ANNUITY INVESTORS (SERVICEMARK) VARIABLE ACCOUNT B
OF
ANNUITY INVESTORS (LOGO) (SERVICEMARK)
LIFE INSURANCE COMPANY
FOR
[LOGO]
THE COMMODORE (SERVICEMARK)
VARIABLE ANNUITIES
THE COMMODORE
NAVIGATOR (SERVICEMARK)
JUNE 30, 1998
SEMIANNUAL REPORT TO CONTRACT OWNERS
<PAGE>
SEMIANNUAL REPORT TO CONTRACT OWNERS
JUNE 30, 1998
TABLE OF CONTENTS PAGE
LETTER FROM THE PRESIDENT 7
DREYFUS CORPORATION
DREYFUS VARIABLE INVESTMENT FUND, CAPITAL APPRECIATION PORTFOLIO
SEMI-ANNUALLETTER TO SHAREHOLDERS 12
STATEMENT OF INVESTMENTS 15
STATEMENT OF ASSETS AND LIABILITIES 18
STATEMENT OF OPERATIONS 19
STATEMENT OF CHANGES IN NET ASSETS 20
FINANCIAL HIGHLIGHTS 21
NOTES TO FINANCIAL STATEMENTS 22
DREYFUS VARIABLE INVESTMENT FUND, GROWTH AND INCOME PORTFOLIO
LETTER TO SHAREHOLDERS 26
STATEMENT OF INVESTMENTS 28
STATEMENT OF ASSETS AND LIABILITIES 31
STATEMENT OF OPERATIONS 32
STATEMENT OF CHANGES IN NET ASSETS 33
FINANCIAL HIGHLIGHTS 34
NOTES TO FINANCIAL STATEMENTS 35
DREYFUS VARIABLE INVESTMENT FUND, MONEY MARKET PORTFOLIO
LETTER TO SHAREHOLDERS 38
STATEMENT OF INVESTMENTS 40
STATEMENT OF ASSETS AND LIABILITIES 42
STATEMENT OF OPERATIONS 43
STATEMENT OF CHANGES IN NET ASSETS 44
FINANCIAL HIGHLIGHTS 45
NOTES TO FINANCIAL STATEMENTS 46
DREYFUS VARIABLE INVESTMENT FUND, SMALL CAP PORTFOLIO
LETTER TO SHAREHOLDERS 50
STATEMENT OF INVESTMENTS 53
STATEMENT OF ASSETS AND LIABILITIES 57
STATEMENT OF OPERATIONS 58
STATEMENT OF CHANGES IN NET ASSETS 59
FINANCIAL HIGHLIGHTS 60
NOTES TO FINANCIAL STATEMENTS 61
DREYFUS VARIABLE INVESTMENT FUND, SOCIALLY RESPONSIBLE FUND, INC.
LETTER TO SHAREHOLDERS 66
STATEMENT OF INVESTMENTS 70
STATEMENT OF ASSETS AND LIABILITIES 73
STATEMENT OF OPERATIONS 74
STATEMENT OF CHANGES IN NET ASSETS 75
FINANCIAL HIGHLIGHTS 76
NOTES TO FINANCIAL STATEMENTS 77
<PAGE>
TABLE OF CONTENTS PAGE
DREYFUS STOCK INDEX FUND
LETTER TO SHAREHOLDERS 80
STATEMENT OF INVESTMENTS 82
STATEMENT OF FINANCIAL FUTURES 88
STATEMENT OF ASSETS AND LIABILITIES 89
STATEMENT OF OPERATIONS 90
STATEMENT OF CHANGES IN NET ASSETS 91
FINANCIAL HIGHLIGHTS 92
NOTES TO FINANCIAL STATEMENTS 93
JANUS CAPITAL CORPORATION
JANUS ASPEN GROWTH PORTFOLIO
PORTFOLIO STRATEGY 95
PERFORMANCE 96
SCHEDULE OF INVESTMENTS 96
SUMMARY OF INVESTMENT BY COUNTRY 97
FORWARD CURRENCY CONTRACTS 97
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
PORTFOLIO STRATEGY 98
PERFORMANCE 99
SCHEDULE OF INVESTMENTS 99
SUMMARY OF INVESTMENT BY COUNTRY 100
FORWARD CURRENCY CONTRACTS 100
JANUS ASPEN INTERNATIONAL PORTFOLIO
PORTFOLIO STRATEGY 101
PERFORMANCE 102
SCHEDULE OF INVESTMENTS 102
SUMMARY OF INVESTMENT BY COUNTRY 106
FORWARD CURRENCY CONTRACTS 106
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
PORTFOLIO STRATEGY 107
PERFORMANCE 108
SCHEDULE OF INVESTMENTS 108
SUMMARY OF INVESTMENT BY COUNTRY 112
FORWARD CURRENCY CONTRACTS 112
JANUS ASPEN BALANCED PORTFOLIO
CURRENT OUTLOOK 113
PERFORMANCE 114
SCHEDULE OF INVESTMENTS 114
SUMMARY OF INVESTMENT BY COUNTRY 116
<PAGE>
TABLE OF CONTENTS PAGE
STATEMENTS OF ASSETS AND LIABILITIES 118
JANUS ASPEN GROWTH PORTFOLIO
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
JANUS ASPEN INTERNATIONAL PORTFOLIO
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
JANUS ASPEN BALANCED PORTFOLIO
STATEMENTS OF OPERATIONS 118
JANUS ASPEN GROWTH PORTFOLIO
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
JANUS ASPEN INTERNATIONAL PORTFOLIO
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
JANUS ASPEN BALANCED PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS 120
JANUS ASPEN GROWTH PORTFOLIO
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
JANUS ASPEN INTERNATIONAL PORTFOLIO
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
JANUS ASPEN BALANCED PORTFOLIO
FINANCIAL HIGHLIGHTS - INTERNATIONAL SHARES 122
JANUS ASPEN GROWTH PORTFOLIO
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
JANUS ASPEN INTERNATIONAL PORTFOLIO
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
JANUS ASPEN BALANCED PORTFOLIO
FINANCIAL HIGHLIGHTS - RETIREMENT SHARES 125
JANUS ASPEN GROWTH PORTFOLIO
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
JANUS ASPEN INTERNATIONAL PORTFOLIO
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
JANUS ASPEN BALANCED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS 126
INVESCO VARIABLE INVESTMENT FUNDS, INC.
ECONOMIC OVERVIEW 132
INVESCO VARIABLE INVESTMENT FUNDS, INC.
VIF - HIGH YIELD FUND 132
VIF - INDUSTRIAL INCOME FUND 133
VIF - TOTAL RETURN FUND 134
STATEMENT OF INVESTMENT SECURITIES
VIF - HIGH YIELD FUND 145
VIF - INDUSTRIAL INCOME FUND 150
VIF - TOTAL RETURN FUND 161
STATEMENT OF ASSETS AND LIABILITIES
VIF - HIGH YIELD FUND 168
VIF - INDUSTRIAL INCOME FUND 169
VIF - TOTAL RETURN FUND 170
<PAGE>
TABLE OF CONTENTS PAGE
STATEMENT OF OPERATIONS
VIF - HIGH YIELD FUND 171
VIF - INDUSTRIAL INCOME FUND 172
VIF - TOTAL RETURN FUND 173
STATEMENT OF CHANGES IN NET ASSETS
VIF - HIGH YIELD FUND 175
VIF - INDUSTRIAL INCOME FUND 176
VIF - TOTAL RETURN FUND 178
NOTES TO FINANCIAL STATEMENTS 179
FINANCIAL HIGHLIGHTS 183
MORGAN STANLEY UNIVERSAL FUNDS INC.
EMERGING MARKETS EQUITY PORTFOLIO
INVESTMENT OVERVIEW 196
STATEMENT OF NET ASSETS 199
STATEMENT OF OPERATIONS 204
FINANCIAL HIGHLIGHTS 205
NOTES TO FINANCIAL STATEMENTS 206
DIRECTORS AND OFFICERS 211
FIXED INCOME PORTFOLIO
INVESTMENT OVERVIEW 214
STATEMENT OF NET ASSETS 216
STATEMENT OF OPERATIONS 220
FINANCIAL HIGHLIGHTS 221
NOTES TO FINANCIAL STATEMENTS 222
DIRECTORS AND OFFICERS 227
MID CAP VALUE PORTFOLIO
INVESTMENT OVERVIEW 230
STATEMENT OF NET ASSETS 232
STATEMENT OF OPERATIONS 235
FINANCIAL HIGHLIGHTS 236
NOTES TO FINANCIAL STATEMENTS 237
DIRECTORS AND OFFICERS 242
U.S. REAL ESTATE PORTFOLIO
INVESTMENT OVERVIEW 244
STATEMENT OF NET ASSETS 246
STATEMENT OF OPERATIONS 248
FINANCIAL HIGHLIGHTS 249
NOTES TO FINANCIAL STATEMENTS 250
DIRECTORS AND OFFICERS 255
VALUE PORTFOLIO
INVESTMENT OVERVIEW 258
STATEMENT OF NET ASSETS 260
STATEMENT OF OPERATIONS 262
FINANCIAL HIGHLIGHTS 263
NOTES TO FINANCIAL STATEMENTS 264
DIRECTORS AND OFFICERS 269
<PAGE>
TABLE OF CONTENTS PAGE
PBHG INSURANCE SERIES FUND, INC.
PBHG GROWTH II PORTFOLIO
LETTER TO SHAREHOLDERS 272
PORTFOLIO RETURNS 273
STATEMENT OF NET ASSETS 274
STATEMENT OF OPERATIONS 277
STATEMENT OF CHANGES IN NET ASSETS 278
FINANCIAL HIGHLIGHTS 279
NOTES TO FINANCIAL STATEMENTS 280
PBHG LARGE CAP GROWTH PORTFOLIO
LETTER TO SHAREHOLDERS 284
PORTFOLIO RETURNS 286
STATEMENT OF NET ASSETS 287
STATEMENT OF OPERATIONS 289
STATEMENT OF CHANGES IN NET ASSETS 290
FINANCIAL HIGHLIGHTS 291
NOTES TO FINANCIAL STATEMENTS 292
PBHG TECHNOLOGY & COMMUNICATIONS PORTFOLIO
LETTER TO SHAREHOLDERS 296
PORTFOLIO RETURNS 298
STATEMENT OF NET ASSETS 299
STATEMENT OF OPERATIONS 301
STATEMENT OF CHANGES IN NET ASSETS 302
FINANCIAL HIGHLIGHTS 303
NOTES TO FINANCIAL STATEMENTS 304
STRONG FUNDS
STRONG OPPORTUNITY FUND II, INC.
INVESTMENT REVIEW 308
FINANCIAL INFORMATION
SCHEDULE OF INVESTMENTS IN SECURITIES 310
STATEMENT OF ASSETS AND LIABILITIES312
STATEMENT OF OPERATIONS 313
STATEMENTS OF CHANGES IN NET ASSETS 314
NOTES TO FINANCIAL STATEMENTS 315
FINANCIAL HIGHLIGHTS 317
STRONG GROWTH FUND II, INC.
INVESTMENT REVIEW 320
FINANCIAL INFORMATION
SCHEDULE OF INVESTMENTS IN SECURITIES 322
STATEMENT OF ASSETS AND LIABILITIES 323
STATEMENT OF OPERATIONS 324
STATEMENTS OF CHANGES IN NET ASSETS 324
NOTES TO FINANCIAL STATEMENTS 325
FINANCIAL HIGHLIGHTS 326
<PAGE>
TABLE OF CONTENTS PAGE
THE TIMOTHY PLAN VARIABLE SERIES
THE TIMOTHY PLAN VARIABLE SERIES
LETTER TO SHAREHOLDERS 328
SCHEDULE OF INVESTMENTS 329
STATEMENT OF OPERATIONS 329
STATEMENT OF CHANGES IN NET ASSETS 330
FINANCIAL HIGHLIGHTS 331
NOTES TO FINANCIAL STATEMENTS 332
<PAGE>
REPORT FROM THE PRESIDENT
Dear Contract Owner:
During the first six months of 1998, Annuity Investors Variable Account B added
The Timothy Plan Variable Series to its investment options. With the inclusion
of this sub-account in the Separate Account, Annuity Investors now has an
attractive option for the culturally conservative, socially responsible
investor. We will continue to follow new market trends and sectors to be certain
there are adequate diversification options available to our contract holders.
The semi-annual reports for each of the twenty-five portfolios are reprinted in
the following pages. Below are performance results for each sub-account of
Annuity Investors Variable Account B for the 1997 fiscal year and the six month
period ending June 30, 1998. All performance results are measured by the
percentage change in unit values for the applicable period, net of all mortality
and expense charges.
Six Months Year
Ending Ending
6/30/98 12/31/97
INTERNATIONAL PORTFOLIOS:
Morgan Stanley Universal Funds Inc. -
Emerging Markets Equity Portfolio (15.96%) (1.08%)
Janus Aspen Series International
Growth Portfolio 21.38% 16.87%
Janus Aspen Series Worldwide Growth
Portfolio 26.15% 20.47%
AGGRESSIVE GROWTH PORTFOLIOS:
Janus Aspen Series Aggressive Growth
Portfolio 16.47% 11.11%
PBHG Insurance Series Fund, Inc. -
Technology and Communication Fund 11.52% 3.14%
GROWTH PORTFOLIOS:
Dreyfus VIF Small Cap Portfolio 5.23% 15.14%
PBHG Insurance Series Fund, Inc. -
PBHG Growth II Portfolio 9.38% 6.51%
Strong VIF Growth Fund II 15.75% 27.96%
Strong Special Opportunity Fund II, Inc. 12.64% 23.72%
Morgan Stanley Universal Funds Inc. -
Mid-Cap Value Portfolio 8.34% 38.99%
Janus Aspen Series Growth Portfolio 18.42% 21.05%
PBHG Insurance Series Fund, Inc. -
PBHG Large Cap Growth Portfolio 18.55% 17.11%
Dreyfus VIF Capital Appreciation
Portfolio 19.90% 26.29%
The Dreyfus Socially Responsible
Growth Fund, Inc. 17.57% 26.66%
Morgan Stanley Universal Funds Inc. -
Value Portfolio 4.79% 19.32%
Dreyfus Stock Index Fund 16.70% 31.12%
The Timothy Plan Variable Series* .07% N/A
GROWTH AND INCOME PORTFOLIO:
Dreyfus VIF Growth and Income Portfolio 5.76% 14.61%
REAL ESTATE PORTFOLIO:
Morgan Stanley Universal Funds Inc. -
U.S. Real Estate Portfolio (5.39%) 16.63%
BALANCED PORTFOLIOS:
Janus Aspen Series Balanced Portfolio 16.64% 20.42%
INCOME PORTFOLIOS:
INVESCO VIF Industrial Income Fund 9.45% 26.40%
INVESCO VIF Total Return Fund 6.41% 21.22%
INVESCO VIF High Yield Fund 5.13% 15.71%
Morgan Stanley Universal Funds Inc. -
Fixed Income Portfolio 2.84% 8.42%
MONEY MARKET PORTFOLIO:
Dreyfus VIF Domestic Money Market Fund 1.47% 2.96%
*Performance results for the period of May 1, 1998 to June 30, 1998 only.
<PAGE>
In the first half of 1998, the equity market as measured by the Standard &
Poor's 500 index, showed a 16.84% increase and the NASDAQ Composite Index
increased by 20.66%. The bond market, as measured by the Lehman Brothers
Aggregate Index, increased by 4.20% over the same period.
Based on the level of professional investment expertise present in each
management company and their dedication to in-depth research, Annuity Investors
is proud to offer Dreyfus, Janus, INVESCO, Morgan Stanley, Pilgrim Baxter,
Strong and the Timothy Plan for inclusion in its Variable Account B. This broad
range of investment options allows you the flexibility to implement your own
personal investment strategy and to change your mix of investments as your
objectives change over time.
It gives me great pleasure to present this performance and we look forward to
continuing to serve you in the future.
Sincerely,
Robert A. Adams
President
<PAGE>
ANNUITY INVESTORS (SERVICEMARK) VARIABLE ACCOUNT B
[DREYFUS LOGO]
Dreyfus Variable Investment Fund - Capital Appreciation Portfolio
Dreyfus Variable Investment Fund - Growth & Income Portfolio
Dreyfus Variable Investment Fund - Money Market Portfolio
Dreyfus Variable Investment Fund - Small Cap Portfolio
The Dreyfus Socially Responsible Growth Fund, Inc.
Dreyfus Stock Index Fund
[JANUS LOGO]
Janus Aspen Growth Portfolio
Janus Aspen Aggressive Growth Portfolio
Janus Aspen International Portfolio
Janus Aspen Worldwide Growth Portfolio
Janus Aspen Balanced Portfolio
[INVESCO FUNDS LOGO]
INVESCO VIF High Yield Fund
INVESCO VIF Industrial Income Fund
INVESCO VIF Total Return Fund
[MORGAN STANLEY LOGO]
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
Morgan Stanley Universal Funds Inc. - U.S. Real Estate Portfolio
Morgan Stanley Universal Funds Inc. - Value Portfolio
[PBHG LOGO]
PBHG Insurance Series Fund, Inc. - PBHG Growth II Portfolio
PBHG Insurance Series Fund, Inc. - PBHG Large Cap Growth Portfolio
PBHB Insurance Series Fund, Inc. - PBHG Technology & Communications Portfolio
[STRONG FUNDS LOGO]
Strong Opportunity Fund II, Inc.
Strong Growth Fund II, Inc.
[TIMOTHY PLAN LOGO]
The Timothy Plan Variable Series
<PAGE>
The Financial Statements of the following investment companies ("Registrant")
are made a part hereof and incorporated herein:
REGISTRANT 1940 Act Number
- ---------- ---------------
Dreyfus Variable Investment Fun - Capital Appreciation Portfolio 811-05125
- --Capital Appreciation Portfolio
- --Growth & Income Portfolio
- --Money Market Portfolio
- --Small Cap Portfolio
The Dreyfus Socially Responsible Growth Fund, Inc. 811-07044
Dreyfus Stock Index Fund 811-05719
Janus Aspen Series 811-07736
- --Janus Aspen Growth Portfolio
- --Janus Aspen Aggressive Growth Portfolio
- --Janus Aspen International Portfolio
- --Janus Aspen Worldwide Growth Portfolio
- --Janus Aspen Balanced Portfolio
INVESCO Variable Investment Fund 811-8038
- --High Yield Fund
- --Industrial Income Fund
- --Total Return Fund
Morgan Stanley Universal Fund Inc. 811-07607
- --Emerging Markets Equity Portfolio
- --Fixed Income Portfolio
- --Mid Cap Value Portfolio
- --U.S. Real Estate Portfolio
- --Value Portfolio
PBHG Insurance Series Fund, Inc. 811-08009
- --PGHB Growth II Portfolio
- --PBHG Large Cap Growth Portfolio
- --PBHG Technology & Communications Portfolio
Strong Opportunity Fund II, Inc. 811-6552
Strong VIF Growth Fund II 811-6553
The Timothy Plan Variable Series 811-8228
<PAGE>
Annuity Investors Life Insurance Company (REGISTERED TRADEMARK)
P.O. Box 5423
Cincinnati, Ohio 45201-5423
1-800-789-6771
ANNUITY INVESTORS (REGISTERED TRADEMARK)
VARIABLE ACCOUNT B
OF
Annuity Investors (REGISTERED TRADEMARK)
Life Insurance Company
FOR
(LOGO)
THE COMMODORE (SERVICEMARK)
Variable Annuities
JUNE 30, 1998
SEMIANNUAL REPORT TO CONTRACT OWNERS
This report is for the information of the contract owners and participants of
the Annuity Investors Life Insurance Company and the Annuity Investors Variable
Account B. It is authorized for distribution to other persons only when preceded
or accompanied by a current prospectus which contains complete information,
including charges and expenses.
