not hold itself out to be, a trustee in respect of any
amounts under the Separate Account.
OWNER
The Owner of this Contract is the person shown as Owner on the Contract
Specifications page.
Unless otherwise stated, the Owner may exercise all ownership rights under this
Contract.
TRANSFER AND ASSIGNMENT
You may not transfer, sell, assign, pledge, charge, encumber or in any way
alienate your interest under this Contract.
SUCCESSOR OWNER
By Written Request, your spouse may, in some cases, succeed to the ownership of
this Contract after your death. Specifically, if you die and your spouse is the
sole surviving Beneficiary under this Contract, he or she will become the
Successor Owner of this Contract if:
1) you make that Written Request before your death; or
2) after your death, your spouse makes that Written Request within one
(1) year of your death and before the Death Benefit Commencement Date.
As Successor Owner, your spouse will then succeed to all rights of ownership
under this Contract except the right to name another Successor Owner.
COMMUNITY PROPERTY
If you live in a community property state and have a spouse at any time while
you own this Contract, the laws of that state may vary your ownership rights.
-15-
<PAGE>
BENEFICIARY PROVISIONS
BENEFICIARY
The Beneficiary is the person or persons so designated in the application, if
any, or under the CHANGE OF BENEFICIARY provision of this Contract. If you have
not designated a Beneficiary, or if no Beneficiary designated by you survives
you, then the Beneficiary will be your estate.
A Beneficiary will be deemed not to have survived you if he or she dies within
thirty (30) days after your death.
A beneficiary designation may be joint or contingent or both. Unless otherwise
stated, joint Beneficiaries will be entitled to equal shares. A contingent
Beneficiary will be entitled to a benefit only if there is no surviving primary
Beneficiary.
CHANGE OF BENEFICIARY
Unless you have designated an irrevocable Beneficiary, you may change your
designation of a Beneficiary at any time before the Annuity Commencement Date.
Any such change 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 any
settlement option election previously made.
BENEFIT ON ANNUITY COMMENCEMENT DATE
ANNUITY COMMENCEMENT DATE
The Annuity Commencement Date is shown on the Contract Specifications page. You
may change the Annuity Commencement Date by Written Request made at least thirty
(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 your 85th birthday or five (5)
years after the Contract Effective Date, whichever is later.
ANNUITY BENEFIT PAYMENTS
An amount equal to the Account Value (after deduction of any fees and charges,
loans, or applicable premium tax or other taxes not previously deducted) will be
used to provide Annuity Benefit payments under this Contract commencing on or
after the Annuity Commencement Date.
Notwithstanding the foregoing, a surrender will be deemed to have been made, and
an amount equal to the Surrender Value as of the Annuity Commencement Date will
be used to provide Annuity Benefit payments commencing on or after the Annuity
Commencement Date if the payee is a non-natural person, unless the non-natural
person payee is the Owner and has an immediate obligation to make corresponding
payments of an Annuity Benefit to the Annuitant.
Annuity Benefit payments will be made to you as payee. Any Annuity Benefit
amounts remaining payable on your death will be paid to the contingent payee
designated by you by Written Request. We may reject the naming of a non-natural
payee. You will be the person on whose life any Annuity Benefit payments are
based.
If no contingent payee designated by you is surviving at the time payment is to
be made, then after your death any Annuity Benefit amounts remaining payable
will be paid to the person or persons designated as contingent payee by Written
Request by the last payee who received payments. Failing that, any such amounts
will be paid to the estate of the last payee who received payments.
FORM OF ANNUITY BENEFIT
Annuity Benefit payments will be Fixed Dollar Benefit payments, made monthly in
accordance with the terms of Option B with a fixed period of one hundred twenty
(120) months under the SETTLEMENT OPTIONS section of this Contract.
-16-
<PAGE>
In lieu of that, you may elect to have Annuity Benefit payments made pursuant to
any other available settlement option under the SETTLEMENT OPTIONS section of
this Contract. Any such election must be made by Written Request before the
Annuity Commencement Date. You may change your election of a settlement option
by Written Request made at least thirty (30) days prior to the date that Annuity
Benefit payments are scheduled to begin.
BENEFIT ON DEATH OF OWNER
DEATH BENEFIT
A Death Benefit will be paid under this Contract if:
1) you die before the Annuity Commencement Date and before this Contract
is fully surrendered;
2) the Death Benefit Valuation Date has occurred; and
3) your spouse does not become the Successor Owner.
If a Death Benefit becomes payable:
1) it will be in lieu of all other benefits under this Contract; and
2) all other rights under this Contract will be terminated except for
rights related to the Death Benefit.
Death Benefit payments shall be made to the Beneficiary as payee.
The Beneficiary will be the person on whose life any Death Benefit payments
under a settlement option are based.
Any Death Benefit amounts remaining payable on the death of the Beneficiary will
be paid:
1) to any contingent payee designated by you as part of any Death Benefit
settlement option election made by you, or if none is surviving at the
time payment is to be made; then
2) to any contingent payee designated by the Beneficiary by Written
Request, or if none is surviving at the time payment is to be made;
then
3) to the estate of the last payee who received payments.
Only one Death Benefit will be paid under this Contract.
DEATH BENEFIT AMOUNT
The Death Benefit will be an amount equal to the greater of:
1) the Account Value as of the Death Benefit Valuation Date; or
2) one hundred percent (100%) of the Purchase Payment(s) received by us,
including the Purchase Payment bonus(es) credited thereto, less any
amounts returned to you and any Contingent Deferred Sales Charges that
applied to those amounts.
As of the Death Benefit Valuation Date, the amount of the Death Benefit will be
allocated among the Sub-Accounts and Fixed Account options in the same
proportion as each Account's value is to the total Account Value as of the end
of the Valuation Period immediately preceding the Death Benefit Valuation Date.
Any applicable premium tax or other taxes not previously deducted, and any
outstanding loans, will be deducted from the Death Benefit amount described
above.
TRANSFERS AFTER DEATH
Between the Death Benefit Valuation Date and the Death Benefit Commencement
Date, the Beneficiary may transfer funds among Sub-Accounts and Fixed Account
options as described under the TRANSFERS section of this Contract.
DEATH BENEFIT COMMENCEMENT DATE
The Beneficiary may designate the Death Benefit Commencement Date by Written
Request within one (1) year of your death. If no designation is made, then the
Death Benefit Commencement Date will be one (1) year after your death.
-17-
<PAGE>
FORM OF DEATH BENEFIT
Payments under the DEATH BENEFIT provision of this Contract will be Fixed Dollar
Benefit payments made monthly in accordance with the terms of Option A with a
period certain of forty-eight (48) months under the SETTLEMENT OPTIONS section
of this Contract.
In lieu of that, you may elect at any time before your death to have payments
under the DEATH BENEFIT provision of this Contract made in one lump sum or
pursuant to any available settlement option under the SETTLEMENT OPTIONS section
of this Contract. If you do not make any such election, the Beneficiary may make
that election at any time after your death and before the Death Benefit
Commencement Date.
You may change your election of a settlement option at any time before your
death.
If a Beneficiary elects a settlement option as noted above, he or she may change
his or her own election of a settlement option by Written Request made at least
thirty (30) days prior to the date that Death Benefit payments are scheduled to
begin.
Any election or change of election must be made by Written Request.
SETTLEMENT OPTIONS
CONDITIONS
Benefit Payments under a settlement option are subject to any minimum amounts,
Payment Intervals, and other terms or conditions that we may from time to time
require. If we change our minimums, we 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 elected settlement options must comply with current applicable laws,
regulations and rulings issued by any governmental agency.
If more than one person is the payee under a settlement option, payments will be
made to the payees jointly. No more than two persons may be initial payees under
any joint and survivor settlement option.
If payment under a settlement option depends on whether a specified person is
still alive, we may at any time require proof that such person is still living.
We will require proof of the age and/or sex of any person on whose life Benefit
Payments are based.
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, we 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, we 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; we 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 (12) months, the Person
Controlling Payments may, no more than once each twelve (12) 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).
-18-
<PAGE>
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 or other taxes 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 Benefit Payment
Period.
If at the time a Fixed Dollar Benefit is elected, we have 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 your Variable Account Value (expressed in thousands of dollars and
after deduction of any fees and charges, loans, or applicable premium tax or
other taxes 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 you is determined by
dividing the dollar amount of the first monthly Variable Dollar Benefit payment
from each Sub-Account by the Benefit Unit Value for that Sub-Account as of the
applicable Commencement Date. The number of Benefit Units remains fixed during
the Benefit Payment Period, except as a result of any transfers among
Sub-Accounts after the applicable Commencement Date.
The dollar amount of the second and any subsequent Variable Dollar Benefit
payment will reflect the investment performance of the Sub-Account(s) selected
and may vary from month to month. The total amount of the second and any
subsequent Variable Dollar Benefit payment will be equal to the sum of the
payments from each Sub-Account less a pro-rata portion of the Contract
Maintenance Fee.
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 value of a Benefit Unit
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 the ACCUMULATION UNIT VALUE provision of this Contract,
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
three percent (3%) per year, compounded annually, that is reflected in the
Settlement Option Tables.
LIMITATION ON ELECTION OF SETTLEMENT OPTION
Fixed periods shorter than five (5) years are not available, except as a Death
Benefit settlement option.
SETTLEMENT OPTION COMPUTATIONS
The 1983 Individual Annuity Mortality Table with interest at three percent (3%)
per year, compounded annually, is used to compute all guaranteed settlement
option factors, values, and benefits under this Contract.
AVAILABLE SETTLEMENT OPTIONS
The available settlement options are set out below.
OPTION A Income for a Fixed Period
We 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 us or money will be held by us is
thirty (30) years. The Option A Table applies to this Option.
-19-
<PAGE>
OPTION B Life Annuity with Payments for at Least a Fixed Period
We will make periodic payments for a least a fixed period. If the person
on whose life Benefit Payments are based lives longer than the fixed
period, then we will make payments until his or her death. The first
payment will be paid as of the first day of the initial Payment Interval.
The Option B Table applies to this Option.
OPTION C Joint and One-half Survivor Annuity
We will make periodic payments until the death of the primary person on
whose life Benefit Payments are based; thereafter, we will make one-half
(1/2) of the periodic payment until the death of the secondary person on
whose life Benefit Payments are based. The first payment will be paid as
of the first day of the initial Payment Interval. The Option C Table
applies to this Option.
OPTION D Life Annuity
We will make periodic payments until the death of the person on whose life
Benefit Payments are based. The first payment will be paid as of the first
day of the initial Payment Interval. The Option D Table applies to this
Option.
OPTION E Any Other Form
We will make periodic payments in any other form of settlement option
which is acceptable to us at the time of an election.
SETTLEMENT OPTION TABLES
The Option Tables show the payments we will make at sample Payment Intervals for
each $1,000 applied at the guaranteed interest rate. Amounts may vary with the
Payment Interval and the age of the person on whose life Benefit Payments are
based.
OPTION A TABLE - INCOME FOR A FIXED PERIOD
Payments for fixed number of years for each $1,000 applied.
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
Terms of Semi- Terms of Semi- Terms of Semi-
Payments Annual Annual Quarterly Monthly Payments Annual Annual Quarterly Monthly Payments Annual Annual Quarterly Monthly
- --------------------------------------------------------------------------------------------------------------------------
YEARS YEARS YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6 184.60 91.62 45.64 15.18 11 108.08 53.64 26.72 8.88 16 79.61 39.51 19.68 6.54
7 160.51 79.66 39.68 13.20 12 100.46 49.86 24.84 8.26 17 75.95 37.70 18.78 6.24
8 142.46 70.70 35.22 11.71 13 94.03 46.67 23.25 7.73 18 72.71 36.09 17.98 5.98
9 128.43 63.74 31.75 10.56 14 88.53 43.94 21.89 7.28 19 69.81 34.65 17.26 5.74
10 117.23 58.18 28.98 9.64 15 83.77 41.57 20.71 6.89 20 67.22 33.36 16.62 5.53
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
-20-
<PAGE>
OPTION B TABLE - LIFE ANNUITY
With Payments For At Least A Fixed Period
---------------------------------------------------
60 MONTHS 120 MONTHS 180 MONTHS 240 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
---------------------------------------------------
OPTION C TABLE - JOINT AND ONE-HALF SURVIVOR ANNUITY
Monthly payments for each $1,000 of proceeds by ages of persons named.*
- --------------------------------------------------------------------------------
Secondary Age
- --------------------------------------------------------------------------------
Primary
Age 60 61 62 63 64 65 66 67 68 69 70
- --------------------------------------------------------------------------------
60 $4.56 $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 (1/2) 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
- -----------------------------------------------------------------------------
-21-
<PAGE>
[GRAPHIC OMITTED]
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
Nonparticipating - No Dividends
TAX-QUALIFIED
EXHIBIT (4)(d)
[GRAPHIC OMITTED]
ANNUITY INVESTORS(SERVICEMARK)
LIFE INSURANCE COMPANY
A Stock Insurance Company
Domicile Address: 580 Walnut Street, Cincinnati, Ohio 45202
Administrative Office:
P. O. Box 5423, Cincinnati, Ohio 45201-5423
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
TWENTY DAY EXAMINATION-RIGHT TO CANCEL
You may cancel this contract ("Contract") by returning it and giving us
written notice of cancellation. You have until midnight of the twentieth day
following the date you receive this Contract. This Contract must be returned
to us and the required notice must be given in person, or to the agent who
sold it to you, 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 you cancel this Contract as set forth above, the
Contract will be void and we will refund the Purchase Payments, plus or minus
any investment gains or losses under the Contract, and less the bonus amounts
credited to the Purchase Payments, as of the end of the Valuation Period
during which the returned Contract is received by the Company, or as
otherwise required by law.
As you read through this Contract, please note that the words "we", "us",
"our", and "Company" refer to Annuity Investors Life Insurance Company. The
words "you" and "your" refer to the Owner, including any joint owner.
This is a deferred variable annuity contract. It is a legally binding
agreement between you and us.
PLEASE READ YOUR CONTRACT WITH CARE.
/s/ Betty Kasproniz /s/ James M. Martensen
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
Nonparticipating - No Dividends
NON-TAX-QUALIFIED
BENEFIT PAYMENTS AND OTHER VALUES DESCRIBED IN THIS CONTRACT, WHEN BASED ON THE
INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT, MAY INCREASE OR DECREASE AND ARE
NOT GUARANTEED AS TO FIXED DOLLAR AMOUNTS. NO MINIMUM CONTRACT VALUE IS
GUARANTEED, EXCEPT FOR AMOUNTS IN THE FIXED ACCOUNT.
<PAGE>
CONTRACT SPECIFICATIONS
-----------------------
OWNER: JOHN DOE
AGE OF OWNER AS OF CONTRACT EFFECTIVE DATE: 35
[JOINT OWNER:]
[AGE OF JOINT OWNER AS OF CONTRACT EFFECTIVE DATE:]
ANNUITANT:
[AGE OF ANNUITANT AS OF CONTRACT EFFECTIVE DATE:]
CONTRACT NUMBER: 000000000
CONTRACT EFFECTIVE DATE: APRIL 01, 1996
ANNUITY COMMENCEMENT DATE: APRIL 01, 2031
PURCHASE PAYMENT BONUS RATE: [3%]
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT: Annuity Investors Variable Account B
- ----------------
Following is a list of the currently available Funds in which the Separate
Account invests:
[Janus Aspen Series Aggressive Growth Portfolio]
[Janus Aspen Series Worldwide Growth Portfolio]
[Janus Aspen Series Balanced Portfolio]
[Janus Aspen Series Growth Portfolio]
[Janus Aspen Series International Growth Portfolio]
[Dreyfus Variable Investment Fund-Capital Appreciation Portfolio]
[Dreyfus Variable Investment Fund-Money Market Portfolio]
[Dreyfus Variable Investment Fund-Growth and Income Portfolio]
[Dreyfus Variable Investment Fund-Small Cap Portfolio]
[The Dreyfus Socially Responsible Growth Fund, Inc.]
[Dreyfus Stock Index Fund]
[Strong Opportunity Fund II, Inc.]
[Strong Growth Fund II]
[INVESCO VIF-Industrial Income Fund]
[INVESCO VIF-Total Return Fund]
[INVESCO VIF- High Yield Fund]
[Morgan Stanley Universal Funds Inc. U.S. Real Estate Portfolio]
[Morgan Stanley Universal Funds Inc. Value Portfolio]
[Morgan Stanley Universal Funds Inc. Emerging Markets Equity Portfolio]
[Morgan Stanley Universal Funds Inc. Fixed Income Portfolio]
[Morgan Stanley Universal Funds Inc. Mid-Cap Value Portfolio]
[Pilgrim Baxter PBHG Insurance Series Fund, Inc.-Growth II Fund]
[Pilgrim Baxter PBHG Insurance Series Fund, Inc.-Large Cap Growth Fund]
[Pilgrim Baxter PBHG Insurance Series Fund, Inc.-Technology & Communications
Fund]
-2-
<PAGE>
FIXED ACCOUNT:
Following is a list of the currently available Fixed Account options, with
guarantee periods as may be applicable:
Fixed Accumulation Account Option
[Fixed Account Option One-Year Guarantee Period]
[Fixed Account Option Three-Year Guarantee Period]
[Fixed Account Option Five-Year Guarantee Period]
[Fixed Account Option Seven-Year Guarantee Period]
The guaranteed rate of interest for the Fixed Account options is three percent
(3%) per year, compounded annually.
TRANSFER FEE: [$25] per transfer in excess of twelve (12) in any Contract Year.
CONTINGENT DEFERRED SALES CHARGE: An amount deducted on each partial or full
surrender of a Purchase Payment, as follows:
NUMBER OF FULL YEARS ELAPSED BETWEEN CONTINGENT DEFERRED SALES CHARGE AS
THE DATE OF RECEIPT OF A PURCHASE A PERCENTAGE OF THE ASSOCIATED
PAYMENT AND DATE WRITTEN REQUEST FOR PURCHASE PAYMENT SURRENDERED
SURRENDER IS RECEIVED
--------------------------------------- ---------------------------------------
0 8%
1 8%
2 8%
3 7%
4 6%
5 5%
6 3%
7 2%
8+ 0%
Please see the SURRENDERS section of this Contract for additional information.
FREE WITHDRAWAL PRIVILEGE:
- --------------------------
CONTRACT YEAR APPLICABLE PERCENTAGE
------------- ---------------------
1 10% of all Purchase Payments received
2 and thereafter Greater of: (a) Accumulated Earnings;
or (b) 10% of Account Value as of
last Contract Anniversary
Please see the SURRENDERS section of this Contract for additional information.
CONTRACT MAINTENANCE FEE: [$30] Annually
MORTALITY AND EXPENSE RISK CHARGE: A charge equal to an effective annual rate of
[1.25%] of the daily Net Asset Value of the Sub-Accounts.
ADMINISTRATION CHARGE: A charge equal to an effective annual rate of [0.15%] of
the daily Net Asset Value of the Sub-Accounts.
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TERMINATION: We reserve the right to terminate this Contract at any time the
Surrender Value is less than $500. A surrender will be deemed to have been made
and we will pay you the Surrender Value of this Contract.
INQUIRIES: FOR INFORMATION, OR TO MAKE A COMPLAINT, CALL OR WRITE:
- ---------- -------------------------------------------------------
Variable Annuity Service Center
Annuity Investors Life Insurance Company
Post Office Box 5423
Cincinnati, Ohio 45201-5423
[1-800-789-6771]
TABLE OF CONTENTS PAGE
- ---------------------------------------------------------------------
DEFINITIONS.........................................................6
GENERAL PROVISIONS..................................................8
Entire Contract..................................................8
Changes -- Waivers...............................................8
Nonparticipating.................................................8
Misstatement.....................................................8
Required Reports.................................................8
Exclusive Benefit................................................8
State Law........................................................9
Claims of Creditors..............................................9
Company Liability................................................9
Voting Rights....................................................9
Incontestability.................................................9
Discharge of Liability...........................................9
Transfer By the Company..........................................9
PURCHASE PAYMENTS...................................................9
Purchase Payments................................................9
Purchase Payment Bonus...........................................9
Allocation of Purchase Payments..................................9
No Termination..................................................10
FIXED ACCOUNT......................................................10
Fixed Account...................................................10
Fixed Account Options.........................................10
Interest Credited.............................................10
Renewal.......................................................10
Fixed Account Value.............................................10
SEPARATE ACCOUNT...................................................11
General Description.............................................11
Sub-Accounts of the Separate Account............................11
Valuation of Assets.............................................11
Variable Account Value..........................................11
Accumulation Unit Value.........................................13
TRANSFERS..........................................................13
FEES AND CHARGES...................................................14
Mortality and Expense Risk Charge...............................14
Administration Charge...........................................14
Contract Maintenance Fee........................................14
SURRENDERS.........................................................14
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Surrenders......................................................14
Surrender Value.................................................14
Contingent Deferred Sales Charge................................15
Free Withdrawal Privilege.......................................15
Deferral of Payment.............................................15
OWNERSHIP PROVISIONS...............................................15
Ownership of Separate Account...................................15
Owner...........................................................15
Joint Ownership.................................................15
Assignment......................................................17
Transfer of Ownership...........................................17
Successor Owner.................................................17
Community Property..............................................17
ANNUITANT PROVISIONS...............................................17
Annuitant.......................................................17
Death of Annuitant..............................................17
Change of Annuitant.............................................19
BENEFICIARY PROVISIONS.............................................19
Beneficiary.....................................................19
Change of Beneficiary...........................................19
BENEFIT ON ANNUITY COMMENCEMENT DATE...............................19
Annuity Commencement Date.......................................19
Annuity Benefit Payments........................................19
Form of Annuity Benefit.........................................20
BENEFIT ON DEATH OF OWNER..........................................20
Death Benefit...................................................20
Death Benefit Amount............................................21
Transfers After Death...........................................21
Death Benefit Commencement Date.................................21
Form of Death Benefit...........................................21
CONTRACT DISTRIBUTION RULES........................................22
Rules Before Annuity Commencement Date..........................22
Rules On or After Annuity Commencement Date.....................22
Rules On or After Death Benefit Commencement Date...............22
SETTLEMENT OPTIONS.................................................22
Conditions......................................................22
Benefit Payments................................................22
Fixed Dollar Benefit............................................23
Variable Dollar Benefit.........................................23
Limitation on Election of Settlement Option.....................23
Settlement Option Computations..................................24
Available Settlement Options....................................24
Settlement Option Tables........................................24
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DEFINITIONS
ACCOUNT(S): The Sub-Account(s) and/or the Fixed Account options.
ACCOUNT VALUE: The aggregate value of your interest in the Sub-Account(s) and
the Fixed Account options as of the end of any Valuation Period. The value of
your interest in all Sub-Accounts is the "Variable Account Value," and the value
of your interest in all Fixed Account options is the "Fixed Account Value."
ACCUMULATED EARNINGS: The Account Value in excess of Purchase Payments received
by us and which have not been returned to you.
ACCUMULATION PERIOD: The period prior to the applicable Commencement Date.
ACCUMULATION UNIT: A unit of measure used to calculate the value(s) 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."
ADMINISTRATIVE OFFICE: The home office of the Company or any other place of
business which we 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 on the Commencement Date during
which Benefit Payments are to be made under this Contract.
BENEFIT UNIT: A unit of measure used to determine the dollar value of any
Variable Dollar Benefit payments after the first Benefit Payment is made by us.
The value of a Benefit Unit is referred to as a "Benefit Unit Value."
CODE: The Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder.
COMMENCEMENT DATE: The Annuity Commencement Date if an Annuity Benefit is
payable under this Contract, or the Death Benefit Commencement Date if a Death
Benefit is payable under this Contract.
CONTRACT ANNIVERSARY: An annual anniversary of the Contract Effective Date.
CONTRACT EFFECTIVE DATE: The date shown on the Contract Specifications page.
CONTRACT YEAR: Any period of twelve (12) consecutive 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
this Contract.
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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 us and the earlier to occur of:
1) our 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 us.
FUND: A management investment company or portfolio thereof, registered under the
Investment Company Act of 1940, in which the Separate AccountError! Bookmark not
defined. 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.
PAYMENT INTERVAL: A monthly, quarterly, annual or other regular interval during
the Benefit Payment Period.
PERSON CONTROLLING PAYMENTS: 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.
PURCHASE PAYMENT: A contribution amount paid to us in consideration for this
Contract, after the deduction of any and all of the following which may apply:
1) any fee charged by the person remitting payments for you;
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.
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 us, that is sent to us on our form or in a manner satisfactory
to us, which may, at our discretion, be telephonic, and that is received by us
at our Administrative Office. A Written Request is subject to any payment made
or any action we take before we acknowledge it. A Written Request may be
modified or revoked only by a subsequent Written Request, when permitted by the
terms of this Contract. You may be required to return this Contract to us in
connection with a Written Request.
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<PAGE>
GENERAL PROVISIONS
ENTIRE CONTRACT
We have issued this Contract to the Owner identified on the Contract
Specifications page. This Contract is an individual flexible premium deferred
variable annuity contract. This Contract is restricted as required to obtain
favorable tax treatment under the Code. This Contract, any endorsements to it
and the application for it, if any, form the entire Contract between you and us.
Only statements in the application, if any, or statements made elsewhere by you
in consideration for this Contract will be used to void your interest under this
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 this Contract are valid unless made in
writing by our President, Vice President, or Secretary. No agent or other person
not named above has authority to change or waive any provision of this Contract.
We reserve the right both to administer and to change the provisions of this
Contract to conform to any applicable laws, regulations or rulings issued by a
governmental agency.
In any event, the Company reserves the right to add or delete Fixed Account
options and Sub-Accounts, to substitute shares of a different Fund or different
class or series of a Fund for shares held in a Sub-Account, to merge or combine
Sub-Accounts, to merge or combine the Separate Account with any other separate
account of the Company, to transfer the assets of the Separate Account to
another life insurance company by means of a merger or reinsurance, to convert
the Separate Account into a managed separate account, and to de-register the
Separate Account under the Investment Company Act of 1940. Any such change will
be made in accordance with applicable insurance and securities laws and after
obtaining any necessary federal and/or state regulatory approvals.
NONPARTICIPATING
This Contract does not pay dividends or share in the Company's divisible
surplus.
MISSTATEMENT
If the age or sex of a person on whose life Benefit Payments are based is
misstated, the payments or other benefits under this Contract shall be adjusted
to the amount which would have been payable based on the correct age or sex. If
we 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, we may deduct any
overpayments made, with interest, from any succeeding payment(s) due under this
Contract.
REQUIRED REPORTS
At least once each Contract Year, we will send you a report of your current
values and any other information required by law, until the first to occur of
the following:
1) the date this Contract is fully surrendered;
2) the Annuity Commencement Date; or
3) the Death Benefit Commencement Date.
The report will be mailed to your last known address. The reported values will
be based on the information in our possession at the time the report is prepared
by us. We may adjust the reported values at a later date if that information
proves to be incorrect or has changed.
EXCLUSIVE BENEFIT
This Contract is for the exclusive benefit of you and your Beneficiaries. Your
interest under this Contract is nonforfeitable by us.
-8-
<PAGE>
STATE LAW
All factors, values, benefits and reserves under this Contract will not be less
than those required by the law of the state in which this Contract is delivered.
CLAIMS OF CREDITORS
To the extent allowed by law, your Contract and all values and benefits under it
are not subject to the claims of creditors or to legal process.
COMPANY LIABILITY
We will not incur any liability or be responsible for any failure, in whole or
in part, by you or by any person having rights or benefits arising out of or
related to this Contract, to comply with any applicable laws, regulations or
rulings issued by a governmental agency.
VOTING RIGHTS
To the extent required by law, we will vote all shares of the Funds held in the
Separate Account, at regular and special shareholder meetings of the Funds. The
shares will be voted in accordance with instructions received from you, or if
applicable, from the Person Controlling Payments. If there is a change in the
law which permits us to vote the shares of the Funds without such instructions,
then we reserve the right to do so.
INCONTESTABILITY
This Contract shall not be contestable by us.
DISCHARGE OF LIABILITY
Upon payment of any partial or full surrender, or any Benefit Payment, we shall
be discharged from all liability to the extent of each such payment.
TRANSFER BY THE COMPANY
We reserve the right to transfer our obligations under this Contract to another
qualified life insurance company under an assumption reinsurance arrangement
without your prior consent.
PURCHASE PAYMENTS
PURCHASE PAYMENTS
One or more Purchase Payments may be paid to us at any time before the Annuity
Commencement Date, so long as:
1) you are still living; and
2) this Contract has not been fully surrendered.
The initial Purchase Payment must be paid to us on or before the Contract
Effective Date. Each Purchase Payment must be paid to us at our Administrative
Office, and is subject to any minimums or maximums that we set for such from
time to time. Upon request, we will provide you with a receipt as proof of
payment.
PURCHASE PAYMENT BONUS
A bonus in the amount of the Purchase Payment bonus rate set forth on the
Contract Specifications page multiplied by the amount of the Purchase Payment
will be credited to each Purchase Payment received by us. The amount of a
Purchase Payment will be determined, solely for purposes of determining the
amount of the bonus, without deduction of premium taxes or other taxes. The
bonus will be added to and will be deemed part of the Purchase Payment for all
purposes under this Contract. Notwithstanding the foregoing, the bonus will not
be returned to you if you cancel this Contract under the Right to Cancel
provision of this Contract, or if you surrender this Contract in full during the
first Contract Year.
ALLOCATION OF PURCHASE PAYMENTS
We will allocate Purchase Payments to the Fixed Account options and/or to the
Sub-Accounts according to the instructions we receive by Written Request.
Allocations must be made in whole percentages. The minimum amount that can be
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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 $2000. 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.
NO TERMINATION
Except as stated elsewhere in this Contract, this Contract will not be
terminated by us due to failure to make additional Purchase Payments.
FIXED ACCOUNT
FIXED ACCOUNT
The Fixed Account is part of the Company's general account. The values of the
Fixed Account are not dependent upon the investment performance of the
Sub-Accounts.
FIXED ACCOUNT OPTIONS. The Fixed Account options available as of the Contract
Effective Date are listed on the Contract Specifications page. Different Fixed
Account options may be offered by us at any time.
INTEREST CREDITED. The guaranteed rate of interest for the Fixed Account options
is three percent (3%) per year, compounded annually. We may, at any time, pay a
current interest rate as declared by our Board of Directors for any of the Fixed
Account options that is higher than the guaranteed rate.
The interest rate initially credited to each Purchase Payment allocated to the
Fixed Accumulation Account Option will not be changed any sooner than twelve
(12) months following the date on which that Purchase Payment was received;
thereafter, the interest rate credited will not be changed more frequently than
once per calendar quarter. In the case of transfers from other Fixed Account
options or the Sub-Accounts to the Fixed Accumulation Account Option, the
interest rate will not be changed more frequently than once per calendar
quarter.
The interest rate credited to amounts allocated to the Fixed Account options
other than the Fixed Accumulation Account Option will not be changed during the
duration of the applicable guarantee period.
RENEWAL. The following RENEWAL provisions apply to all Fixed Account options
except the Fixed Accumulation Account Option.
At the end of a guarantee period, and for the thirty (30) days immediately
preceding the end of such guarantee period, you may elect a new option to
replace the Fixed Account option that is then expiring. The entire amount
maturing may be re-allocated to any of the then-current options under this
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 (1) year of such Commencement Date, the
only Fixed Account option available is the Fixed Accumulation Account Option.
If you do not specify a new Fixed Account option in accordance with the
preceding paragraph, you will be deemed to have selected 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, you 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.
Any renewal of a Fixed Account option under this RENEWAL provision will be
effective on the day after the expiration of the guarantee period that is then
expiring.
FIXED ACCOUNT VALUE
The Fixed Account Value for this Contract at any time is equal to:
1) the Purchase Payment(s) allocated to the Fixed Account; plus
2) amounts transferred to the Fixed Account; plus
3) interest credited to the Fixed Account; less
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<PAGE>
4) any charges, surrenders, deductions, amounts transferred from the
Fixed Account or other adjustments made as described elsewhere in
this Contract.
SEPARATE ACCOUNT
GENERAL DESCRIPTION
The variable benefits under this Contract are provided through the Separate
Account. The Separate Account is registered with the Securities and Exchange
Commission as a unit investment trust under the Investment Company Act of 1940.
The income, if any, and any gains or losses, realized or unrealized, on the
Separate Account will be credited to or charged against the amounts allocated to
such account without regard to other income, gains, or losses of the Company.
The amounts allocated to the Separate Account and the accumulations thereon
remain the property of the Company, but that portion of the assets of the
Separate Account that is equal to the reserves and other contractual liabilities
under all policies, annuities, and other contracts identified with the Separate
Account is not chargeable with liabilities arising out of any other business of
the Company. The Company is not, and does not hold itself out to be, a trustee
in respect of such amounts.
We have the right to transfer to our general account, in our sole discretion and
at any time without prior written notice, any assets of the Separate Account
which are in excess of the required reserves and other contractual liabilities
under all policies, annuities, and other contracts identified with the Separate
Account.
SUB-ACCOUNTS OF THE SEPARATE ACCOUNT
The assets of the Separate Account are divided into Sub-Accounts. The
Sub-Accounts available as of the Contract Effective Date are listed on the
Contract Specifications page. Each Sub-Account is invested exclusively in shares
of an underlying Fund as shown on the Contract Specifications page. Any amounts
of income and any gains on the shares of a Fund will be reinvested in additional
shares of that Fund at its Net Asset Value.
VALUATION OF ASSETS
Shares of Funds held by each Sub-Account will be valued at their Net Asset Value
at the end of each Valuation Period, as reported by each such Fund.
VARIABLE ACCOUNT VALUE
Purchase Payment(s) may be allocated among and, as described elsewhere in this
Contract, Account values may be transferred to the various Sub-Accounts within
the Separate Account. For each Sub-Account, the Purchase Payment(s) or amounts
transferred are converted into Accumulation Units. The number of Accumulation
Units credited is determined by dividing the dollar amount directed to each
Sub-Account by the value of the Accumulation Unit for that Sub-Account at the
end of the Valuation Period during which the Purchase Payment(s) or transferred
amount is received.
The following events will result in the cancellation of an appropriate number of
Accumulation Units of a Sub-Account:
1) transfer from a Sub-Account;
2) full or partial surrender of the Variable Account Value;
3) payment of a Death Benefit;
4) application of the Variable Account Value to a settlement option;
5) deduction of the Contract Maintenance Fee; or
6) deduction of any Transfer Fee.
Accumulation Units will be canceled as of the end of the Valuation Period during
which the Company receives a Written Request regarding the event giving rise to
such cancellation, or an applicable Commencement Date, or the end of the
Valuation Period on which the Contract Maintenance Fee or Transfer Fee is due,
as the case may be.
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<PAGE>
The Variable Account Value for this Contract at any time is equal to the sum of
the number of Accumulation Units for each Sub-Account attributable to this
Contract multiplied by the Accumulation Unit Value for each Sub-Account at the
end of the preceding Valuation Period.
ACCUMULATION UNIT VALUE
The initial Accumulation Unit Value for each Sub-Account, with the exception of
the Money Market Sub-Account, was set at $10.00. 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.
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.
TRANSFERS
Prior to the applicable Commencement Date, you 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, you 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 this
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 number of transfers
per year over which we will charge a Transfer Fee on each additional transfer,
and the amount of the Transfer Fee, are shown on the Contract Specifications
page.
We reserve the right, in our sole discretion and at any time without prior
notice, to terminate, suspend or modify the transfer privileges described above.
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FEES AND CHARGES
MORTALITY AND EXPENSE RISK CHARGE
The Mortality and Expense Risk Charge is shown on the Contract Specifications
page and is deducted daily from each Sub-Account. This deduction is made to
compensate the Company for assuming the mortality and expense risks under this
Contract.
ADMINISTRATION CHARGE
The Administration Charge is shown on the Contract Specifications page and is
deducted daily from each Sub-Account. This deduction is made to reimburse the
Company for expenses incurred in the administration of this Contract and the
Separate Account.
CONTRACT MAINTENANCE FEE
The Contract Maintenance Fee ("Fee") is shown on the Contract Specifications
page and is deducted as of the Valuation Period next following each Contract
Anniversary prior to the applicable Commencement Date. In addition, the full
annual Fee will be deducted at the time of a full surrender. The Fee will be
allocated to each Sub-Account in the same proportion as each Sub-Account's value
is to the total Variable Account Value as of the end of such Valuation Period.
The Fee does not apply to the Fixed Account.
After the applicable Commencement Date, if a Variable Dollar Benefit is elected,
the Fee will be deducted pro-rata from each Benefit Payment and will result in a
reduction in the amount of such payment.
The Fee may be waived in whole or in part in our sole discretion.
SURRENDERS
SURRENDERS
You may surrender this 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 your Surrender Value to less than
$500. Surrenders will be deemed to be withdrawn first from the portion of the
Surrender Value that represents your Accumulated Earnings and then from Purchase
Payments. For purposes of this Contract, Purchase Payments are deemed to be
withdrawn on a "first-in, first-out" (FIFO) 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.
SURRENDER VALUE
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) during the first Contract Year, the amount of the bonus(es) credited
to Purchase Payment(s); less
3) any applicable Contingent Deferred Sales Charge; less
4) any outstanding loans; and less
5) 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. Upon payment of the Surrender Value
to you this Contract will be terminated. Any bonus amounts which were credited
to your Account Value will be forfeited upon a full surrender of the Surrender
Value during the first Contract Year.
-13-
<PAGE>
CONTINGENT DEFERRED SALES CHARGE
A full or partial surrender may be subject to a Contingent Deferred Sales Charge
as set forth on the Contract Specifications page. The Contingent Deferred Sales
Charge applies to and is calculated separately for each Purchase Payment.
Surrenders will result in the cancellation of Accumulation Units from each
applicable Sub-Account(s) and/or a reduction of your Fixed Account Value. In the
case of a full surrender, this Contract will be terminated. The Contingent
Deferred Sales Charge may be waived in whole or in part in our sole discretion.
FREE WITHDRAWAL PRIVILEGE
Subject to the provisions of this Contract, we will waive the Contingent
Deferred Sales Charge, 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
the applicable percentage (shown on the Contract Specifications
page) of all Purchase Payments received; and
2) during the second and succeeding Contract Years, on an amount equal
to the greater of:
a) Accumulated Earnings, or
b) not more than the applicable percentage (shown on the Contract
Specifications page) of the Account Value as of the last
Contract Anniversary.
The Free Withdrawal Privilege will be applied in each case to monies in the
order in which they are deemed withdrawn, as described in the SURRENDERS
provision of this Contract.
DEFERRAL OF PAYMENT
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 is closed, or when trading on the
New York Stock Exchange is restricted; or
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 a partial or full
surrender of the Fixed Account Value for up to six (6) months after we receive
your Written Request.
OWNERSHIP PROVISIONS
OWNERSHIP OF SEPARATE ACCOUNT
The Company has absolute ownership of the assets in the Separate Account. The
Company is not, and does not hold itself out to be, a trustee in respect of any
amounts under the Separate Account.
OWNER
The Owner of this Contract is the person or persons shown as Owner on the
Contract Specifications page, or the person or persons you designate under the
TRANSFER OF OWNERSHIP provision of this Contract.
Unless otherwise stated, the Owner may exercise all ownership rights under this
Contract.
If you or the joint owner is a non-natural person, then the age of the eldest
Annuitant will be treated as the age of such Owner for all purposes under this
Contract.
-14-
<PAGE>
JOINT OWNERSHIP
Two owners may jointly own this Contract. Joint owners may independently
exercise transfers among the Sub-Accounts and the Fixed Account options. In
addition, joint owners may independently designate Purchase Payment allocations.
All other rights of ownership must be exercised by joint action.
ASSIGNMENT
You may assign all or any part of your rights under this Contract except your
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 you make an assignment is called an assignee.
We are not responsible for the validity of any assignment. An assignment must be
in writing and must be received at our Administrative Office. We will not be
bound by an assignment until we acknowledge it. An assignment is subject to any
payment made or any action we take before we acknowledge it. An assignment may
be ended only by the assignee or as provided by law.
The rights of an assignee, including the right to any distribution under this
Contract, come before the rights of any Owner, Annuitant, Beneficiary or other
payee.
TRANSFER OF OWNERSHIP
You may transfer ownership at any time during your 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.
SUCCESSOR OWNER
By Written Request, your spouse may, in some cases, succeed to the ownership of
this Contract after your death. Specifically, if you die and your spouse is the
surviving joint owner or sole surviving Beneficiary under this Contract, he or
she will become the Successor Owner of this Contract if:
1) you make that Written Request before your death; or
2) after your death, your spouse makes that Written Request within one
(1) year of your death and before the Death Benefit Commencement
Date.
As Successor Owner, your spouse will then succeed to all rights of ownership
under this Contract except the right to name another Successor Owner.
COMMUNITY PROPERTY
If you live in a community property state and have a spouse at any time while
you own this Contract, the laws of that state may vary your ownership rights.
ANNUITANT PROVISIONS
ANNUITANT
The Annuitant is the person or persons designated on the Contract Specifications
page, or under the CHANGE OF ANNUITANT provision of this Contract. Two or more
Annuitants may jointly be the persons on whose lives Annuity Benefit payments
are based.
An Annuitant designation may be joint or contingent or both. A contingent
Annuitant will be the person on whose life Annuity Benefit payments are based
only if there is no surviving primary Annuitant.
DEATH OF ANNUITANT (OTHER THAN OWNER)
If an Annuitant who is not an Owner dies before the Annuity Commencement Date,
then:
1) if there is one or more surviving joint Annuitant(s), such survivor
or survivors will continue as the sole or joint Annuitant(s) under
the Contract, as the case may be; or
2) if there is no surviving joint Annuitant(s), any surviving contingent
Annuitant(s) will become the sole or joint Annuitant(s) under the
Contract, as the case may be; or
-15-
<PAGE>
3) if there is no surviving joint or contingent Annuitant(s), the Owner
or joint owners will become the sole or joint Annuitant(s), as the
case may be.
If you or the joint owner, if any, is a non-natural person, then the death of an
Annuitant before the Annuity Commencement Date will be treated as the death of
the Owner for all purposes under this Contract.
CHANGE OF ANNUITANT
You may change the Annuitant at any time before the Annuity Commencement Date,
except that no change of Annuitant may be made if you or the joint owner, if
any, is a non-natural person.
Any such change 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 a Beneficiary or any settlement option election
previously made.
BENEFICIARY PROVISIONS
BENEFICIARY
If there is a joint owner and that joint owner survives you, that joint owner is
the Beneficiary, regardless of any designation made by you. If there is no
surviving joint owner, the Beneficiary is the person or persons so designated in
the application, if any, or under the CHANGE OF BENEFICIARY provision of this
Contract. If you have not designated a Beneficiary, or if no Beneficiary
designated by you survives you, then the Beneficiary will be your estate.
A Beneficiary will be deemed not to have survived you if he or she dies within
thirty (30) days after your death.
A beneficiary designation may be joint or contingent or both. Unless otherwise
stated, joint Beneficiaries will be entitled to equal shares. A contingent
Beneficiary will be entitled to a benefit only if there is no surviving primary
Beneficiary.
CHANGE OF BENEFICIARY
Unless you have designated an irrevocable Beneficiary, you may change your
designation of a Beneficiary at any time before the Annuity Commencement Date.
Any such change 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 any settlement option election
previously made.
BENEFIT ON ANNUITY COMMENCEMENT DATE
ANNUITY COMMENCEMENT DATE
The Annuity Commencement Date is shown on the Contract Specifications page. You
may change the Annuity Commencement Date by Written Request made at least thirty
(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
of you or the joint owner, if any, or five (5) years after the Contract
Effective Date, whichever is later.
ANNUITY BENEFIT PAYMENTS
An amount equal to the Account Value (after deduction of any fees and charges,
loans, or applicable premium tax or other taxes not previously deducted) will be
used to provide Annuity Benefit payments under this Contract commencing on or
after the Annuity Commencement Date.
-16-
<PAGE>
Annuity Benefit payments will be made to the Annuitant as payee. In lieu of
that, you may elect by Written Request to have Annuity Benefit payments made to
you as payee. Any Annuity Benefit amounts remaining payable on the death of the
payee will be paid to the contingent payee designated by you by Written Request.
We may reject the naming of a non-natural payee. You may designate or change the
payee or contingent payee after the Annuity Commencement Date only if:
1) you are the payee, or
2) you reserve that right, by Written Request, on or before the Annuity
Commencement Date; or
3) you reserve that right, by Written Request, when designating another
person as payee or contingent payee.
In any event, the Annuitant will be the person on whose life any Annuity Benefit
payments are based, and no change of payee or contingent payee at any time will
change this.
If no payee or contingent payee designated by you is surviving at the time
payment is to be made, then any Annuity Benefit amounts remaining payable will
be paid to the person or persons designated as contingent payee by Written
Request by the last payee who received payments. Failing that, any such amounts
will be paid to the estate of the last payee who received payments.
FORM OF ANNUITY BENEFIT
Annuity Benefit payments will be Fixed Dollar Benefit payments, made monthly in
accordance with the terms of Option B with a fixed period of one hundred twenty
(120) months under the SETTLEMENT OPTIONS section of this Contract.
In lieu of that, you may elect to have Annuity Benefit payments made pursuant to
any other available settlement option under the SETTLEMENT OPTIONS section of
this Contract. Any such election must be made by Written Request before the
Annuity Commencement Date, and is subject to the CONTRACT DISTRIBUTION RULES
section of this Contract. You may change your election of a settlement option by
Written Request made at least thirty (30) days prior to the date that Annuity
Benefit payments are scheduled to begin.
BENEFIT ON DEATH OF OWNER
DEATH BENEFIT
A Death Benefit will be paid under this Contract if:
1) you or the joint owner, if any, dies before the Annuity Commencement
Date and before this 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 this Contract; and
2) all other rights under this Contract will be terminated except for
rights related to the Death Benefit.
Death Benefit payments shall be made to the Beneficiary as payee. In lieu of
that, after the death of the Owner, a Beneficiary which is a non-natural person
may elect to have Death Benefit payments made to a payee to whom the Beneficiary
is obligated to make corresponding payments of a death benefit. Any such
election by a non-natural person as Beneficiary shall be by Written Request, and
may be made or changed at any time.
The Beneficiary will be the person on whose life any Death Benefit payments
under a settlement option are based. However, if the Beneficiary is a
non-natural person, then any payments under a life option will be based on the
life of a person to whom the Beneficiary is obligated, who must be designated by
the Beneficiary by Written Request before the Death Benefit Commencement Date.
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<PAGE>
Any Death Benefit amounts remaining payable on the death of the Beneficiary will
be paid:
1) to any contingent payee designated by you as part of any Death
Benefit settlement option election made by you, or if none is
surviving at the time payment is to be made; then
2) to any contingent payee designated by the Beneficiary by Written
Request, or if none is surviving at the time payment is to be made;
then
3) to the estate of the last payee who received payments.
In any event, if the Beneficiary is a non-natural person, any Death Benefit
amounts remaining payable on the death of the payee will be paid to any
contingent payee designated by the Beneficiary by Written Request, or if none is
surviving at the time payment is to be made, then to the Beneficiary.
Only one Death Benefit will be paid under this Contract.
DEATH BENEFIT AMOUNT
The Death Benefit will be an amount equal to the greater of:
1) the Account Value as of the Death Benefit Valuation Date; or
2) one hundred percent (100%) of the Purchase Payment(s) received by
us, including the Purchase Payment bonus(es) credited thereto, less
any amounts returned to you and any Contingent Deferred Sales
Charges that applied to those amounts.
As of the Death Benefit Valuation Date, the amount of the Death Benefit will be
allocated among the Sub-Accounts and Fixed Account options in the same
proportion as each Account's value is to the total Account Value as of the end
of the Valuation Period immediately preceding the Death Benefit Valuation Date.
Any applicable premium tax or other taxes not previously deducted, and any
outstanding loans, will be deducted from the Death Benefit amount described
above.
TRANSFERS AFTER DEATH
Between the Death Benefit Valuation Date and the Death Benefit Commencement
Date, the Beneficiary may transfer funds among Sub-Accounts and Fixed Account
options as described under the TRANSFERS section of this Contract.
DEATH BENEFIT COMMENCEMENT DATE
The Beneficiary may designate the Death Benefit Commencement Date by Written
Request within one (1) year of your death. If no designation is made, then the
Death Benefit Commencement Date will be one (1) year after your death.
FORM OF DEATH BENEFIT
Payments under the DEATH BENEFIT provision of this Contract will be Fixed Dollar
Benefit payments made monthly in accordance with the terms of Option A with a
period certain of forty-eight (48) months under the SETTLEMENT OPTIONS section
of this Contract.
In lieu of that, you may elect at any time before your death to have payments
under the DEATH BENEFIT provision of this Contract made in one lump sum or
pursuant to any available settlement option under the SETTLEMENT OPTIONS section
of this Contract. If you do not make any such election, the Beneficiary may make
that election at any time after your death and before the Death Benefit
Commencement Date.
You may change your election of a settlement option at any time before your
death.
If a Beneficiary elects a settlement option as noted above, he or she may change
his or her own election of a settlement option by Written Request made at least
thirty (30) days prior to the date that Death Benefit payments are scheduled to
begin.
Any election or change of election must be made by Written Request, and is
subject to the CONTRACT DISTRIBUTION RULES section of this Contract.
-18-
<PAGE>
CONTRACT DISTRIBUTION RULES
RULES BEFORE ANNUITY COMMENCEMENT DATE
If you or the joint owner, if any, dies before the Annuity Commencement Date,
the Death Benefit under the BENEFIT ON DEATH OF OWNER section of this Contract
must be paid either:
1) in full within five (5) years of such death; or
2) over the life of the Beneficiary or over a period certain not
exceeding his or her life expectancy, with payments at least annually
starting within one (1) year of such death.
However, if your spouse becomes the Successor Owner of this Contract after your
death, then:
1) this rule will not apply at the time of your death; and
2) if your spouse later dies before the Annuity Commencement Date, this
rule will apply upon the death of your spouse, with your spouse being
treated as the Owner for purposes of this rule.
RULES ON OR AFTER ANNUITY COMMENCEMENT DATE
If the Person Controlling Payments under this Contract on or after the Annuity
Commencement Date dies on or after that date, any amount remaining payable under
this Contract at the time of his or her death must be paid at least as rapidly
as payments were being made at the time of such death.
RULES ON OR AFTER DEATH BENEFIT COMMENCEMENT DATE
If the Beneficiary dies on or after the Death Benefit Commencement Date, any
amount remaining payable under this Contract at the time of his or her death
must be paid at least as rapidly as payments were being made at the time of such
death.
SETTLEMENT OPTIONS
CONDITIONS
Benefit Payments under a settlement option are subject to any minimum amounts,
Payment Intervals, and other terms or conditions that we may from time to time
require. If we change our minimums, we 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 elected settlement options must comply with current applicable laws,
regulations and rulings issued by any governmental agency.
If more than one person is the payee under a settlement option, payments will be
made to the payees jointly. No more than two persons may be initial payees under
any joint and survivor settlement option.
If payment under a settlement option depends on whether a specified person is
still alive, we may at any time require proof that such person is still living.
We will require proof of the age and/or sex of any person on whose life Benefit
Payments are based.
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, we 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, we 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; we 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
-19-
<PAGE>
Benefit will be allowed after the Commencement Date. However, after the Variable
Dollar Benefit has been paid for at least twelve (12) months, the Person
Controlling Payments may, no more than once each twelve (12) 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 or other taxes 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 Benefit Payment
Period.
If at the time a Fixed Dollar Benefit is elected, we have 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 your Variable
Account Value (expressed in thousands of dollars and after deduction of any fees
and charges, loans, or applicable premium tax or other taxes 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 you is determined by
dividing the dollar amount of the first monthly Variable Dollar Benefit payment
from each Sub-Account by the Benefit Unit Value for that Sub-Account as of the
applicable Commencement Date. The number of Benefit Units remains fixed during
the Benefit Payment Period, except as a result of any transfers among
Sub-Accounts after the applicable Commencement Date.
The dollar amount of the second and any subsequent Variable Dollar Benefit
payment will reflect the investment performance of the Sub-Account(s) selected
and may vary from month to month. The total amount of the second and any
subsequent Variable Dollar Benefit payment will be equal to the sum of the
payments from each Sub-Account less a pro-rata portion of the Contract
Maintenance Fee.
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 value of a Benefit Unit
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 the ACCUMULATION UNIT VALUE provision of this Contract,
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
three percent (3%) per year, compounded annually, that is reflected in the
Settlement Option Tables.
LIMITATION ON ELECTION OF SETTLEMENT OPTION
Fixed periods shorter than five (5) years are not available, except as a Death
Benefit settlement option.
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SETTLEMENT OPTION COMPUTATIONS
The 1983 Individual Annuity Mortality Table with interest at three percent (3%)
per year, compounded annually, is used to compute all guaranteed settlement
option factors, values, and benefits under this Contract.
AVAILABLE SETTLEMENT OPTIONS
The available settlement options are set out below.
OPTION A Income for a Fixed Period
We 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 us or money will be
held by us is thirty (30) years. The Option A Table applies to this
Option.
OPTION B Life Annuity with Payments for at Least a Fixed Period
We 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 we 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 apply to this Option.
OPTION C Joint and One-half Survivor Annuity
We will make periodic payments until the death of the primary person on
whose life Benefit Payments are based; thereafter, we will make one-half
(1/2) of the periodic payment until the death of the secondary 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
apply to this Option.
OPTION D Life Annuity
We will make periodic payments until the death of the person on whose
life Benefit Payments are based. The first payment will be paid as of
the first day of the initial Payment Interval. The Option D Tables apply
to this Option.
OPTION E Any Other Form
We will make periodic payments in any other form of settlement option
which is acceptable to us at the time of an election.
SETTLEMENT OPTION TABLES
The Option Tables show the payments we will make at sample Payment Intervals for
each $1,000 applied at the guaranteed interest rate. Amounts may vary with the
Payment Interval and the sex and age of the person on whose life Benefit
Payments are based.
OPTION A TABLE - INCOME FOR A FIXED PERIOD Payments
for fixed number of years for each $1,000 applied.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
TERMS TERMS TERMS
OF OF OF
PAY- SEMI- QUAR- PAY- SEMI- QUAR- PAY- SEMI- QUAR-
ENTS ANNUAL ANNUAL TERLY MONTHLY MENTS ANNUAL ANNUAL TERLY MONTHLY MENTS ANNUAL ANNUAL TERLY MONTHLY
- -------------------------------------------------------------------------------------------------------------
YEARS YEARS YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6 184.60 91.62 45.64 15.18 11 108.08 53.64 26.72 8.88 16 79.61 39.51 19.68 6.54
7 160.51 79.66 39.68 13.20 12 100.46 49.86 24.84 8.26 17 75.95 37.70 18.78 6.24
8 142.46 70.70 35.22 11.71 13 94.03 46.67 23.25 7.73 18 72.71 36.09 17.98 5.98
9 128.43 63.74 31.75 10.56 14 88.53 43.94 21.89 7.28 19 69.81 34.65 17.26 5.74
10 117.23 58.18 28.98 9.64 15 83.77 41.57 20.71 6.89 20 67.22 33.36 16.62 5.53
- -------------------------------------------------------------------------------------------------------------
</TABLE>
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OPTION B TABLES - LIFE ANNUITY
With Payments For At Least A Fixed Period
------ ------------- ------------ ------------- -------------
MALE 60 MONTHS 120 MONTHS 180 MONTHS 240 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 MONTHS 120 MONTHS 180 MONTHS 240 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
---------------------------------------------------------------
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OPTION C TABLES - JOINT AND ONE-HALF SURVIVOR ANNUITY
Monthly payments for each $1,000 of proceeds by ages of persons named.*
<TABLE>
<CAPTION>
- ---------- -------------------------------------------------------------------------------------
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 4.84 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
- ---------- ------- ------- ------- ------- ------ ------- ------- ------- ------- ------ -------
</TABLE>
*Payments after the death of the Primary Payee will be one-half (1/2) of the
amount shown.
Monthly payments for each $1,000 of proceeds by ages of persons named.*
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------------------------
</TABLE>
*Payments after the death of the Primary Payee will be one-half (1/2) of the
amount shown.
-23-
<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.
-24-
<PAGE>
[GRAPHIC OMITTED]
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
Nonparticipating - No Dividends
NON-TAX-QUALIFIED
EXHIBIT 4(p)
ANNUITY INVESTORS[SERVICEMARK]
LIFE INSURANCE COMPANY
INDIVIDUAL RETIREMENT ANNUITY
ENDORSEMENT
The annuity contract is changed as set out below to make it an Individual
Retirement Annuity.
APPLICABLE TAX LAW RESTRICTIONS. This annuity contract is intended to
receive contributions that qualify for deferred tax treatment under Internal
Revenue Code ("IRC") Section 408(b). It is restricted as required by federal
tax law. We may change the terms of this annuity contract or administer this
annuity contract at any time as needed to comply with that law. Any such
change may be applied retroactively.
EXCLUSIVE BENEFIT. This annuity contract is established for the
exclusive benefit of you and your beneficiaries. Your interest in this
annuity contract is nonforfeitable.
NON-PARTICIPATING. This annuity contract does not pay dividends or share in
our surplus.
NO ASSIGNMENT OR TRANSFER. You cannot assign, sell, or transfer your
interest in this annuity contract. You cannot pledge it to secure a loan or
the performance of an obligation, or for any other purpose. The only
exceptions to these rules are:
1) an interest in this annuity contract may be transferred to a spouse
or former spouse under a divorce or separation instrument described
in IRC Section 71(b)(2)(A); and
2) you may designate another person to receive payments with you based
on joint lives or joint life expectancies, but any such designation
shall not give that other person any present rights under the annuity
contract during your lifetime.
CONTRIBUTIONS. This annuity contract does not require fixed premiums,
purchase payments, or other contributions, but we may decline to accept any
contribution of less than $50. This annuity contract will not lapse if you
do not make contributions. This annuity contract will remain subject to
cancellation under any involuntary surrender or termination provision of
this annuity contract; provided, however, that in no event shall any such
cancellation occur unless, at a minimum, contributions have not been made
for at least two full years and the value of this annuity contract
(increased by any guaranteed interest) would provide a benefit at age 70-1/2
of less than $20 a month under the regular settlement option.
<PAGE>
All contributions to us must be made in cash BY CHECK OR MONEY ORDER MADE
PAYABLE TO US. Total contributions made to this policy with respect to any
one tax year may not exceed $2,000, excluding any payment which is:
1) allowed as a rollover under IRC Section 402(c), 403(a)(4), 403(b)(8),
or 408(d)(3); or
2) made through a Simplified Employee Pension (SEP) program under IRC
Section 408(k).
This annuity contract will not accept contributions made by an employer
through a SIMPLE plan under IRC Section 408(p). This annuity contract will
not accept a transfer or rollover of any funds attributable to contributions
made by an employer through a SIMPLE plan until at least 2-years after the
date you first participated in that employer's SIMPLE plan.
ANNUAL REPORT. Following the end of each calendar year, we will send you a
report concerning the status of your annuity contract. This report will
include (i) the amount of all regular contributions received during or after
the calendar year which relate to such calendar year, (ii) the amount of all
rollover contributions received during such calendar year, (iii) the
contract value(s) determined as of the end of such calendar year, and (iv)
such other information as may be required under federal tax law.
REQUIRED MINIMUM DISTRIBUTIONS DURING LIFE. The Required Beginning Date for
distributions under this annuity contract is April 1 following the calendar
year in which you reach age 70-1/2. No later than the Required Beginning
Date:
1) your entire interest in this annuity contract must be paid in full;
or
2) distributions from this annuity contract must begin in the form of
periodic payments made at least annually (i) for your life or as
joint and survivor payments to you and one other individual, or (ii)
over a period certain not to exceed your life expectancy or the joint
and last survivor expectancy of you and one other individual
designated to receive any remaining payments after your death, with
payments which do not increase or increase only as provided in Q&A
F-3 of Section 1.401(a)(9)-1 of the Proposed Income Tax Regulations.
All distributions made hereunder shall be made in accordance with the
requirements of IRC Section 401(a)(9), including the incidental death
benefit requirements of IRC Section 401(a)(9)(G), and the regulations
thereunder, including the minimum distribution incidental benefit
requirements of Section 1.401(a)(9)-2 of the Proposed Income Tax
Regulations.
Life expectancies are computed using the expected return multiples in Tables
V and VI of Section 1.72-9 of the Income Tax Regulations. The life
expectancies of you and your spouse shall be recalculated annually unless
periodic payments for a fixed period begin irrevocably (subject to
acceleration) by the Required Beginning Date. The life expectancy of any
other individual may not be recalculated. Any life expectancy which is not
being recalculated shall be determined using the attained age of the
individual in the calendar year in which you reach age 70-1/2 or in any
earlier year in which payments begin irrevocably, and any payment
calculations for subsequent years shall be based on such life expectancy
reduced by one for each calendar year which has elapsed since the calendar
year such life expectancy was first determined.
-2-
<PAGE>
REQUIRED MINIMUM DISTRIBUTIONS AFTER DEATH. If you die after the Required
Beginning Date or after payments begin irrevocably (subject to
acceleration), the remaining portion of your interest in this annuity
contract must continue to be distributed at least as rapidly as under the
method of distribution being used prior to your death.
If you die before the Required Beginning Date and before payments begin
irrevocably, your entire interest in this annuity contract must be paid
either:
1) in full by December 31 of the fifth calendar year after your death;
or
2) over the life or over a period certain not greater than the life
expectancy of the individual designated under this annuity contract
to receive payments after your death with payments beginning by
December 31 of the first calendar year after your death.
However, if your surviving spouse is the individual designated to receive
your entire interest in this annuity contract, the starting date for
payments under clause (2) above may be delayed to a date not later than
December 31 of the calendar year in which you would have reached age 70-1/2.
Alternatively, this annuity contract will be treated as the IRA of such
spouse if he or she becomes Successor Owner of this contract, makes a
rollover from this contract, or fails to receive distributions from this
contract otherwise required by this provision. No contributions or rollover
to this annuity contract may be made after your death unless your spouse
becomes Successor Owner In any case, if a surviving spouse dies before
payments begin under this provision, then this provision shall apply upon
the death of your spouse as if your spouse was the owner of this annuity
contract.
Life expectancy is computed using the expected return multiples in Tables V
and VI of Section 1.72-9 of the Income Tax Regulations. For distributions
beginning after your death, the life expectancy of your surviving spouse
shall be recalculated annually unless periodic payments for a fixed period
begin irrevocably (subject to acceleration) by the date payments are
required to begin. The life expectancy of any other individual may not be
recalculated. Any life expectancy which is not being recalculated shall be
determined using the attained age of such individual in the calendar year in
which payments are required to begin or in any earlier year in which
payments begin irrevocably, and any payment calculations for subsequent
years shall be based on such life expectancy reduced by one for each
calendar year which has elapsed since the calendar year life expectancy was
first determined.
This is part of your annuity contract. It is not a separate contract. It changes
the annuity contract only as and to the extent stated. In all cases of conflict
with the other terms of the annuity contract, the provisions of this Endorsement
shall control.
Signed for us at our office as of the date of issue.
/s/ Betty Kaspowicz /s/ James M. Mortensen
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
-3-
EXHIBIT (4)(q)
SAVINGS INCENTIVE MATCH PLAN FOR EMPLOYEES
INDIVIDUAL RETIREMENT ANNUITY
ENDORSEMENT
The annuity contract is changed as set out below to make it a SIMPLE Individual
Retirement Annuity.
APPLICABLE TAX LAW RESTRICTIONS. This annuity contract is intended to receive
contributions under a Savings Incentive Match Plan for Employees of Small
Employers ("SIMPLE IRA plan") that qualifies under Internal Revenue Code ("IRC")
Section 408(p). It is restricted as required by federal tax law. We may change
the terms of this annuity contract or administer this annuity contract at any
time as needed to comply with that law. Any such change may be applied
retroactively.
EXCLUSIVE BENEFIT. This annuity contract is established for the exclusive
benefit of you and your beneficiaries. Your interest in this annuity
contract is nonforfeitable.
NON-PARTICIPATING. This annuity contract does not pay dividends or share in our
surplus.
NO ASSIGNMENT OR TRANSFER. You cannot assign, sell, or transfer your interest in
this annuity contract. You cannot pledge it to secure a loan or the performance
of an obligation, or for any other purpose. The only exceptions to these rules
are:
1) an interest in this annuity contract may be transferred to a spouse
or former spouse under a divorce or separation instrument described
in IRC Section 71(b)(2)(A); and
2) you may designate another person to receive payments with you based
on joint lives or joint life expectancies, but any such designation
shall not give that other person any present rights under the annuity
contract during your lifetime.
CONTRIBUTIONS. This annuity contract does not require fixed premiums, purchase
payments, or other contributions, but we may decline to accept any contribution
of less than $50. This annuity contract will not lapse if you do not make
contributions. This annuity contract will remain subject to cancellation under
any involuntary surrender or termination provision of this annuity contract;
provided, however, that in no event shall any such cancellation occur unless, at
a minimum, contributions have not been made for at least two full years and the
value of this annuity contract (increased by any guaranteed interest) would
provide a benefit at age 70-1/2 of less than $20 a month under the regular
settlement option.
All contributions to us must be made in cash BY CHECK OR MONEY ORDER MADE
PAYABLE TO US.
This annuity contract will only accept contributions made by an employer under a
SIMPLE IRA plan that meets the requirements of IRC Section 408(p), and rollover
contributions or transfers from another SIMPLE IRA owned by you. No other
contributions to this annuity contract will be accepted.
<PAGE>
ANNUAL REPORT. Following the end of each calendar year, we will send you a
report concerning the status of your annuity contract. This report will include
(i) the amount of all regular contributions received during or after the
calendar year which relate to such calendar year, (ii) the amount of all
rollover contributions received during such calendar year, (iii) the contract
value(s) determined as of the end of such calendar year, and (iv) such other
information as may be required under federal tax law.
If contributions to this annuity contract are paid directly by your employer
under a SIMPLE IRA plan, we will provide your employer with the summary
description required by IRC Section 408(l)(2)(B).
DESIGNATED FINANCIAL INSTITUTION. If we are the designated financial institution
for your employer's SIMPLE IRA plan, as defined in IRC Section 408(p)(7), then
you may direct that contributions paid on your behalf be transferred to another
qualified SIMPLE IRA without cost or penalty, provided that you elect such a
transfer either before the beginning of the calendar year to which such
contribution relates or within the 60-day election period which includes the
date you first become eligible to participate in the SIMPLE IRA plan.
LIMITS ON ROLLOVERS AND TRANSFERS; ADDITIONAL TAXES. During the first two years
that you participate in the SIMPLE IRA plan of your employer, any rollover or
transfer otherwise permitted under this annuity contract must be made to another
SIMPLE IRA owned by you. In some cases, any distribution to you during this
two-year period may be subject to a twenty-five percent additional penalty tax
if you do not roll over the amount distributed into a SIMPLE IRA. After the end
of this two-year period, a rollover or transfer otherwise permitted under this
annuity contract may be made to any IRA owned by you that is qualified under IRC
Section 408(a), (b), or (p).
REQUIRED MINIMUM DISTRIBUTIONS DURING LIFE. The Required Beginning Date for
distributions under this annuity contract is April 1 following the calendar year
in which you reach age 70-1/2. No later than the Required Beginning Date:
1) your entire interest in this annuity contract must be paid in full;
or
2) distributions from this annuity contract must begin in the form of
periodic payments made at least annually (i) for your life or as
joint and survivor payments to you and one other individual, or (ii)
over a period certain not to exceed your life expectancy or the joint
and last survivor expectancy of you and one other individual
designated to receive any remaining payments after your death, with
payments which do not increase or increase only as provided in Q&A
F-3 of Section 1.401(a)(9)-1 of the Proposed Income Tax Regulations.
All distributions made hereunder shall be made in accordance with the
requirements of IRC Section 401(a)(9), including the incidental death benefit
requirements of IRC Section 401(a)(9)(G), and the regulations thereunder,
including the minimum distribution incidental benefit requirements of Section
1.401(a)(9)-2 of the Proposed Income Tax Regulations.
Life expectancies are computed using the expected return multiples in Tables V
and VI of Section 1.72-9 of the Income Tax Regulations. The life expectancies of
you and your spouse shall be recalculated annually unless periodic payments for
a fixed period begin irrevocably (subject to acceleration) by the Required
Beginning Date. The life expectancy of any other individual may not be
recalculated. Any life expectancy which is not being recalculated shall be
determined using the attained age of the individual in the calendar year in
which you reach age 70-1/2 or in any earlier year in which payments begin
irrevocably, and any payment calculations for subsequent years shall be based on
such life expectancy reduced by one for each calendar year which has elapsed
since the calendar year such life expectancy was first determined.
-2-
<PAGE>
REQUIRED MINIMUM DISTRIBUTIONS AFTER DEATH. If you die after the Required
Beginning Date or after payments begin irrevocably (subject to acceleration),
the remaining portion of your interest in this annuity contract must continue to
be distributed at least as rapidly as under the method of distribution being
used prior to your death.
If you die before the Required Beginning Date and before payments begin
irrevocably, your entire interest in this annuity contract must be paid either:
1) in full by December 31 of the fifth calendar year after your death;
or
2) over the life or over a period certain not greater than the life
expectancy of the individual designated under this annuity contract
to receive payments after your death with payments beginning by
December 31 of the first calendar year after your death.
However, if your surviving spouse is the individual designated to receive your
entire interest in this annuity contract, the starting date for payments under
clause (2) above may be delayed to a date not later than December 31 of the
calendar year in which you would have reached age 70-1/2. Alternatively, this
annuity contract will be treated as the IRA of such spouse if he or she becomes
Successor Owner of this contract, makes a rollover from this contract, or fails
to receive distributions from this contract otherwise required by this
provision. No contributions or rollover to this annuity contract may be made
after your death unless your spouse becomes Successor Owner In any case, if a
surviving spouse dies before payments begin under this provision, then this
provision shall apply upon the death of your spouse as if your spouse was the
owner of this annuity contract.
Life expectancy is computed using the expected return multiples in Tables V and
VI of Section 1.72-9 of the Income Tax Regulations. For distributions beginning
after your death, the life expectancy of your surviving spouse shall be
recalculated annually unless periodic payments for a fixed period begin
irrevocably (subject to acceleration) by the date payments are required to
begin. The life expectancy of any other individual may not be recalculated. Any
life expectancy which is not being recalculated shall be determined using the
attained age of such individual in the calendar year in which payments are
required to begin or in any earlier year in which payments begin irrevocably,
and any payment calculations for subsequent years shall be based on such life
expectancy reduced by one for each calendar year which has elapsed since the
calendar year life expectancy was first determined.
This is part of your annuity contract. It is not a separate contract. It changes
the annuity contract only as and to the extent stated. In all cases of conflict
with the other terms of the annuity contract, the provisions of this Endorsement
shall control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortensen
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
-3-
EXHIBIT (4)(r)
ROTH
INDIVIDUAL RETIREMENT ANNUITY
ENDORSEMENT
The annuity contract is changed as set out below to make it a Roth Individual
Retirement Annuity.
APPLICABLE TAX LAW RESTRICTIONS. This annuity contract is intended to receive
contributions that qualify for special tax treatment under Internal Revenue
Code ("IRC") Section 408A. It is restricted as required by federal tax law.
We may change the terms of this annuity contract or administer this annuity
contract at any time as needed to comply with that law. Any such change may
be applied retroactively.
EXCLUSIVE BENEFIT. This annuity contract is established for the exclusive
benefit of you and your beneficiaries. Your interest in this annuity
contract is nonforfeitable.
NON-PARTICIPATING. This annuity contract does not pay dividends or share in
our surplus.
NO ASSIGNMENT OR TRANSFER. You cannot assign, sell, or transfer your interest
in this annuity contract. You cannot pledge it to secure a loan or the
performance of an obligation, or for any other purpose. The only exceptions
to these rules are:
1) an interest in this annuity contract may be transferred to a spouse or
former spouse under a divorce or separation instrument described in IRC
Section 71(b)(2)(A); and
2) you may designate another person to receive payments with you based on
joint lives or joint life expectancies, but any such designation shall
not give that other person any present rights under the annuity
contract during your lifetime.
CONTRIBUTIONS. This annuity contract does not require fixed premiums,
purchase payments, or other contributions, but we may decline to accept any
contribution of less than $50. This annuity contract will not lapse if you do
not make contributions. This annuity contract will remain subject to
cancellation under any involuntary surrender or termination provision of this
annuity contract; provided, however, that in no event shall any such
cancellation occur unless, at a minimum, contributions have not been made for
at least two full years and the value of this annuity contract (increased by
any guaranteed interest) would provide a benefit at its stated maturity date
of less than $20 a month under the regular settlement option.
All contributions to us must be made in cash BY CHECK OR MONEY ORDER MADE
PAYABLE TO US.
Total contributions made to this annuity contract with respect to any one tax
year may not exceed $2,000, excluding any payment which is a qualified
rollover contribution under IRC Section 408A(e).
This annuity contract will not accept contributions made by an employer
through Simplified Employee Pension (SEP) program under IRC Section 408(k) or
a SIMPLE plan under IRC Section 408(p). No rollover contributions will be
accepted other than a qualified rollover contribution from an IRA or Roth IRA
under IRC Section 408A(e). This annuity contract will not accept a transfer
or rollover of any funds attributable to contributions made by an employer
through a SEP program or SIMPLE plan except to the extent provided by the
Secretary of the Treasury.
<PAGE>
ANNUAL REPORT. Following the end of each calendar year, we will send you a
report concerning the status of your annuity contract. This report will
include (i) the amount of all regular contributions received during or after
the calendar year which relate to such calendar year, (ii) the amount of all
rollover contributions received during such calendar year, (iii) the contract
value(s) determined as of the end of such calendar year, and (iv) such other
information as may be required under federal tax law.
REQUIRED MINIMUM DISTRIBUTIONS DURING LIFE. During your lifetime,
distributions from your annuity contract need not meet the requirements of
IRC Section 401(a)(9) or the incidental death benefit requirements of IRC
Section 401(a)(9)(G).
REQUIRED MINIMUM DISTRIBUTIONS AFTER DEATH. Your entire interest in this
annuity contract must be paid either:
1) in full by December 31 of the fifth calendar year after your death;
or
2) over the life or over a period certain not greater than the life
expectancy of the individual designated under this annuity contract to
receive payments after your death with payments beginning by December
31 of the first calendar year after your death.
However, if your surviving spouse is the individual designated to receive
your entire interest in this annuity contract, this annuity contract will be
treated as the Roth IRA of such spouse if he or she becomes Successor Owner
of this contract, makes a rollover from this contract, or fails to receive
distributions from this contract otherwise required by this provision. No
contributions or rollover to this annuity contract may be made after your
death unless your spouse becomes Successor Owner. In any case, if a surviving
spouse dies before payments begin under this provision, then this provision
shall apply upon the death of your spouse as if your spouse was the owner of
this annuity contract.
Life expectancy is computed using the expected return multiples in Tables V
and VI of Section 1.72-9 of the Income Tax Regulations. The life expectancy
of your surviving spouse shall be recalculated annually unless periodic
payments for a fixed period begin irrevocably (subject to acceleration) by
the date payments are required to begin. The life expectancy of any other
individual may not be recalculated. Any life expectancy which is not being
recalculated shall be determined using the attained age of such individual in
the calendar year in which payments are required to begin or in any earlier
year in which payments begin irrevocably, and any payment calculations for
subsequent years shall be based on such life expectancy reduced by one for
each calendar year which has elapsed since the calendar year life expectancy
was first determined.
This is part of your annuity contract. It is not a separate contract. It changes
the annuity contract only as and to the extent stated. In all cases of conflict
with the other terms of the annuity contract, the provisions of this Endorsement
shall control. This Endorsement shall supersede any other Individual Retirement
Annuity endorsement(s) which may have previously been a part of the contract.
Signed for us at our office as of the date of issue.
/s/ Betty Kaspowicz /s/ James M. Mortensen
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
-2-
EXHIBIT (4)(s)
ANNUITY INVESTORS[SERVICEMARK]
LIFE INSURANCE COMPANY
EMPLOYER PLAN
ENDORSEMENT
The annuity contract is changed as set out below to adapt it for use with an
employee benefit plan:
PLAN. "Plan" means the employee benefit plan named on the group annuity
contract application or any successor plan.
EMPLOYER. "Employer" means the employer sponsoring the Plan and named on
the group annuity contract application, or any other employer which
succeeds to its rights under the Plan.
PLAN ADMINISTRATOR. "Plan Administrator" means the person designated as
such to us in writing by the Employer. If no person has been designated,
"Plan Administrator" means the Employer.
PLAN INTERPRETATION. For purposes of this annuity contract, the Plan
Administrator shall interpret the Plan and decide all questions about what is
allowed or required by the Plan. We have no duty to review or interpret the
Plan, or to review or approve any decision of the Plan Administrator. We are
entitled to rely on the written directions of the Plan Administrator on such
matters.
APPLICABLE RESTRICTIONS. This annuity contract may be restricted by federal
and/or state laws related to employee benefit plans. We may change the terms
of this annuity contract or administer this annuity contract at any time as
needed to comply with such laws.
PLAN DISTRIBUTION PROVISIONS. Distributions of a participant's interest
allowed under this annuity contract may be made only at a time allowed by the
Plan or required by this annuity contract. The form of any distribution shall
be determined under the Plan from among those forms of distribution available
under this annuity contract. No distribution may be made without the written
direction of the Plan Administrator unless required by this annuity contract.
Distributions of a participant's interest in the annuity contract may be made
without the participant's consent when required by the Plan.
FORFEITURE OF NON-VESTED AMOUNTS. Any amount under this annuity contract
attributable to contributions by the Employer (excluding any contributions
made under a salary reduction agreement with an employer) is subject to the
vesting provisions of the Plan. If at any time the Plan provides for a
forfeiture of an amount that is not vested, then such amount may be withdrawn
and paid as directed by the Plan Administrator.
RETURN OF EXCESS CONTRIBUTIONS. Contributions made to this annuity contract
are subject to any limits on contributions and nondiscrimination provisions
of the Plan. If the Plan Administrator determines that excess or
discriminatory contributions were made, then amounts attributable to such
contributions may be withdrawn and paid as directed by the Plan
Administrator.
<PAGE>
ENTITLEMENT TO DEATH BENEFITS. The person or persons entitled to any portion
of a participant's interest in this annuity contract remaining payable after
the participant's death shall be determined under the Plan. No distribution
of any such amount shall be made without the written direction of the Plan
Administrator.
INVESTMENT ALLOCATIONS AND TRANSFERS. If this annuity contract provides that
amounts held under it are allocated among separate investment funds or fixed
accounts, then any such allocations and/or subsequent transfers shall be made
only as required or allowed by the Plan, or as required by this annuity
contract to secure a loan. No such allocation or transfer shall be made
without the written direction of the Plan Administrator unless required by
this annuity contract to secure a loan. Allocations or transfers with respect
to a participant's interest in the annuity contract may be made without the
participant's consent when required by the Plan or the annuity contract.
PLAN LOAN PROVISIONS. If loans are allowed under this annuity contract, no
such loan may be made unless also allowed by the Plan. Any such loan will be
subject to any additional limits and conditions which apply under the Plan.
No loan may be made without the written direction of the Plan Administrator.
The rate of interest to be paid by a participant on any such loan will be
fixed by the Plan Administrator, but we may require that it be at least three
percentage points higher than the minimum guaranteed rate of interest, if
any, that applies to that portion of a participant's interest in this annuity
contract used as security for the loan.
QUALIFIED JOINT AND 50% SURVIVOR ANNUITY OPTION. In addition to the other
payment options available under the annuity contract, payments of a
participant's interest may be made in the form of a Qualified Joint and 50%
Survivor Annuity. Under this payment option, we will make equal payments to
the participant for life at least once per year. If the person who is the
participant's spouse at the time payments commence survives the participant,
then after the participant's death we will make payments to such spouse at
the same intervals equal to one-half of the amount of the prior payments,
with such payments continuing to such spouse until his or her death. The
first payment under this payment option will be made on the effective date of
the payment option. The amount of the payments we will make under this
payment option is based on the intervals for payments, which are subject to
our approval. Amounts vary with the ages, as of the first payment date, of
the participant and his or her spouse. We will require proof of the ages of
the participant and spouse. Monthly payments that we will make under this
payment option for each $1,000 of proceeds applied will be furnished upon
request. Once payments begin under this payment option, the value of future
payments may not be withdrawn as a commutation of benefits.
This is a part of the annuity contract. It is not a separate contract. It
changes the annuity contract only as and to the extent stated. In all cases of
conflict with the other terms of the annuity contract, the provisions of this
endorsement shall control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortensen
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
-2-
EXHIBIT (4)(t)
ANNUITY INVESTORS[SERVICEMARK]
LIFE INSURANCE COMPANY
EMPLOYER PLAN
ENDORSEMENT
Your Certificate of Participation under the annuity contract (your
"Certificate") is changed as set out below to adapt it for use with an employee
benefit plan:
PLAN. "Plan" means the employee benefit plan named on your application or
any successor plan.
EMPLOYER. "Employer" means the employer sponsoring the Plan and named on
your application, or any other employer which succeeds to its rights under
the Plan.
PLAN ADMINISTRATOR. "Plan Administrator" means the person designated as
such to us in writing by the Employer. If no person has been designated,
"Plan Administrator" means the Employer.
PLAN INTERPRETATION. For purposes of the annuity contract, the Plan
Administrator shall interpret the Plan and decide all questions about what is
allowed or required by the Plan. We have no duty to review or interpret the
Plan, or to review or approve any decision of the Plan Administrator. We are
entitled to rely on the written directions of the Plan Administrator on such
matters.
APPLICABLE RESTRICTIONS. The annuity contract may be restricted by federal
and/or state laws related to employee benefit plans. We may change the terms
of the annuity contract and your Certificate, or administer the annuity
contract and your interest in it, at any time as needed to comply with such
laws.
PLAN DISTRIBUTION PROVISIONS. Distributions of your interest allowed under
the annuity contract and your Certificate may be made only at a time allowed
by the Plan or required by the annuity contract. The form of any distribution
of shall be determined under the Plan from among those forms of distribution
available under the annuity contract. No distribution of your interest may be
made without the written direction of the Plan Administrator unless required
by the annuity contract. Distributions of your interest may be made without
your consent when required by the Plan.
FORFEITURE OF NON-VESTED AMOUNTS. Any portion of your interest in the annuity
contract attributable to contributions by the Employer (excluding any
contributions made under a salary reduction agreement with your employer) is
subject to the vesting provisions of the Plan. If at any time the Plan
provides for a forfeiture of an amount that is not vested, then such amount
may be withdrawn and paid as directed by the Plan Administrator.
RETURN OF EXCESS CONTRIBUTIONS. Contributions made to the annuity contract
for you are subject to any limits on contributions and nondiscrimination
provisions of the Plan. If the Plan Administrator determines that excess or
discriminatory contributions were made, then amounts attributable to such
contributions may be withdrawn and paid as directed by the Plan
Administrator.
ENTITLEMENT TO DEATH BENEFITS. The person or persons entitled to any portion
of your interest in the annuity contract remaining payable after your death
shall be determined under the Plan. No distribution of any such amount shall
be made without the written direction of the Plan Administrator.
<PAGE>
INVESTMENT ALLOCATIONS AND TRANSFERS. If the annuity contract provides that
amounts held under it are allocated among separate investment funds or fixed
accounts, then any such allocations and/or subsequent transfers shall be made
only as required or allowed by the Plan, or as required by the annuity
contract to secure a loan. No such allocation or transfer shall be made
without the written direction of the Plan Administrator unless required by
the annuity contract to secure a loan. Allocations or transfers with respect
to your interest in the annuity contract may be made without your consent
when required by the Plan or the annuity contract.
PLAN LOAN PROVISIONS. If loans are allowed under the annuity contract, no
such loan may be made unless also allowed by the Plan. Any such loan will be
subject to any additional limits and conditions which apply under the Plan.
No loan may be made without the written direction of the Plan Administrator.
The rate of interest to be paid by you on any such loan will be fixed by the
Plan Administrator, but we may require that it be at least three percentage
points higher than the minimum guaranteed rate of interest, if any, that
applies to that portion of your interest in the annuity contract used as
security for the loan.
QUALIFIED JOINT AND 50% SURVIVOR ANNUITY OPTION. In addition to the other
payment options available under the annuity contract, payments of your
interest may be made in the form of a Qualified Joint and 50% Survivor
Annuity. Under this payment option, we will make equal payments to you for
life at least once per year. If the person who is your spouse at the time
payments commence survives you, then after your death we will make payments
to such spouse at the same intervals equal to one-half of the amount of the
prior payments, with such payments continuing to such spouse until his or her
death. The first payment under this payment option will be made on the
effective date of the payment option. The amount of the payments we will make
under this payment option is based on the intervals for payments, which are
subject to our approval. Amounts vary with the ages, as of the first payment
date, of you and your spouse. We will require proof of the ages of you and
your spouse. Monthly payments that we will make under this payment option for
each $1,000 of proceeds applied will be furnished at your request. Once
payments begin under this payment option, the value of future payments may
not be withdrawn as a commutation of benefits.
This is a part of your Certificate. It is not a contract. It changes your
Certificate only as and to the extent stated. In all cases of conflict with the
other terms of your Certificate, the provisions of this endorsement shall
control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortensen
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
-2-
EXHIBIT (4)(u)
ANNUITY INVESTORS[SERVICEMARK]
LIFE INSURANCE COMPANY
EMPLOYER PLAN
ENDORSEMENT
The annuity contract is changed as set out below to adapt it for use with an
employee benefit plan:
PLAN. "Plan" means the employee benefit plan named on your application or
any successor plan.
EMPLOYER. "Employer" means the employer sponsoring the Plan and named on
your application, or any other employer which succeeds to its rights under
the Plan.
PLAN ADMINISTRATOR. "Plan Administrator" means the person designated as
such to us in writing by the Employer. If no person has been designated,
"Plan Administrator" means the Employer.
PLAN INTERPRETATION. For purposes of this annuity contract, the Plan
Administrator shall interpret the Plan and decide all questions about what is
allowed or required by the Plan. We have no duty to review or interpret the
Plan, or to review or approve any decision of the Plan Administrator. We are
entitled to rely on the written directions of the Plan Administrator on such
matters.
APPLICABLE RESTRICTIONS. This annuity contract may be restricted by federal
and/or state laws related to employee benefit plans. We may change the terms
of this annuity contract or administer this annuity contract at any time as
needed to comply with such laws.
PLAN DISTRIBUTION PROVISIONS. Distributions allowed under this annuity
contract may be made only at a time allowed by the Plan or required by this
annuity contract. The form of any distribution shall be determined under the
Plan from among those forms of distribution available under this annuity
contract. No distribution may be made without the written direction of the
Plan Administrator unless required by this annuity contract. Distributions
may be made without your consent when required by the Plan.
FORFEITURE OF NON-VESTED AMOUNTS. Any amount under this annuity contract
attributable to contributions by the Employer (excluding any contributions
made under a salary reduction agreement with your employer) is subject to the
vesting provisions of the Plan. If at any time the Plan provides for a
forfeiture of an amount that is not vested, then such amount may be withdrawn
and paid as directed by the Plan Administrator.
RETURN OF EXCESS CONTRIBUTIONS. Contributions made to this annuity contract
for you are subject to any limits on contributions and nondiscrimination
provisions of the Plan. If the Plan Administrator determines that excess or
discriminatory contributions were made, then amounts attributable to such
contributions may be withdrawn and paid as directed by the Plan
Administrator.
ENTITLEMENT TO DEATH BENEFITS. The person or persons entitled to any amount
remaining payable under this annuity contract after your death shall be
determined under the Plan. No distribution of any such amount shall be made
without the written direction of the Plan Administrator.
<PAGE>
INVESTMENT ALLOCATIONS AND TRANSFERS. If this annuity contract provides that
amounts held under it are allocated among separate investment funds or fixed
accounts, then any such allocations and/or subsequent transfers shall be made
only as required or allowed by the Plan, or as required by this annuity
contract to secure a loan. No such allocation or transfer shall be made
without the written direction of the Plan Administrator unless required by
this annuity contract to secure a loan. Allocations or transfers may be made
without your consent when required by the Plan or the annuity contract.
PLAN LOAN PROVISIONS. If loans are allowed under this annuity contract, no
such loan may be made unless also allowed by the Plan. Any such loan will be
subject to any additional limits and conditions which apply under the Plan.
No loan may be made without the written direction of the Plan Administrator.
The rate of interest to be paid by you on any such loan will be fixed by the
Plan Administrator, but we may require that it be at least three percentage
points higher than the minimum guaranteed rate of interest, if any, that
applies to your interest in this annuity contract used as security for the
loan.
QUALIFIED JOINT AND 50% SURVIVOR ANNUITY OPTION. In addition to the other
payment options available under this annuity contract, payments may be made
in the form of a Qualified Joint and 50% Survivor Annuity. Under this payment
option, we will make equal payments to you for life at least once per year.
If the person who is your spouse at the time payments commence survives you,
then after your death we will make payments to such spouse at the same
intervals equal to one-half of the amount of the prior payments, with such
payments continuing to such spouse until his or her death. The first payment
under this payment option will be made on the effective date of the payment
option. The amount of the payments we will make under this payment option is
based on the intervals for payments, which are subject to our approval.
Amounts vary with the ages, as of the first payment date, of you and your
spouse. We will require proof of the ages of you and your spouse. Monthly
payments that we will make under this payment option for each $1,000 of
proceeds applied will be furnished at your request. Once payments begin under
this payment option, the value of future payments may not be withdrawn as a
commutation of benefits.
This is a part of your annuity contract. It is not a separate contract. It
changes the annuity contract only as and to the extent stated. In all cases of
conflict with the other terms of the annuity contract, the provisions of this
endorsement shall control.
Signed for us at our office as of the date of issue.
/s/ Betty Kaspowicz /s/ James M. Mortensen
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
-2-
EXHIBIT 4(v)
ANNUITY INVESTORS[SERVICEMARK]
LIFE INSURANCE COMPANY
TAX SHELTERED ANNUITY ENDORSEMENT
The annuity contract is changed as set out below to add provisions for a Tax
Sheltered Annuity.
APPLICABLE TAX LAW RESTRICTIONS. This annuity contract is intended to receive
contributions that qualify for deferred tax treatment under Internal Revenue
Code ("IRC") Section 403(b). It is restricted as required by federal tax law.
We may change the terms of this annuity contract or administer this annuity
contract at any time as needed to comply with that law. Any such change may
be applied retroactively.
NO ASSIGNMENT OR TRANSFER. A participant cannot assign, sell, or transfer his
or her interest in this annuity contract. A participant cannot pledge it to
secure a loan or the performance of an obligation, or for any other purpose.
The only exceptions to these rules are:
1) an interest in this annuity contract may secure a loan made under any
loan provisions of this annuity contract;
2) an interest in this annuity contract may be transferred under a
Qualified Domestic Relations Order as defined in IRC Section 414(p);
and
3) a participant may designate another person to receive payments with
the participant based on joint lives or joint life expectancies, but
any such designation shall not give that other person any present
rights under the annuity contract during the participant's lifetime.
LIMITS ON CONTRIBUTIONS. We may refuse to accept any contribution to this
annuity contract that does not qualify for deferred tax treatment under IRC
Section 403(b) and Section 415. Contributions made for a participant to this
annuity contract and any other plan, contract, or arrangement under salary
reduction agreement(s) with his or her employer(s) cannot exceed the limits
of IRC Section 402(g).
DISTRIBUTION RESTRICTIONS ON SALARY REDUCTION CONTRIBUTIONS AND CUSTODIAL
ACCOUNTS TRANSFERS. To comply with federal tax law, distribution restrictions
apply to amounts under this annuity contract that represent:
1) contributions made after December 31, 1988 under any salary reduction
agreement with an employer;
2) income earned after December 31, 1988 on salary reduction
contributions whenever made; or
3) transfers from a custodial account described in IRC Section 403(b)(7)
and all income attributable to the amount transferred.
Any such amount cannot be distributed from this annuity contract unless the
participant has:
1) reached age 59-1/2; or
2) separated from service with his or her employer; or
3) become disabled (as defined in IRC Section 72(m)(7)); or
4) in the case of salary reduction contributions (including salary
reduction contributions to a custodial account), incurred a hardship
as defined under the IRC.
<PAGE>
A withdrawal made by reason of a hardship cannot include any income earned
after December 31, 1988 attributable to salary reduction contributions.
IRC Section 72(m)(7) states that: "An individual shall be considered to be
disabled if he is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can
be expected to result in death or to be of long-continued and indefinite
duration. An individual shall not be considered to be disabled unless he
furnishes proof of the existence thereof in such form and manner as the
Secretary [of the Treasury] may require."
DIRECT ROLLOVERS. To the extent required under IRC Section 401(a)(31), a
participant or his or her surviving spouse may elect to have any portion of
an eligible rollover distribution (as defined in IRC Section 403(b)(8)) paid
directly to an Individual Retirement Annuity or Individual Retirement Account
(as defined in IRC Section 408) or, if allowed, to another Tax Sheltered
Annuity (as defined in IRC Section 403(b)), specified by the participant or
surviving spouse and which accepts such distribution. Any direct rollover
election must be made on our form, and must be received at our office before
the date of payment.
REQUIRED MINIMUM DISTRIBUTIONS DURING LIFE. The Required Beginning Date for
distributions of a participant's interest in this annuity contract is April 1
following the later of the calendar year in which the participant reaches age
70-1/2 or the calendar year in which the participant retires.
No later than the Required Beginning Date:
1) the participant's interest in this annuity contract must be paid in
full; or
2) distributions of the participant's interest in this annuity contract
must begin in the form of periodic payments made at least annually
(i) for the participant's life or as joint and survivor payments to
the participant and one other individual, or (ii) over a period
certain not to exceed the participant's life expectancy or the joint
and last survivor life expectancy of the participant and one other
individual named to receive any remaining payments after the
participant's death, with payments which do not increase or increase
only as provided in Q&A F-3 of Section 1.401(a)(9)-1 of the Proposed
Income Tax Regulations.
All distributions made hereunder shall be made in accordance with the
requirements of IRC Section 401(a)(9), including the incidental death benefit
requirements of IRC Section 401(a)(9)(G), and the regulations thereunder,
including the minimum distribution incidental benefit requirements of Section
1.401(a)(9)-2 of the Proposed Income Tax Regulations.
Life expectancies are computed using the expected return multiples in Tables
V and VI of Section 1.72-9 of the Income Tax Regulations. The life
expectancies of a participant and his or her spouse shall be recalculated
annually unless periodic payments for a fixed period begin irrevocably
(subject to acceleration) by the Required Beginning Date. The life expectancy
of any other individual may not be recalculated. Any life expectancy which is
not being recalculated shall be determined using the attained age of the
individual in the calendar year in which the participant reaches age 70-1/2
or in any earlier year in which payments begin irrevocably, and any payment
calculations for subsequent years shall be based on such life expectancy
reduced by one for each calendar year which has elapsed since the calendar
year such life expectancy was first determined.
REQUIRED MINIMUM DISTRIBUTIONS AFTER DEATH. If the participant dies after the
Required Beginning Date or after payments begin irrevocably (subject to
acceleration), the remaining portion of the participant's interest in this
annuity contract must continue to be distributed at least as rapidly as under
the method of distribution being used prior to the participant's death.
-2-
<PAGE>
If the participant dies before the Required Beginning Date and before
payments begin irrevocably, the participant's entire interest in this annuity
contract must be paid either:
1) in full by December 31 of the fifth calendar year after the
participant's death; or
2) over the life or over a period certain not greater than the life
expectancy of the individual designated under this annuity contract
to receive payments after the participant's death with payments
beginning by December 31 of the first calendar year after the
participant's death.
However, if the participant's surviving spouse is the individual designated
to receive his or her entire interest in this annuity contract, then the
starting date for payments under clause 2) above may be delayed to a date not
later than December 31 of the calendar year in which the participant would
have reached age 70-1/2. If the participant's surviving spouse dies before
payments begin under this provision, then this provision shall apply upon the
death of the participant's spouse as if the participant's spouse were the
owner of this annuity contract.
Life expectancy is computed using the expected return multiples in Tables V
and VI of Section 1.72-9 of the Income Tax Regulations. For distributions
beginning after the participant's death, the life expectancy of the
participant's surviving spouse shall be recalculated annually unless periodic
payments for a fixed period begin irrevocably (subject to acceleration) by
the date payments are required to begin. The life expectancy of any other
individual may not be recalculated. Any life expectancy which is not being
recalculated shall be determined using the attained age of such individual in
the calendar year in which payments are required to begin or in any earlier
year in which payments begin irrevocably, and any payment calculations for
subsequent years shall be based on such life expectancy reduced by one for
each calendar year which has elapsed since the calendar year life expectancy
was first determined.
This is part of the annuity contract. It is not a separate contract. It changes
the annuity contract only as and to the extent stated. In all cases of conflict
with the other terms of the annuity contract, the provisions of this Endorsement
shall control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortensen
SECRETARY EXECUTIVE VICE PRESIDENT
-3-
EXHIBIT (4)(w)
ANNUITY INVESTORS[SERVICEMARK]
LIFE INSURANCE COMPANY
TAX SHELTERED ANNUITY ENDORSEMENT
The Certificate of Participation under the annuity contract (your "Certificate")
is changed as set out below to add provisions for a Tax Sheltered Annuity.
APPLICABLE TAX LAW RESTRICTIONS. The annuity contract is intended to receive
contributions that qualify for deferred tax treatment under Internal Revenue
Code ("IRC") Section 403(b). It is restricted as required by federal tax law.
We may change the terms of the annuity contract and your Certificate, or
administer the annuity contract and your interest in it, at any time as
needed to comply with that law. Any such change may be applied retroactively.
NO ASSIGNMENT OR TRANSFER. You cannot assign, sell, or transfer your interest
in the annuity contract. You cannot pledge it to secure a loan or the
performance of an obligation, or for any other purpose. The only exceptions
to these rules are:
1) you may use your interest in the annuity contract to secure a loan
made under any loan provisions of the annuity contract;
2) all or part of your interest in the annuity contract may be
transferred under a Qualified Domestic Relations Order as defined in
IRC Section 414(p); and
3) you may designate another person to receive payments with you based
on joint lives or joint life expectancies, but any such designation
shall not give that other person any present rights under the annuity
contract during your lifetime.
LIMITS ON CONTRIBUTIONS. We may refuse to accept any contribution to the
annuity contract that does not qualify for deferred tax treatment under IRC
Section 403(b) and Section 415. Contributions made for you to the annuity
contract and any other plan, contract, or arrangement under salary reduction
agreement(s) with your employer(s) cannot exceed the limits of IRC Section
402(g).
DISTRIBUTION RESTRICTIONS ON SALARY REDUCTION CONTRIBUTIONS AND CUSTODIAL
ACCOUNTS TRANSFERS. To comply with federal tax law, distribution restrictions
apply to amounts under the annuity contract that represent:
1) contributions made after December 31, 1988 under any salary reduction
agreement with an employer;
2) income earned after December 31, 1988 on salary reduction
contributions whenever made; or
3) transfers from a custodial account described in IRC Section 403(b)(7)
and all income attributable to the amount transferred.
Any such amount cannot be distributed with respect to your interest in the
annuity contract unless you have:
1) reached age 59-1/2; or
2) separated from service with your employer; or
3) become disabled (as defined in IRC Section 72(m)(7)); or
4) in the case of salary reduction contributions (including salary
reduction contributions to a custodial account), incurred a hardship
as defined under the IRC.
<PAGE>
A withdrawal made by reason of a hardship cannot include any income earned
after December 31, 1988 attributable to salary reduction contributions.
IRC Section 72(m)(7) states that: "An individual shall be considered to be
disabled if he is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can
be expected to result in death or to be of long-continued and indefinite
duration. An individual shall not be considered to be disabled unless he
furnishes proof of the existence thereof in such form and manner as the
Secretary [of the Treasury] may require."
DIRECT ROLLOVERS. To the extent required under IRC Section 401(a)(31), you or
your surviving spouse may elect to have any portion of an eligible rollover
distribution (as defined in IRC Section 403(b)(8)) paid directly to an
Individual Retirement Annuity or Individual Retirement Account (as defined in
IRC Section 408) or, if allowed, to another Tax Sheltered Annuity (as defined
in IRC Section 403(b)), specified by your or your surviving spouse and which
accepts such distribution. Any direct rollover election must be made on our
form, and must be received at our office before the date of payment.
REQUIRED MINIMUM DISTRIBUTIONS DURING LIFE. The Required Beginning Date for
distributions with respect to your interest in the annuity contract is April
1 following the later of the calendar year in which you reach age 70-1/2 or
the calendar year in which you retire. No later than the Required Beginning
Date:
1) your interest in the annuity contract must be paid in full; or
2) distributions of your interest in the annuity contract must begin in
the form of periodic payments made at least annually (i) for your
life or as joint and survivor payments to you and one other
individual, or (ii) over a period certain not to exceed the your life
expectancy or the joint and last survivor life expectancy of you and
one other individual named to receive any remaining payments after
your death, with payments which do not increase or increase only as
provided in Q&A F-3 of Section 1.401(a)(9)-1 of the Proposed Income
Tax Regulations.
All distributions made hereunder shall be made in accordance with the
requirements of IRC Section 401(a)(9), including the incidental death benefit
requirements of IRC Section 401(a)(9)(G), and the regulations thereunder,
including the minimum distribution incidental benefit requirements of Section
1.401(a)(9)-2 of the Proposed Income Tax Regulations.
Life expectancies are computed using the expected return multiples in Tables
V and VI of Section 1.72-9 of the Income Tax Regulations. The life
expectancies of you and your spouse shall be recalculated annually unless
periodic payments for a fixed period begin irrevocably (subject to
acceleration) by the Required Beginning Date. The life expectancy of any
other individual may not be recalculated. Any life expectancy which is not
being recalculated shall be determined using the attained age of the
individual in the calendar year in which you reach age 70-1/2 or in any
earlier year in which payments begin irrevocably, and any payment
calculations for subsequent years shall be based on such life expectancy
reduced by one for each calendar year which has elapsed since the calendar
year such life expectancy was first determined.
REQUIRED MINIMUM DISTRIBUTIONS AFTER DEATH. If you die after the Required
Beginning Date or after payments begin irrevocably (subject to acceleration),
the remaining portion of your interest in the annuity contract must continue
to be distributed at least as rapidly as under the method of distribution
being used prior to your death.
-2-
<PAGE>
If you die before the Required Beginning Date and before payments begin
irrevocably, your entire interest in the annuity contract must be paid
either:
1) in full by December 31 of the fifth calendar year after your death;
or
2) over the life or over a period certain not greater than the life
expectancy of the individual designated under the annuity contract to
receive payments after your death with payments beginning by December
31 of the first calendar year after your death.
However, if your surviving spouse is the individual designated to receive
your entire interest in the annuity contract, then the starting date for
payments under clause 2) above may be delayed to a date not later than
December 31 of the calendar year in which you would have reached age 70-1/2.
If your surviving spouse dies before payments begin under this provision,
then this provision shall apply upon the death of your spouse as if your
spouse were the owner of your interest in the annuity contract.
Life expectancy is computed using the expected return multiples in Tables V
and VI of Section 1.72-9 of the Income Tax Regulations. For distributions
beginning after your death, the life expectancy of your surviving spouse
shall be recalculated annually unless periodic payments for a fixed period
begin irrevocably (subject to acceleration) by the date payments are required
to begin. The life expectancy of any other individual may not be
recalculated. Any life expectancy which is not being recalculated shall be
determined using the attained age of such individual in the calendar year in
which payments are required to begin or in any earlier year in which payments
begin irrevocably, and any payment calculations for subsequent years shall be
based on such life expectancy reduced by one for each calendar year which has
elapsed since the calendar year life expectancy was first determined.
This is part of your Certificate. It is not a contract. It changes your
Certificate only as and to the extent stated. In all cases of conflict with the
other terms of your Certificate, the provisions of this Endorsement shall
control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz James M. Mortensen
Secretary Executive Vice President
-3-
EXHIBIT (4)(x)
ANNUITY INVESTORS[SERVICEMARK]
LIFE INSURANCE COMPANY
TAX SHELTERED ANNUITY ENDORSEMENT
The annuity contract is changed as set out below to add provisions for a Tax
Sheltered Annuity.
APPLICABLE TAX LAW RESTRICTIONS. This annuity contract is intended to receive
contributions that qualify for deferred tax treatment under Internal Revenue
Code ("IRC") Section 403(b). It is restricted as required by federal tax law. We
may change the terms of this annuity contract or administer this annuity
contract at any time as needed to comply with that law. Any such change may be
applied retroactively.
NO ASSIGNMENT OR TRANSFER. You cannot assign, sell, or transfer your interest in
this annuity contract. You cannot pledge it to secure a loan or the performance
of an obligation, or for any other purpose. The only exceptions to these rules
are:
1) you may use this annuity contract to secure a loan made under any
loan provisions of this annuity contract;
2) an interest in this annuity contract may be transferred under a
Qualified Domestic Relations Order as defined in IRC Section 414(p);
and
3) you may designate another person to receive payments with you based
on joint lives or joint life expectancies, but any such designation
shall not give that other person any present rights under the annuity
contract during your lifetime.
LIMITS ON CONTRIBUTIONS. We may refuse to accept any contribution to this
annuity contract that does not qualify for deferred tax treatment under IRC
Section 403(b) and Section 415. Contributions made for you to this annuity
contract and any other plan, contract, or arrangement under salary reduction
agreement(s) with your employer(s) cannot exceed the limits of IRC Section
402(g).
DISTRIBUTION RESTRICTIONS ON SALARY REDUCTION CONTRIBUTIONS AND CUSTODIAL
ACCOUNTS TRANSFERS. To comply with federal tax law, distribution restrictions
apply to amounts under this annuity contract that represent:
1) contributions made after December 31, 1988 under any salary reduction
agreement with an employer;
2) income earned after December 31, 1988 on salary reduction
contributions whenever made; or
3) transfers from a custodial account described in IRC Section 403(b)(7)
and all income attributable to the amount transferred.
Any such amount cannot be distributed from this annuity contract unless you
have:
1) reached age 59-1/2; or
2) separated from service with your employer; or
3) become disabled (as defined in IRC Section 72(m)(7)); or
4) in the case of salary reduction contributions (including salary
reduction contributions to a custodial account), incurred a hardship
as defined under the IRC.
A withdrawal made by reason of a hardship cannot include any income earned after
December 31, 1988 attributable to salary reduction contributions.
-2-
<PAGE>
IRC Section 72(m)(7) states that: "An individual shall be considered to be
disabled if he is unable to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment which can be
expected to result in death or to be of long-continued and indefinite duration.
An individual shall not be considered to be disabled unless he furnishes proof
of the existence thereof in such form and manner as the Secretary [of the
Treasury] may require."
DIRECT ROLLOVERS. To the extent required under IRC Section 401(a)(31), you or
your surviving spouse may elect to have any portion of an eligible rollover
distribution (as defined in IRC Section 403(b)(8)) paid directly to an
Individual Retirement Annuity or Individual Retirement Account (as defined in
IRC Section 408) or, if allowed, to another Tax Sheltered Annuity (as defined in
IRC Section 403(b)), specified by you or your surviving spouse and which accepts
such distribution. Any direct rollover election must be made on our form, and
must be received at our office before the date of payment.
REQUIRED MINIMUM DISTRIBUTIONS DURING LIFE. The Required Beginning Date for
distributions under this annuity contract is April 1 following the later of the
calendar year in which you reach age 70-1/2 or the calendar year in which you
retire. No later than the Required Beginning Date:
1) your interest in this annuity contract must be paid in full; or
2) distributions from this annuity contract must begin in the form of
periodic payments made at least annually (i) for your life or as
joint and survivor payments to you and one other individual, or (ii)
over a period certain not to exceed your life expectancy or the joint
and last survivor life expectancy of you and one other individual
named to receive any remaining payments after your death, with
payments which do not increase or increase only as provided in Q&A
F-3 of Section 1.401(a)(9)-1 of the Proposed Income Tax Regulations.
All distributions made hereunder shall be made in accordance with the
requirements of IRC Section 401(a)(9), including the incidental death benefit
requirements of IRC Section 401(a)(9)(G), and the regulations thereunder,
including the minimum distribution incidental benefit requirements of Section
1.401(a)(9)-2 of the Proposed Income Tax Regulations.
Life expectancies are computed using the expected return multiples in Tables V
and VI of Section 1.72-9 of the Income Tax Regulations. The life expectancies of
you and your spouse shall be recalculated annually unless periodic payments for
a fixed period begin irrevocably (subject to acceleration) by the Required
Beginning Date. The life expectancy of any other individual may not be
recalculated. Any life expectancy which is not being recalculated shall be
determined using the attained age of the individual in the calendar year in
which you reach age 70-1/2 or in any earlier year in which payments begin
irrevocably, and any payment calculations for subsequent years shall be based on
such life expectancy reduced by one for each calendar year which has elapsed
since the calendar year such life expectancy was first determined.
REQUIRED MINIMUM DISTRIBUTIONS AFTER DEATH. If you die after the Required
Beginning Date or after payments begin irrevocably (subject to acceleration),
the remaining portion of your interest in this annuity contract must continue to
be distributed at least as rapidly as under the method of distribution being
used prior to your death.
If you die before the Required Beginning Date and before payments begin
irrevocably, your entire interest in this annuity contract must be paid either:
1) in full by December 31 of the fifth calendar year after your death;
or
2) over the life or over a period certain not greater than the life
expectancy of the individual designated under this annuity contract
to receive payments after your death with payments beginning by
December 31 of the first calendar year after your death.
-3-
<PAGE>
However, if your surviving spouse is the individual designated to receive your
entire interest in this annuity contract, then the starting date for payments
under clause 2) above may be delayed to a date not later than December 31 of the
calendar year in which you would have reached age 70-1/2. If your surviving
spouse dies before payments begin under this provision, then this provision
shall apply upon the death of your spouse as if your spouse were the owner of
this annuity contract.
Life expectancy is computed using the expected return multiples in Tables V and
VI of Section 1.72-9 of the Income Tax Regulations. For distributions beginning
after your death, the life expectancy of your surviving spouse shall be
recalculated annually unless periodic payments for a fixed period begin
irrevocably (subject to acceleration) by the date payments are required to
begin. The life expectancy of any other individual may not be recalculated. Any
life expectancy which is not being recalculated shall be determined using the
attained age of such individual in the calendar year in which payments are
required to begin or in any earlier year in which payments begin irrevocably,
and any payment calculations for subsequent years shall be based on such life
expectancy reduced by one for each calendar year which has elapsed since the
calendar year life expectancy was first determined.
This is part of your annuity contract. It is not a separate contract. It changes
the annuity contract only as and to the extent stated. In all cases of conflict
with the other terms of the annuity contract, the provisions of this Endorsement
shall control.
Signed for us at our office as of the date of issue.
/s/ Betty Kaspowicz /s/ James M. Mortensen
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
-4-
EXHIBIT (4)(y)
ANNUITY INVESTORS[SERVICEMARK]
LIFE INSURANCE COMPANY
QUALIFIED PENSION, PROFIT SHARING, AND ANNUITY PLAN
ENDORSEMENT
The annuity contract is changed as set out below to add provisions for a
qualified pension, profit sharing, or annuity plan. This endorsement and the
annuity contract to which it is attached are not valid without additional
endorsement(s) defining the Plan and Plan Administrator.
APPLICABLE TAX LAW RESTRICTIONS. This annuity contract is intended to receive
contributions pursuant to a pension, profit sharing, or annuity plan
qualified under Internal Revenue Code ("IRC") Section 401(a) or 403(a). It is
restricted as required by federal tax law. We may change the terms of this
annuity contract or administer this annuity contract at any time as needed to
comply with that law. Any such change may be applied retroactively.
EXCLUSIVE BENEFIT. This annuity contract is established for the exclusive
benefit of the participants and their beneficiaries. No amounts held under
this annuity contract may be used for or diverted to any purpose other than
the provision of Plan benefits except as permitted by the Plan after the
complete satisfaction of all liabilities to persons covered by the Plan and
their beneficiaries. Until distributed, the Plan retains all legal ownership
rights and control over a participant's interest in the annuity contract
except as provided by the Plan Administrator.
NO ASSIGNMENT OR TRANSFER. A participant cannot assign, sell, or transfer his
or her interest in this annuity contract. A participant cannot pledge it to
secure a loan or the performance of an obligation, or for any other purpose.
The only exceptions to these rules are:
1) a participant's interest in this annuity contract may secure a loan
made to the participant under any loan provisions of this annuity
contract;
2) all or part of a participant's interest in this annuity contract may
be transferred under a Qualified Domestic Relations Order as defined
in IRC Section 414(p); and
3) payments from a participant's interest in this annuity contract may
be made based on joint lives or joint life expectancies of the
participant and another person, but such other person shall have no
present rights under this annuity contract during the participant's
lifetime.
Except as elected under the DIRECT ROLLOVER provision, any distributions from
a participant's interest in this annuity contract shall be paid to the
annuity contract owner or to the participant or another person entitled to
Plan benefits through the participant, as may be directed by the annuity
contract owner.
LIMITS ON CONTRIBUTIONS. Contributions to a participant's interest in this
annuity contract which represent contributions to the Plan for the
participant's benefit must not exceed the limits set forth in IRC Section
415. Contributions to a participant's interest in this annuity contract which
represent the participant's elective deferrals cannot exceed the limits of
IRC Section 402(g). Additional limits may apply under the terms of the Plan.
The Plan Administrator shall ensure compliance with these IRC limits and any
Plan limits.
<PAGE>
DISTRIBUTION RESTRICTIONS ON 401(K) EMPLOYEE ELECTIVE CONTRIBUTIONS. Any
amounts under a participant's interest in this annuity contract which
represent employee elective contributions made pursuant to salary reduction
agreement(s) under IRC Section 401(k) and any income earned on such amounts,
cannot be distributed any earlier than allowed under IRC Section
401(k)(2)(B). Additional limits may apply under the terms of the Plan. The
Plan Administrator shall determine when a distribution is allowed under this
IRC section and the Plan.
DISTRIBUTION RESTRICTIONS ON PENSION CONTRIBUTIONS. Any amounts under a
participant's interest in this annuity contract which represent contributions
for the participant to a money purchase pension plan or a defined benefit
pension plan, and any income earned on such amounts, cannot be distributed
any earlier than allowed under Section 1.401-1(b)(1)(i) of the Income Tax
Regulations. Additional limits may apply under the terms of the Plan. The
Plan Administrator shall determine when a distribution is allowed under this
regulation and the Plan.
DIRECT ROLLOVERS. To the extent required under IRC Section 401(a)(31), a
participant or his or her surviving spouse may elect to have any portion of
an eligible rollover distribution (as defined in IRC Section 402(c)(4)) paid
directly to an Individual Retirement Annuity or Individual Retirement Account
(as defined in IRC Section 408) or, if allowed, to another qualified pension,
profit sharing, or annuity plan (as defined in IRC Section 401(a) or 403(a)),
specified by the participant or surviving spouse and which accepts such
distribution. Any direct rollover election must be made on our form, and must
be received at our office before the date of payment.
DATE BENEFITS TO BEGIN. Unless a participant elects to delay the payment of
his or her benefits, distributions of the participant's interest in this
annuity contract shall begin no later than 60 days after the end of the Plan
year in which the last of the following occurs:
1) the participant has reached the earlier of age 65 or the normal
retirement age stated in the Plan;
2) the 10th anniversary of the date the participant joined the Plan; or
3) the participant's separation from service with the employer.
The Plan Administrator shall make any determination required under this
provision.
In no event can the payment of benefits be delayed beyond the Required
Beginning Date stated in the REQUIRED MINIMUM DISTRIBUTIONS DURING LIFE
provision, below.
REQUIRED MINIMUM DISTRIBUTIONS DURING LIFE. The Required Beginning Date for
distributions with respect to a participant's interest in this annuity
contract is April 1 following the later of the calendar year in which the
participant reaches age 70-1/2 or the calendar year in which the participant
separates from service with the Employer. If the participant is a 5% owner of
the Employer, the Required Beginning Date is April 1 following the calendar
year in which the participant reaches age 70-1/2.
No later than the Required Beginning Date:
1) the participant's interest in this annuity contract must be paid in
full; or
2) distributions of the participant's interest in this annuity contract
must begin in the form of periodic payments made at least annually
(i) for the participant's life or as joint and survivor payments for
the lives of the participant and one other individual, or (ii) over a
period certain not to exceed the participant's life expectancy or the
joint and last survivor life expectancy of the participant and one
other individual entitled to receive any remaining payments after the
participant's death, with payments which do not increase or increase
only as provided in Q&A F-3 of Section 1.401(a)(9)-1 of the Proposed
Income Tax Regulations.
-2-
<PAGE>
All distributions made hereunder shall be made in accordance with the
requirements of IRC Section 401(a)(9), including the incidental death benefit
requirement of IRC Section 401(a)(9)(G), and the regulations thereunder,
including the minimum distribution incidental benefit requirements of Section
1.401(a)(9)-2 of the Proposed Income Tax Regulations.
Life expectancies are computed using the expected return multiples in Tables
V and VI of Section 1.72-9 of the Income Tax Regulations. The life
expectancies of the participant and his or her spouse shall be recalculated
annually unless periodic payments for a fixed period begin irrevocably
(subject to acceleration) by the Required Beginning Date. The life expectancy
of any other individual may not be recalculated. Any life expectancy which is
not being recalculated shall be determined using the attained age of the
individual in the calendar year immediately preceding the Required Beginning
Date or in any earlier year in which payments begin irrevocably, and any
payment calculations for subsequent years shall be based on such life
expectancy reduced by one for each calendar year which has elapsed since the
calendar year such life expectancy was first determined.
REQUIRED MINIMUM DISTRIBUTIONS AFTER DEATH. If a participant dies after the
Required Beginning Date or after payments begin irrevocably (subject to
acceleration), the remaining portion of the participant's interest in this
annuity contract must continue to be distributed at least as rapidly as under
the method of distribution being used prior to the participant's death.
If a participant dies before the Required Beginning Date and before payments
begin irrevocably, the participant's entire interest in this annuity contract
must be paid either:
1) in full by December 31 of the fifth calendar year after the
participant's death; or
2) over the life or over a period certain not greater than the life
expectancy of the individual designated to receive payments after the
participant's death with payments beginning by December 31 of the
first calendar year after the participant's death.
However, if the participant's surviving spouse is the individual designated
to receive the participant's entire interest in this annuity contract, then
the starting date for payments under clause 2) above may be delayed to a date
not later than December 31 of the calendar year in which the participant
would have reached age 70-1/2. If the participant's surviving spouse dies
before payments begin under this provision, then this provision shall apply
upon the death of the participant's spouse as if the spouse were the owner of
the participant's interest in this annuity contract.
-3-
<PAGE>
Life expectancy is computed using the expected return multiples in Tables V
and VI of Section 1.72-9 of the Income Tax Regulations. For distributions
beginning after a participant's death, the life expectancy of the
participant's surviving spouse shall be recalculated annually unless periodic
payments for a fixed period begin irrevocably (subject to acceleration) by
the date payments are required to begin. The life expectancy of any other
individual may not be recalculated. Any life expectancy which is not being
recalculated shall be determined using the attained age of such individual in
the calendar year in which payments are required to begin or in any earlier
year in which payments begin irrevocably, and any payment calculations for
subsequent years shall be based on such life expectancy reduced by one for
each calendar year which has elapsed since the calendar year life expectancy
was first determined.
This is part of the annuity contract. It is not a separate contract. It changes
the annuity contract only as and to the extent stated. In all cases of conflict
with the other terms of the annuity contract, the provisions of this Endorsement
shall control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz James M. Mortensen
Secretary Executive Vice President
-4-
EXHIBIT (4)(z)
ANNUITY INVESTORS[SERVICEMARK
LIFE INSURANCE COMPANY
QUALIFIED PENSION, PROFIT SHARING, AND ANNUITY PLAN
ENDORSEMENT
Your Certificate of Participation under the annuity contract (your
"Certificate") is changed as set out below to add provisions for a qualified
pension, profit sharing, or annuity plan. This endorsement and the Certificate
to which it is attached are not valid without additional endorsement(s) defining
the Plan and Plan Administrator.
APPLICABLE TAX LAW RESTRICTIONS. The annuity contract is intended to receive
contributions pursuant to a pension, profit sharing, or annuity plan qualified
under Internal Revenue Code ("IRC") Section 401(a) or 403(a). It is restricted
as required by federal tax law. We may change the terms of the annuity contract
and your Certificate, or administer the annuity contract and your interest in
it, at any time as needed to comply with that law. Any such change may be
applied retroactively.
EXCLUSIVE BENEFIT. Your interest in the annuity contract is established for the
exclusive benefit of you and your beneficiaries. No amounts held under your
interest in the annuity contract may be used for or diverted to any purpose
other than the provision of Plan benefits except as permitted by the Plan after
the complete satisfaction of all liabilities to persons covered by the Plan and
their beneficiaries. Until distributed, the Plan retains all legal ownership
rights and control over your interest in the annuity contract except as provided
by the Plan Administrator.
NO ASSIGNMENT OR TRANSFER. You cannot assign, sell, or transfer your interest in
the annuity contract. You cannot pledge it to secure a loan or the performance
of an obligation, or for any other purpose. The only exceptions to these rules
are:
1) your interest in the annuity contract may secure a loan made to you
under any loan provisions of the annuity contract;
2) all or part of your interest in the annuity contract may be
transferred under a Qualified Domestic Relations Order as defined in
IRC Section 414(p); and
3) payments from your interest in the annuity contract may be made based
on joint lives or joint life expectancies of you and another person,
but such other person shall have no present rights under the annuity
contract during your lifetime.
Except as elected under the DIRECT ROLLOVER provision, any distributions from
your interest in the annuity contract shall be paid to the annuity contract
owner or to you or another person entitled to Plan benefits through you, as may
be directed by the annuity contract owner.
LIMITS ON CONTRIBUTIONS. Contributions to your interest in the annuity contract
which represent contributions to the Plan for your benefit must not exceed the
limits set forth in IRC Section 415. Contributions to your interest in the
annuity contract which represent your elective deferrals cannot exceed the
limits of IRC Section 402(g). Additional limits may apply under the terms of the
Plan. The Plan Administrator shall ensure compliance with these IRC limits and
any Plan limits.
<PAGE>
DISTRIBUTION RESTRICTIONS ON 401(K) EMPLOYEE ELECTIVE CONTRIBUTIONS. Any amounts
under your interest in the annuity contract which represent employee elective
contributions made pursuant to salary reduction agreement(s) under IRC Section
401(k) and any income earned on such amounts, cannot be distributed any earlier
than allowed under IRC Section 401(k)(2)(B). Additional limits may apply under
the terms of the Plan. The Plan Administrator shall determine when a
distribution is allowed under this IRC section and the Plan.
DISTRIBUTION RESTRICTIONS ON PENSION CONTRIBUTIONS. Any amounts under your
interest in the annuity contract which represent contributions for you to a
money purchase pension plan or a defined benefit pension plan, and any income
earned on such amounts, cannot be distributed any earlier than allowed under
Section 1.401-1(b)(1)(i) of the Income Tax Regulations. Additional limits may
apply under the terms of the Plan. The Plan Administrator shall determine when a
distribution is allowed under this regulation and the Plan.
DIRECT ROLLOVERS. To the extent required under IRC Section 401(a)(31), you or
your surviving spouse may elect to have any portion of an eligible rollover
distribution (as defined in IRC Section 402(c)(4)) paid directly to an
Individual Retirement Annuity or Individual Retirement Account (as defined in
IRC Section 408) or, if allowed, to another qualified pension, profit sharing,
or annuity plan (as defined in IRC Section 401(a) or 403(a)), specified by you
or your surviving spouse and which accepts such distribution. Any direct
rollover election must be made on our form, and must be received at our office
before the date of payment.
DATE BENEFITS TO BEGIN. Unless you elect to delay the payment of your benefits,
distributions of your interest in the annuity contract shall begin no later than
60 days after the end of the Plan year in which the last of the following
occurs:
1) you have reached the earlier of age 65 or the normal retirement age
stated in the Plan;
2) the 10th anniversary of the date you joined the Plan; or
3) your separation from service with the employer.
The Plan Administrator shall make any determination required under this
provision.
In no event can the payment of benefits be delayed beyond the Required Beginning
Date stated in the REQUIRED MINIMUM DISTRIBUTIONS DURING LIFE provision, below.
REQUIRED MINIMUM DISTRIBUTIONS DURING LIFE. The Required Beginning Date for
distributions with respect to your interest in the annuity contract is April 1
following the later of the calendar year in which you reach age 70-1/2 or the
calendar year in which you separate from service with the Employer. If you are a
5% owner of the Employer, the Required Beginning Date is April 1 following the
calendar year in which you reach age 70-1/2. No later than the Required
Beginning Date:
1) your interest in the annuity contract must be paid in full; or
2) distributions of your interest in the annuity contract must begin in
the form of periodic payments made at least annually (i) for your
life or as joint and survivor payments for the lives of you and one
other individual, or (ii) over a period certain not to exceed your
life expectancy or the joint and last survivor life expectancy of you
and one other individual entitled to receive any remaining payments
after your death, with payments which do not increase or increase
only as provided in Q&A F-3 of Section 1.401(a)(9)-1 of the Proposed
Income Tax Regulations.
-2-
<PAGE>
All distributions made hereunder shall be made in accordance with the
requirements of IRC Section 401(a)(9), including the incidental death benefit
requirement of IRC Section 401(a)(9)(G), and the regulations thereunder,
including the minimum distribution incidental benefit requirements of Section
1.401(a)(9)-2 of the Proposed Income Tax Regulations.
Life expectancies are computed using the expected return multiples in Tables V
and VI of Section 1.72-9 of the Income Tax Regulations. The life expectancies of
you and your spouse shall be recalculated annually unless periodic payments for
a fixed period begin irrevocably (subject to acceleration) by the Required
Beginning Date. The life expectancy of any other individual may not be
recalculated. Any life expectancy which is not being recalculated shall be
determined using the attained age of the individual in the calendar year
immediately preceding the Required Beginning Date or in any earlier year in
which payments begin irrevocably, and any payment calculations for subsequent
years shall be based on such life expectancy reduced by one for each calendar
year which has elapsed since the calendar year such life expectancy was first
determined.
REQUIRED MINIMUM DISTRIBUTIONS AFTER DEATH. If you die after the Required
Beginning Date or after payments begin irrevocably (subject to acceleration),
the remaining portion of your interest in the annuity contract must continue to
be distributed at least as rapidly as under the method of distribution being
used prior to your death.
If you die before the Required Beginning Date and before payments begin
irrevocably, your entire interest in the annuity contract must be paid either:
1) in full by December 31 of the fifth calendar year after your death;
or
2) over the life or over a period certain not greater than the life
expectancy of the individual designated to receive payments after
your death with payments beginning by December 31 of the first
calendar year after your death.
However, if your surviving spouse is the individual designated to receive your
entire interest in the annuity contract, then the starting date for payments
under clause 2) above may be delayed to a date not later than December 31 of the
calendar year in which you would have reached age 70-1/2. If your surviving
spouse dies before payments begin under this provision, then this provision
shall apply upon the death of your spouse as if your spouse were the owner of
your interest in the annuity contract.
Life expectancy is computed using the expected return multiples in Tables V and
VI of Section 1.72-9 of the Income Tax Regulations. For distributions beginning
after your death, the life expectancy of your surviving spouse shall be
recalculated annually unless periodic payments for a fixed period begin
irrevocably (subject to acceleration) by the date payments are required to
begin. The life expectancy of any other individual may not be recalculated. Any
life expectancy which is not being recalculated shall be determined using the
attained age of such individual in the calendar year in which payments are
required to begin or in any earlier year in which payments begin irrevocably,
and any payment calculations for subsequent years shall be based on such life
expectancy reduced by one for each calendar year which has elapsed since the
calendar year life expectancy was first determined.
This is part of your Certificate. It is not a contract. It changes your
Certificate only as and to the extent stated. In all cases of conflict with the
other terms of your Certificate, the provisions of this Endorsement shall
control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortensen
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
-3-
EXHIBIT (4)(aa)
ANNUITY INVESTORS[SERVICEMARK]
LIFE INSURANCE COMPANY
QUALIFIED PENSION, PROFIT SHARING, AND ANNUITY PLAN
ENDORSEMENT
The annuity contract is changed as set out below to add provisions for a
qualified pension, profit sharing, or annuity plan. This endorsement and the
annuity contract to which it is attached are not valid without additional
endorsement(s) defining the Plan and Plan Administrator.
APPLICABLE TAX LAW RESTRICTIONS. This annuity contract is intended to receive
contributions pursuant to a pension, profit sharing, or annuity plan
qualified under Internal Revenue Code ("IRC") Section 401(a) or 403(a). It is
restricted as required by federal tax law. We may change the terms of this
annuity contract or administer this annuity contract at any time as needed to
comply with that law. Any such change may be applied retroactively.
ANNUITANT. "Annuitant" means the designated person covered under the Plan for
whose benefit this annuity contract was purchased. If the owner of this
annuity contract is the Employer or Plan trustee, then any reference in this
annuity contract to the owner's life, age, death, or spouse shall be treated
as a reference to the Annuitant's life, age, death, or spouse.
EXCLUSIVE BENEFIT. This annuity contract is for the exclusive benefit of the
Annuitant and his or her beneficiaries. No amounts held under this annuity
contract may be used for or diverted to any purpose other than the provision
of Plan benefits except as permitted by the Plan after the complete
satisfaction of all liabilities to persons covered by the Plan and their
beneficiaries. Until distributed, the Plan retains all legal ownership rights
and control over the Annuitant's interest in the annuity contract except as
provided by the Plan Administrator.
NO ASSIGNMENT OR TRANSFER. No interest in this annuity contract may be
assigned, sold, or transferred. No interest in this annuity contract may be
pledged to secure a loan or the performance of an obligation, or for any
other purpose. The only exceptions to these rules are:
1) if this annuity contract is owned by the Employer or Plan trustee, it
may be transferred to a successor Employer or Plan trustee or to the
Annuitant or another person entitled to Plan benefits through the
Annuitant;
2) this annuity contract may secure a loan to the Annuitant made under
any loan provisions of this annuity contract;
3) the Annuitant's interest in this annuity contract may be transferred
under a Qualified Domestic Relations Order as defined in IRC Section
414(p); and
4) payments may be made based on joint lives or joint life expectancies
of the Annuitant and another person, but such other person shall have
no present rights under this annuity contract during the lifetime of
the Annuitant.
Except as elected under the DIRECT ROLLOVER provision, any distributions
under this annuity contract shall be paid to the owner or to the Annuitant or
other person entitled to Plan benefits through the Annuitant, as may be
directed by the owner of the annuity contract.
<PAGE>
LIMITS ON CONTRIBUTIONS. Contributions to this annuity contract which
represent contributions to the Plan must not exceed the limits set forth in
IRC Section 415. Contributions to this annuity contract which represent
elective deferrals cannot exceed the limits of IRC Section 402(g). Additional
limits may apply under the terms of the Plan. The Plan Administrator shall
ensure compliance with these IRC limits and any Plan limits.
DISTRIBUTION RESTRICTIONS ON 401(K) EMPLOYEE ELECTIVE CONTRIBUTIONS. Any
amounts under this annuity contract which represent employee elective
contributions made pursuant to salary reduction agreement(s) under IRC
Section 401(k) and any income earned on such amounts, cannot be distributed
any earlier than allowed under IRC Section 401(k)(2)(B). Additional limits
may apply under the terms of the Plan. The Plan Administrator shall determine
when a distribution is allowed under this IRC section and the Plan.
DISTRIBUTION RESTRICTIONS ON PENSION CONTRIBUTIONS. Any amounts under this
annuity contract which represent contributions to a money purchase pension
plan or a defined benefit pension plan, and any income earned on such
amounts, cannot be distributed any earlier than allowed under Section
1.401-1(b)(1)(i) of the Income Tax Regulations. Additional limits may apply
under the terms of the Plan. The Plan Administrator shall determine when a
distribution is allowed under this regulation and the Plan.
DIRECT ROLLOVERS. To the extent required under IRC Section 401(a)(31), the
Annuitant or his or her surviving spouse may elect to have any portion of an
eligible rollover distribution (as defined in IRC Section 402(c)(4)) paid
directly to an Individual Retirement Annuity or Individual Retirement Account
(as defined in IRC Section 408) or, if allowed, to another qualified pension,
profit sharing, or annuity plan (as defined in IRC Section 401(a) or 403(a)),
specified by the Annuitant or surviving spouse and which accepts such
distribution. Any direct rollover election must be made on our form, and must
be received at our office before the date of payment.
DATE BENEFITS TO BEGIN. Unless the Annuitant elects to delay the payment of
his or her benefits, a distribution of the Annuitant's interest in this
annuity contract shall begin no later than 60 days after the end of the Plan
year in which the last of the following occurs:
1) the Annuitant has reached the earlier of age 65 or the normal
retirement age stated in the Plan;
2) the 10th anniversary of the date the Annuitant joined the Plan; or
3) the Annuitant's separation from service with the employer.
The Plan Administrator shall make any determination required under this
provision.
In no event can the payment of benefits be delayed beyond the Required
Beginning Date stated in the REQUIRED MINIMUM DISTRIBUTIONS DURING LIFE
provision, below.
-2-
<PAGE>
REQUIRED MINIMUM DISTRIBUTIONS DURING LIFE. The Required Beginning Date for
distributions under this annuity contract is April 1 following the later of
the calendar year in which the Annuitant reaches age 70-1/2 or the calendar
year in which the Annuitant separates from service with the Employer. For any
5% owner of the Employer, the Required Beginning Date is April 1 following
the calendar year in which the Annuitant reaches age 70-1/2. No later than
the Required Beginning Date:
1) the entire amount payable under this annuity contract must be paid in
full; or
2) distributions from this annuity contract must begin in the form of
periodic payments made at least annually (i) for the Annuitant's life
or as joint and survivor payments for the lives of the Annuitant and
one other individual, or (ii) over a period certain not to exceed the
Annuitant's life expectancy or the joint and last survivor life
expectancy of the Annuitant and one other individual entitled to
receive any amount payable after the Annuitant's death, with payments
which do not increase or increase only as provided in Q&A F-3 of
Section 1.401(a)(9)-1 of the Proposed Income Tax Regulations.
All distributions made hereunder shall be made in accordance with the
requirements of IRC Section 401(a)(9), including the incidental death benefit
requirement of IRC Section 401(a)(9)(G), and the regulations thereunder,
including the minimum distribution incidental benefit requirements of Section
1.401(a)(9)-2 of the Proposed Income Tax Regulations.
Life expectancies are computed using the expected return multiples in Tables
V and VI of Section 1.72-9 of the Income Tax Regulations. The life
expectancies of the Annuitant and his or her spouse shall be recalculated
annually unless periodic payments for a fixed period begin irrevocably
(subject to acceleration) by the Required Beginning Date. The life expectancy
of any other individual may not be recalculated. Any life expectancy which is
not being recalculated shall be determined using the attained age of the
individual in the calendar year in which the Annuitant reaches age 70-1/2 or
in any earlier year in which payments begin irrevocably, and any payment
calculations for subsequent years shall be based on such life expectancy
reduced by one for each calendar year which has elapsed since the calendar
year such life expectancy was first determined.
REQUIRED MINIMUM DISTRIBUTIONS AFTER DEATH. If the Annuitant dies after the
Required Beginning Date or after payments begin irrevocably (subject to
acceleration), any amount remaining payable under this annuity contract must
continue to be distributed at least as rapidly as under the method of
distribution being used prior to the Annuitant's death.
If the Annuitant dies before the Required Beginning Date and before payments
begin irrevocably, then any amount remaining payable under this annuity
contract must be paid either:
1) in full by December 31 of the fifth calendar year after the
Annuitant's death; or
2) over the life or over a period certain not greater than the life
expectancy of the individual entitled to payments after the
Annuitant's death with payments beginning by December 31 of the first
calendar year after the Annuitant's death.
However, if the Annuitant's spouse is the individual entitled to receive the
entire amount remaining payable under this annuity contract, then the
starting date for payments under clause 2) above may be delayed to a date not
later than December 31 of the calendar year in which the Annuitant would have
reached age 70-1/2. If the Annuitant's surviving spouse dies before payments
begin under this provision, then this provision shall apply upon the death of
the Annuitant's spouse as if the spouse were the Annuitant under this annuity
contract.
-3-
<PAGE>
Life expectancy is computed using the expected return multiples in Tables V
and VI of Section 1.72-9 of the Income Tax Regulations. For distributions
beginning after the Annuitant's death, the life expectancy of his or her
surviving spouse shall be recalculated annually unless periodic payments for
a fixed period begin irrevocably (subject to acceleration) by the date
payments are required to begin. The life expectancy of any other individual
may not be recalculated. Any life expectancy which is not being recalculated
shall be determined using the attained age of such individual in the calendar
year in which payments are required to begin or in any earlier year in which
payments begin irrevocably, and any payment calculations for subsequent years
shall be based on such life expectancy reduced by one for each calendar year
which has elapsed since the calendar year life expectancy was first
determined.
This is part of the annuity contract. It is not a separate contract. It changes
the annuity contract only as and to the extent stated. In all cases of conflict
with the other terms of the annuity contract, the provisions of this Endorsement
shall control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortensen
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
-4-
EXHIBIT (4)(bb)
ANNUITY INVESTORS[SERVICEMARK]
LIFE INSURANCE COMPANY
GOVERNMENTAL SECTION 457 PLAN
ENDORSEMENT
The annuity contract is changed as set out below to add provisions for a
governmental Section 457 plan. This endorsement and the annuity contract to
which it is attached are not valid without additional endorsement(s) defining
the Plan and Plan Administrator.
APPLICABLE TAX LAW RESTRICTIONS. This annuity contract is intended to receive
contributions pursuant to a plan qualified under Internal Revenue Code
("IRC") Section 457 maintained by a state, a political subdivision of a
state, or any agency or instrumentality of a state or political subdivision
of a state. It is restricted as required by federal tax law. We may change
the terms of this annuity contract or administer this annuity contract at any
time as needed to comply with that law. Any such change may be applied
retroactively.
EXCLUSIVE BENEFIT. This annuity contract is for the exclusive benefit of the
participants and their beneficiaries. No amounts held under this annuity
contract may be used for or diverted to any purpose other than the provision
of Plan benefits except as permitted by the Plan after the complete
satisfaction of all liabilities to persons covered by the Plan and their
beneficiaries. Until distributed, the Plan retains all legal ownership rights
and control over a participant's interest in the annuity contract except as
provided by the Plan Administrator.
NO ASSIGNMENT OR TRANSFER. A participant cannot assign, sell, or transfer his
or her interest in this annuity contract. A participant cannot pledge it to
secure a loan or the performance of an obligation, or for any other purpose.
The only exceptions to these rules are:
1) a participant's interest in this annuity contract may secure a loan
to the participant made under any loan provisions of this annuity
contract;
2) all or part of a participant's interest in this annuity contract may
be transferred under a Qualified Domestic Relations Order as defined
in IRC Section 414(p); and
3) payments from a participant's interest in this annuity contract may
be made based on joint lives or joint life expectancies of the
participant and another person, but such other person shall have no
present rights under this annuity contract during the participant's
lifetime.
Any distributions from a participant's interest in this annuity contract
shall be paid to the annuity contract owner or to the participant or other
person entitled to Plan benefits through the participant, as may be directed
by the annuity contract owner.
LIMITS ON CONTRIBUTIONS. Contributions to a participant's interest in this
annuity contract which represent contributions to the Plan for the
participant's benefit must not exceed the limits set forth in IRC Section
457(b) and (c). No elective contributions may be made by the participant with
respect to any month unless the participant has entered an agreement for
deferral before the first day of that month. However, an elective
contribution may be made for the first month of employment of the participant
if the agreement for deferral is made on or before the date service with the
Employer begins. Additional limits may apply under the terms of the Plan. The
Plan Administrator shall ensure compliance with these IRC limits and any Plan
limits.
<PAGE>
DISTRIBUTION RESTRICTIONS. As required under IRC Section 457(d), no
distributions from a participant's interest in this annuity contract can
be made until:
1) the calendar year in which the participant reaches age 70-1/2; or
2) the participant's separation from service with the Employer; or
3) the participant is faced with an unforeseeable emergency as defined
under the IRC; or
4) the conditions are met for an in-service distribution to the
participant under IRC Section 457(e)(9).
Additional limits may apply under the terms of the Plan. The Plan
Administrator shall determine when a distribution is allowed under this IRC
section and the Plan.
DATE BENEFITS TO BEGIN. A distribution of a participant's interest in this
annuity contract shall begin no later than 60 days after the end of the Plan
year in which the later of the following occurs:
1) the participant reaches normal retirement age as determined under the
Plan; or
2) the participant separates from service with the Employer.
If the Plan permits benefit payments upon separation from service to begin
before the latest date required under this provision, then prior to the date
a participant's payments actually begin the Plan may allow the participant to
elect irrevocably to delay payment to a later fixed and determinable date
within the limits of this provision. The participant may make only one such
election after the earliest date on which the Plan permits benefit payments
upon separation from service.
The Plan Administrator shall make any determination required under this
provision.
In no event can the payment of benefits to a participant be delayed beyond
the Required Beginning Date stated in the REQUIRED MINIMUM DISTRIBUTIONS
DURING LIFE provision, below.
REQUIRED MINIMUM DISTRIBUTIONS DURING LIFE. The Required Beginning Date for
distributions with respect to a participant's interest in this annuity
contract is April 1 following the later of the calendar year in which the
participant reaches age 70-1/2 or the calendar year in which the participant
separates from service with the Employer. No later than the Required
Beginning Date:
1) the participant's interest in this annuity contract must be paid in
full; or
2) distributions of the participant's interest in this annuity contract
must begin in the form of periodic payments made at least annually
(i) for the participant's life or as joint and survivor payments for
the lives of the participant and one other individual, or (ii) over a
period certain not to exceed the participant's life expectancy or the
joint and last survivor life expectancy of the participant and one
other individual entitled to receive any amount payable after the
participant's death, with payments which do not increase or increase
only as provided in Q&A F-3 of Section 1.401(a)(9)-1 of the Proposed
Income Tax Regulations.
All distributions made hereunder shall be made in accordance with the
requirements of IRC Section 401(a)(9), including the incidental death benefit
requirement of IRC Section 401(a)(9)(G), and the regulations thereunder,
including the minimum distribution incidental benefit requirements of Section
1.401(a)(9)-2 of the Proposed Income Tax Regulations and any guidance which
may be issued by the Secretary of the Treasury under IRC Section 457.
-2-
<PAGE>
Life expectancies are computed using the expected return multiples in Tables
V and VI of Section 1.72-9 of the Income Tax Regulations. The life
expectancies of the participant and his or her spouse shall be recalculated
annually unless periodic payments for a fixed period begin irrevocably
(subject to acceleration) by the Required Beginning Date. The life expectancy
of any other individual may not be recalculated. Any life expectancy which is
not being recalculated shall be determined using the attained age of the
individual in the calendar year in which the participant reaches age 70-1/2
or in any earlier year in which payments begin irrevocably, and any payment
calculations for subsequent years shall be based on such life expectancy
reduced by one for each calendar year which has elapsed since the calendar
year such life expectancy was first determined.
REQUIRED MINIMUM DISTRIBUTIONS AFTER DEATH. If a participant dies after the
Required Beginning Date or after payments begin irrevocably (subject to
acceleration), the remaining portion of the participant's interest in annuity
contract must continue to be distributed at least as rapidly as under the
method of distribution being used prior to the participant's death.
If a participant dies before the Required Beginning Date and before payments
begin irrevocably, then the participant's entire interest in this annuity
contract must be paid either:
1) in full by December 31 of the fifth calendar year after the
participant's death;
2) if someone other than the participant's surviving spouse is entitled
to receive part or all of the participant's interest after the
participant's death, over a period certain not greater than fifteen
years and not greater than the life expectancy of the eldest person
entitled to benefits, with payments beginning by December 31 of the
first calendar year after the participant's death; or
3) if the participant's spouse is the sole person entitled to receive
the participant's interest after the participant's death, over the
life or over a period certain not greater than the life expectancy of
the surviving spouse, with payments beginning by December 31 of the
later of first calendar year after the participant's death or the
calendar year in which the participant would have attained age
70-1/2.
If the participant's surviving spouse is the sole person entitled to receive
the participant's interest in this annuity contract after the participant's
death and the surviving spouse dies before payments begin under this
provision, then this provision shall apply upon the death of the
participant's spouse as if the spouse were the owner of the participant's
interest in this annuity contract.
-3-
<PAGE>
Life expectancy is computed using the expected return multiples in Tables V
and VI of Section 1.72-9 of the Income Tax Regulations. For distributions
beginning after the participant's death, the life expectancy of his or her
surviving spouse shall be recalculated annually unless periodic payments for
a fixed period begin irrevocably (subject to acceleration) by the date
payments are required to begin. The life expectancy of any other individual
may not be recalculated. Any life expectancy which is not being recalculated
shall be determined using the attained age of such individual in the calendar
year in which payments are required to begin or in any earlier year in which
payments begin irrevocably, and any payment calculations for subsequent years
shall be based on such life expectancy reduced by one for each calendar year
which has elapsed since the calendar year life expectancy was first
determined.
This is part of the annuity contract. It is not a separate contract. It changes
the annuity contract only as and to the extent stated. In all cases of conflict
with the other terms of the annuity contract, the provisions of this Endorsement
shall control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortensen
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
-4-
EXHIBIT (4)(cc)
ANNUITY INVESTORS[SERVICEMARK]
LIFE INSURANCE COMPANY
GOVERNMENTAL SECTION 457 PLAN
ENDORSEMENT
Your Certificate of Participation under the annuity contract (your
"Certificate") is changed as set out below to add provisions for a governmental
Section 457 plan. This endorsement and the Certificate to which it is attached
are not valid without additional endorsement(s) defining the Plan and Plan
Administrator.
APPLICABLE TAX LAW RESTRICTIONS. The annuity contract is intended to receive
contributions pursuant to a plan qualified under Internal Revenue Code
("IRC") Section 457 maintained by a state, a political subdivision of a
state, or any agency or instrumentality of a state or political subdivision
of a state. It is restricted as required by federal tax law. We may change
the terms of the annuity contract and your Certificate, or administer the
annuity contract and your interest in it, at any time as needed to comply
with that law. Any such change may be applied retroactively.
EXCLUSIVE BENEFIT. Your interest in the annuity contract is for the exclusive
benefit of you and your beneficiaries. No amounts held under your interest in
the annuity contract may be used for or diverted to any purpose other than
the provision of Plan benefits except as permitted by the Plan after the
complete satisfaction of all liabilities to persons covered by the Plan and
their beneficiaries. Until distributed, the Plan retains all legal ownership
rights and control over your interest in the annuity contract except as
provided by the Plan Administrator.
NO ASSIGNMENT OR TRANSFER. You cannot assign, sell, or transfer your interest
in the annuity contract. You cannot pledge it to secure a loan or the
performance of an obligation, or for any other purpose. The only exceptions
to these rules are:
1) your interest in the annuity contract may secure a loan to you made
under any loan provisions of the annuity contract;
2) all or part of your interest in the annuity contract may be
transferred under a Qualified Domestic Relations Order as defined in
IRC Section 414(p); and
3) payments from your interest in the annuity contract may be made based
on joint lives or joint life expectancies of you and another person,
but such other person shall have no present rights under the annuity
contract during your lifetime.
Any distributions from your interest in the annuity contract shall be paid to
the annuity contract owner or to you or other person entitled to Plan
benefits through you, as may be directed by the annuity contract owner.
LIMITS ON CONTRIBUTIONS. Contributions to your interest in the annuity
contract which represent contributions to the Plan for your benefit must not
exceed the limits set forth in IRC Section 457(b) and (c). No elective
contributions may be made by you with respect to any month unless you have
entered an agreement for deferral before the first day of that month.
However, an elective contribution may be made for your first month of
employment if the agreement for deferral is made on or before the date your
service with the Employer begins. Additional limits may apply under the terms
of the Plan. The Plan Administrator shall ensure compliance with these IRC
limits and any Plan limits.
<PAGE>
DISTRIBUTION RESTRICTIONS. As required under IRC Section 457(d), no
distributions from your interest in the annuity contract can be made until:
1) the calendar year in which you reach age 70-1/2; or
2) your separation from service with the Employer; or
3) you are faced with an unforeseeable emergency as defined under the
IRC; or
4) the conditions are met for an in-service distribution you under IRC
Section 457(e)(9).
Additional limits may apply under the terms of the Plan. The Plan
Administrator shall determine when a distribution is allowed under this IRC
section and the Plan.
DATE BENEFITS TO BEGIN. A distribution of your interest in the annuity
contract shall begin no later than 60 days after the end of the Plan year in
which the later of the following occurs:
1) you reach normal retirement age as determined under the Plan; or
2) you separate from service with the Employer.
If the Plan permits benefit payments upon separation from service to begin
before the latest date required under this provision, then prior to the date
your payments actually begin the Plan may allow you to elect irrevocably to
delay payment to a later fixed and determinable date within the limits of
this provision. You may make only one such election after the earliest date
on which the Plan permits benefit payments upon separation from service.
The Plan Administrator shall make any determination required under this
provision.
In no event can the payment of your benefits be delayed beyond the Required
Beginning Date stated in the REQUIRED MINIMUM DISTRIBUTIONS DURING LIFE
provision, below.
REQUIRED MINIMUM DISTRIBUTIONS DURING LIFE. The Required Beginning Date for
distributions with respect to your interest in the annuity contract is April
1 following the later of the calendar year in which you reach age 70-1/2 or
the calendar year in which you separate from service with the Employer. No
later than the Required Beginning Date:
1) your interest in the annuity contract must be paid in full; or
2) distributions of your interest in the annuity contract must begin in
the form of periodic payments made at least annually (i) for your
life or as joint and survivor payments for the lives of you and one
other individual, or (ii) over a period certain not to exceed your
life expectancy or the joint and last survivor life expectancy of you
and one other individual entitled to receive any amount payable after
your death, with payments which do not increase or increase only as
provided in Q&A F-3 of Section 1.401(a)(9)-1 of the Proposed Income
Tax Regulations.
All distributions made hereunder shall be made in accordance with the
requirements of IRC Section 401(a)(9), including the incidental death benefit
requirement of IRC Section 401(a)(9)(G), and the regulations thereunder,
including the minimum distribution incidental benefit requirements of Section
1.401(a)(9)-2 of the Proposed Income Tax Regulations and any guidance which
may be issued by the Secretary of the Treasury under IRC Section 457.
-2-
<PAGE>
Life expectancies are computed using the expected return multiples in Tables
V and VI of Section 1.72-9 of the Income Tax Regulations. The life
expectancies of you and your spouse shall be recalculated annually unless
periodic payments for a fixed period begin irrevocably (subject to
acceleration) by the Required Beginning Date. The life expectancy of any
other individual may not be recalculated. Any life expectancy which is not
being recalculated shall be determined using the attained age of the
individual in the calendar year in which you reach age 70-1/2 or in any
earlier year in which payments begin irrevocably, and any payment
calculations for subsequent years shall be based on such life expectancy
reduced by one for each calendar year which has elapsed since the calendar
year such life expectancy was first determined.
REQUIRED MINIMUM DISTRIBUTIONS AFTER DEATH. If you die after the Required
Beginning Date or after payments begin irrevocably (subject to acceleration),
the remaining portion of your interest in annuity contract must continue to
be distributed at least as rapidly as under the method of distribution being
used prior to your death.
If you die before the Required Beginning Date and before payments begin
irrevocably, then your entire interest in the annuity contract must be paid
either:
1) in full by December 31 of the fifth calendar year after your death;
2) if someone other than your surviving spouse is entitled to receive
part or all of your interest after your death, over a period certain
not greater than fifteen years and not greater than the life
expectancy of the eldest person entitled to benefits, with payments
beginning by December 31 of the first calendar year after your death;
or
3) if your spouse is the sole person entitled to receive your interest
after your death, over the life or over a period certain not greater
than the life expectancy of the surviving spouse, with payments
beginning by December 31 of the later of first calendar year after
your death or the calendar year in which you would have attained age
70-1/2.
If your surviving spouse is the sole person entitled to receive your interest
in the annuity contract after your death and the surviving spouse dies before
payments begin under this provision, then this provision shall apply upon the
death of your spouse as if the spouse were the owner of your interest in the
annuity contract.
Life expectancy is computed using the expected return multiples in Tables V
and VI of Section 1.72-9 of the Income Tax Regulations. For distributions
beginning after your death, the life expectancy of your surviving spouse
shall be recalculated annually unless periodic payments for a fixed period
begin irrevocably (subject to acceleration) by the date payments are required
to begin. The life expectancy of any other individual may not be
recalculated. Any life expectancy which is not being recalculated shall be
determined using the attained age of such individual in the calendar year in
which payments are required to begin or in any earlier year in which payments
begin irrevocably, and any payment calculations for subsequent years shall be
based on such life expectancy reduced by one for each calendar year which has
elapsed since the calendar year life expectancy was first determined.
This is part of your Certificate. It is not a contract. It changes your
Certificate only as and to the extent stated. In all cases of conflict with the
other terms of your Certificate, the provisions of this Endorsement shall
control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortensen
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
-3-
EXHIBIT (4)(dd)
ANNUITY INVESTORS[SERVICEMARK]
LIFE INSURANCE COMPANY
Box 5423, Cincinnati, Ohio 45201-5423 o (800) 789-6771
GOVERNMENTAL SECTION 457 PLAN
ENDORSEMENT
The annuity contract is changed as set out below to add provisions for a
governmental Section 457 plan. This endorsement and the annuity contract to
which it is attached are not valid without additional endorsement(s) defining
the Plan and Plan Administrator.
APPLICABLE TAX LAW RESTRICTIONS. This annuity contract is intended to receive
contributions pursuant to a plan qualified under Internal Revenue Code
("IRC") Section 457 maintained by a state, a political subdivision of a
state, or any agency or instrumentality of a state or political subdivision
of a state. It is restricted as required by federal tax law. We may change
the terms of this annuity contract or administer this annuity contract at any
time as needed to comply with that law. Any such change may be applied
retroactively.
ANNUITANT. "Annuitant" means the designated person covered under the Plan for
whose benefit this annuity contract was purchased. If the owner of this
annuity contract is the Employer or Plan trustee, then any reference in this
annuity contract to the owner's life, age, death, or spouse shall be treated
as a reference to the Annuitant's life, age, death, or spouse.
EXCLUSIVE BENEFIT. This annuity contract is for the exclusive benefit of the
Annuitant and his or her beneficiaries. No amounts held under this annuity
contract may be used for or diverted to any purpose other than the provision
of Plan benefits except as permitted by the Plan after the complete
satisfaction of all liabilities to persons covered by the Plan and their
beneficiaries. Until distributed, the Plan retains all legal ownership rights
and control over the Annuitant's interest in the annuity contract except as
provided by the Plan Administrator.
NO ASSIGNMENT OR TRANSFER. No interest in this annuity contract may be
assigned, sold, or transferred. No interest in this annuity contract may be
pledged to secure a loan or the performance of an obligation, or for any
other purpose. The only exceptions to these rules are:
1) if this annuity contract is owned by the Employer or Plan trustee, it
may be transferred to a successor Employer or Plan trustee or to the
Annuitant or another person entitled to Plan benefits through the
Annuitant;
2) this annuity contract may secure a loan to the Annuitant made under
any loan provisions of this annuity contract;
3) the Annuitant's interest in this annuity contract may be transferred
under a Qualified Domestic Relations Order as defined in IRC Section
414(p); and
4) payments may be made based on joint lives or joint life expectancies
of the Annuitant and another person, but such other person shall have
no present rights under this annuity contract during the lifetime of
the Annuitant.
Any distributions under this annuity contract shall be paid to the owner or
to the Annuitant or other person entitled to Plan benefits through the
Annuitant, as may be directed by the owner of the annuity contract.
<PAGE>
LIMITS ON CONTRIBUTIONS. Contributions to this annuity contract which
represent contributions to the Plan must not exceed the limits set forth in
IRC Section 457(b) and (c). No elective contributions may be made by the
Annuitant with respect to any month unless the Annuitant has entered an
agreement for deferral before the first day of that month. However, an
elective contribution may be made for the first month of employment of the
Annuitant if the agreement for deferral is made on or before the date service
with the Employer begins. Additional limits may apply under the terms of the
Plan. The Plan Administrator shall ensure compliance with these IRC limits
and any Plan limits.
DISTRIBUTION RESTRICTIONS. As required under IRC Section 457(d), no
distributions from this annuity contract can be made until:
1) the calendar year in which the Annuitant reaches age 70-1/2; or
2) the Annuitant's separation from service with the Employer; or
3) the Annuitant is faced with an unforeseeable emergency as defined
under the IRC; or
4) the conditions are met for an in-service distribution under IRC
Section 457(e)(9).
Additional limits may apply under the terms of the Plan. The Plan
Administrator shall determine when a distribution is allowed under this IRC
section and the Plan.
DATE BENEFITS TO BEGIN. A distribution of the Annuitant's interest in this
annuity contract shall begin no later than 60 days after the end of the Plan
year in which the later of the following occurs:
1) the Annuitant reaches normal retirement age as determined under the
Plan; or
2) the Annuitant separates from service with the Employer.
If the Plan permits benefit payments upon separation from service to begin
before the latest date required under this provision, then prior to the date
payments actually begin the Plan may allow the Annuitant to elect irrevocably
to delay payment to a later fixed and determinable date within the limits of
this provision. The Annuitant may make only one such election after the
earliest date on which the Plan permits benefit payments upon separation from
service.
The Plan Administrator shall make any determination required under this
provision.
In no event can the payment of benefits be delayed beyond the Required
Beginning Date stated in the REQUIRED MINIMUM DISTRIBUTIONS DURING LIFE
provision, below.
REQUIRED MINIMUM DISTRIBUTIONS DURING LIFE. The Required Beginning Date for
distributions under this annuity contract is April 1 following the later of
the calendar year in which the Annuitant reaches age 70-1/2 or the calendar
year in which the Annuitant separates from service with the Employer. No
later than the Required Beginning Date:
1) the entire amount payable under this annuity contract must be paid in
full; or
2) distributions from this annuity contract must begin in the form of
periodic payments made at least annually (i) for the Annuitant's life
or as joint and survivor payments for the lives of the Annuitant and
one other individual, or (ii) over a period certain not to exceed the
Annuitant's life expectancy or the joint and last survivor life
expectancy of the Annuitant and one other individual entitled to
receive any amount payable after the Annuitant's death, with payments
which do not increase or increase only as provided in Q&A F-3 of
Section 1.401(a)(9)-1 of the Proposed Income Tax Regulations.
-2-
<PAGE>
All distributions made hereunder shall be made in accordance with the
requirements of IRC Section 401(a)(9), including the incidental death benefit
requirement of IRC Section 401(a)(9)(G), and the regulations thereunder,
including the minimum distribution incidental benefit requirements of Section
1.401(a)(9)-2 of the Proposed Income Tax Regulations and any guidance which
may be issued by the Secretary of the Treasury under IRC Section 457.
Life expectancies are computed using the expected return multiples in Tables
V and VI of Section 1.72-9 of the Income Tax Regulations. The life
expectancies of the Annuitant and his or her spouse shall be recalculated
annually unless periodic payments for a fixed period begin irrevocably
(subject to acceleration) by the Required Beginning Date. The life expectancy
of any other individual may not be recalculated. Any life expectancy which is
not being recalculated shall be determined using the attained age of the
individual in the calendar year in which the Annuitant reaches age 70-1/2 or
in any earlier year in which payments begin irrevocably, and any payment
calculations for subsequent years shall be based on such life expectancy
reduced by one for each calendar year which has elapsed since the calendar
year such life expectancy was first determined.
REQUIRED MINIMUM DISTRIBUTIONS AFTER DEATH. If the Annuitant dies after the
Required Beginning Date or after payments begin irrevocably (subject to
acceleration), any amount remaining payable under this annuity contract must
continue to be distributed at least as rapidly as under the method of
distribution being used prior to the Annuitant's death.
If the Annuitant dies before the Required Beginning Date and before payments
begin irrevocably, then any amount remaining payable under this annuity
contract must be paid either:
1) in full by December 31 of the fifth calendar year after the
Annuitant's death;
2) if someone other than the Annuitant's surviving spouse is entitled to
receive part or all of the amount remaining payable after the
Annuitant's death, over a period certain not greater than fifteen
years and not greater than the life expectancy of the eldest person
entitled to benefits, with payments beginning by December 31 of the
first calendar year after the Annuitant's death; or
3) if the Annuitant's spouse is the sole person entitled to receive the
amount remaining payable after the Annuitant's death, over the life
or over a period certain not greater than the life expectancy of the
surviving spouse, with payments beginning by December 31 of the later
of first calendar year after the Annuitant's death or the calendar
year in which the Annuitant would have attained age 70-1/2.
If the Annuitant's surviving spouse is the sole person entitled to receive
the amount remaining payable after the Annuitant's death and the surviving
spouse dies before payments begin under this provision, then this provision
shall apply upon the death of the Annuitant's spouse as if the spouse were
the Annuitant under this annuity contract.
Life expectancy is computed using the expected return multiples in Tables V
and VI of Section 1.72-9 of the Income Tax Regulations. For distributions
beginning after the Annuitant's death, the life expectancy of his or her
surviving spouse shall be recalculated annually unless periodic payments for
a fixed period begin irrevocably (subject to acceleration) by the date
payments are required to begin. The life expectancy of any other individual
may not be recalculated. Any life expectancy which is not being recalculated
shall be determined using the attained age of such individual in the calendar
year in which payments are required to begin or in any earlier year in which
payments begin irrevocably, and any payment calculations for subsequent years
shall be based on such life expectancy reduced by one for each calendar year
which has elapsed since the calendar year life expectancy was first
determined.
-3-
<PAGE>
This is part of the annuity contract. It is not a separate contract. It
changes the annuity contract only as and to the extent stated. In all cases
of conflict with the other terms of the annuity contract, the provisions of
this Endorsement shall control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortensen
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
-4-
Exhibit (5)(a)
================================================================================
[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)(b)
================================================================================
[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)(d)(i)
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
NAME OF SEPARATE ACCOUNT CONTRACTS FUNDED
DATE ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT
- -------------------------------------- -------------------
Annuity Investors[SERVICEMARK] The Commodore Nauticus(R)
Variable Account A Group Flexible Premium
May 26, 1995 Deferred Annuity
G800(95)-3 & C800(95)-3
The Commodore Americus[SERVICEMARK]
Individual Flexible Premium
Deferred Annuity
A800(Q96)-3 & A800(NQ96)-3
NAME OF SEPARATE ACCOUNT CONTRACTS FUNDED
DATE ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT
- -------------------------------------- -------------------
Annuity Investors[SERVICEMARK] The Commodore Navigator[SERVICEMARK]
Variable Account B Individual Flexible Premium
December 19, 1996 Deferred Annuity
A801-BD(NQRev.3/97)-3 and
A801-BD(QRev. 3/97)-3
The Commodore Navigator[SERVICEMARK]
Group Flexible Premium
Deferred Annuity
G801-BD(97)-3 and
C801-BD(97)-3
The Commodore Independence[SERVICEMARK]
Individual Flexible Premium
Deferred Annuity
A802 (Q98)-3 and
A802(NQ98)-3
The Commodore Advantage[SERVICEMARK]
Group Flexible Premium
Deferred Annuity
G803-BD(97)-3 and
C803-BD(97)-3
<PAGE>
NAME OF SEPARATE ACCOUNT CONTRACTS FUNDED
DATE ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT
- -------------------------------------- -------------------
The Commodore Advantage[SERVICEMARK]
Individual Flexible Premium
Deferred Annuity
A803-BD (Q97)-3 and
A803-BD(NQ97)-3
EXHIBIT (8)(f)(i)
SCHEDULE B
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
NAME OF SEPARATE ACCOUNT CONTRACTS FUNDED
DATE ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT
- -------------------------------------- -------------------
Annuity Investors[SERVICEMARK] The Commodore Navigator[SERVICEMARK]
Variable Account B
December 19, 1996 Individual Flexible Premium
Deferred Annuity
A801-BD(NQRev.3/97)-3 and
A801-BD(QRev. 3/97)-3
The Commodore Navigator[SERVICEMARK]
Group Flexible Premium
Deferred Annuity
G801-BD(97)-3 and
C801-BD(97)-3
The Commodore Independence[SERVICEMARK]
Individual Flexible Premium
Deferred Annuity
A802 (Q98)-3 and
A802(NQ98)-3
The Commodore Advantage[SERVICEMARK]
Group Flexible Premium
Deferred Annuity
G803-BD(97)-3 and
C803-BD(97)-3
The Commodore Advantage[SERVICEMARK]
Individual Flexible Premium
Deferred Annuity
A803-BD (Q97)-3 and
A803-BD(NQ97)-3
EXHIBIT (8)(g)(i)
SCHEDULE B
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
<TABLE>
<CAPTION>
NAME OF SEPARATE ACCOUNT CONTRACTS FUNDED
DATE ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT
- -------------------------------------- -------------------
<S> <C>
Annuity Investors[SERVICEMARK] The Commodore Nauticus[REGISTERED]
Variable Account A Group Flexible Premium
May 26, 1995 Deferred Annuity
G800(95)-3 & C800(95)-3
The Commodore Americus[SERVICEMARK]
Individual Flexible Premium
Deferred Annuity
A800(Q96)-3 & A800(NQ96)-3
NAME OF SEPARATE ACCOUNT CONTRACTS FUNDED
DATE ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT
- -------------------------------------- -------------------
Annuity Investors[SERVICEMARK] The Commodore Navigator
Variable Account B Individual Flexible Premium
December 19, 1996 Deferred Annuity
A801-BD(NQRev.3/97)-3 and
A801-BD(QRev. 3/97)-3
The Commodore Navigator[SERVICEMARK]
Group Flexible Premium
Deferred Annuity
G801-BD(97)-3 and
C801-BD(97)-3
The Commodore Independence[SERVICEMARK]
Individual Flexible Premium
Deferred Annuity
A802 (Q98)-3 and
A802(NQ98)-3
The Commodore Advantage[SERVICEMARK]
Group Flexible Premium
Deferred Annuity
G803-BD(97)-3 and
C803-BD(97)-3
The Commodore Advantage[SERVICEMARK]
Individual Flexible Premium
Deferred Annuity
A803-BD (Q97)-3 and
A803-BD(NQ97)-3
</TABLE>
EXHIBIT 8(q)
[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)(r)
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.
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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
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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.
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<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.
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<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.
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<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.
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<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
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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
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<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,
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<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)(s)
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
AMERICAN ANNUTIY GROUP INC.
EXHIBIT 9
P.O. BOX 120
Cincinnati, Ohio 45201
(513) 333-5511
Fax (513) 357-3397
Mark F. Muething
Senior Vice President
General Counsel and Secretary
April 6, 1998
Annuity Investors Life Insurance Company
250 East Fifth Street
Cincinnati. Ohio 45202
Gentlemen:
This opinion is provided in connection with the Registration Statement
on Form N-4 for the Annuity Investors Variable Account B of which Annuity
Investors Life Insurance Company ("AILIC") is the Depositor. The Registration
Statement has been filed with the Securities and Exchange Commission for the
purpose of registering variable annuity contracts issued by AILIC and interests
in the Annuity Investors Variable Account B under such variable annuity
contracts.
I have examined the Articles of Incorporation and bylaws of AILIC,
minutes of meetings of its Board of Directors and other records, and pertinent
provisions of the Ohio insurance laws, together with such other documents as I
have deemed appropriate. Based on the foregoing it is my opinion that:
1. AILIC is duly organized and validly existing as an insurance company
under the laws of the State of Ohio.
2. Annuity Investors Variable Account B has been validly created as a
Separate Account in accordance with the laws of the State of Ohio.
3. AILIC has the legal power and authority to create and issue the
variable annuity contracts which are administered within and by means of the
Annuity Investors Variable Account B.
4. The variable annuity contracts to be sold pursuant to the Registration
Statement, when issued, will represent binding obligations of AILIC in
accordance with their terms, provided such contracts are issued for the
consideration set forth therein and evidenced by appropriate policies and
certificates.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Mark F. Muething
Mark F. Muething
EXHIBIT 13
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%
