As filed with the Securities and Exchange Commission on February 26, 1999
File No. 333-51955
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. 1 ( X )
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 ( )
Pre-effective Amendment No. ( )
Post-effective Amendment No. 10 ( 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
- ------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------
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 May 1, 1999 pursuant to Rule 485(a)(1)
/ /__75 days after filing pursuant to Rule 485(a)(2)
/ /__On pursuant to Rule 485(a)(2)
<PAGE>
CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
(Commodore IndependenceSERVICE 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
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 %.................... Not Applicable
(c) Special Purchase Plan........... Not Applicable
(d) Commissions..................... AAG Securities, Inc.
<PAGE>
(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
<PAGE>
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................... Not Applicable
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
<PAGE>
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
<PAGE>
ANNUITY INVESTORSREGISTERED VARIABLE ACCOUNT B
PROSPECTUS for
The Commodore IndependenceSERVICE MARK
Individual and Group Flexible Premium Deferred Annuities
May 1, 1999
This prospectus describes The Commodore IndependenceSERVICE 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 29 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 (6 Portfolios)
-Aggressive Growth Portfolio
-Worldwide Growth Portfolio
-Balanced Portfolio
-Growth Portfolio
-International Growth Portfolio
-Capital Appreciation 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
The Timothy Plan Variable Series
BT Insurance Funds Trust (3 Portfolios)
-EAFEREGISTERED Equity Index Fund
-Equity 500 Index Fund
-Small Cap Index Fund
INVESCO Variable Investment Funds, Inc. (3 Portfolios)
-Industrial Income Portfolio
-Total Return Portfolio
-High Yield Portfolio
Morgan Stanley Dean Witter 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
This prospectus includes information you should know before investing in The
Commodore Independence. 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.
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
-1-
<PAGE>
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?...............................................6
FEE TABLE.....................................................................7
Owner Transaction Expenses..................................................7
Separate Account Annual Expenses............................................7
Portfolio Annual Expenses for Year Ended 12/31/981..........................7
Examples....................................................................9
CONDENSED FINANCIAL INFORMATION..............................................14
Financial Statements.......................................................15
Performance Information....................................................16
Yield Data...............................................................16
Total Return Data........................................................16
Other Performance Measures...............................................16
THE PORTFOLIOS...............................................................17
Janus Aspen Series.........................................................17
Dreyfus Portfolios.........................................................18
Strong Portfolios..........................................................19
BT Insurance Funds Trust...................................................19
INVESCO Variable Investment Funds, Inc.....................................20
PBHG Insurance Series Fund, Inc............................................20
Morgan Stanley Dean Witter Universal Funds, Inc............................21
The Timothy Plan Variable Series...........................................21
Additions, Deletions, or Substitutions.....................................22
Voting Rights..............................................................22
ANNUITY INVESTORS LIFE INSURANCE COMPANY(R)..................................23
THE SEPARATE ACCOUNT.........................................................23
AAG SECURITIES, INC..........................................................23
CHARGES AND DEDUCTIONS.......................................................25
Charges and Deductions By the Company......................................25
Contract Maintenance Fee.................................................25
Transfer Fee.............................................................26
Administration Charge....................................................26
Mortality and Expense Risk Charge........................................27
Premium Taxes............................................................27
Discretionary Waivers of Charges.........................................27
Expenses of the Portfolios.................................................27
THE CONTRACTS................................................................28
Right to Cancel............................................................28
Persons With Rights Under a Contract.......................................28
ACCUMULATION PERIOD..........................................................29
Account Statements.........................................................29
-2-
<PAGE>
Account Value..............................................................29
Purchase Payments..........................................................30
Investment Options--Allocations............................................30
Transfers..................................................................31
Surrenders.................................................................33
Contract Loans.............................................................34
Termination................................................................34
BENEFIT PAYMENT PERIOD.......................................................35
Annuity Benefit............................................................35
Death Benefit..............................................................35
Settlement Options.........................................................35
Form of Settlement Option................................................36
Calculation of Fixed Dollar Benefit Payments.............................36
Calculation of Variable Dollar Benefit Payments..........................36
FEDERAL TAX MATTERS..........................................................38
Tax Deferral On Annuities..................................................38
Tax-Qualified Plans........................................................39
Individual Retirement Annuities..........................................39
Roth IRAs................................................................39
Tax-Sheltered Annuities..................................................39
Texas Optional Retirement Program........................................39
Pension and Profit Sharing Plans.........................................39
Governmental Deferred Compensation Plans.................................39
Nonqualified Deferred Compensation Plans...................................39
Summary of Income Tax Rules................................................41
GLOSSARY OF FINANCIAL TERMS..................................................42
THE REGISTRATION STATEMENT...................................................43
OTHER INFORMATION............................................................43
Year 2000..................................................................43
Legal Proceedings..........................................................43
STATEMENT OF ADDITIONAL INFORMATION..........................................44
-3-
<PAGE>
DEFINITIONS
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.
-4-
<PAGE>
OVERVIEW
- --------------------------------------------------------------------------------
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 29 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 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.
Will Any Penalties or Charges Apply If I Surrender a Contract? There are no
charges imposed on partial or full surrenders of the Contracts, except that the
annual contract maintenance fee will be deducted at the time of a full
surrender. Surrender procedures are described in the Surrenders section
beginning on page ____ of this prospectus. A penalty tax may 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? 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.
-5-
<PAGE>
FEE TABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Owner Transaction Expenses
<S> <C>
Sales load imposed on purchase payments or on surrenders None
Transfer Fee (applies to transfers in excess of 12 in any contract year) $25
Annual Contract Maintenance Fee (not assessed against fixed account options) $40
</TABLE>
Separate Account Annual Expenses
(as a percentage of the average value of the owner's interest in the
Sub-Accounts)
<TABLE>
<S> <C> <C> <C>
Enhanced Contracts
Standard Enhanced with
Contracts Contracts Administration
Charge Waived
Mortality and Expense Risk Charge 1.25% 0.95% 0.75% 0.95% 0.75%
Administration Charge 0.15% 0.15% 0.15% 0.00% 0.00%
----- ----- ----- ----- -----
Total Separate Account Annual 1.40% 1.10% 0.90% 0.95% 0.75%
Expenses
</TABLE>
Portfolio Annual Expenses for Year Ended 12/31/981
(as a percentage of Portfolio average net assets)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
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
Janus A.S.-Capital Appreciation 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
BT Insurance Funds Trust-EAFE REGISTERED Equity Inde Fund
BT Insurance Funds Trust-Equity 500 Index Fund
BT Insurance Funds Trust-Small Cap Index Fund
INVESCO VIF -Industrial Income Portfolio
INVESCO VIF-Total Return Portfolio
INVESCO VIF-High Yield Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-Mid Cap Value Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-Value Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-Fixed Income Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-U.S. Real Estate Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-Emerging Markets Equity Port.
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>
-6-
<PAGE>
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. Fee
and expenses shown below are actual fees and expenses before any applicable fee
waivers or reductions or expense reimbursements.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
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
Janus A.S.-Capital Appreciation 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
BT Insurance Funds Trust-EAFE REGISTERED Equity Index Fund
BT Insurance Funds Trust-Equity 500 Index Fund
BT Insurance Funds Trust-Small Cap Index Fund
INVESCO VIF -Industrial Income Portfolio
INVESCO VIF-Total Return Portfolio
INVESCO VIF-High Yield Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-Mid Cap Value Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-Value Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-Fixed Income Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-U.S. Real Estate Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-Emerging Markets Equity Port.
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>
-7-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Examples Example #1--Assuming Surrender Example #2--Assuming No Surrender
Standard Contracts
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
Janus A.S.-Capital Appreciation 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
BT Insurance Funds Trust-EAFE REGISTERED Equity Index Fund
BT Insurance Funds Trust-Equity 500 Index Fund
BT Insurance Funds Trust-Small Cap Index Fund
INVESCO VIF -Industrial Income Portfolio
INVESCO VIF-Total Return Portfolio
INVESCO VIF-High Yield Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-Mid Cap Value Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-Value Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-Fixed Income Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-U.S. Real Estate Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-Emerging Markets Equity Port.
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>
-8-
<PAGE>
<TABLE>
<CAPTION>
Enhanced Contracts Example #1--Assuming Surrender Example #2--Assuming No Surrender
(1.10% Total Separate Account Annual Expenses)
<S> <C> <C>
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
Janus A.S.-Capital Appreciation 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
BT Insurance Funds Trust-EAFE REGISTERED Equity Index Fund
BT Insurance Funds Trust-Equity 500 Index Fund
BT Insurance Funds Trust-Small Cap Index Fund
INVESCO VIF -Industrial Income Portfolio
INVESCO VIF-Total Return Portfolio
INVESCO VIF-High Yield Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-Mid Cap Value Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-Value Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-Fixed Income Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-U.S. Real Estate Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-Emerging Markets Equity Port.
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
-9-
<PAGE>
Enhanced Contracts Example #1--Assuming Surrender Example #2--Assuming No Surrender
(0.90% Total Separate Account Annual Expenses)
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
Janus A.S.-Capital Appreciation 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
BT Insurance Funds Trust-EAFE REGISTERED Equity Index Fund
BT Insurance Funds Trust-Equity 500 Index Fund
BT Insurance Funds Trust-Small Cap Index Fund
INVESCO VIF -Industrial Income Portfolio
INVESCO VIF-Total Return Portfolio
INVESCO VIF-High Yield Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-Mid Cap Value Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-Value Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-Fixed Income Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-U.S. Real Estate Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-Emerging Markets Equity Port.
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
-10-
<PAGE>
Enhanced Contracts with Administration Charge Waived Example #1--Assuming Surrender Example #2--Assuming No Surrender
(0.95% Total Separate Account Annual Expenses)
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
Janus A.S.-Capital Appreciation 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
BT Insurance Funds Trust-EAFE REGISTERED Equity Index Fund
BT Insurance Funds Trust-Equity 500 Index Fund
BT Insurance Funds Trust-Small Cap Index Fund
INVESCO VIF -Industrial Income Portfolio
INVESCO VIF-Total Return Portfolio
INVESCO VIF-High Yield Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-Mid Cap Value Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-Value Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-Fixed Income Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-U.S. Real Estate Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-Emerging Markets Equity Port.
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
-11-
<PAGE>
Enhanced Contracts with Administration Charge Waived Example #1--Assuming Surrender Example #2--Assuming No Surrender
(0.75% Total Separate Account Annual Expenses)
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
Janus A.S.-Capital Appreciation 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
BT Insurance Funds Trust-EAFE REGISTERED Equity Index Fund
BT Insurance Funds Trust-Equity 500 Index Fund
BT Insurance Funds Trust-Small Cap Index Fund
INVESCO VIF -Industrial Income Portfolio
INVESCO VIF-Total Return Portfolio
INVESCO VIF-High Yield Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-Mid Cap Value Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-Value Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-Fixed Income Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-U.S. Real Estate Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-Emerging Markets Equity Port.
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
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 among 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 to not
include charges for premium taxes.
</TABLE>
-12-
<PAGE>
<TABLE>
<CAPTION>
CONDENSED FINANCIAL INFORMATION
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sub-Account 12/31/97 12/31/98
--------------- -------------------------------------------- ----------------- ----------------
Janus Aggressive Growth Portfolio
Aspen Accumulation Unit Value 10.723950 14.199318
Series Accumulation Units Outstanding 2,830.076 53,896.345
-------------------------------------------- ----------------- ----------------
Worldwide Growth Portfolio
Accumulation Unit Value 9.935860 12.632936
Accumulation Units Outstanding 56,665.753 402,131.168
-------------------------------------------- ----------------- ----------------
Balanced Portfolio
Accumulation Unit Value 10.604609 14.043929
Accumulation Units Outstanding 30,519.754 373.285.807
-------------------------------------------- ----------------- ----------------
Growth Portfolio
Accumulation Unit Value 10.239960 13.699715
Accumulation Units Outstanding 32,737.591 172,190.630
-------------------------------------------- ----------------- ----------------
International Growth Portfolio
Accumulation Unit Value 9.735841 11.256365
Accumulation Units Outstanding 12,541.039 45,382.775
-------------------------------------------- ----------------- ----------------
Capital Appreciation Portfolio
Accumulation Unit Value N/A N/A
Accumulation Units Outstanding N/A N/A
----------------------------------------------------------------------------------- -----------
Dreyfus Capital Appreciation Portfolio
Variable Accumulation Unit Value 10.103905 12.975443
Investment Accumulation Units Outstanding 18,347.666 170,523.015
Fund -------------------------------------------- ----------------- ----------------
Money Market Portfolio
Accumulation Unit Value 1.016499 1.050876
Accumulation Units Outstanding 0.000 658,981.650
-------------------------------------------- ----------------- ----------------
Growth and Income Portfolio
Accumulation Unit Value 10.196538 11.243790
Accumulation Units Outstanding 32,231.762 159,409.837
-------------------------------------------- ----------------- ----------------
Small Cap Portfolio
Accumulation Unit Value 10.362314 9.867472
Accumulation Units Outstanding 41,359.506 171,968.905
------------------------------------------------------------ ----------------- ----------------
The Dreyfus Socially Responsible Growth Fund, Inc.
Accumulation Unit Value 10.320883 13.169143
Accumulation Units Outstanding 26,332.500 140,614.024
------------------------------------------------------------ ----------------- ----------------
Dreyfus Stock Index Fund
Accumulation Unit Value 10.479569 13.250646
Accumulation Units Outstanding 69,510.645 779,485.606
------------------------------------------------------------ ----------------- ----------------
Strong Opportunity Fund II, Inc.
Accumulation Unit Value 10.727356 12.012034
Accumulation Units Outstanding 6,416.208 72,644.387
------------------------------------------------------------ ----------------- ----------------
Strong Variable Insurance Funds, Inc.-Strong Growth Fund II
Accumulation Unit Value 10.707133 13.587521
Accumulation Units Outstanding 2,147.556 33,197.715
--------------- -------------------------------------------- ----------------- ----------------
BT Insurance EAF REGISTERED Equity Index Fund
Funds Trust Accumulation Unit Value N/A N/A
Accumulation Units Outstanding N/A N/A
-------------------------------------------- ----------------- ----------------
Equity 500 Index Fund
Accumulation Unit Value N/A N/A
Accumulation Units Outstanding N/A N/A
-------------------------------------------- ----------------- ----------------
Small Cap Index Fund
Accumulation Unit Value N/A N/A
Accumulation Units Outstanding N/A N/A
----------------------------------------------------------- ----------------- ----------------
INVESCO Industrial Income Portfolio
Variable Accumulation Unit Value 10.659157 12.120155
Investment Accumulation Units Outstanding 33,269.953 200,541.938
Funds, Inc. -------------------------------------------- ----------------- ----------------
Total Return Portfolio
Accumulation Unit Value 10.503108 11.348675
Accumulation Units Outstanding 14,641.934 154,762.526
-------------------------------------------- ----------------- ----------------
High Yield Portfolio
Accumulation Unit Value 10.687084 10.689459
Accumulation Units Outstanding 10,260.821 70,047.913
----------------------------------------------------------- ----------------- ----------------
Morgan Mid-Cap Value Portfolio
Stanley Accumulation Unit Value 11.113227 12.705082
Dean Witter Accumulation Units Outstanding 16,674.966 111,076.120
Universal -------------------------------------------- ----------------- ----------------
Funds, Inc. Value Portfolio
Accumulation Unit Value 10.204064 9.848411
Accumulation Units Outstanding 9,944.401 34,212.111
-------------------------------------------- ----------------- ----------------
Fixed Income Portfolio
Accumulation Unit Value 10.412276 11.079965
Accumulation Units Outstanding 4.653 46,348.096
-------------------------------------------- ----------------- ----------------
U.S. Real Estate Portfolio
Accumulation Unit Value 11.101269 9.758808
Accumulation Units Outstanding 7,200.060 43,786.457
-------------------------------------------- ----------------- ----------------
Emerging Markets Equity Portfolio
Accumulation Unit Value 7.911559 5.915866
Accumulation Units Outstanding 9,042.956 30,255.642
-13-
<PAGE>
----------------------------------------------------------- ----------------- ----------------
PBHG PBHG Growth II Portfolio
Insurance Accumulation Unit Value 9.511124 10.147606
Series Accumulation Units Outstanding 6,195.935 24,618.770
Fund, Inc. -------------------------------------------- ----------------- ----------------
PBHG Large Cap Growth Portfolio
Accumulation Unit Value 10.150555 13.076352
Accumulation Units Outstanding 11,415.131 31,474.961
-------------------------------------------- ----------------- ----------------
PBHG Technology & Communications Portfolio
Accumulation Unit Value 9.057045 11.808346
Accumulation Units Outstanding 20,974.008 65,820.143
------------------------------------------------------------ ----------------- ----------------
The Timothy Plan Variable Series
Accumulation Unit Value N/A 10.283942
Accumulation Units Outstanding N/A 29,293.327
</TABLE>
The above table 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, or as of May 1, 1999 (the effective date of the
Sub-Account) for the Janus Aspen Series Capital Appreciation Portfolio and the
three BT Insurance Funds Trust Portfolios. The beginning Accumulation Unit Value
for the Dreyfus Money Market Portfolio Sub-Account was 1.000000 as of July 15,
1997. The Contracts were not available for sale until July 22, 1998. No Enhanced
Contracts, or 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.
-14-
<PAGE>
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 may advertise two types of total return data: "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. "Non-standardized" total return data does not reflect
the deduction of 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
consecutive 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
periods, 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.
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.
-15-
<PAGE>
THE PORTFOLIOS
- ------------------------------------------------------------------------------
The Separate Account is currently divided into 29 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 in
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.
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 Capita 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 Capita 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.
Advisor: Capital Appreciation Portfolio
Janus Capital Corporation A nondiversified portfolio that seeks long-term
growth of capital by investing primarily in common
stocks of issuers of any size.
-16-
<PAGE>
Dreyfus Portfolios
Advisor: Dreyfus Variable Investment Fund-Capital
Th Dreyfus Corporation Appreciation Portfolio
The Capital Appreciation Portfolio's primary
Sub-Advisor: investment objective is to provide long-term capital
Fayez Sarofim & Co. growth consistent with the preservation of capital.
Current income is a secondary goal. It seeks to
achieve its goals by investing principally in common
stocks of domestic and foreign issuers, common
stocks with warrants attached and debt securities of
foreign governments.
Advisor: Dreyfus Variable Investment Fund-Money Market
The Dreyfus Corporation Portfolio
The Money Market Portfolio's goal is to provide as
high a level of current income as is consistent with
the preservation of capital and the maintenance of
liquidity. This Portfolio invests in short-term
money market instruments. An investment in the Money
Market Portfolio is neither insured nor guaranteed
by the U.S. Government. There can be no assurance
that the Money Market Portfolio will be able to
maintain a stable net asset value of $1.00 per
share.
Advisor: Dreyfus Variable Investment Fund-Growth and Income
The Dreyfus Corporation Portfolio
The Growth and Income Portfolio's goal is to provide
long-term capital growth, current income and growth
of income, consistent with reasonable investment
risk. This Portfolio invests primarily in equity
securities, 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
Sub-Advisor: to achieve this goal by investing principally in
NCM Capital Management common stocks, or securities convertible into common
Group, Inc. stock, of companies which, in the opinion of the
Portfolio's management, not only meet traditional
investment standards, but also show evidence that
they conduct their business in a manner that
contributes to the enhancement of the quality of
life in America. Current income is a secondary goal.
Advisor: Dreyfus Stock Index Fund
TheDreyfus 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
Index Manager: common stocks in the aggregate, as represented by
Mellon Equity Associates the Standard & Poor's 500 Composite Stock Price
(an affiliate of Dreyfus) Index. The Stock Index Fund is neither sponsored by
nor affiliated with Standard & Poor's Corporation.
-17-
<PAGE>
Strong Portfolios
Advisor: Strong Opportunity Fund II, Inc.
Strong Capital Management, The investment objective of the Strong Opportunity
Inc. Fund II is to seek capital growth. It 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
Strong Capital Management, Fund II
Inc. The investment objective of the Strong Growth Fund
II is to seek capital growth. It invests primarily
in equity securities that the Portfolio's adviser
believes have above-average growth prospects.
BT Insurance Funds Trust
Advisor: EAFE REGISTERED Equity Index Fund
Bankers Trust Company The EAFE(R)Equity Index Fund seeks to replicate as
closely as possible (before deduction of expenses)
the total return of the Europe, Australia, Far East
Index (the EAFE REGISTERED Index), a
capitalization-weighted index containing
approximately 1,100 equity securities of companies
located outside the United States. The Fund will be
invested primarily in equity securities of business
enterprises organized and domiciled outside of the
United States or for which the principal trading
market is outside the United States. Statistical
methods will be employed to replicate the EAFE
REGISTERED Index by buying most of the EAFE
REGISTERED Index securities. Securities purchased
for the Fund will generally, but not necessarily, be
traded on a foreign securities exchange.
Advisor: Equity 500 Index Fund
Bankers Trust Company The Equity 500 Index Fund seeks to replicate as
closely as possible (before deduction of expenses)
the total return of the Standard & Poor's 500
Composite Stock Price Index (the "S&P 500"), an
index emphasizing large-capitalization stocks. The
Fund will include the common stock of those
companies included in the S&P 500, other than the
Bankers Trust New York Corporation, selected on the
basis of computer generated statistical data, that
are deemed representative of the industry
diversification of the entire S&P 500.
Advisor: Small Cap Index Fund
Bankers Trust Company The Small Cap Index Fund seeks to replicate as
closely as possible (before deduction of expenses)
the total return of the Russell 2000 Small Stock
Index (the "Russell 2000"), an index consisting of
2,000 small-capitalization common stocks. The Fund
will include the common stock of companies included
in the Russell 2000, on the basis of
computer-generated statistical data, that are deemed
representative of the industry diversification of
the entire Russell 2000.
-18-
<PAGE>
INVESCO Variable Investment Funds, 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 Funds Group, Inc.
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.
PBHG Insurance Series Fund, Inc.
Advisor: PBHG Growth II Portfolio
Pilgrim Baxter & The investment objective of the PBHG Insurance
Associates, Ltd. Series Growth II Portfolio is to seek 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 & The investment objective of the PBHG Insurance
Associates, Ltd. Series Large Cap Growth Portfolio is to seek
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 & The investment objective of the PBHG Insurance
Associates, Ltd. Series Technology & Communications Portfolio 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.
-19-
<PAGE>
Morgan Stanley Dean Witter Universal Funds, Inc.
Advisor: Mid Cap Value Portfolio
Miller Anderson & Sherrerd, The Mid Cap Value Portfolio seeks above-average
LLP (an indirect wholly total return over a market cycle of three to five
owned subsidiary of Morgan years by investing in common stocks and other equity
Stanley Dean Witter & Co.) securities of issuers with equity capitalizations in
the range of the companies represented in the S&P
MidCap 400 Index. Such range is currently $500
million to $6 billion but the range fluctuates over
time with changes in the equity market.
Advisor: Value Portfolio
Miller Anderson & Sherrerd, The investment objective of the Value Portfolio is
LLP (an indirect wholly to seek above-average total return over a market
owned subsidiary of Morgan cycle of three to five years by investing primarily
Stanley Dean Witter & Co.) in a diversified portfolio of common stocks and
other equity securities deemed by the adviser to be
undervalued based on various measures such as
price/earnings and price/book ratios.
Advisor: Fixed Income Portfolio
Miller Anderson & Sherrerd, The investment objective of the Fixed Income
LLP (an indirect wholly Portfolio is to seek above-average total return over
owned subsidiary of Morgan a market cycle of three to five years by investing
Stanley Dean Witter & Co.) primarily in a diversified portfolio of securities
issued by the U.S. Government and its Agencies,
Corporate Bonds, Mortgage-Backed Securities, Foreign
Bonds, and other Fixed Income Securities and
Derivatives.
Advisor: U.S. Real Estate Portfolio
Morgan Stanley Dean Witter The investment objective of the U.S. Real Estate
Investment Management Inc. Portfolio is above-average current income and
(a wholly owned subsidary long-term capital appreciation by investing
of Morgan Stanley Dean primarily in equity securities of U.S. and non-U.S.
Witter & Co.) companies principally engaged in the U.S. real
estate industry, including Real Estate Investment
Trusts (REITs).
Advisor: Emerging Markets Equity Portfolio
Morgan Stanley Dean Witter The investment objective of the Emerging Markets
Investment Management Inc. Equity Portfolio is long-term capital appreciation
(a wholly owned subsidary by investing primarily in equity securities of
of Morgan Stanley Dean emerging market country issuers with a focus on
Witter & Co.) those in which the adviser believes the economies
are developing strongly and in which the markets are
becoming more sophisticated.
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.
-20-
<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.
-21-
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY(R)
- --------------------------------------------------------------------------------
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.
-22-
<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 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.
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 $40.00 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.
-23-
<PAGE>
Transfer Fee
Purpose of Charge Offset cost incurred in administering the Contracts.
Amoun to 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 Amounts invested in the Sub-Accounts. Not assessed
against the fixed account options.
Waivers May be waived or reduced in the Company's discretion
where the Company incurs reduced sales and servicing
expenses.
-24-
<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.
Assesse 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 either: 1) 0.002590% of
the daily Net Asset Value for each Sub-Account, which
corresponds to an effective annual rate of 0.95%: or 2)
0.002047% of the daily Net Asset Value for each
Sub-Account, which corresponds to an effective annual
rate of 0.75%. The Company estimates that for Enhanced
Contracts, the mortality risk component of either
charge is 0.75% and the expense risk component is 0.20%
or 0.00%, respectively.
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 has 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).
-25-
<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.
-26-
<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 at least once each
contract year a report 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.
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.
-27-
<PAGE>
Purchase Payments
Purchase payments may be made at any time during the Accumulation Period. The
current restrictions on purchase payment amounts are as follows:
Tax-Qualified Non-Tax-Qualified
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Minimum single purchase payment $20,000 $20,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Minimum additional payments $50 $100
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Maximum purchase payment $500,000 or Company $500,000 or Company
approval approval
The Company reserves the right to increase or decrease the minimum allowable
single purchase payment 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 the Company receives 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. The fixed account options are not
available under group Contracts. 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:
-28-
<PAGE>
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:
Tax-Qualified and Non-Tax-Qualified
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Minimum allocation to any Sub-Account $10
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Minimum allocation to fixed $10
accumulation account Not available under group Contracts.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Minimum allocation to fixed account $2,000
guarantee option Not available under group
Contracts. 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 The Company may require that
period purchase payment(s) be allocated
to the money market Sub-Account
or to the fixed accumulation
account option during the right
to cancel period.
-29-
<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 of an individual contract 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 among
Sub-Accounts, between fixed account options (where available), and/or between
Sub-Accounts and fixed account options (where available).
The current restrictions on transfers are as follows:
<TABLE>
<CAPTION>
Tax-Qualified and Non-Tax-Qualified
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
<S> <C>
Minimum transfer from any Sub-Account $500 or balance of Sub-Account, if less
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Minimum transfer from fixed account $500 or balance of fixed account option, if
option less
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Minimum transfer to fixed account $2,000
guarantee option Not available under group
Contracts. 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 the
fixed other than fixed account guarantee option account option's value as of the
most recent which is maturing contract anniversary.
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Transfer 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.
</TABLE>
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.
-30-
<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>
<S> <C> <C> <C>
Service Description Minimum Account Requirements Limitations/Notes
- ----------------------------------- ------------------------------------------------------------------------------------------------
- ----------------------------------- ------------------------------------------------------------------------------------------------
Dollar Cost Averaging Automatic transfers from the Source of funds must be at Dollar cost averaging transfers
There are risks involved in money market Sub-Account to any least $10,000. may not be made to any of the
switching between investments other Sub-Account(s), or from fixed account options. The
available under the Contract. the fixed accumulation account Minimum transfer per month is dollar cost averaging transfers
Dollar cost averaging requires option (where available) to any $500. When balance of source will take place on the last
regular investment changes Sub-Account(s), on a monthly or of funds falls below $500, Valuation Date of each calendar
regardless of fluctuating price quarterly basis. entire balance will be month or quarter as requested
levels and does not guarantee allocated according to dollar by the owner.
profits or prevent losses in a cost averaging instructions.
declining market. You should
consider your financial ability
to continue dollar cost averaging
transfers through periods of
changing price levels.
- ----------------------------------- ------------------------------------------------------------------------------------------------
- ----------------------------------- ------------------------------------------------------------------------------------------------
Portfolio Rebalancing Automatically transfer amounts Minimum Account Value of Transfers will take place on
between the Sub-Accounts and $10,000. the last Valuation Date of each
the fixed accumulation account calendar quarter. Portfolio
option (where available) to rebalancing will not be
maintain the percentage available if the dollar cost
allocations selected by the averaging program or an
owner. interest sweep from the fixed
accumulation account option is
being utilized.
- ----------------------------------- ------------------------------------------------------------------------------------------------
- ----------------------------------- ------------------------------------------------------------------------------------------------
Interest Sweep Automatic transfers of the Balance of each fixed account Interest sweep transfers will
Not available under group income from any fixed account option selected must be at take place on the last
Contracts. option(s) to any Sub-Account(s). least $5,000. Maximum Valuation Date of each calendar
transfer from each fixed quarter.
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.
-31-
<PAGE>
</TABLE>
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 that
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. The restrictions and charges on surrenders are as follows:
<TABLE>
<CAPTION>
Tax-Qualified Non-Tax-Qualified
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
<S> <C>
Minimum amount of partial surrender $500
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Minimum remaining Account Value after partial $500
surrender
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Amount available for surrender (valued as of Account Value subject Account Value
end of Valuation Period in which request for to tax law or subject to employer
surrender is received by the Company) 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 $40
- ---------------------------------------------------------------------------------------------
</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 that 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.
-32-
<PAGE>
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. 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 adviser. 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.
-33-
<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 larger of the following two
amounts:
o The Account Value on the Death Benefit Valuation Date
o The total purchase payment(s) less any partial surrenders
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 among
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.
-34-
<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. Upon request, the Company will provide
minimum monthly payments for ages or fixed periods not shown in the settlement
option tables.
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 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 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.
-35-
<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 adviser 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.
-36-
<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.
-37-
<PAGE>
Summary of Income Tax Rules
The following chart summarizes the basic income tax rules governing
tax-qualified and non-tax-qualified Contracts:
<TABLE>
<CAPTION>
- -------------------------------- ----------------------------------------------------- --------------------------------------------
Tax-Qualified Plans Basic Non-Tax-Qualified Contracts
Nonqualified Deferred Compensation Plans
- -------------------------------- ----------------------------------------------------- ---------------------------------------------
- -------------------------------- ----------------------------------------------------- ---------------------------------------------
<S> <C> <C> <C> <C>
Plan Types o IRC Section 401 (Pension and Profit o IRC Section 72 only
Sharing)
o IRC Section403 (Tax-Sheltered Annuities)
o IRC Section 408 (IRA, SIMPLE IRA)
o IRC Section 408A (Roth IRA)
o IRC Section 457
o Nonqualified Deferred Compensation
- -------------------------------- ----------------------------------------------------- ---------------------------------------------
- -------------------------------- ----------------------------------------------------- ---------------------------------------------
Who May Purchase Contract Natural person, employer, or employer plan. Anyone. Non-natural person may purchase but
Nonqualified deferred compensation plans will will generally lose tax-deferred status.
generally lose tax-deferred status.
- -------------------------------- ----------------------------------------------------- ---------------------------------------------
- -------------------------------- ----------------------------------------------------- ---------------------------------------------
Taxation of Surrenders If there is an after-tax "investment in the Account Value in excess of investment in the
contract," a pro-rata portion of amount surrendered contract is taxable. Generally, the "invest-
is taxable based on ratio of "investment in the ment in the contract" will equal the sum of
contract" to Account Value. Usually, 100% of all purchase payments. Surrenders are deemed
distributions from a qualified plan will be taxed to come from earnings first, and purchase
because there was no after-tax contribution and payments last.
therefore no "investment in the contract." For
a Contract purchased as part of an IRC Section
Qualified distributions from Section 408A Roth
IRA 1035 exchange which includes contributions
made may be completely tax-free. before August
14, 1982 ("pre-TEFRA contributions")
partial withdrawals are not taxable until the
Surrenders prior to age 59 1/2 may be subject to pre-TEFRA contributions have been returned.
10% or greater tax penalty depending on the type
of qualified plan. The taxable portion of any surrenders prior
to age 59 1/2 may be subject to a 10% tax
Surrenders from tax-qualified Contracts may be penalty.
restricted by the Internal Revenue Code or by
the terms of a retirement plan.
- -------------------------------- ---------------------------------------------------------------------------------------------------
- -------------------------------- ---------------------------------------------------------------------------------------------------
Taxation of Benefit Payments May vary depending on type of settlement option selected, but generally, for fixed dollar benefit
(annuity benefit payments or payments, a pro-rata portion of each payment equal to [100% - (investment in contract/total
death benefit payments) expected payments)] is subject to income tax. For variable dollar benefit payments, a specific
dollar 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
Section 408A Roth IRA may be completely tax-free.
- -------------------------------- ---------------------------------------------------------------------------------------------------
- -------------------------------- ---------------------------------------------------------------------------------------------------
Taxation of Lump Sum Death Taxed to recipient generally in same manner as full surrender. Tax penalties do not apply to death
Benefit Payment benefit distributions.
- -------------------------------- ---------------------------------------------------------------------------------------------------
- -------------------------------- ---------------------------------------------------------------------------------------------------
Assignment of Assignment and transfer of ownership generally
Contract/Transfer of Ownership not permitted. Generally, deferred earnings become taxable
to transferor at 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 from Section 401 Generally, payee may elect to have taxes
and Section 403(b) Contracts subject to 20% withheld or not.
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>
-38-
<PAGE>
GLOSSARY OF FINANCIAL TERMS
- --------------------------------------------------------------------------------
The following financial terms explain how the variable portion of the Contracts
is 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.
-39-
<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 333-51955.
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.
-40-
<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 COMPANY REGISTERED
......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:
-41-
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANYREGISTERED
ANNUITY INVESTORSREGISTERED VARIABLE ACCOUNT B
STATEMENT OF ADDITIONAL INFORMATION FOR
THE COMMODORE NAVIGATOR SERVICE MARK
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES
THE COMMODORE INDEPENDENCE SERVICE MARK
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES
THE COMMODORE ADVANTAGE SERVICE 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 and Group 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 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 DEFERRAL ON NONQUALIFIED CONTRACTS....................................10
FINANCIAL STATEMENTS........................................................11
2
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY REGISTERED
- --------------------------------------------------------------------------------
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 % %
Standard Advantage Contracts % %
Standard 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
n.....= number of years
ERV = "ending redeemable value" of a hypothetical $1,000 payment
made at the beginning of the one-, five- or ten-year period at
the end of the one-, five- or ten-year period (or fractional
portion thereof)
Average annual total return may be presented in either standardized or
nonstandardized form. Average annual total return data 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. 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>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN DATA NAVIGATOR NAVIGATOR ADVANTAGE INDEPENDENCE
(DATA REFLECTS DEDUCTION OF ALL RECURRING CHARGES STANDARD ENHANCED STANDARD STANDARD
INCLUDING CONTINGENT DEFERRED SALES CHARGES AND CONTRACTS1/ CONTRACTS2/ CONTRACTS1/ CONTRACTS1/
CONTRACT MAINTENANCE FEES)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------
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
Janus A.S.-Capital Appreciation Portfolio
Dreyfus V.I.F.-Capital Appreciation Portfolio
Dreyfus V.I.F.-Money Marke 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
BT Insurance Funds Trust-EAFE(R)Equity Index Fund 4/ 4/ 4/ 4/
- - -
BT Insurance Funds Trust-Equity 500 Index Fund 5/ 5/ 5/ 5/
- - - -
BT Insurance Funds Trust-Small Cap Index Fund 6/ 6/ 6/ 6/
- - - -
INVESCO VIF-Industrial Income Portfolio
INVESCO VIF-Total Return Portfolio
INVESCO VIF-High Yield Portfolio
Morgan Stanley Dean Witter Universal Funds,Inc.-Mid Cap Value Portfolio
Morgan Stanley Dean Witter Universal Funds,Inc.-Value Portfolio
Morgan Stanley Dean Witter Universal Funds,Inc.-Fixed Income Portfolio
Morgan Stanley Dean Witter Universal Funds,Inc.-U.S. Real Estate Portfolio
Morgan Stanley Dean Witter 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 N/A 7/ N/A 7/ N/A 7/ N/A 7/
- - - -
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN DATA NAVIGATOR STANDARD NAVIGATOR ENHANCED
(DATA REFLECTS DEDUCTION OF ALL RECURRING CHARGES EXCEPT CONTRACTS1/; ADVANTAGE CONTRACTS2/
CONTINGENT DEFERRED SALES CHARGES AND CONTRACT MAINTENANCE STANDARD CONTRACTS1/;
FEES--DATA IS THE SAME FOR NAVIGATOR STANDARD CONTRACTS, INDEPENDENCE STANDARd
ADVANTAGE STANDARD CONTRACTS AND INDEPENDENCE STANDARD CONTRACTS1/
CONTRACTS)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year Life of 1 Year Life of
ALL PERIODS Separate Separate
ENDING 12/31/98 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
Janus A. S.-Capital Appreciation 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
BT Insurance Funds Trust-EAFE(R)Equity Index Fund 4/ 4/
BT Insurance Funds Trust-Equity 500 Index Fund 5/ 5/
- -
BT Insurance Funds Trust-Small Cap Index Fund 6/ 6/
- -
INVESCO VIF-Industrial Income Portfolio
INVESCO VIF-Total Return Portfolio
INVESCO VIF-High Yield Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-Mid Cap Value Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-Value Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-Fixed Income Portfolio
Morgan Stanley Dean Witter Universal Funds, Inc.-U.S. Real Estate Portfolio
Morgan Stanley Dean Witter 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 7/ 7/
- -
</TABLE>
1/ Annual mortality and expense risk charge of 1.25% of daily net asset value
and annual administration charge of 0.15% of daily net asset value.
2/ Annual mortality and expense risk charge of 0.95% of daily net asset value
and annual administration charge of 0.15% 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 (8/22/97) to 12/31/98.
5/ From inception date of Portfolio (10/1/97) to 12/31/98.
6/ From inception date of Portfolio (8/25/97) to 12/31/98.
7/ From inception date of Portfolio (5/1/98) to 12/31/98.
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/
(i) Amended Schedule 1 to Distribution Agreement. 3/
(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. 5/
(4) Individual and Group Contract Forms and Endorsements.
(a) Form of No-Load Qualified Individual Flexible Premium
Deferred Annuity Contract. 3/
(b) Form of No-Load Non-Qualified Individual Flexible Premium
Deferred Annuity Contract. 3/
(c) Form of Individual Retirement Annuity Endorsement to
Individual Qualified Contract. 3/
(d) Form of SIMPLE IRA Endorsement to Qualified Individual
Contract. 3/
(e) Form of Roth IRA Endorsement to Qualified Individual
Contract. 3/
(f) Form of Employer Plan Endorsement to Qualified Individual
Contract. 3/
(g) Form of Tax Sheltered Annuity Endorsement to Qualified
Individual Contract. 3/
(h) Form of Qualified Pension, Profit Sharing and Annuity Plan
Endorsement to Qualified Individual Contract. 3/
(i) Form of Governmental Section 457 Plan Endorsement to
Qualified Individual Contract. 3/
(j) Form of Texas Optional Retirement Program Endorsement to
Individual Contract.2/
(k) Form of Long-Term Care Waiver Rider to Individual Contract.2/
(l) Form of Loan Endorsement to Individual Contract.2/
(m) Form of Group Flexible Premium Deferred Variable Annuity
Contract (filed herewith).
(n) Form of Certificate of Participation under a Group Flexible
Premium Deferred Variable Annuity Contract (filed herewith).
(o) Form of Loan Endorsement to Group Contract.2/
(p) Form of Loan Endorsement to Certificate of Participation
under a Group Contract. 2/
(q) Form of Tax Sheltered Annuity Endorsement to Group
Contract.7/
(r) Form of Tax Sheltered Annuity Endorsement to Certificate of
Participation under a Group Contract.7/
(s) Form of Qualified Pension, Profit Sharing and
Annuity Plan Endorsement to Group Contract.7/
(t) Form of Qualified Pension, Profit Sharing and Annuity Plan
Endorsement to Certificate of Participation under a Group
Contract.7/
(u) Form of Employer Plan Endorsement to Group Contract.7/
(v) Form of Employer Plan Endorsement to Certificate of
Participation under a Group Contract.7/
(w) Form of Deferred Compensation Endorsement to Group
Contract.2/
(x) Form of Deferred Compensation Endorsement to Certificate of
Participation under a Group Contract.2/
(y) Form of Texas Optional Retirement Program Endorsement to
Group Contract.2/
(z) Form of Texas Optional Retirement Program Endorsement to
Certificate of Participation under a Group Contract.2/
(aa) Form of Governmental Section 457 Plan Endorsement to Group
Contract. 7/
(bb) Form of Governmental Section 457 Plan Endorsement to
Certificate of Participation under a Group Contract. 7/
(cc) Form of Successor Owner Endorsement to Group Contract (filed
herewith).
(dd) Form of Successor Owner Endorsement to Certificate of
Participation under a Group Contract (filed herewith).
(ee) Form of Successor Owner Endorsement to Qualified Individual
Contract and Non-Qualified Individual Contract (filed
herewith).
(ff) Form of Individual Retirement Annuity Endorsement to Group
Contract . 6/
(gg) Form of Individual Retirement Annuity Endorsement to
Certificate of Participation under a Group Contract. 6/
(hh) Form of SIMPLE Individual Retirement Annuity Endorsement to
Group Contract. 6/
(ii) Form of SIMPLE Individual Retirement Annuity Endorsement
to Certificate of Participation under a Group Contract. 6/
(jj) Form of Roth Individual Retirement Annuity Endorsement to
Group Contract. 6/
(kk) Form of Roth Individual Retirement Annuity Endorsement to
Certificate of Participation under a Group Contract. 6/
(ll) Form of Unisex Endorsement to Nonqualified Individual
Contract. 6/
(5) (a) Form of Application for Individual Flexible Premium
Deferred
Annuity Contract. 3/
(b) Form of Application for Group Flexible Premium Deferred
Annuity Contract. 8/
(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/
(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/
(i) Amended Schedule A to Participation Agreement between
Annuity Investors Life Insurance Company and Janus
Aspen Series. 3/
(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/
(i) Amended Schedule B to Participation Agreement between
Annuity Investors Life Insurance Company and INVESCO
Variable Investment Funds, Inc. 3/
(g) Participation Agreement between Annuity Investors Life
Insurance CompanyREGISTERED and Morgan Stanley Universal
Funds, Inc.2/
(i) Amended Schedule B to Participation Agreement between
Annuity Investors Life Insurance Company and Morgan
Stanley Universal Funds, Inc. 3/
(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 GroupSERVICE MARK,
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 GroupSERVICE
MARK, 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. 3/
(r) Participation Agreement between The Timothy Plan Variable
Series, Timothy Partners, Ltd. and Annuity Investors Life
Insurance Company.3/
(s) Service Agreement between The Timothy Plan Variable Series
and Annuity Investors Life Insurance Company. 3/
(t) Participation Agreement between BT Insurance Funds Trust and
Annuity Investors Life Insurance Company. 9/
(u) Service Agreement between Bankers Trust Company and Annuity
Investors Life Insurance Company. 9/
(9) Opinion and Consent of Counsel. 3/
(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. 3/
(14) Financial Data Schedule. 3/
(15) Powers of Attorney. 4/ ------------------------
1/ Incorporated by reference to Form N-4, filed on behalf of Annuity Investors
Variable Account B, SEC File No. 333-19725 on December 23, 1996.
2/ Incorporated by reference to Pre-Effective Amendment No. 1, filed on behalf
of Annuity Investors Variable Account B, SEC File No. 333-19725 on June 3,
1997.
3/ Filed in initial Registration Statement on N-4, filed on behalf of
Commodore Independence Contracts, SEC File No. 333-51955 , on May 6, 1998.
4/ Filed with Pre-Effective Amendment No. 1 on July 6, 1998.
5/ Incorporated by reference to Post-Effective Amendment No. 3, filed on
behalf of Annuity Investors Variable Account B, SEC File No. 333-19725 on
November 17, 1998.
6/ Incorporated by reference to Post-Effective Amendment No. 4, filed on
behalf of Annuity Investors Variable Account B, SEC File No. 333-19725 on
February _1_, 1999.
7/ Incorporated by reference to Post-Effective Amendment No. 1, filed on
behalf of Annuity Investors Variable Account B, SEC File No. 333-19725 on
February _27_, 1998.
8/ Incorporated by reference to Post-Effective Amendment No. 2, filed on
behalf of Annuity Investors Variable Account B, SEC File No. 333-19725 on
April_29_, 1998.
9/ Incorporated by reference to Post-Effective Amendment No. 5, filed on
behalf of Annuity Investors Variable Account B, SEC File No. 333-19725 on
February 26, 1999.
<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
Arthur Ronald Greene, III (1) Vice President
Betty Marie Kasprowicz (1) Vice President and
Assistant Secretary
Michael Joseph O'Connor (1) Senior Vice President
Lynn Edward Laswell (1) Vice President and
Controller
Vincent J. Graneri (1) Vice President and Chief
Actuary
David Shipley (1) Vice President
Thomas E. Mischell (1) Assistant Treasurer
(1) P.O. Box 5423, Cincinnati, Ohio 45201-5423.
Item 26. Persons Controlled by or Under Common Control With the Depositor
or Registrant
The Depositor, Annuity Investors Life Insurance CompanyREGISTERED is a wholly
owned subsidiary of Great AmericanREGISTERED Life Insurance Company, which is a
wholly owned subsidiary of American Annuity Group,SERVICE MARK 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.
<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 Financial Corporation Ohio 08/27/1963 100 Inactive
|_American Money Management Corporation Ohio 03/01/1973 100 Investment Management
|_American Money Management Netherland - 05/10/1985 100 Securities Management
International, N.V 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 New Jersey 11/10/1804 100 Inactive
Company
|_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 Indiana 11/19/1872 100 Inactive
Company
|_Lehigh Valley Railroad Company Pennsylvania 04/21/1846 100 Inactive
|_The New York and Harlem Railroad New York 04/25/1831 97 Inactive
Company
|_The Owasco River Railway, Inc. New York 06/02/1881 100 Inactive
|_PCC Real Estate, Inc. New York 12/15/1986 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, Delaware 05/05/1989 80 Real Estate Developer
L.P.
|_Penn Central Energy Management Delaware 05/11/1987 100 Energy Operations Manager
Company
|_Pennsylvania Company Delaware 12/05/1958 100 Holding Company
|_Atlanta Casualty Company Ohio 06/13/1972 100 (2) Property/Casualty Insurance
|_American Premier Insurance Indiana 11/30/1989 100 Property/Casualty Insurance
Company
|_Atlanta Reserve Insurance Ohio 12/07/1998 100 Property/Casualty Insurance
Company
|_Atlanta Specialty Insurance Ohio 02/06/1974 100 Property/Casualty Insurance
Company
|_Atlanta Casualty Group, Inc. Georgia 04/01/1977 100 Insurance Agency
|_Atlanta Casualty General Texas 03/15/1961 100 Managing General Agency
Agency, Inc.
|_Atlanta Insurance Brokers, Georgia 02/06/1971 100 Insurance Agency
Inc.
|_Treaty House, Ltd. (d/b/a Nevada 11/02/1971 100 Insurance Premium Finance
Mr. Budget)
|_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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
|_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 Indiana 08/05/1992 100 Property/Casualty Insurance
Company
|_Infinity Select Insurance Indiana 06/11/1991 100 Property/Casualty Insurance
Company
|_Leader Insurance Company Ohio 03/20/1963 100 Property/Casualty Insurance
|_American Commonwealth Texas 07/23/1963 100 Real Estate Development
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 Texas 05/19/1989 100 Managing General Agency
Agency, Inc.
|_Leader National Agency, Inc. Ohio 04/05/1963 100 Brokering Agent
|_Leader National Agency of Texas 01/25/1994 100 Managing General Agency
Texas, Inc.
|_Leader Preferred Insurance Ohio 11/07/1994 100 Property/Casualty Insurance
Company
|_Leader Specialty Insurance Indiana 03/10/1994 100 Property/Casualty Insurance
Company
|_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 Delaware 11/18/1983 100 Holding Company
Companies, Inc.
|_Marathon Manufacturing Delaware 12/07/1979 100 Inactive
Company
|_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 California 12/05/1972 100 Workers' Compensation Insurance
America
|_Republic Indemnity Company of California 10/13/1982 100 Workers' Compensation Insurance
California
|_Republic Indemnity Medical California 03/25/1996 100 Medical Bill Review
Management, 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 Oklahoma 12/28/1966 100 Property/Casualty Insurance
Company
|_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, Mexico 11/24/1994 100 (2) Property/Casualty Insurance
S.A. de C.V.
|_Financiadora De Primas Mexico 03/06/1998 99 Premium Finance Company
Condor S.A. de C.V.
|_Moore Group Inc. Georgia 12/19/1962 100 Insurance Holding Company/Agency
|_Casualty Underwriters, Inc. Georgia 10/01/1954 51 Insurance Agency
|_Dudley L. Moore Insurance, Louisiana 03/30/1978 beneficial Insurance Agency
Inc. interest
|_Hallmark General Insurance Oklahoma 06/16/1972 beneficial Insurance Agency
Agency, Inc. interest
|_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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
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 Pennsylvania 08/14/1970 83 Inactive
Railroad Company
|_Premier Lease & Loan Services Washington 12/27/1983 100 Insurance Agency
Agency, Inc.
|_Premier Lease & Loan Services of Washington 02/28/1991 100 Insurance Agency
Canada, 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 Michigan 01/30/1902 82 Inactive
Company
|_Waynesburg Southern Railroad Pennsylvania 09/01/1966 100 Inactive
Company
|_Chiquita Brands International, Inc. New Jersey 03/30/1999 36.66 Production/Processing/Distribution
(and subsidiaries) (2)
| 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 Delaware 02/28/1979 100 Excess & Surplus Lines Insurance
Insurance Company
|_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 Holding Company
(2)
|_AAG Holding Company, Inc. Ohio 09/11/1996 100 Holding Company
|_American Annuity Group Capital Delaware 09/13/1996 100 Financing Vehicle
Trust I
|_American Annuity Group Capital Delaware 03/11/1997 100 Financing Vehicle
Trust II
|_American Annuity Group Capital Delaware 05/27/1997 100 Financing Vehicle
Trust III
|_Great American Life Insurance Ohio 12/15/1959 100 Life Insurance Company
Company
|_American Retirement Life Ohio 05/12/1978 100 Life Insurance Company
Insurance Company
|_Annuity Investors Life Ohio 11/31/1981 100 Life Insurance Company
Insurance Company
|_CHATBAR, Inc. Massachusetts 11/02/1993 100 Hotel Operator
|_Driskill Holdings, Inc. Texas 06/07/1995 beneficial Hotel Management
interest
|_GALIC Brothers, Inc. Ohio 11/12/1993 80 Real Estate Management
|_Great American Life Ohio 08/10/1967 100 Life Insurance Company
Assurance Company
|_Great American Life Ohio 08/06/1998 beneficial Charitable Foundation
Children's Foundation interest
|_Loyal American Life Ohio 05/18/1955 100 Life Insurance Company
Insurance Company
|_ADL Financial Services, North Carolina 09/10/1970 100 Marketing Services
Inc.
|_Purity Financial Florida 12/21/1991 100 Marketing Services
Corporation
|_Prairie National Life South Dakota 02/11/1976 100 Life Insurance Company
Insurance Company
|_AAG Insurance Agency, Inc. Kentucky 12/06/1994 100 Life Insurance Agency
|_AAG Insurance Agency of Massachusetts 05/25/1995 100 Insurance Agency
Massachusetts, Inc.
|_AAG Securities, Inc. Ohio 12/10/1993 100 Broker-Dealer
|_American Data Source India India 09/03/1997 99 Software Development
Private Limited
|_American Memorial Marketing Washington 06/19/1980 100 Marketing Services
Services, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
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 Puerto Rico 07/01/1964 99 Life Insurance Company
Company of Puerto Rico, Inc.
|_Keyes-Graham Insurance Agency, Massachusetts 12/23/1987 100 Insurance Agency
Inc.
|_Laurentian Credit Services Delaware 10/07/1994 100 Inactive
Corporation
|_Laurentian Marketing Services, Delaware 12/23/1987 100 Marketing Services
Inc.
|_Laurentian Securities Delaware 01/30/1990 100 Inactive
Corporation
|_Lifestyle Financial Ohio 12/29/1993 100 Marketing Services
Investments, Inc.
|_Lifestyle Financial Ohio 03/07/1994 beneficial Life Insurance Agency
Investments Agency of Ohio, Inc. interest
|_Lifestyle Financial Indiana 02/24/1994 100 Life Insurance Agency
Investments of Indiana, Inc.
|_Lifestyle Financial Kentucky 10/03/1994 100 Insurance Agency
Investments of Kentucky, Inc.
|_Lifestyle Financial Minnesota 06/10/1985 100 Insurance Agency
Investments of the Northwest, Inc.
|_Lifestyle Financial North Carolina 07/13/1994 100 Insurance Agency
Investments of 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 06/02/1995 100 Life Insurance Agency
Texas, Inc.
|_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 Ohio 07/27/1983 100 Management Holding Company
Services, Inc.
|_American Custom Insurance California 05/18/1992 100 Insurance Agency & Brokerage
Services 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 Massachusetts 04/19/1994 100 Surplus Lines Brokerage
Insurance, Inc.
|_Professional Risk Brokers of Connecticut 07/09/1992 100 Insurance Agency & Brokerage
Connecticut, Inc.
|_Professional Risk Brokers of Ohio 12/17/1986 100 Insurance Agency and Brokerage
Ohio, Inc.
|_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 Delaware 01/12/1982 100 Excess & Surplus Lines Insurance
Insurance Company
|_American Empire Surplus Lines Delaware 07/15/1977 100 Excess & Surplus Lines Insurance
Insurance Company
|_American Empire Insurance Company Ohio 11/26/1979 100 Property/Casualty Insurance
|_American Signature Ohio 04/08/1996 100 Insurance Agency
Underwriters, Inc.
|_Specialty Underwriters, Inc. Texas 05/19/1976 100 Insurance Agency
|_Fidelity Excess and Surplus Ohio 06/30/1987 100 Property/Casualty Insurance
Insurance Company
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
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, Connecticut 00/00/1871 100 Closed End Investment Company
Inc. (2)
|_American Insurance Agency, Inc. Kentucky 07/27/1967 100 Insurance Agency
|_American National Fire Insurance New York 08/22/1947 100 Property/Casualty Insurance
Company
|_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 Cincinnatian Ohio 01/25/1994 100 Hotel Manager
Corporation
|_Brothers Landing Corporation Louisiana 02/24/1994 100 Real Estate Holding Corporation
|_Brothers Pennsylvanian Pennsylvania 12/23/1994 100 Real Estate Holding Corporation
Corporation
|_Brothers Port Richey Florida 12/06/1993 100 Apartment Manager
Corporation
|_Brothers Property Management Ohio 09/25/1987 100 Real Estate Management
Corporation
|_Brothers Railyard Corporation Texas 12/14/1993 100 Apartment Manager
|_Contemporary American Insurance Illinois 04/16/1996 100 Property/Casualty Insurance
Company
|_Crop Managers Insurance Agency, Kansas 08/09/1989 100 Insurance Agency
Inc.
|_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 Texas 10/09/1979 beneficial Lloyd's Plan Insurer
Company interest
|_Great American Management Ohio 12/05/1974 100 Data Processing and Equipment
Services, Inc. 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, Ohio 04/21/1980 100 Insurance Risk Management
Inc.
|_Great Texas County Mutual Texas 04/29/1954 beneficial Property/Casualty Insurance
Insurance Company interest
|_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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
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 California 05/05/1994 100 Insurance Agency
Agency
|_Explorer Insurance Agency, Inc. Ohio 07/17/1997 beneficial Insurance Agency
interest
|_National Interstate Insurance Texas 06/07/1989 beneficial Insurance Agency
Agency of Texas, Inc. interest
|_National Interstate Insurance Ohio 02/13/1989 100 Insurance Agency
Agency, Inc.
|_National Interstate Insurance Ohio 02/10/1989 100 Property/Casualty Insurance
Company
|_Safety, Claims & Litigation Pennsylvania 06/23/1995 100 Claims Third Party Administrator
Services, 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 Georgia 08/07/1995 100 Insurance Agency
Liability 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 Services
|_Transport Insurance Agency, Inc. Texas 08/21/1989 beneficial Insurance Agency
interest
|_Transport Underwriters Association California 05/11/1945 100 Holding Company/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
</TABLE>
(1) Except Director's Qualifying Shares.
(2) Total percentage owned by parent shown and by other affiliated company(ies).
<PAGE>
Item 27. Number of Contract Owners As of March 31, 1998, no Commodore
Independence Contracts had been issued. As of March 31, 1999, there were
________ Contract owners, of which ________ were qualified and _______ were
non-qualified.
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.
<PAGE>
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.
(b) Directors and Officers of AAG Securities, Inc.
Name and Principal Position with
Business Address AAG Securities, Inc.
- ------------------ --------------------
Thomas Kevin Liguzinski (1) Chief Executive Officer and Director
Charles Kent McManus (1) Senior Vice President
Mark Francis Muething (1) Vice President, Secretary and Director
William Jack Maney, II (1) Director
Jeffrey Scott Tate (1) Director
James Lee Henderson (1) President
Andrew Conrad Bambeck, III (1) Vice President
William Claire Bair, Jr. (1) Treasurer
Thomas E. Mischell (1) Assistant Treasurer
Fred J. Runk (1) Assistant Treasurer
(1) 250 East Fifth Street, Cincinnati, Ohio 45202
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts and records required to be maintained by Section 31(a) of the 1940
Act and the rules under it are maintained by Lynn E. Laswell, Vice President and
Controller of the Company, at the Administrative Office.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Registrant undertakes that it will file a post-effective amendment to this
registration statement as frequently as necessary to ensure that the audited
financial statements in the registration statement are never more than 16 months
old for so long as payments under the variable annuity contracts may be
accepted.
(b) Registrant undertakes that it will include either (1) as part of any
application to purchase a Contract offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
post card or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information.
(c) Registrant undertakes to deliver any Prospectus and Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request to the Company at the address or
phone number listed in the Prospectus.
(d) The Company represents that the fees and charges deducted under the
Contract, in the aggregate, are reasonable in relation to the services rendered,
the expenses expected to be incurred and the risks assumed by the Company.
<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. 1 to its Registration Statement to be signed on its behalf by the
undersigned in the City of Cincinnati, State of Ohio on the 26th day of
February, 1999.
ANNUITY INVESTORSREGISTERED VARIABLE ACCOUNT B
(REGISTRANT)
By: /s/ ------------------------------
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
Chairman of the Board, President
and Director
As required by the Securities Act of 1933, this Post-Effective Amendment
No. 1 to its Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
/s/ Robert Allen Adams Principal Executive February 26, 1999
Robert Allen Adams* Officer, Director
/s/ Edward Lynn Laswell Principal Financial February 26, 1999
Edward Lynn Laswell Officer
/s/ Lynn Edward Laswell Principal Accounting February 26, 1999
Lynn Edward Laswell* Officer
/s/ Stephen Craig Lindner Director February 26, 1999
Stephen Craig Lindner*
/s/ William Jack Maney, II Director February 26, 1999
William Jack Maney, II*
/s/ James Michael Mortensen Director February 26, 1999
James Michael Mortensen*
/s/ Mark Francis Muething Director February 26, 1999
Mark Francis Muething*
/s/ Jeffrey Scott Tate Director February 26, 1999
Jeffrey Scott Tate*
*Executed by John Gruber on behalf of those indicated pursuant to Power of
Attorney.
<PAGE>
EXHIBIT LIST
(5) Resolution of the Board of Directors of Annuity Investors Life
Insurance CompanyREGISTERED authorizing establishment of Annuity
InvestorsREGISTERED Variable Account B.1/
(6) Not Applicable.
(7) (a) Insurance Company REGISTERED and AAG Securities, Inc.2/
(i) Amended Schedule 1 to Distribution Agreement. 3/
(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. 5/
(8) Individual and Group Contract Forms and Endorsements.
(a) Form of No-Load Qualified Individual Flexible Premium
Deferred Annuity Contract. 3/
(b) Form of No-Load Non-Qualified Individual Flexible Premium
Deferred Annuity Contract. 3/
(c) Form of Individual Retirement Annuity Endorsement to
Individual Qualified Contract. 3/
(d) Form of SIMPLE IRA Endorsement to Qualified Individual
Contract. 3/
(e) Form of Roth IRA Endorsement to Qualified Individual
Contract. 3/
(f) Form of Employer Plan Endorsement to Qualified Individual
Contract. 3/
(g) Form of Tax Sheltered Annuity Endorsement to Qualified
Individual Contract. 3/
(h) Form of Qualified Pension, Profit Sharing and Annuity Plan
Endorsement to Qualified Individual Contract. 3/
(i) Form of Governmental Section 457 Plan Endorsement to
Qualified Individual Contract. 3/
(j) Form of Texas Optional Retirement Program Endorsement to
Individual Contract.2/
(k) Form of Long-Term Care Waiver Rider to Individual Contract.2/
(l) Form of Loan Endorsement to Individual Contract.2/
(m) Form of Group Flexible Premium Deferred Variable Annuity
Contract (filed herewith).
(n) Form of Certificate of Participation under a Group Flexible
Premium Deferred Variable Annuity Contract (filed herewith).
(o) Form of Loan Endorsement to Group Contract.2/
(p) Form of Loan Endorsement to Certificate of Participation
under a Group Contract. 2/
(q) Form of Tax Sheltered Annuity Endorsement to Group
Contract.7/
(r) Form of Tax Sheltered Annuity Endorsement to Certificate of
Participation under a Group Contract.7/
(s) Form of Qualified Pension, Profit Sharing and Annuity Plan
Endorsement to Group Contract.7/
(t) Form of Qualified Pension, Profit Sharing and Annuity Plan
Endorsement to Certificate of Participation under a Group
Contract.7/
(u) Form of Employer Plan Endorsement to Group Contract.7/
(v) Form of Employer Plan Endorsement to Certificate of
Participation under a Group Contract.7/
(w) Form of Deferred Compensation Endorsement to Group
Contract.2/
(x) Form of Deferred Compensation Endorsement to Certificate of
Participation under a Group Contract.2/
(y) Form of Texas Optional Retirement Program Endorsement to
Group Contract.2/
(z) Form of Texas Optional Retirement Program Endorsement to
Certificate of Participation under a Group Contract.2/
(aa) Form of Governmental Section 457 Plan Endorsement to Group
Contract. 7/
(bb) Form of Governmental Section 457 Plan Endorsement to
Certificate of Participation under a Group Contract. 7/
(cc) Form of Successor Owner Endorsement to Group Contract (filed
herewith).
(dd) Form of Successor Owner Endorsement to Certificate of
Participation under a Group Contract (filed herewith).
(ee) Form of Successor Owner Endorsement to Qualified Individual
Contract and Non-Qualified Individual Contract (filed
herewith).
(ff) Form of Individual Retirement Annuity Endorsement to Group
Contract . 6/
(gg) Form of Individual Retirement Annuity Endorsement to
Certificate of Participation under a Group Contract. 6/
(hh) Form of SIMPLE Individual Retirement Annuity Endorsement to
Group Contract. 6/
(ii) Form of SIMPLE Individual Retirement Annuity Endorsement to
Certificate of Participation under a Group Contract. 6/
(jj) Form of Roth Individual Retirement Annuity Endorsement to
Group Contract. 6/
(kk) Form of Roth Individual Retirement Annuity Endorsement to
Certificate of Participation under a Group Contract. 6/
(ll) Form of Unisex Endorsement to Nonqualified Individual
Contract. 6/
(5) (a) Form of Application for Individual Flexible Premium Deferred
Annuity Contract. 3/
(b) Form of Application for Group Flexible Premium Deferred
Annuity Contract. 8/
(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/
(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/
(i) Amended Schedule A to Participation Agreement between
Annuity Investors Life Insurance Company and Janus Aspen
Series. 3/
(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/
(i) Amended Schedule B to Participation Agreement between
Annuity Investors Life Insurance Company and INVESCO
Variable Investment Funds, Inc. 3/
(g) Participation Agreement between Annuity Investors Life
Insurance CompanyREGISTERED and Morgan Stanley Universal
Funds, Inc.2/
(i) Amended Schedule B to Participation Agreement between
Annuity Investors Life Insurance Company and Morgan
Stanley Universal Funds, Inc. 3/
(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 GroupSERVICE MARK,
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 GroupSERVICE
MARK, 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. 3/
(r) Participation Agreement between The Timothy Plan Variable
Series, Timothy Partners, Ltd. and Annuity Investors Life
Insurance Company.3/
(s) Service Agreement between The Timothy Plan Variable Series
and Annuity Investors Life Insurance Company. 3/
(t) Participation Agreement between BT Insurance Funds Trust and
Annuity Investors Life Insurance Company. 9/
(u) Service Agreement between Bankers Trust Company and Annuity
Investors Life Insurance Company. 9/
(9) Opinion and Consent of Counsel. 3/
(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. 3/
(14) Financial Data Schedule. 3/
(15) Powers of Attorney. 4/
Item 4(m)
A Stock Insurance Company
Domicile Address: 580 Walnut Street, Cincinnati, Ohio 45202
Administrative Office:
P. O. Box 5423, Cincinnati, Ohio 45201-5423
Certificate of Participation
Under a Group Flexible Premium Deferred Variable Annuity Contract
This is your Certificate of Participation ("Certificate"). It is evidence of
your participation interest in the Group Flexible Premium Deferred Variable
Annuity Contract ("the Contract"), as identified on the Certificate
Specifications page, which has been issued by Annuity Investors Life Insurance
Company to the Contract Owner. As you read through this Certificate, please note
that the words "we", "us", "our", and "Company" refer to Annuity Investors Life
Insurance Company. The words "you" and "your" refer to the Participant.
Assistant Secretary Executive Vice President
Non-Participating - No Dividends
BENEFIT PAYMENTS AND OTHER VALUES DESCRIBED IN THIS CERTIFICATE, WHEN BASED ON
THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT, MAY INCREASE OR DECREASE AND
ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNTS. NO MINIMUM CONTRACT VALUE IS
GUARANTEED, EXCEPT FOR AMOUNTS IN THE FIXED ACCOUNT.
<PAGE>
CERTIFICATE SPECIFICATIONS
PARTICIPANT: JOHN DOE
AGE OF PARTICIPANT AS OF CERTIFICATE EFFECTIVE DATE: 35
GROUP CONTRACT OWNER: ANYTOWN TRUCKING COMPANY
GROUP CONTRACT NUMBER: 000000000
CERTIFICATE NUMBER: 000000000
CERTIFICATE EFFECTIVE DATE: APRIL 01, 1998
ANNUITY COMMENCEMENT DATE: APRIL 01, 2033
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT: Annuity Investors Variable Account B
Following is a list of the currently available Funds in which the Separate
Account invests:
[Janus Aspen Series Aggressive Growth Portfolio]
[Janus Aspen Series Worldwide Growth Portfolio]
[Janus Aspen Series Balanced Portfolio]
[Janus Aspen Series Growth Portfolio]
[Janus Aspen Series International Growth Portfolio]
[Janus Aspen Series Capital Appreciation Portfolio]
[Dreyfus Variable Investment Fund-Capital Appreciation Portfolio]
[Dreyfus Variable Investment Fund-Money Market Portfolio]
[Dreyfus Variable Investment Fund-Growth and Income Portfolio]
[Dreyfus Variable Investment Fund-Small Cap Portfolio]
[The Dreyfus Socially Responsible Growth Fund, Inc.]
[Dreyfus Stock Index Fund]
[Strong Opportunity Fund II, Inc.]
[Strong Growth Fund II]
[The Timothy Plan Variable Series]
[INVESCO VIF-Industrial Income Portfolio]
[INVESCO VIF-Total Return Portfolio]
[INVESCO VIF- High Yield Portfolio]
[Morgan Stanley Universal Funds Inc. U.S. Real Estate Portfolio]
[Morgan Stanley Universal Funds Inc. Value Portfolio]
[Morgan Stanley Universal Funds Inc. Emerging Markets Equity Portfolio]
[Morgan Stanley Universal Funds Inc. Fixed Income Portfolio]
[Morgan Stanley Universal Funds Inc. Mid-Cap Value Portfolio]
[Pilgrim Baxter PBHG Insurance Series Fund, Inc.-Growth II Fund]
[Pilgrim Baxter PBHG Insurance Series Fund, Inc.-Large Cap Growth Fund]
[Pilgrim Baxter PBHG Insurance Series Fund, Inc.-Technology & Communications
Fund]
[BT Insurance Funds Trust-EAFE(R) Equity Index Fund]
[BT Insurance Funds Trust-Equity 500 Index Fund]
[BT Insurance Funds Trust-Small Cap Index Fund]
<PAGE>
TRANSFER FEE:[$25] per transfer in excess of twelve (12) in any Certificate Year
- -------------
CERTIFICATE MAINTENANCE FEE: [$40] Annually
MORTALITY AND EXPENSE RISK CHARGE: A charge equal to an effective annual rate of
[1.25%] of the daily Net Asset Value of the Sub-Accounts.
ADMINISTRATION CHARGE: A charge equal to an effective annual rate of [0.15%] of
the daily Net Asset Value of the Sub-Accounts.
TERMINATION: We reserve the right to terminate your participation interest under
the Contract, and this Certificate, at any time the Account Value is less than
$500. A surrender will be deemed to have been made and we will pay you the
Account Value of your participation interest under the Contract.
INQUIRIES: For information, or to make a complaint, call or write:
Variable Annuity Service Center
Annuity Investors Life Insurance Company
Post Office Box 5423
Cincinnati, Ohio 45201-5423
[1-800-789-6771]
<PAGE>
TABLE OF CONTENTS PAGE
- --------------------------------------------------------------------------------
DEFINITIONS.................................................................6
GENERAL PROVISIONS..........................................................9
Entire Contract...........................................................9
Participant Certificate...................................................9
Changes -- Waivers........................................................9
Nonparticipating..........................................................9
Misstatement..............................................................9
Required Reports.........................................................10
Exclusive Benefit........................................................10
State Law................................................................10
Claims of Creditors......................................................10
Company Liability........................................................10
Voting Rights............................................................10
Incontestability.........................................................10
Discharge of Liability...................................................10
Transfer By the Company..................................................10
Termination..............................................................10
PURCHASE PAYMENTS..........................................................11
Purchase Payments........................................................11
Allocation of Purchase Payment(s)........................................11
No Termination...........................................................11
FIXED ACCOUNT..............................................................11
Fixed Accumulation Account...............................................11
SEPARATE ACCOUNT...........................................................11
General Description......................................................11
Sub-Accounts of the Separate Account.....................................12
Valuation of Assets......................................................12
Variable Account Value...................................................12
Accumulation Unit Value..................................................13
TRANSFERS..................................................................13
FEES AND CHARGES...........................................................14
Mortality and Expense Risk Charge........................................14
Administration Charge....................................................14
Certificate Maintenance Fee..............................................14
SURRENDERS.................................................................14
Surrenders...............................................................14
Deferral of Payment......................................................14
OWNERSHIP PROVISIONS.......................................................15
Ownership of Separate Account............................................15
Ownership of Contract and Participant Account............................15
Transfer and Assignment..................................................15
Successor Owner..........................................................16
Community Property.......................................................16
BENEFICIARY PROVISIONS.....................................................16
Beneficiary..............................................................16
Change of Beneficiary....................................................16
BENEFIT ON ANNUITY COMMENCEMENT DATE.......................................16
Annuity Commencement Date................................................16
Annuity Benefit Payments.................................................17
Form of Annuity Benefit..................................................17
BENEFIT ON DEATH OF PARTICIPANT............................................17
Death Benefit............................................................17
Death Benefit Amount.....................................................18
Transfers After Death....................................................18
Form of Death Benefit....................................................18
SETTLEMENT OPTIONS.........................................................19
Conditions...............................................................19
Benefit Payments.........................................................19
Fixed Dollar Benefit.....................................................19
Variable Dollar Benefit..................................................20
Limitation on Election of Settlement Option..............................20
Settlement Option Computations...........................................20
Available Settlement Options.............................................20
Settlement Option Tables.................................................21
<PAGE>
DEFINITIONS
Account(s): The Sub-Account(s) and/or the Fixed Accumulation Account.
Account Value: The aggregate value of your interest in the Sub-Account(s) and
the Fixed Accumulation Account as of the end of any Valuation Period. The value
of your interest in all Sub-Accounts is the "Variable Account Value," and the
value of your interest in the Fixed Accumulation Account is the "Fixed Account
Value."
Accumulated Earnings: The Account Value in excess of Purchase Payments received
by us and which have not been returned to you.
Accumulation Period: The period prior to the applicable Commencement Date.
Accumulation Unit: A unit of measurement used to calculate the value(s) of the
Sub-Account(s) prior to the applicable Commencement Date. The value of an
Accumulation Unit is referred to as an "Accumulation Unit Value."
Administrative Office: The home office of the Company or any other place of
business which we may designate for administration.
Age: Age as of most recent birthday.
Annuitant: The Annuitant is the Participant and is the person on whose life
Annuity Benefit
payments are based.
Annuity Benefit: Periodic payments made under a settlement option, which
commence on or after the Annuity Commencement Date.
Annuity Commencement Date: The first day of the first Payment Interval for which
an Annuity Benefit payment is to be made under a settlement option.
Beneficiary: A person entitled to the Death Benefit.
Benefit Payment: The Annuity Benefit or Death Benefit payable under a settlement
option. Variable Dollar Benefit payments may vary in amount. Fixed Dollar
Benefit payments remain constant except under certain joint and survivor
settlement options.
Benefit Payment Period: The period starting on the Commencement Date during
which Benefit
Payments are to be made.
Benefit Unit: A unit of measure used to determine the dollar value of any
Variable Dollar Benefit payments after the first Benefit Payment is made by us.
The value of a Benefit Unit is referred to as a "Benefit Unit Value."
Certificate Anniversary: An annual anniversary of the Certificate Effective
Date.
Certificate Effective Date: The date shown on the Certificate Specifications
page.
Certificate Year: Any period of twelve (12) consecutive months commencing on the
Certificate Effective Date and on each Certificate Anniversary thereafter.
<PAGE>
Code: The Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder.
Commencement Date: The Annuity Commencement Date if an Annuity Benefit is
payable under this Certificate, or the Death Benefit Commencement Date if a
Death Benefit is payable under this Certificate.
Death Benefit: The benefit described in the Benefit on Death of Participant
section of this Certificate.
Death Benefit Commencement Date: The first day of the first Payment Interval for
which a Death Benefit payment is to be made under a settlement option, or the
date a Death Benefit is to be paid in a lump sum.
Death Benefit Valuation Date: The date that Due Proof of Death has been received
by us and the earlier to occur of:
1)......our receipt of a Written Request with instructions as to the form of
Death Benefit; or
2)......the Death Benefit Commencement Date.
Due Proof of Death: Any of the following:
1) a certified copy of a death certificate;
2) a certified copy of a decree of a court of competent jurisdiction as to the
finding of death; or
3) any other proof satisfactory to us.
Fund: A management investment company or portfolio thereof, registered under the
Investment Company Act of 1940, in which the Separate Account invests.
Net Asset Value: The amount computed by an investment company, no less
frequently than each Valuation Period, as the price at which its shares or
units, as the case may be, are redeemed in accordance with the rules of the
Securities and Exchange Commission.
Owner: The person identified as such on the Contract Specifications page.
Participant: The person identified on the Certificate Specifications page who
participates in the benefits of the Contract as evidenced by this Certificate.
Payment Interval: A monthly, quarterly, annual or other regular interval during
the Benefit Payment Period.
Person Controlling Payments: The "Person Controlling Payments" means the
following, as the case may be:
1) with respect to Annuity Benefit payments, you; and
2) with respect to Death Benefit payments,
a) the Beneficiary; or
b) if the Beneficiary is deceased, the payee.
Purchase Payment: A contribution amount paid to us in consideration for your
participation under the Contract, after the deduction of any and all of the
following which may apply:
1) any fee charged by the person remitting payments for you;
2) premium taxes; and/or
3) other taxes.
<PAGE>
Separate Account: An account, which may be an investment company, which is
established and maintained by the Company pursuant to the laws of the State of
Ohio.
Sub-Account: The Separate Account is divided into Sub-Accounts, each of which is
invested in the shares of a designated Fund.
Valuation Period: The period commencing at the close of regular trading on the
New York Stock Exchange on any Valuation Date, and ending at the close of
trading on the next succeeding Valuation Date. "Valuation Date" means each day
on which the New York Stock Exchange is open for business.
Written Request: Information provided, or a request made, that is complete and
satisfactory to us, that is sent to us on our form or in a manner satisfactory
to us, which may, at our discretion, be telephonic, and that is received by us
at our Administrative Office. A Written Request is subject to any payment made
or any action we take before we acknowledge it. A Written Request may be
modified or revoked only by a subsequent Written Request, when permitted by the
terms of the Contract. You may be required to return this Certificate to us in
connection with a Written Request.
<PAGE>
GENERAL PROVISIONS
Entire Contract
We have issued the Contract to the Contract Owner identified on the Certificate
Specifications page. The Contract is a group flexible premium deferred variable
annuity contract. The Contract and this Certificate are restricted by
endorsement as required to obtain favorable tax treatment under the Code, and
neither is valid without the requisite endorsement(s) being attached. The
Contract, its endorsement(s), the application, if any, and the enrollment forms,
if any, of all participants under it, form the entire contract between the
Contract Owner and us. This Certificate is not a contract and is not a part of
the Contract.
Only statements in the application for the Contract, if any, or in your
enrollment form, if any, will be used to void your participation interest under
the Contract, or to defend a claim based on it. Such statements are
representations and not warranties.
Participant Certificate
This Certificate is evidence of your participation interest under the Contract.
When the term "Certificate" is used herein to describe values, benefits, terms
or conditions under the Contract, it means your participation interest under the
Contract.
Changes -- Waivers
No changes or waivers of the terms of the Contract or this Certificate, are
valid unless made in writing by our President, Vice President, or Secretary. No
agent or other person not named above has authority to change or waive any
provision of the Contract. We reserve the right both to administer and to change
the provisions of the Contract to conform to any applicable laws, regulations or
rulings issued by a governmental agency.
In any event, the Company reserves the right to add or delete Sub-Accounts, to
substitute shares of a different Fund or different class or series of a Fund for
shares held in a Sub-Account, to merge or combine Sub-Accounts, to merge or
combine the Separate Account with any other separate account of the Company, to
transfer the assets of the Separate Account to another life insurance company by
means of a merger or reinsurance, to convert the Separate Account into a managed
separate account, and to de-register the Separate Account under the Investment
Company Act of 1940. Any such change will be made in accordance with applicable
insurance and securities laws and after obtaining any necessary federal and/or
state regulatory approvals.
Nonparticipating
The Contract does not pay dividends or share in the Company's divisible surplus.
Misstatement
If the age or sex of a person on whose life Benefit Payments are based is
misstated, the payments or other benefits under this Certificate shall be
adjusted to the amount which would have been payable based on the correct age or
sex. If we made any underpayments based on any misstatement, the amount of any
underpayment with interest shall be immediately paid in one sum. In addition to
any other remedies that may be available at law or at equity, we may deduct any
overpayments made, with interest, from any succeeding payments due under this
Certificate.
<PAGE>
Required Reports
At least once each Certificate Year, we will send a report of your current
values and any other information required by law, until the first to occur of
the following:
1) the date your participation interest under the Contract is fully
surrendered;
2) the Annuity Commencement Date; or
3) the Death Benefit Commencement Date.
The report will be mailed to your last known address. The reported values will
be based on the information in our possession at the time the report is prepared
by us. We may adjust the reported values at a later date if that information
proves to be incorrect or has changed.
Exclusive Benefit
Your participation interest under the Contract is for the exclusive benefit of
you and your Beneficiaries. Your participation interest under the Contract is
nonforfeitable by us.
State Law
All factors, values, benefits and reserves under the Contract will not be less
than those required by the law of the state in which the Contract is delivered.
Claims of Creditors
To the extent allowed by law, the Contract and all values and benefits under it
are not subject to the claims of creditors or to legal process.
Company Liability
We will not incur any liability or be responsible for any failure, in whole or
in part, by you or by any person having rights or benefits arising out of or
related to the Contract, to comply with any applicable laws, regulations or
rulings issued by a governmental agency.
Voting Rights
To the extent required by law, we will vote all shares of the Funds held in the
Separate Account, at regular and special shareholder meetings of the Funds, in
accordance with instructions received from you, or, if applicable, from the
Person Controlling Payments. If there is a change in the law which permits us to
vote the shares of the Funds without such instructions, then we reserve the
right to do so.
Incontestability
This Certificate shall not be contestable by us.
Discharge of Liability
Upon payment of any partial or full surrender, any Benefit Payment, we shall be
discharged from all liability to the extent of each such payment.
Transfer By the Company
We reserve the right to transfer our obligations under the Contract to another
qualified life insurance company under an assumption reinsurance arrangement
without your prior consent.
Termination
Either we or the Contract Owner may terminate the Contract by giving advance
notice in writing. The Contract describes the benefits and charges, if any, in
the event of termination of the Contract. Refer to the Contract for information
regarding these benefits and charges. If the Contract is terminated, this
Certificate and your participation interest under the Contract may be continued
on a deferred paid-up basis, subject to all of the terms and conditions of the
Contract, unless you surrender your participation as a whole. Termination of the
Contract will not affect Benefit Payments being made by us.
<PAGE>
PURCHASE PAYMENTS
Purchase Payments
One or more Purchase Payments may be paid to us for you at any time before the
Annuity Commencement Date, so long as:
1) you are still living; and
2) your participation interest has not been fully surrendered.
The initial Purchase Payment for you must be paid to us on or before the
Certificate Effective Date. Each Purchase Payment must be paid to us at our
Administrative Office, and is subject to any minimums or maximums that we set
for such from time to time. Upon request, we will provide the Contract Owner
with a receipt as proof of payment.
Allocation of Purchase Payment(s)
We will allocate Purchase Payments to the Sub-Accounts according to the
instructions we receive in your enrollment form, if any, or subsequent Written
Request. Allocations must be made in whole percentages. The minimum amount that
can be allocated to a Sub-Account is $10.
No Termination
Except as stated elsewhere in this Certificate, your participation interest will
not be terminated by us due to failure to make additional Purchase Payments.
FIXED ACCOUNT
Fixed Accumulation Account
The Fixed Accumulation Account is part of the Company's general account. The
values of the Fixed Accumulation Account are not dependent upon the investment
performance of the Sub-Accounts. The Fixed Accumulation Account is not available
as an investment option, but any loan collateral will be allocated to the Fixed
Accumulation Account and will earn a fixed rate of interest no less than three
percent (3%) per year, compounded annually.
SEPARATE ACCOUNT
General Description
The variable benefits under this Certificate are provided through the Separate
Account. The Separate Account is registered with the Securities and Exchange
Commission as a unit investment trust under the Investment Company Act of 1940.
<PAGE>
The income, if any, and any gains or losses, realized or unrealized, on the
Separate Account will be credited to or charged against the amounts allocated to
such account without regard to other income, gains, or losses of the Company.
The amounts allocated to the Separate Account and the accumulations thereon
remain the property of the Company, but that portion of the assets of the
Separate Account that is equal to the reserves and other contractual liabilities
under all policies, annuities, and other contracts identified with the Separate
Account, is not chargeable with liabilities arising out of any other business of
the Company. The Company is not, and does not hold itself out to be, a trustee
in respect of such amounts.
We have the right to transfer to our general account, in our sole discretion and
at any time without prior written notice, any assets of the Separate Account
which are in excess of the required reserves and other contractual liabilities
under all policies, annuities, and other contracts identified with the Separate
Account.
Sub-Accounts of the Separate Account
The assets of the Separate Account are divided into Sub-Accounts. The
Sub-Accounts available as of the Certificate Effective Date are listed on the
Certificate Specifications page. Each Sub-Account invests exclusively in shares
of an underlying Fund as shown on the Certificate Specifications page. Any
amounts of income and any gains on the shares of a Fund will be reinvested in
additional shares of that Fund at its Net Asset Value.
Valuation of Assets
Shares of Funds held for each Sub-Account will be valued at their Net Asset
Value at the end of each Valuation Period, as reported by each such Fund.
Variable Account Value
Purchase Payment(s) may be allocated among and, as described elsewhere in this
Certificate, Account values may be transferred to the various Sub-Accounts
within the Separate Account. For each Sub-Account, the Purchase Payment(s) or
amounts transferred are converted into Accumulation Units. The number of
Accumulation Units credited is determined by dividing the dollar amount directed
to each Sub-Account by the value of the Accumulation Unit for that Sub-Account
at the end of the Valuation Period on which the Purchase Payment(s) or
transferred amount is received.
The following events will result in the cancellation of an appropriate number of
Accumulation Units of a Sub-Account:
1) transfer from a Sub-Account;
2) full or partial surrender of your Variable Account Value;
3) payment of a Death Benefit;
4) application of your Variable Account Value to a settlement option;
5) deduction of the Certificate Maintenance Fee; or
6) deduction of any Transfer Fee.
Accumulation Units will be canceled as of the end of the Valuation Period during
which the Company receives a Written Request regarding the event giving rise to
such cancellation, or an applicable Commencement Date, or the end of the
Valuation Period on which the Certificate Maintenance Fee or Transfer Fee is
due, as the case may be.
The Variable Account Value for this Certificate at any time is equal to the sum
of the number of Accumulation Units for each Sub-Account attributable to this
Certificate multiplied by the Accumulation Unit Value for each Sub-Account at
the end of the preceding Valuation Period.
<PAGE>
Accumulation Unit Value
The initial Accumulation Unit Value for each Sub-Account, with the exception of
the Money Market Sub-Account, was set at $10.00. The initial Accumulation Unit
Value for the Money Market Sub-Account was set at $1.00. Thereafter, the
Accumulation Unit Value at the end of each Valuation Period is the Accumulation
Unit Value at the end of the previous Valuation Period multiplied by the Net
Investment Factor, as described below.
The Net Investment Factor is a factor applied to measure the investment
performance of a Sub-Account from one Valuation Period to the next. Each
Sub-Account has a Net Investment Factor for each Valuation Period which may be
greater or less than one. Therefore, the Accumulation Unit Value for each
Sub-Account may increase or decrease. The Net Investment Factor for any
Sub-Account for any Valuation Period is determined by dividing (1) by (2) and
subtracting (3) from the result, where:
1) is equal to:
a) the Net Asset Value per share of the Fund held in that Sub-Account,
determined at the end of the applicable Valuation Period; plus
b) the per share amount of any dividend or net capital gain distributions
made by the Fund held in that Sub-Account, if the "ex-dividend" date
occurs during the applicable Valuation Period; plus or minus
c) a per share charge or credit for any taxes reserved for, which is
determined by the Company to have resulted from the investment
operations of the Sub-Account;
2) is the Net Asset Value per share of the Fund held in that Sub-Account,
determined at the end of the immediately preceding Valuation Period; and
3) is the factor representing the Mortality and Expense Risk Charge and the
Administration Charge deducted from the Sub-Account for the number of
days in the applicable Valuation Period.
TRANSFERS
Prior to the applicable Commencement Date, you may transfer amounts in a
Sub-Account to a different Sub-Account.
The minimum transfer amount for any transfer is $500. The number of transfers
per year over which we will charge a Transfer Fee on each additional transfer,
and the amount of the Transfer Fee, are shown on the Certificate Specifications
page.
We reserve the right, in our sole discretion and at any time without prior
notice, to terminate, suspend or modify the transfer privileges described above.
<PAGE>
FEES AND CHARGES
Mortality and Expense Risk Charge
The Mortality and Expense Risk Charge is shown on the Certificate Specifications
page and is deducted daily from each Sub-Account. This deduction is made to
compensate the Company for assuming the mortality and expense risks under the
Contract.
Administration Charge
The Administration Charge is shown on the Certificate Specifications page and is
deducted daily from each Sub-Account. This deduction is made to reimburse the
Company for expenses incurred in the administration of the Contract, the
Certificates thereunder, and the Separate Account.
Certificate Maintenance Fee
The Certificate Maintenance Fee ("Fee") is shown on the Certificate
Specifications page and is deducted as of the Valuation Date next following each
Certificate Anniversary prior to the applicable Commencement Date. In addition,
the full annual Fee will be charged at the time of a full surrender. The Fee
will be allocated to each Sub-Account in the same proportion as each
Sub-Account's value is to the total Variable Account Value for this Certificate
on the end of such Valuation Period. The Fee does not apply to the Fixed
Account.
After the applicable Commencement Date, if a Variable Dollar Benefit is elected,
the Fee will be deducted pro-rata from each Benefit Payment and will result in a
reduction in the amount of such payment.
The Fee may be waived in whole or in part in our sole discretion.
SURRENDERS
Surrenders
A surrender in full may be made for the Account Value, or partial surrenders may
be made for a lesser amount, by Written Request at any time prior to the Annuity
Commencement Date. The amount of any partial surrender must be at least $500. A
partial surrender cannot reduce the Account Value to less than $500. Surrenders
will be deemed to be withdrawn first from the portion of the Account Value that
represents the Accumulated Earnings for this Certificate and then from Purchase
Payments. For purposes of this Certificate, Purchase Payments are deemed to be
withdrawn on a "first-in, first-out" (FIFO) basis.
The amount available for surrender will be the Account Value at the end of the
Valuation Period in which the Written Request is received by us.
Deferral of Payment
The Company has the right to suspend or delay the date of payment of a partial
or full surrender of the Variable Account Value for any period:
1) when the New York Stock Exchange is closed, or when trading on the New
York Stock Exchange is restricted; or
2) when an emergency exists (as determined by the Securities and Exchange
Commission) as a result of which:
a) the disposal of securities in the Separate Account is not reasonably
practicable; or
b) it is not reasonably practicable to determine fairly the value of the
net assets in the Separate Account; or
3) when the Securities and Exchange Commission so permits for the
protection of security holders.
The Company further reserves the right to delay payment of a partial or full
surrender of the Fixed Account Value for up to six (6) months after we receive
your Written Request.
OWNERSHIP PROVISIONS
Ownership of Separate Account
The Company has absolute ownership of the assets in the Separate Account.
However, the Company is not, and does not hold itself out to be, a trustee in
respect of any amounts under the Separate Account.
Ownership of Contract and Participant Account
The owner of the Contract (the "Contract Owner") is your employer or the trustee
for your employer's retirement plan, as shown on your enrollment form, if any,
and on the Certificate Specifications page. The Contract is held by the Contract
Owner for the benefit of the participants and Beneficiaries.
Each participant for whom Purchase Payment(s) are made will participate in the
Contract as a Participant. A participant account will be established for each
Participant.
Transfer and Assignment
Neither you nor the Contract Owner may transfer, sell, assign, pledge, charge,
encumber or in any way alienate an interest under this Certificate or the
Contract.
Successor Owner
By Written Request, your spouse may, in some cases, succeed to the ownership of
your participation interest under the Contract after your death. Specifically,
if you die and your spouse is the sole surviving Beneficiary of your
participation interest, he or she will become the Successor Owner of your
participation interest if: 1) you make that Written Request before your death;
or 2) after your death, your spouse makes that Written Request within one (1)
year of your death and before the Death Benefit Commencement Date.
As Successor Owner, your spouse will then succeed to all rights of ownership
under this Certificate except the right to name another Successor Owner.
Community Property If you live in a community property state and have a spouse
at any time while you participate under the Contract, the laws of that state may
vary your ownership rights.
BENEFICIARY PROVISIONS
Beneficiary
The Beneficiary is the person or persons so designated on your enrollment form,
if any, or under the Change of Beneficiary provision of this Certificate. If you
have not designated a Beneficiary, or if no Beneficiary designated survives you,
then the Beneficiary will be your estate.
A Beneficiary will be deemed not to have survived you if he or she dies within
thirty (30) days after your death.
A Beneficiary designation may be joint or contingent or both. Unless otherwise
stated, joint Beneficiaries will be entitled to equal shares. A contingent
Beneficiary will be entitled to a benefit only if there is no surviving primary
Beneficiary.
Change of Beneficiary
Unless you have designated an irrevocable Beneficiary, you may change your
designation of a Beneficiary at any time before the Annuity Commencement Date.
Any such change is subject to the following:
1) it must be made by Written Request; and
2) unless otherwise elected or required by law, it will not cancel any
settlement option election previously made.
BENEFIT ON ANNUITY COMMENCEMENT DATE
Annuity Commencement Date
The Annuity Commencement Date is shown on the Certificate Specifications page.
You may change the Annuity Commencement Date by Written Request made at least
thirty (30) days prior to the date that Annuity Benefit payments are scheduled
to begin. Unless the Company agrees otherwise, the Annuity Commencement Date
cannot be later than the Certificate Anniversary following your 85th birthday,
or five (5) years after the Certificate Effective Date, whichever is later.
Annuity Benefit Payments
An amount equal to the Account Value (after deduction of any fees and charges,
loans, or applicable premium tax or other taxes not previously deducted) will be
used to provide Annuity Benefit payments commencing on or after the Annuity
Commencement Date.
Annuity Benefit payments will be made to you as payee. Any Annuity Benefit
amounts remaining payable on your death will be paid to the contingent payee
designated by you by Written Request. We may reject the naming of a non-natural
payee. You will be the person on whose life any Annuity Benefit payments are
based.
If no contingent payee designated by you is surviving at the time payment is to
be made, then after your death any Annuity Benefit amounts remaining payable
will be paid to the person or persons designated as contingent payee by Written
Request by the last payee who received payments. Failing that, any such amounts
will be paid to the estate of the last payee who received payments.
Form of Annuity Benefit
Annuity Benefit payments will be Fixed Dollar Benefit payments, made monthly in
accordance with the terms of Option B with a fixed period of one hundred twenty
(120) months under the SETTLEMENT OPTIONS section of this Certificate.
In lieu of that, you may elect to have Annuity Benefit payments made pursuant to
any other available settlement option under the SETTLEMENT OPTIONS section of
this Certificate. Any such election must be made by Written Request before the
Annuity Commencement Date. You may change your election of a settlement option
by Written Request made at least thirty (30) days prior to the date that Annuity
Benefit payments are scheduled to begin.
BENEFIT ON DEATH OF PARTICIPANT
Death Benefit
A Death Benefit will be paid under this Certificate if:
1) you die before the Annuity Commencement Date and before your
participation interest is fully surrendered;
2) the Death Benefit Valuation Date has occurred; and
3) your spouse does not become the Successor Owner of your participation
interest.
If a Death Benefit becomes payable:
1) it will be in lieu of all other benefits under this Certificate; and
2) all other rights under this Certificate will be terminated except for
rights related to the Death Benefit.
Death Benefit payments shall be made to the Beneficiary as payee.
The Beneficiary shall be the person on whose life any Death Benefit payments
under a settlement option election are based.
Any Death Benefit amounts remaining payable on the death of the Beneficiary will
be paid:
1) to any contingent payee designated as part of any Death Benefit
settlement option election made by you, or if none is surviving at the
time payment is to be made; then
2) to any contingent payee designated by the Beneficiary by Written
Request, or if none is surviving at the time payment is to be made; then
3) to the estate of the last payee who received payments.
Only one Death Benefit will be paid with respect to your participation interest
under the Contract.
Death Benefit Amount
The Death Benefit will be an amount equal to the greater of:
1) the Account Value as of the Death Benefit Valuation Date; or
2) one hundred percent (100%) of the Purchase Payment(s) received by us,
less any amounts returned to you.
As of the Death Benefit Valuation Date, the amount of the Death Benefit will be
allocated among the Sub-Accounts and Fixed Account options in the same
proportion as each Account's value is to the total Account Value as of the end
of the Valuation Period immediately preceding the Death Benefit Valuation Date.
Any applicable premium tax or other taxes not previously deducted, and any
outstanding loans, will be deducted from the Death Benefit amount described
above.
Transfers After Death
Between the Death Benefit Valuation Date and the Death Benefit Commencement
Date, a Beneficiary may transfer funds among Sub-Accounts as described under the
TRANSFERS section of this Certificate.
Form of Death Benefit
Payments under the Death Benefit provision of this Certificate will be Fixed
Dollar Benefit payments made monthly in accordance with the terms of Option A
with a period certain of forty-eight (48) months under the SETTLEMENT OPTIONS
section of this Certificate.
In lieu of that, you may elect at any time before your death to have payments
under the Death Benefit provision of this Certificate made in one lump sum or
pursuant to any available settlement option under the SETTLEMENT OPTIONS section
of this Certificate. If you do not make any such election, the Beneficiary may
make that election at any time after your death and before the Death Benefit
Commencement Date.
You may change your election of a settlement option at any time before your
death.
If a Beneficiary elects a settlement option as noted above, he or she may change
his or her own election of a settlement option by Written Request made at least
thirty (30) days prior to the date that Death Benefit payments are scheduled to
begin.
Any election or change of election must be made by Written Request.
SETTLEMENT OPTIONS
Conditions
Benefit Payments under a settlement option are subject to any minimum amounts,
Payment Intervals, and other terms or conditions that we may from time to time
require. If we change our minimums, we may change any current or future payment
amounts and/or Payment Intervals to conform with the change. More than one
settlement option may be elected if the requirements for each settlement option
elected are satisfied. Once payment begins under a settlement option, the
settlement option may not be changed.
All elected settlement options must comply with current applicable laws,
regulations and rulings issued by any governmental agency.
If more than one person is the payee under a settlement option, payments will be
made to the payees jointly. No more than two persons may be initial payees under
any joint and survivor settlement options.
If payment under a settlement option depends on whether a specified person is
still alive, we may at any time require proof that such person is still living.
We will require proof of the age and/or sex of any person on whose life Benefit
Payments are based.
Benefit Payments
Benefit Payments may be calculated and paid:
1) as a Fixed Dollar Benefit:
2) as a Variable Dollar Benefit; or
3) as a combination of both.
If only a Fixed Dollar Benefit is to be paid, we will transfer all of the
Account Value to the Company's general account on the applicable Commencement
Date, or on the Death Benefit Valuation Date (if applicable). Similarly, if only
a Variable Dollar Benefit is elected, we will transfer all of the Account Value
to the Sub-Accounts as of the end of the Valuation Period immediately prior to
the applicable Commencement Date; we will allocate the amount applied to a
Variable Dollar Benefit among the Sub-Accounts in accordance with a Written
Request. No transfers between the Fixed Dollar Benefit and the Variable Dollar
Benefit will be allowed after the Commencement Date. However, after the Variable
Dollar Benefit has been paid for at least twelve (12) months, the Person
Controlling Payments may, no more than once each twelve (12) months thereafter,
transfer all or part of the Benefit Units upon which the Variable Dollar Benefit
is based from the Sub-Account(s) then held, to the Benefit Units in different
Sub-Account(s).
If a Variable Dollar Benefit is elected, the amount to be applied under that
benefit is the Variable Account Value as of the end of the Valuation Period
immediately preceding the applicable Commencement Date. If a Fixed Dollar
Benefit is to be paid, the amount to be applied under that benefit is the Fixed
Account Value as of the applicable Commencement Date, or as of the Death Benefit
Valuation Date (if applicable).
Fixed Dollar Benefit
Fixed Dollar Benefits payments are determined by multiplying the Fixed Account
Value (expressed in thousands of dollars and after deduction of any fees and
charges, loans, or applicable premium tax or other taxes not previously
deducted) by the amount of the monthly payment per $1,000 of value obtained from
the Settlement Option Table for the settlement option elected. Fixed Dollar
Benefit payments will remain level for the duration of the Benefit Payment
Period.
If at the time a Fixed Dollar Benefit is elected, we have available options or
rates on a more favorable basis than those guaranteed, the higher benefits shall
be applied and shall not change for as long as that election remains in force.
Variable Dollar Benefit
The first monthly Variable Dollar Benefit payment is equal to your Variable
Account Value (expressed in thousands of dollars and after deduction of any fees
and charges, loans, or applicable premium tax or other taxes not previously
deducted) as of the end of the Valuation Period immediately preceding the
applicable Commencement Date multiplied by the amount of the monthly payment per
$1,000 of value obtained from the Settlement Option Table for the Benefit
Payment elected less the pro-rata portion of the Certificate Maintenance Fee.
The number of Benefit Units in each Sub-Account held by you is determined by
dividing the dollar amount of the first monthly Variable Dollar Benefit payment
for each Sub-Account by the Benefit Unit Value for that Sub-Account as of the
applicable Commencement Date. The number of Benefit Units remains fixed during
the Benefit Payment Period, except as a result of any transfers among
Sub-Accounts after the applicable Commencement Date.
The dollar amount of the second and subsequent Variable Dollar Benefit payment
will reflect the investment performance of the Sub-Account(s) selected and may
vary from month to month. The total amount of the second and any subsequent
Variable Dollar Benefit payment will be equal to the sum of the payments from
each Sub-Account less a pro-rata portion of the Certificate Maintenance Fee.
The payment from each Sub-Account is found by multiplying the number of Benefit
Units held in each Sub-Account by you by the Benefit Unit Value for that
Sub-Account as of the end of the fifth Valuation Period preceding the due date
of the payment.
The Benefit Unit Value for each Sub-Account is originally established in the
same manner as Accumulation Unit Values. Thereafter, the value of a Benefit Unit
for a Sub-Account is determined by multiplying the Benefit Unit Value as of the
end of the preceding Valuation Period by the Net Investment Factor, determined
as set forth under the Accumulation Unit Value provision of this Certificate,
for the Valuation Period just ended. The product is then multiplied by the
assumed daily investment factor (0.99991781), for the number of days in the
Valuation Period. The factor is based on the assumed net investment rate of
three percent (3%) per year, compounded annually, that is reflected in the
Settlement Option Tables.
Limitation on Election of Settlement Option
Fixed periods shorter than five (5) years are not available, except as a Death
Benefit settlement option.
Settlement Option Computations
The 1983 Group Annuity Mortality Table with interest at three percent (3%) per
year, compounded annually, is used to compute all guaranteed settlement option
factors, values, and benefits under this Certificate.
Available Settlement Options
The available settlement options are set out below.
Option A Income for a Fixed Period
We will make periodic payments for a fixed period. The first payment
will be paid as of the last day of the initial Payment Interval. The
maximum time over which payments will be made by us or money will be
held by us is thirty (30) years. The Option A Table applies to this
Option.
Option B Life Annuity with Payments for at Least a Fixed Period
We will make monthly payments for at least a fixed period. If the person
on whose life Benefit Payments are based lives longer than the fixed
period, then we will make payments until his or her death. The first
payment will be paid as of the first day of the initial Payment
Interval. The Option B Table applies to this Option.
Option C Joint and One-half Survivor Annuity
We will make periodic payments until the death of the primary person on
whose life Benefit Payments are based; thereafter, we will make one-half
(1/2) of the periodic payment until the death of the secondary person on
whose life Benefit Payments are based. The first payment will be paid as
of the first day of the initial Payment Interval. The Option C Table
applies to this Option.
Option D Life Annuity
We will make periodic payments until the death of the person on whose
life Benefit Payments are based. The first payment will be paid as of
the first day of the initial Payment Interval. The Option D Table
applies to this Option.
Option E Any Other Form
We will make periodic payments in any other form of settlement option
which is acceptable to us at the time of election.
Settlement Option Tables
The Option Tables show the payments we will make at sample Payment Intervals for
each $1,000 applied at the guaranteed interest rate. Amounts may vary with the
Payment Interval and the age of the person on whose life Benefit Payments are
based.
<PAGE>
<TABLE>
<CAPTION>
OPTION A TABLE - INCOME FOR A FIXED PERIOD Payments
for fixed number of years for each $1,000 applied.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
Terms of Semi-Annual Terms of Semi-Annual
Payments Annual Quarterly Monthly Payments Annual Quarterly Monthly
- ---------------------------------------------------------------------------------------------------------------
Years Years
6 184.60 91.62 45.64 15.18 11 108.08 53.64 26.72 8.88
7 160.51 79.66 39.68 13.20 12 100.46 49.86 24.84 8.26
8 142.46 70.70 35.22 11.71 13 94.03 46.67 23.25 7.73
9 128.43 63.74 31.75 10.56 14 88.53 43.94 21.89 7.28
10 117.23 58.18 28.98 9.64 15 83.77 41.57 20.71 6.89
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Terms of Semi-Annual
Payments Annual Quarterly Monthly
--------------------------------------------------------------------------------------------------------------
Years
16 79.61 39.51 19.68 6.54
17 75.95 37.70 18.78 6.24
18 72.71 36.09 17.98 5.98
19 69.81 34.65 17.26 5.74
20 67.22 33.36 16.62 5.53
--------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
OPTION B TABLE - LIFE ANNUITY
With Payments For At Least A Fixed Period
-------- ------------- ------------ ------------- -------------
60 Months 120 Months 180 Months 240 Months
-------- ------------- ------------ ------------- -------------
Age
-------- ------------- ------------ ------------- -------------
55 $4.55 $4.51 $4.44 $4.33
56 4.65 4.61 4.52 4.39
57 4.76 4.71 4.61 4.46
58 4.87 4.81 4.70 4.53
59 4.99 4.92 4.79 4.60
60 5.12 5.04 4.89 4.67
61 5.25 5.16 4.99 4.74
62 5.40 5.29 5.09 4.81
63 5.55 5.42 5.19 4.87
64 5.72 5.56 5.30 4.94
65 5.89 5.71 5.40 5.00
66 6.08 5.86 5.51 5.06
67 6.27 6.02 5.62 5.11
68 6.48 6.19 5.72 5.17
69 6.71 6.36 5.83 5.22
70 6.95 6.54 5.93 5.26
71 7.20 6.72 6.03 5.30
72 7.46 6.90 6.12 5.34
73 7.75 7.08 6.21 5.37
74 8.04 7.27 6.30 5.40
-------- ------------- ------------ ------------- -------------
<PAGE>
<TABLE>
<CAPTION>
OPTION C TABLE - JOINT AND ONE-HALF SURVIVOR ANNUITY
Monthly payments for each $1,000 of proceeds by ages of persons
named.*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------ ------------------------------------------------------------------------------------
Secondary Age
Primary Age
60 61 62 63 64 65 66 67 68 69 70
60 $4.73 $4.75 $4.78 $4.80 $4.83 $4.85 $4.87 $4.89 $4.92 $4.93 $4.95
61 4.81 4.84 4.87 4.90 4.92 4.95 4.97 5.00 5.02 5.04 5.06
62 4.90 4.93 4.96 4.99 5.02 5.05 5.08 5.11 5.13 5.16 5.18
63 4.99 5.03 5.06 5.09 5.13 5.16 5.19 5.22 5.25 5.28 5.30
64 5.09 5.12 5.16 5.20 5.23 5.27 5.30 5.34 5.37 5.40 5.43
65 5.18 5.22 5.26 5.31 5.35 5.38 5.42 5.46 5.49 5.53 5.56
66 5.28 5.33 5.37 5.42 5.46 5.50 5.54 5.58 5.62 5.66 5.70
67 5.38 5.43 5.48 5.53 5.58 5.62 5.67 5.72 5.76 5.80 5.84
68 5.49 5.54 5.59 5.65 5.70 5.75 5.80 5.85 5.90 5.95 5.99
69 5.60 5.65 5.71 5.77 5.82 5.88 5.93 5.99 6.04 6.10 6.15
70 5.71 5.77 5.83 5.89 5.95 6.01 6.07 6.13 6.19 6.25 6.31
- ------------ ------ ------- ------- ------- ------- ------ ------- ------- ------- ------ -------
*Payments after the death of the Primary Payee will be one-half (1/2) of the
amount shown.
</TABLE>
OPTION D TABLE - LIFE ANNUITY Monthly payments
for each $1,000 applied.
------------------------ ---------------------
Age
------------------------ ---------------------
55 $4.65
56 4.67
57 4.77
58 4.89
59 5.01
60 5.14
61 5.28
62 5.43
63 5.59
64 5.76
65 5.95
66 6.14
67 6.35
68 6.58
69 6.82
70 7.08
71 7.36
72 7.66
73 7.98
74 8.33
------------------------ ---------------------
<PAGE>
Upon request, we will provide information on the payments that we will make for
other payment intervals, gender combinations, and ages.
Certificate of Participation
Under a Group Flexible Premium Deferred Variable Annuity Contract
Nonparticipating - No Dividends
Item 4(n)
A Stock Insurance Company
Domicile Address: 580 Walnut Street, Cincinnati, Ohio 45202
Administrative Office:
P. O. Box 5423, Cincinnati, Ohio 45201-5423
Group Flexible Premium Deferred Variable Annuity Contract
In consideration of the application, if any, the enrollment forms, if any, of
participants hereunder ("Participants"), and the payment of Purchase Payments
for the benefit of Participants, we have issued this Group Flexible Premium
Deferred Variable Annuity Contract ("Contract") to the Contract Owner identified
on the Contract Specifications page, effective as of the Contract Effective Date
and subject to all of the terms and conditions set out on the following pages.
As you read through this Contract, please note that the words "we", "us", "our",
and "Company" refer to Annuity Investors Life Insurance Company. The words "you"
and "your" refer to the Contract Owner.
Assistant Secretary Executive Vice President
Nonparticipating - No Dividends
BENEFIT PAYMENTS AND OTHER VALUES DESCRIBED IN THIS CONTRACT, WHEN BASED ON THE
INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT, MAY INCREASE OR DECREASE AND ARE
NOT GUARANTEED AS TO FIXED DOLLAR AMOUNTS. NO MINIMUM CONTRACT VALUE IS
GUARANTEED, EXCEPT FOR AMOUNTS IN THE FIXED ACCOUNT.
<PAGE>
CONTRACT SPECIFICATIONS
CONTRACT OWNER: JOHN DOE
CONTRACT NUMBER: 00000000
CONTRACT EFFECTIVE DATE: APRIL 01, 1998
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT: Annuity Investors Variable Account B
Following is a list of the currently available Funds in which the Separate
Account invests:
[Janus Aspen Series Aggressive Growth Portfolio]
[Janus Aspen Series Worldwide Growth Portfolio]
[Janus Aspen Series Balanced Portfolio]
[Janus Aspen Series Growth Portfolio]
[Janus Aspen Series International Growth Portfolio]
[Janus Aspen Series Capital Appreciation Portfolio]
[Dreyfus Variable Investment Fund-Capital Appreciation Portfolio]
[Dreyfus Variable Investment Fund-Money Market Portfolio]
[Dreyfus Variable Investment Fund-Growth and Income Portfolio]
[Dreyfus Variable Investment Fund-Small Cap Portfolio]
[The Dreyfus Socially Responsible Growth Fund, Inc.]
[Dreyfus Stock Index Fund]
[Strong Opportunity Fund II, Inc.]
[Strong Growth Fund II]
[The Timothy Plan Variable Series]
[INVESCO VIF-Industrial Income Portfolio]
INVESCO VIF-Total Return Portfolio]
[INVESCO VIF-High Yield Portfolio]
[Morgan Stanley Universal Funds Inc. U.S. Real Estate Portfolio]
[Morgan Stanley Universal Funds Inc. Value Portfolio]
[Morgan Stanley Universal Funds Inc. Emerging Markets Equity Portfolio]
[Morgan Stanley Universal Funds Inc. Fixed Income Portfolio]
[Morgan Stanley Universal Funds Inc. Mid-Cap Value Portfolio]
[Pilgrim Baxter PBHG Insurance Series Fund, Inc.-Growth II Fund]
[Pilgrim Baxter PBHG Insurance Series Fund, Inc.-Large Cap Growth Fund]
[Pilgrim Baxter PBHG Insurance Series Fund, Inc.-Technology & Communications
Fund]
[BT Insurance Funds Trust-EAFE(R) Equity Index Fund]
[BT Insurance Funds Trust-Equity 500 Index Fund]
[BT Insurance Funds Trust-Small Cap Index Fund]
<PAGE>
TRANSFER FEE:[$25] per transfer in excess of twelve (12) in any Certificate Year
- -------------
CERTIFICATE MAINTENANCE FEE: [$40] Annually
MORTALITY AND EXPENSE RISK CHARGE: A charge equal to an effective annual rate of
[1.25%] of the daily Net Asset Value of the Sub-Accounts.
ADMINISTRATION CHARGE: A charge equal to an effective annual rate of [0.15%] of
the daily Net Asset Value of the Sub-Accounts.
TERMINATION: We reserve the right to terminate any Participant's participation
interest under this Contract, if at any time the Account Value of his/her
Certificate is less than $500. A surrender will be deemed to have been made and
we will pay the Participant the Account Value of his or her participation
interest.
[The following terms and conditions apply to termination of this Contract:
- ---------------------]
INQUIRIES: For information, or to make a complaint, call or write:
Variable Annuity Service Center
Annuity Investors Life Insurance Company
Post Office Box 5423
Cincinnati, Ohio 45201-5423
[1-800-789-6771]
<PAGE>
TABLE OF CONTENTS PAGE
- --------------------------------------------------------------------------------
DEFINITIONS..................................................................6
GENERAL PROVISIONS...........................................................9
Entire Contract............................................................9
Participant Certificate....................................................9
Changes -- Waivers.........................................................9
Nonparticipating...........................................................9
Misstatement...............................................................9
Required Reports...........................................................9
Exclusive Benefit.........................................................10
State Law.................................................................10
Claims of Creditors.......................................................10
Company Liability.........................................................10
Voting Rights.............................................................10
Incontestability..........................................................10
Discharge of Liability....................................................10
Transfer By the Company...................................................10
Termination...............................................................10
PURCHASE PAYMENTS...........................................................11
Purchase Payments.........................................................11
Allocation of Purchase Payments...........................................11
No Termination............................................................11
FIXED ACCOUNT...............................................................11
Fixed Accumulation Account................................................11
SEPARATE ACCOUNT............................................................12
General Description.......................................................12
Sub-Accounts of the Separate Account......................................12
Valuation of Assets.......................................................12
Variable Account Value....................................................12
Accumulation Unit Value...................................................13
TRANSFERS...................................................................13
FEES AND CHARGES............................................................13
Mortality and Expense Risk Charge.........................................14
Administration Charge.....................................................14
Certificate Maintenance Fee...............................................14
SURRENDERS..................................................................14
Surrenders................................................................14
Deferral of Payment.......................................................15
OWNERSHIP PROVISIONS........................................................15
Ownership of Separate Account.............................................15
Ownership of Contract and Participant Account.............................15
Transfer and Assignment...................................................15
Successor Owner...........................................................15
Community Property........................................................15
BENEFICIARY PROVISIONS......................................................16
Beneficiary...............................................................16
Change of Beneficiary.....................................................16
BENEFIT ON ANNUITY COMMENCEMENT DATE........................................16
Annuity Commencement Date.................................................16
Annuity Benefit Payments..................................................16
Form of Annuity Benefit...................................................17
BENEFIT ON DEATH OF PARTICIPANT.............................................17
Death Benefit.............................................................17
Death Benefit Amount......................................................17
Transfers After Death.....................................................18
Form of Death Benefit.....................................................18
SETTLEMENT OPTIONS..........................................................18
Conditions................................................................18
Benefit Payments..........................................................19
Fixed Dollar Benefit......................................................19
Variable Dollar Benefit...................................................19
Limitation on Election of Settlement Option...............................20
Settlement Option Computations............................................20
Available Settlement Options..............................................20
Settlement Option Tables..................................................21
Group Flexible Premium Deferred Variable Annuity Contract.................24
.......
<PAGE>
DEFINITIONS
Account(s): The Sub-Account(s) and/or the Fixed Accumulation Account.
Account Value: The aggregate value of a Participant's interest in the
Sub-Account(s) and the Fixed Accumulation Account as of the end of any Valuation
Period. The value of a Participant's interest in all Sub-Accounts is his or her
"Variable Account Value," and the value of a Participant's interest in the Fixed
Accumulation Account is his or her "Fixed Account Value."
Accumulated Earnings: A Participant's Account Value in excess of Purchase
Payments received by us and which have not been returned to the Participant.
Accumulation Period: The period prior to the applicable Commencement Date under
a Certificate.
Accumulation Unit: A unit of measurement used to calculate the value(s) of the
Sub-Account(s) prior to the applicable Commencement Date. The value of an
Accumulation Unit is referred to as an "Accumulation Unit Value."
Administrative Office: The home office of the Company or any other place of
business which we may designate for administration.
Age: Age as of most recent birthday.
Annuitant: For each participation interest under this Contract, the Annuitant is
the Participant, and is the person on whose life Annuity Benefit payments are
based.
Annuity Benefit: Periodic payments made under a settlement option, which
commence on or after the Annuity Commencement Date.
Annuity Commencement Date: For each Participant, the first day of the first
Payment Interval for which an Annuity Benefit payment is to be made under a
settlement option.
Beneficiary: A person entitled to the Death Benefit under a Certificate.
Benefit Payment: The Annuity Benefit or Death Benefit payable under a settlement
option. Variable Dollar Benefit payments may vary in amount. Fixed Dollar
Benefit payments remain constant except under certain joint and survivor
settlement options.
Benefit Payment Period: The period starting on the Commencement Date during
which Benefit Payments are to be made under a Certificate.
Benefit Unit: A unit of measure used to determine the dollar value of any
Variable Dollar Benefit payments after the first Benefit Payment is made by us.
The value of a Benefit Unit is referred to as a "Benefit Unit Value."
Certificate Anniversary: An annual anniversary of a Participant's Certificate
Effective Date.
Certificate Effective Date: The date shown on a Participant's Certificate
Specifications page.
Certificate Year: For a Participant's Certificate, any period of twelve (12)
consecutive months commencing on the Certificate Effective Date and on each
Certificate Anniversary thereafter.
<PAGE>
Code: The Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder.
Commencement Date: The Annuity Commencement Date if an Annuity Benefit is
payable under a Certificate, or the Death Benefit Commencement Date if a Death
Benefit is payable under a Certificate.
Death Benefit: The benefit described in the Benefit on Death of Participant
section of this Contract.
Death Benefit Commencement Date: For each Participant, the first day of the
first Payment Interval for which a Death Benefit payment is to be made under a
settlement option, or the date a Death Benefit is to be paid in a lump sum.
Death Benefit Valuation Date: The date that Due Proof of Death has been received
by us and the earlier to occur of:
1) our receipt of a Written Request with instructions as to the form of
Death Benefit; or
2) the Death Benefit Commencement Date.
Due Proof of Death: Any of the following:
1) a certified copy of a death certificate;
2) a certified copy of a decree of a court of competent jurisdiction as to
the finding of death; or
3) any other proof satisfactory to us.
Fund: A managem ent investment company or portfolio thereof, registered under
the Investment Company Act of 1940, in which the Separate Account invests.
Net Asset Value: The amount computed by an investment company, no less
frequently than each Valuation Period, as the price at which its shares or
units, as the case may be, are redeemed in accordance with the rules of the
Securities and Exchange Commission.
Owner: The person identified as such on the Contract Specifications page.
Participant: A person who participates in the benefits of this Contract pursuant
to the
enrollment form for such person, if any, as evidenced by a Certificate.
Payment Interval: A monthly, quarterly, annual or other regular interval during
a Benefit Payment Period.
Person Controlling Payments: The "Person Controlling Payments" means the
following, as the case may be:
1) with respect to Annuity Benefit payments, the Participant; and
2) with respect to Death Benefit payments,
a) the Beneficiary; or
b) if the Beneficiary is deceased, the payee.
Purchase Payment: A contribution amount paid to us in consideration for a
Participant's participation interest under this Contract, after the deduction of
any and all of the following which may apply:
1) any fee charged by the person remitting payments for you;
2) premium taxes; and/or
3) other taxes.
<PAGE>
Separate Account: An account, which may be an investment company, which is
established and maintained by the Company pursuant to the laws of the State of
Ohio.
Sub-Account: The Separate Account is divided into Sub-Accounts, each of which is
invested in the shares of a designated Fund.
Valuation Period: The period commencing at the close of regular trading on the
New York Stock Exchange on any Valuation Date, and ending at the close of
trading on the next succeeding Valuation Date. "Valuation Date" means each day
on which the New York Stock Exchange is open for business.
Written Request: Information provided, or a request made, that is complete and
satisfactory to us, that is sent to us on our form or in a manner satisfactory
to us, which may, at our discretion, be telephonic, and that is received by us
at our Administrative Office. A Written Request is subject to any payment made
or any action we take before we acknowledge it. A Written Request may be
modified or revoked only by a subsequent Written Request, when permitted by the
terms of this Contract. A Participant may be required to return his or her
Certificate to us in connection with a Written Request.
<PAGE>
GENERAL PROVISIONS
Entire Contract
We have issued this Contract to the Contract Owner identified on the Contract
Specifications page. This Contract is a group flexible premium deferred variable
annuity contract. This Contract is restricted by endorsement as required to
obtain favorable tax treatment under the Code, and is not valid without the
requisite endorsement(s) being attached. This Contract, its endorsements, the
application, if any, and the enrollment forms, if any, of all Participants under
it, form the entire Contract between you and us. Certificates are not contracts
and are not a part of this Contract.
Only statements in the application, if any, or in a Participant's enrollment
form, if any, will be used to void a Participant's participation interest
hereunder, or to defend a claim based on it. Such statements are representations
and not warranties.
Participant Certificate
A Certificate of Participation ("Certificate") is evidence of a Participant's
participation interest under this Contract.
Changes -- Waivers
No changes or waivers of the terms of this Contract are valid unless made in
writing by our President, Vice President, or Secretary. No agent or other person
not named above has authority to change or waive any provision of this Contract.
We reserve the right both to administer and to change the provisions of this
Contract to conform to any applicable laws, regulations or rulings issued by a
governmental agency.
In any event, the Company reserves the right to add or delete Sub-Accounts, to
substitute shares of a different Fund or different class or series of a Fund for
shares held in a Sub-Account, to merge or combine Sub-Accounts, to merge or
combine the Separate Account with any other separate account of the Company, to
transfer the assets of the Separate Account to another life insurance company by
means of a merger or reinsurance, to convert the Separate Account into a managed
separate account, and to de-register the Separate Account under the Investment
Company Act of 1940. Any such change will be made in accordance with applicable
insurance and securities laws and after obtaining any necessary federal and/or
state regulatory approvals.
Nonparticipating
This Contract does not pay dividends or share in the Company's divisible
surplus.
Misstatement
If the age or sex of a person on whose life Benefit Payments are based is
misstated, the payments or other benefits under this Contract shall be adjusted
to the amount which would have been payable based on the correct age or sex. If
we made any underpayments based on any misstatement, the amount of any
underpayment with interest shall be immediately paid in one sum. In addition to
any other remedies that may be available at law or at equity, we may deduct any
overpayments made, with interest, from any succeeding payments due.
Required Reports At least once each Certificate Year, we will send a report of a
Participant's current values and any other information required by law, until
the first to occur of the following:
1) the date the Participant's participation interest under this Contract is
fully surrendered;
2) the Participant's Annuity Commencement Date; or
3) the Participant's Death Benefit Commencement Date.
<PAGE>
The report will be mailed to the last known address of the Participant. The
reported values will be based on the information in our possession at the time
the report is prepared by us. We may adjust the reported values at a later date
if that information proves to be incorrect or has changed.
Exclusive Benefit
This Contract is for the exclusive benefit of Participants and their
Beneficiaries. Their interests under this Contract are nonforfeitable by us.
State Law
All factors, values, benefits and reserves under this Contract will not be less
than those required by the law of the state in which this Contract is delivered.
Claims of Creditors
To the extent allowed by law, this Contract and all values and benefits under it
are not subject to the claims of creditors or to legal process.
Company Liability
We will not incur any liability or be responsible for any failure, in whole or
in part, by you or by any person having rights or benefits arising out of or
related to this Contract, to comply with any applicable laws, regulations or
rulings issued by a governmental agency.
Voting Rights
To the extent required by law, we will vote all shares of the Funds held in the
Separate Account, at regular and special shareholder meetings of the Funds, in
accordance with instructions received from the Participant, or, if applicable,
from the Person Controlling Payments. If there is a change in the law which
permits us to vote the shares of the Funds without such instructions, then we
reserve the right to do so.
Incontestability
This Contract, and the participation interests of Participants under it, shall
not be contestable by us.
Discharge of Liability
Upon payment of any partial or full surrender, or any Benefit Payment, we shall
be discharged from all liability to the extent of each such payment.
Transfer By the Company
We reserve the right to transfer our obligations under this Contract to another
qualified life insurance company under an assumption reinsurance arrangement
without your prior consent.
Termination
Either we or you may terminate this Contract by giving sixty (60) days advance
notice in writing. Refer to the Contract Specifications page for information
regarding the benefits and charges, if any, in the event of termination of this
Contract. If this Contract is terminated, a Participant may continue his or her
participation interest under it on a deferred paid-up basis, subject to all of
the terms and conditions of this Contract, unless he or she surrenders his or
her participation as a whole. Termination of this Contract will not affect
Benefit Payments being made by us.
<PAGE>
PURCHASE PAYMENTS
Purchase Payments
One or more Purchase Payments may be paid to us for a Participant at any time
before the Participant's Annuity Commencement Date, so long as:
1) the Participant is still living; and
2) the Participant's participation interest has not been fully surrendered.
The initial Purchase Payment for a Participant must be paid to us on or before
the Participant's Certificate Effective Date. Each Purchase Payment must be paid
to us at our Administrative Office, and is subject to any minimums or maximums
that we set for such from time to time. Upon request, we will provide you with a
receipt as proof of payment.
Allocation of Purchase Payments
We will allocate Purchase Payments to the Sub-Accounts according to the
instructions we receive in the Participant's enrollment form, if any, or
subsequent Written Request. Allocations must be made in whole percentages. The
minimum amount that can be allocated to a Sub-Account is $10. You shall be
responsible to collect Purchase Payment(s) by payroll deduction or otherwise and
to remit Purchase Payment(s) to us in the proper amount, together with all
information necessary to apply such amounts properly under the terms of this
Contract and with respect to the participation interests of Participants
hereunder.
No Termination
Except as stated elsewhere in this Contract, neither this Contract nor the
participation interest of a Participant under it will be terminated by us due to
failure to make additional Purchase Payments.
FIXED ACCOUNT
Fixed Accumulation Account
The Fixed Accumulation Account is part of the Company's general account. The
values of the Fixed Accumulation Account are not dependent upon the investment
performance of the Sub-Accounts. The Fixed Accumulation Account is not available
as an investment option, but any loan collateral will be allocated to the Fixed
Accumulation Account and will earn a fixed rate of interest no less than three
percent (3%) per year, compounded annually.
<PAGE>
SEPARATE ACCOUNT
General Description
The variable benefits under this Contract are provided through the Separate
Account. The Separate Account is registered with the Securities and Exchange
Commission as a unit investment trust under the Investment Company Act of 1940.
The income, if any, and any gains or losses, realized or unrealized, on the
Separate Account will be credited to or charged against the amounts allocated to
such account without regard to other income, gains, or losses of the Company.
The amounts allocated to the Separate Account and the accumulations thereon
remain the property of the Company, but that portion of the assets of the
Separate Account that is equal to the reserves and other contractual liabilities
under all policies, annuities, and other contracts identified with the Separate
Account, is not chargeable with liabilities arising out of any other business of
the Company. The Company is not, and does not hold itself out to be, a trustee
in respect of such amounts.
We have the right to transfer to our general account, in our sole discretion and
at any time without prior written notice, any assets of the Separate Account
which are in excess of the required reserves and other contractual liabilities
under all policies, annuities, and other contracts identified with the Separate
Account.
Sub-Accounts of the Separate Account
The assets of the Separate Account are divided into Sub-Accounts. The
Sub-Accounts available as of the Contract Effective Date are listed on the
Contract Specifications page. Each Sub-Account invests exclusively in shares of
an underlying Fund as shown on the Contract Specifications page. Any amounts of
income and any gains on the shares of a Fund will be reinvested in additional
shares of that Fund at its Net Asset Value.
Valuation of Assets
Shares of Funds held for each Sub-Account will be valued at their Net Asset
Value at the end of each Valuation Period, as reported by each such Fund.
Variable Account Value
Purchase Payment(s) may be allocated among and, as described elsewhere in this
Contract, Account values may be transferred to the various Sub-Accounts within
the Separate Account. For each Sub-Account, the Purchase Payment(s) or amounts
transferred are converted into Accumulation Units. The number of Accumulation
Units credited is determined by dividing the dollar amount directed to each
Sub-Account by the value of the Accumulation Unit for that Sub-Account at the
end of the Valuation Period on which the Purchase Payment(s) or transferred
amount is received.
The following events will result in the cancellation of an appropriate number of
Accumulation Units of a Sub-Account:
1) transfer from a Sub-Account;
2) full or partial surrender of a Participant's Variable Account Value;
3) payment of a Death Benefit;
4) application of a Participant's Variable Account Value to a settlement
option;
5) deduction of a Certificate Maintenance Fee; or
6) deduction of any Transfer Fee.
<PAGE>
Accumulation Units will be canceled as of the end of the Valuation Period during
which the Company receives a Written Request regarding the event giving rise to
such cancellation, or an applicable Commencement Date, or the end of the
Valuation Period on which a Certificate Maintenance Fee or Transfer Fee is due,
as the case may be.
A Participant's Variable Account Value at any time is equal to the sum of the
number of Accumulation Units for each Sub-Account attributable to his or her
participation multiplied by the Accumulation Unit Value for each Sub-Account at
the end of the preceding Valuation Period.
Accumulation Unit Value
The initial Accumulation Unit Value for each Sub-Account, with the exception of
the Money Market Sub-Account, was set at $10.00. The initial Accumulation Unit
Value for the Money Market Sub-Account was set at $1.00. Thereafter, the
Accumulation Unit Value at the end of each Valuation Period is the Accumulation
Unit Value at the end of the previous Valuation Period multiplied by the Net
Investment Factor, as described below.
The Net Investment Factor is a factor applied to measure the investment
performance of a Sub-Account from one Valuation Period to the next. Each
Sub-Account has a Net Investment Factor for each Valuation Period which may be
greater or less than one. Therefore, the Accumulation Unit Value for each
Sub-Account may increase or decrease. The Net Investment Factor for any
Sub-Account for any Valuation Period is determined by dividing (1) by (2) and
subtracting (3) from the result, where:
1) is equal to:
a) the Net Asset Value per share of the Fund held in that Sub-Account,
determined at the end of the applicable Valuation Period; plus
b) the per share amount of any dividend or net capital gain distributions
made by the Fund held in that Sub-Account, if the "ex-dividend" date
occurs during the applicable Valuation Period; plus or minus
c) a per share charge or credit for any taxes reserved for, which is
determined by the Company to have resulted from the investment
operations of the Sub-Account;
2) is the Net Asset Value per share of the Fund held in that Sub-Account,
determined at the end of the immediately preceding Valuation Period; and
3) is the factor representing the Mortality and Expense Risk Charge and the
Administration Charge deducted from the Sub-Account for the number of
days in the applicable Valuation Period.
TRANSFERS
Prior to his or her applicable Commencement Date, a Participant may transfer
amounts in a Sub-Account to a different Sub-Account.
The minimum transfer amount for any transfer is $500. The number of transfers
per year for each Participant, over which we will charge a Transfer Fee on each
additional transfer, and the amount of the Transfer Fee, are shown on the
Contract Specifications page.
We reserve the right, in our sole discretion and at any time without prior
notice, to terminate, suspend or modify the transfer privileges described above.
FEES AND CHARGES
Mortality and Expense Risk Charge
The Mortality and Expense Risk Charge is shown on the Contract Specifications
page and is deducted daily from each Sub-Account. This deduction is made to
compensate the Company for assuming the mortality and expense risks under this
Contract.
Administration Charge
The Administration Charge is shown on the Contract Specifications page and is
deducted daily from each Sub-Account. This deduction is made to reimburse the
Company for expenses incurred in the administration of this Contract, the
Certificates thereunder, and the Separate Account.
Certificate Maintenance Fee
The Certificate Maintenance Fee ("Fee") is shown on the Contract Specifications
page and is deducted for each Participant as of the Valuation Period next
following each Certificate Anniversary prior to the applicable Commencement
Date. In addition, the full annual Fee will be charged at the time of a full
surrender of a Participant's participation interest. The Fee will be allocated
to each Sub-Account in the same proportion as each Sub-Account's value is to the
Participant's total Variable Account Value as of the end of such Valuation
Period. The Fee does not apply to the Fixed Account.
After his or her applicable Commencement Date, if a Variable Dollar Benefit is
elected by a Participant, the Fee will be deducted pro-rata from each Benefit
Payment and will result in a reduction in the amount of such payment.
The Fee may be waived in whole or in part in our sole discretion.
SURRENDERS
Surrenders
A surrender in full may be made for a Participant's Account Value, or partial
surrenders may be made for a lesser amount, by Written Request at any time prior
to the Participant's Annuity Commencement Date. The amount of any partial
surrender must be at least $500. A partial surrender cannot reduce a
Participant's Account Value to less than $500. Surrenders will be deemed to be
withdrawn first from the portion of the Account Value that represents a
Participant's Accumulated Earnings and then from Purchase Payments. For purposes
of this Contract, Purchase Payments are deemed to be withdrawn on a "first-in,
first-out" (FIFO) basis.
<PAGE>
The amount available for surrender will be the Account Value at the end of the
Valuation Period in which the Written Request is received by us.
Deferral of Payment
The Company has the right to suspend or delay the date of payment of a partial
or full surrender of the Variable Account Value for any period:
1) when the New York Stock Exchange is closed, or when trading on the New
York Stock Exchange is restricted; or
2) when an emergency exists (as determined by the Securities and Exchange
Commission) as a result of which:
a) the disposal of securities in the Separate Account is not reasonably
practicable; or
b) it is not reasonably practicable to determine fairly the value of the
net assets in the Separate Account; or
3) when the Securities and Exchange Commission so permits for the
protection of security holders.
The Company further reserves the right to delay payment of a partial or full
surrender of the Fixed Account Value for up to six (6) months after we receive a
Written Request.
OWNERSHIP PROVISIONS
Ownership of Separate Account
The Company has absolute ownership of the assets in the Separate Account.
However, the Company is not, and does not hold itself out to be, a trustee in
respect of any amounts under the Separate Account.
Ownership of Contract and Participant Account
The Contract Owner must be an employer or the trustee for an employer's
retirement plan. The Contract Owner is shown on the Contract Specifications
page. This Contract is held by the Contract Owner for the benefit of the
Participants and Beneficiaries.
Each participant for whom Purchase Payment(s) are made will participate in this
Contract as a Participant. A participant account will be established for each
Participant.
Transfer and Assignment
Neither you nor a Participant may transfer, sell, assign, pledge, charge,
encumber or in any way alienate an interest under this Contract.
Successor Owner
By Written Request, a Participant's spouse may, in some cases, succeed to the
ownership of a Participant's participation interest under this Contract after
the Participant's death. Specifically, if a Participant dies and his or her
spouse is the sole surviving Beneficiary of the Participant's participation
interest, he or she will become the Successor Owner of the Participant's
participation interest if: 1) the Participant makes that Written Request before
his or her death; or 2) after the Participant's death, his or her spouse makes
that Written Request within one (1) year of the Participant's death and before
the Death Benefit Commencement Date.
As Successor Owner, the Participant's spouse will then succeed to all the
Participant's rights of ownership under this Contract except the right to name
another Successor Owner.
Community Property
If a Participant lives in a community property state and has a spouse at any
time while he or she participates under this Contract, the laws of that state
may vary his or her ownership rights.
BENEFICIARY PROVISIONS
Beneficiary
A Participant's Beneficiary is the person or persons so designated on his or her
enrollment form, if any, or under the Change of Beneficiary provision of this
Contract. If a Participant has not designated a Beneficiary, or if no
Beneficiary designated survives the Participant, then the Beneficiary will be
the Participant's estate.
A Beneficiary will be deemed not to have survived a Participant if he or she
dies within thirty (30) days after the Participant's death.
A Beneficiary designation may be joint or contingent or both. Unless otherwise
stated, joint Beneficiaries will be entitled to equal shares. A contingent
Beneficiary will be entitled to a benefit only if there is no surviving primary
Beneficiary.
Change of Beneficiary
Unless a Participant has designated an irrevocable Beneficiary, he or she may
change his or her designation of a Beneficiary at any time before the Annuity
Commencement Date.
Any such change is subject to the following:
1) it must be made by Written Request; and
2) unless otherwise elected or required by law, it will not cancel any
settlement option election previously made.
BENEFIT ON ANNUITY COMMENCEMENT DATE
Annuity Commencement Date
The Annuity Commencement Date for a Participant is shown on the Participant's
Certificate Specifications page. A Participant may change his or her Annuity
Commencement Date by Written Request made at least thirty (30) days prior to the
date that Annuity Benefit payments are scheduled to begin. Unless the Company
agrees otherwise, a Participant's Annuity Commencement Date cannot be later than
the Certificate Anniversary following his or her 85th birthday, or five (5)
years after his or her Certificate Effective Date, whichever is later.
Annuity Benefit Payments
An amount equal to the Participant's Account Value (after deduction of any fees
and charges, loans, or applicable premium tax or other taxes not previously
deducted) will be used to provide Annuity Benefit payments to Participants under
this Contract commencing on or after a Participant's Annuity Commencement Date.
Annuity Benefit payments will be made to the Participant as payee. Any Annuity
Benefit amounts remaining payable on his or her death will be paid to the
contingent payee designated by the Participant by Written Request. We may reject
the naming of a non-natural payee. The Participant will be the person on whose
life any Annuity Benefit payments are based.
If no contingent payee designated by the Participant is surviving at the time
payment is to be made, then after the Participant's death any Annuity Benefit
amounts remaining payable will be paid to the person or persons designated as
contingent payee by Written Request by the last payee who received payments.
Failing that, any such amounts will be paid to the estate of the last payee who
received payments.
Form of Annuity Benefit
Annuity Benefit payments will be Fixed Dollar Benefit payments, made monthly in
accordance with the terms of Option B with a fixed period of one hundred twenty
(120) months under the SETTLEMENT OPTIONS section of this Contract.
In lieu of that, a Participant may elect to have Annuity Benefit payments made
pursuant to any other available settlement option under the SETTLEMENT OPTIONS
section of this Contract. Any such election must be made by Written Request
before the Annuity Commencement Date. A Participant may change his or her
election of a settlement option by Written Request made at least thirty (30)
days prior to the date that Annuity Benefit payments are scheduled to begin.
BENEFIT ON DEATH OF PARTICIPANT
Death Benefit
A Death Benefit will be paid under this Contract if:
1) a Participant dies before his or her Annuity Commencement Date and
before his or her participation interest is fully surrendered;
2) the Participant's Death Benefit Valuation Date has occurred; and
3) the Participant's spouse does not become the Successor Owner of the
Participant's participation interest.
If a Death Benefit becomes payable with respect to a Participant:
1) it will be in lieu of all other benefits with respect to that
Participant under this Contract; and
2) all other rights with respect to that Participant under this Contract
will be terminated except for rights related to the Death Benefit.
Death Benefit payments shall be made to the Participant's Beneficiary as payee.
The Participant's Beneficiary will be the person on whose life any Death Benefit
payments under a settlement option are based.
Any Death Benefit amounts remaining payable on the death of a Beneficiary will
be paid:
1) to any contingent payee designated by the Participant as part of any
Death Benefit settlement option election made by the Participant, or if
none is surviving at the time payment is to be made; then
2) to any contingent payee designated by the Beneficiary by Written
Request, or if none is surviving at the time payment is to be made; then
3) to the estate of the last payee who received payments.
Only one Death Benefit will be paid with respect to a Participant's
participation interest under this Contract.
Death Benefit Amount
The Death Benefit will be an amount equal to the greater of:
1) the Participant's Account Value as of the Death Benefit Valuation Date;
or
2) one hundred percent (100%) of the Purchase Payment(s) received by us for
him or her, less any amounts returned to you.
As of the Death Benefit Valuation Date for a Participant, the amount of the
Death Benefit will be allocated among the Sub-Accounts in the same proportion as
each Account's value is to the total Account Value for that Participant as of
the end of the Valuation Period immediately preceding the Death Benefit
Valuation Date.
Any applicable premium tax or other taxes not previously deducted, and any
outstanding loans, will be deducted from the Death Benefit amount described
above.
Transfers After Death
Between the Death Benefit Valuation Date and the Death Benefit Commencement
Date, a Beneficiary may transfer funds among Sub-Accounts as described under the
TRANSFERS section of this Contract.
Form of Death Benefit
Payments under the Death Benefit provision of this Contract will be Fixed Dollar
Benefit payments made monthly in accordance with the terms of Option A with a
period certain of forty-eight (48) months under the SETTLEMENT OPTIONS section
of this Contract.
In lieu of that, a Participant may elect at any time before his or her death to
have payments under the Death Benefit provision of this Contract made in one
lump sum or pursuant to any available settlement option under the SETTLEMENT
OPTIONS section of this Contract. If a Participant does not make any such
election, the Beneficiary may make that election at any time after the
Participant's death and before the Death Benefit Commencement Date.
A Participant may change his or her election of a settlement option at any time
before his or her death.
If a Beneficiary elects a settlement option as noted above, he or she may change
his or her own election of a settlement option by Written Request made at least
thirty (30) days prior to the date that Death Benefit payments are scheduled to
begin.
Any election or change of election must be made by Written Request.
SETTLEMENT OPTIONS
Conditions
Benefit Payments under a settlement option are subject to any minimum amounts,
Payment Intervals, and other terms or conditions that we may from time to time
require. If we change our minimums, we may change any current or future payment
amounts and/or Payment Intervals to conform with the change. More than one
settlement option may be elected if the requirements for each settlement option
elected are satisfied. Once payment begins under a settlement option, the
settlement option may not be changed.
All elected settlement options must comply with current applicable laws,
regulations and rulings issued by any governmental agency.
If more than one person is the payee under a settlement option, payments will be
made to the payees jointly. No more than two persons may be initial payees under
any joint and survivor settlement options.
If payment under a settlement option depends on whether a specified person is
still alive, we may at any time require proof that such person is still living.
We will require proof of the age and/or sex of any person on whose life Benefit
Payments are based.
Benefit Payments
Benefit Payments may be calculated and paid:
1) as a Fixed Dollar Benefit;
2) as a Variable Dollar Benefit; or
3) as a combination of both.
If only a Fixed Dollar Benefit is to be paid, we will transfer all of the
Participant's Account Value to the Company's general account on the applicable
Commencement Date, or on the Death Benefit Valuation Date (if applicable).
Similarly, if only a Variable Dollar Benefit is elected, we will transfer all of
the Participant's Account Value to the Sub-Accounts as of the end of the
Valuation Period immediately prior to the applicable Commencement Date; we will
allocate the amount applied to a Variable Dollar Benefit among the Sub-Accounts
in accordance with a Written Request. No transfers between the Fixed Dollar
Benefit and the Variable Dollar Benefit will be allowed after the Commencement
Date. However, after the Variable Dollar Benefit has been paid for at least
twelve (12) months, the Person Controlling Payments may, no more than once each
twelve (12) months thereafter, transfer all or part of the Benefit Units upon
which the Variable Dollar Benefit is based from the Sub-Account(s) then held, to
the Benefit Units in different Sub-Account(s).
If a Variable Dollar Benefit is elected, the amount to be applied under that
benefit is the Variable Account Value as of the end of the Valuation Period
immediately preceding the applicable Commencement Date. If a Fixed Dollar
Benefit is to be paid, the amount to be applied under that benefit is the Fixed
Account Value as of the applicable Commencement Date, or as of the Death Benefit
Valuation Date (if applicable).
Fixed Dollar Benefit
Fixed Dollar Benefit payments are determined by multiplying the Participant's
Fixed Account Value (expressed in thousands of dollars and after deduction of
any fees and charges, loans, or applicable premium tax or other taxes not
previously deducted) by the amount of the monthly payment per $1,000 of value
obtained from the Settlement Option Table for the settlement option elected.
Fixed Dollar Benefit payments will remain level for the duration of the Benefit
Payment Period.
If at the time a Fixed Dollar Benefit is elected, we have available options or
rates on a more favorable basis than those guaranteed, the higher benefits shall
be applied and shall not change for as long as that election remains in force.
Variable Dollar Benefit
The first monthly Variable Dollar Benefit payment is equal to the Participant's
Variable Account Value (expressed in thousands of dollars and after deduction of
any fees and charges, loans, or applicable premium tax or other taxes not
previously deducted) as of the end of the Valuation Period immediately preceding
the applicable Commencement Date multiplied by the amount of the monthly payment
per $1,000 of value obtained from the Settlement Option Table for the Benefit
Payment elected less the pro-rata portion of the Certificate Maintenance Fee.
The number of Benefit Units in each Sub-Account held by a Participant is
determined by dividing the dollar amount of the first monthly Variable Dollar
Benefit payment from each Sub-Account by the Benefit Unit Value for that
Sub-Account as of the applicable Commencement Date. The number of Benefit Units
remains fixed during the Benefit Payment Period, except as a result of any
transfers among Sub-Accounts after the applicable Commencement Date.
The dollar amount of the second and subsequent Variable Dollar Benefit payment
will reflect the investment performance of the Sub-Account(s) selected and may
vary from month to month. The total amount of the second and any subsequent
Variable Dollar Benefit payment will be equal to the sum of the payments from
each Sub-Account less a pro-rata portion of the Certificate Maintenance Fee.
The payment from each Sub-Account is found by multiplying the number of Benefit
Units held in each Sub-Account by a Participant by the Benefit Unit Value for
that Sub-Account as of the end of the fifth Valuation Period preceding the due
date of the payment.
The Benefit Unit Value for each Sub-Account is originally established in the
same manner as Accumulation Unit Values. Thereafter, the value of a Benefit Unit
for a Sub-Account is determined by multiplying the Benefit Unit Value as of the
end of the preceding Valuation Period by the Net Investment Factor, determined
as set forth under the Accumulation Unit Value provision of this Contract, for
the Valuation Period just ended. The product is then multiplied by the assumed
daily investment factor (0.99991781), for the number of days in the Valuation
Period. The factor is based on the assumed net investment rate of three percent
(3%) per year, compounded annually, that is reflected in the Settlement Option
Tables.
Limitation on Election of Settlement Option
Fixed periods shorter than five (5) years are not available, except as a Death
Benefit settlement option.
Settlement Option Computations
The 1983 Group Annuity Mortality Table with interest at three percent (3%) per
year, compounded annually, is used to compute all guaranteed settlement option
factors, values, and benefits under this Contract.
Available Settlement Options
The available settlement options are set out below.
Option A Income for a Fixed Period
We will make periodic payments for a fixed period. The first payment
will be paid as of the last day of the initial Payment Interval. The
maximum time over which payments will be made by us or money will be
held by us is thirty (30) years. The Option A Table applies to this
Option.
Option B Life Annuity with Payments for at Least a Fixed Period
We will make monthly payments for at least a fixed period. If the person
on whose life Benefit Payments are based lives longer than the fixed
period, then we will make payments until his or her death. The first
payment will be paid as of the first day of the initial Payment
Interval. The Option B Table applies to this Option.
Option C Joint and One-half Survivor Annuity
We will make periodic payments until the death of the primary person on
whose life Benefit Payments are based; thereafter, we will make one-half
(1/2) of the periodic payment until the death of the secondary person on
whose life Benefit Payments are based. The first payment will be paid as
of the first day of the initial Payment Interval. The Option C Table
applies to this Option.
Option D Life Annuity
We will make periodic payments until the death of the person on whose
life Benefit Payments are based. The first payment will be paid as of
the first day of the initial Payment Interval. The Option D Table
applies to this Option.
<PAGE>
Option E Any Other Form
We will make periodic payments in any other form of settlement option
which is acceptable to us at the time of election.
Settlement Option Tables
The Option Tables show the payments we will make at sample Payment Intervals for
each $1,000 applied at the guaranteed interest rate. Amounts may vary with the
Payment Interval and the age of the person on whose life Benefit Payments are
based.
<PAGE>
<TABLE>
<CAPTION>
OPTION A TABLE - INCOME FOR A FIXED PERIOD Payments
for fixed number of years for each $1,000 applied.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
Terms of Semi-Annual Terms of Semi-Annual
Payments Annual Quarterly Monthly Payments Annual Quarterly Monthly
- -----------------------------------------------------------------------------------------------------------------
Years Years
6 184.60 91.62 45.64 15.18 11 108.08 53.64 26.72 8.88
7 160.51 79.66 39.68 13.20 12 100.46 49.86 24.84 8.26
8 142.46 70.70 35.22 11.71 13 94.03 46.67 23.25 7.73
9 128.43 63.74 31.75 10.56 14 88.53 43.94 21.89 7.28
10 117.23 58.18 28.98 9.64 15 83.77 41.57 20.71 6.89
- -----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Terms of Semi-Annual
Payments Annual Quarterly Monthly
- ---------------------------------------------------------------------------------------------------------------------------------
Years
16 79.61 39.51 19.68 6.54
17 75.95 37.70 18.78 6.24
18 72.71 36.09 17.98 5.98
19 69.81 34.65 17.26 5.74
20 67.22 33.36 16.62 5.53
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
OPTION B TABLE - LIFE ANNUITY
With Payments For At Least A Fixed Period
-------- ------------- ------------ ------------- -------------
60 Months 120 Months 180 Months 240 Months
-------- ------------- ------------ ------------- -------------
Age
-------- ------------- ------------ ------------- -------------
55 $4.55 $4.51 $4.44 $4.33
56 4.65 4.61 4.52 4.39
57 4.76 4.71 4.61 4.46
58 4.87 4.81 4.70 4.53
59 4.99 4.92 4.79 4.60
60 5.12 5.04 4.89 4.67
61 5.25 5.16 4.99 4.74
62 5.40 5.29 5.09 4.81
63 5.55 5.42 5.19 4.87
64 5.72 5.56 5.30 4.94
65 5.89 5.71 5.40 5.00
66 6.08 5.86 5.51 5.06
67 6.27 6.02 5.62 5.11
68 6.48 6.19 5.72 5.17
69 6.71 6.36 5.83 5.22
70 6.95 6.54 5.93 5.26
71 7.20 6.72 6.03 5.30
72 7.46 6.90 6.12 5.34
73 7.75 7.08 6.21 5.37
74 8.04 7.27 6.30 5.40
-------- ------------- ------------ ------------- -------------
<PAGE>
<TABLE>
<CAPTION>
OPTION C TABLE - JOINT AND ONE-HALF SURVIVOR ANNUITY
Monthly payments for each $1,000 of proceeds by ages of persons
named.*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------ ------------------------------------------------------------------------------------
Secondary Age
Primary Age
60 61 62 63 64 65 66 67 68 69 70
60 4.73 $4.75 $4.78 $4.80 $4.83 $4.85 $4.87 $4.89 $4.92 $4.93 $4.95
61 4.81 4.84 4.87 4.90 4.92 4.95 4.97 5.00 5.02 5.04 5.06
62 4.90 4.93 4.96 4.99 5.02 5.05 5.08 5.11 5.13 5.16 5.18
63 4.99 5.03 5.06 5.09 5.13 5.16 5.19 5.22 5.25 5.28 5.30
64 5.09 5.12 5.16 5.20 5.23 5.27 5.30 5.34 5.37 5.40 5.43
65 5.18 5.22 5.26 5.31 5.35 5.38 5.42 5.46 5.49 5.53 5.56
66 5.28 5.33 5.37 5.42 5.46 5.50 5.54 5.58 5.62 5.66 5.70
67 5.38 5.43 5.48 5.53 5.58 5.62 5.67 5.72 5.76 5.80 5.84
68 5.49 5.54 5.59 5.65 5.70 5.75 5.80 5.85 5.90 5.95 5.99
69 5.60 5.65 5.71 5.77 5.82 5.88 5.93 5.99 6.04 6.10 6.15
70 5.71 5.77 5.83 5.89 5.95 6.01 6.07 6.13 6.19 6.25 6.31
- ------------ ------ ------- ------- ------- ------ ------- ------- ------- ------- ------ -------
</TABLE>
*Payments after the death of the Primary Payee will be one-half (1/2) of the
amount shown.
<PAGE>
OPTION D TABLE - LIFE ANNUITY Monthly payments
for each $1,000 applied.
------------------------ ---------------------
Age
------------------------ ---------------------
55 $4.65
56 4.67
57 4.77
58 4.89
59 5.01
60 5.14
61 5.28
62 5.43
63 5.59
64 5.76
65 5.95
66 6.14
67 6.35
68 6.58
69 6.82
70 7.08
71 7.36
72 7.66
73 7.98
74 8.33
------------------------ ---------------------
<PAGE>
Group Flexible Premium Deferred Variable Annuity Contract
Nonparticipating - No Dividends
Item 4(cc)
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.
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.
Item 4(dd)
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.
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.
Item 4(ee)
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.
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.
