As filed with the Securities and Exchange Commission on February 1, 1999
File No. 333-19725
File No. 811-08017
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ( )
Pre-effective Amendment No. ( )
Post-effective Amendment No. 4 ( X )
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 ( )
Pre-effective Amendment No. ( )
Post-effective Amendment No. 8 ( X )
(Check appropriate box or boxes)
------------------------
ANNUITY INVESTORSREGISTERED VARIABLE ACCOUNT B
(Exact Name of Registrant)
ANNUITY INVESTORS LIFE INSURANCE COMPANYREGISTERED
(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:
John P. Gruber, Esq.
Annuity Investors Life Insurance Company
P. O. Box 5423
Cincinnati, Ohio 45201-5423
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It is proposed that this filing will become effective:
/----/Immediately upon filing pursuant to Rule 485(b)
/----/On pursuant to Rule 485(b)
/----/60 days after filing pursuant to Rule 485(a)(1)
/-X--/On April 21,1999 pursuant to Rule 485(a)(1)
/----/75 days after filing pursuant to Rule 485(a)(2)
/----/On pursuant to Rule 485(a)(2)
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CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
(Commodore NavigatorSERVICE MARK)
Showing Location in Part A (Prospectus),
Part B (Statement of Additional Information) and Part C (Other Information)
of Registration Statement Information Required by Form N-4
PART A
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Item of Form N-4 Prospectus Caption
1. Cover Page............................ Cover Page
2. Definitions........................... Definitions, Glossary of Financial Terms
3. Synopsis.............................. Overview
4. Condensed Financial Information
(a) Accumulation Unit Values........ Condensed Financial Information
(b) Performance Data................ Performance Information
(c) Financial Statements............ Financial Statements
5. General Description of Registrant,
Depositor and Portfolio
Companies
(a) Depositor....................... Annuity Investors Life Insurance
CompanyREGISTERED
(b) Registrant...................... The Separate Account
(c) Portfolio Companies............. The Portfolios
(d) Portfolio Prospectuses.......... The Portfolios
(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..................... AAG Securities, Inc.
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(e) Portfolio Expenses.............. Fee Table
(f) Operating Expenses.............. Fee Table
7. Contracts
(a) Persons with Rights............. Persons with Rights Under a
Contract; 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....................... How Do I Contact the Company
8. Annuity Period........................ Benefit Payment Period
9. Death Benefit......................... Death Benefit
10. Purchases and Contract Values
(a) Purchases....................... Purchase Payments; Investment
Options--Allocations
(b) Valuation....................... Account Value; Definitions
(c) Daily Calculation............... Account Value; Accumulation
Units; Definitions
(d) Underwriter..................... AAG Securities, Inc.
11. Redemptions
(a) By Owner........................ Surrenders
By Annuitant.................... Not Applicable
(b) Texas ORP....................... Texas Optional Retirement Program
(c) Check Delay..................... Surrenders
(d) Free Look....................... Right to Cancel
12. Taxes................................. Federal Tax Matters
13. Legal Proceedings..................... Legal Proceedings
14. Table of Contents for the Statement of
Additional Statement of Additional
Information........................... Information
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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) AAG Securities, Inc.
Offering Sales Load................... (Prospectus) Contingent Deferred
Sales Charge
20. Underwriters.......................... AAG Securities, Inc.
21. Calculation of Performance Data
(a) Money Market Funded Sub-Accounts Money Market Sub-Account
Standardized Yield
Calculation
(b) Other Sub-Accounts.............. Not Applicable
22. Annuity Payments...................... (Prospectus) Fixed Dollar
Benefit; Variable Dollar Benefit; (SAI)
Benefit Units--Transfer Formulas
23. Financial Statements.................. Financial Statements
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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
25. Directors and Officers of the Depositor Directors and Officers of Annuity
Investors Life Insurance CompanyREGISTERED
26. Persons Controlled By or Under Common Persons Controlled By Or Under
Control With the Common
Registrant............................ Control With the Depositor or
Registrant
27. Number of Owners...................... Number of Owners
28. Indemnification....................... Indemnification
29. Principal Underwriters................ Principal Underwriter
30. Location of Accounts and
Records............................... Location of Accounts and Records
31. Management Services................... Management Services
32. Undertakings.......................... Undertakings
Signature Page........................ Signature Page
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ANNUITY INVESTORS LIFE INSURANCE COMPANYREGISTERED
ANNUITY INVESTORSREGISTERED VARIABLE ACCOUNT B
PROSPECTUS for
The Commodore NavigatorSERVICE MARK
Individual and Group Flexible Premium Deferred Annuities
May 1, 1999
This prospectus describes The Commodore NavigatorSERVICE MARK individual and
group flexible premium deferred annuity contracts (the "Contracts"). Annuity
Investors Life Insurance CompanyREGISTERED (the "Company") is the issuer of the
Contracts. The Contracts are available for tax-qualified and non-tax-qualified
annuity purchases. All Contracts qualify for tax-deferred treatment during the
Accumulation Period. The tax treatment of annuities is discussed in the Federal
Tax Matters section of this prospectus.
The Contracts offer both variable and fixed investment options. The variable
investment options under the Contracts are Sub-Accounts of Annuity
InvestorsREGISTERED Variable Account B (the "Separate Account"). The Contracts
currently offer 25 Sub-Accounts. Each Sub-Account is invested in shares of a
registered investment company or a portfolio thereof (each, a "Portfolio"). The
Portfolios are listed below.
Janus Aspen Series (5 Portfolios)
-Aggressive Growth Portfolio
-Worldwide Growth Portfolio
-Balanced Portfolio
-Growth Portfolio
-International Growth Portfolio
Dreyfus Variable Investment Fund (4 Portfolios)
-Capital Appreciation Portfolio
-Money Market Portfolio
-Growth and Income Portfolio
-Small Cap Portfolio
The Dreyfus Socially Responsible Growth Fund, Inc.
Dreyfus Stock Index Fund
Strong Opportunity Fund II, Inc.
Strong Variable Insurance Funds, Inc. (1 Portfolio)
-Strong Growth Fund II
INVESCO Variable Investment Funds, Inc. (3 Portfolios)
-Industrial Income Portfolio
-Total Return Portfolio
-High Yield Portfolio
Morgan Stanley Universal Funds, Inc. (5 Portfolios)
-Mid Cap Value Portfolio
-Value Portfolio
-Fixed Income Portfolio
-U.S. Real Estate Portfolio
-Emerging Markets Equity Portfolio
PBHG Insurance Series Fund, Inc. (3 Portfolios)
-PBHG Growth II Portfolio
-PBHG Large Cap Growth Portfolio
-PBHG Technology & Communications Portfolio
The Timothy Plan Variable Series
This prospectus includes information you should know before investing in The
Commodore Navigator. This prospectus is not complete without the current
prospectuses for the Portfolios. Please keep this prospectus and the Portfolio
prospectuses for future reference.
A statement of additional information, dated May 1, 1999, contains more
information about the Separate Account and the Contracts. The Company filed the
statement of additional information with the Securities and Exchange Commission.
It is part of this prospectus. For a free copy, complete and return the form on
page ____ of this prospectus, or call the Company at 1-800-789-6771. You may
also access the statement of additional information (as well as all other
documents filed with the Securities and Exchange Commission with respect to the
Contracts, the Separate Account or the Company) at the Securities and Exchange
Commission's Web site: http://www.sec.gov. The table of contents for the
statement of additional information is printed on the last page of this
prospectus.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
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These securities may be sold by a bank or credit union, but are not financial
institution products.
o The Contracts are Not FDIC or NCUSIF Insured
o The Contracts are Obligations of the Company and Not of the Bank or Credit
Union
o The Bank or Credit Union Does Not Guarantee the Company's Obligations Under
the Contracts
o The Contracts Involve Investment Risk and May Lose Value
- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
Page
DEFINITIONS....................................................................4
OVERVIEW.......................................................................5
What is the Separate Account?................................................5
What Are the Contracts?......................................................5
How Do I Purchase or Cancel a Contract?......................................5
Will Any Penalties or Charges Apply If I Surrender a Contract?...............5
What Other Charges and Deductions Apply to the Contract?.....................5
How Do I Contact the Company?................................................5
FEE TABLE......................................................................6
Owner Transaction Expenses...................................................6
Separate Account Annual Expenses.............................................6
Portfolio Annual Expenses for Year Ended 12/31/98............................6
Examples.....................................................................8
CONDENSED FINANCIAL INFORMATION...............................................11
Financial Statements........................................................12
Performance Information.....................................................12
Yield Data................................................................12
Total Return Data.........................................................12
Other Performance Measures................................................13
THE PORTFOLIOS................................................................13
Janus Aspen Series..........................................................13
Aggressive Growth Portfolio...............................................13
Worldwide Growth Portfolio................................................13
Balanced Portfolio........................................................13
Growth Portfolio..........................................................13
International Growth Portfolio............................................13
Dreyfus Portfolios..........................................................14
Dreyfus Variable Investment Fund-Capital Appreciation Portfolio...........14
Dreyfus Variable Investment Fund-Money Market Portfolio...................14
Dreyfus Variable Investment Fund-Growth and Income Portfolio..............14
Dreyfus Variable Investment Fund-Small Cap Portfolio......................14
The Dreyfus Socially Responsible Growth Fund, Inc.........................14
Dreyfus Stock Index Fund..................................................14
Strong Portfolios...........................................................15
Strong Opportunity Fund II, Inc...........................................15
Strong Variable Insurance Funds, Inc.-Strong Growth Fund II...............15
INVESCO Variable Investment Funds, Inc......................................15
Industrial Income Portfolio...............................................15
Total Return Portfolio....................................................15
High Yield Portfolio......................................................15
Morgan Stanley Universal Funds, Inc.........................................16
Mid Cap Value Portfolio...................................................16
Value Portfolio...........................................................16
Fixed Income Portfolio....................................................16
U.S. Real Estate Portfolio................................................16
Emerging Markets Equity Portfolio.........................................16
PBHG Insurance Series Fund, Inc.............................................17
PBHG Growth II Portfolio..................................................17
PBHG Large Cap Growth Portfolio...........................................17
PBHG Technology & Communications Portfolio................................17
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The Timothy Plan Variable Series............................................17
Additions, Deletions, or Substitutions......................................18
Voting Rights...............................................................18
ANNUITY INVESTORS LIFE INSURANCE COMPANYREGISTERED............................19
THE SEPARATE ACCOUNT..........................................................19
AAG SECURITIES, INC...........................................................19
CHARGES AND DEDUCTIONS........................................................20
Charges and Deductions By the Company.......................................20
Contingent Deferred Sales Charge ("CDSC").................................20
Contract Maintenance Fee..................................................21
Transfer Fee..............................................................21
Administration Charge.....................................................21
Mortality and Expense Risk Charge.........................................22
Premium Taxes.............................................................22
Discretionary Waivers of Charges..........................................22
Expenses of the Portfolios..................................................22
THE CONTRACTS.................................................................23
Right to Cancel.............................................................23
Persons With Rights Under a Contract........................................23
ACCUMULATION PERIOD...........................................................24
Account Statements..........................................................24
Account Value...............................................................24
Purchase Payments...........................................................25
Investment Options--Allocations.............................................25
Transfers...................................................................26
Surrenders..................................................................28
Contract Loans..............................................................29
Termination.................................................................29
BENEFIT PAYMENT PERIOD........................................................30
Annuity Benefit.............................................................30
Death Benefit...............................................................30
Settlement Options..........................................................30
Form of Settlement Option.................................................31
Calculation of Fixed Dollar Benefit Payments..............................31
Calculation of Variable Dollar Benefit Payments...........................32
FEDERAL TAX MATTERS...........................................................33
Tax Deferral On Annuities...................................................33
Tax-Qualified Plans.........................................................34
Individual Retirement Annuities...........................................34
Roth IRAs.................................................................34
Tax-Sheltered Annuities...................................................34
Texas Optional Retirement Program.........................................34
Pension and Profit Sharing Plans..........................................34
Governmental Deferred Compensation Plans..................................34
Nonqualified Deferred Compensation Plans....................................34
Summary of Income Tax Rules.................................................35
THE REGISTRATION STATEMENT....................................................36
OTHER INFORMATION.............................................................37
Year 2000...................................................................37
Legal Proceedings...........................................................37
STATEMENT OF ADDITIONAL INFORMATION...........................................38
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DEFINITIONS
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The capitalized terms defined on this page will have the meanings given to them
when used in this prospectus. Other terms which may have a specific meaning
under the Contracts, but which are not defined on this page, will be explained
as they are used in this prospectus.
Account Value: The value of a Contract during the Accumulation Period. It is
equal to the sum of the value of the owner's interest in the Sub-Accounts and
the owner's interest in the fixed account options.
Accumulation Period: The period during which purchase payments are invested
according to the investment options elected and accumulated on a tax-deferred
basis. The Accumulation Period ends when a Contract is annuitized or surrendered
in full, or on the Death Benefit Valuation Date.
Accumulation Unit: A share of a Sub-Account that an owner purchases during the
Accumulation Period.
Accumulation Unit Value: The value of an Accumulation Unit at the end of a
Valuation Period. See the Glossary of Financial Terms on page ___ of this
prospectus for an explanation of how Accumulation Unit Values are calculated.
Benefit Payment Period: The period during which either annuity benefit or death
benefit payments are paid under a settlement option. The Benefit Payment Period
begins on the first day of the first payment interval in which a benefit payment
will be paid.
Benefit Unit: A share of a Sub-Account that is used to determine the amount of
each variable dollar benefit payment after the first variable dollar benefit
payment during the Benefit Payment Period.
Benefit Unit Value: The value of a Benefit Unit at the end of a Valuation
Period. See the Glossary of Financial Terms on page ___ of this prospectus for
an explanation of how Benefit Unit Values are calculated.
Death Benefit Valuation Date: The date the death benefit is valued. It is the
date that the Company receives both proof of the death of the owner and
instructions as to how the death benefit will be paid. If instructions are not
received within one year of the date of death, the Death Benefit Valuation Date
will be one year after the date of death. The Death Benefit Valuation Date may
never be later than five years after the date of death.
Net Asset Value: The price computed by or for each Portfolio, no less frequently
than each Valuation Period, at which the Portfolio's shares or units are
redeemed in accordance with the rules of the Securities and Exchange Commission.
Net Investment Factor: The factor that represents the percentage change in the
Accumulation Unit Values and Benefit Unit Values from one Valuation Period to
the next. See the Glossary of Financial Terms on page ___ of this prospectus for
an explanation of how the Net Investment Factor is calculated.
Valuation Date: A day on which Accumulation Unit Values and Benefit Unit Values
can be calculated. Each day the New York Stock Exchange is open for business is
a Valuation Date.
Valuation Period: The period starting 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.
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OVERVIEW
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What is the Separate Account?
The Separate Account is a unit investment trust registered with the Securities
and Exchange Commission under the Investment Company Act of 1940. The Separate
Account is divided into Sub-Accounts, each of which is invested in one of the
Portfolios listed on page 1 of this prospectus. If you choose a variable
investment option, you are investing in the Sub-Accounts, not directly in the
Portfolios.
What Are the Contracts?
The Contracts are deferred annuities, which are insurance products. The
Contracts are available in both tax-qualified and non-tax-qualified forms, both
of which qualify for tax-deferred investment status. See the Federal Tax Matters
section beginning on page ____ of this prospectus for more information about tax
qualifications and taxation of annuities in general. During the Accumulation
Period, the amounts you contribute can be allocated among any of the 25 variable
investment options and five fixed account options. The variable investment
options are the Sub-Accounts of the Separate Account, each of which is invested
in a Portfolio. The owner bears the risk of any investment gain or loss on
amounts allocated to the Sub-Accounts. The fixed account options earn a fixed
rate of interest declared by the Company, which will be no less than 3% per
year. The Company guarantees amounts invested in the fixed account options and
the earnings thereon are guaranteed by the Company so long as those amounts
remain in the fixed account.
During the Benefit Payment Period, payments can be allocated between variable
dollar benefit and fixed dollar benefit options. If a variable dollar benefit is
selected, Benefit Units can be allocated to any of the same Sub-Accounts that
are available during the Accumulation Period.
How Do I Purchase or Cancel a Contract?
The requirements to purchase a Contract are explained in The Contracts section
beginning on page ____ of this prospectus. You may purchase a Contract only
through a licensed securities representative. You may cancel a Contract within
twenty days after you receive it (the right to cancel may be longer in some
States). In many States, you will bear the risk of investment gain or loss on
any amounts allocated to the Sub-Accounts prior to cancellation. The right to
cancel may not apply to group Contracts. The right to cancel is described in the
Right to Cancel section on page ___ of this prospectus.
<PAGE>
Will Any Penalties or Charges Apply If I Surrender a Contract? A contingent
deferred sales charge ("CDSC") may apply to amounts surrendered depending on the
timing and amount of the surrender. The maximum CDSC is 7% for each purchase
payment. The CDSC percentage decreases by 1% annually to 0% after seven years
from the date of receipt of each purchase payment. Surrender procedures and the
CDSC are described in the Surrenders section beginning on page ____ of this
prospectus. A penalty tax may also be imposed at the time of a surrender
depending on your age and other circumstances of the surrender. Tax consequences
of a surrender are described in the Federal Tax Matters section on page ____ of
this prospectus. The right to surrender may be restricted under certain
tax-qualified plans.
What Other Charges and Deductions Apply to the Contract?
Other than the CDSC, the Company will charge the fees and charges listed below
unless the Company waives the fee or charge as discussed in the Charges and
Deductions section beginning on page ___ of this prospectus:
o a transfer fee for certain transfers between investment options;
o an annual contract maintenance fee, which is assessed only against
investments in the Sub-Accounts;
o a mortality and expense risk charge, which is an expense of the Separate
Account and charged against all assets in the Sub-Accounts (this charge may
never be waived);
o an administration charge, which is an expense of the Separate Account and
charged against all assets in the Sub-Accounts; and
o premium taxes in some States (where taxes apply, they may never be waived).
In addition to charges and deductions under the Contracts, the Portfolios incur
expenses that are passed through to owners. Portfolio expenses for the fiscal
year ending December 31, 1998 are included in the Fee Table on page ____ of this
prospectus and are described in the prospectuses and statements of additional
information for the Portfolios.
How Do I Contact the Company?
Any questions or inquiries should be directed to the Company's Administrative
Office, P.O. Box 5423, Cincinnati, Ohio 45201-5423, (800) 789-6771. Please
include the Contract number and the owner's name.
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FEE TABLE
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Owner Transaction Expenses
Maximum Contingent Deferred Sales Charge (applies to purchase payments only) 7%
Transfer Fee (applies to transfers in excess of 12 in any contract year) $25
Annual Contract Maintenance Fee (not assessed against fixed account options) $30
Separate Account Annual Expenses
(as a percentage of the average value of the owner's interest in the
Sub-Accounts)
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Enhanced
Contracts with
Standard Enhanced Administration
Contracts Contracts Charge Waived
Mortality and Expense Risk Charge 1.25% 0.95% .95%
Administration Charge 0.15% 0.15% 0%
Total Separate Account Annual Expenses --------- ------- -----
Portfolio Annual Expenses for Year Ended 12/31/981 1.40% 1.10% .95%
(as a percentage of Portfolio average net assets)
Sub-Account Management Other Total
Fees Expenses Expenses
- ---------------------------------------------------------------- -------------- ---------- ------------
Janus A.S.-Aggressive Growth Portfolio
Janus A.S.-Worldwide Growth Portfolio
Janus A.S.-Balanced Portfolio
Janus A.S.-Growth Portfolio
Janus A.S.-International Growth Portfolio
Dreyfus V.I.F.-Capital Appreciation Portfolio
Dreyfus V.I.F.-Money Market Portfolio
Dreyfus V.I.F.-Growth and Income Portfolio
Dreyfus V.I.F.-Small Cap Portfolio
The Dreyfus Socially Responsible Growth Fund, Inc.
Dreyfus Stock Index Fund
Strong Opportunity Fund II, Inc.
Strong Variable Insurance Funds, Inc.-Strong Growth Fund II
INVESCO VIF-Industrial Income Portfolio
INVESCO VIF-Total Return Portfolio
INVESCO VIF-High Yield Portfolio
Morgan Stanley Universal Funds, Inc.-Mid Cap Value Portfolio
Morgan Stanley Universal Funds, Inc.-Value Portfolio
Morgan Stanley Universal Funds, Inc.-Fixed Income Portfolio
Morgan Stanley Universal Funds, Inc.-U.S. Real Estate Portfolio
Morgan Stanley Universal Funds, Inc.-Emerging Markets Equity Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Growth II Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Large Cap Growth Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Tech. & Comm. Portfolio
The Timothy Plan Variable Series
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The purpose of the Fee Table is to assist the owner in understanding the various
costs and expenses that an owner will bear directly or indirectly. The Fee Table
reflects expenses of the Separate Account as well as of the Portfolios. The
Separate Account expenses are discussed more fully in the Charges and Deductions
section beginning on page ___ of this prospectus. The Portfolio expenses are
discussed more fully in the Portfolio prospectuses. Premium taxes may also
apply.
1 Data for each Portfolio are for its fiscal year ended December 31, 1998.
Actual expenses in future years may be higher or lower. Portfolios may have
agreements with their advisors to cap or waive fees, and/or to reduce or waive
expenses or to reimburse expenses. The specific terms of such waivers,
reductions or reimbursements are discussed in the Portfolio prospectuses. Fees
and expenses shown below are actual fees and expenses before any applicable fee
waivers or reductions or expense reimbursements.
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Sub-Account Management Other Total
Fees Expenses Expenses
------------------------------------------------------ ------------ ---------- ------------
Janus A.S.-Aggressive Growth Portfolio
Janus A.S.-Worldwide Growth Portfolio
Janus A.S.-Balanced Portfolio
Janus A.S.-Growth Portfolio
Janus A.S.-International Growth Portfolio
Dreyfus V.I.F.-Capital Appreciation Portfolio
Dreyfus V.I.F.-Money Market Portfolio
Dreyfus V.I.F.-Growth and Income Portfolio
Dreyfus V.I.F.-Small Cap Portfolio
The Dreyfus Socially Responsible Growth Fund, Inc.
Dreyfus Stock Index Fund
Strong Opportunity Fund II, Inc.
Strong Variable Insurance Funds, Inc.-Strong Growth Fund II
INVESCO VIF-Industrial Income Portfolio
INVESCO VIF-Total Return Portfolio
INVESCO VIF-High Yield Portfolio
Morgan Stanley Universal Funds, Inc.-Mid Cap Value
Portfolio
Morgan Stanley Universal Funds, Inc.-Value Portfolio
Morgan Stanley Universal Funds, Inc.-Fixed Income
Portfolio
Morgan Stanley Universal Funds, Inc.-U.S. Real
Estate Portfolio
Morgan Stanley Universal Funds, Inc.-Emerging
Markets Equity Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Growth II
Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Large Cap
Growth Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Tech. & Comm.
Portfolio
The Timothy Plan Variable Series
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Examples-Standard Contracts Example #1--Assuming Surrender Example #2--Assuming No Surrender
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If the owner surrenders his or If the owner does not surrender
her Contract at the end of the his or her Contract, or if it is
applicable time period, the annuitized, the following
following expenses would be expenses would be charged on a
charged on a $1,000 investment: $1,000 investment at the end of
the applicable time period:
- --------------------------------------------------------- --------------------------------- ----------------------------------
Sub-Account 1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Year
- --------------------------------------------------------- ------- -------- -------- ------- -------- -------- ------- --------
Janus A.S.-Aggressive Growth Portfolio
Janus A.S.-Worldwide Growth Portfolio
Janus A.S.-Balanced Portfolio
Janus A.S.-Growth Portfolio
Janus A.S.-International Growth Portfolio
Dreyfus V.I.F.-Capital Appreciation Portfolio
Dreyfus V.I.F.-Money Market Portfolio
Dreyfus V.I.F.-Growth and Income Portfolio
Dreyfus V.I.F.-Small Cap Portfolio
The Dreyfus Socially Responsible Growth Fund, Inc.
Dreyfus Stock Index Fund
Strong Opportunity Fund II, Inc.
Strong Variable Insurance Funds, Inc.-Strong Growth Fund II
INVESCO VIF-Industrial Income Portfolio
INVESCO VIF-Total Return Portfolio
INVESCO VIF-High Yield Portfolio
Morgan Stanley Universal Funds, Inc.-Mid Cap Value Portfolio
Morgan Stanley Universal Funds, Inc.-Value Portfolio
Morgan Stanley Universal Funds, Inc.-Fixed Income Portfolio
Morgan Stanley Universal Funds, Inc.-U.S. Real Estate Portfolio
Morgan Stanley Universal Funds, Inc.-Emerging Markets Equity Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Growth II Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Large Cap Growth Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Tech. & Comm. Portfolio
The Timothy Plan Variable Series
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Examples--Enhanced Contracts Example #1--Assuming Surrender Example #2--Assuming No Surrender
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If the owner surrenders his or If the owner does not surrender
her Contract at the end of the his or her Contract, or if it is
applicable time period, the annuitized, the following
following expenses would be expenses would be charged on a
charged on a $1,000 investment: $1,000 investment at the end of
the applicable time period:
- --------------------------------------------------------- --------------------------------- ----------------------------------------
Sub-Account 1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------- ------- -------- -------- ------- ----------- --------- -------- ---------
Janus A.S.-Aggressive Growth Portfolio
Janus A.S.-Worldwide Growth Portfolio
Janus A.S.-Balanced Portfolio
Janus A.S.-Growth Portfolio
Janus A.S.-International Growth Portfolio
Dreyfus V.I.F.-Capital Appreciation Portfolio
Dreyfus V.I.F.-Money Market Portfolio
Dreyfus V.I.F.-Growth and Income Portfolio
Dreyfus V.I.F.-Small Cap Portfolio
The Dreyfus Socially Responsible Growth Fund, Inc.
Dreyfus Stock Index Fund
Strong Opportunity Fund II, Inc.
Strong Variable Insurance Funds, Inc.-Strong Growth Fund II
INVESCO VIF-Industrial Income Portfolio
INVESCO VIF-Total Return Portfolio
INVESCO VIF-High Yield Portfolio
Morgan Stanley Universal Funds, Inc.-Mid Cap Value Portfolio
Morgan Stanley Universal Funds, Inc.-Value Portfolio
Morgan Stanley Universal Funds, Inc.-Fixed Income Portfolio
Morgan Stanley Universal Funds, Inc.-U.S. Real Estate Portfolio
Morgan Stanley Universal Funds, Inc.-Emerging Markets Equity Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Growth II Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Large Cap Growth Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Tech. & Comm. Portfolio
The Timothy Plan Variable Series
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Examples--Enhanced Contracts with Administration Charge Example #1--Assuming Surrender Example #2--Assuming No Surrender
Waived
If the owner surrenders his or If the owner does not surrender
her Contract at the end of the his or her Contract, or if it is
applicable time period, the annuitized, the following
following expenses would be expenses would be charged on a
charged on a $1,000 investment: $1,000 investment at the end of
the applicable time period:
- --------------------------------------------------------- --------------------------------- ----------------------------------
Sub-Account 1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------- ------- -------- -------- ------- -------- -------- ------- --------
Janus A.S.-Aggressive Growth Portfolio
Janus A.S.-Worldwide Growth Portfolio
Janus A.S.-Balanced Portfolio
Janus A.S.-Growth Portfolio
Janus A.S.-International Growth Portfolio
Dreyfus V.I.F.-Capital Appreciation
Portfolio Dreyfus V.I.F.-Money Market Portfolio
Dreyfus V.I.F.-Growth and Income Portfolio
Dreyfus V.I.F.-Small Cap Portfolio
The Dreyfus Socially Responsible Growth Fund, Inc.
Dreyfus Stock Index Fund
Strong Opportunity Fund II, Inc.
Strong Variable Insurance Funds, Inc.-Strong Growth Fund II
INVESCO VIF-Industrial Income Portfolio
INVESCO VIF-Total Return Portfolio
INVESCO VIF-High Yield Portfolio
Morgan Stanley Universal Funds, Inc.-Mid Cap Value Portfolio
Morgan Stanley Universal Funds, Inc.-Value Portfolio
Morgan Stanley Universal Funds, Inc.-Fixed Income Portfolio
Morgan Stanley Universal Funds, Inc.-U.S. Real Estate Portfolio
Morgan Stanley Universal Funds, Inc.-Emerging Markets Equity Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Growth II Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Large Cap Growth Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Tech. & Comm. Portfolio
The Timothy Plan Variable Series
</TABLE>
The examples are not indicative of past or future expenses or annual rates of
return of any Portfolio. Actual expenses and annual rates of return may be more
or less than those assumed in the examples. The examples assume the reinvestment
of all dividends and distributions, no transfers between Sub-Accounts or between
the fixed account options and the Sub-Accounts and a 5% annual rate of return.
The contract maintenance fee is reflected in the examples as a charge of ___ per
year based on the ratio of actual contract maintenance fees collected for the
year ended 12/31/98 to total net assets as of 12/31/98. The examples do not
include charges for premium taxes.
-10-
<PAGE>
<TABLE>
<CAPTION>
CONDENSED FINANCIAL INFORMATION
<S> <C> <C> <C> <C> <C>
Standard Contracts Enhanced Contracts
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Account 12/31/97 12/31/98 12/31/97 12/31/98
- ---------------- -------------------------------------------- ----------------- ---------------- ----------------- ----------------
Janus Aggressive Growth Portfolio
Aspen Accumulation Unit Value 10.723950 10.738659
Series Accumulation Units Outstanding 2,830.076 0.000
-------------------------------------------- ----------------- ---------------- ----------------- ----------------
Worldwide Growth Portfolio
Accumulation Unit Value 9.935860 9.949496
Accumulation Units Outstanding 56,665.753 0.000
-------------------------------------------- ----------------- ---------------- ----------------- ----------------
Balanced Portfolio
Accumulation Unit Value 10.604609 10.619159
Accumulation Units Outstanding 30,519.754 0.000
-------------------------------------------- ----------------- ---------------- ----------------- ----------------
Growth Portfolio
Accumulation Unit Value 10.239960 10.254006
Accumulation Units Outstanding 32,737.591 0.000
-------------------------------------------- ----------------- ---------------- ----------------- ----------------
International Growth Portfolio
Accumulation Unit Value 9.735841 9.749214
Accumulation Units Outstanding 12,541.039 0.000
- ------------------------------------------------------------- ----------------- ---------------- ----------------- ----------------
Dreyfus Capital Appreciation Portfolio
Variable Accumulation Unit Value 10.103905 10.117776
Investment Accumulation Units Outstanding 18,347.666 0.000
Fund -------------------------------------------- ----------------- ---------------- ----------------- -------------
Money Market Portfolio
Accumulation Unit Value 1.016499 1.017876
Accumulation Units Outstanding 0.000 0.000
-------------------------------------------- ----------------- ---------------- ----------------- ----------------
Growth and Income Portfolio
Accumulation Unit Value 10.196538 10.210527
Accumulation Units Outstanding 32,231.762 0.000
-------------------------------------------- ----------------- ---------------- ----------------- ----------------
Small Cap Portfolio
Accumulation Unit Value 10.362314 10.376538
Accumulation Units Outstanding 41,359.506 0.000
- ------------------------------------------------------------- ----------------- ---------------- ----------------- ----------------
The Dreyfus Socially Responsible Growth Fund, Inc.
Accumulation Unit Value 10.320883 10.335055
Accumulation Units Outstanding 26,332.500 0.000
- ------------------------------------------------------------- ----------------- ---------------- ----------------- ----------------
Dreyfus Stock Index Fund
Accumulation Unit Value 10.479569 10.493943
Accumulation Units Outstanding 69,510.645 0.000
- ------------------------------------------------------------- ----------------- ---------------- ----------------- ----------------
Strong Opportunity Fund II, Inc.
Accumulation Unit Value 10.727356 10.742083
Accumulation Units Outstanding 6,416.208 0.000
- ------------------------------------------------------------- ----------------- ---------------- ----------------- ----------------
Strong Variable Insurance Funds, Inc.-Strong Growth Fund II
Accumulation Unit Value 10.707133 10.721828
Accumulation Units Outstanding 2,147.556 0.000
- ------------------------------------------------------------- ----------------- ---------------- ----------------- ----------------
INVESCO Industrial Income Portfolio
Variable Accumulation Unit Value 10.659157 10.673778
Investment Accumulation Units Outstanding 33,269.953 0.000
Funds, Inc. -------------------------------------------- ----------------- ---------------- ----------------- ----------------
Total Return Portfolio
Accumulation Unit Value 10.503108 10.517508
Accumulation Units Outstanding 14,641.934 0.000
-------------------------------------------- ----------------- ---------------- ----------------- ----------------
High Yield Portfolio
Accumulation Unit Value 10.687084 10.701757
Accumulation Units Outstanding 10,260.821 0.000
- ------------------------------------------------------------- ----------------- ---------------- ----------------- ----------------
Morgan Mid Cap Value Portfolio
Stanley Accumulation Unit Value 11.113227 11.128478
Universal Accumulation Units Outstanding 16,674.966 0.000
Funds, Inc. -------------------------------------------- ----------------- ---------------- ----------------- ----------------
Value Portfolio
Accumulation Unit Value 10.204064 10.218060
Accumulation Units Outstanding 9,944.401 0.000
-------------------------------------------- ----------------- ---------------- ----------------- ----------------
Fixed Income Portfolio
Accumulation Unit Value 10.412276 10.426565
Accumulation Units Outstanding 4.653 0.000
-------------------------------------------- ----------------- ---------------- ----------------- ----------------
U.S. Real Estate Portfolio
Accumulation Unit Value 11.101269 11.116503
Accumulation Units Outstanding 7,200.060 0.000
-------------------------------------------- ----------------- ---------------- ----------------- ----------------
Emerging Markets Equity Portfolio
Accumulation Unit Value 7.911559 7.922446
Accumulation Units Outstanding 9,042.956 0.000
- ------------------------------------------------------------- ----------------- ---------------- ----------------- ----------------
PBHG PBHG Growth II Portfolio
Insurance Accumulation Unit Value 9.511124 9.524184
Series Accumulation Units Outstanding 6,195.935 0.000
Fund, Inc. -------------------------------------------- ----------------- ---------------- ----------------- -------
PBHG Large Cap Growth Portfolio
Accumulation Unit Value 10.150555 10.164489
Accumulation Units Outstanding 11,415.131 0.000
-------------------------------------------- ----------------- ---------------- ----------------- ----------------
PBHG Technology & Communications Portfolio
Accumulation Unit Value 9.057045 9.069487
Accumulation Units Outstanding 20,974.008 0.000
- ------------------------------------------------------------- ----------------- ---------------- ----------------- ----------------
The Timothy Plan Variable Series
Accumulation Unit Value N/A N/A
Accumulation Units Outstanding N/A N/A
</TABLE>
-11-
<PAGE>
The table on the preceding page gives year-end Accumulation Unit information for
each Sub-Account from the end of the year of inception to December 31, 1998.
This information should be read in conjunction with the Separate Account
financial statements, including the notes to those statements. The beginning
Accumulation Unit Value for each Sub-Account other than the Dreyfus Money Market
Portfolio Sub-Account was 10.00000 as of July 15, 1997 (the Separate Account
commencement date), or as of May 1, 1998 (the effective date of the
Sub-Account)for the Timothy Plan Variable Series. The beginning Accumulation
Unit Value for the Dreyfus Money Market Portfolio Sub-Account was 1.000000 as of
July 15, 1997. No Enhanced Contracts with Administration Charge waived were
issued as of December 31, 1998.
Financial Statements
The financial statements and reports of independent public accountants for the
Company and for the Separate Account are included in the statement of additional
information.
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. Performance data and a more detailed
description of the methods used to determine yield and total return are included
in 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 "effective yield" of the money market Sub-Account is the same as the
"yield" except that it assumes reinvestment of the income earned in that
Sub-Account. The effective yield will be slightly higher than the yield because
of the compounding effect of this assumed reinvestment. The Company does not
advertise yields for any Sub-Account other than the money market Sub-Account.
Total Return Data
The Company advertises two types of total return data. The two types of total
return are "average annual total return" and "cumulative total return." Average
annual total return is presented in both standardized and non-standardized form.
"Standardized" total return data reflects the deduction of all charges that
apply to all Contracts of that type, except for premium taxes. The contingent
deferred sales charge ("CDSC") reflected in standardized total return is the
percentage CDSC that would apply at the end of the period presented assuming the
purchase payment was received on the first day of the period presented.
"Non-standardized" total return data does not reflect the deduction of CDSCs and
contract maintenance fees. Cumulative total return data is currently presented
only in non-standardized form.
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.
"Average annual total return" is either hypothetical or actual return data that
reflects performance of a Sub-Account for a one year period or for an average of
consective one year periods. If average annual total return data is
hypothetical, it reflects performance for a period of time before the Separate
Account commenced operations. When a Sub-Account has been in operation for one,
five and ten years, average annual total return will be presented for these
peiords, although other periods may be presented as well.
"Cumulative total return" is either hypothetical or actual return data that
reflects the performance of a Sub-Account from the beginning of the period
presented to the end of the period presented. If cumulative total return data is
hypothetical, it reflects performance for a period of time before the Separate
Account commenced operations.
<PAGE>
Other Performance Measures
The Company may include in reports and promotional literature rankings of the
Sub-Accounts, the Separate Account or the Contracts, as published by any
service, company, or person who ranks separate accounts or other investment
products on overall performance or other criteria. Examples of companies that
publish such rankings are 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
Morningstar.
The Company may also:
o compare the performance of a Sub-Account with applicable indices and/or
industry averages;
o present performance information that reflects the effects of tax-deferred
compounding on Sub-Account investment returns;
o compare investment return on a tax-deferred basis with currently taxable
investment return;
o illustrate investment returns by graphs, charts, or otherwise.
-12-
<PAGE>
THE PORTFOLIOS
- --------------------------------------------------------------------------------
The Separate Account is currently divided into 25 Sub-Accounts. Each Sub-Account
is invested in a Portfolio. Each Portfolio has its own investment objectives and
policies. The current Portfolio prospectuses which accompany this prospectus
contain additional information concerning the investment objectives and policies
of each Portfolio, the investment advisory services and administrative services
of each Portfolio and the charges of each Portfolio. There is no assurance that
the Portfolios will achieve their stated objectives. You should read the
Portfolio prospectuses carefully before making any decision concerning the
allocation of purchase payments to, or transfers among, the Sub-Accounts.
All dividends and capital gains distributed by the Portfolios are reinvested by
the Separate Account and reflected in Accumulation Unit Values. Portfolio
dividends and net capital gains are not distributed to owners.
The Securities and Exchange Commission does not supervise the management or the
investment practices and/or policies of any of the Portfolios.
The Portfolios are available only through insurance company separate accounts
and certain qualified retirement plans. Though a Portfolio may have a name
and/or investment objectives which are similar to those of a publicly available
mutual fund, and/or may be managed by the same investment advisor that manages a
publicly available mutual fund, the performance of the Portfolio is entirely
independent of the performance of any publicly available mutual fund. Neither
the Company nor the Portfolios make any representations or assurances that the
investment performance of any Portfolio will be the same or similar to the
investment performance of any publicly available mutual fund.
<TABLE>
<S> <C>
Janus Aspen Series
Advisor: Aggressive Growth Portfolio
Janus Capital Corporation A nondiversified portfolio that seeks long-term growth of capital by investing primarily in
common stocks with an emphasis on securities issued by medium-sized companies.
Advisor: Worldwide Growth Portfolio
Janus Capital Corporation A diversified portfolio that seeks long-term growth of capital by investing primarily in common
stocks of foreign and domestic 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.
Advisor: Balanced Portfolio
Janus Capital Corporation A diversified portfolio that seeks long-term growth of capital balanced by current income. The
Portfolio 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.
Advisor: Growth Portfolio
Janus Capital Corporation 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.
Advisor: International Growth Portfolio
Janus Capital Corporation 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.
-13-
<PAGE>
Dreyfus Portfolios
Advisor: Dreyfus Variable Investment Fund-Capital Appreciation Portfolio
The Dreyfus Corporation 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
Sub-Advisor: goal. It seeks to achieve its goals by investing principally in common stocks of domestic
Fayez Sarofim & Co. and foreign issuers, common stocks with warrants attached and debt securities of foreign
governments.
Advisor: Dreyfus Variable Investment Fund-Money Market Portfolio
The Dreyfus Corporation 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.
Advisor: Dreyfus Variable Investment Fund-Growth and Income Portfolio
The Dreyfus Corporation The Growth and Income Portfolio's goal is to provide long-term capital growth, current
income and growth of income, consistent with reasonable investment risk. This Portfolio
invests primarily in equity securities, debt securities and money market instruments of
domestic and foreign issuers.
Advisor: Dreyfus Variable Investment Fund-Small Cap Portfolio
The Dreyfus Corporation 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.
Advisor: The Dreyfus Socially Responsible Growth Fund, Inc.
The Dreyfus Corporation 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
Sub-Advisor: securities convertible into common stock, of companies which, in the opinion of the
NCM Capital Management Portfolio's management, not only meet traditional investment standards, but also show
Group Inc. 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.
Advisor: Dreyfus Stock Index Fund
The Dreyfus Corporation 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
Index Manager: aggregate, as represented by the Standard & Poor's 500 Composite Stock Price Index. The
Mellon Equity Associates(an Stock Index Fund is neither sponsored by nor affiliated with Standard & Poor's Corporation.
affiliate of Dreyfus)
-14-
<PAGE>
Strong Portfolios
Advisor: Strong Opportunity Fund II, Inc.
Strong Capital Management, The investment objective of the Strong Opportunity Fund II is to seek capital growth. It
Inc. currently emphasizes medium-sized companies that the Portfolio's adviser believes are
under-researched and attractively valued.
Advisor: Strong Variable Insurance Funds, Inc.-Strong Growth Fund II
Strong Capital Management, The investment objective of the Strong Growth Fund II is to seek capital growth. It
Inc. invests primarily in equity securities that the Portfolio's adviser believes have
above-average growth prospects.
INVESCO Variable Investment
Finds Inc.
Advisor: Industrial Income Portfolio
INVESCO Funds Group, Inc. 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.
Advisor: Total Return Portfolio
INVESCO Funds Group, Inc. 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.
Advisor: High Yield Portfolio
INVESCO Funds Group, Inc. 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.
-15-
<PAGE>
Morgan Stanley Universal Funds, Inc.
Advisor: Mid Cap Value Portfolio
Miller Anderson & The Mid Cap Value Portfolio seeks above-average total return over a market cycle of three to
Sherrerd, LLP (an five years by investing in common stocks and other equity securities of issuers with equity
indirect wholly owned capitalizations in the range of the companies represented in the S&P MidCap 400 Index. Such
subsidiary of Morgan range is currently $500 million to $6 billion but the range fluctuates over time with
Stanley Dean Witter & Co.) changes in the equity market.
Advisor: Value Portfolio
Miller Anderson & The investment objective of the Value Portfolio is to seek above-average total return over a
Sherrerd, LLP (an market cycle of three to five years by investing primarily in a diversified portfolio of
indirect wholly owned common stocks and other equity securities deemed by the adviser to be undervalued based on
subsidiary of Morgan various measures such as price/earnings and price/book ratios.
Stanley Dean Witter & Co.)
Advisor: Fixed Income Portfolio
Miller Anderson & The investment objective of the Fixed Income Portfolio is to seek above-average total return
Sherrerd, LLP (an over a market cycle of three to five years by investing primarily in a diversified portfolio
indirect wholly owned of securities issued by the U.S. Government and its Agencies, Corporate Bonds,
subsidiary of Morgan Mortgage-Backed Securities, Foreign Bonds, and other Fixed Income Securities and
Stanley Dean Witter & Co.) Derivatives.
Advisor: U.S. Real Estate Portfolio
Morgan Stanley Asset The investment objective of the U.S. Real Estate Portfolio is above-average current income
Management Inc. (a wholly and long-term capital appreciation by investing primarily in equity securities of U.S. and
owned subsidiary of non-U.S. companies principally engaged in the U.S. real estate industry, including Real
Morgan Stanley Dean Estate Investment Trusts (REITs).
Witter & Co.)
Advisor: Emerging Markets Equity Portfolio
Morgan Stanley Asset The investment objective of the Emerging Markets Equity Portfolio is long-term capital
Management Inc. (a wholly appreciation by investing primarily in equity securities of emerging market country issuers
owned subsidiary of with a focus on those in which the adviser believes the economies are developing strongly
Morgan Stanley Dean and in which the markets are becoming more sophisticated.
Witter & Co.)
-16-
<PAGE>
PBHG Insurance Series Fund, Inc.
Advisor: PBHG Growth II Portfolio
Pilgrim Baxter & Associates The investment objective of the PBHG Insurance Series Growth II ,Portfolio is to seek
Ltd. capital appreciation. The Portfolio invests 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.
Advisor: PBHG Large Cap Growth Portfolio
Pilgrim Baxter & Associates The investment objective of the PBHG Insurance Series Large ,Cap Growth Portfolio is to seek
Ltd. long-term growth of capital. The Portfolio invests 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.
Advisor: PBHG Technology & Communications Portfolio
Pilgrim Baxter & Associates The investment objective of the PBHG Insurance ,Series Technology & Communications Portfolio
Ltd. is to seek long-term growth of capital. Current income is incidental to the Portfolio's
objective. The Portfolio invests 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.
The Timothy Plan Variable Series
Advisor: The Timothy Plan Variable Series
Timothy Partners, Ltd. 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 Portfolio shall seek to
achieve its objectives while abiding by ethical standards established for investments by the
Portfolio. The securities in which the Portfolio shall be precluded from investing, by
virtue of the Portfolio's ethical standards, are referred to as excluded securities.
</TABLE>
-17-
<PAGE>
Additions, Deletions, or Substitutions
The Company may add or delete Sub-Accounts at any time, or may substitute one
Portfolio for another, at any time. The Company does not guarantee that any of
the Sub-Accounts or any of the Portfolios will always be available for
allocation of purchase payments or transfers. 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.
Additions, deletions or substitutions of Sub-Accounts or Portfolios may be due
to an investment decision by the Company, or due to an event not within the
Company's control, such as liquidation of a Portfolio or an irreconcilable
conflict of interest between the Separate Account and another insurance company
which offers a Portfolio. The Portfolio prospectuses describe the possibility of
material conflict of interest in greater detail.
If the Company eliminates a Sub-Account or substitutes the shares of another
investment company for the shares of any Portfolio, the Company will first
obtain approval of the Securities and Exchange Commission to the extent required
by the Investment Company Act of 1940, as amended ("1940 Act"), or other
applicable law. The Company will also notify owners before it eliminates a
Sub-Account or substitutes a Portfolio.
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.
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.
Voting Rights
To the extent required by law, all Portfolio shares held in the Separate Account
will be voted by the Company at regular and special shareholder meetings of the
respective Portfolios in accordance with instructions received from persons
having voting interests in the corresponding Sub-Account. During the
Accumulation Period, the Company will vote Portfolio shares according to
instructions of owners, unless the Company is permitted to vote shares in its
own right.
The number of votes that an owner may vote will be calculated separately for
each Sub-Account. The 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's percentage interest and the total number of votes will be determined
as of the record date established by that Portfolio for voting purposes. Voting
instructions will be solicited by written communication in accordance with
procedures established by the respective Portfolios.
The Company will vote or abstain from voting shares for which it receives no
timely instructions and shares it holds as to which owners have no beneficial
interest (including shares held by the Company as reserves for benefit
payments*). The Company will vote or abstain from voting such shares in
proportion to the voting instructions it receives from owners of all Contracts
participating in the Sub-Account.
Each person or entity having a voting interest in a Sub-Account will receive
proxy material, reports and other material relating to the appropriate
Portfolio. The Portfolios are not required to hold annual or other regular
meetings of shareholders.
*Neither the owner nor payee has any interest in the Separate Account during the
Benefit Payment Period. Benefit Units are merely a measure of the amount of the
payment the Company is obligated to pay on each payment date.
-18-
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANYREGISTERED
- --------------------------------------------------------------------------------
Annuity Investors Life Insurance CompanyREGISTERED (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 variable and fixed
annuity policies. The home office of the Company is located at 250 East Fifth
Street, Cincinnati, Ohio 45202.
The Company is a wholly owned subsidiary of Great American Life Insurance
CompanyREGISTERED which is a wholly owned subsidiary of American Annuity
GroupREGISTERED, Inc., ("AAG") a publicly traded insurance holding company
(NYSE: AAG). AAG is in turn indirectly controlled by American Financial Group,
Inc., a publicly traded holding company (NYSE: AFG).
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. Each year A.M.
Best Company reviews the financial status of thousands of insurers, culminating
in the assignment of Best's Ratings. These ratings reflect A.M. Best Company's
opinion of the relative financial strength and operating performance of an
insurance company in comparison to the norms of the life/health insurance
industry. Ratings of the Company do not reflect the investment performance of
the Separate Account or the degree of risk associated with an investment in the
Separate Account.
THE SEPARATE ACCOUNT
- --------------------------------------------------------------------------------
Annuity InvestorsREGISTERED 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. Under Ohio law, 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 realized or not, 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.
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 all other contracts that invest in the Separate Account.
AAG SECURITIES, INC.
- --------------------------------------------------------------------------------
AAG Securities, Inc. ("AAGS"), an affiliate of the Company, is the principal
underwriter and distributor of the Contracts. AAG Securities is a wholly owned
subsidiary of AAG. AAGS 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 AAGS for acting as
underwriter according to the terms of a distribution agreement.
AAGS sells Contracts through its registered representatives. In addition, AAGS
may enter into sales agreements with other broker-dealers to solicit
applications for the Contracts through its registered representatives. These
broker-dealers are registered with the Securities and Exchange Commission and
are members of the NASD. All registered representatives who sell the Contracts
are appointed by the Company as insurance agents and are authorized under
applicable state insurance regulations to sell variable annuities.
The Company or AAGS may pay commissions to registered representatives of AAGS
and other broker-dealers of up to 8.5% of purchase payments made under the
Contracts. 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, AAGS and/or the Company may pay trail commissions to
registered representatives of AAGS 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 permitted under current law, the Company and/or
AAGS may pay production, persistency and managerial bonuses as well as other
promotional incentives, in cash or other compensation, to registered
representatives of AAGS and/or other broker-dealers.
-19-
<PAGE>
CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
Charges and Deductions By the Company
There are two types of charges and deductions by the Company. There are charges
assessed to the Contract which are reflected in the Account Value of the
Contract, but not in Accumulation Unit Values (or Benefit Unit Values). These
charges are the contingent deferred sales charge, the annual contract
maintenance fee, premium taxes where applicable and transfer fees. There are
also charges assessed against the Separate Account. These charges are reflected
in the Accumulation Unit Values (and Benefit Unit Values) of the Sub-Accounts.
These charges are the mortality and expense risk charge and the administration
charge.
The Company will never charge more to a Contract than the fees and charges
described below, even if its actual expenses exceed the total fees and charges
collected. If the fees and charges collected by the Company exceed the actual
expenses it incurs, the excess will be profit to the Company and will not be
returned to owners.
Notwithstanding the above, the Company reserves the right to increase the amount
of the transfer fee in the future, and/or to charge fees for the automatic
transfer programs described in the Transfers section beginning on page ___ of
this prospectus, and/or for the systematic withdrawal program described in the
Surrenders section on page ____ of this prospectus, if in the Company's
discretion, it determines such charges are necessary to offset the costs of
administering transfers or systematic withdrawals.
Contingent Deferred Sales Charge ("CDSC")
Purpose of Charge Offset expenses incurred by the Company in the sale of
the Contracts, including commissions paid and costs of
sales literature.
Amount of Charge Up to 7% of each purchase payment depending on number
of years elapsed since receipt of the purchase payment.
=============================== ===== ===== ===== ===== ===== ===== ===== =====
Number of full years elapsed
between date of receipt of 0 1 2 3 4 5 6 7
purchase payment and date or
request for surrender received more
=============================== ===== ===== ===== ===== ===== ===== ===== =====
CDSC as a percentage of
purchase payment surrendered 7% 6% 5% 4% 3% 2% 1% 0%
=============================== ===== ===== ===== ===== ===== ===== ===== =====
When Assessed On partial or full surrenders of purchase payments
during Accumulation Period.
Assessed Against What Purchase payments only, not earnings. See the
Surrenders section of this prospectus for information
on order of withdrawal of earnings and purchase
payments.
Waivers o Free withdrawal privilege. See the Surrenders section
for information.
o In the Company's discretion where the Company incurs
reduced sales and servicing expenses.
o Upon separation from service if Contract issued with
employer plan endorsement or deferred compensation
endorsement.
o If Contract is issued with a tax sheltered annuity
endorsement (and without an employer plan endorsement):
(i) upon separation from service if owner has attained
age 55 and Contract has been in force for at least
seven years; or (ii) after Contract has been in force
fifteen years or more.
o Long term care waiver rider. See the Surrenders
section for information.
o If the Social Security Administration determines
after the Contract is issued that the owner is
"disabled" as that term is defined in the Social
Security Act of 1935, as amended.
o Successor Owner endorsement. See the Account Value
section for information.
o Where required to satisfy state law.
-20-
<PAGE>
Contract Maintenance Fee
Purpose of Charge Offset expenses incurred in issuing the Contracts and
in maintaining the Contracts and the Separate Account.
Amount of Charge $30.00 per year.
When Assessed During the Accumulation Period the charge is deducted
on each anniversary of the effective date of the
Contract, and at time of full surrender. During the
Benefit Payment Period a portion of the charge is
deducted from each variable dollar benefit payment.
Assessed Against What Amounts invested in the Sub-Accounts. During the
Accumulation Period, the charge is deducted pro-rata
from the Sub-Accounts in which the Contract has an
interest on the date of the charge. During the Benefit
Payment Period, a pro-rata portion of the annual charge
is deducted from each benefit payment from the variable
account. The charge is not assessed against the fixed
account options.
Waivers o During Accumulation Period if the Account Value is at
least $40,000 on the date of the charge (individual
contracts only).
o During Benefit Payment Period if the amount applied
to a variable dollar benefit is at least $40,000
(individual contracts only).
o In the Company's discretion where the Company incurs
reduced sales and servicing expenses.
o During Benefit Payment Period where required to
satisfy state law.
Transfer Fee
Purpose of Charge Purpose of Charge Offset cost incurred in administering
the Contracts.
Amount of Charge $25 for each transfer in excess of 12 in any contract
year. The Company reserves the right to change the
amount of this charge at any time.
When Assessed During Accumulation Period.
Assessed Against What Deducted from amount transferred.
Waivers Currently, the transfer fee does not apply to transfers
associated with the dollar cost averaging, interest
sweep and portfolio rebalancing programs. Transfers
associated with these programs do not count toward the
12 free transfers permitted in a contract year. The
Company reserves the right to eliminate this waiver at
any time.
Administration Charge
Purpose of Charge Offset expenses incurred in administering the Contracts
and the Separate Account.
Amount of Charge Daily charge equal to .000411% of the daily Net Asset
Value for each Sub-Account, which corresponds to an
annual effective rate of 0.15%.
When Assessed During the Accumulation Period and during the Benefit
Payment Period if a variable dollar benefit is elected.
Assessed Against What Amount invested in the Sub-Accounts. Not assessed
against fixed account options.
Waivers May be waived or reduced in the Company's discretion
where the Company incurs reduced sales and servicing
expenses.
-21-
<PAGE>
Mortality and Expense Risk Charge
Purpose of Charge Compensation for bearing certain mortality and expense
risks under the Contract. Mortality risks arise from
the Company's obligation to pay benefit payments during
the Benefit Payment Period and to pay the death
benefit. 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, transfer fees and administration
charges.
Amount of Charge Daily charge equal to .003403% of the daily Net Asset
Value for each Sub-Account, which corresponds to an
effective annual rate of 1.25%. The Company estimates
that the mortality risk component of this charge is
0.75% and the expense risk component is 0.50%.
Contracts with the 1.25% mortality and expense risk
charge are referred to as "Standard Contracts."
When Assessed During the Accumulation Period, and during the Benefit
Payment Period if a variable dollar benefit is elected.
Assessed Against What Amounts invested in the Sub-Accounts. Not assessed
against the fixed account options.
Waivers When the Company expects to incur reduced sales and
servicing expenses, it may issue a Contract with a
reduced mortality and expense risk charge. These
Contracts are referred to as "Enhanced Contracts." The
mortality and expense risk charge under an Enhanced
Contract is a daily charge of 0.002590% of the daily
Net Asset Value for each Sub-Account, which corresponds
to an effective annual rate of 0.95%. The Company
estimates that for Enhanced Contracts, the mortality
risk component of this charge is 0.75% and the expense
risk component is 0.20%.
Premium Taxes
Certain state and local governments impose premium taxes. These taxes currently
range up to 5.0% depending upon the jurisdiction. 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, but no earlier than
when the Company incurs a tax liability under state law.
Discretionary Waivers of Charges
The Company will look at the following factors to determine if it will waive a
charge, in part or in full, due to reduced sales and servicing expenses: (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 Company would expect to incur reduced sales and servicing
expenses in connection with Contracts offered to 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 reduced sales and
servicing expenses. In no event will the Company waive a charge where such
waiver would be unfairly discriminatory to any person.
Expenses of the Portfolios
In addition to charges and deductions by the Company, there are Portfolio
management fees and administration expenses which are described in the
prospectus and statement of additional information for each Portfolio. The
actual Portfolio fees and expenses for the prior calendar year are included in
the Fee Table on page ___ of this prospectus. Portfolio expenses, like Separate
Account expenses, are reflected in Accumulation Unit Values (or Benefit Unit
Values).
-22-
<PAGE>
THE CONTRACTS
- --------------------------------------------------------------------------------
Each Contract is an agreement between the Company and the owner. Values,
benefits and charges are calculated separately for each Contract. In the case of
a group Contract, the agreement is between the group owner and the Company. An
individual participant under a group Contract will receive a certificate of
participation, which is evidence of the participant's interest in the group
Contract. A certificate of participation is not a contract. Values, benefits and
charges are calculated separately for each certificate issued under a Contract.
The description of Contract provisions in this prospectus applies to the
interests of certificate owners, except where otherwise noted.
Because 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 in a given State may depend on that State's
approval of the Contracts. Where required by state law or regulation, the
Contracts will be modified accordingly.
Right to Cancel
The owner of an individual Contract may cancel it before midnight of the
twentieth day following the date the owner receives the Contract. For a valid
cancellation, the Contract must be returned to the Company, and written notice
of cancellation must be given to the Company, or to the agent who sold the
Contract, by that deadline. If mailed, 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, the Contract will be void and
the Company will refund the purchase payment(s) paid for it plus or minus any
investment gains or losses under the Contract as of the end of the Valuation
Period during which the returned Contract is received by the Company. When
required by state or federal law, the Company will return the purchase payments
without any investment gain or loss, during all or part of the right to cancel
period. When required by state law, the right to cancel period may be longer
than 20 days. When required by state law, the right to cancel may apply to group
Contracts.
Persons With Rights Under a Contract
Owner: The owner is the person with authority to exercise rights and receive
benefits under the Contract (e.g., make allocations among investment options,
elect settlement option, designate annuitant, beneficiary and payee). An owner
must ordinarily be a natural person, or a trust or other legal entity holding a
contract for the benefit of a natural person. In the case of a group Contract,
the participant will have the rights of an owner unless restricted by the terms
of an employer plan. Ownership of a non-tax-qualified Contract may be
transferred, but transfer may have adverse tax consequences. Ownership of a
tax-qualified Contract may not be transferred.
Joint Owners: There may be joint owners of a non-tax-qualified Contract. Joint
owners may each exercise transfer rights and make purchase payment allocations
independently. All other rights must be exercised by joint action. A surviving
joint owner who is not the spouse of a deceased owner may not become a successor
owner, but will be deemed to be the beneficiary of the death benefit which
becomes payable on the death of the first owner to die, regardless of any
beneficiary designation.
Successor Owner: The surviving spouse of a deceased owner may become a successor
owner if the surviving spouse was either the joint owner or sole surviving
beneficiary under the Contract. In order for a spouse to become a successor
owner, the owner must make an election prior to the owner's death, or the
surviving spouse must make an election within one year of the owner's death.
Annuitant: The annuitant is the person whose life is the measuring life for life
contingent annuity benefit payments. The annuitant is the same person as the
owner under a tax-qualified contract. The owner may designate an annuitant under
a non-tax-qualified Contract.
Beneficiary: The person entitled to receive the death benefit. The owner may
designate the beneficiary, except that a surviving joint owner will be deemed to
be the beneficiary regardless of any designation. If no beneficiary is
designated, and there is no surviving joint owner, the owner's estate will be
the beneficiary. The beneficiary will be the measuring life for life contingent
death benefit payments.
Payee: Under a tax-qualified Contract, the owner-annuitant is the payee of
annuity benefits. Under a non-tax-qualified Contract, the owner may designate
the payee of annuity benefits. Irrevocable naming of a payee other than the
owner can have adverse tax consequences. During the Benefit Payment Period, the
beneficiary is the payee.
Assignee: Under a tax-qualified Contract, assignment is not permitted. The owner
of a non-tax-qualified Contract may assign most of his/her rights or benefits
under a Contract. Assignment of rights or benefits may have adverse tax
consequences.
-23-
<PAGE>
ACCUMULATION PERIOD
- --------------------------------------------------------------------------------
Each Contract allows for an Accumulation Period during which purchase payments
are invested according to the owner's instructions. During the Accumulation
Period, the owner can control the allocation of investments through telephone
transfers or through the following investment programs offered by the Company:
dollar cost averaging, portfolio rebalancing and interest sweep. These programs
and telephone transfer procedures are described in the Transfers section
beginning on page ____ of this prospectus. The owner can access the Account
Value during the Accumulation Period through surrenders, systematic withdrawal,
or contract loans if available. These withdrawal features are described more
fully in the Surrenders and Contract Loans sections on pages ___ and ___ of this
prospectus.
Account Statements
During the Accumulation Period, the Company will provide a report at least once
each contract year of the Contract's Account Value, and any other information
required by law. The Company will confirm receipt of any purchase payments made
after the initial purchase payment in quarterly statements of account activity.
Account Value
The value of a Contract during the Accumulation Period is referred to as the
"Account Value." The Account Value at any given time is the sum of (1) amounts
invested in the fixed investment options plus the fixed rate(s) of interest
earned on those amounts as of that time; and (2) the value of the owner's
interest in the Sub-Accounts as of that time. The value of the owner's interest
in the Sub-Accounts 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. The Account Value at any time is net of any charges,
deductions, surrenders, and/or outstanding loans incurred prior to or as of the
end of that Valuation Period.
Accumulation Units
Amounts allocated or transferred to a Sub-Account are converted into
Accumulation Units. The number of Accumulation Units credited is determined by
dividing the dollar amount directed to the Sub-Account by the Accumulation Unit
Value for that Sub-Account as of the end of the Valuation Period in which the
amount allocated is received by the Company, or as of the end of the Valuation
Period in which the transfer is made.
Accumulation Units will be canceled as of the end of the Valuation Period during
which one of the following events giving rise to cancellation occurs:
o transfer from a Sub-Account
o full or partial surrender from the Sub-Accounts
o payment of a death benefit
o application of the amounts in the Sub-Accounts to a settlement option
o deduction of the contract maintenance fee
o deduction of any transfer fee
Successor Owner Endorsement
If the Contract is modified by the Successor Owner endorsement, and the
surviving spouse of a deceased owner becomes a successor owner of the Contract,
the Account Value will be stepped-up to equal the death benefit which otherwise
would have been payable, as of what would have been the Death Benefit Valuation
Date. In addition, contingent deferred sales charges will be waived on the
entire stepped-up Account Value as of that date, but will apply to any purchase
payments applied to the Contract after that date.
For purposes of determining what would have been the Death Benefit Valuation
Date, the election to become successor owner will be deemed to be instructions
as to the form of death benefit. The election to become successor owner must be
made within one year of the date of the owner's death.
The Successor Owner endorsement may not be available in all States.
-24-
<PAGE>
<TABLE>
Purchase Payments
Purchase payments may be made at any time during the Accumulation Period. The
current restrictions on purchase payment amounts are as follows:
<CAPTION>
<S> <C> <C>
Tax-Qualified Non-Tax-Qualified
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Minimum single purchase payment $2,000 $5,000
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Minimum monthly under periodic payment program $50 $100
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Minimum additional payments $50 $50
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Maximum purchase payment $500,000 or Company $500,000 or Company
approval approval
</TABLE>
The Company reserves the right to increase or decrease the minimum allowable
single purchase payment or minimum purchase payment under a periodic payment
program, or the minimum allowable additional purchase payment, at its discretion
and at any time, where permitted by law.
Each purchase payment will be applied by the Company to the credit of the
owner's account. If the application form is in good order, the Company will
apply the initial purchase payment to an account for the owner within two
business days of receipt of the purchase payment. 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 applicant 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 Valuation
Date on which we receive the purchase payment. If the purchase payment is
allocated to a Sub-Account, it will be applied at the Accumulation Unit Value
calculated at the end of the Valuation Period in which that Valuation Date
occurs.
Investment Options--Allocations
Purchase payments can be allocated in whole percentages to any of the available
Sub-Accounts or fixed account options. See The Portfolios section beginning on
page ___ of this prospectus for a listing and description of the currently
available Sub-Accounts. The currently available fixed account options are as
follows:
Fixed Accumulation Account Option
One Year Guaranteed Interest Rate Option
Three Year Guaranteed Interest Rate Option
Five Year Guaranteed Interest Rate Option
Seven Year Guaranteed Interest Rate Option
The current restrictions on allocations are as follows:
<TABLE>
<CAPTION>
<S> <C>
Tax-Qualified and Non-Tax-Qualified
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Minimum allocation to any Sub-Account $10
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Minimum allocation to fixed accumulation account $10
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Minimum allocation to fixed account guarantee $2,000
option
No amounts may be allocated to a
guarantee period option which
would extend beyond the owner's
85th birthday or 5 years after
the effective date of the
Contract, if later.
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Allocation during 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.
</TABLE>
-25-
<PAGE>
Interests in the fixed account options are not securities and are not registered
with the Securities and Exchange Commission. Amounts allocated to the fixed
account options will receive a stated rate of interest of at least 3% per year.
Amounts allocated to the fixed account options and interest credited to the
fixed account options are guaranteed by the Company. Interests in the
Sub-Accounts are securities registered with the Securities and Exchange
Commission. The owner bears the risk of investment gain or loss on amounts
allocated to the Sub-Accounts.
Principal Guarantee Program
An owner may elect to have the Company allocate a portion of a purchase payment
to the seven-year guaranteed interest rate option such that, at the end of the
seven-year guarantee period, that account will grow to an amount equal to the
total purchase payment (so long as there are no surrenders or loans from the
Contract). The Company determines the portion of the purchase payment that must
be allocated to the seven-year guarantee option such that, based on the interest
rate then in effect, that account will grow to equal the full amount of the
purchase payment after seven years. The remainder of the purchase payment will
be allocated according to the owner's instructions. The minimum purchase payment
eligible for the principal guarantee program is $5,000.
Renewal of Fixed Account Guarantee Options
At the end of a guarantee period, and for 30 days preceding the end of such
guarantee period, the owner may elect to allocate the amount maturing to any of
the available investment options under the Contract. If the owner does not make
a reallocation election, the amount maturing will be allocated to the guarantee
period option with the same number of years as the period expiring, or the next
shortest period as may be required to comply with the restriction on allocation
to guarantee period options as described in the Investment Options-Allocations
section on page _____ of this prospectus. If a guarantee period is unavailable
due to this restriction, the amount maturing will be allocated to the fixed
accumulation account option.
Transfers
During the Accumulation Period, an owner may transfer amounts between
Sub-Accounts, between fixed account options, and/or between Sub-Accounts and
fixed account options.
The current restrictions on transfers are as follows:
<TABLE>
<CAPTION>
<S> <C>
Tax-Qualified and Non-Tax-Qualified
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Minimum transfer from any Sub-Account $500 or balance of Sub-Account if less
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Minimum transfer from fixed account option $500 or balance of fixed account option if
less
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Minimum transfer to fixed account guarantee $2,000
option No amounts may be transferred to
a guarantee period option which
would extend beyond the owner's
85th birthday or 5 years after
the effective date of the
Contract, if later.
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Maximum transfer from fixed account option During any contract year, 20% of
other than fixed account guarantee option the fixed account option's value
which is maturing. as of the most recent contract
anniversary.
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Transfers from fixed account options o May not be made prior to first
contract anniversary.
o Amounts transferred from fixed
account options to Sub-Accounts
may not be transferred back to
fixed account options for a
period of 6 months from the date
of the original transfer.
A transfer is effective on the Valuation Date during which the Company receives
the request for transfer, and will be processed at the Accumulation Unit Value
for the end of the Valuation Period in which that Valuation Date occurs.
</TABLE>
-26-
<PAGE>
Automatic Transfer Programs
During the Accumulation Period, the Company offers the automatic transfer
services described below. To enroll in one of these programs, you will need to
complete the appropriate authorization form, which you can obtain from the
Company by calling 1-800-789-6771.
Currently, the transfer fee does not apply to dollar cost averaging, portfolio
rebalancing, or interest sweep transfers, and transfers under these programs
will not count toward the twelve transfers permitted under the Contract without
a transfer fee charge. However, the Company reserves the right to impose a fee
in such amount as the Company may then determine to be reasonable for
participation in automatic transfer programs.
<TABLE>
<CAPTION>
Service Description Minimum Account Limitations/Notes
Requirements
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dollar Cost Averaging Automatic transfers Source of funds must Dollar cost averaging
There are risks from the money market be at least $10,000. transfers may not be
involved in switching Sub-Account to any made to any of the
between investments other Sub-Account(s), Minimum transfer per fixed account
available under the or from the fixed month is $500. When options. The dollar
Contract. Dollar cost accumulation account balance of source of cost averaging
averaging requires option to any funds falls below transfers will take
regular investment Sub-Account(s), on a $500, entire balance place on the last
changes regardless of monthly or quarterly will be allocated Valuation Date of
fluctuating price basis. according to dollar each calendar month
levels and does not cost averaging or quarter as
guarantee profits or instructions. requested by the
prevent losses in a owner.
declining market. You
should consider your
financial ability to
continue dollar cost
averaging transfers
through periods of
changing price levels.
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Portfolio Rebalancing Automatically Minimum Account Value Transfers will take
transfer amounts of $10,000. place on the last
between the Valuation Date of
Sub-Accounts and the each calendar
fixed accumulation quarter. Portfolio
account option to rebalancing will not
maintain the be available if the
percentage dollar cost averaging
allocations selected program or an
by the owner. interest sweep from
the fixed accumulation
account option is being
utilized.
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Interest Sweep Automatic transfers Balance of each fixed Interest sweep
of the income from account option transfers will take
any fixed account selected must be at place on the last
option(s) to any least $5,000. Valuation Date of
Sub-Account(s). Maximum transfer from each calendar quarter.
each fixed account
option selected is
20% of such fixed
account option's
value per year.
Amounts transferred
under the interest
sweep program will
reduce the 20%
maximum transfer
amount otherwise
allowed.
</TABLE>
-27-
<PAGE>
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 with the
right to control 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.
Termination of Transfer Programs
The owner may terminate any of the automatic transfer programs 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. The Company may terminate, suspend
or modify any aspect of the transfer programs 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
An owner may surrender a Contract either in full or in part during the
Accumulation Period. A contingent deferred sales charge ("CDSC") may apply on
surrender. The restrictions and charges on surrenders are as follows:
<TABLE>
<CAPTION>
Tax-Qualified Non-Tax-Qualified
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Minimum amount of partial surrender $500
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Minimum remaining Account Value after partial $500
surrender
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Amount available for surender (valued as of Account Value less Account Value less
end of Valuation Period in which request for applicable CDSC, applicable CDSC,
surrender is received by the Company) subject to tax law subject to employer
or employer plan plan restrictions on
restrictions on withdrawals
withdrawals
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Tax penalty for early withdrawal Up to 10% of Account Value before age 59 1/2
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Contract maintenance fee on full surrender $30 (no CDSC applies)
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Contingent deferred sales charge ("CDSC") Up to 7% of purchase payments
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Order of withdrawal for purposes of CDSC First from accumulated earnings (no CDSC
(order may be different for tax purposes) applies) and then from purchase payments on
"first-in, first-out" basis (CDSC may apply)
</TABLE>
A full surrender will terminate the Contract. Partial surrenders are withdrawn
proportionally from all Sub-Accounts and fixed account options in which the
Contract is invested on the date the Company receives the surrender request,
unless the owner requests that the surrender be withdrawn from a specific
investment option. A surrender is effective on the Valuation Date during which
the Company receives the request for surrender, and will be processed at the
Accumulation Unit Value for the end of the Valuation Period in which that
Valuation Date occurs. Payment of a surrendered amount may be delayed if the
amount surrendered was paid to the Company by a check that has not yet cleared.
Surrenders from a fixed account option may be delayed for up to six months after
receipt of a surrender request as allowed by state law. Surrenders from the
Sub-Accounts may be delayed during any period the New York Stock Exchange is
closed or trading is restricted, or when the Securities and Exchange Commission
either 1) determines there is an emergency which prevents valuation or disposal
of securities held in the Separate Account; or 2) permits a delay in payment for
the protection of security holders.
-28-
<PAGE>
Free Withdrawal Privilege
The Company will waive the CDSC on full or partial surrenders during the first
contract year, on an amount equal to not more than 10% of all purchase payments
received. During the second and succeeding contract years, the Company will
waive the CDSC 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.
Long Term Care Waiver Rider
If a Contract is modified by the Long Term Care Waiver Rider, surrenders may be
made free of any CDSC if the owner has been confined in a qualifying licensed
hospital or long-term care facility for at least 90 days beginning on or after
the first contract anniversary. This rider may not be available in all States.
Systematic Withdrawal
During the Accumulation Period, an owner may elect to automatically withdraw
money from the Contract. The Account Value must be at least $10,000 in order to
make a systematic withdrawal election. The minimum monthly amount that can be
withdrawn is $100. Systematic withdrawals will be subject to the contingent
deferred sales charge to the extent the amount withdrawn exceeds the free
withdrawal privilege. The owner may begin or discontinue systematic withdrawals
at any time by 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.
Before electing a systematic withdrawal program, you should consult with a
financial advisor. Systematic withdrawal is similar to annuitization, but will
result in different taxation of payments and potentially different amount of
total payments over the life of the Contract than if annuitization were elected.
Contract Loans
The Company may make loans to owners of tax-qualified Contracts. Any such loans
will be secured with an interest in the Contract, and the collateral for the
loan will be moved to the fixed accumulation account option and earn a fixed
rate of interest applicable to loan collateral. Loan amounts and repayment
requirements are subject to provisions of the Internal Revenue Code, and default
on a loan will result in a taxable event. You should consult a tax adviser prior
to exercising loan privileges. Loan provisions are described in the loan
endorsement to the Contract.
A loan, whether or not repaid, will have a permanent effect on the Account Value
of a Contract because the collateral cannot be allocated to the Sub-Accounts or
fixed account guarantee periods. 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 collateral 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.
Termination
The Company reserves the right to terminate any Contract at any time during the
Accumulation Period if the Account Value is less than $500. In that case, the
Contract will be involuntarily surrendered and the Company will pay the owner
the amount which would be due the owner on a full surrender. 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 involuntary surrender right as described above.
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<PAGE>
BENEFIT PAYMENT PERIOD
Annuity Benefit
- --------------------------------------------------------------------------------
An owner may designate the date that annuity payments will begin, and may change
the date up to 30 days before annuity payments are scheduled to begin. Unless
the Company agrees otherwise, the first day of a Benefit Payment Period in which
annuity payments are paid cannot be later than the contract anniversary
following the 85th birthday of the eldest owner, or five years after the
effective date of the Contract, whichever is later.
The amount applied to a settlement option will be the Account Value as of the
end of the Valuation Period immediately preceding the first day of the Benefit
Payment Period. The owner may select any form of settlement option which is
currently available. The standard forms of settlement options are described in
the Settlement Option section beginning on page ___ of this prospectus.
If the owner does not make an election as to form of settlement option, the
Company will apply the Account Value to a fixed dollar benefit for the life of
the annuitant with 120 monthly payments assured.
Death Benefit
A death benefit will be paid under a Contract if the owner dies during the
Accumulation Period. If a surviving spouse becomes a successor owner of the
Contract, the death benefit will be paid on the death of the successor owner if
he or she dies during the Accumulation Period.
The death benefit will be an amount equal to the largest of the following three
amounts:
o The Account Value on the Death Benefit Valuation Date.
o The total purchase payment(s), with interest at three percent (3%) per year
through the Death Benefit Valuation Date or the owner's 80th birthday if
earlier, compounded annually, less any partial surrenders and any contingent
deferred sales charges that applied to those amounts.
o The largest Account Value on any contract anniversary after the fourth
contract anniversary and prior to the Death Benefit Valuation Date or the
owner's 80th birthday if earlier, less any partial surrenders and any
contingent deferred sales charges 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.
An owner may elect the form of payment of the death benefit at any time before
his or her death. The form of payment may be a lump sum, or any available form
of settlement option. The standard forms of settlement options are described in
the Settlement Option section beginning on page ___ of this prospectus. If the
owner does not make an election as to the form of death benefit, the beneficiary
may make an election within one year after the owner's death. If no election as
to form of settlement option is made, the Company will apply the death benefit
to a fixed dollar benefit for a period certain of 48 months. The first day of
the Benefit Payment Period in which a death benefit is paid may not be more than
one year after the owner's death; the day a death benefit is paid in a lump sum
may not be more than five years after the owner's date of death.
Settlement Options
When a Contract is annuitized, or when a death benefit is applied to a
settlement option, the Account Value or the death benefit, as the case may be,
is surrendered to the Company in exchange for a promise to pay a stream of
benefit payments for the duration of the settlement option selected. Benefit
payments may be calculated and paid: (1) as a variable dollar benefit; (2) as a
fixed dollar benefit; or (3) as a combination of both. The stream of payments,
whether variable dollar or fixed dollar, is an obligation of the Company's
general account. However, only the amount of fixed dollar benefit payments is
guaranteed by the Company. The owner (or payee) bears the risk that any variable
dollar benefit payment may be less than the initial variable dollar benefit
payment, or that it may decline to zero, if Benefit Unit Values for that payment
decrease sufficiently. Transfers between a variable dollar benefit and a fixed
dollar benefit are not permitted, but transfers of Benefit Units between
Sub-Accounts are permitted once each 12 months after a variable dollar benefit
has been paid for at least 12 months. The formulas for transferring Benefit
Units among Sub-Accounts during the Benefit Payment Period are set forth in the
statement of additional information.
-30-
<PAGE>
Form of Settlement Option
The Company will make periodic payments in any form of settlement option that is
acceptable to it at the time of an election. The standard forms of settlement
options are described below. Payments under any settlement option may be in
monthly, quarterly, semi-annual or annual payment intervals. If the amount of
any regular payment under the form of settlement option elected would be less
than $50, an alternative form of settlement option will have to be elected. The
Company, in its discretion, may require benefit payments to be made by direct
deposit or wire transfer to the account of a designated payee.
The Company may modify minimum amounts, payment intervals and other terms and
conditions at any time without prior notice to owners. 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 or commuted.
The dollar amount of benefit payments will vary with the frequency of the
payment interval and the duration of the payments. Generally, each payment in a
stream of payments will be lesser in amount as the frequency of payments
increases, or as the length of the payment period increases, because more
payments will be paid. For life contingent settlement options, each payment in
the stream of payments will generally be lesser in amount as the life expectancy
of the annuitant or beneficiary increases because more payments are expected to
be paid.
Income for a Fixed Period: The Company will make periodic payments at the end of
each payment interval for a fixed period of 5 to 30 years. (Periods of 1-4 years
are available for death benefit settlement options only.)
Life Annuity with Payments for at Least a Fixed Period: The Company will make
periodic payments at the beginning of each payment interval for a fixed period,
or until the death of the person on whose life benefit payments are based if he
or she lives longer than the fixed period.
Joint and One-Half Survivor Annuity: The Company will make periodic payments at
the beginning of each payment interval 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.
Life Annuity: The Company will make periodic payments at the beginning of each
payment interval until the death of the person on whose life benefit payments
are based.
Calculation of Fixed Dollar Benefit Payments
Fixed dollar benefit payments are determined by multiplying the amount applied
to the fixed dollar benefit (expressed in thousands of dollars and after
deduction of any fees and charges, loans, or applicable premium taxes) by the
amount of the payment per $1,000 of value which the Company is currently paying
for settlement options of that type. Fixed dollar benefit payments will remain
level for the duration of the Benefit Payment Period.
The Company guarantees minimum fixed dollar benefit payment factors based on
1983 annuity mortality tables for individuals or groups, as applicable, with
interest at 3% per year, compounded annually. For group contracts, individual
tax-qualified Contracts and individual non-tax-qualified Internal Revenue Code
("IRC") Section 457 Contracts, the Company uses tables for blended lives (60%
female/40% male). For individual non-tax-qualified Contracts except IRC Section
457, the Company uses tables for male and female lives. The minimum monthly
payments per $1,000 of value for the Company's standard settlement options are
set forth in tables in the Contracts. The Company will provide upon request
minimum monthly payments for ages or fixed periods not shown in the settlement
option tables.
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<PAGE>
Calculation of Variable Dollar Benefit Payments
The first variable dollar benefit payment is calculated as if it were a fixed
dollar benefit payment. The amount applied to a variable dollar benefit is
converted into a stream of payments using the Company's minimum guaranteed
settlement option factors (including a 3% rate of interest). The amount of the
first payment paid will be the same amount as if the payment were a fixed dollar
benefit payment, except that it will be reduced by a pro rata portion of the
contract maintenance fee. The pro rata portion will be the amount of the full
contract maintenance fee divided by the number of payments to be made over a 12
month period.
The amount of each subsequent variable dollar benefit payment will reflect the
investment performance of the Sub-Account(s) selected and may vary from payment
to payment. Because the first variable dollar benefit payment included a 3% rate
of interest subsequent benefit payments will be the same amount as the first
payment if the net investment performance of the Sub-Accounts selected is
exactly 3%. Subsequent variable dollar benefit payments will be greater than or
less than the first payment if the net investment performance of the
Sub-Accounts selected is greater than or less than 3%, respectively.
The amount of each second and subsequent payment is the sum of the payment due
for each Sub-Account selected, less a pro rata portion of the contract
maintenance fee, as described above. The payment due for a Sub-Account is found
by multiplying the number of Benefit Units for the 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. An explanation of how Benefit Unit Values
are calculated is included in the Glossary of Financial Terms on page ____ of
this prospectus.
The number of Benefit Units for each Sub-Account selected by the owner (or
payee) is determined by allocating the amount of the first variable dollar
benefit payment (before deduction of the pro rata portion of the contract
maintenance fee) among the Sub-Account(s) selected in the percentages indicated
by the owner (or payee). The dollar amount allocated to each Sub-Account is
divided by the Benefit Unit Value for that Sub-Account as of the first day of
the Benefit Payment Period. The result is the number of Benefit Units that the
Company will pay for that Sub-Account at each payment interval. The number of
Benefit Units for each Sub-Account remains fixed during the Benefit Payment
Period, except as a result of any transfers among Sub-Accounts.
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<PAGE>
- --------------------------------------------------------------------------------
FEDERAL TAX MATTERS
- --------------------------------------------------------------------------------
This section provides a general description of federal income tax considerations
relating to the Contracts. The purchase of a Contract may have federal estate
and gift tax consequences in addition to income tax consequences. Estate and
gift taxation is not discussed in this prospectus or in the statement of
additional information. State taxation will vary depending on the State in which
you reside, and is not discussed in this prospectus or in the statement of
additional information.
The tax information provided in the prospectus and statement of additional
information should not be used as tax advice. Federal income tax laws are
subject to interpretation by the IRS and may be changed by future legislation.
You should consult a competent tax advisor to discuss how current tax laws
affect your particular situation.
Tax Deferral On Annuities
Internal Revenue Code ("IRC") Section 72 governs taxation of annuities in
general. The income earned during the Accumulation Period of a Contract is
generally not includable in income until it is withdrawn. In other words, a
Contract is a tax-deferred investment. The Contracts must meet certain
requirements in order to qualify for tax-deferred treatment under IRC Section
72. These requirements are discussed in the statement of additional information.
In addition, tax deferral is generally not available for a Contract when the
owner is not a natural person unless the Contract is part of a tax-qualified
plan. For a nonqualified deferred compensation plan, this rule means that the
employer as owner of the Contract will generally be taxed currently on any
increase in the Account Value, although the plan may provide a tax deferral to
the participating employee.
-33-
<PAGE>
Tax-Qualified Plans
Annuities may also qualify for tax-deferred treatment under other IRC provisions
governing tax-qualified retirement plans. These provisions include IRC Sections
401 (pension and profit sharing plans), 403(b) (tax-sheltered annuities), 408
and 408A (individual retirement annuities), and 457(g) (governmental deferred
compensation). Contributions to a tax-qualified Contract are typically made with
pre-tax dollars, while contributions to a non-tax-qualified Contract are
typically made from after-tax dollars, though there are exceptions in either
case. Tax-qualified Contracts may also be subject to restrictions on withdrawals
which do not apply to non-tax-qualified Contracts. These restrictions may be
imposed by the IRC or by an employer plan. Following is a brief description of
the types of tax-qualified retirement plans for which the Contracts are
available.
Individual Retirement Annuities
IRC 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.
Roth IRAs
IRC Section 408A permits certain individuals to contribute to a Roth IRA.
Contributions are not deductible. Tax-free distributions may be made after five
years once the owner attains age 59 1/2, becomes disabled, or dies, or for
qualified first-time homebuyer expenses.
Tax-Sheltered Annuities
IRC 403(b) of the Code permits the purchase of "tax-sheltered annuities" by
public schools and certain charitable, religious, educational and scientific
organizations described in IRC Section 501(c)(3). 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 with fixed employer and employee contributions. Under
Section 830.105 of the Texas Government Code, amounts cannot be distributed from
a Contract issued under the ORP until the employee terminates employment from
all Texas public institutions of higher education, retires, attains age 70 1/2,
or dies. Section 830.205 of the Texas Government Code provides that
employer-provided ORP benefits vest after one year of participation.
Accordingly, no distribution can be made 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
IRC 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 annuity 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 for
their specific needs.
Governmental Deferred Compensation Plans
State and local government employers may purchase annuity contracts to fund
deferred compensation plans for the benefit of their employees under IRC Section
457(g).
Nonqualified Deferred Compensation Plans
Governmental and other tax-exempt employers may invest in annuity contracts in
connection with nonqualified deferred compensation plans established for the
benefit of their employees under IRC Section 457 (other than 457(g)). Other
employers may invest in annuity contracts in connection with nonqualified
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. In these situations, the Contract is usually
owned by the employer and is subject to the claims of its general creditors.
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<PAGE>
Summary of Income Tax Rules
The following chart summarizes the basic income tax rules governing
tax-qualified and non-tax-qualified Contracts:
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------
Tax-Qualified Plans Basic Non-Tax-Qualified Contracts
Nonqualified Deferred Compensation
Plans
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Plan Types o IRC ss.401 (Pension and Profit o IRC ss.72 only
Sharing)
o IRC ss.403 (Tax-Sheltered
Annuities)
o IRC ss.408 (IRA, SIMPLE IRA)
o IRC ss.408A (Roth IRA)
o IRC ss.457
o Nonqualified Deferred
Compensation
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Who May Purchase Natural person or Anyone. Non-natural person may
Contract employer or employer plan. purchase but will generally lose
Nonqualified deferred compensation tax-deferred status.
plans will generally lose
tax-deferred status.
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Taxation of If there is an after-tax Account Value in excess of
Surrenders "investment in the contract," a investment in the contract is
pro-rata portion of amount taxable. Generally, the
surrendered is taxable based on "investment in the contract" will
ratio of "investment in the equal the sum of all purchase
contract" to Account Value. payments. Surrenders are deemed
Usually, 100% of distributions to come from earnings first, and
from a qualified plan will be purchase payments last.
taxed because there was no
after-tax contribution and For a Contract purchased as part
therefore no "investment in the of an IRC Section 1035 exchange
contract." Qualified which includes contributions made
distributions fromss.408A Roth IRA before August 14, 1982 ("pre-TEFRA
may be completely tax-free. contributions") partial
withdrawals are not taxable until
Surrenders prior to age 59 1/2 may the pre-TEFRA contributions have
be subject to 10% or greater tax been returned.
penalty depending on the type of
qualified plan. The taxable portion of any
surrenders prior to age 59 1/2 may
Surrenders from tax-qualified be subject to a 10% tax penalty.
Contracts may be restricted by the
Internal Revenue Code or by the terms
of a retirement plan.
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Taxation of Benefit May vary depending on type of settlement option selected, but generally,
Payments (annuity for fixed dollar benefit payments, a pro-rata portion of each payment
benefit payments or equal to [100% - (investment in contract/total expected payments)] is
death benefit subject to income tax. For variable dollar payments, a specific dollar
payments) amount of each payment is taxable, as predetermined by a pro-rata
formula, rather than subjecting a percentage of each payment to
taxation. Once the investment in the contract has been recovered, the
full amount of each benefit payment is taxable. Qualified distributions
from a ss.408A Roth IRA may be completely tax-free.
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Taxation of Lump Sum Taxed to recipient generally in same manner as full surrender. Tax
Death Benefit Payment penalties do not apply to death benefit distributions.
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Assignment of Assignment and transfer of Generally, deferred earnings
Contract/Transfer of ownership generally not permitted. become taxable to transferor at
Ownership time of transfer and transferee
receives an investment in the
contract equal to the Account
Value at that time. Gift tax
consequences not discussed herein.
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Withholding Eligible rollover distributions Generally, payee may elect to have
from ss.401 and ss.403(b) Contracts taxes withheld or not.
subject to 20% mandatory withholding on
taxable portion unless direct rollover.
Section 457 plan benefits and
nonqualified deferred compensation plan
benefits subject to wage withholding. For
all other payments, payee may elect to
have taxes withheld or not.
- -----------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
GLOSSARY OF FINANCIAL TERMS
- --------------------------------------------------------------------------------
The following financial terms explain how the variable portion of the Contracts
are valued. Read these terms in conjunction with the Definitions on page ___ of
this prospectus.
Accumulation Unit Value: The initial Accumulation Unit Value for each
Sub-Account other than the money market Sub-Account was set at $10. The initial
Accumulation Unit Value for the money market Sub-Account was set at $1. The
initial Accumulation Unit Value for a Sub-Account was established at the
inception date of the Separate Account, or on the date the Sub-Account was
established, if later. The Company establishes distinct Accumulation Unit Values
for Contracts with different Separate Account fee structures, as described in
the Fee Table.
After the initial Accumulation Unit Value is established, the Accumulation Unit
Value for a Sub-Account 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 for that Sub-Account for the current Valuation Period.
A Net Investment Factor of 1 produces no change in the Accumulation Unit Value
for that Valuation Period. A Net Investment Factor of more than 1 or less than 1
produces an increase or a decrease, respectively, in the Accumulation Unit Value
for that Valuation Period.
Benefit Unit Value: The initial Benefit Unit Value for a Sub-Account will be set
equal to the Accumulation Unit Value for that Sub-Account at the end of the
first Valuation Period in which a variable dollar benefit is established by the
Company. The Company will establish distinct Benefit Unit Values for Contracts
with different Separate Account fee structures, as described in the Fee Table.
The Benefit Unit Value for a Sub-Account at the end of each Valuation Period
after the first is the Benefit Unit Value at the end of the previous Valuation
Period multiplied by the Net Investment Factor for that Sub-Account for the
current Valuation Period, and multiplied by a daily investment factor
(0.99991781) for each day in the Valuation Period. The daily investment factor
reduces the previous Benefit Unit Value by the daily amount of the assumed
interest rate (3% per year, compounded annually) which is already incorporated
in the stream of variable dollar benefit payments.
Net Investment Factor: The Net Investment Factor for any Sub-Account for any
Valuation Period is determined by dividing NAV2 by NAV1 and subtracting a factor
representing the mortality and expense risk charge and the administration charge
deducted from the Sub-Account during that Valuation Period, where:
NAV1 is equal to the Net Asset Value for the Portfolio for the preceding
Valuation Period; and
NAV2 is equal to the Net Asset Value for the Portfolio for the current Valuation
Period plus the per share amount of any dividend or net capital gain
distributions made by the Portfolio during the current Valuation Period, and
plus or minus a per share charge or credit if the Company adjusts its tax
reserves due to investment operations of the Sub-Account or changes in tax law.
In other words, the Net Investment Factor represents the percentage change in
the total value of assets invested by the Separate Account in a Portfolio. That
percentage is then applied to Accumulation Unit Values and Benefit Unit Values
as described in the discussion of those terms in this section of the prospectus.
-36-
<PAGE>
THE REGISTRATION STATEMENT
- --------------------------------------------------------------------------------
The Company filed a Registration Statement with the Securities and Exchange
Commission under the Securities Act of 1933 relating to the Contracts offered by
this prospectus. This prospectus was filed as an annual amendment to the
Registration Statement, but it does not constitute the complete Registration
Statement. The Registration Statement contains further information relating to
the Company and the Contracts. Statements in this prospectus discussing the
content of the Contracts and other legal instruments are summaries. The actual
documents are filed as exhibits to the Registration Statement. For a complete
statement of the terms of the Contracts or any other legal document, refer to
the appropriate exhibit 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 Securities and Exchange
Commission's Web site http:\\www.sec.gov. The registration number for the
Registration Statement is 333-19725.
OTHER INFORMATION
- --------------------------------------------------------------------------------
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 Portfolios' preparations for the year 2000 are described in the Portfolio
prospectuses.
Legal Proceedings
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. There are no pending legal proceedings against the
Separate Account or AAG Securities, Inc.
-37-
<PAGE>
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 the statement of additional information:
Page
ANNUITY INVESTORS LIFE INSURANCE COMPANYREGISTERED............................3
General Information and History.........................................3
State Regulation........................................................3
SERVICES......................................................................3
Safekeeping of Separate Account Assets..................................3
Records and Reports.....................................................3
Experts.................................................................3
DISTRIBUTION OF THE CONTRACTS.................................................3
CALCULATION OF PERFORMANCE INFORMATION........................................4
Money Market Sub-Account Standardized Yield Calculation.................4
Average Annual Total Return Calculation.................................5
Cumulative Total Return Calculation.....................................5
Standardized Average Annual Total Return Data...........................6
Non-Standardized Average Annual Total Return Data.......................7
Other Performance Measures..............................................8
BENEFIT UNITS--TRANSFER FORMULAS..............................................9
FEDERAL TAX MATTERS..........................................................10
Taxation of Separate Account Income....................................10
Tax Deferred Status of Non-Qualified Contracts.........................10
FINANCIAL STATEMENTS.........................................................11
Copies of the statement of additional information dated May 1, 1999 are
available without charge. To request a copy, please clip this coupon on the
dotted line below, enter your name and address in the spaces provided below, and
mail to: Annuity Investors Life Insurance CompanyREGISTERED, P.O. Box 5423,
Cincinnati, Ohio 45201-5423.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Name:
Address:
City:
State:
Zip:
-38-
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANYREGISTERED
ANNUITY INVESTORSREGISTERED VARIABLE ACCOUNT B
STATEMENT OF ADDITIONAL INFORMATION for
The Commodore NavigatorSERVICE MARK
Individual and Group Flexible Premium Deferred Annuities
The Commodore IndependenceSERVICE MARK
Individual Flexible Premium Deferred Annuities
The Commodore AdvantageSERVICE MARK
Individual and Group Flexible Premium Deferred Annuities
May 1, 1999
This statement of additional information supplements the current prospectuses
for The Commodore NavigatorSERVICE MARK Individual and Group Flexible Premium
Deferred Annuity Contracts, The Commodore AdvantageSERVICE MARK Individual and
Group Flexible Premium Deferred Annuity Contracts, and The Commodore
IndependenceSERVICE MARK Individual Flexible Premium Deferred Annuity Contracts
(collectively, the "Contracts") offered by Annuity Investors Life Insurance
CompanyREGISTERED. This statement of additional information is not a prospectus
and should be read only in conjunction with the prospectus for the applicable
Contract. Terms used in this statement of additional information have the same
meaning as in the prospectuses.
A copy of any of the prospectuses dated May 1, 1999, 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.
-1-
<PAGE>
TABLE OF CONTENTS
Page
ANNUITY INVESTORS LIFE INSURANCE COMPANY(R)..................................3
GENERAL INFORMATION AND HISTORY...........................................3
STATE REGULATION..........................................................3
SERVICES.....................................................................3
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS....................................3
RECORDS AND REPORTS.......................................................3
EXPERTS...................................................................3
DISTRIBUTION OF THE CONTRACTS................................................3
CALCULATION OF PERFORMANCE INFORMATION.......................................4
MONEY MARKET SUB-ACCOUNT STANDARDIZED YIELD CALCULATION...................4
AVERAGE ANNUAL TOTAL RETURN CALCULATION...................................5
CUMULATIVE TOTAL RETURN CALCULATION.......................................5
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN DATA.............................6
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN DATA.........................7
OTHER PERFORMANCE MEASURES................................................8
BENEFIT UNITS--TRANSFER FORMULAS.............................................9
FEDERAL TAX MATTERS.........................................................10
TAXATION OF SEPARATE ACCOUNT INCOME......................................10
TAX DEFERRED STATUS OF NON-QUALIFIED CONTRACTS...........................10
FINANCIAL STATEMENTS........................................................11
-2-
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY(R)
- --------------------------------------------------------------------------------
General Information and History
Annuity Investors Life Insurance CompanyREGISTERED (the "Company"), formerly
known as Carillon Life Insurance Company, is a stock life insurance company
incorporated under the laws of the State of Ohio in 1981. The name change
occurred in the state of domicile on April 12, 1995. The Company is principally
engaged in the sale of fixed and variable annuity policies.
The Company was acquired in November, 1994, by American Annuity Group(R), Inc.
("AAG") a Delaware corporation that is a publicly traded insurance holding
company. Great AmericanREGISTERED Insurance Company ("GAIC"), an Ohio
corporation, owns more than 80% of the common stock of AAG. GAIC is a multi-line
insurance carrier and a wholly owned subsidiary of Great AmericanREGISTERED
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 Portfolio shares held by each
of the Sub-Accounts.
Title to assets invested in the fixed account options 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 options 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.
Experts
The financial statements of the Separate Account as of December 31, 1998 and the
year then ended and the statutory-basis financial statements of the Company as
of December 31, 1998 and 1997, and for the years then ended, appearing in this
statement of additional information have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon also 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.
The approximate commissions received and retained by AAG Securities, Inc. ("AAG
Securities") for sale of the Contracts for each of the last three fiscal years
are as follows:
- ----------------- ------------ ------------ -----------
Year Ended 12/31/98 12/31/97 12/31/96
- ----------------- ------------ ------------ -----------
Navigator (7/15 to N/A
12/31)
Received $296,000 N/A
Retained $18,000 N/A
- ----------------- ------------ ------------ -----------
Advantage (7/22 to N/A N/A
12/31)
Received N/A N/A
Retained N/A N/A
- ----------------- ------------ ------------ -----------
Independence (7/22 to N/A N/A
12/31)
Received N/A N/A
Retained N/A N/A
- ----------------- ------------ ------------ -----------
N/A = Contract not available and no commissions paid.
-3-
<PAGE>
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 Portfolio or on its portfolio securities. This current annualized yield
is calculated according to the following formula:
YIELD = (BASE PERIOD RETURN/7)*365
Where:
BASE PERIOD RETURN = The percentage (or net) change in the
Accumulation Unit Value for the money market
Sub-Account ("AUV") over a 7 day period
determined as follows:
AUV at end of 7 day period - AUV at
beginning of 7 day period AUV at
beginning of 7 day period
Because the Net Asset Value of the money market Portfolio rarely deviates from
1.000000 per unit, the change in the Accumulation Unit Value for the money
market Sub-Account (the numerator of the above fraction) is ordinarily
attributable exclusively to dividends paid and reinvested over the 7 day period
less mortality and expense risk and administration charges deducted from the
Sub-Account over the 7 day period. Because of the deductions for mortality and
expense risk and administration charges, the yield for the money market
Sub-Account of the Separate Account will be lower than the yield for the money
market Portfolio 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,
which is yield 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 yields and effective yields for the money market Sub-Account for the
seven-day period ended December 31, 1998 are as follows:
Money Market Sub-Account Yield Effective Yield
Standard Navigator Contracts % %
Enhanced Navigator Contracts % %
Advantage Contracts % %
Independence Contracts % %
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 Portfolio or
substitute funding vehicle, the types and quality of portfolio securities held
by the money market Portfolio or substitute funding vehicle, and operating
expenses. IN ADDITION, THE YIELD FIGURES DO NOT REFLECT THE EFFECT OF ANY
CONTINGENT DEFERRED SALES CHARGE OR CONTRACT MAINTENANCE FEES THAT MAY BE
APPLICABLE ON SURRENDER UNDER ANY CONTRACT.
-4-
<PAGE>
Average Annual Total Return Calculation
The Company may from time to time 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)n = ERV
Where
P = a hypothetical initial payment of $1,000
T = average annual total return
= 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)
Average annual total return may be presented in either standardized or
nonstandardized form. Average annual total return data may be either actual or
hypothetical return. It will be hypothetical if it reflects performance for a
period ofr time before the Separate Account commenced operations. The ERV for
standardized data reflects the deduction of all recurring fees, such as contract
maintenance fees, contingent deferred sales charges, mortality and expense risk
charges, and administration charges, which are charged to all Contracts of that
type. The ERV for nonstandardized data reflects the deduction of mortality and
expense risk charges and administration charges, but not contract maintenance
fees or contingent deferred sales charges. Non-standardized performance data
will be advertised only if the requisite standardized performance data is also
disclosed.
Cumulative Total Return Calculation
The Company may from time to time disclose cumulative total return for various
periods of time. Cumulative total return reflects the performance of a
Sub-Account over the entire period presented. Cumulative total return may be
either actual return or hypothetical return. It will be hypothetical if it
reflects performance for a period of time before the Separate Account commenced
operations. Cumulative total return is calculated using the following formula:
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
Although cumulative total return can be presented in either standardized or
non-standardized form, the Company currently advertises only non-standardized
cumulative total return, which assumes a contingent deferred sales charge of 0%,
and no contract maintenance fee. Non-standardized cumulative total return can
only be advertised if standardized average annual total return is also
disclosed.
-5-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Standardized Average Annual Total Return Data
(Data reflects deduction of all recurring Navigator Navigator Advantage Independence
charges including contingent deferred sales Standard Enhanced Contracts Contracts
charges and contract maintenance fees) Contracts1/ Contracts2/
----------------------------------------------------------------------------------
1 Year Life of 1 Year Life of 1 Year Life of 1 Year Life of
All Periods Separate Separate Separate Separate
Ending 12/31/98 Account3/ Account3/ Account3/ Account3/
- ------------------------------------------------------------------------------------------------------------------------------------
Janus A.S.-Aggressive Growth Portfolio
Janus A.S.-Worldwide Growth Portfolio
Janus A.S.-Balanced Portfolio
Janus A.S.-Growth Portfolio
Janus A.S.-International Growth Portfolio
Dreyfus V.I.F.-Capital Appreciation Portfolio
Dreyfus V.I.F.-Money Market Portfolio
Dreyfus V.I.F.-Growth and Income Portfolio
Dreyfus V.I.F.-Small Cap Portfolio
The Dreyfus Socially Responsible Growth Fund,Inc.
Dreyfus Stock Index Fund
Strong Opportunity Fund II, Inc.
Strong Variable Insurance Funds, Inc.-Strong
Growth Fund II
INVESCO VIF-Industrial Income Portfolio
INVESCO VIF-Total Return Portfolio
INVESCO VIF-High Yield Portfolio
Morgan Stanley Universal Funds, Inc.-Mid Cap
Value Portfolio
Morgan Stanley Universal Funds, Inc.-Value
Portfolio
Morgan Stanley Universal Funds, Inc.-Fixed
Income Portfolio
Morgan Stanley Universal Funds, Inc.-U.S.
Real Estate Portfolio
Morgan Stanley Universal Funds, Inc.-Emerging
Markets Equity Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Growth
II Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Large
Cap Growth Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Tech. &
Comm. Portfolio
The Timothy Plan Variable Series 4/ 4/ 4/ 4/
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
1/ Annual mortality and expense risk charge of 1.25% of daily net asset value.
2/ Annual mortality and expense risk charge of 0.95% of daily net asset value.
3/ From Separate Account commencement date (7/15/97) to 12/31/98 unless otherwise noted.
4/ From inception date of Portfolio (5/1/98) to 12/31/98.
</FN>
-6-
<PAGE>
Non-Standardized Average Annual Total Return Data
(Data reflects deduction of all recurring charges Navigator Standard Contracts1/; Navigator
except contingent deferred sales charges and contract Advantage Contracts; Independence Enhanced Contracts2/
maintenance fees data is the same for Navigator Contracts
Standard Contracts, Advantage Contracts and
Independence Contracts)
--------------------------------------------------------------------------
1 Year Life of Separate 1 Year Life of Separate
All Periods Account3/ Account3/
Ending 12/31/98
- --------------------------------------------------------- -------------------- -----------------------------------------------------
Janus A.S.-Aggressive Growth Portfolio
Janus A.S.-Worldwide Growth Portfolio
Janus A.S.-Balanced Portfolio
Janus A.S.-Growth Portfolio
Janus A.S.-International Growth Portfolio
Dreyfus V.I.F.-Capital Appreciation Portfolio
Dreyfus V.I.F.-Money Market Portfolio
Dreyfus V.I.F.-Growth and Income Portfolio
Dreyfus V.I.F.-Small Cap Portfolio
The Dreyfus Socially Responsible Growth Fund, Inc.
Dreyfus Stock Index Fund
Strong Opportunity Fund II, Inc.
Strong Variable Insurance Funds, Inc.-Strong
Growth Fund II
INVESCO VIF-Industrial Income Portfolio
INVESCO VIF-Total Return Portfolio
INVESCO VIF-High Yield Portfolio
Morgan Stanley Universal Funds, Inc.-Mid Cap
Value Portfolio
Morgan Stanley Universal Funds, Inc.-Value
Portfolio
Morgan Stanley Universal Funds, Inc.-Fixed
Income
Portfolio
Morgan Stanley Universal Funds, Inc.-U.S. Real
Estate
Portfolio
Morgan Stanley Universal Funds, Inc.-Emerging
Markets
Equity Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Growth
II Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Large
Cap Growth Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Tech.
& Comm. Portfolio
The Timothy Plan Variable Series 4/ 4/
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
1/ Annual mortality and expense risk charge of 1.25% of daily net asset value.
2/ Annual mortality and expense risk charge of 0.95% of daily net asset value.
3/ From Separate Account commencement date (7/15/97) to 12/31/98 unless otherwise noted.
4/ From inception date of Portfolio (5/1/98) to 12/31/98
</FN>
</TABLE>
-7-
<PAGE>
Other Performance Measures
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 options
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
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 Portfolios, 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 Portfolios. 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 Portfolios 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 Portfolio'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.
-8-
<PAGE>
BENEFIT UNITS--TRANSFER FORMULAS
- --------------------------------------------------------------------------------
Transfers of a Contract owner's Benefit Units between Sub-Accounts during the
Benefit Payment Period are implemented according to the following formulas:
(1) The number of Benefit Units to be transferred from a given
Sub-Account is BU1(trans).
(2) The number of the Contract owner's Benefit Units remaining in such
Sub-Account (after the transfer)
= UNIT1 - BU1(trans).
(3) The number of Benefit Units transferred to the new Sub-Account is
BU2(trans). BU2(trans) = BU1(trans) * BUV1/BUV2.
(4) The number of the Contract owner's Benefit Units in the new
Sub-Account (after the transfer)
= UNIT2 + BU2(trans).
(5) Subsequent variable dollar benefit payments will be based on the
number of the Contract owner's Benefit Units in each Sub-Account
(after the transfer) as of the next variable dollar benefit
payment's due date.
Where:
BU1(trans) is the number of the Contract owner's Benefit Units
transferred from a given Sub-Account.
BUV1 is the Benefit Unit Value of the Sub-Account from which the
transfer is being made as of the end of the Valuation Period in
which the transfer request was received.
BU2(trans) is the number of the Contract owner's Benefit Units
transferred into the new Sub-Account.
BUV2 is the Benefit Unit Value of the Sub-Account to which the
transfer is being made as of the end of the Valuation Period in
which the transfer request was received.
UNIT1 is the number of the Contract owner's Benefit Units in the
Sub-Account from which the transfer is being made, before the
transfer.
UNIT2 is the number of the Contract owner's Benefit Units in the
Sub-Account to which the transfer is being made, before the
transfer.
-9-
<PAGE>
FEDERAL TAX MATTERS
- --------------------------------------------------------------------------------
The following discussion supplements the discussion of federal tax matters in
the prospectuses for the Contracts. This discussion is general and is not
intended as tax advice. Federal income tax laws or the interpretation of those
laws by the Internal Revenue Service may change at any time.
Taxation of Separate Account Income
The Company is taxed as a life insurance company under Part I of Subchapter L of
the Internal Revenue Code ("IRC"). 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 IRC. 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.
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 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
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 of a Contract has more
flexibility in allocating purchase payments and Account Value than was
contemplated in the rulings. These differences could result in an owner or
participant 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.
Tax Deferral On Nonqualified Contracts
Section 817(h) of the Code requires that with respect to nonqualified Contracts,
the investments of the Portfolios 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 Portfolios, intends to
comply with the diversification requirements prescribed by the Treasury in Reg.
Sec. 1.817-5, which affect how the Portfolios' assets may be invested. Failure
of a Portfolio to meet the diversification requirement would result in loss of
tax deferred status to owners of nonqualified Contracts.
-10-
<PAGE>
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The audited financial statements of the Separate Account for the year ended
December 31, 1998 and the Company's audited statutory-basis financial statements
for the years ended December 31, 1998 and 1997 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.
-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 CompanyREGISTERED authorizing establishment of Annuity
InvestorsREGISTERED Variable Account B.1/
(2) Not Applicable.
(3) (a) Distribution Agreement between Annuity Investors Life Insurance
Company REGISTERED and AAG Securities, Inc.2/
(b) Form of Selling Agreement between Annuity Investors Life
Insurance CompanyREGISTERED, AAG Securities, Inc. and another
Broker-Dealer.1/
(c) Revised form of Selling Agreement between Annuity Investors
Life Insurance CompanyREGISTERED, AAG Securities, Inc. and
another Broker-Dealer.. 6/
(4) Individual and Group Contract Forms and Endorsements.
(a) Form of Qualified Individual Flexible Premium Deferred Variable
Annuity Contract.2/
(b) Form of Non-Qualified Individual Flexible Deferred Variable
Annuity Contract.2/
(c) Form of Loan Endorsement to Individual Contract.2/
(d) Form of Tax Sheltered Annuity Endorsement to Individual
Contract.2/
(e) Form of Qualified Pension, Profit Sharing and Annuity Plan
Endorsement to Individual Contract.2/
(f) Form of Employer Plan Endorsement to Individual Contract.2/
(g) Form of Individual Retirement Annuity Endorsement to Individual
Contract.2/
(h) Form of Texas Optional Retirement Program Endorsement to
Individual Contract.2/
(i) Form of Long-Term Care Waiver Rider to Individual Contract.2/
(j) Form of Simple IRA Endorsement to Individual Contract.2/
(k) Form of Group Flexible Premium Deferred Variable Annuity
Contract.2/
-1-
(l) Form of Certificate of Participation under a Group Flexible
Premium Deferred Variable Annuity Contract.2/
(m) Form of Loan Endorsement to Group Contract.2/
(n) Form of Loan Endorsement to Certificate of Participation under
a Group Contract. 2/
(o) Form of Tax Sheltered Annuity Endorsement to Group Contract.2/
(p) Form of Tax Sheltered Annuity Endorsement to Certificate
of Participation under a Group Contract.2/
(q) Form of Qualified Pension, Profit Sharing and Annuity Plan
Endorsement to Group Contract.2/
(r) Form of Qualified Pension, Profit Sharing and Annuity Plan
Endorsement to Certificate of Participation under a Group
Contract.2/
(s) Form of Employer Plan Endorsement to Group Contract.2/
(t) Form of Employer Plan Endorsement to Certificate of
Participation under a Group Contract.2/
(u) Form of Deferred Compensation Endorsement to Group Contract.2/
(v) Form of Deferred Compensation Endorsement to Certificate of
Participation under a Group Contract.2/
(w) Form of Texas Optional Retirement Program Endorsement to Group
Contract.2/
(x) Form of Texas Optional Retirement Program Endorsement to
Certificate of Participation under a Group Contract.2/
(y) Form of Long-Term Care Waiver Rider to Group Contract.2/
(z) Form of Long-Term Care Waiver Rider to Certificate of
Participation under a Group Contract.2/
(aa) Revised form of Individual Retirement Annuity Endorsement to
Individual Qualified Contract. 3/
(bb) Revised form of SIMPLE IRA Endorsement to Qualified Individual
Contract.3/
(cc) Form of Roth IRA Endorsement to Qualified Individual Contract.
3/
(dd) Revised form of Employer Plan Endorsement to Group Contract. 3/
-2-
<PAGE>
(ee) Revised form of Employer Plan Endorsement to Certificate of
Participation under a Group Contract. 3/
(ff) Revised form of Employer Plan Endorsement to Qualified
Individual Contract. 3/
(gg) Revised form of Tax Sheltered Annuity Endorsement to Group
Contract.3/
(hh) Revised form of Tax Sheltered Annuity Endorsement to
Certificate of Participation under a Group Contract. 3/
(ii) Revised form of Tax Sheltered Annuity Endorsement to Qualified
Individual Contract. 3/
(jj) Revised form of Qualified Pension, Profit Sharing and Annuity
Plan Endorsement to Group Contract. 3/
(kk) Revised form of Qualified Pension, Profit Sharing and Annuity
Plan Endorsement to Certificate of Participation under a Group
Contract. 3/
(ll) Revised form of Qualified Pension, Profit Sharing and Annuity
Plan Endorsement to Qualified Individual Contract. 3/
(mm) Form of Governmental Section 457 Plan Endorsement to Group
Contract. 3/
(nn) Form of Governmental Section 457 Plan Endorsement to
Certificate of Participation under a Group Contract. 3/
(oo) Form of Governmental Section 457 Plan Endorsement to Qualified
Individual Contract. 3/
(pp) Form of Successor Owner Endorsement to Group Contract. 6/
(qq) Form of Successor Owner Endorsement to Certificate of
Participation under a Group Contract. 6/
(rr) Form of Successor Owner Endorsement to Qualified Individual
Contract and Non-Qualified Individual Contract. 6/
(ss) Revised form of Successor Owner Endorsement to Group Contract
(filed herewith).
(tt) Revised form of Successor Owner Endorsement to Certificate of
Participation under a Group Contract (filed herewith).
(uu) Revised form of Successor Owner Endorsement to Qualified
Individual Contract and Non-Qualified Individual Contract
(filed herewith).
(vv) Form of Individual Retirement Annuity Endorsement to Group
Contract (filed herewith).
(ww) Form of Individual Retirement Annuity Endorsement to
Certificate of Participation under a Group Contract (filed
herewith).
-3-
<PAGE>
(xx) Form of SIMPLE Individual Retirement Annuity Endorsement to
Group Contract (filed herewith).
(yy) Form of SIMPLE Individual Retirement Annuity Endorsement to
Certificate of Participation under a Group Contract (filed
herewith).
(zz) Form of Roth Individual Retirement Annuity Endorsement to Group
Contract (filed herewith).
(aaa) Form of Roth Individual Retirement Annuity Endorsement to
Certificate of Participation under a Group Contract (filed
herewith).
(bbb) Form of Unisex Endorsement to Nonqualified Individual Contract
(filed herewith).
(5) (a) Form of Application for Individual Flexible Premium Deferred
Annuity Contract and Certificate of Participation under a Group
Contract.2/
(b) Form of Application for Group Flexible Premium Deferred Annuity
Contract.2/
(c) Revised form of Application for Individual Flexible Premium
Deferred Annuity Contract and Certificate of Participation
under a Group Contract. 4/
(d) Revised form of Application for Group Flexible Premium Deferred
Annuity Contract. 4/
(6) (a) Articles of Incorporation of Annuity Investors Life Insurance
CompanyREGISTERED.1/
(i) Amendment t o 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.REGISTERED1/
(7) Not Applicable.
(8) (a) Participation Agreement between Annuity Investors Life
Insurance CompanyREGISTERED 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 CompanyREGISTERED and Dreyfus Life and Annuity Index
Fund, Inc. (d/b/a Dreyfus Stock Index Fund).2/
-4-
<PAGE>
(i) Letter Agreement dated April 14, 1997 between Annuity
Investors Life Insurance CompanyREGISTERED and Dreyfus
Life and Annuity Index Fund, Inc. (d/b/a Dreyfus Stock
Index Fund).2/
(c) Participation Agreement between Annuity Investors Life
Insurance CompanyREGISTERED and The Dreyfus Socially
Responsible Growth Fund, Inc.2/
(i) Letter Agreement dated April 14, 1997 between Annuity
Investors Life Insurance CompanyREGISTERED and The
Dreyfus Socially Responsible Growth Fund, Inc.2/
(d) Participation Agreement between Annuity Investors Life
Insurance CompanyREGISTERED and Janus Aspen Series.2/
(e) Participation Agreement between Annuity Investors Life
Insurance CompanyREGISTERED and Strong Variable Insurance
Funds, Inc. and Strong Special Fund II, Inc.2/
(f) Participation Agreement between Annuity Investors Life
Insurance CompanyREGISTERED and INVESCO Variable Investment
Funds, Inc.2/
(g) Participation Agreement between Annuity Investors Life
Insurance CompanyREGISTERED and Morgan Stanley Universal Funds,
Inc.2/
(h) Participation Agreement between Annuity Investors Life
Insurance CompanyREGISTERED and PBHG Insurance Series Fund,
Inc.2/
(i) Service Agreement between Annuity Investors Life Insurance
CompanyREGISTERED and American Annuity GroupSM, Inc.1/
(j) Agreement between AAG Securities, Inc. and AAG Insurance
Agency, Inc.1/
(k) Investment Service Agreement between Annuity Investors Life
Insurance CompanyREGISTERED and American Annuity GroupSM, Inc.
1/
(l) Service Agreement between Annuity Investors Life Insurance
CompanyREGISTERED and Strong Capital Management, Inc.2/
(m) Service Agreement between Annuity Investors Life Insurance
CompanyREGISTERED and Pilgrim Baxter & Associates, Ltd.2/
(n) Service Agreement between Annuity Investors Life Insurance
CompanyREGISTERED and Morgan Stanley Asset Management, Inc. 2/
(o) Amended and Restated Agreement between The Dreyfus Corporation
and Annuity Investors Life Insurance CompanyREGISTERED.2/
(p) Service Agreement between Annuity Investors Life Insurance
CompanyREGISTERED and Janus Capital Corporation.2/
(q) Service Agreement between INVESCO Funds Group, Inc. and Annuity
Investors Life Insurance Company.4/
-5-
<PAGE>
(r) Participation Agreement between The Timothy Plan Variable
Series, Timothy Partners, Ltd. and Annuity Investors Life
Insurance Company4/
(s) Service Agreement between The Timothy Plan Variable Series and
Annuity Investors Life Insurance Company. 4/
(9) Opinion and Consent of Counsel.1/
(10) Consent of Independent Auditors. 4/
(11) No financial statements are omitted from Item 23.
(12) Not Applicable.
(13) Schedule for Computation of Performance Quotations. 4/
(14) Financial Data Schedule. 4/
(15) Powers of Attorney. 5/
- ------------------------
1/ Filed with Form N-4 on December 23, 1996.
2/ Filed with Pre-Effective Amendment No. 1 on June 3, 1997.
3/ Filed with Post-Effective Amendment No. 1 on February 27, 1998.
4/ Filed with Post-Effective Amendment No. 2 on April 29, 1998.
5/ Incorporated by reference to Pre-Effective Amendment No. 1, filed on
behalf of Annuity Investors Variable Account B, SEC File No. 333-51955
on July 6, 1998.
6/ Filed with Post-Effective Amendment No. 3 on November 17, 1998.
-6-
<PAGE>
Item 25. Directors and Officers of the Depositor
Principal Positions and Offices
Name Business Address With the Company
Robert Allen Adams (1) President, Director
Stephen Craig Lindner (1) Director
William Jack Maney, II (1) Assistant Treasurer and
Director
James Michael Mortensen (1) Executive Vice President,
Assistant Secretary and
Director
Mark Francis Muething (1) Senior Vice President,
Secretary, General Counsel
and Director
Jeffrey Scott Tate (1) Director
Thomas Kevin Liguzinski (1) Senior Vice President
Charles Kent McManus (1) Senior Vice President
Robert Eugene Allen (1) Vice President and Treasurer
Arthur Ronald Greene, III (1) Vice President
Betty Marie Kasprowicz (1) Vice President and Assistant
Secretary
Michael Joseph O'Connor (1) Senior Vice President
Lynn Edward Laswell (1) Vice President and Controller
Vincent J. Graneri (1) Vice President and Chief Actuary
David Shipley (1) Vice President
Thomsas E. Mischell (1) Assistant Treasurer
(1) P.O. Box 5423, Cincinnati, Ohio 45201-5423.
Item 26. Persons Controlled by or Under Common Control With the Depositor or
Registrant
The Depositor, Annuity Investors Life Insurance CompanyREGISTERED is a wholly
owned subsidiary of Great AmericanREGISTERED Life Insurance Company, which is a
wholly owned subsidiary of American Annuity Group,SM Inc. The Registrant,
Annuity InvestorsREGISTERED Variable Account B, is a segregated asset account of
Annuity Investors Life Insurance CompanyREGISTERED.
The following chart shows the affiliations among Annuity Investors Life
Insurance CompanyREGISTERED and its parent, subsidiary and affiliated entities.
-7-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> >
AMERICAN FINANCIAL GROUP, INC. % OF STOCK OWNED (1)
| STATE OF DATE OF BY IMMEDIATE
| DOMICILE INCORPORATION PARENT COMPANY NATURE OF BUSINESS
|
|_AFC Holding Company Ohio 12/09/1994 100 Holding Company
|_AHH Holdings, Inc. Florida 12/27/1995 49 Holding Company
|_Columbia Financial Company Florida 10/26/1993 100 Real Estate Holding Company
|_American Heritage Holding Corporation Delaware 11/02/1994 100 Home Builder
|_Heritage Homes Realty, Inc. Florida 07/20/1993 100 Home Sales
|_Southeast Title, Inc. Florida 05/16/1995 100 Title Company
|_Heritage Home Finance Corporation Florida 02/10/1994 100 Finance Company
|_American Financial Capital Trust I Delaware 09/14/1996 100 Statutory Business Trust
|_American Financial Corporation Ohio 11/15/1955 100 Holding Company
|_AFC Coal Properties, Inc. Ohio 12/18/1996 100 Real Estate Holding Company
|_American Barge & Towing Company Ohio 03/25/1982 100 Inactive
|_Spartan Transportation Ohio 07/19/1983 Mgmt-River Transportation
Corporation 100 Equipment
|_American Financial Corporation Ohio 08/27/1963 100 Inactive
|_American Money Management Corporation Ohio 03/01/1973 100 Investment Management
|_American Money Management International, N.V Netherland - 05/10/1985 100 Securities Management
Antilles
|_American Premier Underwriters, Inc. Pennsylvania 00/00/1846 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 05/30/1979 100 Inactive
|_GAI (Bermuda) Ltd. Bermuda 04/06/1998 100 Holding Company
|_GAI Insurance Company, Ltd. Bermuda 09/18/1989 100 Reinsurance Company
|_The Indianapolis Union Railway Company Indiana 11/19/1872 100 Inactive
|_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 12/15/1986 100 Holding Company
|_PCC Chicago Realty Corp. New York 12/23/1986 100 Real Estate Developer
|_PCC Gun Hill Realty Corp. New York 12/18/1985 100 Real Estate Developer
|_PCC Michigan Realty, Inc. Michigan 11/09/1987 100 Real Estate Developer
|_PCC Scarsdale Realty Corp. New York 06/01/1986 100 Real Estate Developer
|_Scarsdale Depot Associates, L.P. Delaware 05/05/1989 80 Real Estate Developer
|_Penn Central Energy Management Company Delaware 05/11/1987 100 Energy Operations Manager
|_Pennsylvania Company Delaware 12/05/1958 100 Holding Company
|_Atlanta Casualty Company Ohio 06/13/1972 100 (2) Property/Casualty Insurance
|_American Premier Insurance Company Indiana 11/30/1989 100 Property/Casualty Insurance
|_Atlanta Reserve Insurance Company Ohio 12/07/1998 100 Property/Casualty Insurance
|_Atlanta Specialty Insurance Company Ohio 02/06/1974 100 Property/Casualty Insurance
|_Atlanta Casualty Group, Inc. Georgia 04/01/1977 100 Insurance Agency
|_Atlanta Casualty General Agency, Inc. Texas 03/15/1961 100 Managing General Agency
|_Atlanta Insurance Brokers, Inc. Georgia 02/06/1971 100 Insurance Agency
|_Treaty House, Ltd. (d/b/a Mr. Budget) Nevada 11/02/1971 100 Insurance Premium Finance
|_Penn Central U.K. Limited United Kingdom 10/28/1992 100 Insurance Holding Company
|_Insurance (GB) Limited United Kingdom 05/13/1992 100 Property/Casualty Insurance
-8-
<PAGE>
|_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
|
|_Delbay Corporation Delaware 12/27/1962 100 Inactive
|_Great Southwest Corporation Delaware 10/25/1978 100 Real Estate Developer
|_World Houston, Inc. Delaware 05/30/1974 100 Real Estate Developer
|_Hangar Acquisition Corp. Ohio 10/06/1995 100 Aircraft Investment
|_Infinity Insurance Company Indiana 07/09/1955 100 Property/Casualty Insurance
|_Infinity Agency of Texas, Inc. Texas 07/15/1992 100 Managing General Agency
|_The Infinity Group, Inc. Indiana 07/22/1992 100 Services Provider
|_Infinity National Insurance Company Indiana 08/05/1992 100 Property/Casualty Insurance
|_Infinity Select Insurance Company Indiana 06/11/1991 100 Property/Casualty Insurance
|_Leader Insurance Company Ohio 03/20/1963 100 Property/Casualty Insurance
|_American Commonwealth Development Texas 07/23/1963 100 Real Estate Development
Company
|_ACDC Holdings Corporation Texas 05/04/1981 100 Real Estate Development
|_Budget Insurance Premiums, Inc. Ohio 02/14/1964 100 Premium Finance Company
|_Leader Group, Inc. Ohio 12/12/1997 100 Services Provider
|_Leader Managing General Agency, Inc. Texas 05/19/1989 100 Managing General Agency
|_Leader National Agency, Inc. Ohio 04/05/1963 100 Brokering Agent
|_Leader National Agency of Texas, Inc. Texas 01/25/1994 100 Managing General Agency
|_Leader Preferred Insurance Company Ohio 11/07/1994 100 Property/Casualty Insurance
|_Leader Specialty Insurance Company Indiana 03/10/1994 100 Property/Casualty Insurance
|_TICO Insurance Company Ohio 06/03/1980 100 Property/Casualty Insurance
|_PCC Technical Industries, Inc. California 03/07/1955 100 Holding Company
|_ESC, Inc. California 11/02/1962 100 Connector Accessories
|_Marathon Manufacturing Companies, Inc. Delaware 11/18/1983 100 Holding Company
|_Marathon Manufacturing Company Delaware 12/07/1979 100 Inactive
|_PCC Maryland Realty Corp. Maryland 08/18/1993 100 Real Estate Holding Company
|_Penn Camarillo Realty Corp. California 11/24/1992 100 Real Estate Holding Company
|_Penn Towers, Inc. Pennsylvania 08/01/1958 100 Inactive
|_Republic Indemnity Company of America California 12/05/1972 100 Workers' Compensation Insur.
|_Republic Indemnity Company of California California 10/13/1982 100 Workers' Compensation Insur.
|_Republic Indemnity Medical Management, California 03/25/1996 100 Medical Bill Review
Inc.
|_Risico Management Corporation Delaware 01/10/1989 100 Risk Management
|_Windsor Insurance Company Indiana 11/05/1987 100 (2) Property/Casualty Insurance
|_American Deposit Insurance Company Oklahoma 12/28/1966 100 Property/Casualty Insurance
|_Granite Finance Co., Inc. Texas 11/09/1965 100 Premium Financing
|_Coventry Insurance Company Ohio 09/05/1989 100 Property/Casualty Insurance
|_El Aguila Compania de Seguros, S.A. de Mexico 11/24/1994 100 (2) Property/Casualty Insurance
C.V.
|_Financiadora De Primas Condor S.A. de Mexico 03/06/1998 99 Premium Finance Company
C.V.
|_Moore Group Inc. Georgia 12/19/1962 100 Insurance Holding Co./Agency
|_Casualty Underwriters, Inc. Georgia 10/01/1954 51 Insurance Agency
|_Dudley L. Moore Insurance, Inc. Louisiana 03/30/1978 beneficial interest Insurance Agency
|_Hallmark General Insurance Agency, Oklahoma 06/16/1972 beneficial interest Insurance Agency
Inc.
|_Windsor Group, Inc. Georgia 05/23/1991 100 Insurance Holding Company
|_Regal Insurance Company Indiana 11/05/1987 100 Property/Casualty Insurance
|_Texas Windsor Group, Inc. Texas 06/23/1988 100 Insurance Agency
-9-
<PAGE>
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
|
|_Pennsylvania-Reading Seashore Lines New Jersey 06/14/1901 66.67 Inactive
|_Pittsburgh and Cross Creek Railroad Company Pennsylvania 08/14/1970 83 Inactive
|_Premier Lease & Loan Services Agency, Inc. Washington 12/27/1983 100 Insurance Agency
|_Premier Lease & Loan Services of Canada, Washington 02/28/1991 100 Insurance Agency
Inc.
|_Premier Lease & Loan Services, Ltd. Washington 05/14/1990 100 Insurance Agency
|_Terminal Realty Penn Co. District of 09/23/1968 100 Inactive
Columbia
|_United Railroad Corp. Delaware 11/25/1981 100 Inactive
|_Detroit Manufacturers Railroad Company Michigan 01/30/1902 82 Inactive
|_Waynesburg Southern Railroad Company Pennsylvania 09/01/1966 100 Inactive
|_Chiquita Brands International, Inc. (and New Jersey 03/30/1999 36.66 (2) Production/Processing
subsidiaries) /Distribution of Food
| Products
|_Dixie Terminal Corporation Ohio 04/23/1970 100 Commercial Leasing
|_Fairmont Holdings, Inc. Ohio 12/15/1983 100 Holding Company
|_FWC Corporation Ohio 03/16/1983 100 Financial Services
|_Great American Insurance Company Ohio 03/07/1872 100 Property/Casualty Insurance
|_Agricultural Excess and Surplus Insurance Delaware 02/28/1979 100 Excess & Surplus Lines
Company Insurance
|_Agricultural Insurance Company Ohio 03/23/1905 100 Property/Casualty Insurance
|_American Alliance Insurance Company Ohio 09/11/1945 100 Property/Casualty Insurance
|_American Annuity Group, Inc. Delaware 05/15/1987 82.35 (2) Holding Company
|_AAG Holding Company, Inc. Ohio 09/11/1996 100 Holding Company
|_American Annuity Group Capital Trust I Delaware 09/13/1996 100 Financing Vehicle
|_American Annuity Group Capital Trust II Delaware 03/11/1997 100 Financing Vehicle
|_American Annuity Group Capital Trust III Delaware 05/27/1997 100 Financing Vehicle
|_Great American Life Insurance Company Ohio 12/15/1959 100 Life Insurance Company
|_American Retirement Life Insurance Ohio 05/12/1978 100 Life Insurance Company
Company
|_Annuity Investors Life Insurance Ohio 11/31/1981 100 Life Insurance Company
Company
|_CHATBAR, Inc. Massachusetts 11/02/1993 100 Hotel Operator
|_Driskill Holdings, Inc. Texas 06/07/1995 beneficial interest Hotel Management
|_GALIC Brothers, Inc. Ohio 11/12/1993 80 Real Estate Management
|_Great American Life Assurance Company Ohio 08/10/1967 100 Life Insurance Company
|_Great American Life Children's Ohio 08/06/1998 beneficial interest Charitable Foundation
Foundation
|_Loyal American Life Insurance Company Ohio 05/18/1955 100 Life Insurance Company
|_ADL Financial Services, Inc. North Carolina 09/10/1970 100 Marketing Services
|_Purity Financial Corporation Florida 12/21/1991 100 Marketing Services
|_Prairie National Life Insurance South Dakota 02/11/1976 100 Life Insurance Company
Company
|_AAG Insurance Agency, Inc. Kentucky 12/06/1994 100 Life Insurance Agency
|_AAG Insurance Agency of Massachusetts, Massachusetts 05/25/1995 100 Insurance Agency
Inc.
|_AAG Securities, Inc. Ohio 12/10/1993 100 Broker-Dealer
|_American Data Source India Private Limited India 09/03/1997 99 Software Development
|_American Memorial Marketing Services, Inc. Washington 06/19/1980 100 Marketing Services
-10-
<PAGE>
AMERICAN FINANCIAL GROUP, INC.
|_AFC Holding Company
|_American Financial 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
|
|_CSW Management Services, Inc. Texas 06/27/1985 100 Pre-need Trust Admin. Services
|_GALIC Disbursing Company Ohio 05/31/1994 100 Payroll Servicer
|_Great American Life Assurance Company Puerto Rico 07/01/1964 99 Life Insurance Company
of Puerto Rico, Inc.
|_Keyes-Graham Insurance Agency, Inc. Massachusetts 12/23/1987 100 Insurance Agency
|_Laurentian Credit Services Corporation Delaware 10/07/1994 100 Inactive
|_Laurentian Marketing Services, Inc. Delaware 12/23/1987 100 Marketing Services
|_Laurentian Securities Corporation Delaware 01/30/1990 100 Inactive
|_Lifestyle Financial Investments, Inc. Ohio 12/29/1993 100 Marketing Services
|_Lifestyle Financial Investments Ohio 03/07/1994 beneficial Life Insurance Agency
Agency of Ohio, Inc. interest
|_Lifestyle Financial Investments of Indiana 02/24/1994 100 Life Insurance Agency
Indiana, Inc.
|_Lifestyle Financial Investments of Kentucky 10/03/1994 100 Insurance Agency
Kentucky, Inc.
|_Lifestyle Financial Investments of Minnesota 06/10/1985 100 Insurance Agency
the Northwest, Inc.
|_Lifestyle Financial Investments of North Carolina 07/13/1994 100 Insurance Agency
the Southeast, Inc.
|_Loyal Marketing Services, Inc. Alabama 07/20/1990 100 Marketing Services
|_New Energy Corporation Indiana 01/08/1997 49 Holding Company
|_Retirement Resource Group, Inc. Indiana 02/07/1995 100 Insurance Agency
|_AAG Insurance Agency of Texas, Inc. Texas 06/02/1995 100 Life Insurance Agency
|_RRG of Alabama, Inc. Alabama 09/22/1995 100 Life Insurance Agency
|_RRG of Ohio, Inc. Ohio 02/20/1996 beneficial Insurance Agency
interest
|_SPELCO (UK) Ltd. United Kingdom 00/00/0000 99 Inactive
|_SWTC, Inc. Delaware 00/00/0000 100 Inactive
|_SWTC Hong Kong Ltd. Hong Kong 00/00/0000 100 Inactive
|_Technomil Ltd. Delaware 00/00/0000 100 Inactive
|_American Custom Insurance Services, Inc. Ohio 07/27/1983 100 Management Holding Company
|_American Custom Insurance Services California 05/18/1992 100 Insurance Agency & Brokerage
California, Inc.
|_Eden Park Insurance Brokers, Inc. California 02/13/1990 100 Wholesale Brokerage for
Surplus Lines
|_Professional Risk Brokers, Inc. Illinois 03/01/1990 100 Insurance Agency
|_Professional Risk Brokers Insurance, Inc. Massachusetts 04/19/1994 100 Surplus Lines Brokerage
|_Professional Risk Brokers of Connecticut, Connecticut 07/09/1992 100 Insurance Agency & Brokerage
Inc.
|_Professional Risk Brokers of Ohio, Inc. Ohio 12/17/1986 100 Insurance Agency and Brokerage
|_Smith, Evans and Schmitt, Inc. California 08/05/1988 51 Insurance Agency
|_American Custom Insurance Services Illinois 07/08/1992 100 Underwriting Office
Illinois, Inc.
|_American Dynasty Surplus Lines Insurance Delaware 01/12/1982 100 Excess & Surplus Lines
Company Insurance
|_American Empire Surplus Lines Insurance Delaware 07/15/1977 100 Excess & Surplus Lines
Company Insurance
|_American Empire Insurance Company Ohio 11/26/1979 100 Property/Casualty Insurance
|_American Signature Underwriters, Inc. Ohio 04/08/1996 100 Insurance Agency
|_Specialty Underwriters, Inc. Texas 05/19/1976 100 Insurance Agency
|_Fidelity Excess and Surplus Insurance Ohio 06/30/1987 100 Property/Casualty Insurance
Company
-11-
<PAGE>
AMERICAN FINANCIAL GROUP, INC.
|_AFC Holding Company
|_American Financial Corporation % OF STOCK OWNED (1)
|_Great American Insurance Company STATE OF DATE OF BY IMMEDIATE
| DOMICILE INCORPORATION PARENT COMPANY NATURE OF BUSINESS
|
|_American Financial Enterprises, Inc. Connecticut 00/00/1871 100 (2) Closed End Investment Company
|_American Insurance Agency, Inc. Kentucky 07/27/1967 100 Insurance Agency
|_American National Fire Insurance Company New York 08/22/1947 100 Property/Casualty Insurance
|_American Special Risk, Inc. Illinois 12/29/1981 100 Insurance Broker/Managing
General Agency
|_American Spirit Insurance Company Indiana 04/05/1988 100 Property/Casualty Insurance
|_Brothers Property Corporation Ohio 09/08/1987 80 Real Estate Investment
|_Brothers Barrington Corporation Oklahoma 03/18/1994 100 Real Estate Holding Corp.
|_Brothers Cincinnatian Corporation Ohio 01/25/1994 100 Hotel Manager
|_Brothers Columbine Corporation Oklahoma 03/18/1994 100 Real Estate Holding Corp.
|_Brothers Landing Corporation Louisiana 02/24/1994 100 Real Estate Holding Corp.
|_Brothers Pennsylvanian Corporation Pennsylvania 12/23/1994 100 Real Estate Holding Corp.
|_Brothers Port Richey Corporation Florida 12/06/1993 100 Apartment Manager
|_Brothers Property Management Corporation Ohio 09/25/1987 100 Real Estate Management
|_Brothers Railyard Corporation Texas 12/14/1993 100 Apartment Manager
|_Contemporary American Insurance Company Illinois 04/16/1996 100 Property/Casualty Insurance
|_Crop Managers Insurance Agency, Inc. Kansas 08/09/1989 100 Insurance Agency
|_Dempsey & Siders Agency, Inc. Ohio 05/09/1956 100 Insurance Agency
|_Eagle American Insurance Company Ohio 07/01/1987 100 Property/Casualty Insurance
|_Eden Park Insurance Company Indiana 01/08/1990 100 Special Risk Surplus Lines
|_FCIA Management Company, Inc. New York 09/17/1991 79 Servicing Agent
|_The Gains Group, Inc. Ohio 01/26/1982 100 Marketing of Advertising
|_Global Premier Finance Company Ohio 08/25/1998 100 Premium Finance Company
|_Great American Lloyd's, Inc. Texas 08/02/1983 100 Attorney-in-Fact - Texas
Lloyd's Company
|_Great American Lloyd's Insurance Company Texas 10/09/1979 beneficial Lloyd's Plan Insurer
interest
|_Great American Management Services, Inc. Ohio 12/05/1974 100 Data Processing and Equipment
Leasing
|_American Payroll Services, Inc. Ohio 02/20/1987 100 Payroll Services
|_Great American Re Inc. Delaware 05/14/1971 100 Reinsurance Intermediary
|_Great American Risk Management, Inc. Ohio 04/21/1980 100 Insurance Risk Management
|_Great Texas County Mutual Insurance Texas 04/29/1954 beneficial Property/Casualty Insurance
interest
Company
|_Grizzly Golf Center, Inc. Ohio 11/08/1993 100 Operate Golf Courses
|_Homestead Snacks Inc. California 03/02/1979 100 (2) Meat Snack Distribution
|_Giant Snacks, Inc. Delaware 07/06/1989 100 Meat Snack Distribution
|_Key Largo Group, Inc. Florida 07/28/1981 100 Land Developer & Resort
Operator
|_Key Largo Group Utility Company Florida 11/26/1984 100 Water & Sewer Utility
|_Mid-Continent Casualty Company Oklahoma 02/26/1947 100 Property/Casualty Insurance
|_Mid-Continent Insurance Company Oklahoma 08/13/1992 100 Property/Casualty Insurance
|_Oklahoma Surety Company Oklahoma 08/05/1968 100 Property/Casualty Insurance
|_National Interstate Corporation Ohio 01/26/1989 52.15 Holding Company
|_Hudson Indemnity, Ltd. Cayman Islands 06/12/1996 100 Property/Casualty Insurance
-12-
<PAGE>
AMERICAN FINANCIAL GROUP, INC.
|_AFC Holding Company % OF STOCK OWNED (1)
|_American Financial Corporation STATE OF DATE OF BY IMMEDIATE
|_Great American Insurance Company DOMICILE INCORPORATION PARENT COMPANY NATURE OF BUSINESS
-------- ------------- -------------- ------------------
|_National Interstate Corporation
|-
|_American Highways Insurance Agency California 05/05/1994 100 Insurance Agency
|_Explorer Insurance Agency, Inc. Ohio 07/17/1997 beneficial Insurance Agency
interest
|_National Interstate Insurance Agency of Texas 06/07/1989 beneficial Insurance Agency
Texas, Inc. interest
|_National Interstate Insurance Agency, Ohio 02/13/1989 100 Insurance Agency
Inc.
|_National Interstate Insurance Company Ohio 02/10/1989 100 Property/Casualty Insurance
|_Safety, Claims & Litigation Services, Pennsylvania 06/23/1995 100 Claims Third Party Administrator
Inc.
|_OBGC Corporation Florida 11/23/1977 80 Real Estate Development
|_Pointe Apartments, Inc. Minnesota 06/24/1993 100 Real Estate Holding Corporation
|_Premier Dealer Services, Inc. Illinois 06/24/1998 100 Third Party Administrator
|_Seven Hills Insurance Agency, Inc. Ohio 12/22/1997 100 Insurance Agency
|_Seven Hills Insurance Company New York 06/30/1932 100 Property/Casualty Reinsurance
|_Stonewall Insurance Company Alabama 02/00/1866 100 Property/Casualty Insurance
|_Stone Mountain Professional Liability Georgia 08/07/1995 100 Insurance Agency
Agency, Inc.
|_Tamarack American, Inc. Delaware 06/10/1986 100 Management Holding Company
|_Timberglen Limited United Kingdom 10/28/1992 100 Investments
|_Transport Insurance Company Ohio 05/25/1976 100 Property/Casualty Insurance
|_Instech Corporation Texas 09/02/1975 100 Claim & Claim Adjustment
|_Transport Insurance Agency, Inc. Texas 08/21/1989 beneficial Services Insurance Agency
interest
|_Transport Underwriters Association California 05/11/1945 100 Holding Company/Agency
|_Utility Insurance Services, Inc. Texas 04/06/1995 100 (2) Texas Local Recording Agency
|_Utility Management Services, Inc. Texas 09/07/1965 100 Texas Managing General Agency
|_American Financial General Corporation Texas 09/14/1998 100 Holding Company
|_American General Financial Corporation Texas 09/14/1998 100 Holding Company
|_One East Fourth, Inc. Ohio 02/03/1964 100 Commercial Leasing
|_PCC 38 Corp. Illinois 12/23/1996 100 Real Estate Holding Company
|_Pioneer Carpet Mills, Inc. Ohio 04/29/1976 100 Carpet Manufacturing
|_TEJ Holdings, Inc. Ohio 12/04/1984 100 Real Estate Holdings
|_Three East Fourth, Inc. Ohio 08/10/1966 100 Commercial Leasing
(1) Except Director's Qualifying Shares.
(2) Total percentage owned by parent shown and by other affiliated company(ies).
-13-
</TABLE>
<PAGE>
Item 27. Number of Contract Owners
As of March 31, 1998, there were 1,067 Individual Contract Owners, of which 988
were qualified and 79 were non-qualified. As of March 31, 1998, there were 15
Participants (Certificate Owners) in 3 Group Contracts.
Item 28. Indemnification
(a) The Code of Regulations of Annuity Investors Life Insurance
CompanyREGISTERED 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
CompanyREGISTERED 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").
(a) AAG Securities, Inc. does not act as a principal underwriter, depositor,
sponsor or investment adviser for any investment company other than Annuity
InvestorsREGISTERED Variable Account A and Annuity InvestorsREGISTERED Variable
Account B.
-14-
<PAGE>
(b) Directors and Officers of AAG Securities, Inc.
Name and Principal Position with
Business Address AAG Securities, Inc.
Thomas Kevin Liguzinski (1) Chief Executive Officer and Director
Charles Kent McManus (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
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 available under
this Form promptly upon written or oral request to the Company at the address or
phone number listed in the Prospectus.
-15-
<PAGE>
(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.
-16-
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the Registrant certifies that it has caused this Post-Effective
Amendment No. 4 to its Registration Statement to be signed on its behalf by the
undersigned in the City of Cincinnati, State of Ohio on the 22nd day of January,
1999.
ANNUITY INVESTORSREGISTERED VARIABLE ACCOUNT B
(REGISTRANT)
By: /s/ Robert Allen Adams
Robert Allen Adams
Chairman of the Board, President
and Director, Annuity Investors
Life Insurance CompanyREGISTERED
ANNUITY INVESTORS LIFE INSURANCE COMPANYREGISTERED
(DEPOSITOR)
By: /s/ Robert Allen Adams
Robert Allen Adams
Chairman of the Board, President
and Director
As required by the Securities Act of 1933, this Post-Effective Amendment
No. 4 has been signed by the following persons in the capacities and on the
dates indicated.
/s/ Robert Allen Adams Principal Executive January 22, 1999
- ------------------------------
Robert Allen Adams* Officer, Director
/s/ Robert Eugene Allen Principal Financial January 22, 1999
- ------------------------------
Robert Eugene Allen* Officer
/s/ Lynn Edward Laswell Principal Accounting January 22, 1999
- -----------------------------
Lynn Edward Laswell* Officer
-17-
<PAGE>
/s/ Stephen Craig Lindner Director January 22, 1999
Stephen Craig Lindner*
/s/ William Jack Maney, II Director January 22, 1999
- --------------------------------
William Jack Maney, II*
/s/ James Michael Mortensen Director January 22, 1999
James Michael Mortensen*
/s/ Mark Francis Muething Director January 22, 1999
Mark Francis Muething*
/s/ Jeffrey Scott Tate Director January 22, 1999
Jeffrey Scott Tate*
*Executed by John Gruber on behalf of those indicated pursuant to Power of
Attorney.
Item 4. (ss)
ENDORSEMENT
The contract is changed by adding a new provision as follows:
SUCCESSOR OWNER--STEP UP IN ACCOUNT VALUE
If a Participant's spouse becomes the Successor Owner of the Participant's
participation interest under the Contract, the Account Value of the
Participant's participation interest will be increased, as of the date that
would have been the Death Benefit Valuation Date, to equal the amount of the
Death Benefit which would have been payable if the Participant's spouse had not
become the Successor Owner of the Participant's participation interest. If the
Death Benefit which would have been payable is equal to the Account Value as of
the date that would have been the Death Benefit Valuation Date, there will be no
change in the Account Value of the Certificate. If a Participant's Account Value
is increased to equal to Purchase Payments accumulated with interest at the rate
of 3% per year, as described in the Death Benefit Amount provision of this
Contract, the Account Value as of the date of the increase, plus any Purchase
Payments received by us after that date, will accumulate with interest at the
rate of 3% per year for purposes of determining the amount of the Death Benefit
payable under that Certificate on the death of the next owner to die.
For purposes of determining the date that would have been the Death Benefit
Valuation Date, the election to become Successor Owner will be deemed to be
instructions as to the form of death benefit. Therefore, the date that would
have been the Death Benefit Valuation Date will be the later of the date we
receive Due Proof of Death of the Participant, or the date we receive a
Successor Owner election, but never later than one year after the date of death
of the Participant.
If the Participant's spouse becomes the Successor Owner of the Participant's
participation interest, any Contingent Deferred Sales Charge which would
otherwise apply on surrender will be waived, except that if any additional
Purchase Payments are paid by the Successor Owner, Contingent Deferred Sales
Charges will apply as described in this Contract.
If the Account Value of a Certificate is stepped-up under this provision, the
Company will deposit the amount of the increase into the Fixed Accumulation
Account Option.
This is part of the contract. It is not a separate contract. It changes the
policy only as and to the extent stated. In all cases of conflict with the other
terms of the contract, the provisions of this Endorsement shall control.
Signed for us at our office as of the date of issue.
Executive Vice President
Assistant Secretary
Item 4. (tt)
ENDORSEMENT
The certificate is changed by adding a new provision as follows:
SUCCESSOR OWNER--STEP UP IN ACCOUNT VALUE
If your spouse becomes the Successor Owner of your participation interest under
the Contract, the Account Value of your participation interest will be
increased, as of the date that would have been the Death Benefit Valuation Date,
to equal the amount of the Death Benefit which would have been payable if your
spouse had not become the Successor Owner of your participation interest. If the
Death Benefit which would have been payable is equal to the Account Value as of
the date that would have been the Death Benefit Valuation Date, there will be no
change in the Account Value of your Certificate. If the Account Value is
increased to equal to Purchase Payments accumulated with interest at the rate of
3% per year, as described in the Death Benefit Amount provision of this
Certificate, the Account Value as of the date of the increase, plus any Purchase
Payments received by us after that date, will accumulate with interest at the
rate of 3% per year for purposes of determining the amount of the Death Benefit
payable on the death of the next owner to die.
For purposes of determining the date that would have been the Death Benefit
Valuation Date, the election to become Successor Owner will be deemed to be
instructions as to the form of death benefit. Therefore, the date that would
have been the Death Benefit Valuation Date will be the later of the date we
receive Due Proof of Death of the Participant, or the date we receive a
Successor Owner election, but never later than one year after the date of death
of the Participant.
If your spouse becomes the Successor Owner of your participation interest, any
Contingent Deferred Sales Charge which would otherwise apply on surrender will
be waived, except that if any additional Purchase Payments are paid by the
Successor Owner, Contingent Deferred Sales Charges will apply as described in
this Certificate.
If the Account Value of your Certificate is stepped-up under this provision, the
Company will deposit the amount of the increase into the Fixed Accumulation
Account Option.
This is part of the certificate. It is not a legal contract. It changes the
certificate only as and to the extent stated.
Signed for us at our office as of the date of issue.
Executive Vice President
Assistant Secretary
Item 4. (uu)
ENDORSEMENT
The contract is changed by adding a new provision as follows:
SUCCESSOR OWNER--STEP UP IN ACCOUNT VALUE
If your spouse becomes the Successor Owner of this Contract, the Account Value
of the Contract will be increased, as of the date that would have been the Death
Benefit Valuation Date, to equal the amount of the Death Benefit which would
have been payable if your spouse had not become the Successor Owner of the
Contract. If the Death Benefit which would have been payable is equal to the
Account Value as of the date that would have been the Death Benefit Valuation
Date, there will be no change in the Account Value of the Contract. If the
Account Value is increased to equal to Purchase Payments accumulated with
interest at the rate of 3% per year, as described in the Death Benefit Amount
provision of this Contract, the Account Value as of the date of the increase,
plus any Purchase Payments received by us after that date, will accumulate with
interest at the rate of 3% per year for purposes of determining the amount of
the Death Benefit payable on the death of the next owner to die.
For purposes of determining the date that would have been the Death Benefit
Valuation Date, the election to become Successor Owner will be deemed to be
instructions as to the form of death benefit. Therefore, the date that would
have been the Death Benefit Valuation Date will be the later of the date we
receive Due Proof of Death of the owner, or the date we receive a Successor
Owner election, but never later than one year after the date of death of the
owner.
If your spouse becomes the Successor Owner of this Contract, any Contingent
Deferred Sales Charge which would otherwise apply on surrender will be waived,
except that if any additional Purchase Payments are paid by the Successor Owner,
Contingent Deferred Sales Charges will apply as described in this Contract.
If the Account Value is stepped-up under this provision, the Company will
deposit the amount of the increase into the Fixed Accumulation Account Option.
This is part of your contract. It is not a separate contract. It changes the
policy only as and to the extent stated. In all cases of conflict with the other
terms of the contract, the provisions of this Endorsement shall control.
Signed for us at our office as of the date of issue.
Executive Vice President
Assistant Secretary
(vv)
INDIVIDUAL RETIREMENT ANNUITY
ENDORSEMENT
The annuity contract is changed as set out below to add provisions for 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 the participants and their beneficiaries. A participant's
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. 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 be transferred to a spouse or
former spouse of a participant under a divorce or separation instrument
described in IRC Section 71(b)(2)(A); and
2) 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.
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. An interest in this annuity contract will not
lapse if a participant does not make contributions. An interest in 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 the participant for at least
two full years and the value of the participant's interest in 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.
<PAGE>
Total contributions made to this annuity contract for a participant 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 for a participant by an employer through a SIMPLE plan until at least
2-years after the date the participant first participated in that employer's
SIMPLE plan.
ANNUAL REPORT. Following the end of each calendar year, we will send each
participant a report concerning the status of his or her interest in this
annuity contract. This report will include (i) the amount of all regular
contributions received for the participant during or after the calendar year
which relate to such calendar year, (ii) the amount of all rollover
contributions received for the participant during such calendar year, (iii)
the contract value(s) of the participant's interest 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 of a participant's interest in this annuity contract 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 entire 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 expectancy of the participant and one other individual
designated 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 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 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.
<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 the participant's 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 the participant would
have reached age 70-1/2. Alternatively, the participant's interest in this
annuity contract will be treated as the IRA of such spouse if he or she
becomes Successor Owner of the participant's interest, makes a rollover from
the participant's interest, or fails to receive distributions from the
participant's interest otherwise required by this provision. No contributions
or rollover to the participant's interest in this annuity contract may be
made after the participant's death unless the participant's 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
the participant's spouse as if the spouse was the owner of the participant's
interest in 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.
Assistant Secretary Executive
Vice President
(ww)
INDIVIDUAL RETIREMENT ANNUITY
ENDORSEMENT
The Certificate of Participation under the annuity contract (your "Certificate")
is changed as set out below to add provisions for an Individual Retirement
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 408(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.
EXCLUSIVE BENEFIT. Your interest in the annuity contract is established
for the exclusive benefit of you and your beneficiaries. Your interest in
the annuity contract is nonforfeitable.
NON-PARTICIPATING. The annuity contract does not pay dividends or share in
our surplus.
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) all or part of your interest in the 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. The annuity contract does not require fixed premiums, purchase
payments, or other contributions, but we may decline to accept any
contribution of less than $50. Your interest in the annuity contract will not
lapse if you do not make contributions. Your interest in the annuity contract
will remain subject to cancellation under any involuntary surrender or
termination provision of the annuity contract; provided, however, that in no
event shall any such cancellation occur unless, at a minimum, contributions
have not been made for you for at least two full years and the value of your
interest in the 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.
<PAGE>
Total contributions made to the annuity contract for you 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).
The annuity contract will not accept contributions made by an employer
through a SIMPLE plan under IRC Section 408(p). The annuity contract will not
accept a transfer or rollover of any funds attributable to contributions made
for you 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 interest in the annuity contract. This
report will include (i) the amount of all regular contributions received for
you during or after the calendar year which relate to such calendar year,
(ii) the amount of all rollover contributions received for you during such
calendar year, (iii) the contract value(s) of your interest 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 of your interest in the 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 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 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.
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.
<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, 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,
your interest in the annuity contract will be treated as the IRA of such
spouse if he or she becomes Successor Owner of your interest, makes a
rollover from your interest, or fails to receive distributions from your
interest otherwise required by this provision. No contributions or rollover
to your interest in the 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 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.
Assistant Secretary Executive
Vice President
(xx)
SAVINGS INCENTIVE MATCH PLAN FOR EMPLOYEES
INDIVIDUAL RETIREMENT ANNUITY ENDORSEMENT
The annuity contract is changed as set out below to add provisions for 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 the participants and their beneficiaries. A participant's
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. 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 be transferred to a spouse or
former spouse of a participant under a divorce or separation instrument
described in IRC Section 71(b)(2)(A); and
2) 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.
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. An interest in this annuity contract will not
lapse if a participant does not make contributions. An interest in 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 for the participant have not been made for at least
two full years and the value of the participant's interest in 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 a
participant. No other contributions to this annuity contract will be
accepted.
<PAGE>
ANNUAL REPORT. Following the end of each calendar year, we will send each
participant a report concerning the status of his or her interest in this
annuity contract. This report will include (i) the amount of all regular
contributions received for the participant during or after the calendar year
which relate to such calendar year, (ii) the amount of all rollover
contributions received for the participant during such calendar year, (iii)
the contract value(s) of the participant's interest 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 the employer
under a SIMPLE IRA plan, we will provide the employer with the summary
description required by IRC Section 408(l)(2)(B).
DESIGNATED FINANCIAL INSTITUTION. If we are the designated financial
institution for the employer's SIMPLE IRA plan, as defined in IRC Section
408(p)(7), then a participant may direct that contributions paid on his or
her behalf be transferred to another qualified SIMPLE IRA without cost or
penalty, provided that the participant elects 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 the participant
first become eligible to participate in the SIMPLE IRA plan.
LIMITS ON ROLLOVERS AND TRANSFERS; ADDITIONAL TAXES. During the first two
years that a participant in this annuity contract participates in the SIMPLE
IRA plan of the employer, any rollover or transfer otherwise permitted under
this annuity contract must be made to another SIMPLE IRA owned by the
participant. In some cases, any distribution to the participant during this
two-year period may be subject to a twenty-five percent additional penalty
tax if the participant does 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 the participant that is qualified under IRC Section 408(a), (b), or (p).
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 calendar year in which the participant reaches age 70-1/2. No
later than the Required Beginning Date:
1) the participant's entire 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 expectancy of the participant and one other individual
designated 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 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 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.
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 the participant's 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 the participant
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 the
participant's interest, makes a rollover from the participant's interest, or
fails to receive distributions from the participant's interest otherwise
required by this provision. No contributions or rollover to the participant's
interest in this annuity contract may be made after the participant's death
unless the participant's 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 the participant's spouse as if the
spouse was the owner of the participant's interest in 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.
Assistant Secretary Executive
Vice President
(yy)
SAVINGS INCENTIVE MATCH PLAN FOR EMPLOYEES
INDIVIDUAL RETIREMENT ANNUITY ENDORSEMENT
The Certificate of Participation under the annuity contract (your "Certificate")
is changed as set out below to add provisions for a SIMPLE Individual Retirement
Annuity.
APPLICABLE TAX LAW RESTRICTIONS. The 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 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. Your interest in
the annuity contract is nonforfeitable.
NON-PARTICIPATING. The annuity contract does not pay dividends or share in
our surplus.
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) all or part of your interest in the 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. The annuity contract does not require fixed premiums, purchase
payments, or other contributions, but we may decline to accept any
contribution of less than $50. Your interest in the annuity contract will not
lapse if you do not make contributions. Your interest in the annuity contract
will remain subject to cancellation under any involuntary surrender or
termination provision of the annuity contract; provided, however, that in no
event shall any such cancellation occur unless, at a minimum, contributions
for you have not been made for at least two full years and the value of your
interest in the 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.
The 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 the 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 interest in the annuity contract. This
report will include (i) the amount of all regular contributions received for
you during or after the calendar year which relate to such calendar year,
(ii) the amount of all rollover contributions received for you during such
calendar year, (iii) the contract value(s) of your interest 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 the 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 the 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 the 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 of your interest in the 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 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 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.
<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 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 under the annuity contract to
receive payments after your death with payments beginning by December
31 of the first calendar year after your death.
3)
However, if your surviving spouse is the individual designated to receive
your entire interest in the 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,
the annuity contract will be treated as the IRA of such spouse if he or she
becomes Successor Owner of your interest, makes a rollover from your
interest, or fails to receive distributions from your interest otherwise
required by this provision. No contributions or rollover to your interest in
the 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 the spouse was 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.
Assistant Secretary Executive
Vice President
(zz)
ROTH
INDIVIDUAL RETIREMENT ANNUITY
ENDORSEMENT
The annuity contract is changed as set out below to add provisions for 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 the participants and their beneficiaries. A participant's
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. 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 be transferred to a spouse or
former spouse of a participant under a divorce or separation instrument
described in IRC Section 71(b)(2)(A); and
2) 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.
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. An interest in this annuity contract will not
lapse if a participant does not make contributions. An interest in 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 the participant for at least
two full years and the value of the participant's interest in 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 for a participant 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).
<PAGE>
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 for a participant
by an employer through a SEP program or SIMPLE plan except to the extent
provided by the Secretary of the Treasury.
ANNUAL REPORT. Following the end of each calendar year, we will send each
participant a report concerning the status of his or her interest in this
annuity contract. This report will include (i) the amount of all regular
contributions received for the participant during or after the calendar year
which relate to such calendar year, (ii) the amount of all rollover
contributions received for the participant during such calendar year, (iii)
the contract value(s) of the participant's interest 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 the participant's
lifetime, distributions from the participant's interest in this 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. 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 the participant's 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 the participant's interest, makes a rollover from
the participant's interest, or fails to receive distributions from the
participant's interest otherwise required by this provision. No contributions
or rollover to the participant's interest in this annuity contract may be
made after the participant's death unless the participant's 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
the participant's spouse as if the spouse was the owner of the participant's
interest in 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 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.
Assistant Secretary Executive
Vice President
(aaa)
ROTH
INDIVIDUAL RETIREMENT ANNUITY
ENDORSEMENT
The Certificate of Participation under the annuity contract (your "Certificate")
is changed as set out below to add provisions for a Roth Individual Retirement
Annuity.
APPLICABLE TAX LAW RESTRICTIONS. The 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 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. Your interest in
the annuity contract is nonforfeitable.
NON-PARTICIPATING. The annuity contract does not pay dividends or share in
our surplus.
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) all or part of your interest in the 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. The annuity contract does not require fixed premiums, purchase
payments, or other contributions, but we may decline to accept any
contribution of less than $50. An interest in the annuity contract will not
lapse if you do not make contributions. An interest in the annuity contract
will remain subject to cancellation under any involuntary surrender or
termination provision of the annuity contract; provided, however, that in no
event shall any such cancellation occur unless, at a minimum, contributions
have not been made for you for at least two full years and the value of your
interest in the 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 the annuity contract for you 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).
<PAGE>
The 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). The annuity contract will not accept a transfer or
rollover of any funds attributable to contributions made for you by an
employer through a SEP program or SIMPLE plan except to the extent provided
by the Secretary of the Treasury.
ANNUAL REPORT. Following the end of each calendar year, we will send you a
report concerning the status of your interest in the annuity contract. This
report will include (i) the amount of all regular contributions received for
you during or after the calendar year which relate to such calendar year,
(ii) the amount of all rollover contributions received for you during such
calendar year, (iii) the contract value(s) of your interest 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 interest in the 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 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, the annuity contract will be
treated as the Roth IRA of such spouse if he or she becomes Successor Owner
of your interest, makes a rollover from your interest, or fails to receive
distributions from your interest otherwise required by this provision. No
contributions or rollover to your interest in the 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 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. 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.
Assistant Secretary
Executive Vice President
(bbb)
UNISEX ENDORSEMENT
The contract is changed as set out below.
SEX. All references to "sex" in the contract are deleted.
SETTLEMENT OPTION COMPUTATIONS. Settlement option computations which are
based on the life of a person will be calculated without reference to the sex
of the person on whose life benefit payments are based. The individual
guaranteed annuity mortality table specified in the contract, for blended
lives (60% female/40% male) rather than for the sex of the person on whose
life benefit payments are based, with interest at the guaranteed settlement
option interest rate specified in the contract, compounded annually, will be
used to compute all guaranteed option factors, values, and benefits under the
contract. We will provide guaranteed settlement option tables based on
blended lives to you upon request.
This is part of your contract. It is not a separate contract. It changes the
contract only as and to the extent stated. In all cases of conflict with the
other terms of the contract, the provisions of this Endorsement shall control.
Signed for us at our office as of the date of issue.
Assistant Secretary Executive
Vice President
<PAGE>
EXHIBIT INDEX
(1) Resolution of the Board of Directors of Annuity Investors Life
Insurance CompanyREGISTERED authorizing establishment of Annuity
InvestorsREGISTERED Variable Account B.1/
(2) Not Applicable.
(3) (a) Distribution Agreement between Annuity Investors Life
Insurance Company REGISTERED and AAG Securities, Inc.2/
(b) Form of Selling Agreement between Annuity Investors Life
Insurance CompanyREGISTERED, AAG Securities, Inc. and
another Broker-Dealer.1/
(c) Revised form of Selling Agreement between Annuity
Investors Life Insurance CompanyREGISTERED, AAG
Securities, Inc. and another Broker-Dealer.. 6/
(4) Individual and Group Contract Forms and Endorsements.
(a) Form of Qualified Individual Flexible Premium Deferred
Variable Annuity Contract.2/
(b) Form of Non-Qualified Individual Flexible Deferred
Variable Annuity Contract.2/
(c) Form of Loan Endorsement to Individual Contract.2/
(d) Form of Tax Sheltered Annuity Endorsement to Individual
Contract.2/
(e) Form of Qualified Pension, Profit Sharing and Annuity Plan
Endorsement to Individual Contract.2/
(f) Form of Employer Plan Endorsement to Individual
Contract.2/
(g) Form of Individual Retirement Annuity Endorsement to
Individual Contract.2/
(h) Form of Texas Optional Retirement Program Endorsement to
Individual Contract.2/
(i) Form of Long-Term Care Waiver Rider to Individual
Contract.2/
(j) Form of Simple IRA Endorsement to Individual Contract.2/
(k) Form of Group Flexible Premium Deferred Variable Annuity
Contract.2/
(l) Form of Certificate of Participation under a Group
Flexible Premium Deferred Variable Annuity Contract.2/
(m) Form of Loan Endorsement to Group Contract.2/
-19-
<PAGE>
(n) Form of Loan Endorsement to Certificate of Participation
under a Group Contract. 2/
(o) Form of Tax Sheltered Annuity Endorsement to Group
Contract.2/
(p) Form of Tax Sheltered Annuity Endorsement to Certificate
of Participation under a Group Contract.2/
(q) Form of Qualified Pension, Profit Sharing and Annuity Plan
Endorsement to Group Contract.2/
(r) Form of Qualified Pension, Profit Sharing and Annuity Plan
Endorsement to Certificate of Participation under a Group
Contract.2/
(s) Form of Employer Plan Endorsement to Group Contract.2/
(t) Form of Employer Plan Endorsement to Certificate of
Participation under a Group Contract.2/
(u) Form of Deferred Compensation Endorsement to Group
Contract.2/
(v) Form of Deferred Compensation Endorsement to Certificate
of Participation under a Group Contract.2/
(w) Form of Texas Optional Retirement Program Endorsement to
Group Contract.2/
(x) Form of Texas Optional Retirement Program Endorsement to
Certificate of Participation under a Group Contract.2/
(y) Form of Long-Term Care Waiver Rider to Group Contract.2/
(z) Form of Long-Term Care Waiver Rider to Certificate of
Participation under a Group Contract.2/
(aa) Revised form of Individual Retirement Annuity Endorsement
to Individual Qualified Contract. 3/
(bb) Revised form of SIMPLE IRA Endorsement to Qualified
Individual Contract. 3/
(cc) Form of Roth IRA Endorsement to Qualified Individual
Contract. 3/
(dd) Revised form of Employer Plan Endorsement to Group
Contract. 3/
(ee) Revised form of Employer Plan Endorsement to Certificate
of Participation under a Group Contract. 3/
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<PAGE>
(ff) Revised form of Employer Plan Endorsement to Qualified
Individual
Contract. 3/
(gg) Revised form of Tax Sheltered Annuity Endorsement to Group
Contract.3/
(hh) Revised form of Tax Sheltered Annuity Endorsement to
Certificate of Participation under a Group Contract. 3/
(ii) Revised form of Tax Sheltered Annuity Endorsement to
Qualified
Individual Contract. 3/
(jj) Revised form of Qualified Pension, Profit Sharing and
Annuity Plan Endorsement to Group Contract. 3/
(kk) Revised form of Qualified Pension, Profit Sharing and
Annuity Plan Endorsement to Certificate of Participation
under a Group Contract. 3/
(ll) Revised form of Qualified Pension, Profit Sharing and
Annuity Plan
Endorsement to Qualified Individual Contract. 3/
(mm) Form of Governmental Section 457 Plan Endorsement to Group
Contract. 3/
(nn) Form of Governmental Section 457 Plan Endorsement to
Certificate of Participation under a Group Contract. 3/
(oo) Form of Governmental Section 457 Plan Endorsement to
Qualified Individual Contract. 3/
(pp) Form of Successor Owner Endorsement to Group Contract. 6/
(qq) Form of Successor Owner Endorsement to Certificate of
Participation under a Group Contract. 6/
(rr) Form of Successor Owner Endorsement to Qualified
Individual Contract and Non-Qualified Individual Contract.
6/
(ss) Revised form of Successor Owner Endorsement to Group
Contract (filed herewith).
(tt) Revised form of Successor Owner Endorsement to Certificate
of Participation under a Group Contract (filed herewith).
(uu) Revised form of Successor Owner Endorsement to Qualified
Individual Contract and Non-Qualified Individual Contract
(filed herewith).
(vv) Form of Individual Retirement Annuity Endorsement to Group
Contract (filed herewith).
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<PAGE>
(ww) Form of Individual Retirement Annuity Endorsement to
Certificate of Participation under a Group Contract (filed
herewith).
(xx) Form of SIMPLE Individual Retirement Annuity Endorsement
to Group Contract (filed herewith).
(yy) Form of SIMPLE Individual Retirement Annuity Endorsement
to Certificate of Participation under a Group Contract
(filed herewith).
(zz) Form of Roth Individual Retirement Annuity Endorsement to
Group
Contract (filed herewith).
(aaa) Form of Roth Individual Retirement Annuity Endorsement to
Certificate of Participation under a Group Contract (filed
herewith).
(bbb) Form of Unisex Endorsement to Nonqualified Individual
Contract (filed herewith).
(5) (a) Form of Application for Individual Flexible Premium
Deferred Annuity Contract and Certificate of Participation
under a Group Contract.2/
(b) Form of Application for Group Flexible Premium Deferred
Annuity Contract.2/
(c) Revised form of Application for Individual Flexible
Premium Deferred Annuity Contract and Certificate of
Participation under a Group Contract. 4/
(d) Revised form of Application for Group Flexible Premium
Deferred Annuity Contract. 4/
(6) (a) Articles of Incorporation of Annuity Investors Life
Insurance CompanyREGISTERED.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.REGISTERED1/
(7) Not Applicable.
(8) (a) Participation Agreement between Annuity Investors Life
Insurance CompanyREGISTERED 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/
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<PAGE>
(b) Participation Agreement between Annuity Investors Life
Insurance CompanyREGISTERED 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 CompanyREGISTERED
and Dreyfus Life and Annuity Index Fund, Inc.
(d/b/a Dreyfus Stock Index Fund).2/
(c) Participation Agreement between Annuity Investors Life
Insurance CompanyREGISTERED and The Dreyfus Socially
Responsible Growth Fund, Inc.2/
(i) Letter Agreement dated April 14, 1997 between
Annuity Investors Life Insurance CompanyREGISTERED
and The Dreyfus Socially Responsible Growth Fund,
Inc.2/
(d) Participation Agreement between Annuity Investors Life
Insurance CompanyREGISTERED and Janus Aspen Series.2/
(e) Participation Agreement between Annuity Investors Life
Insurance CompanyREGISTERED and Strong Variable Insurance
Funds, Inc. and Strong Special Fund II, Inc.2/
(f) Participation Agreement between Annuity Investors Life
Insurance CompanyREGISTERED and INVESCO Variable
Investment Funds, Inc.2/
(g) Participation Agreement between Annuity Investors Life
Insurance CompanyREGISTERED and Morgan Stanley Universal
Funds, Inc.2/
(h) Participation Agreement between Annuity Investors Life
Insurance CompanyREGISTERED and PBHG Insurance Series
Fund, Inc.2/
(i) Service Agreement between Annuity Investors Life Insurance
CompanyREGISTERED and American Annuity GroupSM, Inc.1/
(j) Agreement between AAG Securities, Inc. and AAG Insurance
Agency, Inc.1/
(k) Investment Service Agreement between Annuity Investors
Life Insurance CompanyREGISTERED and American Annuity
GroupSM, Inc. 1/
(l) Service Agreement between Annuity Investors Life Insurance
CompanyREGISTERED and Strong Capital Management, Inc.2/
(m) Service Agreement between Annuity Investors Life Insurance
CompanyREGISTERED and Pilgrim Baxter & Associates, Ltd.2/
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<PAGE>
(n) Service Agreement between Annuity Investors Life Insurance
CompanyREGISTERED and Morgan Stanley Asset Management,
Inc. 2/
(o) Amended and Restated Agreement between The Dreyfus
Corporation and Annuity Investors Life Insurance
CompanyREGISTERED.2/
(p) Service Agreement between Annuity Investors Life Insurance
CompanyREGISTERED and Janus Capital Corporation.2/
(q) Service Agreement between INVESCO Funds Group, Inc. and
Annuity Investors Life Insurance Company.4/
(r) Participation Agreement between The Timothy Plan Variable
Series, Timothy Partners, Ltd. and Annuity Investors Life
Insurance Company4/
(s) Service Agreement between The Timothy Plan Variable Series
and Annuity Investors Life Insurance Company. 4/
(9) Opinion and Consent of Counsel1/.
(10) Consent of Independent Auditors. 4/
(11) No financial statements are omitted from Item 23.
(12) Not Applicable.
(13) Schedule for Computation of Performance Quotations. 4/
(14) Financial Data Schedule. 4/
(15) Powers of Attorney. 5/
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