Annuity Investors(REGISTERED) Variable Account B
of
Annuity Investors Logo
for
The Commodore Logo
The Commodore The Commodore The Commodore
Navigator(SERVICE Advantage(SERVICE Independence(SERVICE
MARK) MARK) MARK)
December 31, 1998
Annual Report to Contract Owners
<PAGE>
Table of Contents
Page
Letter from the President............................................... 2
Tab
Annuity Investors Variable Account B-Financial Statements.............. I
Dreyfus Portfolios--Annual Reports....................................... II
Dreyfus Variable Investment Fund
Money Market Portfolio
Small Cap Portfolio
Capital Appreciation Portfolio
Growth and Income Portfolio
The Dreyfus Socially Responsible Growth Fund, Inc.
Dreyfus Stock Index Fund
Janus Aspen Series--Annual Report........................................III
Aggressive Growth Portfolio
Worldwide Growth Portfolio
Balanced Portfolio
Growth Portfolio
International Growth Portfolio
INVESCO Variable Investment Funds, Inc.--Annual Report................... IV
Industrial Income Portfolio
Total Return Portfolio
High Yield Portfolio
PBHG Insurance Series Fund, Inc.--Annual Report.......................... V
PBHG Technology & Communications Portfolio
PBHG Large Cap Growth Portfolio
PBHG Growth II Portfolio
Strong Variable Insurance Funds, Inc.--Annual Report..................... VI
Strong Growth Fund II
Strong Variable Insurance Funds, Inc.
Strong Growth Fund II
Morgan Stanley Dean Witter Universal Funds, Inc.--Annual Report..........VII
U.S. Real Estate Portfolio
Fixed Income Portfolio
Value Portfolio
Emerging Markets Equity Portfolio
Mid Cap Value Portfolio
The Timothy Plan Variable Series--Annual Report..........................VIII
Strong Opportunity Fund II, Inc.--Annual Report..........................IX
-1-
<PAGE>
Dear Commodore Contract Owner:
I am pleased to present you with the December 31, 1998 Financial
Statements of Annuity Investors(R) Variable Account B, and the 1998 Annual
Reports for each of the twenty-five Portfolios offered through the sub-accounts
of Annuity Investors Variable Account B. The Portfolios are managed by leading
investment advisors such as Janus Capital Corporation, The Dreyfus Corporation,
Morgan Stanley Dean Witter Investment Management Inc., Pilgrim Baxter &
Associates, Ltd., INVESCO Funds Group, Inc., Strong Capital Management, Inc. and
The Timothy Partners, Ltd. The broad range of investment options offered under
your Contract allows you the flexibility to implement your own personal
investment strategy and to change your mix of investments as your objectives
change over time.
In 1998, the stock market, as measured by the Standard & Poor's 500
Index, showed a 26.67% increase and the NYSE Composite Index increased by
16.55%. The bond market, as measured by Lehman Brothers Aggregate Index,
increased by 8.63% over the same period. The performance of the sub-accounts
offered under your Contract compared favorably to the performance of these
indices, as shown by the average annual total return for the period January 1,
1998 to December 31, 1998, below.*
Janus A.S.-Aggressive Growth Portfolio 32.41%
Janus A.S.-Worldwide Growth Portfolio 27.14%
Janus A.S.-Balanced Portfolio 32.43%
Janus A.S.-Growth Portfolio 33.79%
Janus A.S.-International Growth Portfolio 15.62%
Dreyfus V.I.F.-Capital Appreciation Portfolio 28.42%
Dreyfus V.I.F.-Money Market Portfolio 2.89%
Dreyfus V.I.F.-Growth and Income Portfolio 10.27%
Dreyfus V.I.F.-Small Cap Portfolio -4.77%
The Dreyfus Socially Responsible Growth Fund, Inc. 27.60%
Dreyfus Stock Index Fund 26.44%
Strong Opportunity Fund II, Inc. 11.98%
Strong Variable Insurance Funds, Inc.-Strong Growth Fund II 26.90%
INVESCO VIF-Industrial Income Portfolio 13.71%
INVESCO VIF-Total Return Portfolio 8.05%
INVESCO VIF-High Yield Portfolio 0.02%
Morgan Stanley Universal Funds, Inc.-Mid Cap Value Portfolio 14.32%
Morgan Stanley Universal Funds, Inc.-Value Portfolio -3.49%
Morgan Stanley Universal Funds, Inc.-Fixed Income Portfolio 6.41%
Morgan Stanley Universal Funds, Inc.-U.S. Real Estate Portfolio -12.09%
Morgan Stanley Universal Funds, Inc.-Emerging Markets -25.22%
Equity Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Growth II Portfolio 6.69%
PBHG Insurance Series Fund, Inc.-PBHG Large Cap Growth Portfolio 28.82%
PBHG Insurance Series Fund, Inc.-PBHG Tech. & Comm. Portfolio 30.38%
The Timothy Plan Variable Series 2.84%
*Performance figures are net of all sub-account charges, but do
not reflect contingent deferred sales charges and contract
maintenance fees.
I, and my colleagues at Annuity Investors Life Insurance Company(R),
look forward to serving you in the future.
Sincerely,
/s/---------------
Robert A. Adams
President
-2-
<PAGE>
ANNUITY INVESTORS
VARIABLE ACCOUNT B
Financial Statements
Years ended December 31, 1998 and 1997
With Report of Independent Auditors
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
Financial Statements
Years ended December 31, 1998 and 1997
Contents
Report of Independent Auditors.............................................1
Audited Financial Statements
Statements of Assets and Liabilities - Current Year........................3
Statements of Assets and Liabilities - Prior Year..........................5
Statements of Operations - Current Year....................................7
Statements of Operations - Prior Year......................................8
Statements of Changes in Net Assets - Current Year.........................9
Statements of Changes in Net Assets - Prior Year..........................12
Notes to Financial Statements.............................................14
<PAGE>
Report of Independent Auditors
Contractholders of Annuity Investors Variable Account B
and
Board of Directors of Annuity Investors Life Insurance Company
We have audited the accompanying statements of assets and liabilities of the
Annuity Investors Variable Account B (comprised of the Dreyfus Variable
Investment Fund Capital Appreciation Portfolio, Dreyfus Variable Investment Fund
Growth and Income Portfolio, Dreyfus Variable Investment Fund Money Market
Portfolio, Dreyfus Variable Investment Fund Small Cap Portfolio, Dreyfus
Socially Responsible Growth Fund, Inc., Dreyfus Stock Index Fund, Strong Funds
Growth Fund II, Strong Funds Opportunity Fund II, Timothy Partners, Ltd. Timothy
Plan Variable Series, Invesco Funds Group, Inc. High-Yield Fund, Invesco Funds
Group, Inc. Industrial Income Fund, Invesco Funds Group, Inc. Total Return Fund,
Janus Aspen Series Aggressive Growth Portfolio, Janus Aspen Series Balanced
Portfolio, Janus Aspen Series Growth Portfolio, Janus Aspen Series International
Growth Portfolio, Janus Aspen Series Worldwide Growth Portfolio, Morgan Stanley
Universal Funds, Inc. Emerging Markets Equity Portfolio, Morgan Stanley
Universal Funds, Inc. Fixed Income Fund Portfolio, Morgan Stanley Universal
Funds, Inc. Mid-Cap Value Portfolio, Morgan Stanley Universal Funds, Inc. U.S.
Real Estate Portfolio, Morgan Stanley Universal Funds, Inc. Value Portfolio,
PBHG Insurance Series Fund, Inc. Growth II Portfolio, PBHG Insurance Series
Fund, Inc. Large Cap Growth Portfolio and PBHG Insurance Series Fund, Inc.
Technology & Communications Portfolio Sub-Accounts) as of December 31, 1998 and
1997, and the related statements of operations and changes in net assets for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1998 and 1997, by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
-1-
<PAGE>
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective
sub-accounts constituting the Annuity Investors Variable Account B as of
December 31, 1998 and 1997, and the results of their operations and changes in
their net assets for the years then ended in conformity with generally accepted
accounting principles.
/s/--------------------
Ernst & Young LLP
Cincinnati, Ohio
February 4, 1999
-2-
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<CAPTION>
====================================================================================================================================
Market
Shares Cost Value
----------- ----------- -----------
<S> <C> <C> <C>
Assets:
Investments in portfolio shares, at net asset value (Note 2):
Dreyfus Variable Investment Fund:
Capital Appreciation Portfolio .............................. 61,310.449 $ 1,986,224 $ 2,213,920
Growth and Income Portfolio ................................. 79,205.823 1,695,487 1,792,428
Money Market Portfolio ...................................... 693,094.020 693,094 693,094
Small Cap Portfolio ......................................... 31,479.168 1,696,362 1,697,042
Dreyfus Funds:
Socially Responsible Growth Fund, Inc. ...................... 59,614.852 1,656,611 1,852,830
Stock Index Fund ............................................ 317,633.377 9,216,584 10,329,437
Strong Funds:
Growth Fund II .............................................. 28,164.674 384,240 451,198
Opportunity Fund II ......................................... 40,183.687 839,456 872,790
Timothy Partners, Ltd.:
The Timothy Plan Variable Series ............................ 29,039.766 292,596 301,433
Invesco Funds Group, Inc.:
High-Yield Fund ............................................. 66,153.306 830,346 748,855
Industrial Income Fund ...................................... 130,713.866 2,364,132 2,432,585
Total Return Fund ........................................... 106,008.345 1,747,628 1,757,618
Janus Aspen Series:
Aggressive Growth Portfolio ................................. 27,756.928 623,368 765,814
Balanced Portfolio .......................................... 233,130.163 4,544,500 5,245,429
Growth Portfolio ............................................ 100,260.099 1,985,606 2,360,123
International Growth Portfolio .............................. 24,048.476 485,713 511,511
Worldwide Growth Portfolio .................................. 174,687.736 4,616,525 5,081,666
Morgan Stanley Universal Funds, Inc.:
Emerging Markets Equity Portfolio ........................... 25,174.168 201,513 178,988
Fixed Income Portfolio ...................................... 48,026.095 522,748 513,879
Mid-Cap Value Portfolio ..................................... 94,536.594 1,307,858 1,411,431
U.S. Real Estate Portfolio .................................. 43,612.977 453,655 427,407
Value Portfolio ............................................. 30,375.248 363,820 337,165
PBHG Insurance Series Fund, Inc.:
Growth II Portfolio ......................................... 21,486.549 231,194 249,889
Large Cap Growth Portfolio .................................. 26,656.585 337,367 411,578
Technology & Communications Portfolio ....................... 56,486.691 628,397 777,257
-----------
Total cost................................................................. $39,705,024
====================================================================================================================================
Total assets.............................................................................. 43,415,367
Liabilities:
Amounts due to Annuity Investors Life Insurance Company (Note 4)........................................... 0
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets................................................................................ $43,415,367
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
STATEMENT OF ASSETS AND LIABILITIES (continued)
December 31, 1998
<TABLE>
<CAPTION>
=================================================================================================================================
Market
Units Unit Value Value
----------- ----------- -----------
<S> <C> <C> <C>
Net assets attributable to variable annuity contract holders (Note 2):
Dreyfus Variable Investment Fund:
Capital Appreciation Portfolio - Basic contract ................. 170,523.015 $ 12.975443 $ 2,212,612
Capital Appreciation Portfolio - Enhanced contract .............. 100.415 13.031774 1,308
Growth and Income Portfolio - Basic contract .................... 159,409.837 11.243790 1,792,371
Growth and Income Portfolio - Enhanced contract ................. 5.049 11.292611 57
Money Market Portfolio - Basic contract ......................... 658,981.650 1.050876 692,508
Money Market Portfolio - Enhanced contract ...................... 555.360 1.055214 586
Small Cap Portfolio - Basic contract ............................ 171,968.905 9.867472 1,696,898
Small Cap Portfolio - Enhanced contract ......................... 14.492 9.910354 144
Dreyfus Funds:
Socially Responsible Growth Fund, Inc. - Basic contract ......... 140,614.024 13.169143 1,851,766
Socially Responsible Growth Fund, Inc. - Enhanced contract ...... 80.398 13.226328 1,064
Stock Index Fund - Basic contract ............................... 779,485.606 13.250646 10,328,688
Stock Index Fund - Enhanced contract ............................ 56.321 13.308166 749
Strong Funds:
Growth Fund II - Basic contract ................................. 33,197.715 13.587521 451,075
Growth Fund II - Enhanced contract .............................. 9.046 13.646505 123
Opportunity Fund II - Basic contract ............................ 72,644.387 12.012034 872,607
Opportunity Fund II - Enhanced contract ......................... 15.156 12.064227 183
Timothy Partners Ltd.:
The Timothy Plan Variable Series - Basic contract ............... 29,293.327 10.283942 301,251
The Timothy Plan Variable Series - Enhanced contract ............ 17.653 10.304332 182
Invesco Funds Group, Inc.:
High-Yield Fund - Basic contract ................................ 70,047.913 10.689459 748,774
High-Yield Fund - Enhanced contract ............................. 7.556 10.735898 81
Industrial Income Fund - Basic contract ......................... 200,541.938 12.120155 2,430,599
Industrial Income Fund - Enhanced contract ...................... 163.123 12.172796 1,986
Total Return Fund - Basic contract .............................. 154,762.526 11.348675 1,756,349
Total Return Fund - Enhanced contract ........................... 111.314 11.397954 1,269
Janus Aspen Series:
Aggressive Growth Portfolio - Basic contract .................... 53,896.345 14.199318 765,292
Aggressive Growth Portfolio - Enhanced contract ................. 36.621 14.260947 522
Balanced Portfolio - Basic contract ............................. 373,285.807 14.043929 5,242,400
Balanced Portfolio - Enhanced contract .......................... 214.770 14.104892 3,029
Growth Portfolio - Basic contract ............................... 172,190.630 13.699715 2,358,963
Growth Portfolio - Enhanced contract ............................ 84.318 13.759186 1,160
International Growth Portfolio - Basic contract ................. 45,382.775 11.256365 510,845
International Growth Portfolio - Enhanced contract .............. 58.950 11.305246 666
Worldwide Growth Portfolio - Basic contract ..................... 402,131.168 12.632936 5,080,097
Worldwide Growth Portfolio - Enhanced contract .................. 123.659 12.687776 1,569
Morgan Stanley Universal Funds, Inc.:
Emerging Markets Equity Portfolio - Basic contract .............. 30,255.642 5.915866 178,988
Emerging Markets Equity Portfolio - Enhanced contract ........... 0.000 5.941609 0
Fixed Income Portfolio - Basic contract ......................... 46,348.096 11.079965 513,535
Fixed Income Portfolio - Enhanced contract ...................... 30.906 11.128092 344
Mid-Cap Value Portfolio - Basic contract ........................ 111,076.120 12.705082 1,411,231
Mid-Cap Value Portfolio - Enhanced contract ..................... 15.684 12.760268 200
U.S. Real Estate Portfolio - Basic contract ..................... 43,786.457 9.758808 427,303
U.S. Real Estate Portfolio - Enhanced contract .................. 10.564 9.801228 104
Value Portfolio - Basic contract ................................ 34,212.111 9.848411 336,935
Value Portfolio - Enhanced contract ............................. 23.284 9.891198 230
PBHG Insurance Series Fund, Inc.:
Growth II Portfolio - Basic contract ............................ 24,618.770 10.147606 249,822
Growth II Portfolio - Enhanced contract ......................... 6.572 10.191707 67
Large Cap Growth Portfolio - Basic contract ..................... 31,474.961 13.076352 411,578
Large Cap Growth Portfolio - Enhanced contract .................. 0.000 13.133125 0
Technology & Communications Portfolio - Basic contract .......... 65,820.143 11.808346 777,227
Technology & Communications Portfolio - Enhanced contract ....... 2.516 11.859648 30
- --------------------------------------------------------------------------------------------------------------------------------
Net assets attributable to variable annuity contract holders............................. 43,415,367
- --------------------------------------------------------------------------------------------------------------------------------
Net assets............................................................................... $43,415,367
================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<CAPTION>
====================================================================================================================================
Market
Shares Cost Value
----------- ------------ -------------
<S> <C> <C> <C>
Assets:
Investments in portfolio shares, at net asset value (Note 2):
Dreyfus Variable Investment Fund:
Capital Appreciation Portfolio ............................... 6,644.554 $ 183,954 $ 185,383
Growth and Income Portfolio .................................. 15,815.802 347,532 328,652
Money Market Portfolio ....................................... 0.000 0 0
Small Cap Portfolio .......................................... 7,500.528 453,312 428,580
Dreyfus Funds:
Socially Responsible Growth Fund, Inc. ....................... 10,884.047 277,443 271,775
Stock Index Fund ............................................. 28,288.994 730,922 728,442
Strong Funds:
Growth Fund II ............................................... 1,846.921 23,670 22,994
Opportunity Fund II .......................................... 3,171.842 68,178 68,829
Invesco Funds Group, Inc.:
High-Yield Fund .............................................. 8,800.823 116,406 109,658
Industrial Income Fund ....................................... 20,811.599 368,589 354,630
Total Return Fund ............................................ 9,727.123 154,346 153,786
Janus Aspen Series:
Aggressive Growth Portfolio .................................. 1,476.866 28,664 30,350
Balanced Portfolio ........................................... 18,526.048 319,353 323,650
Growth Portfolio ............................................. 18,140.239 335,162 335,232
International Growth Portfolio ............................... 6,607.011 122,664 122,097
Worldwide Growth Portfolio ................................... 24,071.098 563,724 563,023
Morgan Stanley Universal Funds, Inc.:
Emerging Markets Equity Portfolio ............................ 7,586.839 85,562 71,544
Fixed Income Portfolio ....................................... 4.654 51 48
Mid-Cap Value Portfolio ...................................... 13,912.363 192,769 185,313
U.S. Real Estate Portfolio ................................... 7,005.241 76,971 79,930
Value Portfolio .............................................. 8,614.032 105,785 101,473
PBHG Insurance Series Fund, Inc.:
Growth II Portfolio .......................................... 5,481.888 59,564 58,930
Large Cap Growth Portfolio ................................... 9,802.870 114,392 115,870
Technology & Communications Portfolio ........................ 18,248.082 204,269 189,962
----------
Total cost................................................................... $4,933,282
====================================================================================================================================
Total assets............................................................................... 4,830,151
Liabilities:
Amounts due to Annuity Investors Life Insurance Company (Note 4)............................................ 0
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets................................................................................. $4,830,151
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
December 31, 1997
<TABLE>
<CAPTION>
==================================================================================================================================
Market
Units Unit Value Value
----------- ----------- -----------
<S> <C> <C> <C>
Net assets attributable to variable annuity contract holders (Note 2):
Dreyfus Variable Investment Fund:
Capital Appreciation Portfolio - Basic contract .................. 18,347.666 $ 10.103905 $ 185,383
Capital Appreciation Portfolio - Enhanced contract ............... 0.000 10.117776 0
Growth and Income Portfolio - Basic contract ..................... 32,231.762 10.196538 328,652
Growth and Income Portfolio - Enhanced contract .................. 0.000 10.210527 0
Money Market Portfolio - Basic contract .......................... 0.000 1.016499 0
Money Market Portfolio - Enhanced contract ....................... 0.000 1.017876 0
Small Cap Portfolio - Basic contract ............................. 41,359.506 10.362314 428,580
Small Cap Portfolio - Enhanced contract .......................... 0.000 10.376538 0
Dreyfus Funds:
Socially Responsible Growth Fund, Inc. - Basic contract .......... 26,332.500 10.320883 271,775
Socially Responsible Growth Fund, Inc. - Enhanced contract ....... 0.000 10.335055 0
Stock Index Fund - Basic contract ................................ 69,510.645 10.479569 728,442
Stock Index Fund - Enhanced contract ............................. 0.000 10.493943 0
Strong Funds:
Growth Fund II - Basic contract .................................. 2,147.556 10.707133 22,994
Growth Fund II - Enhanced contract ............................... 0.000 10.721828 0
Opportunity Fund II - Basic contract ............................. 6,416.208 10.727356 68,829
Opportunity Fund II - Enhanced contract .......................... 0.000 10.742083 0
Invesco Funds Group, Inc.:
High-Yield Fund - Basic contract ................................. 10,260.821 10.687084 109,658
High-Yield Fund - Enhanced contract .............................. 0.000 10.701757 0
Industrial Income Fund - Basic contract .......................... 33,269.953 10.659157 354,630
Industrial Income Fund - Enhanced contract ....................... 0.000 10.673778 0
Total Return Fund - Basic contract ............................... 14,641.934 10.503108 153,786
Total Return Fund - Enhanced contract ............................ 0.000 10.517508 0
Janus Aspen Series:
Aggressive Growth Portfolio - Basic contract ..................... 2,830.076 10.723950 30,350
Aggressive Growth Portfolio - Enhanced contract .................. 0.000 10.738659 0
Balanced Portfolio - Basic contract .............................. 30,519.754 10.604609 323,650
Balanced Portfolio - Enhanced contract ........................... 0.000 10.619159 0
Growth Portfolio - Basic contract ................................ 32,737.591 10.239960 335,232
Growth Portfolio - Enhanced contract ............................. 0.000 10.254006 0
International Growth Portfolio - Basic contract .................. 12,541.039 9.735841 122,097
International Growth Portfolio - Enhanced contract ............... 0.000 9.749214 0
Worldwide Growth Portfolio - Basic contract ...................... 56,665.753 9.935860 563,023
Worldwide Growth Portfolio - Enhanced contract ................... 0.000 9.949496 0
Morgan Stanley Universal Funds, Inc.:
Emerging Markets Equity Portfolio - Basic contract ............... 9,042.956 7.911559 71,544
Emerging Markets Equity Portfolio - Enhanced contract ............ 0.000 7.922446 0
Fixed Income Portfolio - Basic contract .......................... 4.653 10.412276 48
Fixed Income Portfolio - Enhanced contract ....................... 0.000 10.426565 0
Mid-Cap Value Portfolio - Basic contract ......................... 16,674.966 11.113227 185,313
Mid-Cap Value Portfolio - Enhanced contract ...................... 0.000 11.128478 0
U.S. Real Estate Portfolio - Basic contract ...................... 7,200.060 11.101269 79,930
U.S. Real Estate Portfolio - Enhanced contract ................... 0.000 11.116503 0
Value Portfolio - Basic contract ................................. 9,944.401 10.204064 101,473
Value Portfolio - Enhanced contract .............................. 0.000 10.218060 0
PBHG Insurance Series Fund, Inc.:
Growth II Portfolio - Basic contract ............................. 6,195.935 9.511124 58,930
Growth II Portfolio - Enhanced contract .......................... 0.000 9.524184 0
Large Cap Growth Portfolio - Basic contract ...................... 11,415.131 10.150555 115,870
Large Cap Growth Portfolio - Enhanced contract ................... 0.000 10.164489 0
Technology & Communications Portfolio - Basic contract ........... 20,974.008 9.057045 189,962
Technology & Communications Portfolio - Enhanced contract ........ 0.000 9.069487 0
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets attributable to variable annuity contract holders................................ 4,830,151
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets.................................................................................. $4,830,151
=================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
====================================================================================================================================
Dreyfus Variable Investment Fund
-------------------------------------------------------
Growth
Capital and Money Small
Appreciation Income Market Cap
Portfolio Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C> <C>
Investment income:
Dividends from investments in portfolio shares .................... $ 10,588 $ 20,270 $ 20,287 $ 24,136
Expenses:
Mortality and expense risk fees (Note 4) .......................... 12,131 13,378 7,149 13,283
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ................................. (1,543) 6,892 13,138 10,853
Net realized gain (loss) and unrealized appreciation (depreciation)
on investments:
Net realized gain (loss) on sale of investments in portfolio shares 16,652 (1,836) 0 (82,430)
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. 226,268 115,821 0 25,412
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ........... 242,920 113,985 0 (57,018)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ... $ 241,377 $ 120,877 $ 13,138 $ (46,165)
====================================================================================================================================
<CAPTION>
====================================================================================================================================
Dreyfus Funds Strong Funds
------------------------ -------------------------
Socially
Responsible Stock Growth Opportunity
Growth Index Fund Fund
Fund, Inc. Fund II II
====================================================================================================================================
<S> <C> <C> <C> <C>
Investment income:
Dividends from investments in portfolio shares .................... $ 68,951 $ 79,649 $ 0 $ 27,211
Expenses:
Mortality and expense risk fees (Note 4) .......................... 13,183 57,253 2,299 5,631
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ................................. 55,768 22,396 (2,299) 21,580
Net realized gain (loss) and unrealized appreciation (depreciation)
on investments:
Net realized gain (loss) on sale of investments in portfolio shares 5,292 108,435 1,666 (6,713)
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. 201,887 1,115,334 67,633 32,683
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ........... 207,179 1,223,769 69,299 25,970
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ... $ 262,947 $1,246,165 $ 67,000 $ 47,550
====================================================================================================================================
<CAPTION>
==============================================================================================
Timothy Partners
----------------
The Timothy
Plan Variable
Series
==============================================================================================
<S> <C>
Investment income:
Dividends from investments in portfolio shares .................... $ 0
Expenses:
Mortality and expense risk fees (Note 4) .......................... 1,244
- ----------------------------------------------------------------------------------------------
Net investment income (loss) ................................. (1,244)
Net realized gain (loss) and unrealized appreciation (depreciation)
on investments:
Net realized gain (loss) on sale of investments in portfolio shares 273
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. 8,837
- ----------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ........... 9,110
- ----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ... $ 7,866
==============================================================================================
</TABLE>
<TABLE>
<CAPTION>
=====================================================================================================================
Invesco Funds Group, Inc.
----------------------------------------
High Industrial Total
Yield Income Return
Fund Fund Fund
=====================================================================================================================
<S> <C> <C> <C>
Investment income:
Dividends from investments in portfolio shares .................... $ 71,584 $ 111,454 $ 70,881
Expenses:
Mortality and expense risk fees (Note 4) .......................... 5,523 16,670 12,061
- ---------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ................................. 66,061 94,784 58,820
Net realized gain (loss) and unrealized appreciation (depreciation)
on investments:
Net realized gain (loss) on sale of investments in portfolio shares (7,511) 3,746 15,273
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares ........................... (74,743) 82,412 10,551
- ---------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ........... (82,254) 86,158 25,824
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ... $ (16,193) $ 180,942 $ 84,644
=====================================================================================================================
<CAPTION>
====================================================================================================================================
Janus Aspen Series
-----------------------------------------------------------
Aggressive International Worldwide
Growth Balanced Growth Growth Growth
Portfolio Portfolio Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Investment income:
Dividends from investments in portfolio shares .................... $ 0 $ 106,282 $ 60,105 $ 4,727 $ 82,948
Expenses:
Mortality and expense risk fees (Note 4) .......................... 3,848 28,653 14,861 3,846 32,507
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ................................. (3,848) 77,629 45,244 881 50,441
Net realized gain (loss) and unrealized appreciation (depreciation)
on investments:
Net realized gain (loss) on sale of investments in portfolio shares 4,948 20,467 2,481 4,688 13,836
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares ........................... 140,760 696,632 374,448 26,364 465,843
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ........... 145,708 717,099 376,929 31,052 479,679
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ... $ 141,860 $ 794,728 $ 422,173 $ 31,933 $ 530,120
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================================================
Morgan Stanley Universal Funds, Inc.
-----------------------------------------------------------
Emerging
Markets Fixed Mid-Cap U.S.
Equity Income Value Real Estate Value
Portfolio Portfolio Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Investment income:
Dividends from investments in portfolio shares .................... $ 704 $ 19,183 $ 36,130 $ 13,686 $ 12,030
Expenses:
Mortality and expense risk fees (Note 4) .......................... 1,545 2,205 9,829 3,783 3,046
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ................................. (841) 16,978 26,301 9,903 8,984
Net realized gain (loss) and unrealized appreciation (depreciation)
on investments:
Net realized gain (loss) on sale of investments in portfolio shares (28,159) 987 (12,000) (11,717) (3,838)
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. (8,506) (8,866) 111,030 (29,207) (22,344)
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ........... (36,665) (7,879) 99,030 (40,924) (26,182)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ... $ (37,506) $ 9,099 $ 125,331 $ (31,021) $ (17,198)
====================================================================================================================================
<CAPTION>
====================================================================================================================================
PBHG Insurance Series Fund, Inc.
-----------------------------------------------------------
Technology
Large Cap and
Growth II Growth Communications
Portfolio Portfolio Portfolio Total
====================================================================================================================================
<S> <C> <C> <C> <C>
Investment income:
Dividends from investments in portfolio shares .................... $ 0 $ 0 $ 75 $ 840,881
Expenses:
Mortality and expense risk fees (Note 4) .......................... 2,021 3,194 5,955 275,098
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ................................. (2,021) (3,194) (5,880) 565,783
Net realized gain (loss) and unrealized appreciation (depreciation)
on investments:
Net realized gain (loss) on sale of investments in portfolio shares (437) 1,576 (2,660) 43,019
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. 19,329 72,732 163,166 3,813,476
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ........... 18,892 74,308 160,506 3,856,495
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ... $ 16,871 $ 71,114 $ 154,626 $4,422,278
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
-7-
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
====================================================================================================================================
Dreyfus Variable Investment Fund
-------------------------------------------------------
Growth
Capital and Money Small
Appreciation Income Market Cap
Portfolio Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C> <C>
Investment income:
Dividends from investments in portfolio shares .................... $ 1,218 $ 20,139 $ 0 $ 22,341
Expenses:
Mortality and expense risk fees (Note 4) .......................... 416 759 0 903
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ................................. 802 19,380 0 21,438
Net realized gain (loss) and unrealized appreciation (depreciation)
on investments:
Net realized gain (loss) on sale of investments in portfolio shares 2 0 0 21
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. 1,429 (18,880) 0 (24,732)
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ........... 1,431 (18,880) 0 (24,711)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ... $ 2,233 $ 500 $ 0 $ (3,273)
====================================================================================================================================
<CAPTION>
====================================================================================================================================
Dreyfus Funds Strong Funds
------------------------ -------------------------
Socially
Responsible Stock Growth Opportunity
Growth Index Fund Fund
Fund, Inc. Fund II II
====================================================================================================================================
<S> <C> <C> <C> <C>
Investment income:
Dividends from investments in portfolio shares .................... $ 8,121 $ 13,466 $ 900 $ 70
Expenses:
Mortality and expense risk fees (Note 4) .......................... 608 1,155 43 154
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ................................. 7,513 12,311 857 (84)
Net realized gain (loss) and unrealized appreciation (depreciation)
on investments:
Net realized gain (loss) on sale of investments in portfolio shares 77 (13) (2) 2
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. (5,668) (2,480) (676) 651
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ........... (5,591) (2,493) (678) 653
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ... $ 1,922 $ 9,818 $ 179 $ 569
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
=====================================================================================================================
Invesco Funds Group, Inc.
----------------------------------------
High Industrial Total
Yield Income Return
Fund Fund Fund
=====================================================================================================================
<S> <C> <C> <C>
Investment income:
Dividends from investments in portfolio shares .................... $ 10,266 $ 23,148 $ 3,585
Expenses:
Mortality and expense risk fees (Note 4) .......................... 353 927 353
- ---------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ................................. 9,913 22,221 3,232
Net realized gain (loss) and unrealized appreciation (depreciation)
on investments:
Net realized gain (loss) on sale of investments in portfolio shares 4 0 58
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. (6,748) (13,959) (561)
- ---------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ........... (6,744) (13,959) (503)
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ... $ 3,169 $ 8,262 $ 2,729
=====================================================================================================================
<CAPTION>
====================================================================================================================================
Janus Aspen Series
-----------------------------------------------------------
Aggressive International Worldwide
Growth Balanced Growth Growth Growth
Portfolio Portfolio Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Investment income:
Dividends from investments in portfolio shares .................... $ 0 $ 2,572 $ 867 $ 132 $ 1,111
Expenses:
Mortality and expense risk fees (Note 4) .......................... 88 646 578 335 1,100
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ................................. (88) 1,926 289 (203) 11
Net realized gain (loss) and unrealized appreciation (depreciation)
on investments:
Net realized gain (loss) on sale of investments in portfolio shares 0 383 0 (5) 0
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. 1,686 4,297 69 (566) (701)
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ........... 1,686 4,680 69 (571) (701)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ... $ 1,598 $ 6,606 $ 358 $ (774) $ (690)
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================================================
Morgan Stanley Universal Funds, Inc.
-----------------------------------------------------------
Emerging
Markets Fixed Mid-Cap U.S.
Equity Income Value Real Estate Value
Portfolio Portfolio Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Investment income:
Dividends from investments in portfolio shares .................... $ 2,377 $ 3 $ 8,589 $ 2,523 $ 2,517
Expenses:
Mortality and expense risk fees (Note 4) .......................... 250 0 298 285 342
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ................................. 2,127 3 8,291 2,238 2,175
Net realized gain (loss) and unrealized appreciation (depreciation)
on investments:
Net realized gain (loss) on sale of investments in portfolio shares (13) 0 1 103 2
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. (14,018) (2) (7,457) 2,959 (4,311)
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ........... (14,031) (2) (7,456) 3,062 (4,309)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ... $ (11,904) $ 1 $ 835 $ 5,300 $ (2,134)
====================================================================================================================================
<CAPTION>
====================================================================================================================================
PBHG Insurance Series Fund, Inc.
-----------------------------------------------------------
Technology
Large Cap and
Growth II Growth Communications
Portfolio Portfolio Portfolio Total
====================================================================================================================================
<S> <C> <C> <C> <C>
Investment income:
Dividends from investments in portfolio shares .................... $ 0 $ 0 $ 0 $ 123,945
Expenses:
Mortality and expense risk fees (Note 4) .......................... 210 334 590 10,727
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ................................. (210) (334) (590) 113,218
Net realized gain (loss) and unrealized appreciation (depreciation)
on investments:
Net realized gain (loss) on sale of investments in portfolio shares 2 (28) (420) 174
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. (634) 1,478 (14,306) (103,130)
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ........... (632) 1,450 (14,726) (102,956)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ... $ (842) $ 1,116 $ (15,316) $ 10,262
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
-8-
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
====================================================================================================================================
Dreyfus Variable Investment Fund
-------------------------------------------------------
Growth
Capital and Money Small
Appreciation Income Market Cap
Portfolio Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C> <C>
Changes from operations:
Net investment income (loss) ......................................... $ (1,543) $ 6,892 $ 13,138 $ 10,853
Net realized gain (loss) on sale of investments in portfolio shares .. 16,652 (1,836) 0 (82,430)
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares ................................. 226,268 115,821 0 25,412
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ........... 241,377 120,877 13,138 (46,165)
Changes from principal transactions:
Contract purchase payments ........................................... 1,508,433 1,155,499 1,405,487 1,210,765
Contract redemptions ................................................. (36,808) (21,639) (72,744) (25,868)
Net transfers (to) from fixed account ................................ 315,535 209,039 (652,787) 129,730
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal transactions .......... 1,787,160 1,342,899 679,956 1,314,627
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets ................................. 2,028,537 1,463,776 693,094 1,268,462
Net assets, beginning of period ........................................... 185,383 328,652 0 428,580
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ................................................. $2,213,920 $1,792,428 $ 693,094 $1,697,042
====================================================================================================================================
<CAPTION>
====================================================================================================================================
Dreyfus Funds Strong Funds
------------------------ -------------------------
Socially
Responsible Stock Growth Opportunity
Growth Index Fund Fund
Fund, Inc. Fund II II
====================================================================================================================================
<S> <C> <C> <C> <C>
Changes from operations:
Net investment income (loss) .......................................... $ 55,768 $ 22,396 $ (2,299) $ 21,580
Net realized gain (loss) on sale of investments in portfolio shares ... 5,292 108,435 1,666 (6,713)
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .................................. 201,887 1,115,334 67,633 32,683
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ............ 262,947 1,246,165 67,000 47,550
Changes from principal transactions:
Contract purchase payments ............................................ 1,348,395 7,674,437 306,962 763,304
Contract redemptions .................................................. (9,281) (58,961) (461) (1,505)
Net transfers (to) from fixed account ................................. (21,006) 739,354 54,703 (5,388)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal transactions ........... 1,318,108 8,354,830 361,204 756,411
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets .................................. 1,581,055 9,600,995 428,204 803,961
Net assets, beginning of period ............................................ 271,775 728,442 22,994 68,829
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period .................................................. $1,852,830 $10,329,437 $ 451,198 $ 872,790
====================================================================================================================================
<CAPTION>
================================================================================================
Timothy Partners
----------------
The Timothy
Plan Variable
Series
================================================================================================
<S> <C>
Changes from operations:
Net investment income (loss) .......................................... $ (1,244)
Net realized gain (loss) on sale of investments in portfolio shares ... 273
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .................................. 8,837
- ------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ............ 7,866
Changes from principal transactions:
Contract purchase payments ............................................ 298,657
Contract redemptions .................................................. (559)
Net transfers (to) from fixed account ................................. (4,531)
- ------------------------------------------------------------------------------------------------
Net increase in net assets from principal transactions ........... 293,567
- ------------------------------------------------------------------------------------------------
Net increase in net assets .................................. 301,433
Net assets, beginning of period ............................................ 0
- ------------------------------------------------------------------------------------------------
Net assets, end of period .................................................. $ 301,433
================================================================================================
</TABLE>
<TABLE>
<CAPTION>
=====================================================================================================================
Invesco Funds Group, Inc.
----------------------------------------
High Industrial Total
Yield Income Return
Fund Fund Fund
=====================================================================================================================
<S> <C> <C> <C>
Changes from operations:
Net investment income (loss) ...................................... $ 66,061 $ 94,784 $ 58,820
Net realized gain (loss) on sale of investments in portfolio shares (7,511) 3,746 15,273
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. (74,743) 82,412 10,551
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ........ (16,193) 180,942 84,644
Changes from principal transactions:
Contract purchase payments ........................................ 546,771 1,705,341 1,533,836
Contract redemptions .............................................. (18,798) (13,427) (21,158)
Net transfers (to) from fixed account ............................. 127,417 205,099 6,510
- ---------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal transactions ....... 655,390 1,897,013 1,519,188
- ---------------------------------------------------------------------------------------------------------------------
Net increase in net assets .............................. 639,197 2,077,955 1,603,832
Net assets, beginning of period ........................................ 109,658 354,630 153,786
- ---------------------------------------------------------------------------------------------------------------------
Net assets, end of period .............................................. $ 748,855 $2,432,585 $1,757,618
=====================================================================================================================
<CAPTION>
====================================================================================================================================
Janus Aspen Series
-----------------------------------------------------------
Aggressive International Worldwide
Growth Balanced Growth Growth Growth
Portfolio Portfolio Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Changes from operations:
Net investment income (loss) ...................................... $ (3,848) $ 77,629 $ 45,244 $ 881 $ 50,441
Net realized gain (loss) on sale of investments in portfolio shares 4,948 20,467 2,481 4,688 13,836
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. 140,760 696,632 374,448 26,364 465,843
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ........ 141,860 794,728 422,173 31,933 530,120
Changes from principal transactions:
Contract purchase payments ........................................ 526,231 3,636,681 1,536,593 333,700 3,571,970
Contract redemptions .............................................. (1,769) (29,318) (12,570) (13,844) (51,084)
Net transfers (to) from fixed account ............................. 69,142 519,688 78,695 37,625 467,637
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal transactions ....... 593,604 4,127,051 1,602,718 357,481 3,988,523
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets .............................. 735,464 4,921,779 2,024,891 389,414 4,518,643
Net assets, beginning of period ........................................ 30,350 323,650 335,232 122,097 563,023
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period .............................................. $ 765,814 $5,245,429 $2,360,123 $ 511,511 $5,081,666
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================================================
Morgan Stanley Universal Funds, Inc.
-----------------------------------------------------------
Emerging
Markets Fixed Mid-Cap U.S.
Equity Income Value Real Estate Value
Portfolio Portfolio Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Changes from operations:
Net investment income (loss) ...................................... $ (841) $ 16,978 $ 26,301 $ 9,903 $ 8,984
Net realized gain (loss) on sale of investments in portfolio shares (28,159) 987 (12,000) (11,717) (3,838)
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. (8,506) (8,866) 111,030 (29,207) (22,344)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ........ (37,506) 9,099 125,331 (31,021) (17,198)
Changes from principal transactions:
Contract purchase payments ........................................ 99,696 399,377 1,042,503 428,467 254,152
Contract redemptions .............................................. (15) (29,179) (33,448) (11,751) (5,163)
Net transfers (to) from fixed account ............................. 45,269 134,534 91,732 (38,218) 3,901
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal transactions ....... 144,950 504,732 1,100,787 378,498 252,890
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets .............................. 107,444 513,831 1,226,118 347,477 235,692
Net assets, beginning of period ........................................ 71,544 48 185,313 79,930 101,473
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period .............................................. $ 178,988 $ 513,879 $1,411,431 $ 427,407 $ 337,165
====================================================================================================================================
<CAPTION>
====================================================================================================================================
PBHG Insurance Series Fund, Inc.
-----------------------------------------------------------
Technology
Large Cap and
Growth II Growth Communications
Portfolio Portfolio Portfolio Total
====================================================================================================================================
<S> <C> <C> <C> <C>
Changes from operations:
Net investment income (loss) ...................................... $ (2,021) $ (3,194) $ (5,880) $ 565,783
Net realized gain (loss) on sale of investments in portfolio shares (437) 1,576 (2,660) 43,019
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. 19,329 72,732 163,166 3,813,476
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ........ 16,871 71,114 154,626 4,422,278
Changes from principal transactions:
Contract purchase payments ........................................ 174,105 216,405 463,808 32,141,575
Contract redemptions .............................................. (347) (1,537) (30,665) (501,899)
Net transfers (to) from fixed account ............................. 330 9,726 (474) 2,523,262
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal transactions ....... 174,088 224,594 432,669 34,162,938
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets .............................. 190,959 295,708 587,295 38,585,216
Net assets, beginning of period ........................................ 58,930 115,870 189,962 4,830,151
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period .............................................. $ 249,889 $ 411,578 $ 777,257 $43,415,367
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
-9-
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEAR ENDED DECEMBER 31, 1998
Basic Contracts
<TABLE>
<CAPTION>
===========================================================================================================
Dreyfus Variable Investment Fund
-------------------------------------------------------------
Growth
Capital and Money Small
Appreciation Income Market Cap
Portfolio Portfolio Portfolio Portfolio
===========================================================================================================
<S> <C> <C> <C> <C>
Units outstanding, December 31, 1997 18,347.666 32,231.762 0.000 41,359.506
Units purchased 155,438.519 129,041.014 1,356,480.568 133,138.490
Units redeemed (3,263.170) (1,862.939) (697,498.918) (2,529.091)
----------- ----------- ------------- -----------
Units outstanding December 31, 1998 170,523.015 159,409.837 658,981.650 171,968.905
=========== =========== ============= ===========
===========================================================================================================
<CAPTION>
=====================================================================================================================
Dreyfus Funds Strong Funds Timothy Partners
----------------------- ---------------------- ----------------
Socially
Responsible Stock Growth Opportunity The Timothy
Growth Index Fund Fund Plan Variable
Fund, Inc. Fund II II Series
=====================================================================================================================
<S> <C> <C> <C> <C> <C>
Units outstanding, December 31, 1997 26,332.500 69,510.645 2,147.556 6,416.208 0.000
Units purchased 117,026.361 715,251.041 31,086.761 67,229.118 30,121.273
Units redeemed (2,744.837) (5,276.080) (36.602) (1,000.939) (827.946)
----------- ----------- ---------- ---------- ----------
Units outstanding December 31, 1998 140,614.024 779,485.606 33,197.715 72,644.387 29,293.327
=========== =========== ========== ========== ==========
=====================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
=====================================================================================
Invesco Funds Group, Inc.
----------------------------------------
High Industrial Total
Yield Income Return
Fund Fund Fund
=====================================================================================
<S> <C> <C> <C>
Units outstanding, December 31, 1997 10,260.821 33,269.953 14,641.934
Units purchased 61,181.214 168,437.163 141,210.628
Units redeemed (1,394.122) (1,165.178) (1,090.036)
---------- ----------- -----------
Units outstanding December 31, 1998 70,047.913 200,541.938 154,762.526
========== =========== ===========
=====================================================================================
<CAPTION>
=================================================================================================================
Janus Aspen Series
---------------------------------------------------------------------
Aggressive International Worldwide
Growth Balanced Growth Growth Growth
Portfolio Portfolio Portfolio Portfolio Portfolio
=================================================================================================================
<S> <C> <C> <C> <C> <C>
Units outstanding, December 31, 1997 2,830.076 30,519.754 32,737.591 12,541.039 56,665.753
Units purchased 51,177.922 345,154.504 140,607.554 32,843.649 350,856.350
Units redeemed (111.653) (2,388.451) (1,154.515) (1.913) (5,390.935)
---------- ----------- ----------- ---------- -----------
Units outstanding December 31, 1998 53,896.345 373,285.807 172,190.630 45,382.775 402,131.168
========== =========== =========== ========== ===========
=================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
==============================================================================================================
Morgan Stanley Universal Funds, Inc.
----------------------------------------------------------------
Emerging
Markets Fixed Mid-Cap U.S.
Equity Income Value Real Estate Value
Portfolio Portfolio Portfolio Portfolio Portfolio
==============================================================================================================
<S> <C> <C> <C> <C> <C>
Units outstanding, December 31, 1997 9,042.956 4.653 16,674.966 7,200.060 9,944.401
Units purchased 21,215.275 49,116.629 97,232.949 41,714.677 24,730.516
Units redeemed (2.589) (2,773.186) (2,831.795) (5,128.280) (462.806)
---------- ---------- ----------- ---------- ----------
Units outstanding December 31, 1998 30,255.642 46,348.096 111,076.120 43,786.457 34,212.111
========== ========== =========== ========== ==========
==============================================================================================================
<CAPTION>
=====================================================================================
PBHG Insurance Series Fund, Inc.
----------------------------------------
Technology
Large Cap and
Growth II Growth Communications
Portfolio Portfolio Portfolio
=====================================================================================
<S> <C> <C> <C>
Units outstanding, December 31, 1997 6,195.935 11,415.131 20,974.008
Units purchased 18,570.037 20,198.140 47,987.213
Units redeemed (147.202) (138.310) (3,141.078)
---------- ---------- ----------
Units outstanding December 31, 1998 24,618.770 31,474.961 65,820.143
========== ========== ==========
=====================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
-10-
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEAR ENDED DECEMBER 31, 1998
Enhanced Contracts
<TABLE>
<CAPTION>
==================================================================================================
Dreyfus Variable Investment Fund
---------------------------------------------------
Growth
Capital and Money Small
Appreciation Income Market Cap
Portfolio Portfolio Portfolio Portfolio
==================================================================================================
<S> <C> <C> <C> <C>
Units outstanding, December 31, 1997 0.000 0.000 0.000 0.000
Units purchased 100.415 5.049 555.360 14.492
Units redeemed 0.000 0.000 0.000 0.000
------- ----- ------- ------
Units outstanding December 31, 1998 100.415 5.049 555.360 14.492
======= ===== ======= ======
==================================================================================================
<CAPTION>
====================================================================================================================
Dreyfus Funds Strong Funds Timothy Partners
----------------------- ---------------------- ----------------
Socially
Responsible Stock Growth Opportunity The Timothy
Growth Index Fund Fund Plan Variable
Fund, Inc. Fund II II Series
====================================================================================================================
<S> <C> <C> <C> <C> <C>
Units outstanding, December 31, 1997 0.000 0.000 0.000 0.000 0.00
Units purchased 80.398 56.321 9.046 15.156 17.653
Units redeemed 0.000 0.000 0.000 0.000 0.000
------ ------ ----- ------ ------
Units outstanding December 31, 1998 80.398 56.321 9.046 15.156 17.653
====== ====== ===== ====== ======
====================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
=====================================================================================
Invesco Funds Group, Inc.
-------------------------------------
High Industrial Total
Yield Income Return
Fund Fund Fund
=====================================================================================
<S> <C> <C> <C>
Units outstanding, December 31, 1997 0.000 0.000 0.000
Units purchased 7.556 163.123 111.314
Units redeemed 0.000 0.000 0.000
----- ------- -------
Units outstanding December 31, 1998 7.556 163.123 111.314
===== ======= =======
=====================================================================================
<CAPTION>
=================================================================================================================
Janus Aspen Series
---------------------------------------------------------------------
Aggressive International Worldwide
Growth Balanced Growth Growth Growth
Portfolio Portfolio Portfolio Portfolio Portfolio
=================================================================================================================
<S> <C> <C> <C> <C> <C>
Units outstanding, December 31, 1997 0.000 0.000 0.000 0.000 0.000
Units purchased 36.621 214.770 84.318 58.950 123.659
Units redeemed 0.000 0.000 0.000 0.000 0.000
------ ------- ------ ------ -------
Units outstanding December 31, 1998 36.621 214.770 84.318 58.950 123.659
====== ======= ====== ====== =======
=================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
==============================================================================================================
Morgan Stanley Universal Funds, Inc.
----------------------------------------------------------------
Emerging
Markets Fixed Mid-Cap U.S.
Equity Income Value Real Estate Value
Portfolio Portfolio Portfolio Portfolio Portfolio
==============================================================================================================
<S> <C> <C> <C> <C> <C>
Units outstanding, December 31, 1997 0.000 0.000 0.000 0.000 0.000
Units purchased 0.000 30.906 15.684 10.564 23.284
Units redeemed 0.000 0.000 0.000 0.000 0.000
----- ------ ------ ------ ------
Units outstanding December 31, 1998 0.000 30.906 15.684 10.564 23.284
===== ====== ====== ====== ======
==============================================================================================================
<CAPTION>
=====================================================================================
PBHG Insurance Series Fund, Inc.
--------------------------------------
Technology
Large Cap and
Growth II Growth Communications
Portfolio Portfolio Portfolio
=====================================================================================
<S> <C> <C> <C>
Units outstanding, December 31, 1997 0.000 0.000 0.000
Units purchased 6.572 0.000 2.516
Units redeemed 0.000 0.000 0.000
----- ----- -----
Units outstanding December 31, 1998 6.572 0.000 2.516
===== ===== =====
=====================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
- -11-
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
====================================================================================================================================
Dreyfus Variable Investment Fund
-------------------------------------------------------
Growth
Capital and Money Small
Appreciation Income Market Cap
Portfolio Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C> <C>
Changes from operations:
Net investment income (loss) ...................................... $ 802 $ 19,380 $ 0 $ 21,438
Net realized gain (loss) on sale of investments in portfolio shares 2 0 0 21
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. 1,429 (18,880) 0 (24,732)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ........ 2,233 500 0 (3,273)
Changes from principal transactions:
Contract purchase payments ........................................ 155,719 321,133 0 396,553
Contract redemptions .............................................. (846) (1,340) 0 0
Net transfers (to) from fixed account ............................. 28,277 8,359 0 35,300
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal transactions ....... 183,150 328,152 0 431,853
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets .............................. 185,383 328,652 0 428,580
Net assets, beginning of period ........................................ 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period .............................................. $ 185,383 $ 328,652 $ 0 $ 428,580
====================================================================================================================================
<CAPTION>
====================================================================================================================================
Dreyfus Funds Strong Funds
------------------------ -------------------------
Socially
Responsible Stock Growth Opportunity
Growth Index Fund Fund
Fund, Inc. Fund II II
====================================================================================================================================
<S> <C> <C> <C> <C>
Changes from operations:
Net investment income (loss) ...................................... $ 7,513 $ 12,311 $ 857 $ (84)
Net realized gain (loss) on sale of investments in portfolio shares 77 (13) (2) 2
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. (5,668) (2,480) (676) 651
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ........ 1,922 9,818 179 569
Changes from principal transactions:
Contract purchase payments ........................................ 271,584 714,481 22,776 68,117
Contract redemptions .............................................. 0 (484) 0 0
Net transfers (to) from fixed account ............................. (1,731) 4,627 39 143
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal transactions ....... 269,853 718,624 22,815 68,260
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets .............................. 271,775 728,442 22,994 68,829
Net assets, beginning of period ........................................ 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period .............................................. $ 271,775 $ 728,442 $ 22,994 $ 68,829
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
=====================================================================================================================
Invesco Funds Group, Inc.
----------------------------------------
High Industrial Total
Yield Income Return
Fund Fund Fund
=====================================================================================================================
<S> <C> <C> <C>
Changes from operations:
Net investment income (loss) ...................................... $ 9,913 $ 22,221 $ 3,232
Net realized gain (loss) on sale of investments in portfolio shares 4 0 58
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. 6,748) (13,959) (561)
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ........ 3,169 8,262 2,729
Changes from principal transactions:
Contract purchase payments ........................................ 91,597 332,968 137,113
Contract redemptions .............................................. (846) (2,541) (2,260)
Net transfers (to) from fixed account ............................. 15,738 15,941 16,204
- ---------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal transactions ....... 106,489 346,368 151,057
- ---------------------------------------------------------------------------------------------------------------------
Net increase in net assets .............................. 109,658 354,630 153,786
Net assets, beginning of period ........................................ 0 0 0
- ---------------------------------------------------------------------------------------------------------------------
Net assets, end of period .............................................. $ 109,658 $ 354,630 $ 153,786
=====================================================================================================================
<CAPTION>
====================================================================================================================================
Janus Aspen Series
-----------------------------------------------------------
Aggressive International Worldwide
Growth Balanced Growth Growth Growth
Portfolio Portfolio Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Changes from operations:
Net investment income (loss) ...................................... $ (88) $ 1,926 $ 289 $ (203) $ 11
Net realized gain (loss) on sale of investments in portfolio shares 0 383 0 (5) 0
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. 1,686 4,297 69 (566) (701)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ........ 1,598 6,606 358 (774) (690)
Changes from principal transactions:
Contract purchase payments ........................................ 28,889 305,338 323,635 119,873 530,453
Contract redemptions .............................................. 0 (564) (846) 0 (1,919)
Net transfers (to) from fixed account ............................. (137) 12,270 12,085 2,998 35,179
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal transactions ....... 28,752 317,044 334,874 122,871 563,713
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets .............................. 30,350 323,650 335,232 122,097 563,023
Net assets, beginning of period ........................................ 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period .............................................. $ 30,350 $323,650 $335,232 $122,097 $563,023
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================================================
Morgan Stanley Universal Funds, Inc.
-----------------------------------------------------------
Emerging
Markets Fixed Mid-Cap U.S.
Equity Income Value Real Estate Value
Portfolio Portfolio Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Changes from operations:
Net investment income (loss) ...................................... $ 2,127 $ 3 $ 8,291 $ 2,238 $ 2,175
Net realized gain (loss) on sale of investments in portfolio shares (13) 0 1 103 2
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. (14,018) (2) (7,457) 2,959 (4,311)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ........ (11,904) 1 835 5,300 (2,134)
Changes from principal transactions:
Contract purchase payments ........................................ 53,465 48 170,534 70,145 98,978
Contract redemptions .............................................. 0 0 0 0 0
Net transfers (to) from fixed account ............................. 29,983 (1) 13,944 4,485 4,629
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal transactions ....... 83,448 47 184,478 74,630 103,607
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets .............................. 71,544 48 185,313 79,930 101,473
Net assets, beginning of period ........................................ 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period .............................................. $ 71,544 $ 48 $ 185,313 $ 79,930 $ 101,473
====================================================================================================================================
<CAPTION>
====================================================================================================================================
PBHG Insurance Series Fund, Inc.
-----------------------------------------------------------
Technology
Large Cap and
Growth II Growth Communications
Portfolio Portfolio Portfolio Total
====================================================================================================================================
<S> <C> <C> <C> <C>
Changes from operations:
Net investment income (loss) ...................................... $ (210) $ (334) $ (590) $ 113,218
Net realized gain (loss) on sale of investments in portfolio shares 2 (28) (420) 174
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. (634) 1,478 (14,306) (103,130)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ........ (842) 1,116 (15,316) 10,262
Changes from principal transactions:
Contract purchase payments ........................................ 41,695 110,081 196,258 4,561,433
Contract redemptions .............................................. 0 (1,297) 0 (12,943)
Net transfers (to) from fixed account ............................. 18,077 5,970 9,020 271,399
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal transactions ....... 59,772 114,754 205,278 4,819,889
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets .............................. 58,930 115,870 189,962 4,830,151
Net assets, beginning of period ........................................ 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period .............................................. $ 58,930 $ 115,870 $ 189,962 $4,830,151
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
-12-
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
Basic Contracts
<TABLE>
<CAPTION>
==================================================================================================
Dreyfus Variable Investment Fund
---------------------------------------------------
Growth
Capital and Money Small
Appreciation Income Market Cap
Portfolio Portfolio Portfolio Portfolio
==================================================================================================
<S> <C> <C> <C> <C>
Units outstanding, December 31, 1996 0.000 0.000 0.000 0.000
Units purchased 18,431.382 32,365.225 0.000 41,359.506
Units redeemed (83.716) (133.463) 0.000 0.000
---------- ---------- ----- ----------
Units outstanding December 31, 1997 18,347.666 32,231.762 0.000 41,359.506
========== ========== ===== ==========
==================================================================================================
<CAPTION>
==================================================================================================
Dreyfus Funds Strong Funds
----------------------- ----------------------
Socially
Responsible Stock Growth Opportunity
Growth Index Fund Fund
Fund, Inc. Fund II II
==================================================================================================
<S> <C> <C> <C> <C>
Units outstanding, December 31, 1996 0.000 0.000 0.000 0.000
Units purchased 26,523.695 69,726.369 2,156.405 6,416.208
Units redeemed (191.195) (215.724) (8.849) 0.000
---------- ---------- --------- ---------
Units outstanding December 31, 1997 26,332.500 69,510.645 2,147.556 6,416.208
========== ========== ========= =========
==================================================================================================
</TABLE>
<TABLE>
<CAPTION>
=====================================================================================
Invesco Funds Group, Inc.
----------------------------------------
High Industrial Total
Yield Income Return
Fund Fund Fund
=====================================================================================
<S> <C> <C> <C>
Units outstanding, December 31, 1996 0.000 0.000 0.000
Units purchased 10,339.969 33,509.762 14,857.849
Units redeemed (79.148) (239.809) (215.915)
---------- ---------- ----------
Units outstanding December 31, 1997 10,260.821 33,269.953 14,641.934
========== ========== ==========
=====================================================================================
<CAPTION>
=================================================================================================================
Janus Aspen Series
---------------------------------------------------------------------
Aggressive International Worldwide
Growth Balanced Growth Growth Growth
Portfolio Portfolio Portfolio Portfolio Portfolio
=================================================================================================================
<S> <C> <C> <C> <C> <C>
Units outstanding, December 31, 1996 0.000 0.000 0.000 0.000 0.000
Units purchased 2,843.016 30,746.037 32,820.195 12,542.402 56,862.257
Units redeemed (12.940) (226.283) (82.604) (1.363) (196.504)
--------- ---------- ---------- ---------- ----------
Units outstanding December 31, 1997 2,830.076 30,519.754 32,737.591 12,541.039 56,665.753
========= ========== ========== ========== ==========
=================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
==============================================================================================================
Morgan Stanley Universal Funds, Inc.
----------------------------------------------------------------
Emerging
Markets Fixed Mid-Cap U.S.
Equity Income Value Real Estate Value
Portfolio Portfolio Portfolio Portfolio Portfolio
==============================================================================================================
<S> <C> <C> <C> <C> <C>
Units outstanding, December 31, 1996 0.000 0.000 0.000 0.000 0.000
Units purchased 9,042.956 4.653 16,674.966 7,201.754 9,944.401
Units redeemed 0.000 0.000 0.000 (1.694) 0.000
--------- ----- ---------- --------- ---------
Units outstanding December 31, 1997 9,042.956 4.653 16,674.966 7,200.060 9,944.401
========= ===== ========== ========= =========
==============================================================================================================
<CAPTION>
=====================================================================================
PBHG Insurance Series Fund, Inc.
--------------------------------------
Technology
Large Cap and
Growth II Growth Communications
Portfolio Portfolio Portfolio
=====================================================================================
<S> <C> <C> <C>
Units outstanding, December 31, 1996 0.000 0.000 0.000
Units purchased 6,195.935 11,550.778 21,141.232
Units redeemed 0.000 (135.647) (167.224)
--------- ---------- ----------
Units outstanding December 31, 1997 6,195.935 11,415.131 20,974.008
========= ========== ==========
=====================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
-13-
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
(1) GENERAL
Annuity Investors Variable Account B (the "Account") is registered under
the Investment Company Act of 1940, as amended, as a unit investment
trust. The Account was established on December 19, 1996 and commenced
operations on July 15, 1997 as a segregated investment account for
individual and group variable annuity contracts which are registered
under the Securities Act of 1933. The operations of the Account are
included in the operations of Annuity Investors Life Insurance Company
(the "Company") pursuant to the provisions of the Ohio Insurance Code.
The Company is an indirect wholly-owned subsidiary of American Annuity
Group, Inc., ("AAG"), a publicly traded insurance holding company listed
on the New York Stock Exchange. The Company is licensed in 47 states.
At December 31, 1998, the following investment options were available:
The Dreyfus Variable Investment Fund:
o Capital Appreciation Portfolio
o Growth and Income Portfolio
o Money Market Portfolio
o Small-Cap Portfolio
Dreyfus Funds:
o Socially Responsible Growth Fund, Inc.
o Stock Index Fund
Strong Funds:
o Growth Fund II
o Opportunity Fund II
Timothy Partners, Ltd.:
o The Timothy Plan Variable Series
Invesco Funds:
o High-Yield Fund
o Industrial Income Fund
o Total Return Fund
Janus Aspen Series:
o Aggressive Growth Portfolio
o Balanced Portfolio
o Growth Portfolio
o International Growth Portfolio
o Worldwide Growth Portfolio
Morgan Stanley Universal Funds, Inc.:
o Emerging Markets Equity Portfolio
o Fixed Income Portfolio
o Mid-Cap Value Portfolio
o U.S. Real Estate Portfolio
o Value Portfolio
PBHG Insurance Series Fund, Inc.:
o Growth II Portfolio
o Large Cap Growth Portfolio
o Technology & Communications Portfolio
The Timothy Plan Variable Series commenced operations on May 1, 1998. No
other variable sub-accounts were added or deleted from the Account in
1998.
14
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amount reported in the financial statements
and accompanying notes. Changes in circumstances could cause actual
results to differ materially from those estimates.
Investments
Investments are valued using the net asset value of the respective
portfolios at the end of each business day of the New York Stock
Exchange, with the exception of business holidays. Investment
transactions are accounted for on the trade date (the date the order to
buy or sell is executed). The cost of investments sold is determined on
a first-in, first-out basis. The Account does not hold any investments
which are restricted as to resale.
Net investment income (loss), net realized gain (loss) and unrealized
appreciation (depreciation) on investments are allocated to the
contracts on each valuation date based on each contract's pro rata share
of the assets of the Account as of the beginning of the valuation date.
Federal Income Taxes
No provision for federal income taxes has been made in the accompanying
financial statements because the operations of the Account are included
in the total operations of the Company, which is treated as a life
insurance company for federal income tax purposes under Subchapter L of
the Internal Revenue Code. Net investment income (loss) and realized
gains (losses) will be retained in the Account and will not be taxable
until received by the contract owner or beneficiary in the form of
annuity payments or other distributions.
Net Assets Attributable to Variable Annuity Contract Holders
The variable annuity contract reserves are comprised of net contract
purchase payments less redemptions and benefits. These reserves are
adjusted daily for the net investment income (loss), net realized gain
(loss) and unrealized appreciation (depreciation) on investments.
15
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998
(3) PURCHASES AND SALES OF INVESTMENTS IN PORTFOLIO SHARES
The aggregate cost of purchases and proceeds from sales of investments
in all portfolio shares for the years ended December 31, 1998 and 1997
are as follows:
1998
Proceeds
Cost of from
Purchases Sales
Dreyfus Variable Investment Fund:
Capital Appreciation Portfolio $ 1,886,283 $ 100,665
Growth and Income Portfolio 1,398,782 48,992
Money Market Portfolio 1,666,990 973,896
Small Cap Portfolio 1,631,617 306,137
Dreyfus Funds:
Socially Responsible Growth Fund, Inc. 1,461,373 87,496
Stock Index Fund 9,153,100 775,873
Strong Funds:
Growth Fund II 382,196 23,292
Opportunity Fund II 829,646 51,656
The Timothy Plan Variable Series:
The Timothy Plan Variable Series 343,335 51,013
Invesco Funds:
High-Yield Fund 825,144 103,692
Industrial Income Fund 2,082,612 90,815
Total Return Fund 1,832,550 254,542
Janus Aspen Series:
Aggressive Growth Portfolio 612,648 22,892
Balanced Portfolio 4,352,317 147,638
Growth Portfolio 1,714,516 66,553
International Growth Portfolio 394,961 36,600
Worldwide Growth Portfolio 4,133,266 94,301
Morgan Stanley Universal Funds, Inc.:
Emerging Markets Equity Portfolio 179,808 35,698
Fixed Income Portfolio 568,197 46,487
Mid-Cap Value Portfolio 1,288,598 161,509
U.S. Real Estate Portfolio 509,629 121,228
Value Portfolio 297,246 35,372
PBHG Insurance Series Fund, Inc.:
Growth II Portfolio 193,300 21,234
Large Cap Growth Portfolio 236,902 15,502
Technology & Communications Portfolio 516,277 89,489
--------- ---------
Total $38,491,293 $3,762,572
=========== ==========
16
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998
(3) PURCHASES AND SALES OF INVESTMENTS IN PORTFOLIO SHARES (Continued)
1997
Proceeds
Cost of from
Purchases Sales
Dreyfus Variable Investment Fund:
Capital Appreciation Portfolio $ 184,066 $ 114
Growth and Income Portfolio 347,539 7
Money Market Portfolio 0 0
Small Cap Portfolio 453,533 242
Dreyfus Funds:
Socially Responsible Growth Fund, Inc. 281,102 3,736
Stock Index Fund 732,154 1,219
Strong Funds:
Growth Fund II 23,723 52
Opportunity Fund II 68,218 41
Invesco Funds:
High-Yield Fund 116,516 114
Industrial Income Fund 368,589 0
Total Return Fund 155,706 1,416
Janus Aspen Series:
Aggressive Growth Portfolio 28,673 9
Balanced Portfolio 325,724 6,754
Growth Portfolio 335,162 0
International Growth Portfolio 122,980 311
Worldwide Growth Portfolio 563,789 65
Morgan Stanley Universal Funds, Inc.:
Emerging Markets Equity Portfolio 85,649 75
Fixed Income Portfolio 51 0
Mid-Cap Value Portfolio 192,812 44
U.S. Real Estate Portfolio 78,457 1,590
Value Portfolio 105,900 118
PBHG Insurance Series Fund, Inc.:
Growth II Portfolio 59,698 135
Large Cap Growth Portfolio 116,890 2,470
Technology & Communications Portfolio 208,284 3,595
----------- --------
Total $4,955,215 $22,107
========== =======
17
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998
(4) DEDUCTIONS AND EXPENSES
Although periodic annuitization payments to contract owners vary
according to the investment performance of the sub-accounts, such
payments are not affected by mortality or expense experience because the
Company assumes the mortality and expense risks under the contracts.
The mortality risk assumed by the Company results from the life annuity
payment option in the contracts, in which the Company agrees to make
annuity payments regardless of how long a particular annuitant or other
payee lives. The annuity payments are determined in accordance with
annuity purchase rate provisions established at the time the contracts
are issued. Based on the actuarial determination of expected mortality,
the Company is required to fund any deficiency in the annuity payment
reserves from its general account assets.
The expense risk assumed by the Company is the risk that the deductions
for sales and administrative expenses may prove insufficient to cover
the actual sales and administrative expenses. Under the Basic Contract,
the Company deducts a fee from the Account each day for assuming the
mortality and expense risks. This fee is equal on an annual basis to
1.40% of the daily value of the total investments of the Account. These
fees aggregated $275,095 and $10,727 for the years ended December 31,
1998 and 1997, respectively.
In connection with certain contracts in which the Company incurs reduced
sales and servicing expenses, such as contracts offered to active
employees of the Company or any of its subsidiaries and/or affiliates,
the Company may offer an Enhanced Contract. Under the Enhanced Contract,
the Company deducts a fee from the Account each day for assuming the
mortality and expense risks. This fee is equal on an annual basis to
1.10% of the daily value of the total investments of the Account. These
fees aggregated $3 and $0 for the years ended December 31, 1998 and
1997, respectively.
Pursuant to an administrative agreement between AAG and the Company, AAG
subsidiaries provide sales and administrative services to the Company
and the Account. The Company may deduct a percentage of purchase
payments surrendered to cover sales expenses. The percentage decreases
to 0% from a maximum of 8.0% depending on the product and based upon the
number of years the purchase payment has been held.
In addition, the Company may deduct units from contracts annually and
upon full surrender to cover an administrative fee ranging from $30 to
$40. These expenses totaled $12,780 and $0 for the years ended December
31, 1998 and 1997, respectively.
(5) OTHER TRANSACTIONS WITH AFFILIATES
AAG Securities, Inc., an affiliate of the Company, is the principal
underwriter and performs all variable annuity sales functions on behalf
of the Company.
18
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998
(6) NET ASSETS
The following is a reconciliation of net assets at December 31, 1998:
1998
Proceeds from the sales of units since organization,
less cost of units redeemed $38,982,827
Undistributed net investment income 679,001
Undistributed net realized gains on sale of investments 43,193
Net unrealized appreciation (depreciation) of investments 3,710,346
----------
Net assets, end of period $43,415,367
(7) YEAR 2000 (Unaudited)
To date, the Company has completed its assessment and remediation of all
systems that could be significantly affected by the Year 2000. The
Company is currently testing its software and hardware for Year 2000
readiness. It is anticipated that this process will be completed in a
timely manner. However, if testing is not completed timely, the Year
2000 Issue could have an impact on the operations of the Company.
The Company's operations could also be affected by the inability of
third parties to become Year 2000 compliant. Various investment advisors
who are not affiliated with the Company manage the investment
sub-accounts included in Separate Account B. Like most financial
organizations, investment advisors have been working diligently to
address Year 2000 issues. The Company does not expect any of the
investment advisors to provide Year 2000 assurance on the various
sub-accounts before the second quarter of 1999. The inability of third
parties to complete the Year 2000 resolution process in a timely fashion
could materially impact the Company. The effect of non-compliance by
significant third parties is not determinable.
19
<PAGE>
The Financial Statements of the following investment companies ("Registrant")
are made a part hereof and incorporated herein:
Registrant 1940 Act Number
Janus Aspen Series 811-07736
- --Janus Aspen Aggressive Growth Portfolio
- --Janus Aspen Worldwide Growth Portfolio
- --Janus Aspen Series International Growth Portfolio
- --Janus Aspen Series Growth Portfolio
Dreyfus Variable Investment Fund 811-05125
- --Capital Appreciation Portfolio
- --Growth & Income Portfolio
- --Small Cap Portfolio
- --Domestic Money Market Fund
The Dreyfus Socially Responsible Growth Fund, Inc. 811-07044
Dreyfus Stock Index Fund 811-05719
INVESCO Variable Investment fund, Inc. 811-8038
- --Total Return Fund
- --Industrial Income Fund
- --High Yield Fund
Morgan Stanley Universal Funds, Inc. 811-07607
- --Emerging Markets Equity Portfolio
- --Mid Cap Value Portflio
- --U.S. Real Estate Portfolio
- --Fixed Income Portfolio
- --Value Portfolio
PBHG Insurance Series Fund, Inc. 811-08009
- --PBHG Technology & Communications Portfolio
- --PBHG Growth II Portfolio
- --Large Cap Growth Portfolio
Strong Special Fund II, Inc. 811-06552
Strong VIF Growth Fund II 811-6553
The Timothy Plan Variable Series 811-8228
<PAGE>
3245 (2/99)
Annuity Investors Life Insurance Company(R)
P. O. Box 5423
Cincinnati, Ohio 45201-5423
1-800-789-6771
This report is for the information of the contract owners and participants of
the Annuity Investors Life Insurance Company and the Annuity Investors Variable
Account B. It is authorized for distribution to other persons only when preceded
or accompanied by a current prospectus which contains complete information,
including charges and expenses.
