ANNUITY INVESTORS VARIABLE ACCOUNT B
485APOS, 1999-02-26
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<PAGE>


   
As filed with the Securities and Exchange Commission on February 26, 1999
                                                            File No. 333-19725
                                                            File No. 811-08017
    
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
                                   FORM N-4
         REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ( )
                       Pre-effective Amendment No. ( )
   
                     Post-effective Amendment No. 5 ( X )
                                    and/or
    
                 REGISTRATION STATEMENT UNDER THE INVESTMENT
                           COMPANY ACT OF 1940 ( )
   
                       Pre-effective Amendment No. ( )
                  Post-effective Amendment No. 9  ( 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 NavigatorSERVICE MARK)


                   Showing Location in Part A (Prospectus),
 Part B (Statement of Additional Information) and Part C (Other Information)
          of Registration Statement Information Required by Form N-4


                                    PART A


      Item of Form N-4                          Prospectus Caption
 1. Cover Page............................    Cover Page

 2. Definitions...........................    Definitions, Glossary of
                                              Financial Terms
 3. Synopsis..............................    Overview

 4. Condensed Financial Information

    (a)   Accumulation Unit Values........    Condensed Financial Information

    (b)   Performance Data................    Performance Information

    (c)   Financial Statements............    Financial Statements

 5. General Description of Registrant,
    Depositor and Portfolio
    Companies
    (a)   Depositor.......................    Annuity Investors Life Insurance
                                              CompanyREGISTERED
    (b)   Registrant......................    The Separate Account

    (c)   Portfolio Companies.............    The Portfolios

    (d)   Portfolio Prospectuses..........    The Portfolios

    (e)   Voting Rights...................    Voting Rights

6.  Deductions and Expenses
    (a)   General.........................    Charges and Deductions

    (b)   Sales Load %....................    Contingent Deferred Sales Charge

    (c)   Special Purchase Plan...........    Contingent Deferred Sales Charge

    (d)   Commissions.....................    AAG Securities, Inc.

<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...................    (Prospectus) Contingent Deferred
                                              Sales Charge

20. Underwriters..........................    AAG Securities, Inc.

21. Calculation of Performance Data
    (a)   Money Market Funded Sub-Accounts    Money Market Sub-Account
                                              Standardized Yield
                                              Calculation
    (b)   Other Sub-Accounts..............    Not Applicable

22. Annuity Payments......................    (Prospectus) Fixed Dollar
                                              Benefit; Variable Dollar Benefit; 
                                              (SAI) Benefit Units--Transfer 
                                              Formulas

23. Financial Statements..................    Financial Statements




<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 INVESTORS LIFE INSURANCE COMPANYREGISTERED
ANNUITY INVESTORSREGISTERED VARIABLE ACCOUNT B
PROSPECTUS for
The Commodore NavigatorSERVICE MARK
Individual and Group Flexible Premium Deferred Annuities
                                                                   May 1, 1999

This  prospectus  describes The Commodore  NavigatorSERVICE  MARK individual and
group flexible  premium deferred annuity  contracts (the  "Contracts").  Annuity
Investors Life Insurance  CompanyREGISTERED (the "Company") is the issuer of the
Contracts.  The Contracts are available for tax-qualified and  non-tax-qualified
annuity purchases.  All Contracts qualify for tax-deferred  treatment during the
Accumulation  Period. The tax treatment of annuities is discussed in the Federal
Tax Matters section of this prospectus.

   
The Contracts  offer both variable and fixed  investment  options.  The variable
investment   options   under  the   Contracts   are   Sub-Accounts   of  Annuity
InvestorsREGISTERED  Variable Account B (the "Separate Account").  The Contracts
currently  offer 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 Trust Fund (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
<PAGE>


This prospectus  includes  information  you should know before  investing in The
Commodore  Navigator.  This  prospectus  is not  complete  without  the  current
prospectuses  for the Portfolios.  Please keep this prospectus and the Portfolio
prospectuses for future reference.

A  statement  of  additional  information,  dated  May 1,  1999,  contains  more
information about the Separate Account and the Contracts.  The Company filed the
statement of additional information with the Securities and Exchange Commission.
It is part of this prospectus.  For a free copy, complete and return the form on
page ____ of this  prospectus,  or call the Company at  1-800-789-6771.  You may
also  access  the  statement  of  additional  information  (as well as all other
documents filed with the Securities and Exchange  Commission with respect to the
Contracts,  the Separate  Account or the Company) at the Securities and Exchange
Commission's  Web  site:  http://www.sec.gov.  The  table  of  contents  for the
statement  of  additional  information  is  printed  on the  last  page  of this
prospectus.

The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus.  Any
representation to the contrary is a criminal offense.

- --------------------------------------------------------------------------------
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
  Enhanced Contracts.........................................................10
CONDENSED FINANCIAL INFORMATION..............................................13
  Financial Statements.......................................................14
  Performance Information....................................................14
    Yield Data...............................................................14
    Total Return Data........................................................14
    Other Performance Measures...............................................15
THE PORTFOLIOS...............................................................16
  Janus Aspen Series.........................................................16
  Dreyfus Portfolios.........................................................18
  Strong Portfolios..........................................................19
  BT Insurance Funds Trust...................................................19
  INVESCO Variable Investment Funds, Inc.....................................19
  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..............................................................23
ANNUITY INVESTORS LIFE INSURANCE COMPANYREGISTERED...........................24
THE SEPARATE ACCOUNT.........................................................24
AAG SECURITIES, INC..........................................................24
CHARGES AND DEDUCTIONS.......................................................26
  Charges and Deductions By the Company......................................26
    Contingent Deferred Sales Charge ("CDSC")................................26
    Contract Maintenance Fee.................................................27
    Transfer Fee.............................................................27
    Administration Charge....................................................27
    Mortality and Expense Risk Charge........................................28
   Income Benefit Rider Charge...............................................28
    Premium Taxes............................................................28
    Discretionary Waivers of Charges.........................................28
  Expenses of the Portfolios.................................................28
THE CONTRACTS................................................................30
  Right to Cancel............................................................30
  Persons With Rights Under a Contract.......................................30
                                            -2-
<PAGE>

ACCUMULATION PERIOD..........................................................31
  Account Statements.........................................................31
  Account Value..............................................................31
  Purchase Payments..........................................................32
  Investment Options--Allocations............................................32
  Transfers..................................................................33
  Surrenders.................................................................35
  Contract Loans.............................................................36
  Termination................................................................36
BENEFIT PAYMENT PERIOD.......................................................37
  Annuity Benefit............................................................37
  Death Benefit..............................................................37
  Settlement Options.........................................................38
    Form of Settlement Option................................................38
    Calculation of Fixed Dollar Benefit Payments.............................39
    Calculation of Variable Dollar Benefit Payments..........................40
  Income Benefit Rider.......................................................40
FEDERAL TAX MATTERS..........................................................42
  Tax Deferral On Annuities..................................................42
  Tax-Qualified Plans........................................................43
    Individual Retirement Annuities..........................................43
    Roth IRAs................................................................43
    Tax-Sheltered Annuities..................................................43
    Texas Optional Retirement Program........................................43
    Pension and Profit Sharing Plans.........................................43
    Governmental Deferred Compensation Plans.................................43
  Nonqualified Deferred Compensation Plans...................................44
  Summary of Income Tax Rules................................................45
GLOSSARY OF FINANCIAL TERMS..................................................46
THE REGISTRATION STATEMENT...................................................47
OTHER INFORMATION............................................................47
  Year 2000..................................................................47
  Legal Proceedings..........................................................47
STATEMENT OF ADDITIONAL INFORMATION..........................................48
    

                                            -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?  A  contingent
deferred sales charge ("CDSC") may apply to amounts surrendered depending on the
timing and amount of the  surrender.  The maximum  CDSC is 7% for each  purchase
payment.  The CDSC  percentage  decreases by 1% annually to 0% after seven years
from the date of receipt of each purchase payment.  Surrender procedures and the
CDSC are  described  in the  Surrenders  section  beginning on page ____ of this
prospectus.  A  penalty  tax may  also be  imposed  at the  time of a  surrender
depending on your age and other circumstances of the surrender. Tax consequences
of a surrender are described in the Federal Tax Matters  section on page ____ of
this  prospectus.  The  right  to  surrender  may be  restricted  under  certain
tax-qualified plans.

What Other Charges and  Deductions  Apply to the Contract?  Other than the CDSC,
the Company  will charge the fees and charges  listed  below  unless the Company
waives the fee or charge as  discussed  in the  Charges and  Deductions  section
beginning on page ___ of this prospectus: o a transfer fee for certain transfers
between  investment  options;  

o      an annual  contract  maintenance  fee,  which is  assessed  only  against
       investments in the Sub-Accounts;
   
o      an annual  Income  Benefit  Rider charge if the Income  Benefit  Rider is
       issued with the Contract;
    
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
- ------------------------------------------------------------------------------
Owner Transaction Expenses
   
<TABLE>
<S>                                                                                <C>             

Maximum Contingent  Deferred Sales Charge (applies to purchase payments only)        7%
Transfer Fee  (applies to  transfers  in excess of 12 in any contract  year)         $25
Annual Contract Maintenance Fee (not assessed against fixed account options)         $30
Annual Income  Benefit Rider Charge (as a percentage of greater of Account Value    .30%
or Income Benefit Value)
</TABLE>

    

Separate Account Annual Expenses
   
(as a  percentage  of  the  average  value  of  the  owner's  interest  in the
Sub-Accounts)
    
<TABLE>
<CAPTION>
                                                                                              Enhanced
                                                         Standard       Enhanced          Contracts with
                                                         Contracts     Contracts          Administration
                                                                                          Charge Waived
<S>                                                       <C>            <C>                 <C>    

Mortality and Expense Risk Charge                          1.25%          0.95%               0.95%
Administration Charge                                      0.15%          0.15%               0.00%
                                                           -----          -----               -----
Total Separate Account Annual Expenses                     1.40%          1.10%               0.95%
</TABLE>

   
Portfolio Annual Expenses for Year Ended 12/31/981
(as a percentage of Portfolio average net assets)
    
<TABLE>
 <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-EAFEREGISTERED 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>
                                            -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.  Fees
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-EAFEREGISTERED 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-EAFEREGISTERED 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>
<S>                                                            <C>                                <C>    

Enhanced Contracts                                              Example #1--Assuming Surrender     Example #2--Assuming No Surrender

                                                                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-EAFEREGISTERED 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>

                                            -9-
<PAGE>



<TABLE>
<CAPTION>
<S>                                                            <C>                                <C>
Enhanced Contracts with Administration Charge Waived            Example #1--Assuming Surrender     Example #2--Assuming No Surrender

                                                                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-EAFEREGISTERED 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>

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 do not
include charges for premium taxes.
    

                                           -10-
<PAGE>

<TABLE>
<CAPTION>

   
CONDENSED FINANCIAL INFORMATION
- -----------------------------------------------------------------------------------------------------------------------------------
<S>             <C>                                              <C>             <C>                <C>              <C>    

                 Sub-Account                                         Standard Contracts                 Enhanced Contracts
                                                                  12/31/97         12/31/98          12/31/97         12/31/98
- ---------------- -------------------------------------------- ----------------- ---------------- ----------------- ----------------
Janus            Aggressive Growth Portfolio
Aspen                     Accumulation Unit Value                 10.723950        14.199318         10.738659        14.260947
Series                    Accumulation Units Outstanding          2,830.076       53,896.345             0.000           36.621
                 -------------------------------------------- ----------------- ---------------- ----------------- ----------------
                 Worldwide Growth Portfolio
                          Accumulation Unit Value                  9.935860        12.632936          9.949496        12.687776
                          Accumulation Units Outstanding         56,665.753      402,131.168             0.000          123.659
                 -------------------------------------------- ----------------- ---------------- ----------------- ----------------
                 Balanced Portfolio
                          Accumulation Unit Value                 10.604609        14.043929         10.619159        14.104892
                          Accumulation Units Outstanding         30,519.754      373,285.807             0.000          214.770
                 -------------------------------------------- ----------------- ---------------- ----------------- ----------------
                 Growth Portfolio
                          Accumulation Unit Value                 10.239960        13.699715         10.254006        13.759186
                          Accumulation Units Outstanding         32,737.591      172,190.630             0.000           84.318
                 -------------------------------------------- ----------------- ---------------- ----------------- ----------------
                 International Growth Portfolio
                          Accumulation Unit Value                  9.735841        11.256365          9.749214        11.305246
                          Accumulation Units Outstanding         12,541.039       45,382.775             0.000           58.950
                 -------------------------------------------- ----------------- ---------------- ----------------- ----------------
                 Capital Appreciation Portfolio
                           Accumulation Unit Value                      N/A              N/A               N/A              N/A
                           Accumulation Units Outstanding               N/A              N/A               N/A              N/A
- ------------------------------------------------------------ ----------------- ---------------- ----------------- ----------------
Dreyfus          Capital Appreciation Portfolio
Variable                  Accumulation Unit Value                 10.103905        12.975443         10.117776        13.031774
Investment                Accumulation Units Outstanding         18,347.666      170,523.015             0.000          100.415
Fund             -------------------------------------------- ----------------- ---------------- ----------------- ----------------
                 Money Market Portfolio
                          Accumulation Unit Value                  1.016499         1.050876          1.017876         1.055214
                          Accumulation Units Outstanding              0.000      658,981.650             0.000          555.360
                 -------------------------------------------- ----------------- ---------------- ----------------- ----------------
                 Growth and Income Portfolio
                          Accumulation Unit Value                 10.196538        11.243790         10.210527        11.292611
                          Accumulation Units Outstanding         32,231.762      159,409.837             0.000            5.049
                 -------------------------------------------- ----------------- ---------------- ----------------- ----------------
                 Small Cap Portfolio
                          Accumulation Unit Value                 10.362314         9.867472         10.376538         9.910354
                          Accumulation Units Outstanding         41,359.506      171,968.905             0.000           14.492
- ------------------------------------------------------------- ----------------- ---------------- ----------------- ----------------
The Dreyfus Socially Responsible Growth Fund, Inc.
                          Accumulation Unit Value                 10.320883        13.169143         10.335055        13.226328
                          Accumulation Units Outstanding         26,332.500      140,614.024             0.000           80.398
- ------------------------------------------------------------- ----------------- ---------------- ----------------- ----------------
Dreyfus Stock Index Fund
                          Accumulation Unit Value                 10.479569        13.250646         10.493943        13.308166
                          Accumulation Units Outstanding         69,510.645      779,485.606             0.000           56.321
- ------------------------------------------------------------- ----------------- ---------------- ----------------- ----------------
Strong Opportunity Fund II, Inc.
                          Accumulation Unit Value                 10.727356        12.012034         10.742083        12.064227
                          Accumulation Units Outstanding          6,416.208       72,644.387             0.000           15.156
- ------------------------------------------------------------- ----------------- ---------------- ----------------- ----------------
Strong Variable Insurance Funds, Inc.-Strong Growth Fund II
                          Accumulation Unit Value                 10.707133        13.587521         10.721828        13.646505
                          Accumulation Units Outstanding          2,147.556       33,197.715             0.000            9.046
- ---------------- -------------------------------------------- ----------------- ---------------- ----------------- ----------------
BT Insurance     EAFE REGISTERED Equity Index Fund
Funds Trust                Accumulation Unit Value                      N/A              N/A               N/A              N/A
                           Accumulation Units Outstanding               N/A              N/A               N/A              N/A
                 -------------------------------------------- ----------------- ---------------- ----------------- ----------------
                 Equity 500 Index Fund
                           Accumulation Unit Value                      N/A              N/A               N/A              N/A
                           Accumulation Units Outstanding               N/A              N/A               N/A              N/A
                 -------------------------------------------- ----------------- ---------------- ----------------- ----------------
                 Small Cap Index Fund
                           Accumulation Unit Value                      N/A              N/A               N/A              N/A
                           Accumulation Units Outstanding               N/A              N/A               N/A              N/A
- -------------------------------------------------------------- ----------------- ---------------- ----------------- ----------------
INVESCO          Industrial Income Portfolio
Variable                  Accumulation Unit Value                 10.659157        12.120155         10.673778        12.172796
Investment                Accumulation Units Outstanding         33,269.953      200,541.938             0.000          163.123
Funds, Inc.      -------------------------------------------- ----------------- ---------------- ----------------- ----------------
                 Total Return Portfolio
                          Accumulation Unit Value                 10.503108        11.348675         10.517508        11.397954
                          Accumulation Units Outstanding         14,641.934      154,762.526             0.000          111.314
                 -------------------------------------------- ----------------- ---------------- ----------------- ----------------
                 High Yield Portfolio
                          Accumulation Unit Value                 10.687084        10.689459         10.701757        10.735898
                          Accumulation Units Outstanding         10,260.821       70,047.913             0.000            7.556
- ------------------------------------------------------------ ----------------- ---------------- ----------------- ----------------
                                           -11-
<PAGE>
- ------------------------------------------------------------ ----------------- ---------------- ----------------- ----------------

Morgan           Mid Cap Value Portfolio
Stanley                   Accumulation Unit Value                 11.113227        12.705082         11.128478        12.760268
Dean Witter               Accumulation Units Outstanding         16,674.966      111,076.120             0.000           15.684
Universal        -------------------------------------------- ----------------- ---------------- ----------------- ----------------
Funds, Inc.      Value Portfolio
                          Accumulation Unit Value                 10.204064         9.848411         10.218060         9.891198
                          Accumulation Units Outstanding          9,944.401       34,212.111             0.000           23.284
                 -------------------------------------------- ----------------- ---------------- ----------------- ----------------
                 Fixed Income Portfolio
                          Accumulation Unit Value                 10.412276        11.079965         10.426565        11.128092
                          Accumulation Units Outstanding              4.653       46,348.096             0.000           30.906
                 -------------------------------------------- ----------------- ---------------- ----------------- ----------------
                 U.S. Real Estate Portfolio
                          Accumulation Unit Value                 11.101269         9.758808         11.116503         9.801228
                          Accumulation Units Outstanding          7,200.060       43,786.457             0.000           10.564
                 -------------------------------------------- ----------------- ---------------- ----------------- ----------------
                 Emerging Markets Equity Portfolio
                          Accumulation Unit Value                  7.911559         5.915866          7.922446         5.941609
                          Accumulation Units Outstanding          9,042.956       30,255.642             0.000            0.000
 ------------------------------------------------------------ ----------------- ---------------- ----------------- ----------------
 PBHG            
 Insurance       PBHG Growth II Portfolio
 Series                   Accumulation Unit Value                  9.511124        10.147606          9.524184        10.191707
 Fund, Inc.               Accumulation Units Outstanding          6,195.935       24,618.770             0.000            6.572
       -------------------------------------------- ----------------- ---------------- ----------------- ----------------
<PAGE>

PBHG Large Cap Growth Portfolio
                          Accumulation Unit Value                 10.150555        13.076352         10.164489        13.133125
                          Accumulation Units Outstanding         11,415.131       31,474.961             0.000            0.000
                 -------------------------------------------- ----------------- ---------------- ----------------- ----------------
                 PBHG Technology & Communications Portfolio
                          Accumulation Unit Value                  9.057045        11.808346          9.069487        11.859648
                          Accumulation Units Outstanding         20,974.008       65,820.143             0.000            2.516
- ------------------------------------------------------------- ----------------- ---------------- ----------------- ----------------
The Timothy Plan Variable Series
                          Accumulation Unit Value                       N/A        10.283942               N/A        10.304332
                          Accumulation Units Outstanding                N/A       29,293.327               N/A           17.653


</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. No Enhanced Contracts with Administration  Charge waived were issued as of
December 31, 1998.

    

Financial Statements
The financial  statements and reports of independent  public accountants for the
Company and for the Separate Account are included in the statement of additional
information.
                                           -12-
<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.  The  contingent  deferred  sales  charge  ("CDSC")
reflected in  standardized  total return is the percentage CDSC that would apply
at the end of the period presented assuming the purchase payment was received on
the first day of the period presented. "Non-standardized" total return data does
not reflect the  deduction of CDSCs and contract  maintenance  fees.  Cumulative
total return data is currently presented only in non-standardized form.

Total  return  data that does not  reflect  the CDSC and other  charges  will be
higher than the total return realized by an investor who incurs the charges.

"Average annual total return" is either  hypothetical or actual return data that
reflects performance of a Sub-Account for a one year period or for an average of
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.

                                           -13-
<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 by
the Separate  Account and  reflected  in  Accumulation  Unit  Values.  Portfolio
dividends and net capital gains are not distributed to owners.

   
The Securities and Exchange  Commission does not supervise the management or the
investment  practices  and/or policies of any of the Portfolios.  The Portfolios
are  available  only through  insurance  company  separate  accounts and certain
qualified retirement plans. Though a Portfolio may have a name and/or investment
objectives  which are  similar to those of a  publicly  available  mutual  fund,
and/or may be managed by the same  investment  advisor  that  manages a publicly
available mutual fund, the performance of the Portfolio is entirely  independent
of the performance of any publicly  available  mutual fund.  Neither the Company
nor the Portfolios  make any  representations  or assurances that the investment
performance  of any  Portfolio  will be the same or  similar  to the  investment
performance of any publicly available mutual fund.
    


Janus Aspen Series

Advisor:                    Aggressive Growth Portfolio
Janus Capital Corporation   A  nondiversified  portfolio  that  seeks  long-term
                            growth of capital by  investing  primarily in common
                            stocks  with an  emphasis  on  securities  issued by
                            medium-sized companies.

Advisor:                    Worldwide Growth Portfolio
Janus Capital Corporation   A diversified  portfolio that seeks long-term growth
                            of capital by investing  primarily in common  stocks
                            of  foreign  and  domestic  issuers.   International
                            investing  may  present  special  risks,   including
                            currency   fluctuations  and  social  and  political
                            developments.  For further  discussion  of the risks
                            associated with international investing,  please see
                            the attached Janus Aspen Series prospectus.

Advisor:                    Balanced Portfolio
Janus Capital Corporation   A diversified  portfolio that seeks long-term growth
                            of capital balanced by current income. The Portfolio
                            normally  invests 40-60% of its assets in securities
                            selected  primarily  for their growth  potential and
                            40-60%  of  its   assets  in   securities   selected
                            primarily for their income potential.

Advisor:                    Growth Portfolio
Janus Capital Corporation   A diversified  portfolio that seeks long-term growth
                            of capital by investing  primarily in common stocks,
                            with an emphasis  on  companies  with larger  market
                            capitalizations.

Advisor:                    International Growth Portfolio
Janus Capital Corporation   A diversified  portfolio that seeks long-term growth
                            of capital by investing  primarily in common  stocks
                            of  foreign  issuers.  International  investing  may
                            present    special   risks,    including    currency
                            fluctuations and social and political  developments.
                            For further  discussion of the risks associated with
                            international  investing,  please  see the  attached
                            Janus Aspen Series prospectus.

   
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.
    

                                           -14-
<PAGE>

Dreyfus Portfolios

Advisor:                    Dreyfus     Variable     Investment     Fund-Capital
The Dreyfus Corporation     Appreciation Portfolio
                            The   Capital   Appreciation   Portfolio's   primary
                            investment objective is to provide long-term capital
Sub-Advisor:                growth  consistent with the preservation of capital.
Fayez Sarofim & Co.         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
                            to achieve  this goal by  investing  principally  in
Sub-Advisor:                common stocks, or securities convertible into common
NCM Capital Management      stock,  of  companies  which,  in the opinion of the
Group, Inc.                 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
The Dreyfus Corporation     The Dreyfus Stock Index Fund's investment  objective
                            is to provide  investment results that correspond to
                            the price and yield  performance of publicly  traded
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.

                                           -15-
<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  REGISTERED  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  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.
    
                                           -16-
<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
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.
    

                                           -17-
<PAGE>


   
Morgan Stanley Dean Witter Universal Funds, Inc.
    


Advisor:                    Mid Cap Value  Portfolio 
Miller Anderson &           The  Mid Cap  Value  Portfolio  seeks  above-average
Sherrerd, LLP (an           total  return  over a market  cycle of three to five
indirect wholly owned       years by investing in common stocks and other equity
subsidiary of Morgan        securities of issuers with equity capitalizations in
Stanley Dean Witter & Co.)  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 &           The investment  objective of the Value  Portfolio is
Sherrerd, LLP (an           to seek  above-average  total  return  over a market
indirect wholly owned       cycle of three to five years by investing  primarily
subsidiary of Morgan        in a  diversified  portfolio  of common  stocks  and
Stanley Dean Witter & Co.)  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 &           The   investment   objective  of  the  Fixed  Income
Sherrerd, LLP (an           Portfolio is to seek above-average total return over
indirect wholly owned       a market  cycle of three to five years by  investing
subsidiary of Morgan        primarily in a  diversified  portfolio of securities
Stanley Dean Witter & Co.)  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 subsidiary  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  Emerging  Markets  Equity  Portfolio The  investment
Investment Management Inc.  objective of the Emerging  Markets Equity  Portfolio
(a wholly owned subsidiary  is  long-term  capital   appreciation  by  investing
of Morgan Stanley Dean      primarily in equity  securities  of emerging  market
Witter & Co.)               country  issuers  with a focus on those in which the
                            adviser   believes  the  economies  are   developing
                            strongly and in which the markets are becoming  more
                            sophisticated.
    


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.


                                           -18-
<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.



                                           -19-

<PAGE>

ANNUITY INVESTORS LIFE INSURANCE COMPANYREGISTERED
- ------------------------------------------------------------------------------
Annuity  Investors Life  Insurance  Company(R)  (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
Company(R)  which is a wholly owned  subsidiary  of American  Annuity  Group(R),
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.


                                           -20-
<PAGE>

CHARGES AND DEDUCTIONS
- ------------------------------------------------------------------------------

Charges and Deductions By the Company
There are two types of charges and deductions by the Company.  There are charges
assessed  to the  Contract  which  are  reflected  in the  Account  Value of the
Contract,  but not in Accumulation  Unit Values (or Benefit Unit Values).  These
charges  are  the  contingent   deferred  sales  charge,   the  annual  contract
maintenance  fee,  premium taxes where  applicable and transfer fees.  There are
also charges assessed against the Separate Account.  These charges are reflected
in the Accumulation  Unit Values (and Benefit Unit Values) of the  Sub-Accounts.
These charges are the  mortality and expense risk charge and the  administration
charge.

The  Company  will never  charge  more to a Contract  than the fees and  charges
described  below,  even if its actual expenses exceed the total fees and charges
collected.  If the fees and charges  collected by the Company  exceed the actual
expenses  it incurs,  the excess  will be profit to the  Company and will not be
returned to owners.

Notwithstanding the above, the Company reserves the right to increase the amount
of the  transfer  fee in the  future,  and/or to charge  fees for the  automatic
transfer  programs  described in the Transfers  section beginning on page ___ of
this prospectus,  and/or for the systematic  withdrawal program described in the
Surrenders  section  on  page  ____  of  this  prospectus,  if in the  Company's
discretion,  it  determines  such  charges are  necessary to offset the costs of
administering transfers or systematic withdrawals.

Contingent Deferred Sales Charge ("CDSC")

Purpose of Charge        Offset expenses  incurred by the Company in the sale of
                         the Contracts,  including commissions paid and costs of
                         sales literature.

Amount of Charge         Up to 7% of each purchase  payment  depending on number
                         of years elapsed since receipt of the purchase payment.

=============================== ===== ===== ===== ===== ===== ===== ===== =====
Number of full years elapsed
between date of receipt of       0     1     2     3     4     5     6    7
purchase payment and date                                                 or
request for surrender received                                            more
=============================== ===== ===== ===== ===== ===== ===== ===== =====
CDSC as a percentage of
purchase payment surrendered     7%    6%    5%    4%    3%    2%    1%    0%
=============================== ===== ===== ===== ===== ===== ===== ===== =====


When Assessed            On  partial or full  surrenders  of  purchase  payments
                         during Accumulation Period.

Assessed Against What    Purchase   payments   only,   not  earnings.   See  the
                         Surrenders  section of this  prospectus for information
                         on  order  of   withdrawal  of  earnings  and  purchase
                         payments.

Waivers             o    Free withdrawal  privilege.  See the Surrenders section
                         for information.
                         
                    o    In the Company's  discretion  where the Company  incurs
                         reduced sales and servicing expenses.
                         
                    o    Upon  separation  from service if Contract  issued with
                         employer  plan  endorsement  or  deferred  compensation
                         endorsement.
                         
                    o    If  Contract  is issued  with a tax  sheltered  annuity
                         endorsement (and without an employer plan endorsement):
                         (i) upon  separation from service if owner has attained
                         age 55 and  Contract  has  been in  force  for at least
                         seven years;  or (ii) after  Contract has been in force
                         fifteen years or more.
                         
                    o    Long term care waiver rider. See the Surrenders section
                         for information.
                        
                    o    If the Social Security Administration  determines after
                         the Contract is issued that the owner is  "disabled" as
                         that term is  defined  in the  Social  Security  Act of
                         1935, as amended.
                         
                    o    Successor  Owner  endorsement.  See the  Account  Value
                         section for information.
                         
                    o    Where required to satisfy state law.
                                           -21-
<PAGE>

Contract Maintenance Fee

Purpose of Charge        Offset  expenses  incurred in issuing the Contracts and
                         in maintaining the Contracts and the Separate Account.

Amount of Charge         $30.00 per year.

When Assessed            During the  Accumulation  Period the charge is deducted
                         on  each  anniversary  of  the  effective  date  of the
                         Contract,  and at time of full  surrender.  During  the
                         Benefit  Payment  Period a  portion  of the  charge  is
                         deducted from each variable dollar benefit payment.

Assessed Against What    Amounts  invested  in  the  Sub-Accounts.   During  the
                         Accumulation  Period,  the charge is deducted  pro-rata
                         from the  Sub-Accounts  in which  the  Contract  has an
                         interest on the date of the charge.  During the Benefit
                         Payment Period, a pro-rata portion of the annual charge
                         is deducted from each benefit payment from the variable
                         account.  The charge is not assessed  against the fixed
                         account options.

Waivers             o    During  Accumulation  Period if the Account Value is at
                         least  $40,000  on the date of the  charge  (individual
                         contracts only).
                         
                    o    During Benefit  Payment Period if the amount applied to
                         a  variable   dollar   benefit  is  at  least   $40,000
                         (individual contracts only).
                        
                    o    In the Company's  discretion  where the Company  incurs
                         reduced sales and servicing expenses.
                         
                    o    During Benefit Payment Period where required to satisfy
                         state law.


Transfer Fee

Purpose of Charge        Offset cost incurred in administering the Contracts.

Amount of Charge         $25 for each  transfer in excess of 12 in any  contract
                         year.  The  Company  reserves  the right to change  the
                         amount of this charge at any time.

When Assessed            During Accumulation Period.

Assessed Against What    Deducted from amount transferred.

Waivers                  Currently, the transfer fee does not apply to transfers
                         associated  with the dollar  cost  averaging,  interest
                         sweep and  portfolio  rebalancing  programs.  Transfers
                         associated  with these programs do not count toward the
                         12 free  transfers  permitted in a contract  year.  The
                         Company  reserves the right to eliminate this waiver at
                         any time.


Administration Charge

Purpose of Charge        Offset expenses incurred in administering the Contracts
                         and the Separate Account.

Amount of Charge         Daily  charge  equal to .000411% of the daily Net Asset
                         Value for each  Sub-Account,  which  corresponds  to an
                         annual effective rate of 0.15%.

When Assessed            During the Accumulation Period and during the
                         Benefit  Payment Period if a variable dollar benefit is
                         elected.

Assessed Against What    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.


                                           -22-

<PAGE>
Mortality and Expense Risk Charge

Purpose of Charge        Compensation for bearing certain  mortality and expense
                         risks under the  Contract.  Mortality  risks arise from
                         the Company's obligation to pay benefit payments during
                         the  Benefit  Payment  Period  and  to  pay  the  death
                         benefit. The expense risk assumed by the Company is the
                         risk   that   the   Company's    actual   expenses   in
                         administering  the Contracts  and the Separate  Account
                         will exceed the amount  recovered  through the contract
                         maintenance  fees,  transfer  fees  and  administration
                         charges.

Amount of Charge         Daily  charge  equal to .003403% of the daily Net Asset
                         Value for each  Sub-Account,  which  corresponds  to an
                         effective annual rate of 1.25%.  The Company  estimates
                         that the  mortality  risk  component  of this charge is
                         0.75%  and  the  expense   risk   component  is  0.50%.
                         Contracts  with the 1.25%  mortality  and expense  risk
                         charge are referred to as "Standard Contracts."

When Assessed            During the Accumulation  Period, and during the Benefit
                         Payment Period if a variable dollar benefit is elected.

Assessed Against What    Amounts  invested  in the  Sub-Accounts.  Not  assessed
                         against the fixed account options.

Waivers                  When the  Company  expects to incur  reduced  sales and
                         servicing  expenses,  it may  issue a  Contract  with a
                         reduced  mortality  and  expense  risk  charge.   These
                         Contracts are referred to as "Enhanced  Contracts." The
                         mortality  and expense  risk  charge  under an Enhanced
                         Contract is a daily  charge of  0.002590%  of the daily
                         Net Asset Value for each Sub-Account, which corresponds
                         to an  effective  annual  rate of  0.95%.  The  Company
                         estimates  that for Enhanced  Contracts,  the mortality
                         risk  component of this charge is 0.75% and the expense
                         risk component is 0.20%.
   
Income Benefit Rider Charge

PurposeofCharge          Compensation  for  bearing  the risk  that the  benefit
                         payable under the Income  Benefit Rider is greater than
                         the benefit otherwise available under the Contract.

Amount of Charge         .30% of the Account Value or the Income  Benefit Value,
                         whichever is greater, or of the amount of the reduction
                         in  the  greater   value  in  the  case  of  a  partial
                         withdrawal.

When Assessed            On each  contract  anniversary,  on the Income  Benefit
                         Date, and on the date of a partial or full surrender of
                         the Contract, until the Rider terminates.

Assessed Against What    Charge  is  deducted  from  the  Account  Value  of the
                         Contract.

Waivers                  None.
    

Premium Taxes
Certain state and local governments  impose premium taxes. These taxes currently
range up to 5.0%  depending upon the  jurisdiction.  The Company will deduct any
applicable  premium taxes from the Account  Value either upon death,  surrender,
annuitization,  or at the time purchase  payments are made,  but no earlier than
when the Company incurs a tax liability under state law.

Discretionary Waivers of Charges
The Company will look at the  following  factors to determine if it will waive a
charge, in part or in full, due to reduced sales and servicing expenses: (1) the
size and type of the group to which sales are to be made;  (2) the total  amount
of purchase payments to be received;  and (3) any prior or existing relationship
with the Company.  The Company would expect to incur reduced sales and servicing
expenses in connection with Contracts  offered to employees of the Company,  its
subsidiaries and/or affiliates.  There may be other circumstances,  of which the
Company  is not  presently  aware,  which  could  result  in  reduced  sales and
servicing  expenses.  In no event  will the  Company  waive a charge  where such
waiver would be unfairly discriminatory to any person.

Expenses of the Portfolios
In  addition to charges  and  deductions  by the  Company,  there are  Portfolio
management  fees  and  administration   expenses  which  are  described  in  the
prospectus  and  statement of additional  information  for each  Portfolio.  The
actual  Portfolio  fees and expenses for the prior calendar year are included in
the Fee Table on page ___ of this prospectus.  Portfolio expenses, like Separate
Account  expenses,  are reflected in  Accumulation  Unit Values (or Benefit Unit
Values).
                                           -23-
<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.
                                           -24-
<PAGE>

ACCUMULATION PERIOD
- ------------------------------------------------------------------------------
Each Contract allows for an Accumulation  Period during which purchase  payments
are invested  according  to the owner's  instructions.  During the  Accumulation
Period,  the owner can control the allocation of investments  through  telephone
transfers or through the following  investment  programs offered by the Company:
dollar cost averaging,  portfolio rebalancing and interest sweep. These programs
and  telephone  transfer  procedures  are  described  in the  Transfers  section
beginning  on page ____ of this  prospectus.  The owner can access  the  Account
Value during the Accumulation Period through surrenders,  systematic withdrawal,
or contract  loans if available.  These  withdrawal  features are described more
fully in the Surrenders and Contract Loans sections on pages ___ and ___ of this
prospectus.

Account Statements
   
During  the  Accumulation  Period,  the  Company  will  provide  a report of the
Contract's  Account Value,  and any other  information  required by law at least
once each  contract  year The  Company  will  confirm  receipt  of any  purchase
payments  made after the initial  purchase  payment in quarterly  statements  of
account activity.
    

Account Value
   
The value of a Contract  during the  Accumulation  Period is  referred to as the
"Account  Value." The Account Value at any given time is the sum of: (1) amounts
invested  in the fixed  investment  options  plus the fixed  rate(s) of interest
earned  on those  amounts  as of that  time;  and (2) the  value of the  owner's
interest in the  Sub-Accounts as of that time. The value of the owner's interest
in  the  Sub-Accounts  at any  time  is  equal  to the  sum  of  the  number  of
Accumulation Units for each Sub-Account attributable to that Contract multiplied
by the Accumulation Unit Value for the applicable  Sub-Account at the end of the
preceding Valuation Period. The Account Value at any time is net of any charges,
deductions,  surrenders, and/or outstanding loans incurred prior to or as of the
end of that Valuation Period.
    

Accumulation Units
Amounts   allocated  or  transferred   to  a  Sub-Account   are  converted  into
Accumulation  Units. The number of Accumulation  Units credited is determined by
dividing the dollar amount directed to the Sub-Account by the Accumulation  Unit
Value for that  Sub-Account  as of the end of the Valuation  Period in which the
amount  allocated is received by the Company,  or as of the end of the Valuation
Period in which the transfer is made.

Accumulation Units will be canceled as of the end of the Valuation Period during
which one of the following events giving rise to cancellation occurs:

o      transfer from a Sub-Account
o      full or partial surrender from the Sub-Accounts
o      payment of a death benefit
o      application of the amounts in the Sub-Accounts to a settlement option
o      deduction of the contract maintenance fee
o      deduction of any transfer fee

Successor Owner Endorsement
If the  Contract  is  modified  by the  Successor  Owner  endorsement,  and  the
surviving  spouse of a deceased owner becomes a successor owner of the Contract,
the Account Value will be stepped-up to equal the death benefit which  otherwise
would have been payable,  as of what would have been the Death Benefit Valuation
Date.  In  addition,  contingent  deferred  sales  charges will be waived on the
entire stepped-up  Account Value as of that date, but will apply to any purchase
payments applied to the Contract after that date.

For purposes of  determining  what would have been the Death  Benefit  Valuation
Date, the election to become  successor  owner will be deemed to be instructions
as to the form of death benefit.  The election to become successor owner must be
made within one year of the date of the owner's death.

The Successor Owner endorsement may not be available in all States.

                                           -25-
<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:
<TABLE>
<CAPTION>
                                               Tax-Qualified          Non-Tax-Qualified
<S>                                           <C>                    <C>    
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Minimum single purchase payment                $2,000                 $5,000
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Minimum monthly under periodic payment program $50                    $100
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Minimum additional payments                    $50                    $50
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Maximum purchase payment                       $500,000 or Company    $500,000 or Company
                                               approval               approval
</TABLE>

The Company  reserves  the right to increase or decrease  the minimum  allowable
single purchase  payment or minimum  purchase  payment under a periodic  payment
program, or the minimum allowable additional purchase payment, at its discretion
and at any time, where permitted by law.

Each  purchase  payment  will be  applied  by the  Company  to the credit of the
owner's  account.  If the  application  form is in good order,  the Company will
apply the  initial  purchase  payment  to an  account  for the owner  within two
business days of receipt of the purchase payment. If the application form is not
in good order,  the Company  will  attempt to get the  application  form in good
order within five business days. If the application form is not in good order at
the end of this period,  the Company will inform the applicant of the reason for
the delay and that the purchase payment will be returned  immediately  unless he
or she  specifically  consents to the Company keeping the purchase payment until
the  application  form is in good order.  Once the  application  form is in good
order,  the purchase  payment will be applied to the owner's  account within two
business days.

   
Each additional  purchase  payment is credited to a Contract as of the Valuation
Date on which 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.  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:


<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   accumulation $10
account
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Minimum  allocation to fixed account guarantee $2,000
option                                         No amounts may be  allocated to a
                                               guarantee   period  option  which
                                               would  extend  beyond the owner's
                                               85th  birthday  or 5 years  after
                                               the   effective   date   of   the
                                               Contract, if later.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Allocation during right to cancel period      The  Company   may  require   that
                                              purchase  payment(s)  be allocated
                                              to the money market Sub-Account or
                                              to the fixed accumulation  account
                                              option  during the right to cancel
                                              period.
                                           -26-
<PAGE>

   
Interests in the fixed account options are not securities and are not registered
with the  Securities  and Exchange  Commission.  Amounts  allocated to the fixed
account  options will receive a stated rate of interest of at least 3% per year.
Amounts  allocated to the fixed  account  options and  interest  credited to the
fixed  account  options  are  guaranteed  by  the  Company.   Interests  in  the
Sub-Accounts  are  securities   registered  with  the  Securities  and  Exchange
Commission.  The owner  bears  the risk of  investment  gain or loss on  amounts
allocated to the Sub-Accounts.
    

Principal Guarantee Program
An owner may elect to have the Company  allocate a portion of a purchase payment
to the seven-year  guaranteed  interest rate option such that, at the end of the
seven-year  guarantee  period,  that account will grow to an amount equal to the
total  purchase  payment (so long as there are no  surrenders  or loans from the
Contract).  The Company determines the portion of the purchase payment that must
be allocated to the seven-year guarantee option such that, based on the interest
rate then in  effect,  that  account  will grow to equal the full  amount of the
purchase  payment after seven years.  The remainder of the purchase payment will
be allocated according to the owner's instructions. The minimum purchase payment
eligible for the principal guarantee program is $5,000.

Renewal of Fixed Account Guarantee Options
At the end of a  guarantee  period,  and for 30 days  preceding  the end of such
guarantee period,  the owner may elect to allocate the amount maturing to any of
the available investment options under the Contract.  If the owner does not make
a reallocation  election, the amount maturing will be allocated to the guarantee
period option with the same number of years as the period expiring,  or the next
shortest  period as may be required to comply with the restriction on allocation
to guarantee  period options as described in the Investment  Options-Allocations
section on page _____ of this  prospectus.  If a guarantee period is unavailable
due to this  restriction,  the amount  maturing  will be  allocated to the fixed
accumulation account option.

Transfers
   
During  the  Accumulation   Period,   an  owner  may  transfer  amounts  between
Sub-Accounts, among fixed account options, and/or between Sub-Accounts and fixed
account options.
    

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 option                          $500 or balance of fixed account option, if less
- -------------------------------------------------------------------- ---------------------------------------------------------------
- -------------------------------------------------------------------- ---------------------------------------------------------------
Minimum transfer to fixed account guarantee option                  $2,000
                                                                    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  other              During any contract year, 20% of the fixed account option's
than  fixed account guarantee option which is maturing              value as of the most recent contract anniversary.
- -------------------------------------------------------------------- ---------------------------------------------------------------
- -------------------------------------------------------------------- ---------------------------------------------------------------
Transfers from fixed account options                                -    May not be made prior to first contract anniversary.
                                                                    -    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.

                                           -27-
<PAGE>


Automatic Transfer Programs
During the  Accumulation  Period,  the  Company  offers the  automatic  transfer
services  described below. To enroll in one of these programs,  you will need to
complete  the  appropriate  authorization  form,  which you can obtain  from the
Company by calling 1-800-789-6771.

Currently,  the transfer fee does not apply to dollar cost averaging,  portfolio
rebalancing,  or interest sweep  transfers,  and transfers  under these programs
will not count toward the twelve transfers  permitted under the Contract without
a transfer fee charge.  However,  the Company reserves the right to impose a fee
in  such  amount  as  the  Company  may  then  determine  to be  reasonable  for
participation in automatic transfer programs.
<TABLE>
<CAPTION>
Service                 Description            Minimum Account        Limitations/Notes
                                               Requirements
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
<S>                    <C>                    <C>                    <C>    
Dollar Cost Averaging   Automatic transfers    Source of funds must   Dollar cost averaging
There are risks         from the money market  be at least $10,000.   transfers may not be
involved in switching   Sub-Account to any                            made to any of the
between investments     other Sub-Account(s),  Minimum transfer per   fixed account
available under the     or from the fixed      month is $500.  When   options.  The dollar
Contract.  Dollar cost  accumulation account   balance of source of   cost averaging
averaging requires      option to any          funds falls below      transfers will take
regular investment      Sub-Account(s), on a   $500, entire balance   place on the last
changes regardless of   monthly or quarterly   will be allocated      Valuation Date of
fluctuating price       basis.                 according to dollar    each calendar month
levels and does not                            cost averaging         or quarter as
guarantee profits or                           instructions.          requested by the
prevent losses in a                                                   owner.
declining market.  You
should consider your
financial ability to
continue dollar cost
averaging transfers
through periods of
changing price levels.
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------

Portfolio Rebalancing   Automatically          Minimum Account Value  Transfers will take
                        transfer amounts       of $10,000.            place on the last
                        between the                                   Valuation Date of
                        Sub-Accounts and the                          each calendar
                        fixed accumulation                            quarter.  Portfolio
                        account option to                             rebalancing will not
                        maintain the                                  be available if the
                        percentage                                    dollar cost averaging
                        allocations selected                          program or an
                        by the owner.                                 interest sweep from
                                                                      the fixed
                                                                      accumulation account
                                                                      option is being
                                                                      utilized.
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Interest Sweep          Automatic  transfers   Balance    of   each   Interest  sweep                  
                        of the  income  from   fixed account option   transfers  will take  
                        any  fixed   account   selected  must be at   place  on  the  last  
                        option(s)   to   any   least        $5,000.   Valuation  Date  of   
                        Sub-Account(s).        Maximum     transfer   each calendar quarter.
                                               from   each    fixed   
                                               account       option
                                               selected  is  20% of
                                               such  fixed  account
                                               option's  value  per
                                               year.        Amounts
                                               transferred    under
                                               the  interest  sweep
                                               program  will reduce
                                               the   20%    maximum
                                               transfer      amount
                                               otherwise allowed.  
</TABLE>
                                           -28-
<PAGE>

Telephone Transfers
An  owner  may  place a  request  for all or part  of the  Account  Value  to be
transferred by telephone.  All transfers must be in accordance with the terms of
the Contract.  Transfer  instructions  are currently  accepted on each Valuation
Date  between  9:30 a.m.  and 4:00 p.m.  Eastern  Time at (800)  789-6771.  Once
instructions  have  been  accepted,  they  may not be  rescinded;  however,  new
telephone instructions may be given the following day.

The Company will not be liable for complying with telephone  instructions  which
the Company reasonably  believes to be genuine, or for any loss, damage, cost or
expense in acting on such telephone  instructions.  The owner or person with the
right to control  payments  will bear the risk of such loss.  The  Company  will
employ  reasonable  procedures  to determine  that  telephone  instructions  are
genuine.  If the  Company  does not employ such  procedures,  the Company may be
liable  for  losses  due  to  unauthorized  or  fraudulent  instructions.  These
procedures may include, among others, tape recording telephone instructions.

Termination of Transfer Programs
The owner may terminate any of the automatic  transfer programs at any time, but
must give the Company at least 30 days notice to change any  automatic  transfer
instructions that are already in place. Termination and change instructions will
be accepted by telephone at (800) 789-6771.  The Company may terminate,  suspend
or modify any aspect of the transfer  programs  described  above  without  prior
notice to owners, as permitted by applicable law. The Company may also impose an
annual fee or increase  the current  annual fee, as  applicable,  for any of the
foregoing  services in such  amount(s)  as the Company may then  determine to be
reasonable for participation in the service.

Surrenders
An  owner  may  surrender  a  Contract  either  in full or in  part  during  the
Accumulation  Period.  A contingent  deferred sales charge ("CDSC") may apply on
surrender. The restrictions and charges on surrenders are as follows:
<TABLE>
<CAPTION>

                                                Tax-Qualified          Non-Tax-Qualified
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
<S>                                                              <C> 
Minimum amount of partial surrender                              $500
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Minimum remaining Account Value after partial                    $500
surrender
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Amount available for surrender (valued as of    Account Value less     Account Value less
end of Valuation Period in which request for    applicable CDSC,       applicable CDSC,
surrender is received by the Company)           subject to tax law or  subject to employer
                                                employer plan          plan restrictions on
                                                restrictions on        withdrawals
                                                withdrawals
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Tax penalty for early withdrawal                Up to 10% of Account Value before age 59 1/2
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Contract maintenance fee on full surrender      $30 (no CDSC applies)
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Contingent deferred sales charge ("CDSC")       Up to 7% of purchase payments
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Order of withdrawal for purposes of CDSC        First from accumulated earnings (no CDSC
(order may be different for tax purposes)       applies) and then from purchase payments on
                                                "first-in, first-out" basis (CDSC may apply)
   
</TABLE>

A full surrender will terminate the Contract.  Partial  surrenders are withdrawn
proportionally  from all  Sub-Accounts  and fixed  account  options in which the
Contract is invested on the date the Company  receives  the  surrender  request,
unless  the owner  requests  that the  surrender  be  withdrawn  from a specific
investment  option.  A surrender is effective on the Valuation Date during which
the Company  receives  the request for  surrender,  and will be processed at the
Accumulation  Unit  Value  for the end of the  Valuation  Period  in which  that
Valuation  Date occurs.  Payment of a  surrendered  amount may be delayed if the
amount  surrendered was paid to the Company by a check that has not yet cleared.
Surrenders from a fixed account option may be delayed for up to six months after
receipt of a  surrender  request as  allowed by state law.  Surrenders  from the
Sub-Accounts  may be delayed  during any period the New York Stock  Exchange  is
closed or trading is restricted,  or when the Securities and Exchange Commission
either:  1) determines  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.
    
                                           -29-
<PAGE>

Free Withdrawal Privilege
The Company will waive the CDSC on full or partial  surrenders  during the first
contract year, on an amount equal to not more than 10% of all purchase  payments
received.  During the second and  succeeding  contract  years,  the Company will
waive  the CDSC on an  amount  equal  to not  more  than  the  greater  of:  (a)
accumulated earnings (Account Value in excess of purchase payments);  or (b) 10%
of the Account Value as of the last contract anniversary.

If the free  withdrawal  privilege is not exercised  during a contract  year, it
does not carry over to the next contract year. The free withdrawal privilege may
not be available under some group Contracts.

Long Term Care Waiver Rider
If a Contract is modified by the Long Term Care Waiver Rider,  surrenders may be
made free of any CDSC if the owner has been  confined in a  qualifying  licensed
hospital or long-term  care facility for at least 90 days  beginning on or after
the first contract anniversary. This rider may not be available in all States.

Systematic Withdrawal
During the Accumulation  Period,  an owner may elect to  automatically  withdraw
money from the Contract.  The Account Value must be at least $10,000 in order to
make a systematic  withdrawal  election.  The minimum monthly amount that can be
withdrawn  is $100.  Systematic  withdrawals  will be subject to the  contingent
deferred  sales  charge to the  extent  the amount  withdrawn  exceeds  the free
withdrawal privilege.  The owner may begin or discontinue systematic withdrawals
at any time by request to the Company, but at least 30 days notice must be given
to change any systematic  withdrawal  instructions  that are currently in place.
The Company reserves the right to discontinue offering systematic withdrawals at
any time. Currently, the Company does not charge a fee for systematic withdrawal
services.  However,  the Company  reserves  the right to impose an annual fee in
such amount as the Company may then determine to be reasonable for participation
in the systematic withdrawal program.

Before  electing a  systematic  withdrawal  program,  you should  consult with a
financial advisor.  Systematic withdrawal is similar to annuitization,  but will
result in different  taxation of payments and  potentially  different  amount of
total payments over the life of the Contract than if annuitization were elected.

Contract Loans
The Company may make loans to owners of tax-qualified  Contracts. Any such loans
will be secured with an interest in the  Contract,  and the  collateral  for the
loan will be moved to the fixed  accumulation  account  option  and earn a fixed
rate of interest  applicable  to loan  collateral.  Loan  amounts and  repayment
requirements are subject to provisions of the Internal Revenue Code, and default
on a loan will result in a taxable event. You should consult a tax adviser prior
to  exercising  loan  privileges.  Loan  provisions  are  described  in the loan
endorsement to the Contract.

A loan, whether or not repaid, will have a permanent effect on the Account Value
of a Contract because the collateral  cannot be allocated to the Sub-Accounts or
fixed account guarantee periods. The longer the loan is outstanding, the greater
the effect is likely to be. The effect could be favorable or unfavorable. If the
investment  results are greater than the rate being credited on collateral while
the loan is  outstanding,  the Account  Value will not increase as rapidly as it
would if no loan were  outstanding.  If investment  results are below that rate,
the  Account  Value  will be higher  than it would have been if no loan had been
outstanding.

Termination
The Company  reserves the right to terminate any Contract at any time during the
Accumulation  Period if the Account Value is less than $500.  In that case,  the
Contract will be  involuntarily  surrendered  and the Company will pay the owner
the amount which would be due the owner on a full  surrender.  A group  Contract
may be terminated on 60 days advance notice,  in which case participants will be
entitled to continue their  interests on a deferred,  paid-up basis,  subject to
the Company's involuntary surrender right as described above.


                                           -30-
<PAGE>

BENEFIT PAYMENT PERIOD

Annuity Benefit
- --------------------------------------------------------------------------------
An owner may designate the date that annuity payments will begin, and may change
the date up to 30 days before  annuity  payments are scheduled to begin.  Unless
the Company agrees otherwise, the first day of a Benefit Payment Period in which
annuity  payments  are paid  cannot  be  later  than  the  contract  anniversary
following  the 85th  birthday  of the  eldest  owner,  or five  years  after the
effective date of the Contract, whichever is later.

The amount  applied to a settlement  option will be the Account  Value as of the
end of the Valuation Period  immediately  preceding the first day of the Benefit
Payment  Period.  The owner may select any form of  settlement  option  which is
currently  available.  The standard forms of settlement options are described in
the Settlement Option section beginning on page ___ of this prospectus.

If the owner does not make an  election  as to form of  settlement  option,  the
Company will apply the Account  Value to a fixed dollar  benefit for the life of
the annuitant with 120 monthly payments assured.

Death Benefit
A death  benefit  will be paid  under a Contract  if the owner  dies  during the
Accumulation  Period.  If a surviving  spouse  becomes a successor  owner of the
Contract,  the death benefit will be paid on the death of the successor owner if
he or she dies during the Accumulation Period.

The death benefit will be an amount equal to the largest of the following  three
amounts:

o  The Account Value on the Death Benefit Valuation Date

o  The total purchase  payment(s),  with interest at three percent (3%) per year
   through the Death  Benefit  Valuation  Date or the owner's  80th  birthday if
   earlier,  compounded annually, less any partial surrenders and any contingent
   deferred sales charges that applied to those amounts

o  The  largest  Account  Value on any  contract  anniversary  after the  fourth
   contract  anniversary  and prior to the Death Benefit  Valuation  Date or the
   owner's  80th  birthday  if  earlier,  less any  partial  surrenders  and any
   contingent deferred sales charges that applied to those amounts

Any  applicable  premium tax or other  taxes not  previously  deducted,  and any
outstanding  loans,  will be deducted  from the death benefit  amount  described
above.

An owner may elect the form of payment of the death  benefit at any time  before
his or her death.  The form of payment may be a lump sum, or any available  form
of settlement  option. The standard forms of settlement options are described in
the Settlement Option section  beginning on page ___ of this prospectus.  If the
owner does not make an election as to the form of death benefit, the beneficiary
may make an election  within one year after the owner's death. If no election as
to form of settlement  option is made,  the Company will apply the death benefit
to a fixed dollar  benefit for a period  certain of 48 months.  The first day of
the Benefit Payment Period in which a death benefit is paid may not be more than
one year after the owner's death;  the day a death benefit is paid in a lump sum
may not be more than five years after the owner's date of death.

Settlement Options
   
When a  Contract  is  annuitized,  or  when a  death  benefit  is  applied  to a
settlement option,  the Account Value or the death benefit,  as the case may be,
is  surrendered  to the  Company  in  exchange  for a promise to pay a stream of
benefit  payments for the duration of the settlement  option  selected.  Benefit
payments may be calculated and paid: (1) as a variable dollar benefit;  (2) as a
fixed dollar  benefit;  or (3) as a combination of both. The stream of payments,
whether  variable  dollar or fixed  dollar,  is an  obligation  of the Company's
general  account.  However,  only the amount of fixed dollar benefit payments is
guaranteed by the Company. The owner (or payee) bears the risk that any variable
dollar  benefit  payment may be less than the initial  variable  dollar  benefit
payment, or that it may decline to zero, if Benefit Unit Values for that payment
decrease  sufficiently.  Transfers between a variable dollar benefit and a fixed
dollar  benefit  are  not  permitted,  but  transfers  of  Benefit  Units  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.
    


                                           -31-
<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.
    

                                           -32-

<PAGE>



Calculation of Variable Dollar Benefit Payments
The first variable  dollar  benefit  payment is calculated as if it were a fixed
dollar  benefit  payment.  The amount  applied to a variable  dollar  benefit is
converted  into a stream of  payments  using the  Company's  minimum  guaranteed
settlement option factors  (including a 3% rate of interest).  The amount of the
first payment paid will be the same amount as if the payment were a fixed dollar
benefit  payment,  except  that it will be reduced by a pro rata  portion of the
contract  maintenance  fee.  The pro rata portion will be the amount of the full
contract  maintenance fee divided by the number of payments to be made over a 12
month period.

The amount of each  subsequent  variable dollar benefit payment will reflect the
investment performance of the Sub-Account(s)  selected and may vary from payment
to payment. Because the first variable dollar benefit payment included a 3% rate
of interest,  subsequent  benefit  payments will be the same amount as the first
payment  if the net  investment  performance  of the  Sub-Accounts  selected  is
exactly 3%. Subsequent  variable dollar benefit payments will be greater than or
less  than  the  first  payment  if  the  net  investment   performance  of  the
Sub-Accounts selected is greater than or less than 3%, respectively.

The amount of each  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.

   
Income Benefit Rider
The Income Benefit Rider may not be available in all States.

If the  Contract is issued with the Income  Benefit  Rider,  the  Contract  will
provide for a guaranteed  minimum  income  benefit that the owner or beneficiary
can elect to receive in lieu of the annuity benefit or death benefit which would
otherwise  be payable  under the  Contract.  The owner may elect to receive  the
Income  Benefit in lieu of an annuity  benefit under the Contract if an election
is made prior to the Income  Benefit Date and prior to the date annuity  benefit
payments begin under the Contract.

If a death benefit becomes payable under the Contract, the beneficiary may elect
to receive the Income Benefit in lieu of the death benefit that would  otherwise
be payable under the Contract,  unless the owner made an irrevocable election as
to the form of death benefit  prior to his or her death.  The  beneficiary  must
make an election to receive the Income  Benefit prior to the Income Benefit Date
and prior to the date death benefit payments begin under the Contract.

Only one Income  Benefit will be paid under the rider.  If the Income Benefit is
paid, it will be in lieu of all other benefits under the Contract.

The Income Benefit is equal to the Income Benefit Value  (expressed in thousands
of dollars and after  deduction of any applicable  fees and charges,  loans,  or
premium tax or other taxes)  multiplied by the amount of the monthly payment per
$1,000 of value  obtained from the  settlement  option table for the  settlement
option selected.  The available  settlement options and settlement option tables
used to determine  the Income  Benefit are set forth in the  Settlement  Options
section of the rider.  Only  life-contingent  fixed dollar benefit  payments are
available under the rider.

The Company  guarantees  minimum fixed dollar benefit  payment factors under the
rider based on 1983  annuity  mortality  tables for  individuals  or groups,  as
applicable,  with  interest  at 2.5% per year,  compounded  annually.  For group
Contracts,  individual tax-qualified Contracts and individual  non-tax-qualified
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 Contracts, the Company uses tables for male and female lives.

                                           -33-
<PAGE>

The Income Benefit Value on any given day is equal to:

1)    the Income Base on that day; plus
2) the value of the fixed account  options and the money market  Sub-Account  on
   that day.

If the rider is issued with the  Contract,  and a step-up in the Income Base has
not  occurred,  the Income Base as of any given day prior to the Income  Benefit
Date is equal to:

1)    the total of all purchase payments received that are allocated to the
   Sub-Accounts, except the money market Sub-Account; plus
2) amounts transferred to the Sub-Accounts, except the money market Sub-Account;
   plus
3) daily  interest  earned at the rate of 6% per annum;  less 4)  deductions  in
proportion to decreases in the value of the Sub-Accounts,
   except the money market Sub-Account, due to transfers or surrenders.

If the rider is issued  after the  Contract  is  issued,  or if a step-up in the
Income  Base has  occurred,  the  Income  Base as of any  given day prior to the
Income Benefit Date is equal to:

1) the of value the Sub-Accounts,  except the money market  Sub-Account,  on the
   date the  rider is issued or on the date the most  recent  step-up  occurred;
   plus
2) all purchase payments received after the given date that are allocated to the
   Sub-Accounts, except the money market Sub-Account; plus
3) amounts  transferred  after that date to the  Sub-Accounts,  except the money
   market Sub-Account; plus
4) daily  interest  earned at the rate of 6% per annum;  less 5)  deductions  in
proportion to decreases in the value of the Sub-Accounts,
   except the money market Sub-Account, due to transfers or surrenders after
   that date.

      For purposes of calculating  the Income Base, a deduction in proportion to
a  decrease  in  the  value  of  the  Sub-Accounts   (except  the  money  market
Sub-Account) is an amount equal to the percentage  reduction in the value of the
Sub-Accounts as of the date of the decrease  multiplied by the Income Base as of
the date of the decrease.

      The owner may elect to increase,  i.e.  step-up,  the Income Base to equal
the value of the  Sub-Accounts,  except  the money  market  Sub-Account,  on any
contract anniversary through the contract anniversary following the owner's 75th
birthday. An election to step-up the Income Base must be made within thirty (30)
days after the contract anniversary on which the step-up is to occur.

The Income Benefit Date is first day of the initial  payment  interval for which
the Income  Benefit is paid.  In no event may the Income  Benefit  Date be later
than the contract anniversary  following the owner's 85th birthday. In addition,
if the owner is living,  the  Income  Benefit  Date may not be earlier  than the
tenth  anniversary of the rider issue date,  or, if a step-up has occurred,  the
tenth contract anniversary following the most recent step-up in the Income Base.
If the owner has died and a death  benefit is payable  under the  Contract,  the
Income Benefit Date may be no later than one year after the date of death of the
owner.

The rider may not be issued after the owner's 75th birthday.

The rider charge is described in the Charges and Deductions  section on page ___
of this prospectus.

If a surviving spouse of an owner becomes a successor owner of the Contract,  he
or she will have the option to:

1)    continue the rider based on his or her age; or
2)    terminate the rider as of the date successor ownership is elected.

The  surviving  spouse must elect to continue or terminate the rider at the time
he or she elects to become a successor owner.

The rider will terminate  without value when a change of ownership  occurs under
the Contract,  when a surviving  spouse elects to discontinue  the rider or upon
termination  of the  Contract,  whichever  comes  first.  The  rider  will  also
terminate  on the  Income  Benefit  Date if the Income  Benefit is not  elected.
Otherwise, the rider may not be terminated by either the Company or the owner.
    
                                           -34-
<PAGE>

FEDERAL TAX MATTERS
- ------------------------------------------------------------------------------
This section provides a general description of federal income tax considerations
relating to the  Contracts.  The purchase of a Contract may have federal  estate
and gift tax  consequences  in addition to income tax  consequences.  Estate and
gift  taxation  is not  discussed  in this  prospectus  or in the  statement  of
additional information. State taxation will vary depending on the State in which
you reside,  and is not  discussed  in this  prospectus  or in the  statement of
additional information.

The tax  information  provided in the  prospectus  and  statement of  additional
information  should  not be used as tax  advice.  Federal  income  tax  laws are
subject to interpretation  by the IRS and may be changed by future  legislation.
You should  consult a  competent  tax  advisor to discuss  how  current tax laws
affect your particular situation.

Tax Deferral On Annuities
Internal  Revenue  Code  ("IRC")  Section 72 governs  taxation of  annuities  in
general.  The income  earned  during the  Accumulation  Period of a Contract  is
generally  not  includable in income until it is  withdrawn.  In other words,  a
Contract  is  a  tax-deferred  investment.   The  Contracts  must  meet  certain
requirements  in order to qualify for  tax-deferred  treatment under IRC Section
72. These requirements are discussed in the statement of additional information.
In addition,  tax deferral is generally  not  available  for a Contract when the
owner is not a natural  person  unless the  Contract is part of a  tax-qualified
plan. For a nonqualified  deferred  compensation  plan, this rule means that the
employer as owner of the  Contract  will  generally  be taxed  currently  on any
increase in the Account  Value,  although the plan may provide a tax deferral to
the participating employee.

                                           -35-
<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.

                                           -36-

<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>    
Plan Types            o   IRC Section 401 (Pension and     o   IRC Section 72 only
                          Profit Sharing)
                      o   IRC Section 403
                          (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       Natural person, employer, or        Anyone.  Non-natural person may
Contract               employer plan.  Nonqualified        purchase but will generally lose
                       deferred compensation plans will    tax-deferred status.
                       generally lose tax-deferred status.
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Taxation of Surrenders If there is an after-tax            Account Value in excess of
                       "investment in the contract," a     investment in the contract is
                       pro-rata portion of amount          taxable.  Generally, the
                       surrendered is taxable based on     "investment in the contract" will
                       ratio of "investment in the         equal the sum of all purchase
                       contract" to Account Value.         payments.  Surrenders are deemed
                       Usually, 100% of distributions      to come from earnings first, and
                       from a qualified plan will be       purchase payments last.
                       taxed because there was no
                       after-tax contribution and          For a Contract purchased as part
                       therefore no "investment in the     of an IRC Section 1035 exchange
                       contract."  Qualified               which includes contributions made
                       distributions from Section 408A     before August 14, 1982 ("pre-TEFRA
                       Roth IRA may be completely          contributions") partial
                       tax-free.                           withdrawals are not taxable until
                                                           the pre-TEFRA contributions have
                       Surrenders prior to age 59 1/2 may    been returned.
                       be subject to 10% or greater tax
                       penalty depending on the type of    The taxable portion of any
                       qualified plan.                     surrenders prior to age 59 1/2 may
                                                           be subject to a 10% tax penalty.
                       Surrenders from tax-qualified 
                       Contracts may be restricted
                       by  the  Internal  Revenue  Code  
                       or by the terms of a retirement
                       plan.
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Taxation of Benefit   May vary depending on type of settlement option selected, but
Payments (annuity     generally, for fixed dollar benefit payments, a pro-rata portion of
benefit payments      each payment equal to [100% - (investment in contract/total expected
or death benefit      payments)] is subject to income tax. For variable dollar benefit
payments)             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  Taxed  to  recipient  generally  in same  manner  as full
surrender.  Tax Death  Benefit  Payment  penalties do not apply to death benefit
distributions.
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Assignment of          Assignment and transfer of          Generally, deferred earnings
Contract/Transfer of   ownership generally not permitted.  become taxable to transferor at
Ownership                                                  time of transfer and transferee
                                                           receives an investment in the
                                                           contract equal to the Account
                                                           Value at that time.  Gift tax
                                                           consequences not discussed herein.
- -----------------------------------------------------------------------------------------------
- -------------------------------- -------------------------------------------------------------- 
Withholding            Eligible rollover distributions     Generally, payee may elect to 
                       from Section 401 and Section        have taxes withheldor not.                                          
                       403(b) Contracts subject to 20%     
                       mandatory withholding on
                       taxable portion unless direct
                       rollover. Section 457 plan
                       benefits and nonqualified
                       deferred compensation plan
                       benefits subject to wage
                       withholding. For all other
                       payments, payee may elect to
                       have taxes withheld or not.
- -----------------------------------------------------------------------------------------------
</TABLE>
                                           -37-

<PAGE>

GLOSSARY OF FINANCIAL TERMS
- --------------------------------------------------------------------------------

The following  financial terms explain how the variable portion of the Contracts
are valued.  Read these terms in conjunction with the Definitions on page ___ of
this prospectus.

Accumulation   Unit  Value:  The  initial   Accumulation  Unit  Value  for  each
Sub-Account other than the money market  Sub-Account was set at $10. The initial
Accumulation  Unit  Value for the money  market  Sub-Account  was set at $1. The
initial  Accumulation  Unit  Value  for a  Sub-Account  was  established  at the
inception  date of the  Separate  Account,  or on the date the  Sub-Account  was
established, if later. The Company establishes distinct Accumulation Unit Values
for Contracts with different  Separate  Account fee structures,  as described in
the Fee Table.

After the initial Accumulation Unit Value is established,  the Accumulation Unit
Value for a Sub-Account at the end of each Valuation  Period is the Accumulation
Unit Value at the end of the previous  Valuation  Period  multiplied  by the Net
Investment Factor for that Sub-Account for the current Valuation Period.

A Net Investment  Factor of 1 produces no change in the Accumulation  Unit Value
for that Valuation Period. A Net Investment Factor of more than 1 or less than 1
produces an increase or a decrease, respectively, in the Accumulation Unit Value
for that Valuation Period.

Benefit Unit Value: The initial Benefit Unit Value for a Sub-Account will be set
equal to the  Accumulation  Unit  Value for that  Sub-Account  at the end of the
first Valuation  Period in which a variable dollar benefit is established by the
Company.  The Company will establish  distinct Benefit Unit Values for Contracts
with different Separate Account fee structures, as described in the Fee Table.

The Benefit Unit Value for a  Sub-Account  at the end of each  Valuation  Period
after the first is the Benefit Unit Value at the end of the  previous  Valuation
Period  multiplied by the Net  Investment  Factor for that  Sub-Account  for the
current  Valuation   Period,   and  multiplied  by  a  daily  investment  factor
(0.99991781) for each day in the Valuation  Period.  The daily investment factor
reduces  the  previous  Benefit  Unit Value by the daily  amount of the  assumed
interest rate (3% per year,  compounded  annually) which is already incorporated
in the stream of variable dollar benefit payments.

Net Investment  Factor:  The Net Investment  Factor for any  Sub-Account for any
Valuation Period is determined by dividing NAV2 by NAV1 and subtracting a factor
representing the mortality and expense risk charge and the administration charge
deducted from the Sub-Account during that Valuation Period, where:

NAV1 is equal to the Net  Asset  Value  for the  Portfolio  for the  preceding
Valuation Period; and

NAV2 is equal to the Net Asset Value for the Portfolio for the current Valuation
Period  plus  the  per  share  amount  of  any  dividend  or  net  capital  gain
distributions  made by the Portfolio during the current  Valuation  Period,  and
plus or minus a per  share  charge  or credit  if the  Company  adjusts  its tax
reserves due to investment operations of the Sub-Account or changes in tax law.

In other words, the Net Investment  Factor  represents the percentage  change in
the total value of assets invested by the Separate Account in a Portfolio.  That
percentage is then applied to  Accumulation  Unit Values and Benefit Unit Values
as described in the discussion of those terms in this section of the prospectus.

                                           -38-
<PAGE>

THE REGISTRATION STATEMENT
- --------------------------------------------------------------------------------
The Company filed a  Registration  Statement  with the  Securities  and Exchange
Commission under the Securities Act of 1933 relating to the Contracts offered by
this  prospectus.  This  prospectus  was  filed as an  annual  amendment  to the
Registration  Statement,  but it does not constitute  the complete  Registration
Statement.  The Registration  Statement contains further information relating to
the Company and the  Contracts.  Statements in this  prospectus  discussing  the
content of the Contracts and other legal  instruments are summaries.  The actual
documents are filed as exhibits to the  Registration  Statement.  For a complete
statement of the terms of the  Contracts or any other legal  document,  refer to
the  appropriate  exhibit  to  the  Registration  Statement.   The  Registration
Statement and the exhibits  thereto may be inspected and copied at the office of
the  Securities  and Exchange  Commission,  located at 450 Fifth  Street,  N.W.,
Washington,  D.C.,  and may also be  accessed  at the  Securities  and  Exchange
Commission's  Web  site  http:\\www.sec.gov.  The  registration  number  for the
Registration Statement is 333-19725.

OTHER INFORMATION
- --------------------------------------------------------------------------------

Year 2000
The  Company  is  developing  plans  to  modify  or  replace  software  used  in
administering  variable  contracts  so that its computer  systems will  function
properly  with  respect to dates in the year 2000 and  beyond.  Should  software
modifications and new software installations not be completed on a timely basis,
there  could be  disruptions  in the ability of the  Company to  administer  the
Contracts.

The  Portfolios'  preparations  for the year 2000 are described in the Portfolio
prospectuses.

Legal Proceedings
The  Company is  involved  in  various  kinds of routine  litigation  which,  in
management's judgment, are not of material importance to the Company's assets or
the  Separate  Account.  There are no  pending  legal  proceedings  against  the
Separate Account or AAG Securities, Inc.

                                           -39-

<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
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:
                                           -40-
<PAGE>

   
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/

               (b)    Form of Selling  Agreement  between Annuity Investors Life
                      Insurance  CompanyREGISTERED,  AAG  Securities,  Inc.  and
                      another Broker-Dealer.1/
    

               (c)    Revised  form  of  Selling   Agreement   between   Annuity
                      Investors    Life   Insurance    CompanyREGISTERED,    AAG
                      Securities, Inc. and another Broker-Dealer.6/

   
        (4)    Individual and Group Contract Forms and Endorsements.

               (a)    Form of Qualified  Individual  Flexible  Premium  Deferred
                      Variable Annuity Contract.2/
    

               (b)    Form  of  Non-Qualified   Individual   Flexible   Deferred
                      Variable Annuity Contract.2/

               (c)    Form of Loan Endorsement to Individual Contract.2/

               (d)    Form of Tax Sheltered  Annuity  Endorsement  to Individual
                      Contract.2/

               (e)    Form of Qualified Pension, Profit Sharing and Annuity Plan
                      Endorsement to Individual Contract.2/

               (f)    Form  of   Employer   Plan   Endorsement   to   Individual
                      Contract.2/

               (g)    Form  of  Individual  Retirement  Annuity  Endorsement  to
                      Individual
                      Contract.2/

               (h)    Form of Texas Optional  Retirement Program  Endorsement to
                      Individual Contract.2/

               (i)    Form  of  Long-Term   Care  Waiver  Rider  to   Individual
                      Contract.2/

               (j)    Form of Simple IRA Endorsement to Individual Contract.2/
<PAGE>

               (k)    Form of Group Flexible Premium  Deferred  Variable Annuity
                      Contract.2/

               (l)    Form  of  Certificate  of  Participation   under  a  Group
                      Flexible Premium Deferred Variable Annuity Contract.2/

               (m)    Form of Loan Endorsement to Group Contract.2/

               (n)    Form of Loan  Endorsement to Certificate of  Participation
                      under a Group Contract. 2/

               (o)    Form  of  Tax  Sheltered  Annuity   Endorsement  to  Group
                      Contract.2/

               (p)    Form of Tax Sheltered  Annuity  Endorsement to Certificate
                      of Participation under a Group Contract.2/

               (q)    Form of Qualified Pension, Profit Sharing and Annuity Plan
                      Endorsement to Group Contract.2/

               (r)    Form of Qualified Pension, Profit Sharing and Annuity Plan
                      Endorsement to Certificate of Participation  under a Group
                      Contract.2/

               (s)    Form of Employer Plan Endorsement to Group Contract.2/

               (t)    Form  of  Employer  Plan  Endorsement  to  Certificate  of
                      Participation under a Group Contract.2/

               (u)    Form  of  Deferred   Compensation   Endorsement  to  Group
                      Contract.2/

               (v)    Form of Deferred  Compensation  Endorsement to Certificate
                      of Participation under a Group Contract.2/

               (w)    Form of Texas Optional  Retirement Program  Endorsement to
                      Group Contract.2/

               (x)    Form of Texas Optional  Retirement Program  Endorsement to
                      Certificate of Participation under a Group Contract.2/

               (y)    Form of Long-Term Care Waiver Rider to Group Contract.2/

               (z)    Form of  Long-Term  Care Waiver  Rider to  Certificate  of
                      Participation under a Group Contract.2/

               (aa)   Revised form of Individual  Retirement Annuity Endorsement
                      to Individual Qualified Contract. 3/

               (bb)   Revised  form  of  SIMPLE  IRA  Endorsement  to  Qualified
                      Individual Contract.3/

               (cc)   Form of  Roth  IRA  Endorsement  to  Qualified  Individual
                      Contract. 3/

               (dd)   Revised  form  of  Employer  Plan   Endorsement  to  Group
                      Contract. 3/
                                            -2-
<PAGE>

               (ee)   Revised form of Employer Plan  Endorsement  to Certificate
                      of Participation under a Group Contract. 3/

               (ff)   Revised  form of Employer  Plan  Endorsement  to Qualified
                      Individual
                      Contract. 3/

               (gg)   Revised form of Tax Sheltered Annuity Endorsement to Group
                      Contract.3/

               (hh)   Revised  form  of Tax  Sheltered  Annuity  Endorsement  to
                      Certificate of Participation under a Group Contract. 3/

               (ii)   Revised  form  of Tax  Sheltered  Annuity  Endorsement  to
                      Qualified Individual Contract. 3/

               (jj)   Revised  form of  Qualified  Pension,  Profit  Sharing and
                      Annuity Plan Endorsement to Group Contract. 3/

               (kk)   Revised  form of  Qualified  Pension,  Profit  Sharing and
                      Annuity Plan  Endorsement to Certificate of  Participation
                      under a Group Contract. 3/

               (ll)   Revised  form of  Qualified  Pension,  Profit  Sharing and
                      Annuity Plan
                      Endorsement to Qualified Individual Contract. 3/

               (mm)   Form of Governmental Section 457 Plan Endorsement to Group
                      Contract. 3/

               (nn)   Form of  Governmental  Section  457  Plan  Endorsement  to
                      Certificate of Participation under a Group Contract. 3/

               (oo)   Form of  Governmental  Section  457  Plan  Endorsement  to
                      Qualified Individual Contract. 3/

               (pp)   Form of Successor Owner Endorsement to Group Contract. 6/

               (qq)   Form of Successor  Owner  Endorsement  to  Certificate  of
                      Participation under a Group Contract. 6/

               (rr)   Form  of   Successor   Owner   Endorsement   to  Qualified
                      Individual Contract and Non-Qualified Individual Contract.
                      6/

   
               (ss)   Revised  form of  Successor  Owner  Endorsement  to  Group
                      Contract . 7/

               (tt)   Revised form of Successor Owner Endorsement to Certificate
                      of Participation under a Group Contract. 7/

               (uu)   Revised form of Successor  Owner  Endorsement to Qualified
                      Individual Contract and Non-Qualified Individual Contract.
                      7/

               (vv)   Form of Individual Retirement Annuity Endorsement to Group
                      Contract. 7/
                                            -3-
<PAGE>

               (ww)   Form  of  Individual  Retirement  Annuity  Endorsement  to
                      Certificate of Participation under a Group Contract. 7/

               (xx)   Form of SIMPLE Individual  Retirement Annuity  Endorsement
                      to Group Contract. 7/

               (yy)   Form of SIMPLE Individual  Retirement Annuity  Endorsement
                      to Certificate of Participation under a Group Contract. 7/

               (zz)   Form of Roth Individual  Retirement Annuity Endorsement to
                      Group Contract. 7/

               (aaa)  Form of Roth Individual  Retirement Annuity Endorsement to
                      Certificate of Participation under a Group Contract. 7/

               (bbb)  Form of  Unisex  Endorsement  to  Nonqualified  Individual
                      Contract. 7/

               (ccc)  Form of Income Benefit Rider to  Non-Qualified  Individual
                      Contract (filed herewith).

               (ddd)  Form of  Income  Benefit  Rider  to  Qualified  Individual
                      Contract (filed
                      herewith).

               (eee)  Form of  Income  Benefit  Rider to Group  Contract  (filed
                      herewith).

               (fff)  Form  of   Income   Benefit   Rider  to   Certificate   of
                      Participation under a Group Contract (filed herewith).
    

        (5)    (a)    Form  of  Application  for  Individual   Flexible  Premium
                      Deferred Annuity Contract and Certificate of Participation
                      under a Group Contract.2/

               (b)    Form of Application  for Group Flexible  Premium  Deferred
                      Annuity Contract.2/

               (c)    Revised  form  of  Application  for  Individual   Flexible
                      Premium  Deferred  Annuity  Contract  and  Certificate  of
                      Participation under a Group Contract. 4/

               (d)    Revised form of  Application  for Group  Flexible  Premium
                      Deferred Annuity Contract. 4/

        (6)    (a)    Articles  of  Incorporation  of  Annuity   Investors  Life
                      Insurance CompanyREGISTERED.1/

                      (i)  Amendment to Articles of Incorporation, adopted April
                           9, 1996,  and  approved  by the  Secretary  of State,
                           State of Ohio, on July 11, 1996.2/

                      (ii) Amendment  to  Articles  of  Incorporation,   adopted
                           August 9, 1996,  and  approved  by the  Secretary  of
                           State, State of Ohio, on December 3, 1996.2/

                                      -4-
<PAGE>

               (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/

               (e)    Participation  Agreement  between  Annuity  Investors Life
                      Insurance  CompanyREGISTERED and Strong Variable Insurance
                      Funds, Inc. and Strong Special Fund II, Inc.2/

               (f)    Participation  Agreement  between  Annuity  Investors Life
                      Insurance    CompanyREGISTERED    and   INVESCO   Variable
                      Investment Funds, Inc.2/

               (g)    Participation  Agreement  between  Annuity  Investors Life
                      Insurance  CompanyREGISTERED  and Morgan Stanley Universal
                      Funds, Inc.2/

               (h)    Participation  Agreement  between  Annuity  Investors Life
                      Insurance  CompanyREGISTERED  and  PBHG  Insurance  Series
                      Fund, Inc.2/

               (i)    Service Agreement between Annuity Investors Life Insurance
                      CompanyREGISTERED and American Annuity GroupSM, Inc.1/

               (j)    Agreement  between AAG Securities,  Inc. and AAG Insurance
                      Agency, Inc.1/

               (k)    Investment  Service  Agreement  between Annuity  Investors
                      Life  Insurance  CompanyREGISTERED  and  American  Annuity
                      GroupSM, Inc. 1/
                                      -5-
<PAGE>

               (l)    Service Agreement between Annuity Investors Life Insurance
                      CompanyREGISTERED and Strong Capital Management, Inc.2/

               (m)    Service Agreement between Annuity Investors Life Insurance
                      CompanyREGISTERED and Pilgrim Baxter & Associates, Ltd.2/

               (n)    Service Agreement between Annuity Investors Life Insurance
                      CompanyREGISTERED  and Morgan  Stanley  Asset  Management,
                      Inc. 2/

               (o)    Amended  and  Restated   Agreement   between  The  Dreyfus
                      Corporation   and   Annuity   Investors   Life   Insurance
                      CompanyREGISTERED.2/

               (p)    Service Agreement between Annuity Investors Life Insurance
                      CompanyREGISTERED and Janus Capital Corporation.2/

               (q)    Service  Agreement  between INVESCO Funds Group,  Inc. and
                      Annuity Investors Life Insurance Company.4/

               (r)    Participation  Agreement between The Timothy Plan Variable
                      Series, Timothy Partners,  Ltd. and Annuity Investors Life
                      Insurance Company4/

               (s)    Service Agreement between The Timothy Plan Variable Series
                      and Annuity Investors Life Insurance Company. 4/

   
               (t)    Participation  Agreement  between BT Insurance Funds Trust
                      and  Annuity   Investors  Life  Insurance  Company  (filed
                      herewith).

               (u)    Service   Agreement  between  Bankers  Trust  Company  and
                      Annuity Investors Life Insurance Company (filed herewith).
    

        (9)    Opinion and Consent of Counsel.1/

        (10)   Consent of Independent Auditors. 4/

        (11)   No financial statements are omitted from Item 23.

        (12)   Not Applicable.

        (13)   Schedule for Computation of Performance Quotations. 4/

        (14)   Financial Data Schedule. 4/

        (15)   Powers of Attorney. 5/
- ------------------------
1/      Filed with Form N-4 on December 23, 1996.
2/      Filed with Pre-Effective Amendment No. 1 on June 3, 1997.
3/      Filed with Post-Effective Amendment No. 1 on February 27, 1998.
4/      Filed with Post-Effective Amendment No. 2 on April 29, 1998.
5/      Incorporated  by  reference  to  Pre-Effective
        Amendment  No. 1,  filed on behalf of  Annuity
        Investors  Variable  Account  B,  SEC File No.
        333-51955 on July 6, 1998.
   
6/      Filed with Post-Effective Amendment No. 3 on November 17, 1998.
7/      Filed with Post-Effective Amendment No. 4 on February 1, 1999.
    
                                      -6-
<PAGE>
Item 25.       Directors and Officers of the Depositor

                              Principal        Positions and Offices
        Name               Business Address      With the Company
Robert Allen Adams               (1)          President, Director
Stephen Craig Lindner            (1)          Director
William Jack Maney, II           (1)          Assistant Treasurer and
                                              Director
James Michael Mortensen          (1)          Executive Vice President,
                                              Assistant Secretary and
                                              Director
Mark Francis Muething            (1)          Senior Vice President,
                                              Secretary, General Counsel and
                                              Director
Jeffrey Scott Tate               (1)          Director
Thomas Kevin Liguzinski          (1)          Senior Vice President
Charles Kent McManus             (1)          Senior Vice President
   
    
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, Treasurer and
                                              Controller
Vincent J. Graneri               (1)          Vice President and Chief Actuary
David Shipley                    (1)          Vice President
Thomsas E. Mischell              (1)          Assistant Treasurer

(1)     P.O. Box 5423, Cincinnati, Ohio  45201-5423.

Item 26.   Persons  Controlled by or Under Common  Control With the Depositor or
           Registrant

The Depositor,  Annuity Investors Life Insurance  CompanyREGISTERED  is a wholly
owned subsidiary of Great  AmericanREGISTERED Life Insurance Company, which is a
wholly owned  subsidiary  of American  Annuity  Group,SM  Inc.  The  Registrant,
Annuity InvestorsREGISTERED Variable Account B, is a segregated asset account of
Annuity Investors Life Insurance CompanyREGISTERED.

The  following  chart  shows  the  affiliations  among  Annuity  Investors  Life
Insurance CompanyREGISTERED and its parent, subsidiary and affiliated entities.

                                      -7-
<PAGE>
<TABLE>
<CAPTION>
AMERICAN FINANCIAL GROUP, INC.                                             % OF STOCK OWNED
                                                                           (1)
|                                           STATE OF       DATE OF         BY IMMEDIATE
|                                           DOMICILE       INCORPORATION   PARENT COMPANY    NATURE OF BUSINESS
<S>                                        <C>            <C>                    <C>        <C>    
|
|_AFC Holding Company                       Ohio           12/09/1994             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>
                                      -8-
<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>
                                     -9-
<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>
                                      -10-
<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>
                                      -11-
<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>
                                      -12-
<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

(1) Except Director's Qualifying Shares.
(2) Total percentage owned by parent shown and by other affiliated
company(ies).
</TABLE>
                                      -13-
<PAGE>

Item 27.  Number of Contract Owners

As of March 31, 1998, there were 1,067 Individual  Contract Owners, of which 988
were qualified and 79 were  non-qualified.  As of March 31, 1998,  there were 15
Participants (Certificate Owners) in 3 Group Contracts.

Item 28.  Indemnification

(a)   The   Code  of   Regulations   of   Annuity   Investors   Life   Insurance
CompanyREGISTERED provides in Article V as follows:

The Corporation  shall, to the full extent permitted by the General  Corporation
Law of Ohio,  indemnify  any person  who is or was a director  or officer of the
Corporation and whom it may indemnify  pursuant  thereto.  The Corporation  may,
within the sole  discretion of the Board of Directors,  indemnify in whole or in
part any other persons whom it may indemnify pursuant thereto.

Insofar as  indemnification  for liability  arising under the  Securities Act of
1933 ("1933  Act") may be  permitted  to  directors,  officers  and  controlling
persons of the Depositor pursuant to the foregoing provisions, or otherwise, the
Depositor  has been advised that in the opinion of the  Securities  and Exchange
Commission  such  indemnification  is against  public policy as expressed in the
1933  Act  and is,  therefore,  unenforceable.  In the  event  that a claim  for
indemnification  against  such  liabilities  (other  than  the  payment  by  the
Depositor of expenses  incurred or paid by the director,  officer or controlling
person of the  Registrant  in the  successful  defense  of any  action,  suit or
proceeding)  is  asserted by such  director,  officer or  controlling  person in
connection with the securities being  registered,  the Depositor will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit  to a  court  of  appropriate  jurisdiction  the  question  whether  such
indemnification  by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue.

(b)  The   directors   and  officers  of  Annuity   Investors   Life   Insurance
CompanyREGISTERED  are covered  under a  Directors  and  Officers  Reimbursement
Policy. Under the Reimbursement  Policy,  directors and officers are indemnified
for loss arising  from any covered  claim by reason of any Wrongful Act in their
capacities  as  directors  or  officers,  except to the extent the  Company  has
indemnified  them.  In  general,  the term  "loss"  means any  amount  which the
directors  or officers  are legally  obligated  to pay for a claim for  Wrongful
Acts. In general,  the term "Wrongful  Acts" means any breach of duty,  neglect,
error,  misstatement,  misleading  statement,  omission  or act by a director or
officer while acting  individually  or  collectively  in their  capacity as such
claimed against them solely by reason of their being directors and officers. The
limit of liability  under the program is $20,000,000  for the policy year ending
September 1, 1999.  The primary  policy under the program is with National Union
Fire  Insurance  Company  of  Pittsburgh,  PA in the  name of  American  Premier
Underwriters, Inc.
                                      -14-
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
    

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.
                                      -15-
(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.

                                      -16-
<PAGE>


                                          SIGNATURES

   
As  required by the  Securities  Act of 1933 and the  Investment  Company Act of
1940, the Registrant certifies that it has caused this Post-Effective  Amendment
No.  5 to  its  Registration  Statement  to be  signed  on  its  behalf  by  the
undersigned  in the  City  of  Cincinnati,  State  of Ohio  on the  25th  day of
February, 1999.
    

                              ANNUITY INVESTORSREGISTERED VARIABLE ACCOUNT B
                              (REGISTRANT)


                              By: /s/ Robert Allen Adams               
                                      Robert Allen Adams
                                      Chairman of the Board, President
                                      and Director, Annuity Investors
                                      Life Insurance CompanyREGISTERED


                              ANNUITY INVESTORS LIFE INSURANCE COMPANYREGISTERED
                              (DEPOSITOR)


                              By: /s/ Robert Allen Adams                        
                                      Robert Allen Adams
                                      Chairman of the Board, President
                                      and Director


   
As required by the Securities Act of 1933, this  Post-Effective  Amendment No. 5
has been  signed by the  following  persons in the  capacities  and on the dates
indicated.



/s/ Robert Allen Adams              Principal Executive        February 25, 1999
- ------------------------------                                              
    
Robert Allen Adams*                  Officer, Director



   
/s/ Lynn Edward Laswell             Principal Financial        February 25, 1999
- ------------------------------                                              
Lynn Edward Laswell                      Officer



/s/ Lynn Edward Laswell             Principal Accounting       February 25, 1999
- -----------------------------                                               
    
Lynn Edward Laswell*                     Officer
                                      -17-
<PAGE>


   
/s/ Stephen Craig Lindner                Director              February 25, 1999
Stephen Craig Lindner*



/s/ William Jack Maney, II               Director              February 25, 1999
- --------------------------------                                            
William Jack Maney, II*



/s/ James Michael Mortensen              Director              February 25, 1999
James Michael Mortensen*



/s/ Mark Francis Muething                Director              February 25, 1999
Mark Francis Muething*



/s/ Jeffrey Scott Tate                   Director              February 25, 1999
Jeffrey Scott Tate*
    

*Executed  by John  Gruber  on behalf of those  indicated  pursuant  to Power of
Attorney.

                                      -18-

<PAGE>


                                             EXHIBIT INDEX

         (1)    Resolution of the Board of Directors of Annuity  Investors  Life
                Insurance CompanyREGISTERED authorizing establishment of Annuity
                InvestorsREGISTERED Variable Account B.1/

         (2)    Not Applicable.

         (3)    (a)  Distribution   Agreement  between  Annuity  Investors  Life
                Insurance Company REGISTERED and AAG Securities, Inc.2/

               (b)    Form of Selling  Agreement  between Annuity Investors Life
                      Insurance  CompanyREGISTERED,  AAG  Securities,  Inc.  and
                      another Broker-Dealer.1/

               (c)    Revised  form  of  Selling   Agreement   between   Annuity
                      Investors Life Insurance Company(R), AAG Securities,  Inc.
                      and another Broker-Dealer.6/

        (4)    Individual and Group Contract Forms and Endorsements.

   
               (a)    Form of Qualified  Individual  Flexible  Premium  Deferred
                      Variable Annuity Contract.2/
    

               (b)    Form  of  Non-Qualified   Individual   Flexible   Deferred
                      Variable Annuity Contract.2/

               (c)    Form of Loan Endorsement to Individual Contract.2/

               (d)    Form of Tax Sheltered  Annuity  Endorsement  to Individual
                      Contract.2/

               (e)    Form of Qualified Pension, Profit Sharing and Annuity Plan
                      Endorsement to Individual Contract.2/

               (f)    Form  of   Employer   Plan   Endorsement   to   Individual
                      Contract.2/

               (g)    Form  of  Individual  Retirement  Annuity  Endorsement  to
                      Individual Contract.2/

               (h)    Form of Texas Optional  Retirement Program  Endorsement to
                      Individual Contract.2/

               (i)    Form  of  Long-Term   Care  Waiver  Rider  to   Individual
                      Contract.2/

               (j)    Form of Simple IRA Endorsement to Individual Contract.2/

               (k)    Form of Group Flexible Premium  Deferred  Variable Annuity
                      Contract.2/

               (l)    Form  of  Certificate  of  Participation   under  a  Group
                      Flexible Premium Deferred Variable Annuity Contract.2/
                                      -19-
<PAGE>
               (m)    Form of Loan Endorsement to Group Contract.2/

               (n)    Form of Loan  Endorsement to Certificate of  Participation
                      under a Group Contract. 2/

               (o)    Form  of  Tax  Sheltered  Annuity   Endorsement  to  Group
                      Contract.2/

               (p)    Form of Tax Sheltered Annuity Endorsement to Certificate
                      of Participation under a Group Contract.2/

               (q)    Form of Qualified Pension, Profit Sharing and Annuity Plan
                      Endorsement to Group Contract.2/

               (r)    Form of Qualified Pension, Profit Sharing and Annuity Plan
                      Endorsement to Certificate of Participation  under a Group
                      Contract.2/

               (s)    Form of Employer Plan Endorsement to Group Contract.2/

               (t)    Form  of  Employer  Plan  Endorsement  to  Certificate  of
                      Participation under a Group Contract.2/

               (u)    Form  of  Deferred   Compensation   Endorsement  to  Group
                      Contract.2/

               (v)    Form of Deferred  Compensation  Endorsement to Certificate
                      of Participation under a Group Contract.2/

               (w)    Form of Texas Optional  Retirement Program  Endorsement to
                      Group Contract.2/

               (x)    Form of Texas Optional  Retirement Program  Endorsement to
                      Certificate of Participation under a Group Contract.2/

               (y)    Form of Long-Term Care Waiver Rider to Group Contract.2/

               (z)    Form of  Long-Term  Care Waiver  Rider to  Certificate  of
                      Participation under a Group Contract.2/

               (aa)   Revised form of Individual  Retirement Annuity Endorsement
                      to Individual Qualified Contract. 3/

               (bb)   Revised  form  of  SIMPLE  IRA  Endorsement  to  Qualified
                      Individual Contract. 3/

               (cc)   Form of  Roth  IRA  Endorsement  to  Qualified  Individual
                      Contract. 3/

               (dd)   Revised  form  of  Employer  Plan   Endorsement  to  Group
                      Contract. 3/
                                      -20-
<PAGE>
               (ee)   Revised form of Employer Plan  Endorsement  to Certificate
                      of Participation under a Group Contract. 3/

               (ff)   Revised  form of Employer  Plan  Endorsement  to Qualified
                      Individual Contract. 3/

               (gg)   Revised form of Tax Sheltered Annuity Endorsement to Group
                      Contract.3/

               (hh)   Revised  form  of Tax  Sheltered  Annuity  Endorsement  to
                      Certificate of Participation under a Group Contract. 3/

               (ii)   Revised  form  of Tax  Sheltered  Annuity  Endorsement  to
                      Qualified Individual Contract. 3/

               (jj)   Revised  form of  Qualified  Pension,  Profit  Sharing and
                      Annuity Plan Endorsement to Group Contract. 3/

               (kk)   Revised  form of  Qualified  Pension,  Profit  Sharing and
                      Annuity Plan  Endorsement to Certificate of  Participation
                      under a Group Contract. 3/

               (ll)   Revised  form of  Qualified  Pension,  Profit  Sharing and
                      Annuity Plan Endorsement to Qualified Individual Contract.
                      3/

               (mm)   Form of Governmental Section 457 Plan Endorsement to Group
                      Contract. 3/

               (nn)   Form of  Governmental  Section  457  Plan  Endorsement  to
                      Certificate of Participation under a Group Contract. 3/

               (oo)   Form of  Governmental  Section  457  Plan  Endorsement  to
                      Qualified Individual Contract. 3/

               (pp)   Form of Successor Owner Endorsement to Group Contract. 6/

               (qq)   Form of Successor  Owner  Endorsement  to  Certificate  of
                      Participation under a Group Contract. 6/

               (rr)   Form  of   Successor   Owner   Endorsement   to  Qualified
                      Individual Contract and Non-Qualified Individual Contract.
                      6/

   
               (ss)   Revised  form of  Successor  Owner  Endorsement  to  Group
                      Contract. 7/

               (tt)   Revised form of Successor Owner Endorsement to Certificate
                      of Participation under a Group Contract. 7/

               (uu)   Revised form of Successor  Owner  Endorsement to Qualified
                      Individual Contract and Non-Qualified Individual Contract.
                      7/
                                      -21-
<PAGE>

               (vv)   Form of Individual Retirement Annuity Endorsement to Group
                      Contract. 7/

               (ww)   Form  of  Individual  Retirement  Annuity  Endorsement  to
                      Certificate of
                      Participation under a Group Contract. 7/

               (xx)   Form of SIMPLE Individual  Retirement Annuity  Endorsement
                      to Group
                      Contract. 7/

               (yy)   Form of SIMPLE Individual  Retirement Annuity  Endorsement
                      to Certificate of Participation under a Group Contract. 7/

               (zz)   Form of Roth Individual  Retirement Annuity Endorsement to
                      Group Contract. 7/

               (aaa)  Form of Roth Individual  Retirement Annuity Endorsement to
                      Certificate of Participation under a Group Contract. 7/

               (bbb)  Form of  Unisex  Endorsement  to  Nonqualified  Individual
                      Contract. 7/

               (ccc)  Form of Income Benefit Rider to  Non-Qualified  Individual
                      Contract
                      (filed herewith).

               (ddd)  Form of  Income  Benefit  Rider  to  Qualified  Individual
                      Contract (filed herewith).

               (eee)  Form of  Income  Benefit  Rider to Group  Contract  (filed
                      herewith).

               (fff)  Form  of   Income   Benefit   Rider  to   Certificate   of
                      Participation under a Group Contract (filed herewith).
    


          (5)  (a)    Form  of   Application  for  Individual  Flexible  Premium
                      Deferred    Annuity    Contract    and    Certificate   of
                      Participation under a Group Contract.2/

               (b)    Form of Application  for Group Flexible  Premium  Deferred
                      Annuity Contract.2/

               (c)    Revised  form  of  Application  for  Individual   Flexible
                      Premium  Deferred  Annuity  Contract  and  Certificate  of
                      Participation under a Group Contract. 4/

               (d)    Revised form of  Application  for Group  Flexible  Premium
                      Deferred Annuity Contract. 4/

          (6)  (a)    Articles  of  Incorporation  of   Annuity  Investors  Life
                      Insurance CompanyREGISTERED.1/
                                      -22-
<PAGE>

                      (i)   Amendment  to  Articles  of  Incorporation,  adopted
                            April 9, 1996,  and  approved  by the  Secretary  of
                            State, State of Ohio, on July 11, 1996.2/

                      (ii)  Amendment  to  Articles  of  Incorporation,  adopted
                            August 9, 1996,  and  approved by the  Secretary  of
                            State, State of Ohio, on December 3, 1996.2/

               (b)    Code of  Regulations  of Annuity  Investors Life Insurance
                      Company.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/

               (e)    Participation  Agreement  between  Annuity  Investors Life
                      Insurance  CompanyREGISTERED and Strong Variable Insurance
                      Funds, Inc. and Strong Special Fund II, Inc.2/

               (f)    Participation  Agreement  between  Annuity  Investors Life
                      Insurance    CompanyREGISTERED    and   INVESCO   Variable
                      Investment Funds, Inc.2/

               (g)    Participation  Agreement  between  Annuity  Investors Life
                      Insurance  CompanyREGISTERED  and Morgan Stanley Universal
                      Funds, Inc.2/

               (h)    Participation  Agreement  between  Annuity  Investors Life
                      Insurance  CompanyREGISTERED  and  PBHG  Insurance  Series
                      Fund, Inc.2/
                                      -23-
<PAGE>

               (i)    Service Agreement between Annuity Investors Life Insurance
                      CompanyREGISTERED and American Annuity GroupSM, Inc.1/

               (j)    Agreement  between AAG Securities,  Inc. and AAG Insurance
                      Agency, Inc.1/

               (k)    Investment  Service  Agreement  between Annuity  Investors
                      Life  Insurance  CompanyREGISTERED  and  American  Annuity
                      GroupSM, Inc. 1/

               (l)    Service Agreement between Annuity Investors Life Insurance
                      CompanyREGISTERED and Strong Capital Management, Inc.2/
 
               (m)    Service Agreement between Annuity Investors Life Insurance
                      CompanyREGISTERED and Pilgrim Baxter & Associates, Ltd.2/

               (n)    Service Agreement between Annuity Investors Life Insurance
                      CompanyREGISTERED  and Morgan  Stanley  Asset  Management,
                      Inc. 2/

               (o)    Amended  and  Restated   Agreement   between  The  Dreyfus
                      Corporation   and   Annuity   Investors   Life   Insurance
                      CompanyREGISTERED.2/

               (p)    Service Agreement between Annuity Investors Life Insurance
                      CompanyREGISTERED and Janus Capital Corporation.2/

               (q)    Service  Agreement  between INVESCO Funds Group,  Inc. and
                      Annuity Investors Life Insurance Company.4/

               (r)    Participation  Agreement between The Timothy Plan Variable
                      Series, Timothy Partners,  Ltd. and Annuity Investors Life
                      Insurance Company4/

               (s)    Service Agreement between The Timothy Plan Variable Series
                      and Annuity Investors Life Insurance Company. 4/

   
               (t)    Participation  Agreement  between BT Insurance Funds Trust
                      and  Annuity   Investors  Life  Insurance  Company  (filed
                      herewith).

               (u)    Service   Agreement  between  Bankers  Trust  Company  and
                      Annuity Investors Life Insurance Company.
    

        (9) Opinion and Consent of Counsel1/.

        (10)   Consent of Independent Auditors. 4/

        (11) No financial  statements are omitted from
Item 23.

        (12)   Not Applicable.
                                      -24-
<PAGE>

        (13)   Schedule for Computation of Performance Quotations. 4/

        (14)   Financial Data Schedule. 4/

        (15)   Powers of Attorney. 5/
                                      -25-

 
Mark F. Muething
Annuity Investors Life Insurance Company
250 E. Fifth Street
Cincinnati, OH  45202

    Re: Administrative Services

Dear Mr. Muething:

    Annuity Investors Life Insurance Company ("Life Company") will invest in one
or more  series  funds  (each a  "Portfolio")  of the BT  Insurance  Funds Trust
("Trust")  as the  underlying  funding  vehicle  for  certain  variable  annuity
contracts and variable life insurance  policies  (collectively,  the "Contracts)
issued by Life Company.  Bankers Trust Company  ("Bankers  Trust") serves as the
investment  adviser  to the  Trust  and in  such  capacity  provides  investment
advisory and administrative services to the Trust and its Portfolios.

    Life Company  hereby agrees to provide the services  enumerated  herein on a
sub-administration  basis to owners of Contracts ("Contract Owners") who are the
beneficial  owners of shares of the  Portfolios.  Such services shall consist of
the following:

1.      Providing  necessary  personnel and facilities to establish and maintain
        Contract Owner accounts and records.

2.      Recording  and  applying  debits and credits to the accounts of Contract
        Owners.

3.      Paying the proceeds of redemptions to Contract Owners either by check or
        by wire.

4.      Furnishing Fund prospectuses,  proxy statements,  annual and semi-annual
        reports  to  shareholders  and  other  communications  from  the Fund to
        Contract Owners.

5.      Performing such  shareholder  servicing as may be required,  which shall
        include but not be limited to, responding to questions regarding account
        balances and other account inquiries.

6.      Federal and state income tax withholding and reporting.

7.      Providing  such other  assistance  and  services  as may  reasonably  be
        requested by the Fund.

    In   recognition   of  Life  Company   providing   such   services  and  the
administrative  cost savings to the Portfolios and the Trust,  the Bankers Trust
will pay Life Company the fees set forth in Exhibit A hereto ("Fees").
<PAGE>

    In the event that the investment advisory and/or administration fees paid by
the Portfolio to Bankers Trust are reduced by the Board of Trustees of the Trust
pursuant to an amendment of the applicable agreement,  or because, in good faith
opinion of the Trust, based upon an opinion of counsel reasonably  acceptable to
Life Company, such payments are, will or may be in contravention or violation of
any law, rule, regulation,  court decision or order, or out-of-court  settlement
of actual or threatened  litigation or  enforcement  position of any  regulatory
body having  jurisdiction over the Trust (taken together,  "Change in Law"), the
Fees shall be adjusted accordingly to conform to such Change in Law on terms and
conditions deemed fair and equitable by Bankers Trust.

    Either party may terminate  this  Agreement,  without  penalty,  on 60 days'
written  notice to the other party;  except that the Fees set forth in Exhibit A
shall  continue as long as the assets  underlying  the Contracts  issued by Life
Company are allocated to the Trust.  Unless so terminated,  this Agreement shall
continue  in  effect  for so long  as  Bankers  Trust,  or its  successor(s)  in
interest,  continues to perform in an advisory capacity for the Trust and for so
long as any Contract  values or any monies  attributable  to Life Company are in
the Trust.

    Each party hereto shall indemnify and hold harmless  ("Indemnifying  Party")
the other party and each of its officers,  directors,  trustees,  employees, and
agents  (individually and collectively and "Indemnified Party") from and against
any and all losses, claims, damages, liabilities, costs, and expenses (including
reasonable  attorneys'  fees)  ("Loss")  arising out of (i) any violation by the
indemnifying  Party of any law,  rule,  regulation,  court order or  enforcement
position of any regulatory body having  jurisdiction over either party, (ii) the
Indemnifying party's performance of or failure to perform its obligations under,
or in connection  with this Agreement  except that an  Indemnifying  Party shall
have no liability to the extent such Losses result from the negligence,  willful
misconduct or breach of this of this  Agreement by an Indemnified  Party.  In no
event shall any party be liable for any special,  consequential,  or  incidental
damages.  The  indemnification  under this  Agreement is in addition to (but not
duplicative of), and not in lieu of, any indemnification provided under any Fund
Participation Agreement entered into between the parties.

    If you are in agreement with the foregoing, please sign a copy and return it
to the undersigned.

Sincerely,

Bankers Trust Company                   Accepted and Agreed:
                                        ANNUITY INVESTORS LIFE INSURANCE COMPANY

By:    ______________________           By:  ____________________
       (Print Name and Title)              Mark F. Muething, 
                                           Senior Vice President

Date:  _____________________        Date:  ___________________

                                      -2-

<PAGE>


Exhibit A
                            BT Insurance Funds Trust Fees

        For each of the following  Portfolios,  Bankers Trust agrees to pay Life
        Company  a  quarterly  amount  that is equal on an  annual  basis to the
        specified  percentage of the average combined daily net assets of all of
        the shares of the Portfolio held in the Life Company's  segregated asset
        accounts pursuant to the applicable Participation Agreement:

        Portfolio                                                    Fees for
        Administrative Services                        


        S&P 500 Equity Index Fund                                       .13%
        Small Cap Index Fund                                            .15%
        EAFE Equity Index Fund                                          .15%

                                      -3-


                         FUND PARTICIPATION AGREEMENT

    THIS AGREEMENT made as of the ____ day of  _____________,  1999 by and among
BT Insurance  Funds Trust  ("TRUST"),  a Massachusetts  business trust,  Bankers
Trust Company ("ADVISER"), a New York banking corporation, and Annuity Investors
Life Insurance  Company ("LIFE  COMPANY"),  a life insurance  company  organized
under the laws of the State of Ohio.

    WHEREAS,  TRUST is registered  with the Securities  and Exchange  Commission
("SEC") under the Investment Company Act of 1940, as amended (the "`40 Act"), as
an open-end, diversified management investment company; and

    WHEREAS,  TRUST is comprised of several  series funds (each a  "Portfolio"),
with those Portfolios  currently  available under this Agreement being listed on
Appendix A hereto; and

    WHEREAS,  TRUST was  organized  to act as the  funding  vehicle  for certain
variable life insurance and/or variable annuity contracts ("Variable Contracts")
offered  by  life  insurance  companies  through  separate  accounts  ("Separate
Accounts")  of  such  life   insurance   companies   ("Participating   Insurance
Companies"); and

    WHEREAS,  TRUST may also offer its shares to certain  qualified  pension and
retirement plans ("Qualified Plans"); and

    WHEREAS,  TRUST has received an order from the SEC,  granting  Participating
Insurance  Companies and their separate accounts  exemptions from the provisions
of Sections 9(a),  13(a),  15(a) and 15(b) of the `40 Act, and Rules 6e-2(b)(15)
and 6e-3(T)(b)(15)  thereunder,  to the extent necessary to permit shares of the
Portfolios  of the TRUST to be sold to and held by  Variable  Contract  Separate
Accounts of both affiliated and unaffiliated  Participating  Insurance Companies
and Qualified Plans ("Exemptive Order"); and

    WHEREAS, LIFE COMPANY has established or will establish one or more Separate
Accounts to offer  Variable  Contracts and is desirous of having TRUST as one of
the underlying funding vehicles for such Variable Contracts; and

    WHEREAS,  ADVISER is a "bank" as defined in the  Investment  Advisers Act of
1940,  as  amended  (the  "Advisers  Act")  and as such  is  excluded  from  the
definition  of  "Investment  Adviser"  and is not  required  to  register  as an
investment adviser pursuant to the Advisers Act; and

    WHEREAS, ADVISER serves as the TRUST's investment adviser; and
<PAGE>

    WHEREAS,   to  the  extent  permitted  by  applicable   insurance  laws  and
regulations,  LIFE  COMPANY  intends  to  purchase  shares  of TRUST to fund the
aforementioned Variable Contracts and TRUST is authorized to sell such shares to
LIFE COMPANY at such shares' net asset value;

    NOW,  THEREFORE,  in consideration  of their mutual promises,  LIFE COMPANY,
TRUST, and ADVISER agree as follows:

                         Article I. SALE OF TRUST SHARES

    1.1 TRUST agrees to make available to the Separate  Accounts of LIFE COMPANY
shares of the  selected  Portfolios  as listed on Appendix B for  investment  of
purchase  payments of Variable  Contracts  allocated to the designated  Separate
Accounts as provided in TRUST's Registration Statement.

    1.2  TRUST  agrees to sell to LIFE  COMPANY  those  shares  of the  selected
Portfolios of TRUST which LIFE COMPANY orders,  executing such orders on a daily
basis  at the net  asset  value  next  computed  after  receipt  by TRUST or its
designee of the order for the shares of TRUST. For purposes of this Section 1.2,
LIFE COMPANY  shall be the designee of TRUST for receipt of such orders from the
designated  Separate  Account  and  receipt by such  designee  shall  constitute
receipt by TRUST; provided that LIFE COMPANY receives the order by 4:00 p.m. New
York time and TRUST receives  notice from LIFE COMPANY by telephone or facsimile
(or by such other means as TRUST and LIFE  COMPANY may agree in writing) of such
order by 9:00 a.m. New York time on the next Business Day.  "Business Day" shall
mean any day on which the New York Stock  Exchange  is open for  trading  and on
which TRUST calculates its net asset value pursuant to the rules of the SEC.

1.3 TRUST agrees to redeem on LIFE  COMPANY's  request,  any full or  fractional
shares of TRUST held by LIFE COMPANY,  executing  such requests on a daily basis
at the net asset value next  computed  after receipt by TRUST or its designee of
the request for redemption,  in accordance with the provisions of this Agreement
and  TRUST's  Registration  Statement.  (In the event of a conflict  between the
provisions  of  this  Agreement  and the  Trust's  Registration  Statement,  the
provisions of the  Registration  Statement  shall  govern.) For purposes of this
Section 1.3, LIFE COMPANY shall be the designee of TRUST for receipt of requests
for redemption from the designated Separate Account and receipt by such designee
shall  constitute  receipt by TRUST;  provided  that LIFE  COMPANY  receives the
request for redemption by 4:00 p.m. New York time and TRUST receives notice from
LIFE COMPANY by telephone or facsimile (or by such other means as TRUST and LIFE
COMPANY may agree in writing) of such  request for  redemption  by 9:00 a.m. New
York time on the next Business Day.

    1.4 TRUST shall furnish,  on or before each ex-dividend date, notice to LIFE
COMPANY of any income  dividends  or capital gain  distributions  payable on the
shares of any Portfolio of TRUST. LIFE COMPANY hereby elects to receive all such
income dividends and capital gain  distributions as are payable on a Portfolio's
shares in additional shares of the Portfolio. TRUST shall notify LIFE COMPANY or
its designee of the number of shares so issued as payment of such  dividends and
distributions.
                                      -2-
<PAGE>

    1.5  TRUST  shall  make the net  asset  value  per  share  for the  selected
Portfolio(s)  available to LIFE  COMPANY on a daily basis as soon as  reasonably
practicable  after the net asset value per share is calculated but shall use its
best efforts to make such net asset value  available by 6:30 p.m. New York time.
If TRUST provides LIFE COMPANY with  materially  incorrect share net asset value
information  through  no fault of LIFE  COMPANY,  LIFE  COMPANY on behalf of the
Separate  Accounts,  shall be entitled to an  adjustment to the number of shares
purchased or redeemed to reflect the correct share net asset value. Any material
error in the calculation of net asset value per share,  dividend or capital gain
information shall be reported promptly upon discovery to LIFE COMPANY.

    1.6 At the end of each Business Day, LIFE COMPANY shall use the  information
described in Section 1.5 to calculate  Separate Account unit values for the day.
Using these unit values,  LIFE COMPANY shall  process each such  Business  Day's
Separate Account  transactions  based on requests and premiums received by it by
the close of trading on the floor of the New York Stock Exchange (currently 4:00
p.m.  New York time) to  determine  the net dollar  amount of TRUST shares which
shall be purchased or redeemed at that day's  closing net asset value per share.
The net purchase or redemption  orders so  determined  shall be  transmitted  to
TRUST by LIFE  COMPANY  by 9:00  a.m.  New York  Time on the  Business  Day next
following  LIFE  COMPANY's  receipt of such  requests and premiums in accordance
with the terms of Sections 1.2 and 1.3 hereof.

1.7 If LIFE COMPANY's order requests the purchase of TRUST shares,  LIFE COMPANY
shall pay for such purchase by wiring  federal funds to TRUST or its  designated
custodial  account on the day the order is transmitted by LIFE COMPANY.  If LIFE
COMPANY's  order requests a net redemption  resulting in a payment of redemption
proceeds  to  LIFE  COMPANY,  TRUST  shall  use its  best  efforts  to wire  the
redemption  proceeds  to LIFE  COMPANY by the next  Business  Day. In any event,
proceeds  shall be wired to LIFE  COMPANY  within  three  business  days or such
longer time period permitted by the '40 Act or the rules,  orders or regulations
thereunder,  and TRUST  shall  notify the person  designated  in writing by LIFE
COMPANY as the  recipient  for such  notice of such delay by 3:00 p.m.  New York
Time on the same Business Day that LIFE COMPANY  transmits the redemption  order
to TRUST.  If LIFE  COMPANY's  order  requests  the  application  of  redemption
proceeds from the redemption of shares to the purchase of shares of another Fund
advised by ADVISER,  TRUST shall so apply such proceeds on the same Business Day
that LIFE COMPANY transmits such order to TRUST.

    1.8 TRUST  agrees  that all shares of the  Portfolios  of TRUST will be sold
only to  Participating  Insurance  Companies which have agreed to participate in
TRUST  to fund  their  Separate  Accounts  and/or  to  Qualified  Plans,  all in
accordance with the  requirements of Section  817(h)(4) of the Internal  Revenue
Code of 1986, as amended ("Code") and Treasury Regulation 1.817-5. Shares of the
TRUST's Portfolios will not be sold directly to the general public.
                                      -3-
<PAGE>

    1.9 TRUST may  refuse to sell  shares of any  Portfolio  to any  person,  or
suspend or terminate the offering of the shares of or liquidate any Portfolio of
TRUST if such  action is  required by law or by  regulatory  authorities  having
jurisdiction or is, in the sole discretion of the Board of Trustees of the TRUST
(the "Board"), acting in good faith and in light of its duties under federal and
any applicable state laws, deemed necessary, desirable or appropriate and in the
best interests of the shareholders of such Portfolios.

    1.10  Issuance and transfer of Portfolio  shares will be by book entry only.
Stock  certificates will not be issued to LIFE COMPANY or the Separate Accounts.
Shares ordered from Portfolio will be recorded in appropriate  book entry titles
for the Separate Accounts.

                   Article II. REPRESENTATIONS AND WARRANTIES

    2.1 LIFE COMPANY  represents  and warrants  that it is an insurance  company
duly organized and in good standing under the laws of the State of Ohio and that
it has legally and validly  established  each  Separate  Account as a segregated
asset  account under such laws,  and that AAG  Securities,  Inc.,  the principal
underwriter for the Variable  Contracts,  is registered as a broker-dealer under
the Securities Exchange Act of 1934 (the "'34 Act").

    2.2 LIFE COMPANY represents and warrants that it has registered or, prior to
any issuance or sale of the Variable  Contracts,  will  register  each  Separate
Account as a unit investment  trust ("UIT") in accordance with the provisions of
the `40 Act and cause each Separate  Account to remain so registered to serve as
a segregated asset account for the Variable Contracts,  unless an exemption from
registration is available.

2.3 LIFE COMPANY  represents  and warrants that the Variable  Contracts  will be
registered  under the Securities Act of 1933 (the "`33 Act") unless an exemption
from  registration  is  available  prior to any issuance or sale of the Variable
Contracts, and that the Variable Contracts will be issued and sold in compliance
in all material respects with all applicable  federal and state laws and further
that the sale of the Variable  Contracts  shall comply in all material  respects
with applicable state insurance law suitability requirements.

    2.4 LIFE COMPANY  represents  and warrants  that the Variable  Contracts are
currently  and at the  time of  issuance  will  be  treated  as life  insurance,
endowment or annuity contracts under applicable  provisions of the Code, that it
will maintain  such  treatment  and that it will notify TRUST  immediately  upon
having a reasonable basis for believing that the Variable  Contracts have ceased
to be so treated or that they might not be so treated in the future.

    2.5 TRUST  represents  and  warrants  that the Fund shares  offered and sold
pursuant  to this  Agreement  will be  registered  under the '33 Act and sold in
accordance with all applicable federal laws, and TRUST shall be registered under
the `40 Act  prior to and at the time of any  issuance  or sale of such  shares.
TRUST,  subject to Section  1.9 above,  shall amend its  registration  statement
under  the `33 Act and the `40 Act  from  time to time as  required  in order to
effect the continuous  offering of its shares.  TRUST shall register and qualify
its shares for sale in  accordance  with the laws of the various  states only if
and to the extent deemed advisable by TRUST.
                                      -4-
<PAGE>

    2.6 TRUST  represents  and warrants that each Portfolio will comply with the
diversification  requirements  set forth in Section  817(h) of the Code, and the
rules  and  regulations   thereunder,   including  without  limitation  Treasury
Regulation  1.817-5,  and will notify  LIFE  COMPANY  immediately  upon having a
reasonable  basis for  believing any Portfolio has ceased to comply or might not
so comply and will immediately take all reasonable steps to adequately diversify
the Portfolio to achieve compliance.

    2.7 TRUST  represents  and warrants that each  Portfolio  invested in by the
Separate  Account  will be treated as a  "regulated  investment  company"  under
Subchapter M of the Code, and will notify LIFE COMPANY immediately upon having a
reasonable  basis for  believing  it has  ceased to so  qualify  or might not so
qualify in the future.

    2.8 ADVISER  represents  and warrants that it shall perform its  obligations
hereunder in compliance in all material  respects with any applicable  state and
federal laws.

                  Article III. PROSPECTUS AND PROXY STATEMENTS

    3.1 TRUST shall prepare and be  responsible  for filing with the SEC and any
state regulators requiring such filing all shareholder reports,  notices,  proxy
materials  (or  similar  materials  such  as  voting  instruction   solicitation
materials),  prospectuses  and  statements of additional  information  of TRUST.
TRUST shall bear the costs of registration  and  qualification  of shares of the
Portfolios,  preparation and filing of the documents  listed in this Section 3.1
and all taxes and filing fees to which an issuer is subject on the  issuance and
transfer of its shares.

    3.2 At least  annually,  TRUST or its designee  shall  provide LIFE COMPANY,
free of charge, with as many copies of the current prospectus (or prospectuses),
statements of additional  information,  annual and semi-annual reports and proxy
statements  for the shares of the  Portfolios  as LIFE  COMPANY  may  reasonably
request for  distribution  to existing  Variable  Contract owners whose Variable
Contracts  are funded by such shares.  TRUST or its designee  shall provide LIFE
COMPANY,  at  LIFE  COMPANY's  expense,  with  as  many  copies  of the  current
prospectus  (or  prospectuses)  for the shares as LIFE  COMPANY  may  reasonably
request for  distribution to prospective  purchasers of Variable  Contracts.  If
requested  by  LIFE   COMPANY,   TRUST  or  its  designee   shall  provide  such
documentation  (including a "camera  ready" copy of the current  prospectus  (or
prospectuses)  as set in type or, at the request of LIFE COMPANY,  as a diskette
in the form sent to the financial printer) and other assistance as is reasonably
necessary in order for the parties hereto once a year (or more frequently if the
prospectus (or  prospectuses) for the shares is supplemented or amended) to have
the prospectus for the Variable  Contracts and the prospectus (or  prospectuses)
for the TRUST  shares  printed  together in one  document.  The expenses of such
printing will be apportioned between LIFE COMPANY and TRUST in proportion to the
number of pages of the Variable Contract and TRUST prospectus, taking account of
other  relevant  factors  affecting  the  expense of  printing,  such as covers,
columns,  graphs and charts;  TRUST  shall bear the cost of  printing  the TRUST
prospectus  portion of such document for distribution only to owners of existing
Variable  Contracts  funded by the TRUST shares and LIFE COMPANY  shall bear the
                                      -5-
<PAGE>

expense of printing  the  portion of such  documents  relating  to the  Separate
Account;  provided,  however,  LIFE COMPANY shall bear all printing  expenses of
such combined documents where used for distribution to prospective purchasers or
to owners of existing Variable  Contracts not funded by the shares. In the event
that LIFE COMPANY requests that TRUST or its designee provide TRUST's prospectus
in a "camera ready" or diskette format, TRUST shall be responsible for providing
the  prospectus  (or  prospectuses)  in the format in which it is  accustomed to
formatting  prospectuses  and shall bear the expense of providing the prospectus
(or prospectuses) in such format (e.g. typesetting  expenses),  and LIFE COMPANY
shall bear the expense of  adjusting  or changing the format to conform with any
of its prospectuses.

3.3 TRUST will  provide  LIFE  COMPANY  with at least one  complete  copy of all
prospectuses,  statements  of  additional  information,  annual and  semi-annual
reports,  proxy  statements,   exemptive  applications  and  all  amendments  or
supplements to any of the above that relate to the Portfolios promptly after the
filing of each such document with the SEC or other  regulatory  authority.  LIFE
COMPANY will provide TRUST with at least one complete copy of all  prospectuses,
statements of additional  information,  annual and  semi-annual  reports,  proxy
statements,  exemptive  applications and all amendments or supplements to any of
the above that relate to a Separate  Account  promptly  after the filing of each
such document with the SEC or other regulatory authority.

                           Article IV. SALES MATERIALS

    4.1 LIFE COMPANY will furnish,  or will cause to be furnished,  to TRUST and
ADVISER,  each piece of sales literature or other promotional  material in which
TRUST or ADVISER is named,  at least  fifteen  (15)  Business  Days prior to its
intended use. No such  material will be used if TRUST or ADVISER  objects to its
use in writing within ten (10) Business Days after receipt of such material.

    4.2 TRUST and ADVISER will furnish,  or will cause to be furnished,  to LIFE
COMPANY,  each piece of sales literature or other promotional  material in which
LIFE COMPANY or its Separate  Accounts are named, at least fifteen (15) Business
Days prior to its intended  use. No such  material  will be used if LIFE COMPANY
objects to its use in writing  within ten (10)  Business  Days after  receipt of
such material.

    4.3 TRUST and its  affiliates  and agents shall not give any  information or
make any  representations  on behalf of LIFE COMPANY or concerning LIFE COMPANY,
the Separate Accounts,  or the Variable Contracts issued by LIFE COMPANY,  other
than the information or representations contained in a registration statement or
prospectus  for such  Variable  Contracts,  as such  registration  statement and
prospectus  may be amended or  supplemented  from time to time, or in reports of
the Separate  Accounts or reports  prepared for  distribution  to owners of such
Variable  Contracts,  or in  sales  literature  or  other  promotional  material
approved by LIFE COMPANY or its designee,  except with the written permission of
LIFE COMPANY.
                                      -6-
<PAGE>

    4.4  LIFE  COMPANY  and  its  affiliates  and  agents  shall  not  give  any
information or make any  representations  on behalf of TRUST or concerning TRUST
other  than the  information  or  representations  contained  in a  registration
statement or prospectus for TRUST, as such registration statement and prospectus
may be amended or  supplemented  from time to time,  or in sales  literature  or
other promotional  material  approved by TRUST or its designee,  except with the
written permission of TRUST.

    4.5 For purposes of this  Agreement,  the phrase "sales  literature or other
promotional  material" or words of similar import include,  without  limitation,
advertisements (such as material published, or designed for use, in a newspaper,
magazine or other periodical,  radio,  television,  telephone or tape recording,
videotape display, signs or billboards,  motion pictures or other public media),
sales  literature  (such  as  any  written  communication  distributed  or  made
generally available to customers or the public, including brochures,  circulars,
research reports,  market letters,  form letters,  seminar texts, or reprints or
excerpts of any other  advertisement,  sales literature,  or published article),
educational or training  materials or other  communications  distributed or made
generally available to some or all agents or employees, registration statements,
prospectuses,  statements of  additional  information,  shareholder  reports and
proxy  materials,  and any  other  material  constituting  sales  literature  or
advertising under National Association of Securities Dealers, Inc.
("NASD") rules, the `40 Act, the '33 Act or rules thereunder.

                         Article V. POTENTIAL CONFLICTS

    5.1 The parties  acknowledge  that TRUST has  received an order from the SEC
granting relief from various  provisions of the '40 Act and the rules thereunder
to the  extent  necessary  to  permit  TRUST  shares  to be sold to and  held by
Variable   Contract  separate  accounts  of  both  affiliated  and  unaffiliated
Participating  Insurance  Companies and  Qualified  Plans.  The Exemptive  Order
requires  TRUST  and  each  Participating   Insurance  Company  to  comply  with
conditions  and  undertakings  substantially  as provided in this Section 5. The
TRUST will not enter into a participation agreement with any other Participating
Insurance  Company unless it imposes the same conditions and undertakings as are
imposed on LIFE COMPANY hereby.

    5.2  The  Board  will  monitor  TRUST  for  the  existence  of any  material
irreconcilable conflict between the interests of Variable Contract owners of all
separate  accounts and with  participants of Qualified Plans investing in TRUST.
An irreconcilable  material  conflict may arise for a variety of reasons,  which
may include:  (a) an action by any state insurance regulatory  authority;  (b) a
change in applicable  federal or state  insurance,  tax, or  securities  laws or
regulations,  or a public ruling, private letter ruling or any similar action by
insurance,  tax or securities regulatory  authorities;  (c) an administrative or
judicial  decision  in any  relevant  proceeding;  (d) the  manner  in which the
investments of TRUST are being managed;  (e) a difference in voting instructions
given by Variable Contract owners;  (f) a decision by a Participating  Insurance
Company to disregard the voting instructions of Variable Contract owners and (g)
if  applicable,  a  decision  by  a  Qualified  Plan  to  disregard  the  voting
instructions of plan participants.
                                      -7-
<PAGE>

5.3 LIFE  COMPANY will report any  potential  or existing  conflicts of which it
becomes aware to the Board.  LIFE COMPANY will be responsible  for assisting the
Board in carrying out its duties in this regard by providing  the Board with all
information  reasonably  necessary for the Board to consider any issues  raised.
The  responsibility  includes,  but is not limited to, an obligation by the LIFE
COMPANY to inform the Board  whenever it has  determined  to disregard  Variable
Contract owner voting instructions.  These responsibilities of LIFE COMPANY will
be  carried  out with a view  only to the  interests  of the  Variable  Contract
owners.

    5.4 If a majority of the Board or majority  of its  disinterested  Trustees,
determines  that  a  material  irreconcilable  conflict  exists  affecting  LIFE
COMPANY,  LIFE COMPANY, at its expense and to the extent reasonably  practicable
(as determined by a majority of the Board's disinterested  Trustees),  will take
any steps necessary to remedy or eliminate the irreconcilable material conflict,
including;  (a) withdrawing the assets  allocable to some or all of the Separate
Accounts from TRUST or any Portfolio  thereof and reinvesting  those assets in a
different  investment  medium,  which may include another Portfolio of TRUST, or
another  investment  company;  (b)  submitting  the  question as to whether such
segregation  should be implemented to a vote of all affected  Variable  Contract
owners  and as  appropriate,  segregating  the assets of any  appropriate  group
(i.e.,  variable  annuity or variable life insurance  Contract  owners of one or
more Participating Insurance Companies) that votes in favor of such segregation,
or offering to the affected Variable Contract owners the option of making such a
change; and (c) establishing a new registered  management investment company (or
series  thereof)  or managed  separate  account.  If a  material  irreconcilable
conflict  arises  because  of LIFE  COMPANY's  decision  to  disregard  Variable
Contract  owner voting  instructions,  and that  decision  represents a minority
position or would preclude a majority vote, LIFE COMPANY may be required, at the
election of TRUST, to withdraw the Separate  Account's  investment in TRUST, and
no  charge or  penalty  will be  imposed  as a result  of such  withdrawal.  The
responsibility  to take such  remedial  action  shall be carried out with a view
only to the interests of the Variable Contract owners.

    For the  purposes  of this  Section  5.4,  a majority  of the  disinterested
members  of the  Board  shall  determine  whether  or not  any  proposed  action
adequately remedies any irreconcilable  material conflict,  but in no event will
TRUST or  ADVISER  (or any other  investment  adviser of TRUST) be  required  to
establish a new funding medium for any Variable Contract.  Further, LIFE COMPANY
shall not be required by this Section 5.4 to establish a new funding  medium for
any Variable  Contracts  if any offer to do so has been  declined by a vote of a
majority of Variable  Contract owners  materially and adversely  affected by the
irreconcilable material conflict.

    5.5 The Board's determination of the existence of an irreconcilable material
conflict  and its  implications  shall be made known  promptly and in writing to
LIFE COMPANY.

    5.6 No less than  annually,  LIFE  COMPANY  shall  submit to the Board  such
reports, materials or data as the Board may reasonably request so that the Board
may fully carry out its obligations.  Such reports, materials, and data shall be
submitted more frequently if deemed appropriate by the Board.
                                      -8-
<PAGE>

                               Article VI. VOTING

    6.1 LIFE COMPANY will provide pass-through voting privileges to all Variable
Contract  owners  so long  as the  SEC  continues  to  interpret  the `40 Act as
requiring   pass-through   voting   privileges  for  Variable  Contract  owners.
Accordingly,  LIFE COMPANY, where applicable,  will vote shares of the Portfolio
held in its Separate  Accounts in a manner  consistent with voting  instructions
timely  received  from  its  Variable  Contract  owners.  LIFE  COMPANY  will be
responsible for assuring that each of its Separate Accounts that participates in
TRUST  calculates   voting   privileges  in  a  manner   consistent  with  other
Participating  Insurance  Companies.  LIFE COMPANY will vote shares for which it
has not received timely voting  instructions,  as well as shares it owns, in the
same  proportion  as its votes  those  shares for which it has  received  voting
instructions.

    6.2 If and to the extent Rule 6e-2 and Rule 6e-3(T) are amended,  or if Rule
6e-3 is adopted,  to provide  exemptive relief from any provision of the `40 Act
or the rules  thereunder  with respect to mixed and shared  funding on terms and
conditions  materially  different from any  exemptions  granted in the Exemptive
Order, then TRUST, and/or the Participating Insurance Companies, as appropriate,
shall  take such  steps as may be  necessary  to comply  with Rule 6e-2 and Rule
6e-3(T),  as amended,  and Rule 6e-3,  as adopted,  to the extent such Rules are
applicable.

                          Article VII. INDEMNIFICATION

        7.1  Indemnification  by LIFE COMPANY.  LIFE COMPANY agrees to indemnify
and  hold  harmless  TRUST,  ADVISER  and  each of  their  Trustees,  directors,
principals, officers, employees and agents and each person, if any, who controls
TRUST or ADVISER within the meaning of Section 15 of the `33 Act  (collectively,
the  "Indemnified  Parties")  against  any  and  all  losses,  claims,  damages,
liabilities  (including  amounts paid in settlement  with the written consent of
LIFE COMPANY,  which consent shall not be  unreasonably  withheld) or litigation
(including  reasonable  legal and  other  expenses),  to which  the  Indemnified
Parties  may become  subject  under any  statute,  regulation,  at common law or
otherwise,  insofar as such losses, claims, damages, liabilities or expenses (or
actions  in  respect  thereof)  or  settlements  are  related  to  the  sale  or
acquisition of TRUST's shares or the Variable Contracts and:

(a) arise out of or are based  upon any  untrue  statements  or  alleged  untrue
    statements of any material fact contained in the  Registration  Statement or
    prospectus for the Variable Contracts or contained in the Variable Contracts
    (or any amendment or supplement to any of the foregoing), or arise out of or
    are based upon the  omission  or the  alleged  omission  to state  therein a
    material  fact  required  to be  stated  therein  or  necessary  to make the
    statements therein not misleading, provided that this agreement to indemnify
    shall not apply as to any Indemnified Party if such statement or omission or
    such  alleged  statement  or  omission  was  made in  reliance  upon  and in
    conformity  with  information  furnished in writing to LIFE COMPANY by or on
                                      -9-
<PAGE>
    
    behalf of TRUST for use in the registration  statement or prospectus for the
    Variable  Contracts or in the Variable Contracts or sales literature (or any
    amendment or supplement) or otherwise for use in connection with the sale of
    the Variable Contracts or TRUST shares; or

(b) arise out of or result from (i)  statements or  representations  (other than
    statements  or  representations  contained  in the  registration  statement,
    prospectus or sales  literature  of TRUST not supplied by LIFE  COMPANY,  or
    persons  under its  control)  or (ii)  wrongful  conduct of LIFE  COMPANY or
    persons under its control,  with respect to the sale or  distribution of the
    Variable Contracts or TRUST shares; or

        (c)arise out of any untrue  statement or alleged  untrue  statement of a
    material fact contained in a registration  statement,  prospectus,  or sales
    literature  of TRUST or any amendment  thereof or supplement  thereto or the
    omission or alleged omission to state therein a material fact required to be
    stated therein or necessary to make the statements therein not misleading if
    such statement or omission or such alleged statement or omission was made in
    reliance upon and in  conformity  with  information  furnished in writing to
    TRUST by or on behalf of LIFE COMPANY; or

        (d)arise  as a  result  of  any  failure  by  LIFE  COMPANY  to  provide
    substantially the services and furnish the materials under the terms of this
    Agreement; or

        (e)arise out of or result from any material breach of any representation
    and/or  warranty  made by LIFE COMPANY in this  Agreement or arise out of or
    result from any other material breach of this Agreement by LIFE COMPANY.

7.2 LIFE COMPANY shall not be liable under this  indemnification  provision with
respect to any losses,  claims,  damages,  liabilities or litigation incurred or
assessed  against an Indemnified  Party to the extent that such losses,  claims,
damages,  liabilities or litigation are attributable to such Indemnified Party's
willful  misfeasance,  bad  faith,  or  negligence  in the  performance  of such
Indemnified  Party's duties or by reason of such  Indemnified  Party's  reckless
disregard of obligations or duties under this Agreement.

    7.3 LIFE COMPANY  shall not be liable under this  indemnification  provision
with  respect  to any claim  made  against  an  Indemnified  Party  unless  such
Indemnified  Party  shall  have  notified  LIFE  COMPANY  in  writing  within  a
reasonable   time  after  the  summons  or  other  first  legal  process  giving
information  of the  nature  of the  claim  shall  have  been  served  upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify LIFE COMPANY of any
such claim shall not relieve LIFE COMPANY from any  liability  which it may have
to the Indemnified  Party against whom such action is brought  otherwise than on
account of this  indemnification  provision.  In case any such action is brought
against an Indemnified  Party,  LIFE COMPANY shall be entitled to participate at
its own  expense  in the  defense of such  action.  LIFE  COMPANY  also shall be
                                      -10-
<PAGE>

entitled to assume the defense thereof,  with counsel  satisfactory to the party
named in the  action.  After  notice  from LIFE  COMPANY  to such  party of LIFE
COMPANY's  election to assume the defense thereof,  the Indemnified  Party shall
bear the fees and expenses of any  additional  counsel  retained by it, and LIFE
COMPANY will not be liable to such party under this  Agreement  for any legal or
other expenses  subsequently  incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.

    7.4  Indemnification  by  ADVISER.  ADVISER  agrees  to  indemnify  and hold
harmless LIFE COMPANY and each of its directors, officers, employees, and agents
and each person, if any, who controls LIFE COMPANY within the meaning of Section
15 of the `33 Act (collectively,  the "Indemnified Parties") against any and all
losses, claims, damages,  liabilities (including amounts paid in settlement with
the written consent of ADVISER which consent shall not be unreasonably withheld)
or  litigation  (including  reasonable  legal and other  expenses)  to which the
Indemnified  Parties may become  subject under any statute,  or  regulation,  at
common law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect  thereof) or settlements are related to the sale
or acquisition of TRUST's shares or the Variable Contracts and:

        (a) arise out of or are  based  upon any  untrue  statement  or  alleged
    untrue  statement  of  any  material  fact  contained  in  the  registration
    statement or  prospectus  or sales  literature of TRUST (or any amendment or
    supplement to any of the  foregoing),  or arise out of or are based upon the
    omission or the alleged  omission to state  therein a material fact required
    to be  stated  therein  or  necessary  to make the  statements  therein  not
    misleading,  provided that this agreement to indemnify shall not apply as to
    any  Indemnified  Party  if such  statement  or  omission  or  such  alleged
    statement  or omission  was made in  reliance  upon and in  conformity  with
    information  furnished  to ADVISER or TRUST by or on behalf of LIFE  COMPANY
    for use in the  registration  statement or prospectus  for TRUST or in sales
    literature  (or  any  amendment  or  supplement)  or  otherwise  for  use in
    connection with the sale of the Variable Contracts or TRUST shares; or

        (b) arise out of or result from (i) statements or representations (other
    than statements or representations  contained in the registration statement,
    prospectus or sales  literature  for the Variable  Contracts not supplied by
    ADVISER or TRUST or persons under its control) or (ii)  wrongful  conduct of
    ADVISER or TRUST or persons under their control, with respect to the sale or
    distribution of the Variable Contracts or TRUST shares; or

        (c) arise out of any untrue  statement or alleged untrue  statement of a
    material fact contained in a registration  statement,  prospectus,  or sales
    literature  covering the Variable  Contracts,  or any  amendment  thereof or
    supplement  thereto or the omission or alleged  omission to state  therein a
    material  fact  required  to be  stated  therein  or  necessary  to make the
                                      -11-
<PAGE>
    
    statements  therein not  misleading,  if such  statement or omission or such
    alleged  statement or omission was made in reliance  upon and in  conformity
    with  information  furnished to LIFE COMPANY for inclusion  therein by or on
    behalf of TRUST; or

        (d) arise as a result of (i) a failure  by  ADVISER  or TRUST to provide
    substantially the services and furnish the materials under the terms of this
    Agreement;  or (ii) a failure by a Portfolio(s)  invested in by the Separate
    Account to comply with the diversification requirements of Section 817(h) of
    the Code; or (iii) a failure by a  Portfolio(s)  invested in by the Separate
    Account to qualify as a "regulated investment company" under Subchapter M of
    the Code; or

        (e) arise as a result of any  failure  by  ADVISER  or TRUST to  provide
    substantially the services and furnish the materials under the terms of this
    Agreement; or

        (f)  arise  out  of  or  result   from  any   material   breach  of  any
    representation  and/or  warranty made by ADVISER in this  Agreement or arise
    out of or  result  from any  other  material  breach  of this  Agreement  by
    ADVISER.

    7.5 ADVISER shall not be liable under this  indemnification  provision  with
respect to any losses,  claims,  damages,  liabilities or litigation incurred or
assessed  against an Indemnified  Party to the extent that such losses,  claims,
damages,  liabilities or litigation are attributable to such Indemnified Party's
willful  misfeasance,  bad  faith,  or  negligence  in the  performance  of such
Indemnified  Party's duties or by reason of such  Indemnified  Party's  reckless
disregard of obligations and duties under this Agreement.

7.6  ADVISER  shall not be liable  under  this  indemnification  provision  with
respect to any claim made against an Indemnified  Party unless such  Indemnified
Party shall have notified  ADVISER in writing within a reasonable time after the
summons or other first legal  process  giving  information  of the nature of the
claim  shall  have been  served  upon  such  Indemnified  Party  (or after  such
Indemnified  Party shall have received  notice of such service on any designated
agent),  but  failure  to notify  ADVISER of any such  claim  shall not  relieve
ADVISER from any liability  which it may have to the  Indemnified  Party against
whom such action is brought  otherwise  than on account of this  indemnification
provision.  In case any such action is brought against the Indemnified  Parties,
ADVISER  shall be  entitled  to  participate  at its own  expense in the defense
thereof.  ADVISER  also shall be entitled to assume the  defense  thereof,  with
counsel satisfactory to the party named in the action. After notice from ADVISER
to such  party  of  ADVISER's  election  to  assume  the  defense  thereof,  the
Indemnified  Party shall bear the fees and  expenses of any  additional  counsel
retained  by it,  and  ADVISER  will not be  liable  to such  party  under  this
Agreement for any legal or other  expenses  subsequently  incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.

                         Article VIII. TERM; TERMINATION

    8.1 This  Agreement  shall be  effective  as of the date  hereof  and  shall
continue in force until terminated in accordance with the provisions herein.

    8.2  This  Agreement  shall  terminate  in  accordance  with  the  following
provisions:
                                      -12-
<PAGE>

        (a) At the  option  of LIFE  COMPANY  or TRUST at any time from the date
    hereof  upon 60 days'  notice,  unless a  shorter  time is  agreed to by the
    parties;

        (b) At the option of LIFE  COMPANY,  if TRUST shares are not  reasonably
    available to meet the  requirements of the Variable  Contracts as determined
    by LIFE COMPANY.  Prompt notice of election to terminate  shall be furnished
    by LIFE COMPANY,  said termination to be effective ten days after receipt of
    notice  unless  TRUST  makes  available  a  sufficient  number  of shares to
    reasonably  meet the  requirements  of the  Variable  Contracts  within said
    ten-day period;

        (c) At the  option  of LIFE  COMPANY,  upon the  institution  of  formal
    proceedings  against  TRUST by the SEC,  the NASD,  or any other  regulatory
    body,  the  expected  or  anticipated  ruling,  judgment or outcome of which
    would,  in LIFE COMPANY's  reasonable  judgment,  materially  impair TRUST's
    ability to meet and perform TRUST's obligations and duties hereunder. Prompt
    notice of election to terminate shall be furnished by LIFE COMPANY with said
    termination to be effective upon receipt of notice;

        (d) At the option of TRUST,  upon the institution of formal  proceedings
    against LIFE COMPANY by the SEC, the NASD, or any other regulatory body, the
    expected  or  anticipated  ruling,  judgment or outcome of which  would,  in
    TRUST's  reasonable  judgment,  materially  impair LIFE COMPANY's ability to
    meet and perform its  obligations  and duties  hereunder.  Prompt  notice of
    election to terminate  shall be furnished by TRUST with said  termination to
    be effective upon receipt of notice;

        (e) In the event TRUST's  shares are not  registered,  issued or sold in
    accordance with  applicable  state or federal law, or such law precludes the
    use of such shares as the underlying investment medium of Variable Contracts
    issued or to be issued by LIFE COMPANY.  Termination shall be effective upon
    such occurrence without notice;

        (f) At the option of TRUST if the Variable Contracts cease to qualify as
    annuity  contracts or life insurance  contracts,  as  applicable,  under the
    Code, or if TRUST reasonably  believes that the Variable  Contracts may fail
    to so qualify. Termination shall be effective upon receipt of notice by LIFE
    COMPANY;

        (g) At the option of LIFE COMPANY,  upon TRUST's  breach of any material
    provision  of this  Agreement,  which  breach  has  not  been  cured  to the
    satisfaction  of LIFE COMPANY  within ten days after written  notice of such
    breach is delivered to TRUST;

        (h) At the option of TRUST,  upon LIFE COMPANY's  breach of any material
    provision  of this  Agreement,  which  breach  has  not  been  cured  to the
    satisfaction of TRUST within ten days after written notice of such breach is
    delivered to LIFE COMPANY;
                                      -13-
<PAGE>

        (i)  At  the  option  of  TRUST,  if  the  Variable  Contracts  are  not
    registered,  issued or sold in accordance  with  applicable  federal  and/or
    state law.  Termination shall be effective  immediately upon such occurrence
    without notice;

        (j) In the event this  Agreement is assigned  without the prior  written
    consent of LIFE COMPANY, TRUST, and ADVISER,  termination shall be effective
    immediately upon such occurrence  without notice,  provided,  however,  that
    this  Agreement may be assigned  without prior written  consent by the other
    parties  to any  company  that  acquires  all or  substantially  all of that
    party's  assets or equity,  or any company or entity into which the party is
    merged or otherwise reorganized.

    8.3  Notwithstanding  any termination of this Agreement  pursuant to Section
8.2 hereof, TRUST shall at the option of LIFE COMPANY continue to make available
additional TRUST shares, as provided below, pursuant to the terms and conditions
of this Agreement, for all Variable Contracts in effect on the effective date of
termination of this Agreement (hereinafter referred to as "Existing Contracts").
Specifically,  without limitation,  if LIFE COMPANY so elects, the owners of the
Existing  Contracts or LIFE COMPANY,  whichever shall have legal authority to do
so, shall be permitted to reallocate investments in TRUST, redeem investments in
TRUST and/or invest in TRUST upon the payment of additional  premiums  under the
Existing Contracts.  In the event of a termination of this Agreement pursuant to
Section 8.2 hereof,  LIFE  COMPANY,  as  promptly  as is  practicable  under the
circumstances,  shall  notify TRUST and ADVISER  whether LIFE COMPANY  elects to
continue to make TRUST shares available after such termination.  If TRUST shares
continue to be made  available  after such  termination,  the provisions of this
Agreement shall remain in effect and thereafter either TRUST or LIFE COMPANY may
terminate  the  Agreement,  as so continued  pursuant to this Section 8.3,  upon
sixty (60) days' prior written notice to the other party.

    8.4 Except as necessary  to  implement  Variable  Contract  owner  initiated
transactions,  or as  required  by state  insurance  laws or  regulations,  LIFE
COMPANY shall not redeem the shares  attributable to the Variable  Contracts (as
opposed to the shares attributable to LIFE COMPANY's assets held in the Separate
Accounts),  and LIFE COMPANY  shall not prevent  Variable  Contract  owners from
allocating  payments  to a  Portfolio  that was  otherwise  available  under the
Variable  Contracts  until  thirty (30) days after the LIFE  COMPANY  shall have
notified TRUST of its intention to do so.

                               Article IX. NOTICES

    Any notice  hereunder  shall be given by registered or certified mail return
receipt  requested  to the other  party at the  address  of such party set forth
below or at such other  address  as such party may from time to time  specify in
writing to the other party.
                                      -14-
<PAGE>

            If to TRUST:

            BT Insurance Funds Trust
            c/o First Data Investor Services Group, Inc.
            One Exchange Place
            53 State Street, Mail Stop BOS 865
            Boston, MA  02109
            Attn:  Elizabeth Russell, Legal Dep't

            and

            c/o BT Alex. Brown
            One South Street, Mail Stop 1-18-6
            Baltimore, MD  21202
            Attn: Mutual Fund Services

            If to ADVISER:

            Bankers Trust Company - U.S. Investment Management
            130 Liberty Street
            New York, NY 10006
            Attn.:  Vinay Mendiratta, Mail Stop 2355


            If to LIFE COMPANY:

           Annuity Investors Life Insurance Company
           250 E. Fifth Street
           Cincinnati, OH  45202
           Attn:  Mark Muething, General Counsel

    Notice  shall be deemed  given on the date of  receipt by the  addressee  as
evidenced by the return receipt.

                            Article X. MISCELLANEOUS

    10.1  The  captions  in this  Agreement  are  included  for  convenience  of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.

    10.2  This  Agreement  may  be  executed   simultaneously  in  two  or  more
counterparts,  each of which taken  together  shall  constitute one and the same
instrument.
                                      -15-
<PAGE>

    10.3 If any provision of this  Agreement  shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.

    10.4 This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of New York. It shall also be
subject  to the  provisions  of the  federal  securities  laws and the rules and
regulations  thereunder and to any orders of the SEC granting  exemptive  relief
therefrom and the conditions of such orders.

    10.5 It is understood and expressly stipulated that neither the shareholders
of  shares  of any  Portfolio  nor the  Trustees  or  officers  of  TRUST or any
Portfolio shall be personally liable hereunder. No Portfolio shall be liable for
the  liabilities  of any other  Portfolio.  All persons  dealing with TRUST or a
Portfolio  must  look  solely  to the  property  of  TRUST  or  that  Portfolio,
respectively,  for enforcement of any claims against TRUST or that Portfolio. It
is also  understood  that each of the Portfolios  shall be deemed to be entering
into a  separate  Agreement  with LIFE  COMPANY  so that it is as if each of the
Portfolios  had signed a separate  Agreement with LIFE COMPANY and that a single
document is being signed simply to facilitate  the execution and  administration
of the Agreement.

    10.6 Each party shall  cooperate  with each other party and all  appropriate
governmental  authorities  (including  without  limitation the SEC, the NASD and
state insurance regulators) and shall permit such authorities  reasonable access
to its books  and  records  in  connection  with any  investigation  or  inquiry
relating to this Agreement or the transactions contemplated hereby.

    10.7 The rights,  remedies and  obligations  contained in this Agreement are
cumulative and are in addition to any and all rights,  remedies and obligations,
at law or in equity,  which the parties  hereto are  entitled to under state and
federal laws.

    10.8 No provision of this Agreement may be amended or modified in any manner
except by a written agreement properly authorized and executed by TRUST, ADVISER
and the LIFE COMPANY.

    10.9 No failure or delay by a party in exercising  any right or remedy under
this  Agreement  will  operate  as a waiver  thereof  and no single  or  partial
exercise of rights shall preclude a further or subsequent  exercise.  The rights
and remedies  provided in this Agreement are cumulative and not exclusive of any
rights or remedies provided by law.

    IN WITNESS WHEREOF,  the parties have caused their duly authorized  officers
to execute this Fund Participation Agreement as of the date and year first above
written.

                            BT INSURANCE FUNDS TRUST


                                    By:_______________________________________
                                         Name:
                                         Title:
                                      -16-
<PAGE>



                              BANKERS TRUST COMPANY


                                    By:_______________________________________
                                         Name:
                                         Title:


                                    ANNUITY INVESTORS LIFE INSURANCE COMPANY


                                    By:_______________________________________
                                         Name:
                                         Title:




                                      -17-
<PAGE>

                                   Appendix A

To Participation  Agreement by and among BT Insurance Funds Trust, Bankers Trust
Company and Annuity Investors Life Insurance Company.

List of portfolios:

S&P 500 Equity Index Fund
Small Cap Index Fund
EAFE Equity Index Fund


                                      -18-
<PAGE>


                                   Appendix B

To Participation  Agreement by and among BT Insurance Funds Trust, Bankers Trust
Company and Annuity Investors Life Insurance Company.

List of variable separate accounts:

Annuity Investors Variable Account A
Annuity Investors Variable Account B

                                      -19-

                                Item 4 (ccc)
                            INCOME BENEFIT RIDER


This Rider is made a part of the contract to which it is attached.

DEFINITIONS.

        Capitalized  terms not defined herein have the meanings given to them in
the Contract.

        Income Base: If the Rider is issued with the Contract,  and a Step-Up in
the Income Base has not  occurred,  the Income Base as of any given day prior to
the Income Benefit Date is equal to:

 1)       the total of all Purchase  Payments received that are allocated to the
          Sub-Accounts, except the Money Market Sub-Account; plus

 2)       amounts  transferred  to the  Sub-Accounts,  except  the Money  Market
          Sub-Account; plus

 3)       daily interest earned at the rate of 6% per annum;  less 4) deductions
          in  proportion to decreases in the value of the  Sub-Accounts,  except
          the Money Market Sub-Account, due to transfers or surrenders.

        If the Rider is issued after the Contract is issued,  or if a Step-Up in
the Income Base has  occurred,  the Income Base as of any given day prior to the
Income Benefit Date is equal to:

1)         the value of the Sub-Accounts,  except the Money Market  Sub-Account,
           on the  date  the  Rider is  issued  or on the  date the most  recent
           Step-Up occurred; plus

2)         all Purchase  Payments received after that date that are allocated to
           the Sub-Accounts, except the Money Market Sub-Account; plus

3)         amounts transferred after that date to the Sub-Accounts, except the
           Money Market Sub-Account; plus

4)         daily interest earned at the rate of 6% per annum; less

5)         deductions   in   proportion   to  decreases  in  the  value  of  the
           Sub-Accounts,  except the Money Market Sub-Account,  due to transfers
           or surrenders after that date.

        For purposes of  calculating  the Income Base, a deduction in proportion
to a  decrease  in the  value  of the  Sub-Accounts  (except  the  Money  Market
Sub-Account) is an amount equal to the percentage  reduction in the value of the
Sub-Accounts as of the date of the decrease  multiplied by the Income Base as of
the date of the decrease.

        Income Benefit:  The Income Benefit is equal to the Income Benefit Value
(expressed in thousands of dollars and after  deduction of any  applicable  fees
and charges,  loans, or premium tax or other taxes)  multiplied by the amount of
the periodic  payment per $1,000 of value  obtained from the  settlement  option
table for the settlement option selected.  The available  settlement options and
the settlement option tables are set forth in the Settlement  Options section of
this Rider.
<PAGE>

        Income Benefit Date: The first day of the initial  payment  interval for
which the Income  Benefit is paid.  In no event may the Income  Benefit  Date be
later than the Contract  Anniversary  following  the owner's 85th  birthday.  In
addition,  if the owner is living,  the Income  Benefit  Date may not be earlier
than the  tenth  anniversary  of the Rider  issue  date,  or,  if a Step-Up  has
occurred,  the tenth Contract  Anniversary  following the most recent Step-Up in
the Income Base.  If the owner has died and a death benefit is payable under the
Contract,  the Income  Benefit Date may be no later than one year after the date
of death of the owner.

  Income Benefit Value:  The Income Benefit Value on any given day is equal to:

1)         the Income Base on that day; plus

2)         the  value  of  the  Fixed  Account  Options  and  the  Money  Market
           Sub-Account on that day.

        Step-Up:  . The owner may elect to increase,  i.e.  Step-Up,  the Income
Base  to  equal  the  value  of  the  Sub-Accounts,   except  the  Money  Market
Sub-Account,  on any  Contract  Anniversary  through  the  Contract  Anniversary
following the owner's 75th birthday. An election to Step-Up the Income Base must
be made within  thirty  (30) days after the  Contract  Anniversary  on which the
Step-Up is to occur.


MAXIMUM  ISSUE  DATE.  This  Rider may not be  issued  after  the  owner's  75th
birthday.

PAYMENT OF INCOME BENEFIT.  The owner may elect to receive the Income Benefit if
an  election is made prior to the Income  Benefit  Date and prior to the Annuity
Commencement Date under the Contract.

        If a death benefit becomes  payable under the Contract,  the beneficiary
may elect to receive the Income  Benefit,  unless the owner made an  irrevocable
election  as to the  form  of  death  benefit  prior  to his or her  death.  The
beneficiary  must make an election to receive  the Income  Benefit  prior to the
Income Benefit Date and prior to the Death Benefit  Commencement  Date under the
Contract.

        Only one Income  Benefit  will be paid under this  Rider.  If the Income
Benefit is paid, it will be in lieu of all other benefits under the Contract.

SETTLEMENT  OPTIONS.  The forms of settlement options available under this Rider
are described below. The first payment under any settlement  option will be paid
as of the first day of the initial payment interval.

Life Annuity:  We will make periodic  fixed dollar  benefit  payments  until the
death of the person on whose life benefit payments are based.

Life  Annuity with  Payments for a Fixed  Period:  We will make  periodic  fixed
dollar benefit 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.

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.

Any Other  Form:  We will make  periodic  payments in any other form of lifetime
settlement option which is acceptable to us at the time of an election.

        The  settlement  option  tables below show the  guaranteed  fixed dollar
benefit  payments we will make at monthly  payment  intervals  for each  $1,000.
Amounts  will  vary  with the  payment  interval  and the sex and the age of the
person on whose life benefit  payments are based.  The 1983  Individual  Annuity
Mortality  Table with five year age  setbacks,  and with interest at the rate of
2.5% per year,  compounded annually,  is used to compute all guaranteed periodic
payments under this Rider.
                                      -2-
<PAGE>

                                  LIFE ANNUITY
                          Monthly payments for each $1,000 applied.
<TABLE>
<CAPTION>
- ------------------------- ---------- ----------- ---------- ----------- ---------- -----------
Male Lives
- ------------------------- ---------- ----------- ---------- ----------- ---------- -----------
    Age                      Age                    Age                    Age
- ------------- ----------- ---------- ----------- ---------- ----------- ---------- -----------
<S>  <C>           <C>      <C>           <C>      <C>           <C>      <C>           <C> 
     55             3.98     60            4.42     65            5.00     70            5.81
              ----------- ---------- ----------- ---------- ----------- ---------- -----------
              ----------- ---------- ----------- ---------- ----------- ---------- -----------
     56             4.06     61            4.52     66            5.14     71            6.01
              ----------- ---------- ----------- ---------- ----------- ---------- -----------
              ----------- ---------- ----------- ---------- ----------- ---------- -----------
     57             4.14     62            4.63     67            5.29     72            6.22
              ----------- ---------- ----------- ---------- ----------- ---------- -----------
              ----------- ---------- ----------- ---------- ----------- ---------- -----------
     58             4.23     63            4.75     68            5.46     73            6.45
              ----------- ---------- ----------- ---------- ----------- ---------- -----------
              ----------- ---------- ----------- ---------- ----------- ---------- -----------
     59             4.32     64            4.87     69            5.63     74            6.69
- ------------- ----------- ---------- ----------- ---------- ----------- ---------- -----------



- ----------------------------------------------------------------------------------------------
Female Lives
- ----------------------------------------------------------------------------------------------
     Age                     Age                    Age                    Age
              --------------------------------------------------------------------------------

     55             3.62     60            3.97     65            4.44     70            5.08
              --------------------------------------------------------------------------------
              --------------------------------------------------------------------------------
     56             3.68     61            4.06     66            4.55     71            5.23
              --------------------------------------------------------------------------------
              --------------------------------------------------------------------------------
     57             3.75     62            4.15     67            4.67     72            5.40
              --------------------------------------------------------------------------------
              --------------------------------------------------------------------------------
     58             3.82     63            4.24     68            4.80     73            5.58
              --------------------------------------------------------------------------------
              --------------------------------------------------------------------------------
     59             3.90     64            4.34     69            4.94     74            5.77
- ----------------------------------------------------------------------------------------------
</TABLE>


                                  LIFE ANNUITY
                    With Payments For At Least A Fixed Period
- --------- ------------ ------------- ------------- -------------
  Male     60 Months    120 Months    180 Months    240 Months
- --------- ------------ ------------- ------------- -------------
  Age
- --------- ------------ ------------- ------------- -------------
   55            3.97          3.94          3.89          3.81
   56            4.05          4.01          3.96          3.87
   57            4.13          4.09          4.03          3.93
   58            4.22          4.17          4.10          3.99
   59            4.31          4.26          4.18          4.06
   60            4.40          4.35          4.26          4.12
   61            4.50          4.44          4.34          4.19
   62            4.61          4.54          4.42          4.25
   63            4.72          4.65          4.51          4.32
   64            4.84          4.76          4.61          4.39
   65            4.97          4.87          4.70          4.45
   66            5.11          4.99          4.80          4.52
   67            5.25          5.12          4.90          4.59
   68            5.41          5.26          5.00          4.65
   69            5.57          5.40          5.10          4.71
   70            5.75          5.54          5.21          4.77
   71            5.94          5.70          5.31          4.83
   72            6.13          5.85          5.41          4.89
   73            6.34          6.02          5.52          4.94
   74            6.56          6.18          5.62          4.98
- --------- ------------ ------------- ------------- -------------

                                      -3-
<PAGE>


- ----------------------------------------------------------------
 Female    60 Months    120 Months   180 Months    240 Months
- ----------------------------------------------------------------
   Age
- ----------------------------------------------------------------
   55             3.62         3.61          3.58          3.55
   56             3.68         3.67          3.64          3.60
   57             3.75         3.73          3.70          3.66
   58             3.82         3.80          3.77          3.71
   59             3.89         3.87          3.83          3.77
   60             3.97         3.94          3.90          3.84
   61             4.05         4.02          3.98          3.90
   62             4.14         4.11          4.05          3.97
   63             4.23         4.19          4.13          4.03
   64             4.33         4.29          4.21          4.10
   65             4.43         4.38          4.30          4.17
   66             4.54         4.49          4.39          4.25
   67             4.66         4.60          4.49          4.32
   68             4.78         4.71          4.58          4.39
   69             4.91         4.83          4.69          4.47
   70             5.05         4.96          4.79          4.54
   71             5.20         5.09          4.90          4.61
   72             5.36         5.23          5.01          4.68
   73             5.53         5.38          5.12          4.75
   74             5.71         5.54          5.24          4.82
- ----------------------------------------------------------------



<PAGE>


<TABLE>
<CAPTION>

                             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>
  Male                                     Female Secondary Age
Primary Age   60      61      62      63      64     65      66      67      68     69      70

    60        3.97    3.99    4.02    4.04    4.06   4.08    4.10    4.12    4.14   4.16    4.18
    61        4.03    4.05    4.07    4.10    4.12   4.15    4.17    4.19    4.21   4.23    4.25
    62        4.08    4.11    4.14    4.16    4.19   4.21    4.24    4.26    4.29   4.31    4.33
    63        4.14    4.17    4.20    4.23    4.25   4.28    4.31    4.34    4.36   4.39    4.41
    64        4.20    4.23    4.26    4.29    4.32   4.35    4.38    4.41    4.44   4.47    4.49
    65        4.26    4.30    4.33    4.36    4.39   4.43    4.46    4.49    4.52   4.55    4.58
    66        4.33    4.36    4.40    4.43    4.47   4.50    4.54    4.57    4.60   4.64    4.67
    67        4.39    4.43    4.47    4.50    4.54   4.58    4.61    4.65    4.69   4.72    4.76
    68        4.46    4.50    4.54    4.58    4.62   4.66    4.70    4.74    4.78   4.81    4.85
    69        4.53    4.57    4.61    4.65    4.70   4.74    4.78    4.82    4.87   4.91    4.95
    70        4.60    4.64    4.69    4.73    4.78   4.82    4.87    4.91    4.96   5.00    5.05

- ------------ ------ ------- ------- ------- ------- ------ ------- ------- ------- ------ -------
*Payments  after the death of the primary  payee will be  one-half  (1/2) of the
amount shown.


           Monthly payments for each $1,000 of proceeds by ages of persons named.*
- --------------------------------------------------------------------------------------------------
  Female                                     Male Secondary Age
Primary Age   60      61      62      63     64      65      66      67      68     69      70

    60         3.78    3.79    3.81    3.82   3.83    3.84    3.85    3.86    3.87   3.88    3.89
    61         3.84    3.85    3.87    3.88   3.89    3.91    3.92    3.93    3.94   3.95    3.96
    62         3.90    3.92    3.93    3.95   3.96    3.97    3.99    4.00    4.01   4.02    4.03
    63         3.96    3.98    4.00    4.01   4.03    4.04    4.06    4.07    4.09   4.10    4.11
    64         4.03    4.05    4.06    4.08   4.10    4.12    4.13    4.15    4.16   4.18    4.19
    65         4.09    4.11    4.13    4.15   4.17    4.19    4.21    4.23    4.24   4.26    4.27
    66         4.16    4.18    4.21    4.23   4.25    4.27    4.29    4.31    4.33   4.35    4.36
    67         4.23    4.26    4.28    4.31   4.33    4.35    4.37    4.39    4.42   4.43    4.45
    68         4.30    4.33    4.36    4.38   4.41    4.44    4.46    4.48    4.51   4.53    4.55
    69         4.38    4.41    4.44    4.47   4.49    4.52    4.55    4.58    4.60   4.62    4.65
    70         4.46    4.49    4.52    4.55   4.58    4.61    4.64    4.67    4.70   4.72    4.75

- --------------------------------------------------------------------------------------------------
</TABLE>

*Payments  after the death of the primary  payee will be  one-half  (1/2) of the
amount shown.


        Upon request,  we will provide  information on the payments that we will
make for other payment intervals, gender combinations, and ages.


COST OF RIDER. A Rider charge will be collected on each Contract Anniversary, on
the date of a partial or full  surrender,  and on the Income  Benefit Date,  and
will be deducted  from the  Account  Value of the  Contract.  The charge will be
deducted from the  Sub-Accounts  and Fixed Account Options under the Contract in
the same  proportion as the value of each  Sub-Account  and Fixed Account Option
bears  to the  total  Account  Value  of the  Contract  as of  the  date  of the
deduction.
                                      -4-
<PAGE>

        The amount of the Rider charge is equal to .30% of the greater of:

1)      the Income Benefit Value; or
2)      the Account Value of the Contract

as of each Contract  Anniversary,  as of the date of a full surrender,  or as of
the Income Benefit Date, whichever is applicable.

        The amount of the charge  that will be deducted on the date of a partial
surrender  will be equal to .30% of the  dollar  amount of the  decrease  in the
greater of:

1)      the Income Benefit Value; or
2)      the Account Value of the Contract

as of the date of the withdrawal.

SUCCESSOR OWNERSHIP. 
If a surviving spouse of an owner becomes a Successor Owner of the Contract,  he
or she will have the option to:

1)      continue the Rider based on his or her age; or
2)      terminate the Rider as of the date successor ownership is elected.

        The  surviving  spouse must elect to continue or terminate  the Rider at
the time he or she elects to become a Successor Owner.

TERMINATION.  This Rider will terminate without value when a change of ownership
occurs under the Contract,  when a surviving  spouse elects to  discontinue  the
Rider as described in the Successor  Ownership  provision of this Rider, or upon
termination  of the  Contract,  whichever  comes  first.  This  Rider  will also
terminate on the Income Benefit Date if the Income Benefit is not elected.  This
Rider, once issued, may not be terminated except as provided in this Termination
provision.
                                      -5-

                                  Item 4 (fff)
                              INCOME BENEFIT RIDER

This Rider is made a part of the certificate to which it is attached.

DEFINITIONS.

        Capitalized  terms not defined herein have the meanings given to them in
the Certificate.

        Income Base: If the Rider is issued with the Certificate,  and a Step-Up
in the Income Base has not  occurred,  the Income Base as of any given day prior
to the Income Benefit Date is equal to:

1)      the total of all Purchase  Payments  received  that are allocated to the
        Sub-Accounts, except the Money Market Sub-Account; plus

2)      amounts  transferred  to  the  Sub-Accounts,  except  the  Money  Market
        Sub-Account;  plus 3) daily interest earned at the rate of 6% per annum;
        less 4)  deductions  in  proportion  to  decreases  in the  value of the
        Sub-Accounts,  except the Money Market Sub-Account,  due to transfers or
        surrenders.

        If the Rider is issued after the Certificate is issued,  or if a Step-Up
in the Income  Base has  occurred,  the Income Base as of any given day prior to
the Income Benefit Date is equal to:

1)      the value of the Sub-Accounts,  except the Money Market Sub-Account,  on
        the date the  Rider is  issued  or on the date the most  recent  Step-Up
        occurred; plus

2)      all Purchase Payments received after that date that are allocated to the
        Sub-Accounts, except the Money Market Sub-Account; plus

3)      amounts  transferred  after  that date to the  Sub-Accounts,  except the
        Money Market Sub-Account; plus

4)      daily interest earned at the rate of 6% per annum; less

5)      deductions in proportion to decreases in the value of the  Sub-Accounts,
        except the Money Market  Sub-Account,  due to  transfers  or  surrenders
        after that date.

        For purposes of  calculating  the Income Base, a deduction in proportion
to a  decrease  in the  value  of the  Sub-Accounts  (except  the  Money  Market
Sub-Account) is an amount equal to the percentage  reduction in the value of the
Sub-Accounts as of the date of the decrease  multiplied by the Income Base as of
the date of the decrease.

        Income Benefit:  The Income Benefit is equal to the Income Benefit Value
(expressed in thousands of dollars and after  deduction of any  applicable  fees
and charges,  loans, or premium tax or other taxes)  multiplied by the amount of
the periodic  payment per $1,000 of value  obtained from the  settlement  option
table for the settlement option selected.  The available  settlement options and
the settlement option tables are set forth in the Settlement  Options section of
this Rider.

        Income Benefit Date: The first day of the initial  payment  interval for
which the Income  Benefit is paid.  In no event may the Income  Benefit  Date be
later  than  the  Certificate   Anniversary  following  the  Participant's  85th
birthday. In addition, if the Participant is living, the Income Benefit Date may
not be  earlier  than the tenth  anniversary  of the Rider  issue  date for that
Certificate,  or, if a Step-Up has occurred,  the tenth Certificate  Anniversary
following the most recent  Step-Up in the Income Base for that  Certificate.  If
the  Participant  has died  and a death  benefit  is  payable  under  his or her
Certificate,  the  Income  Benefit  Date may be no later than one year after the
date of death of the Participant.
                                      -1-
<PAGE>

        Income Benefit Value:  The Income Benefit Value for a Certificate on any
        given day is equal to:

1)      the Income Base on that day; plus

2)      the value of the Fixed Account Options and the Money Market  Sub-Account
        on that day.

        Step-Up:  . The Participant  may elect to increase,  i.e.  Step-Up,  the
Income  Base to equal the value of the  Sub-Accounts,  except  the Money  Market
Sub-Account,  on any Certificate Anniversary through the Certificate Anniversary
following the  Participant's  75th  birthday.  An election to Step-Up the Income
Base must be made within thirty (30) days after the  Certificate  Anniversary on
which the Step-Up is to occur.


MAXIMUM ISSUE DATE.  This Rider may not be issued after the  Participant's  75th
birthday.

PAYMENT OF INCOME  BENEFIT.  The  Participant  may elect to  receive  the Income
Benefit if an election is made prior to the Income Benefit Date and prior to the
Annuity Commencement Date under the Certificate.

        If  a  death  benefit  becomes  payable  under  the   Certificate,   the
beneficiary may elect to receive the Income Benefit, unless the Participant made
an  irrevocable  election  as to the form of death  benefit  prior to his or her
death. The beneficiary must make an election to receive the Income Benefit prior
to the Income  Benefit  Date and prior to the Death  Benefit  Commencement  Date
under the Certificate.

        Only one Income  Benefit  will be paid under this  Rider.  If the Income
Benefit is paid, it will be in lieu of all other benefits under the Certificate.

SETTLEMENT  OPTIONS.  The forms of settlement options available under this Rider
are described below. The first payment under any settlement  option will be paid
as of the first day of the initial payment interval.

Life Annuity:  We will make periodic  fixed dollar  benefit  payments  until the
death of the person on whose life benefit payments are based.

Life  Annuity with  Payments for a Fixed  Period:  We will make  periodic  fixed
dollar benefit 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.

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.

Any Other  Form:  We will make  periodic  payments in any other form of lifetime
settlement option which is acceptable to us at the time of an election.

        The  settlement  option  tables below show the  guaranteed  fixed dollar
benefit  payments we will make at monthly  payment  intervals  for each  $1,000.
Amounts  will vary with the payment  interval and the age of the person on whose
life benefit  payments are based.  The 1983 Group  Annuity  Mortality  Table for
blended  lives  (60%  female/40%  male)  with five year age  setbacks,  and with
interest at the rate of 2.5% per year,  compounded annually,  is used to compute
all guaranteed periodic payments under this Rider.
- -2-
<PAGE>

<TABLE>
<CAPTION>

                                  LIFE ANNUITY
                          Monthly payments for each $1,000 applied.

- ------------------------- ---------- ----------- ---------- ----------- ---------- -----------
<S>                <C>      <C>           <C>      <C>           <C>      <C>           <C>           
- ------------------------- ---------- ----------- ---------- ----------- ---------- -----------
    Age                      Age                    Age                    Age
- ------------- ----------- ---------- ----------- ---------- ----------- ---------- -----------
              ----------- ---------- ----------- ---------- ----------- ---------- -----------
     55             3.86     60            4.28     65            4.86     70            5.67
              ----------- ---------- ----------- ---------- ----------- ---------- -----------
              ----------- ---------- ----------- ---------- ----------- ---------- -----------
     56             3.93     61            4.39     66            5.00     71            5.86
              ----------- ---------- ----------- ---------- ----------- ---------- -----------
              ----------- ---------- ----------- ---------- ----------- ---------- -----------
     57             4.01     62            4.49     67            5.15     72            6.07
              ----------- ---------- ----------- ---------- ----------- ---------- -----------
              ----------- ---------- ----------- ---------- ----------- ---------- -----------
     58             4.10     63            4.61     68            5.31     73            6.30
              ----------- ---------- ----------- ---------- ----------- ---------- -----------
              ----------- ---------- ----------- ---------- ----------- ---------- -----------
     59             4.19     64            4.73     69            5.48     74            6.54
- ------------- ----------- ---------- ----------- ---------- ----------- ---------- -----------
</TABLE>

                                  LIFE ANNUITY
                    With Payments For At Least A Fixed Period
- --------- ------------ ------------- ------------- -------------
           60 Months    120 Months    180 Months    240 Months
- --------- ------------ ------------- ------------- -------------
  Age
- --------- ------------ ------------- ------------- -------------
   55            3.85          3.83          3.80          3.74
   56            3.93          3.91          3.87          3.80
   57            4.01          3.98          3.94          3.86
   58            4.09          4.06          4.01          3.93
   59            4.18          4.15          4.09          3.99
   60            4.27          4.24          4.17          4.06
   61            4.37          4.33          4.25          4.13
   62            4.48          4.43          4.34          4.20
   63            4.59          4.54          4.43          4.27
   64            4.71          4.65          4.53          4.34
   65            4.84          4.77          4.62          4.41
   66            4.98          4.89          4.72          4.48
   67            5.12          5.02          4.83          4.55
   68            5.28          5.15          4.93          4.62
   69            5.44          5.30          5.04          4.68
   70            5.61          5.44          5.15          4.75
   71            5.80          5.60          5.26          4.81
   72            6.00          5.76          5.37          4.87
   73            6.21          5.93          5.47          4.92
   74            6.43          6.10          5.58          4.97
- --------- ------------ ------------- ------------- -------------
<TABLE>
<CAPTION>

                             JOINT  AND  ONE-HALF   SURVIVOR   ANNUITY   Monthly
           payments for each $1,000 of proceeds by ages of persons named.*
- ------------ ------------------------------------------------------------------------------------
                                                Secondary Age
<S>          <C>     <C>      <C>    <C>     <C>    <C>     <C>    <C>     <C>    <C>      <C>
             ------ ------- ------- ------- ------- ------ ------- ------- ------- ------ -------
Primary Age   60      61      62      63      64     65      66      67      68     69      70
- ------------ ------ ------- ------- ------- ------- ------ ------- ------- ------- ------ -------

    60        3.97    3.99    4.01    4.03    4.05   4.06    4.08    4.10    4.11   4.13    4.14
    61        4.03    4.06    4.08    4.10    4.12   4.14    4.15    4.17    4.19   4.20    4.22
    62        4.10    4.12    4.15    4.17    4.19   4.21    4.23    4.25    4.27   4.29    4.30
    63        4.17    4.19    4.22    4.24    4.27   4.29    4.31    4.33    4.35   4.37    4.39
    64        4.24    4.26    4.29    4.32    4.34   4.37    4.39    4.42    4.44   4.46    4.48
    65        4.31    4.34    4.37    4.39    4.42   4.45    4.48    4.50    4.53   4.55    4.58
    66        4.38    4.41    4.44    4.48    4.51   4.54    4.57    4.60    4.62   4.65    4.68
    67        4.45    4.49    4.52    4.56    4.59   4.62    4.66    4.69    4.72   4.75    4.78
    68        4.53    4.57    4.61    4.64    4.68   4.72    4.75    4.79    4.82   4.85    4.89
    69        4.61    4.65    4.69    4.73    4.77   4.81    4.85    4.89    4.92   4.96    5.00
    70        4.69    4.73    4.78    4.82    4.86   4.91    4.95    4.99    5.03   5.07    5.11
- ------------ ------ ------- ------- ------- ------- ------ ------- ------- ------- ------ -------
</TABLE>
*Payments  after the death of the primary  payee will be  one-half  (1/2) of the
amount shown.
- -3-
<PAGE>


        Upon request,  we will provide  information on the payments that we will
make for other payment intervals and ages.


COST OF RIDER. A Rider charge will be collected on each Certificate Anniversary,
on the date of a partial or full surrender,  and on the Income Benefit Date, and
will be deducted from the Account Value of the  Certificate.  The charge will be
deducted from the  Sub-Accounts  and Fixed Account Options under the Certificate
in the same proportion as the value of each Sub-Account and Fixed Account Option
bears  to the  total  Account  Value  of the  Certificate  as of the date of the
deduction.

        The amount of the Rider charge is equal to .30% of the greater of:

1)      the Income Benefit Value; or
2)      the Account Value of the Certificate

as of each Certificate Anniversary, as of the date of a full surrender, or as of
the Income Benefit Date, whichever is applicable.

        The amount of the charge  that will be deducted on the date of a partial
surrender  will be equal to .30% of the  dollar  amount of the  decrease  in the
greater of:

1)      the Income Benefit Value; or
2)      the Account Value of the Certificate as of the date of the withdrawal.

SUCCESSOR OWNERSHIP.  If a surviving spouse of a Participant becomes a Successor
Owner of the Certificate, he or she will have the option to:

1)      continue the Rider based on his or her age; or
2)      terminate the Rider as of the date successor ownership is elected.

        The  surviving  spouse must elect to continue or terminate  the Rider at
the time he or she elects to become a Successor Owner.

TERMINATION.  This Rider will terminate without value when a change of ownership
occurs under the Certificate,  when a surviving spouse elects to discontinue the
Rider as described in the Successor  Ownership  provision of this Rider, or upon
termination  of the  Certificate,  whichever  comes first.  This Rider will also
terminate on the Income Benefit Date if the Income Benefit is not elected.  This
Rider, once issued, may not be terminated except as provided in this Termination
provision.
                                      -4-

                                  Item 4 (eee)
                              INCOME BENEFIT RIDER

This Rider is made a part of the group contract to which it is attached.

DEFINITIONS.

        Capitalized  terms not defined herein have the meanings given to them in
the Contract.

        Income Base: For any Certificate,  if the Certificate is issued with the
Rider, and a Step-Up in the Income Base has not occurred,  the Income Base as of
any given day prior to the Income Benefit Date is equal to:

1)      the total of all Purchase  Payments  received  that are allocated to the
        Sub-Accounts, except the Money Market Sub-Account; plus

2)      amounts  transferred  to  the  Sub-Accounts,  except  the  Money  Market
        Sub-Account; plus

3)      daily interest earned at the rate of 6% per annum; less 4) deductions in
        proportion  to  decreases in the value of the  Sub-Accounts,  except the
        Money Market Sub-Account, due to transfers or surrenders.

        If  the  Rider  is  issued  to a  Participant  after  the  Participant's
Certificate  is issued,  or if a Step-Up in the Income  Base has  occurred,  the
Income Base as of any given day prior to the Income Benefit Date is equal to:

1)      the value of the Sub-Accounts,  except the Money Market Sub-Account,  on
        the date the  Rider is  issued  or on the date the most  recent  Step-Up
        occurred; plus

2)      all Purchase Payments received after that date that are allocated to the
        Sub-Accounts, except the Money Market Sub-Account; plus

3)      amounts  transferred  after  that date to the  Sub-Accounts,  except the
        Money Market Sub-Account; plus

4)      daily interest earned at the rate of 6% per annum; less

5)      deductions in proportion to decreases in the value of the  Sub-Accounts,
        except the Money Market  Sub-Account,  due to  transfers  or  surrenders
        after that date.

        For purposes of  calculating  the Income Base, a deduction in proportion
to a  decrease  in the  value  of the  Sub-Accounts  (except  the  Money  Market
Sub-Account) is an amount equal to the percentage  reduction in the value of the
Sub-Accounts as of the date of the decrease  multiplied by the Income Base as of
the date of the decrease.

        Income Benefit:  The Income Benefit is equal to the Income Benefit Value
(expressed in thousands of dollars and after  deduction of any  applicable  fees
and charges,  loans, or premium tax or other taxes)  multiplied by the amount of
the periodic  payment per $1,000 of value  obtained from the  settlement  option
table for the settlement option selected.  The available  settlement options and
the settlement option tables are set forth in the Settlement  Options section of
this Rider.

        Income Benefit Date: The first day of the initial  payment  interval for
which the Income  Benefit is paid.  In no event may the Income  Benefit  Date be
later  than  the  Certificate   Anniversary  following  the  Participant's  85th
birthday. In addition, if the Participant is living, the Income Benefit Date may
not be  earlier  than the tenth  anniversary  of the Rider  issue  date for that
Certificate,  or, if a Step-Up has occurred,  the tenth Certificate  Anniversary
following the most recent  Step-Up in the Income Base for that  Certificate.  If
the  Participant  has died  and a death  benefit  is  payable  under  his or her
Certificate,  the  Income  Benefit  Date may be no later than one year after the
date of death of the Participant.
                                      -1-
<PAGE>

     Income  Benefit  Value:  The Income  Benefit Value for a Certificate on any
given day is equal to:

1)      the Income Base on that day; plus

2)      the value of the Fixed Account Options and the Money Market  Sub-Account
        on that day.

        Step-Up:  . The Participant  may elect to increase,  i.e.  Step-Up,  the
Income  Base to equal the value of the  Sub-Accounts,  except  the Money  Market
Sub-Account,  on any Certificate Anniversary through the Certificate Anniversary
following the  Participant's  75th  birthday.  An election to Step-Up the Income
Base must be made within thirty (30) days after the  Certificate  Anniversary on
which the Step-Up is to occur.


     MAXIMUM  ISSUE DATE.  This Rider may not be issued after the  Participant's
75th birthday.

PAYMENT OF INCOME  BENEFIT.  The  Participant  may elect to  receive  the Income
Benefit if an election is made prior to the Income Benefit Date and prior to the
Annuity Commencement Date under the Certificate.

        If  a  death  benefit  becomes  payable  under  the   Certificate,   the
beneficiary may elect to receive the Income Benefit, unless the Participant made
an  irrevocable  election  as to the form of death  benefit  prior to his or her
death. The beneficiary must make an election to receive the Income Benefit prior
to the Income  Benefit  Date and prior to the Death  Benefit  Commencement  Date
under the Certificate.

        Only one Income  Benefit  will be paid under this  Rider.  If the Income
Benefit is paid, it will be in lieu of all other benefits under the Certificate.

SETTLEMENT  OPTIONS.  The forms of settlement options available under this Rider
are described below. The first payment under any settlement  option will be paid
as of the first day of the initial payment interval.

Life Annuity:  We will make periodic  fixed dollar  benefit  payments  until the
death of the person on whose life benefit payments are based.

Life  Annuity with  Payments for a Fixed  Period:  We will make  periodic  fixed
dollar benefit 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.

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.

Any Other  Form:  We will make  periodic  payments in any other form of lifetime
settlement option which is acceptable to us at the time of an election.

        The  settlement  option  tables below show the  guaranteed  fixed dollar
benefit  payments we will make at monthly  payment  intervals  for each  $1,000.
Amounts  will vary with the payment  interval and the age of the person on whose
life benefit  payments are based.  The 1983 Group  Annuity  Mortality  Table for
blended  lives  (60%  female/40%  male)  with five year age  setbacks,  and with
interest at the rate of 2.5% per year,  compounded annually,  is used to compute
all guaranteed periodic payments under this Rider.
                                      -2-
<PAGE>

<TABLE>
<CAPTION>
                                  LIFE ANNUITY
                          Monthly payments for each $1,000 applied.

- ------------------------- ---------- ----------- ---------- ----------- ---------- -----------

- ------------------------- ---------- ----------- ---------- ----------- ---------- -----------
 
<S>                <C>     <C>            <C>     <C>            <C>     <C>            <C>
   Age                      Age                    Age                    Age
- ------------- ----------- ---------- ----------- ---------- ----------- ---------- -----------
              ----------- ---------- ----------- ---------- ----------- ---------- -----------
     55             3.86     60            4.28     65            4.86     70            5.67
              ----------- ---------- ----------- ---------- ----------- ---------- -----------
              ----------- ---------- ----------- ---------- ----------- ---------- -----------
     56             3.93     61            4.39     66            5.00     71            5.86
              ----------- ---------- ----------- ---------- ----------- ---------- -----------
              ----------- ---------- ----------- ---------- ----------- ---------- -----------
     57             4.01     62            4.49     67            5.15     72            6.07
              ----------- ---------- ----------- ---------- ----------- ---------- -----------
              ----------- ---------- ----------- ---------- ----------- ---------- -----------
     58             4.10     63            4.61     68            5.31     73            6.30
              ----------- ---------- ----------- ---------- ----------- ---------- -----------
              ----------- ---------- ----------- ---------- ----------- ---------- -----------
     59             4.19     64            4.73     69            5.48     74            6.54
- ------------- ----------- ---------- ----------- ---------- ----------- ---------- -----------
</TABLE>

                                  LIFE ANNUITY
                    With Payments For At Least A Fixed Period
- --------- ------------ ------------- ------------- -------------
           60 Months    120 Months    180 Months    240 Months
- --------- ------------ ------------- ------------- -------------
  Age
- --------- ------------ ------------- ------------- -------------
   55            3.85          3.83          3.80          3.74
   56            3.93          3.91          3.87          3.80
   57            4.01          3.98          3.94          3.86
   58            4.09          4.06          4.01          3.93
   59            4.18          4.15          4.09          3.99
   60            4.27          4.24          4.17          4.06
   61            4.37          4.33          4.25          4.13
   62            4.48          4.43          4.34          4.20
   63            4.59          4.54          4.43          4.27
   64            4.71          4.65          4.53          4.34
   65            4.84          4.77          4.62          4.41
   66            4.98          4.89          4.72          4.48
   67            5.12          5.02          4.83          4.55
   68            5.28          5.15          4.93          4.62
   69            5.44          5.30          5.04          4.68
   70            5.61          5.44          5.15          4.75
   71            5.80          5.60          5.26          4.81
   72            6.00          5.76          5.37          4.87
   73            6.21          5.93          5.47          4.92
   74            6.43          6.10          5.58          4.97
- --------- ------------ ------------- ------------- -------------
<TABLE>
<CAPTION>
                             JOINT  AND  ONE-HALF   SURVIVOR   ANNUITY   Monthly
           payments for each $1,000 of proceeds by ages of persons named.*
- ------------ ------------------------------------------------------------------------------------
                                                Secondary Age
             ------ ------- ------- ------- ------- ------ ------- ------- ------- ------ -------
<S>          <C>     <C>     <C>     <C>     <C>    <C>     <C>     <C>     <C>     <C>     <C>    

Primary Age   60      61      62      63      64     65      66      67      68     69      70
- ------------ ------ ------- ------- ------- ------- ------ ------- ------- ------- ------ -------

    60        3.97    3.99    4.01    4.03    4.05   4.06    4.08    4.10    4.11   4.13    4.14
    61        4.03    4.06    4.08    4.10    4.12   4.14    4.15    4.17    4.19   4.20    4.22
    62        4.10    4.12    4.15    4.17    4.19   4.21    4.23    4.25    4.27   4.29    4.30
    63        4.17    4.19    4.22    4.24    4.27   4.29    4.31    4.33    4.35   4.37    4.39
    64        4.24    4.26    4.29    4.32    4.34   4.37    4.39    4.42    4.44   4.46    4.48
    65        4.31    4.34    4.37    4.39    4.42   4.45    4.48    4.50    4.53   4.55    4.58
    66        4.38    4.41    4.44    4.48    4.51   4.54    4.57    4.60    4.62   4.65    4.68
    67        4.45    4.49    4.52    4.56    4.59   4.62    4.66    4.69    4.72   4.75    4.78
    68        4.53    4.57    4.61    4.64    4.68   4.72    4.75    4.79    4.82   4.85    4.89
    69        4.61    4.65    4.69    4.73    4.77   4.81    4.85    4.89    4.92   4.96    5.00
    70        4.69    4.73    4.78    4.82    4.86   4.91    4.95    4.99    5.03   5.07    5.11

- ------------ ------ ------- ------- ------- ------- ------ ------- ------- ------- ------ -------
</TABLE>
*Payments  after the death of the primary  payee will be  one-half  (1/2) of the
amount shown.
- -3-
<PAGE>


        Upon request,  we will provide  information on the payments that we will
make for other payment intervals and ages.


COST OF RIDER. A Rider charge will be collected on each Certificate Anniversary,
on the date of a partial or full surrender,  and on the Income Benefit Date, and
will be deducted from the Account Value of the  Certificate.  The charge will be
deducted from the  Sub-Accounts  and Fixed Account Options under the Certificate
in the same proportion as the value of each Sub-Account and Fixed Account Option
bears  to the  total  Account  Value  of the  Certificate  as of the date of the
deduction.

        The amount of the Rider charge is equal to .30% of the greater of:

1)      the Income Benefit Value; or

2)      the Account Value of the Certificate as of each Certificate Anniversary,
        as of the date of a full  surrender,  or as of the Income  Benefit Date,
        whichever is applicable.

        The amount of the charge  that will be deducted on the date of a partial
surrender  will be equal to .30% of the  dollar  amount of the  decrease  in the
greater of:

1)      the Income Benefit Value; or

2)      the Account Value of the Certificate as of the date of the withdrawal.

SUCCESSOR OWNERSHIP.  If a surviving spouse of a Participant becomes a Successor
Owner of the Certificate, he or she will have the option to:

1)      continue the Rider based on his or her age; or

2)      terminate the Rider as of the date successor ownership is elected.

        The  surviving  spouse must elect to continue or terminate  the Rider at
the time he or she elects to become a Successor Owner.

TERMINATION.  This Rider will terminate without value when a change of ownership
occurs under the Certificate,  when a surviving spouse elects to discontinue the
Rider as described in the Successor  Ownership  provision of this Rider, or upon
termination  of the  Certificate,  whichever  comes first.  This Rider will also
terminate on the Income Benefit Date if the Income Benefit is not elected.  This
Rider, once issued, may not be terminated except as provided in this Termination
provision.
                                      -3-

                                  Item 4 (ddd)
                              INCOME BENEFIT RIDER

This Rider is made a part of the contract to which it is attached.

DEFINITIONS.

        Capitalized  terms not defined herein have the meanings given to them in
the Contract.

        Income Base: If the Rider is issued with the Contract,  and a Step-Up in
the Income Base has not  occurred,  the Income Base as of any given day prior to
the Income Benefit Date is equal to:

1)      the total of all Purchase  Payments  received  that are allocated to the
        Sub-Accounts, except the Money Market Sub-Account; plus

2)      amounts  transferred  to  the  Sub-Accounts,  except  the  Money  Market
        Sub-Account; plus

3)      daily interest earned at the rate of 6% per annum; less

4)      deductions in proportion to decreases in the value of the  Sub-Accounts,
        except the Money Market Sub-Account, due to transfers or surrenders.

        If the Rider is issued after the Contract is issued,  or if a Step-Up in
the Income Base has  occurred,  the Income Base as of any given day prior to the
Income Benefit Date is equal to:

1)      the value of the Sub-Accounts,  except the Money Market Sub-Account,  on
        the date the  Rider is  issued  or on the date the most  recent  Step-Up
        occurred; plus

2)      all Purchase Payments received after that date that are allocated to the
        Sub-Accounts, except the Money Market Sub-Account; plus

3)      amounts  transferred  after  that date to the  Sub-Accounts,  except the
        Money Market Sub-Account; plus

4)      daily interest earned at the rate of 6% per annum; less

5)      deductions in proportion to decreases in the value of the  Sub-Accounts,
        except the Money Market  Sub-Account,  due to  transfers  or  surrenders
        after that date.

        For purposes of  calculating  the Income Base, a deduction in proportion
to a  decrease  in the  value  of the  Sub-Accounts  (except  the  Money  Market
Sub-Account) is an amount equal to the percentage  reduction in the value of the
Sub-Accounts as of the date of the decrease  multiplied by the Income Base as of
the date of the decrease.

        Income Benefit:  The Income Benefit is equal to the Income Benefit Value
(expressed in thousands of dollars and after  deduction of any  applicable  fees
and charges,  loans, or premium tax or other taxes)  multiplied by the amount of
the periodic  payment per $1,000 of value  obtained from the  settlement  option
table for the settlement option selected.  The available  settlement options and
the settlement option tables are set forth in the Settlement  Options section of
this Rider.

        Income Benefit Date: The first day of the initial  payment  interval for
which the Income  Benefit is paid.  In no event may the Income  Benefit  Date be
later than the Contract  Anniversary  following  the owner's 85th  birthday.  In
addition,  if the owner is living,  the Income  Benefit  Date may not be earlier
than the  tenth  anniversary  of the Rider  issue  date,  or,  if a Step-Up  has
occurred,  the tenth Contract  Anniversary  following the most recent Step-Up in
the Income Base.  If the owner has died and a death benefit is payable under the
Contract,  the Income  Benefit Date may be no later than one year after the date
of death of the owner.
                                      -1-
<PAGE>

Income Benefit Value:  The Income Benefit Value on any given day is equal to:

1)      the Income Base on that day; plus

2)      the value of the Fixed Account Options and the Money Market  Sub-Account
        on that day.

        Step-Up:  . The owner may elect to increase,  i.e.  Step-Up,  the Income
Base  to  equal  the  value  of  the  Sub-Accounts,   except  the  Money  Market
Sub-Account,  on any  Contract  Anniversary  through  the  Contract  Anniversary
following the owner's 75th birthday. An election to Step-Up the Income Base must
be made within  thirty  (30) days after the  Contract  Anniversary  on which the
Step-Up is to occur.


MAXIMUM  ISSUE  DATE.  This  Rider may not be  issued  after  the  owner's  75th
birthday.

PAYMENT OF INCOME BENEFIT.  The owner may elect to receive the Income Benefit if
an  election is made prior to the Income  Benefit  Date and prior to the Annuity
Commencement Date under the Contract.

        If a death benefit becomes  payable under the Contract,  the beneficiary
may elect to receive the Income  Benefit,  unless the owner made an  irrevocable
election  as to the  form  of  death  benefit  prior  to his or her  death.  The
beneficiary  must make an election to receive  the Income  Benefit  prior to the
Income Benefit Date and prior to the Death Benefit  Commencement  Date under the
Contract.

        Only one Income  Benefit  will be paid under this  Rider.  If the Income
Benefit is paid, it will be in lieu of all other benefits under the Contract.

SETTLEMENT  OPTIONS.  The forms of settlement options available under this Rider
are described below. The first payment under any settlement  option will be paid
as of the first day of the initial payment interval.

Life Annuity:  We will make periodic  fixed dollar  benefit  payments  until the
death of the person on whose life benefit payments are based.

Life  Annuity with  Payments for a Fixed  Period:  We will make  periodic  fixed
dollar benefit 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.

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.

Any Other  Form:  We will make  periodic  payments in any other form of lifetime
settlement option which is acceptable to us at the time of an election.

        The  settlement  option  tables below show the  guaranteed  fixed dollar
benefit  payments we will make at monthly  payment  intervals  for each  $1,000.
Amounts  will vary with the payment  interval and the age of the person on whose
life benefit payments are based. The 1983 Individual Annuity Mortality Table for
blended  lives  (60%  female/40%  male)  with five year age  setbacks,  and with
interest at the rate of 2.5% per year,  compounded annually,  is used to compute
all guaranteed periodic payments under this Rider.
                                      -2-
<PAGE>

<TABLE>
<CAPTION>
                                  LIFE ANNUITY
                          Monthly payments for each $1,000 applied.

- ------------------------- ---------- ----------- ---------- ----------- ---------- -----------
<S>                <C>      <C>          <C>       <C>           <C>      <C>           <C>     

    Age                      Age                    Age                    Age
- ------------- ----------- ---------- ----------- ---------- ----------- ---------- -----------
              ----------- ---------- ----------- ---------- ----------- ---------- -----------
     55             3.77     60            4.15     65            4.67     70            5.37
              ----------- ---------- ----------- ---------- ----------- ---------- -----------
              ----------- ---------- ----------- ---------- ----------- ---------- -----------
     56             3.84     61            4.24     66            4.79     71            5.54
              ----------- ---------- ----------- ---------- ----------- ---------- -----------
              ----------- ---------- ----------- ---------- ----------- ---------- -----------
     57             3.91     62            4.34     67            4.92     72            5.73
              ----------- ---------- ----------- ---------- ----------- ---------- -----------
              ----------- ---------- ----------- ---------- ----------- ---------- -----------
     58             3.99     63            4.44     68            5.06     73            5.92
              ----------- ---------- ----------- ---------- ----------- ---------- -----------
              ----------- ---------- ----------- ---------- ----------- ---------- -----------
     59             4.07     64            4.55     69            5.21     74            6.13
- ------------- ----------- ---------- ----------- ---------- ----------- ---------- -----------
</TABLE>

                                  LIFE ANNUITY
                    With Payments For At Least A Fixed Period
- --------- ------------ ------------- ------------- -------------
           60 Months    120 Months    180 Months    240 Months
- --------- ------------ ------------- ------------- -------------
  Age
- --------- ------------ ------------- ------------- -------------
   55            3.76          3.74          3.71          3.66
   56            3.83          3.81          3.77          3.71
   57            3.90          3.88          3.84          3.77
   58            3.98          3.95          3.90          3.83
   59            4.06          4.03          3.98          3.89
   60            4.14          4.11          4.05          3.96
   61            4.23          4.19          4.13          4.02
   62            4.33          4.28          4.21          4.09
   63            4.43          4.38          4.29          4.15
   64            4.53          4.48          4.38          4.22
   65            4.65          4.58          4.47          4.29
   66            4.77          4.69          4.56          4.36
   67            4.90          4.81          4.66          4.43
   68            5.03          4.93          4.76          4.50
   69            5.18          5.06          4.86          4.57
   70            5.33          5.20          4.97          4.64
   71            5.49          5.34          5.07          4.71
   72            5.67          5.49          5.18          4.77
   73            5.85          5.64          5.29          4.83
   74            6.05          5.80          5.40          4.89
- --------- ------------ ------------- ------------- -------------
<TABLE>
<CAPTION>
                             JOINT  AND  ONE-HALF   SURVIVOR   ANNUITY   Monthly
           payments for each $1,000 of proceeds by ages of persons named.*
- ------------ ------------------------------------------------------------------------------------
                                                Secondary Age
             ------ ------- ------- ------- ------- ------ ------- ------- ------- ------ -------
<S>          <C>     <C>     <C>     <C>     <C>    <C>     <C>     <C>     <C>    <C>     <C>   

Primary Age   60      61      62      63      64     65      66      67      68     69      70
- ------------ ------ ------- ------- ------- ------- ------ ------- ------- ------- ------ -------

    60        3.86    3.87    3.89    3.91    3.92   3.94    3.95    3.97    3.98   4.00    4.01
    61        3.91    3.93    3.95    3.97    3.99   4.00    4.02    4.04    4.05   4.07    4.08
    62        3.97    3.99    4.01    4.03    4.05   4.07    4.09    4.11    4.12   4.14    4.16
    63        4.03    4.05    4.08    4.10    4.12   4.14    4.16    4.18    4.20   4.22    4.23
    64        4.09    4.12    4.14    4.17    4.19   4.21    4.23    4.26    4.28   4.30    4.31
    65        4.16    4.18    4.21    4.24    4.26   4.29    4.31    4.33    4.36   4.38    4.40
    66        4.22    4.25    4.28    4.31    4.33   4.36    4.39    4.41    4.44   4.46    4.49
    67        4.29    4.32    4.35    4.38    4.41   4.44    4.47    4.50    4.52   4.55    4.58
    68        4.36    4.39    4.42    4.46    4.49   4.52    4.55    4.58    4.61   4.64    4.67
    69        4.43    4.46    4.50    4.53    4.57   4.60    4.64    4.67    4.70   4.74    4.77
    70        4.50    4.54    4.58    4.61    4.65   4.69    4.73    4.76    4.80   4.83    4.87

- ------------ ------ ------- ------- ------- ------- ------ ------- ------- ------- ------ -------
</TABLE>

*Payments  after the death of the primary  payee will be  one-half  (1/2) of the
amount shown.
                                      -3-
<PAGE>



        Upon request,  we will provide  information on the payments that we will
make for other payment intervals and ages.


COST OF RIDER. A Rider charge will be collected on each Contract Anniversary, on
the date of a partial or full  surrender,  and on the Income  Benefit Date,  and
will be deducted  from the  Account  Value of the  Contract.  The charge will be
deducted from the  Sub-Accounts  and Fixed Account Options under the Contract in
the same  proportion as the value of each  Sub-Account  and Fixed Account Option
bears  to the  total  Account  Value  of the  Contract  as of  the  date  of the
deduction.

        The amount of the Rider charge is equal to .30% of the greater of:

1)      the Income Benefit Value; or

2)      the Account Value of the Contract as of each Contract Anniversary, as of
        the  date  of a  full  surrender,  or as of  the  Income  Benefit  Date,
        whichever is applicable.

        The amount of the charge  that will be deducted on the date of a partial
surrender  will be equal to .30% of the  dollar  amount of the  decrease  in the
greater of:

1)      the Income Benefit Value; or

2)      the Account Value of the Contract as of the date of the withdrawal.

SUCCESSOR OWNERSHIP. If a surviving spouse of an owner becomes a Successor Owner
of the Contract, he or she will have the option to:

1)      continue the Rider based on his or her age; or

2)      terminate the Rider as of the date successor ownership is elected.

        The  surviving  spouse must elect to continue or terminate  the Rider at
the time he or she elects to become a Successor Owner.

TERMINATION.  This Rider will terminate without value when a change of ownership
occurs under the Contract,  when a surviving  spouse elects to  discontinue  the
Rider as described in the Successor  Ownership  provision of this Rider, or upon
termination  of the  Contract,  whichever  comes  first.  This  Rider  will also
terminate on the Income Benefit Date if the Income Benefit is not elected.  This
Rider, once issued, may not be terminated except as provided in this Termination
provision.
                                      -4-


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