333-19725
As filed with the Securities and Exchange Commission o April 28, 2000
File No. 333-19725
File No. 811-08017
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ( )
Pre-effective Amendment No. ( )
Post-effective Amendment No. 7 ( X )
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 ( )
Pre-effective Amendment No. ( )
Post-effective Amendment No. 14 ( X )
(Check appropriate box or boxes)
____________________________________
ANNUITY INVESTORS (R) VARIABLE ACCOUNT B
(Exact Name of Registrant)
ANNUITY INVESTORS LIFE INSURANCE COMPANY(R)
(Name of Depositor)
P.O. Box 5423
Cincinnati, Ohio 45201-5423
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code:
1-800-789-6771
________________________________________________________________________________
Mark F. Muething, Esq.
Executive Vice President, Secretary and General Counsel
Annuity Investors Life Insurance Company
P.O. Box 5423
Cincinnati, Ohio 45201-5423
(Name and Address of Agent for Service)
Copy to:
John P. Gruber, Esq.
Vice President
Annuity Investors Life Insurance Company
P.O. Box 5423
Cincinnati, Ohio 45201-5423
________________________________________________________________________________
It is proposed that this filing will become effective:
_________Immediately upon filing pursuant to Rule 485(b)
_____X__ On May 1, 2000 pursuant to Rule 485(b)
_________60 days after filing pursuant to Rule 485(a)(1)
_________On _____pursuant to Rule 485(a)(1)
_________75 days after filing pursuant to Rule 485(a)(2)
_________On pursuant to Rule 485(a)(2)
<PAGE>
CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
(333-19725)
Showing Location in Part A (Prospectus),
Part B (Statement of Additional Information) and Part C (Other Information)
of Registration Statement Information Required by Form N-4
<TABLE>
<CAPTION>
<PAGE>
PART A
<S> <C> <C>
Item of Form N-4 Prospectus Caption
1. Cover Page................................ Cover Page
2. Definitions............................... Definitions; Glossary of
Financial Terms
3. Synopsis.................................. Overview
4. Condensed Financial Information
(a) Accumulation Unit Values.......... Condensed Financial
Information
(b) Performance Data.................. Performance Information
(c) Financial Statements.............. Financial Statements
5. General Description of Registrant,
Depositor and Portfolio Companies
(a) Depositor......................... Annuity Investors
Life Insurance
Company (R)
(b) Registrant........................ The Separate Account
(c) Portfolio Companies............... The Portfolios
(d) Portfolio Prospectuses............ The Portfolios
(e) Voting Rights..................... Voting Rights
6. Deductions and Expenses
(a) General........................... Charges and Deductions
(b) Sales Load %...................... Contingent Deferred Sales
Charge
(c) Special Purchase Plan............. Contingent Deferred Sales
Charge
(d) Commissions....................... AAG Securities, Inc.
(e) Portfolio Expenses................ Fee Table
(f) Operating Expenses................ Fee Table
7. Contracts
(a) Persons with Rights............... Persons with Rights
Under a Contract;
Voting Rights
(b)(i) Allocation of Premium Payments.... Purchase Payments
(ii) Transfers Transfers
(iii) Exchanges Additions, Deletions
or Substitutions
(c) Changes........................... Not Applicable
(d) Inquiries......................... How Do I Contact the
Company?
8. Annuity Period............................ Benefit Payment Period
9. Death Benefit............................. Death Benefit
10. Purchases and Contract Values
(a) Purchases......................... Purchase Payments;
Investment
Options--Allocations
(b) Valuation......................... Account Value; Definitions;
Glossary of Financial Terms
(c) Daily Calculation................. Account Value; Accumulation
Units; Definitions;
Glossary of Financial Terms
(d) Underwriter....................... AAG Securities, Inc.
11. Redemptions
(a) By Owner.......................... Surrenders
By Annuitant...................... Not Applicable
(b) Texas ORP......................... Texas Optional Retirement
Program
(c) Check Delay....................... Surrenders
(d) Free Look......................... Right to Cancel
12. Taxes..................................... Federal Tax Matters
13. Legal Proceedings......................... Legal Proceedings
14. Table of Contents for the Statement of
Additional Statement of Additional
Information............................... Information
</TABLE>
<PAGE>
PART B
<TABLE>
<CAPTION>
<S> <C> <C>
Statement of Additional
Item of Form N-4 Information Caption
15. Cover Page................................ Cover Page
16. Table of Contents......................... Table of Contents
17. General Information and History........... General Information
and History
18. Services
(a) Fees and Expenses of Registrant... (Prospectus) Fee Table
(b) Management Contracts.............. Not Applicable
(c) Custodian......................... Not Applicable
Independent Auditors.............. Experts
(d) Assets of Registrant.............. Not Applicable
(e) Affiliated Persons................ Not Applicable
(f) Principal Underwriter............. Not Applicable
19. Purchase of Securities Being Offered...... (Prospectus)
AAG Securities, Inc.
Offering Sales Load....................... (Prospectus)
Contingent Deferred
Sales Charge
20. Underwriters.............................. AAG Securities, Inc.
21. Calculation of Performance Data
(a) Money Market Funded Sub-Accounts.. Money Market Sub-Account;
Standardized Yield
Calculation
(b) Other Sub-Accounts................ Not Applicable
22. Annuity Payments.......................... (Prospectus)
Fixed Dollar Benefit;
Variable Dollar Benefit;
(SAI) Benefit
Units - Transfer Formulas
23. Financial Statements...................... Financial Statements
</TABLE>
<PAGE>
PART C
<TABLE>
<CAPTION>
<S> <C> <C>
Item of Form N-4 Part C Caption
24. Financial Statements and Exhibits........ Financial Statements and
Exhibits
(a) Financial Statements............. Financial Statements
(b) Exhibits......................... Exhibits
25. Directors and Officers of the Depositor.. Directors and Officers of
Annuity Investors Life
Insurance Company(R)
26. Persons Controlled By or Under Persons Controlled By Or
Under Common
Common Control With the Registrant....... Control With the Depositor
or Registrant
27. Number of Owners......................... Number of Owners
28. Indemnification.......................... Indemnification
29. Principal Underwriters................... Principal Underwriter
30. Location of Accounts and
Records ................................. Location of Accounts
and Records
31. Management Services...................... Management Services
32. Undertakings............................. Undertakings
Signature Page........................... Signature Page
</TABLE>
<PAGE>
333-19725
ANNUITY INVESTORS LIFE INSURANCE COMPANY (R)
ANNUITY INVESTORS (R) VARIABLE ACCOUNT B
PROSPECTUS FOR INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES
May 1, 2000
This prospectus describes individual and group flexible premium deferred annuity
contracts (the Contracts). Annuity Investors Life Insurance Company (R)(the
Company) is the issuer of the Contracts. The Contracts are available for
tax-qualified and non-tax-qualified annuity purchases. All Contracts qualify for
tax-deferred treatment during the Accumulation Period. The tax treatment of
annuities is discussed in the Federal Tax Matters section of this prospectus.
The Contracts offer both variable and fixed investment options. The variable
investment options under the Contracts are Sub-Accounts of Annuity Investors (R)
Variable Account B (the Separate Account). The Contracts currently offer 29
Sub-Accounts. Each Sub-Account is invested in shares of a registered investment
company or a portfolio thereof (each, a "Portfolio"). The Portfolios are listed
below.
Janus Aspen Series (6 Portfolios)
-Aggressive Growth Portfolio
-Worldwide Growth Portfolio
-Balanced Portfolio
-Growth Portfolio
-International Growth Portfolio
-Capital Appreciation Portfolio
Dreyfus Variable Investment Fund (4 Portfolios)
-Appreciation Portfolio
-Money Market Portfolio
-Growth and Income Portfolio
-Small Cap Portfolio
The Dreyfus Socially Responsible Growth Fund, Inc.
Dreyfus Stock Index Fund
Strong Opportunity Fund II, Inc.
Strong Variable Insurance Funds, Inc. (1 Portfolio)
-Strong Mid Cap Growth Fund II
Deutsche Asset Management VIT Funds (3 Portfolios)
-Deutsche VIT EAFE (R)Equity Index Fund
-Deutsche VIT Equity 500 Index Fund
-Deutsche VIT Small Cap Index Fund
INVESCO Variable Investment Funds, Inc. (3 Portfolios)
-INVESCO VIF-Equity Income Fund
-INVESCO VIF-Total Return Fund
-INVESCO VIF-High Yield Fund
The Universal Institutional Funds, Inc. (5 Portfolios)
Morgan Stanley UIF, Inc.-Mid Cap Value Portfolio
Morgan Stanley UIF, Inc.-Value Portfolio
Morgan Stanley UIF, Inc.-Fixed Income Portfolio
Morgan Stanley UIF, Inc.-U.S. Real Estate Portfolio
Morgan Stanley UIF, Inc.-Emerging Markets Equity Portfolio
PBHG Insurance Series Fund, Inc. (3 Portfolios)
-PBHG Growth II Portfolio
-PBHG Large Cap Growth Portfolio
-PBHG Technology & Communications Portfolio
The Timothy Plan Small-Cap Variable Series
This prospectus includes information you should know before investing in the
Contracts. This prospectus is not complete without the current prospectuses for
the Portfolios. Please keep this prospectus and the Portfolio prospectuses for
future reference.
A statement of additional information, dated May 1, 2000, contains more
information about the Separate Account and the Contracts. The Company filed the
statement of additional information with the Securities and Exchange Commission.
It is part of this prospectus. For a free copy, complete and return the form on
the last page of this prospectus, or call the Company at 1-800-789-6771. You may
also access the statement of additional information (as well as all other
documents filed with the Securities and Exchange Commission with respect to the
Contracts, the Separate Account or the Company) at the Securities and Exchange
Commission's Web site: http://www.sec.gov. The table of contents for the
statement of additional information is printed on the last page of this
prospectus.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
- --------------------------------------------------------------------------------
These securities may be sold by a bank or credit union, but are not financial
institution products.
o The Contracts are Not FDIC or NCUSIF Insured
o The Contracts are Obligations of the Company and Not of the Bank or Credit
Union
o The Bank or Credit Union Does Not Guarantee the Compan's Obligations Under
the Contracts
o The Contracts Involve Investment Risk and May Lose Value
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Page
DEFINITIONS.......................................................................................4
OVERVIEW..........................................................................................5
What is the Separate Account?..................................................................5
What Are the Contracts?........................................................................5
How Do I Purchase or Cancel a Contract?........................................................5
Will Any Penalties or Charges Apply If I Surrender a Contract?.................................5
What Other Charges and Deductions Apply to the Contract?.......................................5
How Do I Contact the Company?..................................................................5
FEE TABLE.........................................................................................6
Owner Transaction Expenses.....................................................................6
Separate Account Annual Expenses...............................................................6
Portfolio Annual Expenses (After Expense Reimbursement) for Year Ended 12/31/991...............6
Examples.......................................................................................8
Enhanced Contracts.............................................................................9
CONDENSED FINANCIAL INFORMATION..................................................................11
Financial Statements..........................................................................12
Performance Information.......................................................................13
Yield Data..................................................................................13
Total Return Data...........................................................................13
Other Performance Measures..................................................................13
THE PORTFOLIOS...................................................................................14
Janus Aspen Series............................................................................14
Dreyfus Portfolios............................................................................15
Strong Portfolios.............................................................................16
Deutsche Asset Management VIT Funds...........................................................16
INVESCO Variable Investment Funds, Inc........................................................17
PBHG Insurance Series Fund, Inc...............................................................17
The Universal Institutional Funds, Inc........................................................18
The Timothy Plan Small-Cap Variable Series....................................................18
Additions, Deletions, or Substitutions........................................................19
Voting Rights.................................................................................19
ANNUITY INVESTORS LIFE INSURANCE COMPANY (R).....................................................20
THE SEPARATE ACCOUNT.............................................................................20
AAG SECURITIES, INC..............................................................................20
CHARGES AND DEDUCTIONS...........................................................................21
Charges and Deductions By the Company.........................................................21
Contingent Deferred Sales Charge ("CDSC")...................................................21
Contract Maintenance Fee....................................................................22
Transfer Fee................................................................................22
Administration Charge.......................................................................22
Mortality and Expense Risk Charge...........................................................23
Premium Taxes...............................................................................23
Discretionary Waivers of Charges............................................................23
Expenses of the Portfolios....................................................................23
THE CONTRACTS....................................................................................24
Right to Cancel...............................................................................24
Persons With Rights Under a Contract..........................................................24
ACCUMULATION PERIOD..............................................................................25
Account Statements............................................................................25
Account Value.................................................................................25
Purchase Payments.............................................................................26
Investment Options--Allocations...............................................................26
Transfers.....................................................................................27
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Surrenders....................................................................................29
Contract Loans................................................................................30
Termination...................................................................................30
BENEFIT PAYMENT PERIOD...........................................................................31
Annuity Benefit...............................................................................31
Death Benefit.................................................................................31
Settlement Options............................................................................31
Form of Settlement Option...................................................................32
Calculation of Fixed Dollar Benefit Payments................................................32
Calculation of Variable Dollar Benefit Payments.............................................33
FEDERAL TAX MATTERS..............................................................................34
Tax Deferral On Annuities.....................................................................34
Tax-Qualified Plans...........................................................................35
Individual Retirement Annuities.............................................................35
Roth IRAs...................................................................................35
Tax-Sheltered Annuities.....................................................................35
Texas Optional Retirement Program...........................................................35
Pension and Profit Sharing Plans............................................................35
Governmental Deferred Compensation Plans....................................................35
Nonqualified Deferred Compensation Plans......................................................35
Summary of Income Tax Rules...................................................................36
GLOSSARY OF FINANCIAL TERMS......................................................................37
THE REGISTRATION STATEMENT.......................................................................38
OTHER INFORMATION................................................................................38
Legal Proceedings.............................................................................38
STATEMENT OF ADDITIONAL INFORMATION..............................................................39
</TABLE>
-3-
<PAGE>
DEFINITIONS
- --------------------------------------------------------------------------------
The capitalized terms defined on this page will have the meanings given to them
when used in this prospectus. Other terms which may have a specific meaning
under the Contracts, but which are not defined on this page, will be explained
as they are used in this prospectus.
- --------------------------------------------------------------------------------
Account Value: The value of a Contract during the Accumulation Period. It is
equal to the sum of the value of the owner's interest in the Sub-Accounts and
the owner's interest in the fixed account options.
Accumulation Period: The period during which purchase payments are invested
according to the investment options elected and accumulated on a tax-deferred
basis. The Accumulation Period ends when a Contract is annuitized or surrendered
in full, or on the Death Benefit Valuation Date.
Accumulation Unit: A share of a Sub-Account that an owner purchases during the
Accumulation Period.
Accumulation Unit Value: The value of an Accumulation Unit at the end of a
Valuation Period. See the Glossary of Financial Terms on page 37 of this
prospectus for an explanation of how Accumulation Unit Values are calculated.
Benefit Payment Period: The period during which either annuity benefit or death
benefit payments are paid under a settlement option. The Benefit Payment Period
begins on the first day of the first payment interval in which a benefit payment
will be paid.
Benefit Unit: A share of a Sub-Account that is used to determine the amount of
each variable dollar benefit payment after the first variable dollar benefit
payment during the Benefit Payment Period.
Benefit Unit Value: The value of a Benefit Unit at the end of a Valuation
Period. See the Glossary of Financial Terms on page 37 of this prospectus for an
explanation of how Benefit Unit Values are calculated.
Death Benefit Valuation Date: The date the death benefit is valued. It is the
date that the Company receives both proof of the death of the owner and
instructions as to how the death benefit will be paid. If instructions are not
received within one year of the date of death, the Death Benefit Valuation Date
will be one year after the date of death. The Death Benefit Valuation Date may
never be later than five years after the date of death.
Net Asset Value: The price computed by or for each Portfolio, no less frequently
than each Valuation Period, at which the Portfolio's shares or units are
redeemed in accordance with the rules of the Securities and Exchange Commission.
Net Investment Factor: The factor that represents the percentage change in the
Accumulation Unit Values and Benefit Unit Values from one Valuation Period to
the next. See the Glossary of Financial Terms on page 37 of this prospectus for
an explanation of how the Net Investment Factor is calculated.
Valuation Date: A day on which Accumulation Unit Values and Benefit Unit Values
can be calculated. Each day the New York Stock Exchange is open for business is
a Valuation Date.
Valuation Period: The period starting at the close of regular trading on the New
York Stock Exchange on any Valuation Date and ending at the close of trading on
the next succeeding Valuation Date.
-4-
<PAGE>
- --------------------------------------------------------------------------------
OVERVIEW
- --------------------------------------------------------------------------------
What is the Separate Account? The Separate Account is a unit investment trust
registered with the Securities and Exchange Commission under the Investment
Company Act of 1940. The Separate Account is divided into Sub-Accounts, each of
which is invested in one of the Portfolios listed on page 1 of this prospectus.
If you choose a variable investment option, you are investing in the
Sub-Accounts, not directly in the Portfolios.
What Are the Contracts? The Contracts are individual and group deferred
annuities, which are insurance products. The Contracts are sold with either a
standard or an enhanced fee structure, as described in the Fee Table on page 6
of this prospectus. The Contracts are available in both tax-qualified and
non-tax-qualified forms, both of which qualify for tax-deferred investment
status. See the Federal Tax Matters section beginning on page 34 of this
prospectus for more information about tax qualifications and taxation of
annuities in general. During the Accumulation Period, the amounts you contribute
can be allocated among any of the 29 variable investment options and five fixed
account options. The variable investment options are the Sub-Accounts of the
Separate Account, each of which is invested in a Portfolio. The owner bears the
risk of any investment gain or loss on amounts allocated to the Sub-Accounts.
The fixed account options earn a fixed rate of interest declared by the Company,
which will be no less than 3% per year. The Company guarantees amounts invested
in the fixed account options and the earnings thereon so long as those amounts
remain in the fixed account.
During the Benefit Payment Period, payments can be allocated between variable
dollar benefit and fixed dollar benefit options. If a variable dollar benefit is
selected, Benefit Units can be allocated to any of the same Sub-Accounts that
are available during the Accumulation Period.
How Do I Purchase or Cancel a Contract? The requirements to purchase a Contract
are explained in The Contracts section beginning on page 24 of this prospectus.
You may purchase a Contract only through a licensed securities representative.
You may cancel a Contract within twenty days after you receive it (the right to
cancel may be longer in some States). In many States, you will bear the risk of
investment gain or loss on any amounts allocated to the Sub-Accounts prior to
cancellation. The right to cancel may not apply to group Contracts. The right to
cancel is described in the Right to Cancel section on page 24 of this
prospectus.
Will Any Penalties or Charges Apply If I Surrender a Contract? A contingent
deferred sales charge (CDSC) may apply to amounts surrendered depending on the
timing and amount of the surrender. The maximum CDSC is 7% for each purchase
payment. The CDSC percentage decreases by 1% annually to 0% after seven years
from the date of receipt of each purchase payment. Surrender procedures and the
CDSC are described in the Surrenders section beginning on page 29 of this
prospectus. A penalty tax may also be imposed at the time of a surrender
depending on your age and other circumstances of the surrender. Tax consequences
of a surrender are described in the Federal Tax Matters section on page 34 of
this prospectus. The right to surrender may be restricted under certain
tax-qualified plans.
What Other Charges and Deductions Apply to the Contract? Other than the CDSC,
the Company will charge the fees and charges listed below unless the Company
waives the fee or charge as discussed in the Charges and Deductions section
beginning on page 21 of this prospectus:
o a transfer fee for certain transfers between investment options;
o an annual contract maintenance fee, which is assessed only against investments
in the Sub-Accounts;
o a mortality and expense risk charge, which is an expense of the Separate
Account and charged against all assets in the Sub-Accounts (this charge may
never be waived);
o an administration charge, which is an expense of the Separate Account and
charged against all assets in the Sub-Accounts; and
o premium taxes in some States (where taxes apply, they may never be waived).
In addition to charges and deductions under the Contracts, the Portfolios incur
expenses that are passed through to owners. Portfolio expenses for the fiscal
year ending December 31, 1999 are included in the Fee Table on page 6 of this
prospectus and are described in the prospectuses and statements of additional
information for the Portfolios.
How Do I Contact the Company? Any questions or inquiries should be directed to
the Company's Administrative Office, P.O. Box 5423, Cincinnati, Ohio 45201-5423,
1-800-789-6771. Please include the Contract number and the owner's name.
- --------------------------------------------------------------------------------
-5-
<PAGE>
FEE TABLE
- -------------------------------------------------------------------------------
Owner Transaction Expenses
<TABLE>
<CAPTION>
<S> <C>
Maximum Contingent Deferred Sales Charge (applies to purchase payments only) 7%
Transfer Fee (applies to transfers in excess of 12 in any contract year) $25
Annual Contract Maintenance Fee (not assessed against fixed account options) $30
</TABLE>
Separate Account Annual Expenses
(As a percentage of the average value of the owner's interest in the
Sub-Accounts)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Standard Contracts Enhanced Contracts with Administration
Charge Waived
Mortality and Expense Risk Charge 1.25% 0.95% 0.95%
Administration Charge 0.15% 0.15% 0.00%
Total Separate Account Annual Expenses 1.40% 1.10% 0.95%
Portfolio Annual Expenses (After Expense Reimbursement) for Year Ended 12/31/991
(As a percentage of Portfolio average net assets)
Sub-Account Management Other Total
Fees Expenses Expenses
------------------------------------------------------------------------ ----------- ----------- ----------
<S> <C> <C> <C>
Janus A.S.-Aggressive Growth Portfolio2 0.65 0.02 0.67
------------------------------------------------------------------------
Janus A.S.-Worldwide Growth Portfolio2 0.65 0.05 0.70
------------------------------------------------------------------------
Janus A.S.-Balanced Portfolio2 0.65 0.02 0.67
------------------------------------------------------------------------
Janus A.S.-Growth Portfolio2 0.65 0.02 0.67
------------------------------------------------------------------------
Janus A.S.-International Growth Portfolio2 0.65 0.11 0.76
------------------------------------------------------------------------
Janus A.S.-Capital Appreciation Portfolio2 0.65 0.04 0.69
------------------------------------------------------------------------
Dreyfus V.I.F.-Appreciation Portfolio 0.75 0.03 0.78
------------------------------------------------------------------------
Dreyfus V.I.F.-Money Market Portfolio 0.50 0.08 0.58
------------------------------------------------------------------------
Dreyfus V.I.F.-Growth and Income Portfolio 0.75 0.04 0.79
------------------------------------------------------------------------
Dreyfus V.I.F.-Small Cap Portfolio 0.75 0.03 0.78
------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund, Inc. 0.75 0.04 0.79
------------------------------------------------------------------------
Dreyfus Stock Index Fund 0.25 0.01 0.26
------------------------------------------------------------------------
Strong Opportunity Fund II, Inc. 1.00 0.14 1.14
------------------------------------------------------------------------
Strong Variable Insurance Funds, Inc.-Strong Mid Cap Growth Fund II 1.00 0.15 1.15
------------------------------------------------------------------------
Deutsche VIT EAFE(R) Equity Index Fund 0.26 0.39 0.65
------------------------------------------------------------------------
Deutsche VIT Equity 500 Index Fund 0.14 0.16 0.30
------------------------------------------------------------------------
Deutsche VIT Small Cap Index Fund 0.13 0.32 0.45
------------------------------------------------------------------------
INVESCO VIF-Equity Income Fund 0.75 0.44 1.19
------------------------------------------------------------------------
INVESCO VIF-Total Return Fund 0.75 0.55 1.30
------------------------------------------------------------------------
INVESCO VIF-High Yield Fund 0.60 0.48 1.08
------------------------------------------------------------------------
Morgan Stanley UIF, Inc.-Mid Cap Value Portfolio 0.43 0.62 1.05
------------------------------------------------------------------------
Morgan Stanley UIF, Inc.-Value Portfolio 0.18 0.67 0.85
------------------------------------------------------------------------
Morgan Stanley UIF, Inc.-Fixed Income Portfolio 0.14 0.56 0.70
------------------------------------------------------------------------
Morgan Stanley UIF, Inc.-U.S. Real Estate Portfolio 0.00 1.10 1.10
------------------------------------------------------------------------
Morgan Stanley UIF, Inc.-Emerging Markets Equity Portfolio 0.42 1.37 1.79
------------------------------------------------------------------------
PBHG Insurance Series Fund, Inc.-PBHG Growth II Portfolio 0.85 0.35 1.20
------------------------------------------------------------------------
PBHG Insurance Series Fund, Inc.-PBHG Large Cap Growth Portfolio 0.68 0.42 1.10
------------------------------------------------------------------------
PBHG Insurance Series Fund, Inc.-PBHG Tech. & Comm. Portfolio 0.85 0.24 1.09
------------------------------------------------------------------------
The Timothy Plan Small-Cap Variable Series 1.00 0.18 1.18
-6-
</TABLE>
<PAGE>
The purpose of the Fee Table is to assist the owner in understanding the various
costs and expenses that an owner will bear directly or indirectly. The Fee Table
reflects expenses of the Separate Account as well as of the Portfolios. The
Separate Account expenses are discussed more fully in the Charges and Deductions
section beginning on page 21 of this prospectus. The Portfolio expenses are
discussed more fully in the Portfolio prospectuses. Premium taxes may also
apply.
1 Data for each Portfolio are for its fiscal year ended December 31, 1999.
Actual expenses in future years may be higher or lower. Portfolios may have
agreements with their advisors to cap or waive fees, and/or to reduce or waive
expenses or to reimburse expenses. The specific terms of such waivers,
reduction, reimbursements, or fee changes are discussed in the Portfolio
prospectuses. Fees and expenses shown below are actual fees and expenses before
any applicable fee waivers or reductions or expense reimbursements.
2 Expenses are based upon expenses for the fiscal year ended December 31, 1999,
restated to reflect a reduction in the management fee for the Janus Aspen
Portfolios.
<TABLE>
<CAPTION>
Sub-Account Management Other Total
Fees Expenses Expenses
------------------------------------------------------------------------ ----------- ----------- -----------
<S> <C> <C> <C>
Janus A.S.-Aggressive Growth Portfolio2 0.65 0.02 0.67
------------------------------------------------------------------------
Janus A.S.-Worldwide Growth Portfolio2 0.65 0.05 0.70
------------------------------------------------------------------------
Janus A.S.-Balanced Portfolio2 0.65 0.02 0.67
------------------------------------------------------------------------
Janus A.S.-Growth Portfolio2 0.65 0.02 0.67
------------------------------------------------------------------------
Janus A.S.-International Growth Portfolio2 0.65 0.11 0.76
------------------------------------------------------------------------
Janus A.S.-Capital Appreciation Portfolio2 0.65 0.04 0.69
------------------------------------------------------------------------
Dreyfus V.I.F.-Appreciation Portfolio 0.75 0.03 0.78
------------------------------------------------------------------------
Dreyfus V.I.F.-Money Market Portfolio 0.50 0.08 0.58
------------------------------------------------------------------------
Dreyfus V.I.F.-Growth and Income Portfolio 0.75 0.04 0.79
------------------------------------------------------------------------
Dreyfus V.I.F.-Small Cap Portfolio 0.75 0.03 0.78
------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund, Inc. 0.75 0.04 0.79
------------------------------------------------------------------------
Dreyfus Stock Index Fund 0.25 0.01 0.26
------------------------------------------------------------------------
Strong Opportunity Fund II, Inc. 1.00 0.14 1.14
------------------------------------------------------------------------
Strong Variable Insurance Funds, Inc.-Strong Mid Cap Growth Fund II 1.00 0.17 1.17
------------------------------------------------------------------------
Deutsche VIT EAFE (R) Equity Index Fund 0.45 0.69 1.15
------------------------------------------------------------------------
Deutsche VIT Equity 500 Index Fund 0.20 0.23 0.43
------------------------------------------------------------------------
Deutsche VIT Small Cap Index Fund 0.35 0.83 1.18
------------------------------------------------------------------------
INVESCO VIF-Equity Income Fund 0.75 0.42 1.17
------------------------------------------------------------------------
INVESCO VIF-Total Return Fund 0.75 0.42 1.17
------------------------------------------------------------------------
INVESCO VIF-High Yield Fund 0.60 0.47 1.07
------------------------------------------------------------------------
Morgan Stanley UIF, Inc.-Mid Cap Value Portfolio 0.75 0.62 1.37
------------------------------------------------------------------------
Morgan Stanley UIF, Inc.-Value Portfolio 0.55 0.67 1.22
------------------------------------------------------------------------
Morgan Stanley UIF, Inc.-Fixed Income Portfolio 0.40 0.56 0.96
------------------------------------------------------------------------
Morgan Stanley UIF, Inc.-U.S. Real Estate Portfolio 0.80 1.10 1.90
------------------------------------------------------------------------
Morgan Stanley UIF, Inc.-Emerging Markets Equity Portfolio 1.25 1.37 2.62
------------------------------------------------------------------------
PBHG Insurance Series Fund, Inc.-PBHG Growth II Portfolio 0.85 0.35 1.20
------------------------------------------------------------------------
PBHG Insurance Series Fund, Inc.-PBHG Large Cap Growth Portfolio 0.75 0.42 1.17
------------------------------------------------------------------------
PBHG Insurance Series Fund, Inc.-PBHG Tech. & Comm. Portfolio 0.85 0.24 1.09
------------------------------------------------------------------------
The Timothy Plan Small-Cap Variable Series 1.00 1.60 2.60
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
Examples Example #1-- Example #2--
Assuming Surrender Assuming No Surrender
Standard Contracts If the owner surrenders If the owner does not
his or her Contract at surrender his or her Contract
the end of the applicable or if it is annuitized, the
time period, the following following expenses would be
expenses would be charged on a $1,000 investment at the
on a $1,000 Investment time period:
- ------------------------------------------------------------------- ------------------------------- -----------------------------
Sub-Account 1 3 5 10 1 3 5 10
Year Years Years Years Year Years Years Years
- ------------------------------------------------------------------- -------------- ------ ------- ------ ------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Janus A.S.-Aggressive Growth Portfolio $92 $121 $158 $311 $22 $71 $128 $311
Janus A.S.-Worldwide Growth Portfolio $92 $122 $160 $315 $22 $72 $130 $315
Janus A.S.-Balanced Portfolio $92 $121 $158 $311 $22 $71 $128 $311
Janus A.S.-Growth Portfolio $92 $121 $158 $311 $22 $71 $128 $311
Janus A.S.-International Growth Portfolio $93 $124 $164 $322 $23 $74 $134 $322
Janus A.S.-Capital Appreciation Portfolio $92 $122 $160 $313 $22 $72 $130 $313
Dreyfus V.I.F.-Appreciation Portfolio $93 $125 $165 $325 $23 $75 $135 $325
Dreyfus V.I.F.-Money Market Portfolio $91 $118 $153 $299 $21 $68 $123 $299
Dreyfus V.I.F.-Growth and Income Portfolio $93 $125 $165 $326 $23 $75 $135 $326
Dreyfus V.I.F.-Small Cap Portfolio $93 $125 $165 $325 $23 $75 $135 $325
The Dreyfus Socially Responsible Growth Fund, Inc. $93 $125 $165 $326 $23 $75 $135 $326
Dreyfus Stock Index Fund $88 $108 $135 $256 $18 $58 $105 $256
Strong Opportunity Fund II, Inc. $97 $136 $185 $371 $27 $86 $155 $371
Strong Variable Insurance Funds, Inc.-Strong Mid Cap Growth Fund II $97 $137 $185 $372 $27 $87 $155 $372
Deutsche VIT EAFE (R) Equity Index Fund $92 $121 $157 $308 $22 $71 $127 $308
Deutsche VIT Equity 500 Index Fund $88 $109 $137 $261 $18 $59 $107 $261
Deutsche VIT Small Cap Index Fund $90 $114 $146 $281 $20 $64 $116 $281
INVESCO VIF-Equity Income Fund $97 $138 $188 $377 $27 $88 $158 $377
INVESCO VIF-Total Return Fund $98 $142 $194 $391 $28 $92 $164 $391
INVESCO VIF-High Yield Fund $96 $135 $182 $363 $26 $85 $152 $363
Morgan Stanley UIF, Inc.-Mid Cap Value Portfolio $96 $134 $180 $360 $26 $84 $150 $360
Morgan Stanley UIF, Inc.-Value Portfolio $94 $127 $169 $334 $24 $77 $139 $334
Morgan Stanley UIF, Inc.-Fixed Income Portfolio $92 $122 $160 $315 $22 $72 $130 $315
Morgan Stanley UIF, Inc.-U.S. Real Estate Portfolio $96 $135 $183 $366 $26 $85 $153 $366
Morgan Stanley UIF, Inc.-Emerging Markets Equity Portfolio $103 $157 $220 $449 $33 $107 $190 $449
PBHG Insurance Series Fund, Inc.-PBHG Growth II Portfolio $97 $138 $188 $378 $27 $88 $158 $378
PBHG Insurance Series Fund, Inc.-PBHG Large Cap Growth Portfolio $96 $135 $183 $366 $26 $85 $153 $366
PBHG Insurance Series Fund, Inc.-PBHG Tech. & Comm. Portfolio $96 $135 $182 $365 $26 $85 $152 $365
The Timothy Plan Small-Cap Variable Series $97 $138 $187 $376 $27 $88 $157 $376
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
Example #1-- Example #2--
Assuming Surrender Assuming No Surrender
If the owner surrenders If the owner does not
Enhanced Contracts his or her Contract at surrender his or her Contract
the end of the applicable or if it is annuitized, the
time period, the following following expenses would be
expenses would be charged on a $1,000 investment at the
on a $1,000 investment: end of charged the applicable
time period:
- -------------------------------------------------------------------- -------------------------------------------------- ---------
Sub-Account 1 3 5 10 1 3 5 10
Year Years Years Years Year Years Years Years
- -------------------------------------------------------------------- ------- ----- ------- ----- ------ ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Janus A.S.-Aggressive Growth Portfolio $89 $112 $141 $271 $19 $62 $111 $271
Janus A.S.-Worldwide Growth Portfolio $89 $113 $143 $275 $19 $63 $113 $275
Janus A.S.-Balanced Portfolio $89 $112 $141 $271 $19 $62 $111 $271
Janus A.S.-Growth Portfolio $89 $112 $141 $271 $19 $62 $111 $271
Janus A.S.-International Growth Portfolio $90 $115 $146 $283 $20 $65 $116 $283
Janus A.S.-Capital Appreciation Portfolio $89 $112 $142 $274 $19 $62 $112 $274
Dreyfus V.I.F.-Appreciation Portfolio $90 $115 $148 $286 $20 $65 $118 $286
Dreyfus V.I.F.-Money Market Portfolio $88 $109 $136 $259 $18 $59 $106 $259
Dreyfus V.I.F.-Growth and Income Portfolio $90 $116 $148 $287 $20 $66 $118 $287
Dreyfus V.I.F.-Small Cap Portfolio $90 $115 $148 $286 $20 $65 $118 $286
The Dreyfus Socially Responsible Growth Fund, Inc. $90 $116 $148 $287 $20 $66 $118 $287
Dreyfus Stock Index Fund $85 $98 $117 $214 $15 $48 $87 $214
Strong Opportunity Fund II, Inc. $94 $127 $168 $333 $24 $77 $138 $333
Strong Variable Insurance Funds, Inc.-Strong Mid Cap Growth Fund II $94 $127 $169 $334 $24 $77 $139 $334
Deutsche VIT EAFE(R)Equity Index Fund $89 $111 $140 $268 $19 $61 $110 $268
Deutsche VIT Equity 500 Index Fund $85 $100 $120 $220 $15 $50 $90 $220
Deutsche VIT Small Cap Index Fund $87 $104 $128 $241 $17 $54 $98 $241
INVESCO VIF-Equity Income Fund $94 $129 $171 $339 $24 $79 $141 $339
INVESCO VIF-Total Return Fund $95 $132 $177 $353 $25 $82 $147 $353
INVESCO VIF-High Yield Fund $93 $125 $165 $325 $23 $75 $135 $325
Morgan Stanley UIF, Inc.-Mid Cap Value Portfolio $93 $124 $163 $321 $23 $74 $133 $321
Morgan Stanley UIF, Inc.-Value Portfolio $91 $118 $152 $295 $21 $68 $122 $295
Morgan Stanley UIF, Inc.-Fixed Income Portfolio $89 $113 $143 $275 $19 $63 $113 $275
Morgan Stanley UIF, Inc.-U.S. Real Estate Portfolio $93 $126 $166 $328 $23 $76 $136 $328
Morgan Stanley UIF, Inc.-Emerging Markets Equity Portfolio $100 $148 $204 $414 $30 $98 $174 $414
PBHG Insurance Series Fund, Inc.-PBHG Growth II Portfolio $94 $129 $171 $341 $24 $79 $141 $341
PBHG Insurance Series Fund, Inc.-PBHG Large Cap Growth Portfolio $93 $126 $166 $328 $23 $76 $136 $328
PBHG Insurance Series Fund, Inc.-PBHG Tech. & Comm. Portfolio $93 $125 $165 $326 $23 $75 $135 $326
The Timothy Plan Small-Cap Variable Series $94 $128 $170 $338 $24 $78 $140 $338
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE>
<TABLE>
<CAPTION>
Enhanced Contracts with Administration Charge Waived Example #1-- Example #2--
Assuming Surrender Assuming No Surrender
If the owner surrenders If the owner does not
his or her Contract at surrender his or her Contract
the end of the applicable or if it is annuitized, the
time period, the following following expenses would be
expenses would be charged on a $1,000 investment at the
on a $1,000 investment: end of charged the applicable
time period:
- --------------------------------------------------------------------- -------------------------------------------------- ----------
Sub-Account 1 3 5 10 1 3 5 10
Year Years Years Years Year Years Years Years
- --------------------------------------------------------------------- ------ ------ ----- ------ ---- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Janus A.S.-Aggressive Growth Portfolio $87 $107 $133 $251 $17 $57 $103 $251
Janus A.S.-Worldwide Growth Portfolio $88 $108 $134 $255 $18 $58 $104 $255
Janus A.S.-Balanced Portfolio $87 $107 $133 $251 $17 $57 $103 $251
Janus A.S.-Growth Portfolio $87 $107 $133 $251 $17 $57 $103 $251
Janus A.S.-International Growth Portfolio $88 $110 $138 $263 $18 $60 $108 $263
Janus A.S.-Capital Appreciation Portfolio $88 $107 $134 $253 $18 $57 $104 $253
Dreyfus V.I.F.-Appreciation Portfolio $89 $110 $139 $266 $19 $60 $109 $266
Dreyfus V.I.F.-Money Market Portfolio $87 $104 $127 $238 $17 $54 $97 $238
Dreyfus V.I.F.-Growth and Income Portfolio $89 $111 $140 $267 $19 $61 $110 $267
Dreyfus V.I.F.-Small Cap Portfolio $89 $110 $139 $266 $19 $60 $109 $266
The Dreyfus Socially Responsible Growth Fund, Inc. $89 $111 $140 $267 $19 $61 $110 $267
Dreyfus Stock Index Fund $83 $93 $108 $193 $13 $43 $78 $193
Strong Opportunity Fund II, Inc. $92 $122 $160 $313 $22 $72 $130 $313
Strong Variable Insurance Funds, Inc.-Strong Mid Cap Growth Fund II $92 $122 $160 $315 $22 $72 $130 $315
Deutsche VIT EAFE(R)Equity Index Fund $87 $106 $131 $248 $17 $56 $101 $248
Deutsche VIT Equity 500 Index Fund $84 $95 $111 $199 $14 $45 $81 $199
Deutsche VIT Small Cap Index Fund $85 $100 $120 $220 $15 $50 $90 $220
INVESCO VIF-Equity Income Fund $93 $124 $162 $320 $23 $74 $132 $320
INVESCO VIF-Total Return Fund $94 $127 $169 $334 $24 $77 $139 $334
INVESCO VIF-High Yield Fund $92 $120 $156 $306 $22 $70 $126 $306
Morgan Stanley UIF, Inc.-Mid Cap Value Portfolio $91 $119 $154 $302 $21 $69 $124 $302
Morgan Stanley UIF, Inc.-Value Portfolio $89 $113 $143 $275 $19 $63 $113 $275
Morgan Stanley UIF, Inc.-Fixed Income Portfolio $88 $108 $134 $255 $18 $58 $104 $255
Morgan Stanley UIF, Inc.-U.S. Real Estate Portfolio $92 $121 $157 $308 $22 $71 $127 $308
Morgan Stanley UIF, Inc.-Emerging Markets Equity Portfolio $99 $143 $196 $395 $29 $93 $166 $395
PBHG Insurance Series Fund, Inc.-PBHG Growth II Portfolio $93 $124 $163 $321 $23 $74 $133 $321
PBHG Insurance Series Fund, Inc.-PBHG Large Cap Growth Portfolio $92 $121 $157 $308 $22 $71 $127 $308
PBHG Insurance Series Fund, Inc.-PBHG Tech. & Comm. Portfolio $92 $120 $157 $307 $22 $70 $127 $307
The Timothy Plan Small-Cap Variable Series $93 $123 $162 $319 $23 $73 $132 $319
</TABLE>
The examples are not indicative of past or future expenses or annual rates of
return of any Portfolio. Actual expenses and annual rates of return may be more
or less than those assumed in the examples. The examples assume the reinvestment
of all dividends and distributions, no transfers among Sub-Accounts or between
the fixed account options and the Sub-Accounts and a 5% annual rate of return.
The contract maintenance fee is reflected in the examples as a charge of $0.68
per year based on the ratio of actual contract maintenance fees collected for
the year ended 12/31/99 to total net assets as of 12/31/99. The examples do not
include charges for premium taxes.
- --------------------------------------------------------------------------------
11
<PAGE>
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Sub-Account Standard Contracts
12/31/97 12/31/98 12/31/99
- ---------------- -------------------------------------------- ------------ -------------- -------------
<S> <C> <C> <C> <C>
Janus Aggressive Growth Portfolio
Aspen Accumulation Unit Value 10.723950 14.199318 31.565210
Series Accumulation Units Outstanding 2,830.076 53,896.345 329,807.902
-------------------------------------------- ------------ -------------- -------------
Worldwide Growth Portfolio
Accumulation Unit Value 9.935860 12.632936 20.488548
Accumulation Units Outstanding 56,665.753 402,131.168 1,026,072.851
-------------------------------------------- ------------ -------------- -------------
Balanced Portfolio
Accumulation Unit Value 10.604609 14.043929 17.556100
Accumulation Units Outstanding 30,519.754 373,285.807 1,571,579.505
-------------------------------------------- ------------ -------------- -------------
Growth Portfolio
Accumulation Unit Value 10.239960 13.699715 19.453513
Accumulation Units Outstanding 32,737.591 172,190.630 643,514.256
-------------------------------------------- ------------ -------------- -------------
International Growth Portfolio
Accumulation Unit Value 9.735841 11.256365 20.234788
Accumulation Units Outstanding 12,541.039 45,382.775 142,343.325
-------------------------------------------- ------------ -------------- -------------
Capital Appreciation Portfolio
Accumulation Unit Value N/A N/A 13.234548
Accumulation Units Outstanding N/A N/A 471,936.628
- ---------------- -------------------------------------------- ------------ -------------- -------------
Dreyfus Appreciation Portfolio
Variable Accumulation Unit Value 10.103905 12.975443 14.262203
Investment Accumulation Units Outstanding 18,347.666 170,523.015 517,772.082
Fund -------------------------------------------- ------------ -------------- -------------
Money Market Portfolio
Accumulation Unit Value 1.016499 1.050876 1.083700
Accumulation Units Outstanding 0.000 658,981.650 2,638,837.162
-------------------------------------------- ------------ -------------- -------------
Growth and Income Portfolio
Accumulation Unit Value 10.196538 11.243790 12.961023
Accumulation Units Outstanding 32,231.762 159,409.837 331,756.261
-------------------------------------------- ------------ -------------- -------------
Small Cap Portfolio
Accumulation Unit Value 10.362314 9.867472 11.984035
Accumulation Units Outstanding 41,359.506 171,968.905 275,503.637
- ---------------- -------------------------------------------- ------------ -------------- -------------
The Dreyfus Socially Responsible Growth Fund, Inc.
Accumulation Unit Value 10.320883 13.169143 16.894039
Accumulation Units Outstanding 26,332.500 140,614.024 408,482.196
- ---------------- -------------------------------------------- ------------ -------------- -------------
Dreyfus Stock Index Fund
Accumulation Unit Value 10.479569 13.250646 15.760394
Accumulation Units Outstanding 69,510.645 779,485.606 2,129,772.165
- ---------------- -------------------------------------------- ------------ -------------- -------------
Strong Opportunity Fund II, Inc.
Accumulation Unit Value 10.727356 12.012034 15.981484
Accumulation Units Outstanding 6,416.208 72,644.387 138,453.066
- ---------------- -------------------------------------------- ------------ -------------- -------------
Strong Variable Insurance Funds, Inc.
- -Strong Mid Cap Growth Fund II
Accumulation Unit Value 10.707133 13.587521 25.444156
Accumulation Units Outstanding 2,147.556 33,197.715 120,559.085
- ---------------- -------------------------------------------- ------------ -------------- -------------
Deutsche Deutsche VIT EAFE(R) Equity Index Fund
Asset Accumulation Unit Value N/A N/A 11.958486
Management Accumulation Units Outstanding N/A N/A 6,821.832
VIT Funds ------------------------------------------- ------------- -------------- -------------
Deutsche VIT Equity 500 Index Fund
Accumulation Unit Value N/A N/A 10.815237
Accumulation Units Outstanding N/A N/A 73,596.514
------------------------------------------- ------------- -------------- -------------
Deutsche VIT Small Cap Index Fund
Accumulation Unit Value N/A N/A 11.606269
Accumulation Units Outstanding N/A N/A 15,259.149
<CAPTION>
Enhanced Contracts
12/31/97 12/31/98 12/31/99
- ---------------- -------------------------------------------- ------------ -------------- -------------
<S> <C> <C> <C> <C>
Janus Aggressive Growth Portfolio
Aspen Accumulation Unit Value 10.738659 14.260947 31.796057
Series Accumulation Units Outstanding 0.000 36.621 829.264
------------------------------------------- ------------- -------------- -------------
Worldwide Growth Portfolio
Accumulation Unit Value 9.949496 12.687776 20.638429
Accumulation Units Outstanding 0.000 123.659 2,225.846
------------------------------------------- ------------- -------------- -------------
Balanced Portfolio
Accumulation Unit Value 10.619159 14.104892 17.684597
Accumulation Units Outstanding 0.000 214.770 2,931.027
------------------------------------------- ------------- -------------- -------------
Growth Portfolio
Accumulation Unit Value 10.254006 13.759186 19.595874
Accumulation Units Outstanding 0.000 84.318 1,374.992
------------------------------------------- ------------- -------------- -------------
International Growth Portfolio
Accumulation Unit Value 9.749214 11.305246 20.382770
Accumulation Units Outstanding 0.000 58.950 2,330.619
-------------------------------------------- ------------ ------------- --------------
Capital Appreciation Portfolio
Accumulation Unit Value N/A N/A 13.260556
Accumulation Units Outstanding N/A N/A 4.141
- ---------------- -------------------------------------------- ------------ -------------- -------------
Dreyfus Appreciation Portfolio
Variable Accumulation Unit Value 10.117776 13.031774 14.366606
Investment Accumulation Units Outstanding 0.000 100.415 2,156.774
Fund ------------------------------------------- ------------ -------------- -------------
Money Market Portfolio
Accumulation Unit Value 1.017876 1.055214 1.090994
Accumulation Units Outstanding 0.000 555.360 8,490.939
------------------------------------------- ------------- -------------- -------------
Growth and Income Portfolio
Accumulation Unit Value 10.210527 11.292611 13.055905
Accumulation Units Outstanding 0.000 5.049 650.409
------------------------------------------- ------------- -------------- -------------
Small Cap Portfolio
Accumulation Unit Value 10.376538 9.910354 12.071820
Accumulation Units Outstanding 0.000 14.492 486.764
- ---------------- -------------------------------------------- ------------ -------------- -------------
The Dreyfus Socially Responsible Growth Fund,Inc.
Accumulation Unit Value 10.335055 13.226328 17.017705
Accumulation Units Outstanding 0.000 80.398 351.586
- ---------------- -------------------------------------------- ------------ -------------- -------------
Dreyfus Stock Index Fund
Accumulation Unit Value 10.493943 13.308166 15.875757
Accumulation Units Outstanding 0.000 56.321 616.234
- ---------------- -------------------------------------------- ------------ -------------- -------------
Strong Opportunity Fund II, Inc.
Accumulation Unit Value 10.742083 12.064227 16.098506
Accumulation Units Outstanding 0.000 15.156 790.953
- ---------------- -------------------------------------------- ------------ -------------- -------------
Strong Variable Insurance Funds, Inc.
- -Strong Mid Cap Growth Fund II
Accumulation Unit Value 10.721828 13.646505 25.630290
Accumulation Units Outstanding 0.000 9.046 164.682
- ---------------- -------------------------------------------- ------------ -------------- -------------
Deutsche Deutsche VIT EAFE(R) Equity Index Fund
Asset Accumulation Unit Value N/A N/A 11.981984
Management Accumulation Units Outstanding N/A N/A 0.000
VIT Funds ------------------------------------------- ------------ ------------- --------------
Deutsche VIT Equity 500 Index Fund
Accumulation Unit Value N/A N/A 10.836517
Accumulation Units Outstanding N/A N/A 0.000
------------------------------------------- ------------ ------------- --------------
Deutsche VIT Small Cap Index Fund
Accumulation Unit Value N/A N/A 11.629080
Accumulation Units Outstanding N/A N/A 0.000
<CAPTION>
Enhanced Contracts With
Administration Charge Waived
12/31/97 12/31/98 12/31/99
- ---------------- -------------------------------------------- ------------ -------------- -------------
<S> <C> <C> <C> <C>
Janus Aggressive Growth Portfolio
Aspen Accumulation Unit Value 10.745938 14.291595 31.911561
Series Accumulation Units Outstanding 0.000 0.000 159.044
------------------------------------------- ------------ ------------- --------------
Worldwide Growth Portfolio
Accumulation Unit Value 9.956287 12.715080 20.713399
Accumulation Units Outstanding 0.000 0.000 151.550
------------------------------------------- ------------ ------------- --------------
Balanced Portfolio
Accumulation Unit Value 10.626394 14.135421 17.749154
Accumulation Units Outstanding 0.000 0.000 111.555
------------------------------------------- ------------ ------------- --------------
Growth Portfolio
Accumulation Unit Value 10.261077 13.789099 19.667608
Accumulation Units Outstanding 0.000 0.000 109.122
------------------------------------------- ------------ ------------- --------------
International Growth Portfolio
Accumulation Unit Value 9.755900 11.329668 20.457001
Accumulation Units Outstanding 0.000 0.000 0.000
------------------------------------------- ------------ ------------- --------------
Capital Appreciation Portfolio
Accumulation Unit Value N/A N/A 13.273610
Accumulation Units Outstanding N/A N/A 170.622
- ---------------- -------------------------------------------- ------------ -------------- -------------
Dreyfus Appreciation Portfolio
Variable Accumulation Unit Value 10.124633 13.059918 14.419045
Investment Accumulation Units Outstanding 0.000 0.000 154.147
Fund ------------------------------------------- ------------ -------------- -------------
Money Market Portfolio
Accumulation Unit Value 10.018560 1.059678 1.096462
Accumulation Units Outstanding 0.000 0.000 0.000
------------------------------------------- ------------ ------------- --------------
Growth and Income Portfolio
Accumulation Unit Value 10.217481 11.251722 13.103601
Accumulation Units Outstanding 0.000 0.000 0.000
------------------------------------------- ------------ ------------- --------------
Small Cap Portfolio
Accumulation Unit Value 10.383658 9.931930 12.116077
Accumulation Units Outstanding 0.000 0.000 199.908
- ---------------- -------------------------------------------- ------------ -------------- -------------
The Dreyfus Socially Responsible Growth Fund, Inc.
Accumulation Unit Value 10.342126 13.254881 17.079770
Accumulation Units Outstanding 0.000 0.000 0.000
- ---------------- -------------------------------------------- ------------ -------------- -------------
Dreyfus Stock Index Fund
Accumulation Unit Value 10.501129 13.337028 15.933836
Accumulation Units Outstanding 0.000 0.000 222.802
- ---------------- -------------------------------------------- ------------ -------------- -------------
Strong Opportunity Fund II, Inc.
Accumulation Unit Value 10.749472 12.090403 16.157323
Accumulation Units Outstanding 0.000 0.000 0.000
- ---------------- -------------------------------------------- ------------ -------------- -------------
Strong Variable Insurance Funds, Inc.
- -Strong Mid Cap Growth Fund II
Accumulation Unit Value 10.729174 13.675996 25.723816
Accumulation Units Outstanding 0.000 0.000 0.000
- ---------------- -------------------------------------------- ------------ -------------- -------------
Deutsche Deutsche VIT EAFE(R) Equity Index Fund
Asset Accumulation Unit Value N/A N/A 11.993767
Management Accumulation Units Outstanding N/A N/A 0.000
VIT Funds -------------------------------------------- ------------ -------------- -------------
Deutsche VIT Equity 500 Index Fund
Accumulation Unit Value N/A N/A 10.847192
Accumulation Units Outstanding N/A N/A 131.993
------------------------------------------- ------------ ------------- --------------
Deutsche VIT Small Cap Index Fund
Accumulation Unit Value N/A N/A 11.640544
Accumulation Units Outstanding N/A N/A 0.000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Sub-Account Standard Contracts
12/31/97 12/31/98 12/31/99
- ---------------- -------------------------------------------- ------------ -------------- -------------
<S> <C> <C> <C> <C>
INVESCO INVESCO VIF-Equity Income Fund
Variable Accumulation Unit Value 10.659157 12.120155 1.726769
Investment Accumulation Units Outstanding 33,269.953 200,541.938 553,696.171
Funds, Inc. -------------------------------------------- ------------ -------------- -------------
INVESCO VIF-Total Return Fund
Accumulation Unit Value 10.503108 11.348675 10.811807
Accumulation Units Outstanding 14,641.934 154,762.526 258,825.173
-------------------------------------------- ------------ -------------- -------------
INVESCO VIF-High Yield Fund
Accumulation Unit Value 10.687084 10.689459 11.510803
Accumulation Units Outstanding 10,260.821 70,047.913 221,636.210
- --------------- -------------------------------------------- ------------ -------------- -------------
Morgan Mid Cap Value Portfolio
Stanley Accumulation Unit Value 11.113227 12.705082 15.049488
UIF, Funds Accumulation Units Outstanding 16,674.966 111,076.120 183,388.647
-------------------------------------------- ------------ -------------- -------------
Value Portfolio
Accumulation Unit Value 10.204064 9.848411 9.536137
Accumulation Units Outstanding 9,944.401 34,212.111 78,330.649
-------------------------------------------- ------------ -------------- -------------
Fixed Income Portfolio
Accumulation Unit Value 10.412276 11.079965 10.749115
Accumulation Units Outstanding 4.653 46,348.096 279,183.758
-------------------------------------------- ------------ -------------- -------------
U.S. Real Estate Portfolio
Accumulation Unit Value 11.101269 9.758808 9.482378
Accumulation Units Outstanding 7,200.060 43,786.457 86,941.426
-------------------------------------------- ------------ -------------- -------------
Emerging Markets Equity Portfolio
Accumulation Unit Value 7.911559 5.915866 11.416896
Accumulation Units Outstanding 9,042.956 30,255.642 56,080.554
- --------------- -------------------------------------------- ------------ -------------- -------------
PBHG PBHG Growth II Portfolio
Insurance Accumulation Unit Value 9.511124 10.147606 19.835104
Series Accumulation Units Outstanding 6,195.935 24,618.770 67,359.578
Fund, Inc. -------------------------------------------- ------------ -------------- -------------
PBHG Large Cap Growth Portfolio
Accumulation Unit Value 10.150555 13.076352 21.307087
Accumulation Units Outstanding 11,415.131 31,474.961 158,614.893
-------------------------------------------- ------------ -------------- -------------
PBHG Technology & Communications Portfolio
Accumulation Unit Value 9.057045 11.808346 38.941384
Accumulation Units Outstanding 20,974.008 65,820.143 433,441.908
- --------------- -------------------------------------------- ------------ -------------- -------------
The Timothy Plan Small-Cap Variable Series
Accumulation Unit Value N/A 10.283942 12.097693
Accumulation Units Outstanding N/A 29,293.327 94,238.615
<CAPTION>
Enhanced Contracts
12/31/97 12/31/98 12/31/99
- ---------------- -------------------------------------------- ------------ -------------- -------------
<S> <C> <C> <C> <C>
INVESCO INVESCO VIF-Equity Income Fund
Variable Accumulation Unit Value 10.673778 12.172796 13.827281
Investment Accumulation Units Outstanding 0.000 163.123 1,667.041
Funds, Inc. ---------------------------------- ------------ -------------- -------------
INVESCO VIF-Total Return Fund
Accumulation Unit Value 10.517508 11.397954 10.890979
Accumulation Units Outstanding 0.000 111.314 1,936.199
------------------------------------------- ----------- -------------- -------------
INVESCO VIF-High Yield Fund
Accumulation Unit Value 10.701757 10.735898 11.595106
Accumulation Units Outstanding 0.000 7.556 113.564
- --------------- ------------------------------------------- ----------- -------------- -------------
Morgan Mid Cap Value Portfolio
Stanley Accumulation Unit Value 11.128478 12.760268 15.159702
UIF, Funds Accumulation Units Outstanding 0.000 15.684 827.448
------------------------------------------- ----------- -------------- -------------
Value Portfolio
Accumulation Unit Value 10.218060 9.891198 9.605992
Accumulation Units Outstanding 0.000 23.284 703.796
------------------------------------------- ----------- -------------- -------------
Fixed Income Portfolio
Accumulation Unit Value 10.426565 11.128092 10.827853
Accumulation Units Outstanding 0.000 30.906 1,472.104
------------------------------------------- ----------- -------------- -------------
U.S. Real Estate Portfolio
Accumulation Unit Value 11.116503 9.801228 9.551867
Accumulation Units Outstanding 0.000 10.564 733.827
------------------------------------------- ----------- -------------- -------------
Emerging Markets Equity Portfolio
Accumulation Unit Value 7.922446 5.941609 11.500499
Accumulation Units Outstanding 0.000 0.000 128.179
- --------------- ------------------------------------------- ----------- -------------- -------------
PBHG PBHG Growth II Portfolio
Insurance Accumulation Unit Value 9.524184 10.191707 19.982600
Series Accumulation Units Outstanding 0.000 6.572 139.873
Fund, Inc. ------------------------------------------- ----------- -------------- -------------
PBHG Large Cap Growth Portfolio
Accumulation Unit Value 10.164489 13.133125 21.462991
Accumulation Units Outstanding 0.000 0.000 549.785
------------------------------------------- ----------- -------------- -------------
PBHG Technology & Communications Portfolio
Accumulation Unit Value 9.069487 11.859648 39.226135
Accumulation Units Outstanding 0.000 2.516 904.009
- --------------- ------------------------------------------- ----------- -------------- -------------
The Timothy Plan Small-Cap Variable Series
Accumulation Unit Value N/A 10.304332 12.157659
Accumulation Units Outstanding N/A 17.653 374.501
<CAPTION>
Enhanced Contracts With
Administration Charge Waived
12/31/97 12/31/98 12/31/99
- ---------------- -------------------------------------------- ------------ -------------- -------------
<S> <C> <C> <C> <C>
INVESCO INVESCO VIF-Equity Income Fund
Variable Accumulation Unit Value 10.681089 12.99230 13.877907
Investment Accumulation Units Outstanding 0.000 0.000 0.000
Funds, Inc. -------------------------------------------- ------------ -------------- --- ---------
INVESCO VIF-Total Return Fund
Accumulation Unit Value 10.524723 14.291595 10.930872
Accumulation Units Outstanding 0.000 0.000 0.000
-------------------------------------------- ------------ -------------- -------------
INVESCO VIF-High Yield Fund
Accumulation Unit Value 10.709127 10.759164 11.637523
Accumulation Units Outstanding 0.000 0.000 0.000
- ---------------- -------------------------------------------- ------------ -------------- -------------
Morgan Mid Cap Value Portfolio
Stanley Accumulation Unit Value 11.136071 12.788027 15.215264
UIF, Funds Accumulation Units Outstanding 0.000 0.000 0.000
-------------------------------------------- ------------ -------------- -------------
Value Portfolio
Accumulation Unit Value 10.225073 9.912646 9.641132
Accumulation Units Outstanding 0.000 0.000 0.000
-------------------------------------------- ------------ -------------- -------------
Fixed Income Portfolio
Accumulation Unit Value 10.443738 11.152242 10.867507
Accumulation Units Outstanding 0.000 0.000 0.000
-------------------------------------------- ------------ -------------- -------------
U.S. Real Estate Portfolio
Accumulation Unit Value 11.124047 9.822531 9.586849
Accumulation Units Outstanding 0.000 0.000 0.000
-------------------------------------------- ------------ -------------- -------------
Emerging Markets Equity Portfolio
Accumulation Unit Value 7.927919 5.954580 11.542646
Accumulation Units Outstanding 0.000 0.000 0.000
- ---------------- -------------------------------------------- ------------ -------------- -------------
PBHG PBHG Growth II Portfolio
Insurance Accumulation Unit Value 9.530743 10.213910 20.053445
Series Accumulation Units Outstanding 0.000 0.000 0.000
Fund, Inc. -------------------------------------------- ------------ -------------- -------------
PBHG Large Cap Growth Portfolio
Accumulation Unit Value 10.171451 13.161608 21.541442
Accumulation Units Outstanding 0.000 0.000 0.000
-------------------------------------------- ------------ -------------- -------------
PBHG Technology & Communications Portfolio
Accumulation Unit Value 9.075740 11.885350 39.369150
Accumulation Units Outstanding 0.000 0.000 274.877
- ---------------- -------------------------------------------- ------------ -------------- -------------
The Timothy Plan
Small-Cap
Variable Series
Accumulation Unit Value N/A 10.314606 12.137973
Accumulation Units Outstanding 0.000 0.000 0.000
</TABLE>
The above table gives year-end Accumulation Unit information for each
Sub-Account from the end of the year of inception to December 31, 1999. This
information should be read in conjunction with the Separate Account financial
statements, including the notes to those statements. The beginning Accumulation
Unit Value for each Sub-Account other than the Dreyfus VIF Money Market
Portfolio Sub-Account was 10.00000 as of July 15, 1997 (the Separate Account
commencement date), or as of May 1, 1998 (the effective date of the Sub-Account)
for The Timothy Plan Small-Cap Variable Series, or as of May 1, 1999 (the
effective date of the Sub-Account) for the Janus Aspen Series Capital
Appreciation Portfolio and the three Deutsche Asset Management VIT Funds. The
beginning Accumulation Unit Value for the Dreyfus VIF Money Market Portfolio
Sub-Account was 1.000000 as of July 15, 1997.
Financial Statements The financial statements and reports of independent
auditors for the Company and for the Separate Account are included in the
statement of additional information.
13
Performance Information From time to time, the Company may advertise yields
and/or total returns for the Sub-Accounts. These figures are based on historical
information and are not intended to indicate future performance. Performance
data and a more detailed description of the methods used to determine yield and
total return are included in the statement of additional information.
- --------------------------------------------------------------------------------
Yield Data
The "yield" of the money market Sub-Account refers to the annualized
income generated by an investment in that Sub-Account over a specified seven-day
period. Th "effective yiel" of the money market Sub-Account is the same as the
"yield" except that it assumes reinvestment of the income earned in that
Sub-Account. The effective yield will be slightly higher than the yield because
of the compounding effect of this assumed reinvestment. The Company does not
advertise yields for any Sub-Account other than the money market Sub-Account.
Total Return Data
The Company may advertise two types of total return data: "average annual total
return" and "cumulative total return. "Average annual total return" is presented
in both standardized and non-standardized form. "Standardized" total return data
reflects the deduction of all charges that apply to all Contracts of that type,
except for premium taxes. The contingent deferred sales charge ("CDSC")
reflected in standardized total return is the percentage CDSC that would apply
at the end of the period presented assuming the purchase payment was received on
the first day of the period presented. "Non-standardized" total return data does
not reflect the deduction of CDSCs and contract maintenance fees. Cumulative
total return data is currently presented only in non-standardized form.
Total return data that does not reflect the CDSC and other charges will be
higher than the total return realized by an investor who incurs the charges.
"Average annual total return" is either hypothetical or actual return data that
reflects performance of a Sub-Account for a one-year period or for an average of
consecutive one-year periods. If average annual total return data is
hypothetical, it reflects performance for a period of time before the Separate
Account commenced operations. When a Sub-Account has been in operation for one,
five and ten years, average annual total return will be presented for these
periods, although other periods may be presented as well.
"Cumulative total return" is either hypothetical or actual return data that
reflects the performance of a Sub-Account from the beginning of the period
presented to the end of the period presented. If cumulative total return data is
hypothetical, it reflects performance for a period of time before the Separate
Account commenced operations.
Other Performance Measures
The Company may include in reports and promotional literature rankings of the
Sub-Accounts, the Separate Account or the Contracts, as published by any
service, company, or person who ranks separate accounts or other investment
products on overall performance or other criteria. Examples of companies that
publish such rankings are Lipper Analytical Services, Inc., VARDS,
IBC/Donoghue's Money Fund Report, Financial Planning Magazine, Money Magazine,
Bank Rate Monitor, Standard & Poor's Indices, Dow Jones Industrial Average, and
Morningstar.
The Company may also:
o compare the performance of a Sub-Account with applicable indices and/or
industry averages;
o present performance information that reflects the effects of tax-deferred
compounding on Sub-Account investment returns;
o compare investment return on a tax-deferred basis with currently taxable
investment return;
o illustrate investment returns by graphs, charts, or otherwise.
- --------------------------------------------------------------------------------
14
THE PORTFOLIOS
- --------------------------------------------------------------------------------
The Separate Account is currently divided into 29 Sub-Accounts. Each Sub-Account
is invested in a Portfolio. Each Portfolio has its own investment objectives and
policies. The current Portfolio prospectuses, which accompany this prospectus,
contain additional information concerning the investment objectives and policies
of each Portfolio, the investment advisory services and administrative services
of each Portfolio and the charges of each Portfolio. There is no assurance that
the Portfolios will achieve their stated objectives. You should read the
Portfolio prospectuses carefully before making any decision concerning the
allocation of purchase payments to, or transfers among, the Sub-Accounts.
All dividends and capital gains distributed by the Portfolios are reinvested by
the Separate Account and reflected in Accumulation Unit Values. Portfolio
dividends and net capital gains are not distributed to owners.
The Securities and Exchange Commission does not supervise the management or the
investment practices and/or policies of any of the Portfolios. The Portfolios
are available only through insurance company separate accounts and certain
qualified retirement plans. Though a Portfolio may have a name and/or investment
objectives which are similar to those of a publicly available mutual fund,
and/or may be managed by the same investment advisor that manages a publicly
available mutual fund, the performance of the Portfolio is entirely independent
of the performance of any publicly available mutual fund. Neither the Company
nor the Portfolios make any representations or assurances that the investment
performance of any Portfolio will be the same or similar to the investment
performance of any publicly available mutual fund.
Janus Aspen Series
<TABLE>
<CAPTION>
<S> <C>
Advisor: Aggressive Growth Portfolio
Janus Capital Corporation A non-diversified portfolio that seeks long-term growth of capital by investing primarily
in common stocks selected for their growth potential, and normally invests at least 50% of
its equity assets in medium-sized companies.
Advisor: Worldwide Growth Portfolio
Janus Capital Corporation A diversified portfolio that seeks long-term growth of capital in a manner consistent with
the preservation of capital by investing primarily in common stocks of companies of any
size throughout the world. International investing may present special risks, including
currency fluctuations and social and political developments.
Advisor: Balanced Portfolio
Janus Capital Corporation A diversified portfolio that seeks long-term capital growth, consistent with preservation
of capital and balanced by current income. The Portfolio normally invests 40-60% of its
assets in securities selected primarily for their growth potential and 40-60% of its
assets in securities selected primarily for their income potential. The Portfolio will
normally invest at least 25% of its assets in fixed-income securities.
Advisor: Growth Portfolio
Janus Capital Corporation A diversified portfolio that seeks long-term growth of capital in a manner consistent with
the preservation of capital by investing primarily in common stocks selected for their
growth potential. Although the Portfolio can invest in companies of any size, it
generally invests in larger, more established companies.
Advisor: International Growth Portfolio
Janus Capital Corporation A diversified portfolio that seeks long-term growth of capital by investing at least 65%
of its total assets in securities from at least five different countries excluding the
United States. International investing may present special risks, including currency
fluctuations and social and political developments.
</TABLE>
- --------------------------------------------------------------------------------
15
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Advisor: Capital Appreciation Portfolio
Janus Capital Corporation A non-diversified portfolio that seeks long-term growth of capital by investing primarily
in common stocks selected for their growth potential. The Portfolio may invest in
companies of any size, from larger, well-established companies to smaller, emerging growth
companies.
Dreyfus Portfolios
Advisor: Dreyfus Variable Investment Fund- Appreciation Portfolio
The Dreyfus Corporation The Appreciation Portfolio seeks to provide long-term capital growth consistent with the
preservation of capital. Current income is a secondary goal. It seeks to achieve its
Sub-Advisor: goals by investing in common stocks, focusing on "blue chip" companies with total market
Fayez Sarofim & Co. values of more than $5 billion at the time of purchase.
Advisor: Dreyfus Variable Investment Fund-Money Market Portfolio
The Dreyfus Corporation The Money Market Portfolio seeks to provide as high a level of current income as is
consistent with the preservation of capital and the maintenance of liquidity. This
Portfolio invests in a diversified portfolio of high quality short-term debt securities.
An investment in the Money Market Portfolio is neither insured nor guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although the
Portfolio seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Portfolio.
Advisor: Dreyfus Variable Investment Fund-Growth and Income Portfolio
The Dreyfus Corporation The Growth and Income Portfolio seeks long-term capital growth, current income and growth
of income, consistent with reasonable investment risk. This Portfolio invests in stocks,
bonds and money market instruments of domestic and foreign issuers.
Advisor: Dreyfus Variable Investment Fund-Small Cap Portfolio
The Dreyfus Corporation The Small Cap Portfolio seeks to maximize capital appreciation. This Portfolio generally
invests at least 65% of its assets in common stocks of U.S. and foreign companies. This
Portfolio focuses on small-cap companies with total market values of less than $1.5
billion.
Advisor: The Dreyfus Socially Responsible Growth Fund, Inc.
The Dreyfus Corporation The Dreyfus Socially Responsible Growth Fund, Inc. seeks to provide capital growth with
current income as a secondary goal. To pursue these goals, the Fund invests primarily in
Sub-Advisor: common stock of companies that, in the opinion of the Fund's management, meet traditional
NCM Capital Management Group, Inc. investment standards, and conduct their business in a manner that contributes to the
enhancement of the quality of life in America.
Advisor: Dreyfus Stock Index Fund
The Dreyfus Corporation The Dreyfus Stock Index Fund seeks to match the total return of the Standard & Poor's 500
Composite Stock Price Index. To pursue this goal, the Fund generally invests in all 500
Index Manager: stocks in the S&P 500(R) in proportion to their weighting in the index. The Fund is not
Mellon Equity Associates (an affiliate sponsored, endorsed, sold or promoted by Standard & Poor's, and Standard & Poor's makes no
of Dreyfus) representation regarding the advisability of investing in the Fund.
</TABLE>
- --------------------------------------------------------------------------------
16
<PAGE>
<TABLE>
<CAPTION>
Strong Portfolios
<S> <C>
Advisor: Strong Opportunity Fund II, Inc.
Strong Capital Management, Inc. The investment objective of the Strong Opportunity Fund II is to seek capital growth. It
currently emphasizes medium-sized companies that the advisor believes are under-researched
and attractively valued.
Advisor: Strong Variable Insurance Funds, Inc.-Strong Mid Cap Growth Fund II
Strong Capital Management, Inc. The investment objective of the Strong Mid Cap Growth Fund II is to seek capital growth.
It invests primarily in equity securities that the Fund's managing advisor believes have
above-average growth prospects. This Portfolio was formerly called the Strong Growth Fund
II.
Deutsche Asset Management VIT Funds
Advisor: Deutsche VIT EAF (R) Equity Index Fund
Bankers Trust Company The EAFE (R) Equity Index Fund seeks to replicate as closely as possible (before deduction
of expenses) the total return of Morgan Stanley Capital International (MSCI) (the "EAFE(R)
Index"), a widely accepted benchmark of stock performance of major companies in Europe,
Australia and the Far East. The Fund will invest primarily in international companies
that compose the EAFE (R) Index, using statistical methods to replicate the EAFE(R) Index
in approximately the same weightings. Securities purchased by the Fund will generally, but
not necessarily, be traded on a foreign securities exchange.
Advisor: Deutsche VIT Equity 500 Index Fund
Bankers Trust Company The Equity 500 Index Fund seeks to replicate as closely as possible (before deduction of
expenses) the total return of the Standard & Poor's 500 Composite Stock Price Index (the
"S&P(R) 500"), which emphasizes stocks of large U.S. Companies. The Portfolio will invest
primarily in the common stock of those companies included in the S&P 500, selected on the
basis of computer generated statistical data, that are deemed representative of the
industry diversification of the entire S&P 500.
Advisor: Deutsche VIT Small Cap Index Fund
Bankers Trust Company The Small Cap Index Fund seeks to replicate as closely as possible (before deduction of
expenses) the total return of the Russell 2000 Small Stock Index (the "Russell(R) 2000")
an index consisting of 2,000 small-capitalization common stocks. The Fund will invest
primarily in companies included in the Russell 2000, on the basis of statistical data,
that are deemed representative of the industry diversification of the entire Russell 2000.
</TABLE>
- --------------------------------------------------------------------------------
17
<PAGE>
INVESCO Variable Investment Funds, Inc.
<TABLE>
<CAPTION>
<S> <C>
Advisor: INVESCO VIF -Equity Income Fund
INVESCO Funds Group, Inc. The primary goal of the INVESCO VIF-Equity Income Fund is to seek high current income.
The Portfolio normally invests at least 65% of its assets in dividend paying common and
preferred stocks. This Portfolio was formerly called the Industrial Income Portfolio.
Advisor: INVESCO VIF -Total Return Fund
INVESCO Funds Group, Inc. The investment objective of the INVESCO VIF-Total Return Fund is to seek a high total
return on investment through capital appreciation and current income. The INVESCO
VIF-Total Return Fund seeks to accomplish its objective by investing in a combination of
equity securities (consisting of common stocks and, to a lesser degree, securities
convertible into common stock) and fixed income securities.
Advisor: INVESCO VIF -High Yield Fund
INVESCO Funds Group, Inc. The investment objective of the INVESCO VIF-High Yield Fund is to seek a high level of
current income by investing substantially all of its assets in lower rated debt
securities and preferred stocks, including securities issued by foreign companies. The
Portfolio pursues its investment objective through investment in a variety of long-term,
intermediate-term, and short-term bonds. Potential capital appreciation is a factor in the
selection of investments, but is secondary to the Portfolio's primary objective. For
further discussion of the risks associated with investment in lower rated bonds, please
see the attached INVESCO Variable Investment Funds, Inc. prospectus.
PBHG Insurance Series Fund, Inc.
Advisor: PBHG Growth II Portfolio
Pilgrim Baxter & Associates, Ltd. The investment objective of the PBHG Insurance Series Growth II Portfolio is to seek
capital appreciation. The Portfolio invests primarily in common stocks and convertible
securities of small and medium sized growth companies (market capitalization or annual
revenues between $500 million and $10 billion) that, in the Advisor's opinion, have strong
business momentum, earnings growth and potential for significant capital appreciation.
Advisor: PBHG Large Cap Growth Portfolio
Pilgrim Baxter & Associates, Ltd. The investment objective of the PBHG Insurance Series Large Cap Growth Portfolio is to
seek long-term growth of capital. The Portfolio invests primarily in common stocks of
large capitalization companies (market capitalization in excess of $1 billion) that, in
the Advisor's opinion, have strong business momentum, growth in earnings and potential for
capital appreciation.
Advisor: PBHG Technology & Communications Portfolio
Pilgrim Baxter & Associates, Ltd. The investment objective of the PBHG Insurance Series Technology & Communications
Portfolio is to seek long-term growth of capital. Current income is incidental to the
Portfolio's objective. The Portfolio, a non-diversified fund, invests primarily in common
stocks of companies doing business in the Technology and Communications sectors of the
market. The Portfolio is concentrated which means it will invest 25% or more of its total
assets in one or more of the industries within these sectors.
</TABLE>
18
<PAGE>
The Universal Institutional Funds, Inc.
<TABLE>
<CAPTION>
<S> <C>
Advisor: Mid Cap Value Portfolio
Miller Anderson & Sherrerd, LLP (an The investment objective of the Mid Cap Value Portfolio is to seek above-average total
indirect wholly owned subsidiary of return over a market cycle of three to five years by investing primarily in common stocks
Morgan Stanley Dean Witter & Co.) of companies with capitalizations in the range of companies included in the S&P MidCap 400
Index (currently $500 million to $6 billion). The Portfolio purchases stocks that
typically do not pay dividends. The Advisor analyzes securities to identify stocks that
are undervalued, and measures the relative attractiveness of the Portfolio's current
holdings against potential purchases.
Advisor: Value Portfolio
Miller Anderson & Sherrerd, LLP (an The investment objective of the Value Portfolio is to seek above-average total return over
indirect wholly owned subsidiary of a market cycle of three to five years by investing primarily in common stocks of companies
Morgan Stanley Dean Witter & Co.) with equity capitalizations greater than $2.5 billion. The Portfolio focuses on stocks
that are undervalued in comparison with the stock market as a whole, as measured by the
S&P 500 Index. The Portfolio may purchase stocks that do not pay dividends; and it may
invest, to a limited extent, in foreign equity securities.
Advisor: Fixed Income Portfolio
Miller Anderson & Sherrerd, LLP (an The investment objective of the Fixed Income Portfolio is to seek above-average total
indirect wholly owned subsidiary of return over a market cycle of three to five years by investing primarily in a diversified
Morgan Stanley Dean Witter & Co.) mix of dollar-denominated investment grade fixed income securities, particularly U.S.
Government, corporate and mortgage securities. The Portfolio ordinarily will maintain an
average weighted maturity in excess of five years. The Portfolio may invest
opportunistically in non-dollar-denominated securities and below investment grade
securities.
Advisor: U.S. Real Estate Portfolio
Morgan Stanley Asset Management (a The investment objective of the U.S. Real Estate Portfolio is to seek above-average
wholly owned subsidiary of Morgan current income and long-term capital appreciation by investing primarily in equity
Stanley Dean Witter & Co.) securities of U.S. and non-U.S. companies engaged in the U.S. real estate industry,
including Real Estate Investment Trusts (REITs).
Advisor: Emerging Markets Equity Portfolio
Morgan Stanley Asset Management (a The investment objective of the Emerging Markets Equity Portfolio is long-term capital
wholly owned subsidiary of Morgan appreciation by investing primarily in equity securities of issuers in emerging market
Stanley Dean Witter & Co.) countries The Portfolio seeks to maximize returns by investing in growth-oriented equity
securities in emerging markets. The Portfolio's investment approach combines top-down
country allocation with bottom-up stock selection. Investment selection criteria include
attractive growth characteristics, reasonable valuations and management with a strong
shareholder value orientation.
The Timothy Plan Small-Cap Variable Series
Advisor: The Timothy Plan Small-Cap Variable Series
Timothy Partners, Ltd. The primary investment objective of The Timothy Plan Small-Cap Variable Series is to seek
long-term capital growth, with a secondary objective of current income. The Portfolio
shall seek to achieve its objectives while abiding by ethical standards established for
investments by the Portfolio. The securities in which the Portfolio shall be precluded
from investing, by virtue of the Portfolio's ethical standards, are referred to as
excluded securities.
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
19
Additions, Deletions, or Substitutions
The Company may add or delete Sub-Accounts at any time, or may substitute one
Portfolio for another, at any time. The Company does not guarantee that any of
the Sub-Accounts or any of the Portfolios will always be available for
allocation of purchase payments or transfers. In the event of any substitution
or change, the Company may make such changes in the Contract as may be necessary
or appropriate to reflect such substitution or change.
Additions, deletions or substitutions of Sub-Accounts or Portfolios may be due
to an investment decision by the Company, or due to an event not within the
Company's control, such as liquidation of a Portfolio or an irreconcilable
conflict of interest between the Separate Account and another insurance company
which offers a Portfolio. The Portfolio prospectuses describe the possibility of
material conflict of interest in greater detail.
If the Company eliminates a Sub-Account or substitutes the shares of another
investment company for the shares of any Portfolio, the Company will first
obtain approval of the Securities and Exchange Commission to the extent required
by the Investment Company Act of 1940, as amended ("1940 Act"), or other
applicable law. The Company will also notify owners before it eliminates a
Sub-Account or substitutes a Portfolio.
New Sub-Accounts may be established when, in the sole discretion of the Company,
marketing, tax, investment or other conditions so warrant. Any new Sub-Accounts
will be made available to existing owners on a basis to be determined by the
Company.
If deemed to be in the best interests of persons having voting rights under the
Contracts, the Separate Account may be operated as a management company under
the 1940 Act or any other form permitted by law, may be de-registered under the
1940 Act in the event such registration is no longer required, or may be
combined with one or more separate accounts.
Voting Rights To the extent required by law, all Portfolio shares held in the
Separate Account will be voted by the Company at regular and special shareholder
meetings of the respective Portfolios in accordance with instructions received
from persons having voting interests in the corresponding Sub-Account. During
the Accumulation Period, the Company will vote Portfolio shares according to
instructions of owners, unless the Company is permitted to vote shares in its
own right.
The number of votes that an owner may vote will be calculated separately for
each Sub-Account. The number will be determined by applying the owner's
percentage interest, if any, in a particular Sub-Account to the total number of
votes attributable to that Sub-Account.
The owner's percentage interest and the total number of votes will be determined
as of the record date established by that Portfolio for voting purposes. Voting
instructions will be solicited by written communication in accordance with
procedures established by the respective Portfolios.
The Company will vote or abstain from voting shares for which it receives no
timely instructions and shares it holds as to which owners have no beneficial
interest (including shares held by the Company as reserves for benefit
payments*). The Company will vote or abstain from voting such shares in
proportion to the voting instructions it receives from owners of all Contracts
participating in the Sub-Account.
Each person or entity having a voting interest in a Sub-Account will receive
proxy material, reports and other material relating to the appropriate
Portfolio. The Portfolios are not required to hold annual or other regular
meetings of shareholders.
*Neither the owner nor payee has any interest in the Separate Account during the
Benefit Payment Period. Benefit Units are merely a measure of the amount of the
payment the Company is obligated to pay on each payment date.
20
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY INVESTORS LIFE INSURANCE COMPANY(R)
- --------------------------------------------------------------------------------
Annuity Investors Life Insurance Company(R) (the "Company") is a stock life
insuranc company. It was incorporated under the laws of the State of Ohio in
1981. The Company is principally engaged in the sale of variable and fixed
annuity policies. The home office of the Company is located at 250 East Fifth
Street, Cincinnati, Ohio 45202.
The Company is a wholly owned subsidiary of Great American Life Insurance
Company(R) which is a wholly owned subsidiary of American Annuity Group(R),
Inc., ("AAG") a publicly traded insurance holding company (NYSE: AAG). AAG is in
turn indirectly controlled by American Financial Group, Inc., a publicly traded
holding company (NYSE: AFG).
The Company may from time to time publish in advertisements, sales literature
and reports to owners the ratings and other information assigned to it by one or
more independent rating organizations such as A.M. Best Company, Standard &
Poor's, and Duff & Phelps. The purpose of the ratings is to reflect the
financial strength and/or claims-paying ability of the Company. Each year A.M.
Best Company reviews the financial status of thousands of insurers, culminating
in the assignment of Best's Ratings. These ratings reflect A.M. Best Company's
opinion of the relative financial strength and operating performance of an
insurance company in comparison to the norms of the life/health insurance
industry. Ratings of the Company do not reflect the investment performance of
the Separate Account or the degree of risk associated with an investment in the
Separate Account.
THE SEPARATE ACCOUNT
- --------------------------------------------------------------------------------
Annuity Investors(R) Variable Account B was established by the Company as an
insurance company separate account under the laws of the State of Ohio on
December 19, 1996, pursuant to resolution of the Company's Board of Directors.
The Separate Account is registered with the Securities and Exchange Commission
under the 1940 Act as a unit investment trust. However, the Securities and
Exchange Commission does not supervise the management or the investment
practices or policies of the Separate Account.
The assets of the Separate Account are owned by the Company, but they are held
separately from the other assets of the Company. Under Ohio law, the assets of a
separate account are not chargeable with liabilities incurred in any other
business operation of the Company. Income, gains and losses incurred on the
assets in the Separate Account, whether realized or not, are credited to or
charged against the Separate Account, without regard to other income, gains or
losses of the Company. Therefore, the investment performance of the Separate
Account is entirely independent of the investment performance of the Company's
general account assets or any other separate account maintained by the Company.
The assets of the Separate Account will be held for the exclusive benefit of
owners of, and the persons entitled to payment under, the Contracts offered by
this prospectus and all other contracts that invest in the Separate Account.
AAG SECURITIES, INC.
- --------------------------------------------------------------------------------
AAG Securities, Inc. ("AAGS"), an affiliate of the Company, is the principal
underwriter and distributor of the Contracts. AAG Securities is a wholly owned
subsidiary of AAG. AAGS is registered with the Securities and Exchange
Commission as a broker-dealer and is a member of the National Association of
Securities Dealers, Inc. ("NASD"). Its principal offices are located at 250 East
Fifth Street, Cincinnati, Ohio 45202. The Company pays AAGS for acting as
underwriter according to the terms of a distribution agreement.
AAGS sells Contracts through its registered representatives. In addition, AAGS
may enter into sales agreements with other broker-dealers to solicit
applications for the Contracts through its registered representatives. These
broker-dealers are registered with the Securities and Exchange Commission and
are members of the NASD. All registered representatives who sell the Contracts
are appointed by the Company as insurance agents and are authorized under
applicable state insurance regulations to sell variable annuities.
The Company or AAGS may pay commissions to registered representatives of AAGS
and other broker-dealers of up to 8.5% of purchase payments made under the
Contracts. These commissions are reduced by one-half for Contracts issued to
owners over age 80. When permitted by state law and in exchange for lower
initial commissions, AAGS and/or the Company may pay trail commissions to
registered representatives of AAGS and to other broker-dealers. Trail
commissions are not expected to exceed 1% of the Account Value of a Contract on
an annual basis. To the extent permitted under current law, the Company and/or
AAGS may pay production, persistency and managerial bonuses as well as other
promotional incentives, in cash or other compensation, to registered
representatives of AAGS and/or other broker-dealers.
21
<PAGE>
CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
Charges and Deductions By the Company
There are two types of charges and deductions by the Company. There are charges
assessed to the Contract, which are reflected in the Account Value of the
Contract, but not in Accumulation Unit Values (or Benefit Unit Values). These
charges are the contingent deferred sales charge, the annual contract
maintenance fee, premium taxes where applicable and transfer fees. There are
also charges assessed against the Separate Account. These charges are reflected
in the Accumulation Unit Values (and Benefit Unit Values) of the Sub-Accounts.
These charges are the mortality and expense risk charge and the administration
charge.
The Company will never charge more to a Contract than the fees and charges
described below, even if its actual expenses exceed the total fees and charges
collected. If the fees and charges collected by the Company exceed the actual
expenses it incurs, the excess will be profit to the Company and will not be
returned to owners.
Notwithstanding the above, the Company reserves the right to increase the amount
of the transfer fee in the future, and/or to charge fees for the automatic
transfer programs described in the Transfers section beginning on page 27 of
this prospectus, and/or for the systematic withdrawal program described in the
Surrenders section on page 29 of this prospectus, if in the Company's
discretion, it determines such charges are necessary to offset the costs of
administering transfers or systematic withdrawals.
Contingent Deferred Sales Charge ("CDSC")
<TABLE>
<CAPTION>
<S> <C>
Purpose of Charge Offset expenses incurred by the Company in the sale of the Contracts, including commissions paid
and costs of sales literature.
Amount of Charge Up to 7% of each purchase payment depending on number of years elapsed since receipt of the
purchase payment.
</TABLE>
<TABLE>
<CAPTION>
============================================ ===== ===== ===== ===== ====== ====== ====== ======
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Number of full years elapsed between date
of receipt of purchase payment and date 0 1 2 3 4 5 6 7 or
request for surrender received more
-------------------------------------------- ----- ----- ------ ----- ------ ------ ------ ------
CDSC as a percentage of purchase payment
surrendered 7% 6% 5% 4% 3% 2% 1% 0%
============================================ ====== ===== ====== ===== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
When Assessed On partial or full surrenders of purchase payments during Accumulation Period.
Assessed Against What Purchase payments only, not earnings. See the Surrenders section of this prospectus for
information on order of withdrawal of earnings and purchase payments.
Waivers o Free withdrawal privilege. See the Surrenders section for information.
o In the Company's discretion where the Company incurs reduced sales and servicing
expenses.
o Upon separation from service if Contract issued with employer plan endorsement or
deferred compensation endorsement.
o If Contract is issued with a tax sheltered annuity endorsement (and without an employer
plan endorsement): (i) upon separation from service if owner has attained age 55 and
Contract has been in force for at least seven years; or (ii) after Contract has been in
force fifteen years or more.
o Long term care waiver rider. See the Surrenders section for information.
o If the Social Security Administration determines after the Contract is issued that the
owner is "disabled" as that term is defined in the Social Security Act of 1935, as amended.
o Successor owner endorsement. See the Account Value section for information.
o Where required to satisfy state law.
</TABLE>
<TABLE>
<CAPTION>
Contract Maintenance Fee
<S> <C>
Purpose of Charge Offset expenses incurred in issuing the Contracts and in maintaining the Contracts and the
Separate Account.
Amount of Charge $30.00 per year.
When Assessed During the Accumulation Period the charge is deducted on each anniversary of the effective date
of the Contract, and at time of full surrender. During the Benefit Payment Period a portion of
the charge is deducted from each variable dollar benefit payment.
Assessed Against What Amounts invested in the Sub-Accounts. During the Accumulation Period, the charge is deducted
pro rata from the Sub-Accounts in which the Contract has an interest on the date of the charge.
During the Benefit Payment Period, a pro rata portion of the annual charge is deducted from each
benefit payment from the variable account. The charge is not assessed against the fixed account
options.
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Waivers o During Accumulation Period if the Account Value is at least $40,000 on the date of the
charge (individual contracts only).
o During Benefit Payment Period if the amount applied to a variable dollar benefit is at
least $40,000 (individual contracts only).
o In the Company's discretion where the Company incurs reduced sales and servicing
expenses.
o During Benefit Payment Period where required to satisfy state law.
Transfer Fee
Purpose of Charge Offset cost incurred in administering the Contracts.
Amount of Charge $25 for each transfer in excess of 12 in any contract year. The Company reserves the right to
change the amount of this charge at any time.
When Assessed During Accumulation Period.
Assessed Against What Deducted from amount transferred.
Waivers Currently, the transfer fee does not apply to transfers associated with the dollar cost
averaging, interest sweep and portfolio rebalancing programs. Transfers associated with these
programs do not count toward the 12 free transfers permitted in a contract year. The Company
reserves the right to eliminate this waiver at any time.
Administration Charge
Purpose of Charge Offset expenses incurred in administering the Contracts and the Separate Account.
Amount of Charge Daily charge equal to 0.000411% of the daily Net Asset Value for each Sub-Account, which
corresponds to an annual effective rate of 0.15%.
When Assessed During the Accumulation Period and during the Benefit Payment Period if a variable dollar
benefit is elected.
Assessed Against What Amounts invested in the Sub-Accounts. Not assessed against the fixed account options.
Waivers May be waived or reduced in the Company's discretion where the Company incurs reduced sales and
servicing expenses.
</TABLE>
23
- -------------------------------------------------------------------------------
<PAGE>
Mortality and Expense Risk Charge
<TABLE>
<CAPTION>
<S> <C>
Purpose of Charge Compensation for bearing certain mortality and expense risks under the Contract. Mortality
risks arise from the Company's obligation to pay benefit payments during the Benefit Payment
Period and to pay the death benefit. The expense risk assumed by the Company is the risk that
the Company's actual expenses in administering the Contracts and the Separate Account will
exceed the amount recovered through the contract maintenance fees, transfer fees and
administration charges.
Amount of Charge Daily charge equal to 0.003403% of the daily Net Asset Value for each Sub-Account, which
corresponds to an effective annual rate of 1.25%. The Company estimates that the mortality risk
component of this charge is 0.75% and the expense risk component is 0.50%. Contracts with the
1.25% mortality and expense risk charge are referred to as "Standard Contracts."
When Assessed During the Accumulation Period, and during the Benefit Payment Period if a variable dollar
benefit is elected.
Assessed Against What Amounts invested in the Sub-Accounts. Not assessed against the fixed account options.
Waivers When the Company expects to incur reduced sales and servicing expenses, it may issue a Contract
with a reduced mortality and expense risk charge. These Contracts are referred to as "Enhanced
Contracts. The mortality and expense risk charge under an Enhanced Contract is a daily charge
of 0.002590% of the daily Net Asset Value for each Sub-Account, which corresponds to an
effective annual rate of 0.95%. The Company estimates that for Enhanced Contracts, the mortality
risk component of this charge is 0.75% and the expense risk component is 0.20%.
</TABLE>
Premium Taxes
Certain state and local governments impose premium taxes. These taxes currently
range up to 5.0% depending upon the jurisdiction. The Company will deduct any
applicable premium taxes from the Account Value either upon death, surrender,
annuitization, or at the time purchase payments are made, but no earlier than
when the Company incurs a tax liability under state law.
Discretionary Waivers of Charges
The Company will look at the following factors to determine if it will waive a
charge, in part or in full, due to reduced sales and servicing expenses: (1) the
size and type of the group to which sales are to be made; (2) the total amount
of purchase payments to be received; and (3) any prior or existing relationship
with the Company. The Company would expect to incur reduced sales and servicing
expenses in connection with Contracts offered to employees of the Company, its
subsidiaries and/or affiliates. There may be other circumstances, of which the
Company is not presently aware, which could result in reduced sales and
servicing expenses. In no event will the Company waive a charge where such
waiver would be unfairly discriminatory to any person.
Expenses of the Portfolios
In addition to charges and deductions by the Company, there are Portfolio
management fees and administration expenses which are described in the
prospectus and statement of additional information for each Portfolio. The
actual Portfolio fees and expenses for the prior calendar year are included in
the Fee Table on page 6 of this prospectus. Portfolio expenses, like Separate
Account expenses, are reflected in Accumulation Unit Values (or Benefit Unit
Values).
24
- --------------------------------------------------------------------------------
<PAGE>
THE CONTRACTS
- --------------------------------------------------------------------------------
Each Contract is an agreement between the Company and the owner. Values,
benefits and charges are calculated separately for each Contract. In the case of
a group Contract, the agreement is between the group owner and the Company. An
individual participant under a group Contract will receive a certificate of
participation, which is evidence of the participant's interest in the group
Contract. A certificate of participation is not a Contract. Values, benefits and
charges are calculated separately for each certificate issued under a Contract.
The description of Contract provisions in this prospectus applies to the
interests of certificate owners, except where otherwise noted.
Because the Company is subject to the insurance laws and regulations of all the
jurisdictions where it is licensed to operate, the availability of certain
Contract rights and provisions in a given State may depend on that State's
approval of the Contracts. Where required by state law or regulation, the
Contracts will be modified accordingly.
Right to Cancel The owner of an individual Contract may cancel it before
midnight of the twentieth day following the date the owner receives the
Contract. For a valid cancellation, the Contract must be returned to the
Company, and written notice of cancellation must be given to the Company, or to
the agent who sold the Contract, by that deadline. If mailed, the return of the
Contract or the notice is effective on the date it is postmarked, with the
proper address and with postage paid. If the owner cancels the Contract, the
Contract will be void and the Company will refund the purchase payment(s) paid
for it plus or minus any investment gains or losses under the Contract as of the
end of the Valuation Period during which the returned Contract is received by
the Company. When required by state or federal law, the Company will return the
purchase payments without any investment gain or loss, during all or part of the
right to cancel period. When required by state law, the right to cancel period
may be longer than 20 days. When required by state law, the right to cancel may
apply to group Contracts.
Persons With Rights Under a Contract
Owner: The owner is the person with authority to exercise rights and receive
benefits under the Contract (e.g., make allocations among investment options,
elect settlement option, designate annuitant, beneficiary and payee). An owner
must ordinarily be a natural person, or a trust or other legal entity holding a
contract for the benefit of a natural person. In the case of a group Contract,
the participant will have the rights of an owner unless restricted by the terms
of an employer plan. Ownership of a non-tax-qualified Contract may be
transferred, but transfer may have adverse tax consequences. Ownership of a
tax-qualified Contract may not be transferred.
Joint Owners: There may be joint owners of a non-tax-qualified Contract. Joint
owners may each exercise transfer rights and make purchase payment allocations
independently. All other rights must be exercised by joint action. A surviving
joint owner who is not the spouse of a deceased owner may not become a successor
owner, but will be deemed to be the beneficiary of the death benefit which
becomes payable on the death of the first owner to die, regardless of any
beneficiary designation.
Successor Owner: The surviving spouse of a deceased owner may become a successor
owner if the surviving spouse was either the joint owner or sole surviving
beneficiary under the Contract. In order for a spouse to become a successor
owner, the owner must make an election prior to the owner's death, or the
surviving spouse must make an election within one year of the owner's death.
Annuitant: The annuitant is the person whose life is the measuring life for life
contingent annuity benefit payments. The annuitant is the same person as the
owner under a tax-qualified Contract. The owner may designate an annuitant under
a non-tax-qualified Contract.
Beneficiary: The person entitled to receive the death benefit. The owner may
designate the beneficiary, except that a surviving joint owner will be deemed to
be the beneficiary regardless of any designation. If no beneficiary is
designated, and there is no surviving joint owner, the owner's estate will be
the beneficiary. The beneficiary will be the measuring life for life contingent
death benefit payments.
Payee: Under a tax-qualified Contract, the owner-annuitant is the payee of
annuity benefits. Under a non-tax-qualified Contract, the owner may designate
the payee of annuity benefits. Irrevocable naming of a payee other than the
owner can have adverse tax consequences. The beneficiary is the payee of the
death benefit.
Assignee: Under a tax-qualified Contract, assignment is not permitted. The owner
of a non-tax-qualified Contract may assign most of his/her rights or benefits
under a Contract. Assignment of rights or benefits may have adverse tax
consequences.
- -------------------------------------------------------------------------------
25
<PAGE>
ACCUMULATION PERIOD
- --------------------------------------------------------------------------------
Each Contract allows for an Accumulation Period during which purchase payments
are invested according to the owner's instructions. During the Accumulation
Period, the owner can control the allocation of investments through telephone
transfers or through the following investment programs offered by the Company:
dollar cost averaging, portfolio rebalancing and interest sweep. These programs
and telephone transfer procedures are described in the Transfers section
beginning on page 27 of this prospectus. The owner can access the Account Value
during the Accumulation Period through surrenders, systematic withdrawal, or
contract loans if available. These withdrawal features are described more fully
in the Surrenders and Contract Loans sections on pages 29 and 30 of this
prospectus.
Account Statements
During the Accumulation Period, the Company will provide a report of the
Contract's Account Value, and any other information required by law, at least
once each contract year. The Company will confirm receipt of any purchase
payments made after the initial purchase payment in quarterly statements of
account activity.
Account Value
The value of a Contract during the Accumulation Period is referred to as the
"Account Value." The Account Value at any given time is the sum of: (1) amounts
invested in the fixed investment options plus the fixed rate(s) of interest
earned on those amounts as of that time; and (2) the value of the owner's
interest in the Sub-Accounts as of that time. The value of the owner's interest
in the Sub-Accounts at any time is equal to the sum of the number of
Accumulation Units for each Sub-Account attributable to that Contract multiplied
by the Accumulation Unit Value for the applicable Sub-Account at the end of the
preceding Valuation Period. The Account Value at any time is net of any charges,
deductions, surrenders, and/or outstanding loans incurred prior to or as of the
end of that Valuation Period.
Accumulation Units
Amounts allocated or transferred to a Sub-Account are converted into
Accumulation Units. The number of Accumulation Units credited is determined by
dividing the dollar amount directed to the Sub-Account by the Accumulation Unit
Value for that Sub-Account as of the end of the Valuation Period in which the
amount allocated is received by the Company, or as of the end of the Valuation
Period in which the transfer is made.
Accumulation Units will be canceled as of the end of the Valuation Period during
which one of the following events giving rise to cancellation occurs:
o transfer from a Sub-Account
o full or partial surrender from the Sub-Accounts
o payment of a death benefit
o application of the amounts in the Sub-Accounts to a settlement option
o deduction of the contract maintenance fee
o deduction of any transfer fee
Successor Owner Endorsement
If the Contract is modified by the successor owner endorsement, and the
surviving spouse of a deceased owner becomes a successor owner of the Contract,
the Account Value will be stepped-up to equal the death benefit which otherwise
would have been payable, as of what would have been the Death Benefit Valuation
Date. In addition, contingent deferred sales charges will be waived on the
entire stepped-up Account Value as of that date, but will apply to any purchase
payments applied to the Contract after that date.
For purposes of determining what would have been the Death Benefit Valuation
Date, the election to become successor owner will be deemed to be instructions
as to the form of death benefit. The election to become successor owner must be
made within one year of the date of the owner's death.
The successor owner endorsement may not be available in all States.
26
- -------------------------------------------------------------------------------
<PAGE>
Purchase Payments
Purchase payments may be made at any time during the Accumulation Period. The
current restrictions on purchase payment amounts are as follows:
<TABLE>
<CAPTION>
Tax-Qualified Non-Tax-Qualified
- ------------------------------------------------------ ----------------------- -----------------------
- ------------------------------------------------------ ----------------------- -----------------------
<S> <C> <C>
Minimum initial purchase payment $2,000 $5,000
- ------------------------------------------------------ ----------------------- -----------------------
- ------------------------------------------------------ ----------------------- -----------------------
Minimum monthly under periodic payment program $50 $100
- ------------------------------------------------------ ----------------------- -----------------------
- ------------------------------------------------------ ----------------------- -----------------------
Minimum additional payments $50 $50
- ------------------------------------------------------ ----------------------- -----------------------
- ------------------------------------------------------ ----------------------- -----------------------
Maximum single purchase payment $500,000 or Company $500,000 or Company
approval approval
</TABLE>
The Company reserves the right to increase or decrease the minimum allowable
single purchase payment or minimum purchase payment under a periodic payment
program, or the minimum allowable additional purchase payment, at its discretion
and at any time, where permitted by law.
Each purchase payment will be applied by the Company to the credit of the
owner's account. If the application form is in good order, the Company will
apply the initial purchase payment to an account for the owner within two
business days of receipt of the purchase payment. If the application form is not
in good order, the Company will attempt to get the application form in good
order within five business days. If the application form is not in good order at
the end of this period, the Company will inform the applicant of the reason for
the delay and that the purchase payment will be returned immediately unless he
or she specifically consents to the Company keeping the purchase payment until
the application form is in good order. Once the application form is in good
order, the purchase payment will be applied to the owner's account within two
business days.
Each additional purchase payment is credited to a Contract as of the Valuation
Date on which the Company receives the purchase payment. If the purchase payment
is allocated to a Sub-Account, it will be applied at the Accumulation Unit Value
calculated at the end of the Valuation Period in which that Valuation Date
occurs.
Investment Options--Allocations
Purchase payments can be allocated in whole percentages to any of the available
Sub-Accounts or fixed account options. See The Portfolios section beginning on
page 14 of this prospectus for a listing and description of the currently
available Sub-Accounts. The currently available fixed account options are as
follows:
Fixed Accumulation Account Option
One Year Guaranteed Interest Rate Option
Three Year Guaranteed Interest Rate Option
Five Year Guaranteed Interest Rate Option
Seven Year Guaranteed Interest Rate Option
The current restrictions on allocations are as follows:
<TABLE>
<CAPTION>
Tax-Qualified and Non-Tax-Qualified
- -------------------------------------------------------- -----------------------------------------------------
- -------------------------------------------------------- -----------------------------------------------------
<S> <C>
Minimum allocation to any Sub-Account $10
- -------------------------------------------------------- -----------------------------------------------------
- -------------------------------------------------------- -----------------------------------------------------
Minimum allocation to fixed accumulation account $10
- -------------------------------------------------------- -----------------------------------------------------
- -------------------------------------------------------- -----------------------------------------------------
Minimum allocation to fixed account guarantee option $2,000
No amounts may be allocated to a guarantee period
option, which would extend beyond the owner's 85th
birthday or 5 years after the effective date of the
Contract, if later.
- -------------------------------------------------------- -----------------------------------------------------
- -------------------------------------------------------- -----------------------------------------------------
Allocation during right to cancel period No current restrictions, but the Company reserves
the right to require that purchase payment(s)
be allocated to the money market Sub-Account or to the
fixed accumulation account option during the right
to cancel period.
- -------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
Interests in the fixed account options are not securities and are not registered
with the Securities and Exchange Commission. Amounts allocated to the fixed
account options will receive a stated rate of interest of at least 3% per year.
Amounts allocated to the fixed account options and interest credited to the
fixed account options are guaranteed by the Company. Interests in the
Sub-Accounts are securities registered with the Securities and Exchange
Commission. The owner bears the risk of investment gain or loss on amounts
allocated to the Sub-Accounts.
Principal Guarantee Program
An owner may elect to have the Company allocate a portion of a purchase payment
to the seven-year guaranteed interest rate option such that, at the end of the
seven-year guarantee period, that account will grow to an amount equal to the
total purchase payment (so long as there are no surrenders or loans from the
Contract). The Company determines the portion of the purchase payment that must
be allocated to the seven-year guarantee option such that, based on the interest
rate then in effect, that account will grow to equal the full amount of the
purchase payment after seven years. The remainder of the purchase payment will
be allocated according to the owner's instructions. The minimum purchase payment
eligible for the principal guarantee program is $5,000.
Renewal of Fixed Account Guarantee Options
At the end of a guarantee period, and for 30 days preceding the end of such
guarantee period, the owner may elect to allocate the amount maturing to any of
the available investment options under the Contract. If the owner does not make
a reallocation election, the amount maturing will be allocated to the guarantee
period option with the same number of years as the period expiring, or the next
shortest period as may be required to comply with the restriction on allocation
to guarantee period options as described in the Investment Options--Allocations
section on page 26 of this prospectus. If a guarantee period is unavailable due
to this restriction, the amount maturing will be allocated to the fixed
accumulation account option.
Transfers
During the Accumulation Period, an owner may transfer amounts between
Sub-Accounts, among fixed account options, and/or between Sub-Accounts and fixed
account options.
The current restrictions on transfers are as follows:
<TABLE>
<CAPTION>
Tax-Qualified and Non-Tax-Qualified
- ------------------------------------------------------------- ------------------------------------------------------------------
- ------------------------------------------------------------- ------------------------------------------------------------------
<S> <C>
Minimum transfer from any Sub-Account $500 or balance of Sub-Account, if less
- ------------------------------------------------------------- ------------------------------------------------------------------
- ------------------------------------------------------------- ------------------------------------------------------------------
Minimum transfer from fixed account option $500 or balance of fixed account option, if less
- ------------------------------------------------------------- ------------------------------------------------------------------
- ------------------------------------------------------------- ------------------------------------------------------------------
Minimum transfer to fixed account guarantee option $2,000
No amounts may be transferred to a guarantee period
option, which would extend beyond the owner's 85th
birthday or 5 years after the effective date of the
Contract, if later.
- ------------------------------------------------------------- ------------------------------------------------------------------
- ------------------------------------------------------------- ------------------------------------------------------------------
Maximum transfer from fixed account option other than fixed During any contract year, 20% of the fixed account
account guarantee option which is maturing option's value as of the most recent contract
anniversary.
- ------------------------------------------------------------- ------------------------------------------------------------------
- ------------------------------------------------------------- ------------------------------------------------------------------
Transfers from fixed account options o May not be made prior to first contract
anniversary.
o Amounts transferred from fixed account
options to Sub-Accounts may not be transferred
back to fixed account options for a period of 6
months from the date of the original transfer.
</TABLE>
A transfer is effective on the Valuation Date during which the Company receives
the request for transfer, and will be processed at the Accumulation Unit Value
for the end of the Valuation Period in which that Valuation Date occurs.
27
- ------------------------------------------------------------------------------
<PAGE>
Automatic Transfer Programs
During the Accumulation Period, the Company offers the automatic transfer
services described below. To enroll in one of these programs, you will need to
complete the appropriate authorization form, which you can obtain from the
Company by calling 1-800-789-6771.
Currently, the transfer fee does not apply to dollar cost averaging, portfolio
rebalancing, or interest sweep transfers, and transfers under these programs
will not count toward the twelve transfers permitted under the Contract without
a transfer fee charge. However, the Company reserves the right to impose a fee
in such amount as the Company may then determine to be reasonable for
participation in automatic transfer programs.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Service Description Minimum Account Limitations/Notes
Requirements
- -------------------------------- ----------------------------- --------------------------- -----------------------------
- -------------------------------- ----------------------------- --------------------------- -----------------------------
Dollar Cost Averaging Automatic transfers from Source of funds must be Dollar cost averaging
There are risks involved the money market at least $10,000. transfers may not be made
in switching between Sub-Account to any other to any of the fixed
investments available under Sub-Account(s), or from Minimum transfer per account options. The
the Contract. Dollar cost the fixed accumulation month is $500. When dollar cost averaging
averaging requires regular account option to any balance of source of transfers will take place
investment changes Sub-Account(s),on a funds falls below $500, on the last Valuation
regardless of fluctuating monthly or quarterly entire balance will be Date of each calendar
price levels and does not basis. allocated according to month or quarter
guarantee profits or dollar cost averaging requested by the owner.
prevent losses in a instructions.
declining market. You
should consider your
financial ability to
continue dollar cost
averaging transfers through
periods of changing price
levels.
- -------------------------------- ----------------------------- --------------------------- -----------------------------
- -------------------------------- ----------------------------- --------------------------- -----------------------------
Portfolio Rebalancing Automatically transfer Minimum Account Value of Transfers will take place
amounts between the $10,000. on the last Valuation
Sub-Accounts and the Date of eachcalendar
fixed accumulation quarter. Portfolio
account option to rebalancing will not be
maintain the percentage available if the dollar
allocations selected by cost averaging program or
the owner. an interest sweep from
the fixed accumulation
account option is being
utilized.
- -------------------------------- ----------------------------- --------------------------- -----------------------------
- -------------------------------- ----------------------------- --------------------------- -----------------------------
Interest Sweep Automatic transfers of Balance of each fixed Interest sweep transfers
the income from any fixed account option selected will take place on the
account option(s) to any must be at least last Valuation Date of
Sub-Account(s). $5,000. Maximum each calendar quarter.
transfer from each
fixed account option
selected is 20% of
such fixed account
option's value per
year. Amounts
transferred under the
interest sweep program
will reduce the 20%
maximum transfer
amount otherwise
allowed.
- -----------------------------------
</TABLE>
28
<PAGE>
Telephone Transfers
An owner may place a request for all or part of the Account Value to be
transferred by telephone. All transfers must be in accordance with the terms of
the Contract. Transfer instructions are currently accepted on each Valuation
Date between 9:30 a.m. and 4:00 p.m. Eastern Time at 1-800-789-6771. Once
instructions have been accepted, they may not be rescinded; however, new
telephone instructions may be given the following day.
The Company will not be liable for complying with telephone instructions, which
the Company reasonably believes to be genuine, or for any loss, damage, cost or
expense in acting on such telephone instructions. The owner or person with the
right to control payments will bear the risk of such loss. The Company will
employ reasonable procedures to determine that telephone instructions are
genuine. If the Company does not employ such procedures, the Company may be
liable for losses due to unauthorized or fraudulent instructions. These
procedures may include, among others, tape recording telephone instructions.
Termination of Transfer Programs
The owner may terminate any of the automatic transfer programs at any time, but
must give the Company at least 30 days notice to change any automatic transfer
instructions that are already in place. Termination and change instructions will
be accepted by telephone at 1-800-789-6771. The Company may terminate, suspend
or modify any aspect of the transfer programs described above without prior
notice to owners, as permitted by applicable law. The Company may also impose an
annual fee or increase the current annual fee, as applicable, for any of the
foregoing services in such amount(s) as the Company may then determine to be
reasonable for participation in the service.
Surrenders
An owner may surrender a Contract either in full or in part during the
Accumulation Period. A contingent deferred sales charge ("CDSD") may apply on
surrender. The restrictions and charges on surrenders are as follows:
<TABLE>
<CAPTION>
Tax-Qualified Non-Tax-Qualified
- -------------------------------------------------------------- -------------------------------- ----------------------------
- -------------------------------------------------------------- -------------------------------------------------------------
<S> <C>
Minimum amount of partial surrender $500
- -------------------------------------------------------------- -------------------------------------------------------------
- -------------------------------------------------------------- -------------------------------------------------------------
Minimum remaining Account Value after partial surrender $500
- -------------------------------------------------------------- -------------------------------------------------------------
- -------------------------------------------------------------- -------------------------------- ----------------------------
Amount available for surrender (valued as of end of Account Value less Account Value less
Valuation Periodin which request for surrender is applicable CDSC, subject applicable CDSC, subject
received by the Company) to tax law or employer to employer plan
plan restrictions on restrictions on
withdrawals withdrawals
- -------------------------------------------------------------- -------------------------------- ----------------------------
- -------------------------------------------------------------- -------------------------------------------------------------
Tax penalty for early withdrawal Up to 10% of Account Value before age 59 1/2
- -------------------------------------------------------------- -------------------------------------------------------------
- -------------------------------------------------------------- -------------------------------------------------------------
Contract maintenance fee on full surrender $30 (no CDSC applies)
- -------------------------------------------------------------- -------------------------------------------------------------
- -------------------------------------------------------------- -------------------------------------------------------------
Contingent deferred sales charge ("CDSC") Up to 7% of purchase payments
- -------------------------------------------------------------- -------------------------------------------------------------
- -------------------------------------------------------------- -------------------------------------------------------------
Order of withdrawal for purposes of CDSC (order may be First from accumulated earnings (no CDSC applies)
different for tax purposes) and then from purchase payments on "first-in,
first-out" basis (CDSC may apply)
</TABLE>
A full surrender will terminate the Contract. Partial surrenders are withdrawn
proportionally from all Sub-Accounts and fixed account options in which the
Contract is invested on the date the Company receives the surrender request,
unless the owner requests that the surrender be withdrawn from a specific
investment option. A surrender is effective on the Valuation Date during which
the Company receives the request for surrender, and will be processed at the
Accumulation Unit Value for the end of the Valuation Period in which that
Valuation Date occurs. Payment of a surrendered amount may be delayed if the
amount surrendered was paid to the Company by a check that has not yet cleared.
Surrenders from a fixed account option may be delayed for up to six months after
receipt of a surrender request as allowed by state law. Surrenders from the
Sub-Accounts may be delayed during any period the New York Stock Exchange is
closed or trading is restricted, or when the Securities and Exchange Commission
either: (1) determines that there is an emergency which prevents valuation or
disposal of securities held in the Separate Account; or (2) permits a delay in
payment for the protection of security holders.
29
<PAGE>
Free Withdrawal Privilege
The Company will waive the CDSC on full or partial surrenders during the first
contract year, on an amount equal to not more than 10% of all purchase payments
received. During the second and succeeding contract years, the Company will
waive the CDSC on an amount equal to not more than the greater of: (a)
accumulated earnings (Account Value in excess of purchase payments); or (b) 10%
of the Account Value as of the last contract anniversary.
If the free withdrawal privilege is not exercised during a contract year, it
does not carry over to the next contract year. The free withdrawal privilege may
not be available under some group Contracts.
Long Term Care Waiver Rider
If a Contract is modified by the Long Term Care Waiver Rider, surrenders may be
made free of any CDSC if the owner has been confined in a qualifying licensed
hospital or long-term care facility for at least 90 days beginning on or after
the first contract anniversary. This rider may not be available in all States
Systematic Withdrawal
During the Accumulation Period, an owner may elect to automatically withdraw
money from the Contract. The Account Value must be at least $10,000 in order to
make a systematic withdrawal election. The minimum monthly amount that can be
withdrawn is $100. Systematic withdrawals will be subject to the contingent
deferred sales charge to the extent the amount withdrawn exceeds the free
withdrawal privilege. The owner may begin or discontinue systematic withdrawals
at any time by request to the Company, but at least 30 days notice must be given
to change any systematic withdrawal instructions that are currently in place.
The Company reserves the right to discontinue offering systematic withdrawals at
any time. Currently, the Company does not charge a fee for systematic withdrawal
services. However, the Company reserves the right to impose an annual fee in
such amount as the Company may then determine to be reasonable for participation
in the systematic withdrawal program.
Before electing a systematic withdrawal program, you should consult with a
financial advisor. Systematic withdrawal is similar to annuitization, but will
result in different taxation of payments and potentially different amount of
total payments over the life of the Contract than if annuitization were elected.
Contract Loans
The Company may make loans to owners of tax-qualified Contracts. Any such loans
will be secured with an interest in the Contract, and the collateral for the
loan will be moved to the fixed accumulation account option and earn a fixed
rate of interest applicable to loan collateral. Loan amounts and repayment
requirements are subject to provisions of the Internal Revenue Code, and default
on a loan will result in a taxable event. You should consult a tax Advisor prior
to exercising loan privileges. Loan provisions are described in the loan
endorsement to the Contract.
A loan, whether or not repaid, will have a permanent effect on the Account Value
of a Contract because the collateral cannot be allocated to the Sub-Accounts or
fixed account guarantee periods. The longer the loan is outstanding, the greater
the effect is likely to be. The effect could be favorable or unfavorable. If the
investment results are greater than the rate being credited on collateral while
the loan is outstanding, the Account Value will not increase as rapidly as it
would if no loan were outstanding. If investment results are below that rate,
the Account Value will be higher than it would have been if no loan had been
outstanding.
Termination
The Company reserves the right to terminate any Contract at any time during the
Accumulation Period if the Account Value is less than $500. In that case, the
Contract will be involuntarily surrendered and the Company will pay the owner
the amount, which would be due the owner on a full surrender. A group Contract
may be terminated on 60 days advance notice, in which case participants will be
entitled to continue their interests on a deferred, paid-up basis, subject to
the Company's involuntary surrender right as described above.
30
<PAGE>
BENEFIT PAYMENT PERIOD
Annuity Benefit
- --------------------------------------------------------------------------------
An owner may designate the date that annuity payments will begin, and may change
the date up to 30 days before annuity payments are scheduled to begin. Unless
the Company agrees otherwise, the first day of a Benefit Payment Period in which
annuity payments are paid cannot be later than the contract anniversary
following the 85th birthday of the eldest owner, or five years after the
effective date of the Contract, whichever is later.
The amount applied to a settlement option will be the Account Value as of the
end of the Valuation Period immediately preceding the first day of the Benefit
Payment Period. The owner may select any form of settlement option, which is
currently available. The standard forms of settlement options are described in
the Settlement Options section beginning on page 31 of this prospectus.
If the owner has not previously made an election as to the form of settlement
option, the Company will contact the owner to ascertain the form of settlement
option to be paid. If the owner does not select a settlement option, such as a
specific fixed dollar benefit payment, a variable dollar benefit payment, or a
combination of a variable and fixed dollar benefit payment, the Company will
apply the Account Value to a fixed dollar benefit for the life of the annuitant
with 120 monthly payments assured, as described in the Settlement Options
section beginning on page 31 of this prospectus.
Death Benefit
A death benefit will be paid under a Contract if the owner dies during the
Accumulation Period. If a surviving spouse becomes a successor owner of the
Contract, the death benefit will be paid on the death of the successor owner if
he or she dies during the Accumulation Period.
The death benefit will be an amount equal to the largest of the following three
amounts:
o The Account Value on the Death Benefit Valuation Date
o The total purchase payment(s), with interest at three percent (3%) per year
through the Death Benefit Valuation Date or the owner's 80th birthday
if earlier, compounded annually, less any partial surrenders and any
contingent deferred sales charges that applied to those amounts
o The largest Account Value on any contract anniversary after the fourth
contract anniversary and prior to the Death Benefit Valuation Date or the
owner's 80th birthday if earlier, less any partial surrenders and any
contingent deferred sales charges that applied to those amounts.
Any applicable premium tax or other taxes not previously deducted, and any
outstanding loans, will be deducted from the death benefit amount described
above.
An owner may elect the form of payment of the death benefit at any time before
his or her death. The form of payment may be a lump sum, or any available form
of settlement option. The standard forms of settlement options are described in
the Settlement Options section beginning on page 31 of this prospectus. If the
owner does not make an election as to the form of death benefit, the beneficiary
may make an election within one year after the owner's death. If no election as
to form of settlement option is made, the Company will apply the death benefit
to a fixed dollar benefit for a period certain of 48 months. The first day of
the Benefit Payment Period in which a death benefit is paid may not be more than
one year after the owner's death; the day a death benefit is paid in a lump sum
may not be more than five years after the owner's date of death.
Settlement Options
When a Contract is annuitized, or when a death benefit is applied to a
settlement option, the Account Value or the death benefit, as the case may be,
is surrendered to the Company in exchange for a promise to pay a stream of
benefit payments for the duration of the settlement option selected. Benefit
payments may be calculated and paid: (1) as a variable dollar benefit; (2) as a
fixed dollar benefit; or (3) as a combination of both. The stream of payments,
whether variable dollar or fixed dollar, is an obligation of the Company's
general account. However, only the amount of fixed dollar benefit payments is
guaranteed by the Company. The owner (or payee) bears the risk that any variable
dollar benefit payment may be less than the initial variable dollar benefit
payment, or that it may decline to zero, if Benefit Unit Values for that payment
decrease sufficiently. Transfers between a variable dollar benefit and a fixed
dollar benefit are not permitted, but transfers of Benefit Units among
Sub-Accounts are permitted once each 12 months after a variable dollar benefit
has been paid for at least 12 months. The formulas for transferring Benefit
Units among Sub-Accounts during the Benefit Payment Period are set forth in the
statement of additional information.
31
<PAGE>
Form of Settlement Option
The Company will make periodic payments in any form of settlement option that is
acceptable to it at the time of an election. The standard forms of settlement
options are described below. Payments under any settlement option may be in
monthly, quarterly, semi-annual or annual payment intervals. If the amount of
any regular payment under the form of settlement option elected would be less
than $50, an alternative form of settlement option will have to be elected. The
Company, in its discretion, may require benefit payments to be made by direct
deposit or wire transfer to the account of a designated payee.
The Company may modify minimum amounts, payment intervals and other terms and
conditions at any time without prior notice to owners. If the Company changes
the minimum amounts, the Company may change any current or future payment
amounts and/or payment intervals to conform with the change. More than one
settlement option may be elected if the requirements for each settlement option
elected are satisfied. Once payment begins under a settlement option, the
settlement option may not be changed or commuted.
The dollar amount of benefit payments will vary with the frequency of the
payment interval and the duration of the payments. Generally, each payment in a
stream of payments will be lesser in amount as the frequency of payments
increases, or as the length of the payment period increases, because more
payments will be paid. For life contingent settlement options, each payment in
the stream of payments will generally be lesser in amount as the life expectancy
of the annuitant or beneficiary increases because more payments are expected to
be paid.
Income for a Fixed Period: The Company will make periodic payments at the end of
each payment interval for a fixed period of 5 to 30 years. (Periods of 1-4 years
are available for death benefit settlement options only.)
Life Annuity with Payments for at Least a Fixed Period: The Company will make
periodic payments at the beginning of each payment interval for a fixed period,
or until the death of the person on whose life benefit payments are based if he
or she lives longer than the fixed period.
Joint and One-Half Survivor Annuity: The Company will make periodic payments at
the beginning of each payment interval until the death of the primary person on
whose life benefit payments are based; thereafter, the Company will make
one-half of the periodic payment until the death of the secondary person on
whose life benefit payments are based.
Life Annuity: The Company will make periodic payments at the beginning of each
payment interval until the death of the person on whose life benefit payments
are based.
Calculation of Fixed Dollar Benefit Payments
Fixed dollar benefit payments are determined by multiplying the amount applied
to the fixed dollar benefit (expressed in thousands of dollars and after
deduction of any fees and charges, loans, or applicable premium taxes) by the
amount of the payment per $1,000 of value which the Company is currently paying
for settlement options of that type. Fixed dollar benefit payments will remain
level for the duration of the Benefit Payment Period.
The Company guarantees minimum fixed dollar benefit payment factors based on
1983 annuity mortality tables for individuals or groups, as applicable, with
interest at 3% per year, compounded annually. For group Contracts, individual
tax-qualified Contracts and individual non-tax-qualified Internal Revenue Code
("IRC") Section 457 Contracts, the Company uses tables for blended lives (60%
female/40% male). For individual non-tax-qualified Contracts except IRC Section
457, the Company uses tables for male and female lives. Where required by state
law, the Company uses blended tables for all Contracts. The minimum monthly
payments per $1,000 of value for the Company's standard settlement options are
set forth in tables in the Contracts. Upon request, the Company will provide
minimum monthly payments for ages or fixed periods not shown in the settlement
option tables.
32
<PAGE>
Calculation of Variable Dollar Benefit Payments
The first variable dollar benefit payment is the amount it would be if it were a
fixed dollar benefit payment calculated at the Company's minimum guaranteed
settlement option factors, reduced by a pro rata portion of the contract
maintenance fee, equal to the amount of the fee divided by the number of
payments to be made over a 12-month period.
The amount of each subsequent variable dollar benefit payment will reflect the
investment performance of the Sub-Account(s) selected and may vary from payment
to payment. For example, because the first benefit payment includes a 3% rate of
interest, subsequent benefit payments will be less than the first payment if the
net investment performance of the applicable Sub-Accounts is less than 3%.
The amount of each subsequent payment is the sum of the payment due for each
Sub-Account selected, less a pro rata portion of the contract maintenance fee,
as described above. The payment due for a Sub-Account equals the shares for that
Sub-Account, which are the Benefit Units, times their value, which is the
Benefit Unit Value for that Sub-Account as of the end of the fifth Valuation
Period preceding the due date of the payment.
The number of Benefit Units for each Sub-Account selected is determined by
allocating the amount of the first variable dollar benefit payment (before
deduction of the pro rata portion of the contract maintenance fee) among the
Sub-Account(s) selected in the percentages indicated by the owner (or payee).
The dollar amount allocated to a Sub-Account is divided by the Benefit Unit
Value for that Sub-Account as of the first day of the Benefit Payment Period.
The result is the number of Benefit Units that the Company will pay for that
Sub-Account at each payment interval. The number of Benefit Units for each
Sub-Account remains fixed during the Benefit Payment Period, except as a result
of any transfers among Sub-Accounts. An explanation of how Benefit Unit Values
are calculated is included in the Glossary of Financial Terms on page 37 of this
prospectus.
33
<PAGE>
FEDERAL TAX MATTERS
- --------------------------------------------------------------------------------
This section provides a general description of federal income tax considerations
relating to the Contracts. The purchase of a Contract may have federal estate
and gift tax consequences in addition to income tax consequences. Estate and
gift taxation is not discussed in this prospectus or in the statement of
additional information. State taxation will vary depending on the State, in
which you reside, and is not discussed in this prospectus or in the statement of
additional information. The tax information provided in the prospectus and
statement of additional information should not be used as tax advice. Federal
income tax laws are subject to interpretation by the IRS and may be changed by
future legislation. You should consult a competent tax advisor to discuss how
current tax laws affect your particular situation.
Tax Deferral On Annuities
Internal Revenue Code ("IRC") Section 72 governs taxation of annuities in
general. The income earned during the Accumulation Period of a Contract is
generally not includable in income until it is withdrawn. In other words, a
Contract is a tax-deferred investment. The Contracts must meet certain
requirements in order to qualify for tax-deferred treatment under IRC Section
72. These requirements are discussed in the statement of additional information.
In addition, tax deferral is not available for a Contract when the owner is not
a natural person unless the Contract is part of a tax-qualified plan or the
owner is a mere agent for a natural person. For a nonqualified deferred
compensation plan, this rule means that the employer as owner of the Contract
will generally be taxed currently on any increase in the Account Value, although
the plan itself may provide a tax deferral to the participating employee. For a
group nonqualified Contract where the owner has no rights over the separate
interests, this rule is applied to each participant who is not a natural person.
34
<PAGE>
Tax-Qualified Plans
Annuities may also qualify for tax-deferred treatment, or serve as a funding
vehicle, under other IRC provisions governing tax-qualified retirement plans.
These provisions include IRC Sections 401 (pension and profit sharing plans),
403(b) (tax-sheltered annuities), 408 and 408A (individual retirement
annuities), and 457(g) (governmental deferred compensation). [In some cases,
tax-deferral may be available under these IRC Sections without the use of an
annuity. Please consult your registered representative.] Contributions to a
tax-qualified Contract are typically made with pre-tax dollars, while
contributions to a non-tax-qualified Contract are typically made from after-tax
dollars, though there are exceptions in either case. Tax-qualified Contracts may
also be subject to restrictions on withdrawals that do not apply to
non-tax-qualified Contracts. These restrictions may be imposed by the IRC or by
an employer plan. Following is a brief description of the types of tax-qualified
retirement plans for which the Contracts are available.
Individual Retirement Annuities
IRC Sections 219 and 408 permit individuals or their employers to contribute to
an individual retirement program known as an "Individual Retirement Annuity" or
"IRA". Under applicable limitations, certain amounts may be contributed to an
IRA that are deductible from an individual's gross income. Employers also may
establish a Simplified Employee Pension (SEP) Plan or Savings Incentive Match
Plan for Employees (SIMPLE) to provide IRA contributions on behalf of their
employees.
Roth IRAs
IRC Section 408A permits certain individuals to contribute to a Roth IRA.
Contributions are not deductible. Tax-free distributions may be made after five
years once the owner attains age 59 1/2, becomes disabled, or dies, or for
qualified first-time homebuyer expenses.
Tax-Sheltered Annuities
IRC 403(b) of the Code permits the purchase of "tax-sheltered annuities" by
public schools and certain charitable, religious, educational and scientific
organizations described in IRC Section 501(c)(3). These qualifying employers may
make contributions to the Contracts for the benefit of their employees. Subject
to certain limits, such contributions are not includable in the gross income of
the employee until the employee receives distributions under the Contract.
Amounts attributable to contributions made under a salary reduction agreement
cannot be distributed until the employee attains age 59 1/2, separates from
service, becomes disabled, incurs a hardship, or dies.
Texas Optional Retirement Program
The Texas Optional Retirement Program ("ORP") provides for the purchase of
tax-sheltered annuities with fixed employer and employee contributions. Under
Section 830.105 of the Texas Government Code, amounts cannot be distributed from
a Contract issued under the ORP until the employee terminates employment from
all Texas public institutions of higher education, retires, attains age 70 1/2,
or dies. Section 830.205 of the Texas Government Code provides that
employer-provided ORP benefits vest after one year of participation.
Accordingly, no distribution can be made without written certification from the
employer of the ORP participant's vesting status and, if the participant is
living and under age 70 1/2, the participant's retirement or other termination
from employment.
Pension and Profit Sharing Plans
IRC Section 401 permits employers to establish various types of retirement plans
for employees, and permits self-employed individuals to establish retirement
plans for themselves and their employees. These retirement plans may permit the
purchase of annuity contracts to accumulate retirement savings under the plans.
Purchasers of a Contract for use with such plans should seek competent advice
regarding the suitability of the proposed plan documents and the Contract for
their specific needs.
Governmental Deferred Compensation Plans
State and local government employers may purchase annuity contracts to fund
deferred compensation plans for the benefit of their employees under IRC Section
457(g).
Nonqualified Deferred Compensation Plans
Governmental and other tax-exempt employers may invest in annuity contracts in
connection with nonqualified deferred compensation plans established for the
benefit of their employees under IRC Section 457 (other than 457(g)). Other
employers may invest in annuity contracts in connection with nonqualified
deferred compensation plans established for the benefit of their employees. In
most cases, these plans are designed so that contributions made for the benefit
of the employees generally will not be includable in the employees' gross income
until distributed from the plan. In these situations, the Contract is usually
owned by the employer and is subject to the claims of its general creditors.
35
- -------------------------------------------------------------------------------
<PAGE>
Summary of Income Tax Rules
The following chart summarizes the basic income tax rules governing
tax-qualified and non-tax-qualified Contracts:
<TABLE>
<CAPTION>
- ---------------------------- --------------------------------------------- -------------------------------------------------
Tax-Qualified Plans Basic Non-Tax-Qualified Contracts
---------------------------------------------
Nonqualified Deferred Compensation Plans
- ---------------------------- --------------------------------------------- -------------------------------------------------
- ---------------------------- --------------------------------------------- -------------------------------------------------
<S> <C> <C>
Plan Types o IRC ss401 (Pension and Profit Sharing) o IRC ss72 only
o IRC ss403 (Tax-Sheltered Annuities)
o IRC ss408 (IRA, SIMPLE IRA)
o IRC ss408A (Roth IRA)
o IRC ss457
o Nonqualified Deferred Compensation
- ---------------------------- --------------------------------------------- -------------------------------------------------
- ---------------------------- --------------------------------------------- -------------------------------------------------
Who May Purchase Contract Natural person, employer, or employer Anyone. Non-natural person may purchase
plan. Nonqualified deferred compensation but will generally lose tax-deferred status.
plans will generally lose tax-deferred
status.
- ---------------------------- -------------------------------------------- -------------------------------------------------
- ---------------------------- -------------------------------------------- -------------------------------------------------
Taxation of Surrenders If there is an after-tax "investment in Account Value in excess of investment in
the contract," a pro rata portion of the contract is taxable. Generally, the
amount surrendered is taxable based on "investment in the contract" will equal
ratio of "investment in the contract" to the sum of all purchase payments.
Account Value. Usually, 100% of Surrenders are deemed to come from
distributions from a qualified plan will earnings first, and purchase payments
be taxed because there was no after-tax last.
contribution and therefore no "investment
in the contract." Qualified For a Contract purchased as part of an
distributions fromss408A Roth IRA may be IRC Section 1035 exchange which includes
completely tax-free. contributions made before August 14,
1982 ("pre-TEFRA contribution")partial
Surrenders prior to age 59 1/2 may be withdrawals are not taxable until the
subject to 10%or greater tax penalty pre-TEFRA contributions have been
depending on the type of qualified plan. returned.
Surrenders from tax-qualified Contracts The taxable portion of any surrenders
may be restricted by the Internal Revenue prior to age 59 1/2 may be subject to
Code or by the terms of a retirement plan. a 10% tax penalty.
- ---------------------------- ----------------------------------------------------- -----------------------------------------
- ---------------------------- -----------------------------------------------------------------------------------------------
Taxation of Benefit May vary depending on type of settlement option selected, but generally, for fixed
Payments (annuity benefit dollar benefit payments, a pro rata portion of each payment equal to [100% -
payments or death benefit (investment in contract/total expected payments)] is subject to income tax. For
payments) variable dollar benefit payments, a specific dollar amount of each payment is
taxable, as predetermined by a pro-rata formula, rather than subjecting a percentage
of each payment to taxation. Once the investment in the Contract has been
recovered, the full amount of each benefit payment is taxable. Qualified
distributions from a ss 408A Roth IRA may be completely tax-free.
- ---------------------------- -------------------------------------------------------------------------------------------
- ---------------------------- -------------------------------------------------------------------------------------------
Taxation of Lump Sum Taxed to recipient generally in same manner as full surrender. Tax penalties do not apply
Death Benefit Payment apply to benefit distributions.
- ---------------------------- ------------------------------------------- -----------------------------------------------
- ---------------------------- ------------------------------------------- -----------------------------------------------
Assignment of Assignment and transfer of ownership Generally, deferred earnings become
Contract/Transfer generally not permitted. taxable to transferor at time of
of Ownership transfer and transferee receives an
investment in the contract equal to the
the Account Value at that time. Gift tax
consequences not discussed herein.
- ----------------------------- ------------------------------------------- ----------------------------------------------
- ----------------------------- ------------------------------------------- ----------------------------------------------
Withholding Eligible rollover distributions from Generally, payee may elect to have
ss 401 and ss 403(b) Contracts subject to taxes withheld or not.
20% mandatory withholding on taxable
portion unless direct rollover. Section
457 plan benefits and nonqualified
deferred compensation plan benefits
subject to wage withholding. For all
other payments, payee may elect to have
taxes withheld or not.
- -------------------------------- -----------------------------------------------
</TABLE>
36
<PAGE>
GLOSSARY OF FINANCIAL TERMS
- --------------------------------------------------------------------------------
The following financial terms explain how the variable portion of the Contracts
are valued. Read these terms in conjunction with the definitions on page 4 of
this prospectus.
Accumulation Unit Value: The initial Accumulation Unit Value for each
Sub-Account other than the money market Sub-Account was set at $10. The initial
Accumulation Unit Value for the money market Sub-Account was set at $1. The
initial Accumulation Unit Value for a Sub-Account was established at the
inception date of the Separate Account, or on the date the Sub-Account was
established, if later. The Company establishes distinct Accumulation Unit Values
for Contracts with different Separate Account fee structures, as described in
the Fee Table.
After the initial Accumulation Unit Value is established, the Accumulation Unit
Value for a Sub-Account at the end of each Valuation Period is the Accumulation
Unit Value at the end of the previous Valuation Period multiplied by the Net
Investment Factor for that Sub-Account for the current Valuation Period.
A Net Investment Factor of 1 produces no change in the Accumulation Unit Value
for that Valuation Period. A Net Investment Factor of more than 1 or less than 1
produces an increase or a decrease, respectively, in the Accumulation Unit Value
for that Valuation Period.
Benefit Unit Value: The initial Benefit Unit Value for a Sub-Account will be set
equal to the Accumulation Unit Value for that Sub-Account at the end of the
first Valuation Period in which a variable dollar benefit is established by the
Company. The Company will establish distinct Benefit Unit Values for Contracts
with different Separate Account fee structures, as described in the Fee Table.
The Benefit Unit Value for a Sub-Account at the end of each Valuation Period
after the first is the Benefit Unit Value at the end of the previous Valuation
Period multiplied by the Net Investment Factor for that Sub-Account for the
current Valuation Period, and multiplied by a daily investment factor
(0.99991789) for each day in the Valuation Period. The daily investment factor
reduces the previous Benefit Unit Value by the daily amount of the assumed
interest rate (3% per year, compounded annually) which is already incorporated
in the stream of variable dollar benefit payments.
Net Investment Factor: The Net Investment Factor for any Sub-Account for any
Valuation Period is determined by dividing NAV2 by NAV1 and subtracting a factor
representing the mortality and expense risk charge and the administration charge
deducted from the Sub-Account during that Valuation Period, where:
NAV1 is equal to the Net Asset Value for the Portfolio for the preceding
Valuation Period; and
NAV2 is equal to the Net Asset Value for the Portfolio for the current Valuation
Period plus the per share amount of any dividend or net capital gain
distributions made by the Portfolio during the current Valuation Period, and
plus or minus a per share charge or credit if the Company adjusts its tax
reserves due to investment operations of the Sub-Account or changes in tax law
In other words, the Net Investment Factor represents the percentage change in
the total value of assets invested by the Separate Account in a Portfolio. That
percentage is then applied to Accumulation Unit Values and Benefit Unit Values
as described in the discussion of those terms in this section of the prospectus.
37
<PAGE>
- -------------------------------------------------------------------------------
THE REGISTRATION STATEMENT
- --------------------------------------------------------------------------------
The Company filed a Registration Statement with the Securities and Exchange
Commission under the Securities Act of 1933 relating to the Contracts offered by
this prospectus. This prospectus was filed as an annual amendment to the
Registration Statement, but it does not constitute the complete Registration
Statement. The Registration Statement contains further information relating to
the Company and the Contracts. Statements in this prospectus discussing the
content of the Contracts and other legal instruments are summaries. The actual
documents are filed as exhibits to the Registration Statement. For a complete
statement of the terms of the Contracts or any other legal document, refer to
the appropriate exhibit to the Registration Statement. The Registration
Statement and the exhibits thereto may be inspected and copied at the office of
the Securities and Exchange Commission, located at 450 Fifth Street, N.W.,
Washington, D.C., and may also be accessed at the Securities and Exchange
Commission's Web site http://www.sec.gov. The registration number for the
Registration Statement is 333-19725.
OTHER INFORMATION
- --------------------------------------------------------------------------------
Legal Proceedings
The Company is involved in various kinds of routine litigation which, in
management's judgment, are not of material importance to the Company's assets or
the Separate Account. There are no pending legal proceedings against the
Separate Account or AAG Securities, Inc.
- -------------------------------------------------------------------------------
38
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
A statement of additional information is available which contains more details
concerning the subjects discussed in this prospectus. The following is the table
of contents for the statement of additional information:
Page
ANNUITY INVESTORS LIFE INSURANCE COMPANY(R).................................3
General Information and History.............................................3
State Regulation...................................................3
SERVICES....................................................................3
Safekeeping of Separate Account Assets.............................3
Records and Reports................................................3
Experts............................................................3
DISTRIBUTION OF THE CONTRACTS...............................................3
CALCULATION OF PERFORMANCE INFORMATION......................................4
Money Market Sub-Account Standardized Yield Calculation............4
Average Annual Total Return Calculation............................5
Cumulative Total Return Calculation.........................................5
Standardized Average Annual Total Return Data......................6
Non-Standardized Average Annual Total Return Data..................8
Other Performance Measures..................................................9
BENEFIT UNITS-TRANSFER FORMULAS.............................................10
FEDERAL TAX MATTERS.........................................................11
Taxation of Separate Account Income................................11
Tax Deferred Status of Non-Qualified Contracts.....................11
FINANCIAL STATEMENTS........................................................12
Copies of the statement of additional information dated May 1, 2000 are
available without charge. To request a copy, please clip this coupon on the
dotted line below, enter your name and address in the spaces provided below, and
mail to: Annuity Investors Life Insurance Company(R), P.O. Box 5423, Cincinnati,
Ohio 45201-5423.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Name:
- -------------------------------------------------------------------------------
Address:
- -------------------------------------------------------------------------------
City:
- -------------------------------------------------------------------------------
State:
- -------------------------------------------------------------------------------
Zip:
- -------------------------------------------------------------------------------
39
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY(R)
ANNUITY INVESTORS (R) VARIABLE ACCOUNT B
STATEMENT OF ADDITIONAL INFORMATION for
Individual and Group Flexible Premium Deferred Annuities
May 1, 2000
This statement of additional information supplements the current prospectuses
for Individual and Group Flexible Premium Deferred Annuity Contracts
(collectively, the "Contracts") offered by Annuity Investors Life Insurance
Company(R) through Annuity Investors(R) Variable Account B (the "Separate
Account" ). This statement of additional information is not a prospectus and
should be read only in conjunction with the prospectus for the applicable
Contract. Terms used in this statement of additional information have the same
meaning as in the prospectuses.
A copy of any of the prospectuses dated May 1, 2000, as supplemented from time
to time, may be obtained free of charge by writing to Annuity Investors Life
Insurance Company, Administrative Office, P.O. Box 5423, Cincinnati, Ohio
45201-5423. Terms used in the current prospectuses for the Contracts are
incorporated in this statement of additional information.
<PAGE>
2
TABLE OF CONTENTS
Page
ANNUITY INVESTORS LIFE INSURANCE COMPANY(R)...................................3
General Information and History............................................3
State Regulation...........................................................3
SERVICES......................................................................3
Safekeeping of Separate Account Assets.....................................3
Records and Reports........................................................3
Experts....................................................................3
DISTRIBUTION OF THE CONTRACTS.................................................3
CALCULATION OF PERFORMANCE INFORMATION........................................4
Money Market Sub-Account Standardized Yield Calculation....................4
Average Annual Total Return Calculation....................................5
Cumulative Total Return Calculation........................................5
Standardized Average Annual Total Return Data..............................6
Non-Standardized Average Annual Total Return Data..........................8
Other Performance Measures.................................................9
BENEFIT UNITS--TRANSFER FORMULAS.............................................10
FEDERAL TAX MATTERS..........................................................11
Taxation of Separate Account Income.......................................11
Tax Deferral On Nonqualified Contracts....................................11
FINANCIAL STATEMENTS.........................................................12
<PAGE>
3
ANNUITY INVESTORS LIFE INSURANCE COMPANY(R)
- --------------------------------------------------------------------------------
General Information and History
Annuity Investors Life Insurance Company(R) (the "Company") is a stock life
insurance company incorporated under the laws of the State of Ohio in 1981. The
Company is principally engaged in the sale of fixed and variable annuity
policies.
The Company is a wholly owned subsidiary of Great American Life Insurance
Company(R) which is a wholly owned subsidiary of American Annuity Group(R),
Inc., ("AA") a publicly traded insurance holding company (NYSE: AAG). AAG is in
turn indirectly controlled by American Financial Group, Inc., a publicly traded
holding company (NYSE: AFG).
State Regulation
The Company is subject to the insurance laws and regulations of all the
jurisdictions where it is licensed to operate. The availability of certain
Contract rights and provisions depends on state approval and/or filing and
review processes in each such jurisdiction. Where required by law or regulation,
the Contracts will be modified accordingly.
SERVICES
- --------------------------------------------------------------------------------
Safekeeping of Separate Account Assets
Title to assets of the Separate Account is held by the Company. The Separate
Account assets are segregated from the Company's general account assets. Records
are maintained of all purchases and redemptions of Portfolio shares held by each
of the Sub-Accounts.
Title to assets invested in the fixed account options is held by the Company
together with the Company's general account assets.
Records and Reports
All records and accounts relating to the fixed account options and the Separate
Account will be maintained by the Company. As presently required by the
provisions of the Investment Company Act of 1940, as amended ("1940 Act"), and
rules and regulations promulgated thereunder which pertain to the Separate
Account, reports containing such information as may be required under the 1940
Act or by other applicable law or regulation will be sent to each owner of an
individual Contract and to each group Contract owner semi-annually at the
owner's last known address.
Experts
The financial statements of the Separate Account and the statutory-basis
financial statements of the Company as of December 31, 1999 and 1998, and for
the years then ended, appearing in this statement of additional information have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon appearing elsewhere herein, and are included in reliance upon
such reports given upon the authority of such firm as experts in accounting and
auditing.
DISTRIBUTION OF THE CONTRACTS
- --------------------------------------------------------------------------------
The offering of the Contracts is expected to be continuous. Although the Company
does not anticipate discontinuing the offering of the Contracts, the Company
reserves the right to discontinue offering any one or more of the Contracts.
The approximate commissions received and retained by AAG Securities, Inc. ("AAG
Securities") for sale of the Contracts for each of the last three fiscal years
are as follows:
- ------------------- -------------- --------------- ---------------
Year Ended 12/31/99 12/31/98 12/31/97
- ------------------- -------------- --------------- ---------------
333-19725 (7/15 -12/31)
Received 3,599,453 $1,857,198 $296,000
Retained $179,972 $98,600 $18,000
- ------------------- -------------- --------------- ---------------
333-51971 (7/22 to N/A
12/31)
Received $239,721 $23,827 N/A
Retained $11,986 $0 N/A
- ------------------- -------------- --------------- ---------------
333-51955 (7/22 to N/A
12/31)
Received 49,751 $3,143 N/A
Retained $4,487 $0 N/A
- ------------------- -------------- --------------- ---------------
N/A = Contract not available and no commissions paid.
- --------------------------------------------------------------------------------
4
- --------------------------------------------------------------------------------
<PAGE>
CALCULATION OF PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
Money Market Sub-Account Standardized Yield Calculation
In accordance with rules and regulations adopted by the Securities and Exchange
Commission, the Company computes the money market Sub-Account's current
annualized yield for a seven-day period in a manner which does not take into
consideration any realized or unrealized gains or losses on shares of the money
market Portfolio or on its portfolio securities. This current annualized yield
is calculated according to the following formula:
YIELD = (BASE PERIOD RETURN/7)*365
Where:
BASE PERIOD RETURN = The percentage (or net) change in the Accumulation
Unit Value for the money market Sub-Account
("AUV") over a 7 day period determined as follows:
AUV at end of 7 day period - AUV at beginning of 7 day period
AUV at beginning of 7 day period
Because the Net Asset Value of the money market Portfolio rarely deviates from
1.000000 per unit, the change in the Accumulation Unit Value for the money
market Sub-Account (the numerator of the above fraction) is ordinarily
attributable exclusively to dividends paid and reinvested over the 7 day period
less mortality and expense risk and administration charges deducted from the
Sub-Account over the 7 day period. Because of the deductions for mortality and
expense risk and administration charges, the yield for the money market
Sub-Account of the Separate Account will be lower than the yield for the money
market Portfolio or any comparable substitute funding vehicle.
The Securities and Exchange Commission also permits the Company to disclose the
effective yield of the money market Sub-Account for the same seven-day period,
which is yield determined on a compounded basis. The effective yield is
calculated according to the following formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1) 365/7] - 1
The yields and effective yields for the money market Sub-Account for the
seven-day period ended December 31, 1999 are as follows:
- ----------------------- -------------------- -----------------------------------
Contract Total Separate Yeild Effective
Account Charges Yield
- ----------------------- ------------------- ------------------------------
- ----------------------- ------------------- ----------------- ------------
333-19725 1.40% 3.84% 3.92%
- ----------------------- ------------------- ------------------------------
- ----------------------- ------------------- ----------------- ------------
1.25% 3.99% 4.07%
- ----------------------- ------------------- ----------------- ------------
- ----------------------- ------------------- ----------------- ------------
0.95% 4.28% 4.38%
- ----------------------- ------------------- ----------------- ------------
- ----------------------- ------------------- ----------------- ------------
333-51971 1.40% 3.84% 3.92%
- ----------------------- ------------------- ----------------- ------------
- ----------------------- ------------------- ----------------- ------------
333-51955 1.40% 3.84% 3.92%
- ----------------------- ------------------- ----------------- ------------
- ----------------------- ------------------- ----------------- ------------
0.75% 4.49% 4.60%
- ----------------------- ------------------- ----------------- ------------
- --------------------------------------------------------------------------
The yield on amounts held in the money market Sub-Account normally will
fluctuate on a daily basis. Therefore, the disclosed yield for any given past
period is not an indication or representation of future yields. The money market
Sub-Account's actual yield is affected by changes in interest rates on money
market securities, average portfolio maturity of the money market Portfolio or
substitute funding vehicle, the types and quality of portfolio securities held
by the money market Portfolio or substitute funding vehicle, and operating
expenses. IN ADDITION, THE YIELD FIGURES DO NOT REFLECT THE EFFECT OF ANY
CONTINGENT DEFERRED SALES CHARGES OR CONTRACT MAINTENANCE FEES THAT MAY BE
APPLICABLE ON SURRENDER UNDER ANY CONTRACT.
<PAGE>
Average Annual Total Return Calculation
The Company may from time to time disclose average annual total returns for one
or more of the Sub-Accounts for various periods of time. Average annual total
return quotations are computed by finding the average annual compounded rates of
return over one-, five- and ten-year periods that would equal the initial amount
invested to the ending redeemable value, according to the following formula:
P(1 + T)n = ERV
Where:
P........= a hypothetical initial payment of $1,000
T........= average annual total return
n........= number of years
ERV = "ending redeemable value" of a hypothetical $1,000
payment made at the beginning of the one-, five- or
ten-year period at the end of the one-, five- or
ten-year period (or fractional portion thereof)
Average annual total return may be presented in either standardized or
nonstandardized form. Average annual total return data may be either actual
return or hypothetical return. It will be hypothetical if it reflects
performance for a period of time before the Separate Account commenced
operations. The ERV for standardized data reflects the deduction of all
recurring fees, such as contract maintenance fees, contingent deferred sales
charges, mortality and expense risk charges, and administration charges, which
are charged to all Contracts of that type. The ERV for nonstandardized data
reflects the deduction of mortality and expense risk charges and administration
charges, but not contract maintenance fees or contingent deferred sales charges.
Non-standardized performance data will be advertised only if the requisite
standardized performance data is also disclosed.
Cumulative Total Return Calculation
The Company may from time to time disclose cumulative total return for various
periods of time. Cumulative total return reflects the performance of a
Sub-Account over the entire period presented. Cumulative total return may be
either actual return or hypothetical return. It will be hypothetical if it
reflects performance for a period of time before the Separate Account commenced
operations. Cumulative total return is calculated using the following formula:
CTR = (ERV/P) - 1
Where:
CTR = the cumulative total return net of Sub-Account recurring
charges, other than the contract maintenance fee, for the
period
ERV = ending redeemable value of a hypothetical $1,000
payment at the beginning of the one-, five- or ten-year
period at the end of the one-, five- or ten-year period
(or fractional portion thereof)
P = a hypothetical initial payment of $1,000
Although cumulative total return can be presented in either standardized or
non-standardized form, the Company currently advertises only non-standardized
cumulative total return, which assumes a contingent deferred sales charge of 0%,
and no contract maintenance fee. Non-standardized cumulative total return can
only be advertised if standardized average annual total return is also
disclosed.
<PAGE>
6
<TABLE>
<CAPTION>
S.E.C. File No.
Standardized Average Annual Total Return Data 333-19725 Contracts
(Data reflects deduction of all recurring charges Standard Enhanced Enhanced Contracts
including contingent deferred sales charges and Contracts1/ Contracts2/ With Administration
contract maintenance fees) Charge Waived3/
- -------------------------------------------------------------------------------------------------------------------------------
1 Year Life of 1 Year Life of 1 Year Life of
All Periods Ending 12/31/99 Separate Separate Separate
Account4/ Account4/ Account4/
- ----------------------------------------------------------- ----------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Janus A.S.-Aggressive Growth Portfolio 113.30% 56.63% 113.96% 57.12% 117.29% 59.23%
Janus A.S.-Worldwide Growth Portfolio 53.18% 30.05% 53.66% 30.47% 56.90% 33.12%
Janus A.S.-Balanced Portfolio 16.01% 21.53% 16.38% 21.92% 19.57% 24.81%
Janus A.S.-Growth Portfolio 33.00% 27.14% 33.42% 27.54% 36.63% 30.27%
Janus A.S.-International Growth Portfolio 70.76% 29.35% 71.29% 29.76% 74.56% 32.43%
Janus A.S.-Capital Appreciation Portfolio 55.69% 42.78% 56.18% 43.22% 59.43% 45.58%
Dreyfus V.I.F.-Appreciation Portfolio 0.92% 10.77% 1.24% 11.14% 4.41% 14.38%
Dreyfus V.I.F.-Money Market Portfolio -6.44% -2.51% -6.26% -2.31% -6.18% -2.22%
Dreyfus V.I.F.-Growth and Income Portfolio 6.27% 6.07% 6.61% 6.43% 9.79% 9.86%
Dreyfus V.I.F.-Small Cap Portfolio 12.45% 2.33% 12.81% 2.67% 15.99% 6.28%
The Dreyfus Socially Responsible Growth Fund, Inc. 19.28% 19.48% 19.66% 19.87% 22.86% 22.81%
Dreyfus Stock Index Fund 9.94% 15.84% 10.29% 16.22% 13.47% 19.29%
Strong Opportunity Fund II, Inc. 24.05% 16.57% 24.44% 16.95% 27.64% 19.99%
Strong Variable Insurance Funds, Inc.- 78.26% 42.84% 78.81% 43.29% 82.09% 45.66%
Strong Mid Cap Growth Fund II
Deutsche VIT EAF(R) Equity Index Fund 16.84% 10.39%5/ 17.21% 10.76%5/ 20.40% 14.19%5/
Deutsche VIT Equity 500 Index Fund 9.72% 15.79%6/ 10.08% 16.17%6/ 13.25% 19.62%6/
Deutsche VIT Small Cap Index Fund 9.51% 2.32%7 9.86% 2.66%7/ 13.03% 6.42%7/
INVESCO VIF-Equity Income Fund 4.26% 9.16% 4.59% 9.52% 7.76% 12.83%
INVESCO VIF-Total Return Fund -13.73% -2.49% -13.45% -2.17% -10.31% -1.66%
INVESCO VIF-High Yield Fund -1.32% 0.56% -1.00% 0.92% 2.16% 4.60%
Morgan Stanley UIF, Inc.-Mid Cap Value Portfolio 9.45% 13.48% 9.80% 13.85% 12.98% 17.00%
Morgan Stanley UIF, Inc.-Value Portfolio -12.17% -8.04% -11.88% -7.72% -8.74% -3.58%
Morgan Stanley UIF, Inc.-Fixed Income Portfolio -11.99% -2.70% -11.70% -2.36% -8.55% -1.48%
Morgan Stanley UIF, Inc.-U.S. Real Estate Portfolio -11.83% -8.29% -11.54% -7.97% -8.40% -3.82%
Morgan Stanley UIF, Inc.-Emerging Markets 83.99% 0.06% 84.55% 0.41% 87.84% 4.12%
Equity Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Growth II 86.46% 28.22% 87.04% 28.63% 90.33% 31.33%
Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Large Cap 53.94% 32.29% 54.42% 32.71% 57.67% 35.31%
Growth Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Tech. & Comm. 220.77% 71.20% 221.75% 71.73% 225.24% 73.63%
Portfolio
The Timothy Plan Small-Cap Variable Series 8.64% 5.30%8/ 8.99% 5.65%8/ 12.16% 9.25%8/
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
S.E.C. File No. S.E.C. File No.
Standardized Average Annual Total Return Data 33-51971 Contracts 333-5195 Contracts
(Data reflects deduction of all recurring charges ---------------------- ---------------------------------------------
including contingent deferred sales charges and Standard Standard Enhanced
contract maintenance fees) Contracts1/ Contracts1/ Contracts9/
- --------------------------------------------------------------------------------------------------------------------------------
1 Year Life of 1 Year Life of 1 Year Life of
All Periods Ending 12/31/99 Separate Separate Separate
Account4/ Account4/ Account4/
- ----------------------------------------------------------- ----------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Janus A.S.-Aggressive Growth Portfolio 111.30% 56.00% 118.30% 57.06% 119.73% 58.11%
Janus A.S.-Worldwide Growth Portfolio 51.18% 29.21% 58.18% 30.60% 59.23% 31.50%
Janus A.S.-Balanced Portfolio 14.01% 20.61% 21.01% 22.14% 21.81% 22.98%
Janus A.S.-Growth Portfolio 31.00% 26.27% 38.00% 27.71% 38.91% 28.59%
Janus A.S.-International Growth Portfolio 68.76% 28.51% 75.76% 29.91% 76.92% 30.79%
Janus A.S.-Capital Appreciation Portfolio 53.69% 42.05% 60.69% 43.26% 61.75% 44.22%
Dreyfus V.I.F.-Appreciation Portfolio -1.08% 9.71% 5.92% 11.46% 6.63% 12.25%
Dreyfus V.I.F.-Money Market Portfolio -8.44% -3.79% -1.44% -2.09% -1.06% -1.67%
Dreyfus V.I.F.-Growth and Income Portfolio 4.27% 4.95% 11.27% 6.82% 12.01% 7.58%
Dreyfus V.I.F.-Small Cap Portfolio 10.45% 1.14% 17.45% 3.11% 18.23% 3.85%
The Dreyfus Socially Responsible Growth Fund, Inc. 17.28% 18.53% 24.28% 20.10% 25.11% 20.94%
Dreyfus Stock Index Fund 7.94% 14.85% 14.94% 16.50% 15.71% 17.31%
Strong Opportunity Fund II, Inc. 22.05% 15.59% 29.05% 17.22% 29.90% 18.03%
Strong Variable Insurance Funds, Inc.-Strong 76.26% 42.11% 83.26% 43.32% 84.47% 44.30%
Mid Cap Growth Fund II
Deutsche VIT EAFE(R) Equity Index Fund 14.84% 9.27%5/ 21.84% 11.13%5/ 22.65% 11.91%5/
Deutsche VIT Equity 500 Index Fund 7.72% 14.67%6/ 14.72% 16.53%6/ 15.49% 17.34%6/
Deutsche VIT Small Cap Index Fund 7.51% 1.08%7/ 14.51% 3.14%7/ 15.27% 3.88%7/
INVESCO VIF-Equity Income Fund 2.26% 8.08% 9.26% 9.87% 9.99% 10.65%
INVESCO VIF-Total Return Fund -15.73% -3.77% -8.73% -1.65% -8.12% -0.95%
INVESCO VIF-High Yield Fund -3.32% -0.66% 3.68% 1.36% 4.39% 2.11%
Morgan Stanley UIF, Inc.-Mid Cap Value Portfolio 7.45% 12.46% 14.45% 14.16% 15.22% 14.95%
Morgan Stanley UIF, Inc.-Value Portfolio -14.17% -9.43% -7.17% -7.13% -6.55% -6.45%
Morgan Stanley UIF, Inc.-Fixed Income Portfolio -13.99% -3.98% -6.99% -1.86% -6.36% -1.14%
Morgan Stanley UIF, Inc.-U.S. Real Estate Portfolio -13.83% -9.69% -6.83% -7.38% -6.21% -6.68%
Morgan Stanley UIF, Inc.-Emerging Markets 81.99% -1.17% 88.99% 0.87% 90.23% 1.61%
Equity Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Growth II 84.46% 27.37% 91.46% 28.79% 92.72% 29.67%
Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Large Cap 51.94% 31.47% 58.94% 32.83% 59.99% 33.74%
Growth Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Tech. & Comm. 218.77% 70.64% 255.77% 71.57% 227.89% 72.71%
Portfolio
The Timothy Plan Small-Cap Variable Series 6.64% 4.13%8/ 13.64% 7.60%8/ 14.40% 8.35%8/
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Non-Standardized Average Annual Total Return Data
(Data reflects deduction of all recurring charge 333-19725;
except contingent deferred sales charges 333-51971; 333-51955
and contract maintenance fee-data is the
same for all Standard Contracts) Standard Contracts1/
------------------------
1 Year Life of
All Periods Ending 12/31/99 Separate
Account4/
- -------------------------------------------------------------------------------- ---------- -------------
<S> <C> <C>
Janus A.S.-Aggressive Growth Portfolio 122.30% 59.56%
Janus A.S.-Worldwide Growth Portfolio 62.18% 33.85%
Janus A.S.-Balanced Portfolio 25.01% 25.71%
Janus A.S.-Growth Portfolio 42.00% 31.06%
Janus A.S.-International Growth Portfolio 79.76% 33.18%
Janus A.S.-Capital Appreciation Portfolio 64.69% 46.11%
Dreyfus V.I.F.-Appreciation Portfolio 9.92% 15.52%
Dreyfus V.I.F.-Money Market Portfolio 2.56% 2.76%
Dreyfus V.I.F.-Growth and Income Portfolio 15.27% 11.12%
Dreyfus V.I.F.-Small Cap Portfolio 21.45% 7.63%
The Dreyfus Socially Responsible Growth Fund, Inc. 28.28% 23.76%
Dreyfus Stock Index Fund 18.94% 20.31%
Strong Opportunity Fund II, Inc. 33.05% 21.00%
Strong Variable Insurance Funds, Inc.-Strong Mid Cap Growth Fund II 87.26% 46.17%
Deutsche VIT EAFE (R) Equity Index Fund 25.84% 15.43%5/
Deutsche VIT Equity 500 Index Fund 18.72% 20.84%6/
Deutsche VIT Small Cap Index Fund 18.51% 7.87%7/
INVESCO VIF-Equity Income Fund 13.26% 14.01%
INVESCO VIF-Total Return Fund -4.73% 3.17%
INVESCO VIF-High Yield Fund 7.68% 5.99%
Morgan Stanley UIF, Inc.-Mid Cap Value Portfolio 18.45% 18.08%
Morgan Stanley UIF, Inc.-Value Portfolio -3.17% -1.91%
Morgan Stanley UIF, Inc.-Fixed Income Portfolio -2.99% 2.98%
Morgan Stanley UIF, Inc.-U.S. Real Estate Portfolio -2.83% -2.14%
Morgan Stanley UIF, Inc.-Emerging Markets Equity Portfolio 92.99% 5.53%
PBHG Insurance Series Fund, Inc.-PBHG Growth II Portfolio 95.46% 32.10%
PBHG Insurance Series Fund, Inc.-PBHG Large Cap Growth Portfolio 62.94% 36.00%
PBHG Insurance Series Fund, Inc.-PBHG Tech. & Comm. Portfolio 229.77% 73.78%
The Timothy Plan Small-Cap Variable Series 17.64% 12.12%8/
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Non-Standardized Average Annual 333-19725
Total Return Data
(Data reflects deduction of all recurring charges Enhanced Contracts With
except contingent deferred sales charges and Contract Administration
maintenance fees-data is the same for all Standard Contracts) Enhanced Contracts2/ Charge Waived3/
- ----------------------------------------------------------------- ----------------- -------------- ------------ ------------
Life of Life of
All Periods Ending 12/31/99 1 Year Separate 1 Year Separate
Account4/ Account4/
- ----------------------------------------------------------------- ----------------------------------------------------------
<S> <C> <C> <C> <C>
Janus A.S.-Aggressive Growth Portfolio 122.96% 60.03% 123.29% 60.27
Janus A.S.-Worldwide Growth Portfolio 62.66% 34.25% 62.90% 34.45%
Janus A.S.-Balanced Portfolio 25.38% 26.08% 25.57% 26.27%
Janus A.S.-Growth Portfolio 42.42% 31.45% 42.63% 31.65%
Janus A.S.-International Growth Portfolio 80.29% 33.57% 80.56% 33.77%
Janus A.S.-Capital Appreciation Portfolio 65.18% 46.54% 65.43% 46.76%
Dreyfus V.I.F.- Appreciation Portfolio 10.24% 15.87% 10.41% 16.04%
Dreyfus V.I.F.-Money Market Portfolio 2.74% 2.94% 2.82% 3.03%
Dreyfus V.I.F.-Growth and Income Portfolio 15.61% 11.45% 15.79% 11.61%
Dreyfus V.I.F.-Small Cap Portfolio 21.81% 7.95% 21.99% 8.12%
The Dreyfus Socially Responsible Growth Fund, Inc. 28.66% 24.13% 28.86% 24.31%
Dreyfus Stock Index Fund 19.29% 20.67% 19.47% 20.85%
Strong Opportunity Fund II, Inc. 33.44% 21.36% 33.64% 21.54%
Strong Variable Insurance Funds, Inc.-Strong Mid Cap 87.81% 46.61% 88.09% 46.83%
Growth Fund II
Deutsche VIT EAFE(R)Equity Index Fund 26.21% 15.77%5/ 26.40% 15.94%5/
Deutsche VIT Equity 500 Index Fund 19.08% 21.20%6/ 19.25% 21.38%6/
Deutsche VIT Small Cap Index Fund 18.86% 8.19%7/ 19.03% 8.35%7/
INVESCO VIF-Equity Income Fund 13.59% 14.35% 13.76% 14.52%
INVESCO VIF-Total Return Fund -4.45% 3.47% -4.31% 3.62%
INVESCO VIF-High Yield Fund 8.00% 6.32% 8.16% 6.48%
Morgan Stanley UIF, Inc.-Mid Cap Value Portfolio 18.80% 18.43% 18.98% 18.60%
Morgan Stanley UIF, Inc.-Value Portfolio -2.88% -1.62% -2.74% -1.47%
Morgan Stanley UIF, Inc.-Fixed Income Portfolio -2.70% 3.29% -2.55% 3.44%
Morgan Stanley UIF, Inc.-U.S. Real Estate Portfolio -2.54% -1.85% -2.40% -1.70%
Morgan Stanley UIF, Inc.-Emerging Markets Equity 93.55% 5.85% 93.84% 6.01%
Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Growth II Portfolio 96.04% 32.49% 96.33% 32.69%
PBHG Insurance Series Fund, Inc.-PBHG Large Cap 63.42% 36.41% 63.67% 36.61%
Growth Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Tech. & Comm. 230.75% 74.30% 231.24% 74.55%
Portfolio
The Timothy Plan Small-Cap Variable Series 17.99% 12.46%8/ 18.16% 12.62%8/
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
333-51955
Non-Standardized Average Annual Total Return Data Enhanced Contracts9/
(Data reflects deduction of all recurring charges
except contingent deferred sales charges and contract maintenance
fees-data is the same for all Standard Contracts)
- -------------------------------------------------------------------------- ---------------------- ---------------
1 Year Life of
All Periods Ending 12/31/99 Separate
Account4/
- -------------------------------------------------------------------------- ---------------------- ---------------
<S> <C> <C>
Janus A.S.-Aggressive Growth Portfolio 123.73% 60.59%
Janus A.S.-Worldwide Growth Portfolio 63.23% 34.72%
Janus A.S.-Balanced Portfolio 25.81% 26.52%
Janus A.S.-Growth Portfolio 42.91% 31.91%
Janus A.S.-International Growth Portfolio 80.92% 34.03%
Janus A.S.-Capital Appreciation Portfolio 65.75% 47.05%
Dreyfus V.I.F.- Appreciation Portfolio 10.63% 16.27%
Dreyfus V.I.F.-Money Market Portfolio 2.94% 3.15%
Dreyfus V.I.F.-Growth and Income Portfolio 16.01% 11.84%
Dreyfus V.I.F.-Small Cap Portfolio 22.23% 8.33%
The Dreyfus Socially Responsible Growth Fund, Inc. 29.11% 24.56%
Dreyfus Stock Index Fund 19.71% 21.09%
Strong Opportunity Fund II, Inc. 33.90% 21.78%
Strong Variable Insurance Funds, Inc.-Strong Mid Cap Growth Fund II 88.47% 47.12%
Deutsche VIT EAFE(R) Equity Index Fund 26.65% 16.17%5/
Deutsche VIT Equity 500 Index Fund 19.49% 21.62%6/
Deutsche VIT Small Cap Index Fund 19.27% 8.57%7/
INVESCO VIF-Equity Income Fund 13.99% 14.75%
INVESCO VIF-Total Return Fund -4.12% 3.83%
INVESCO VIF-High Yield Fund 8.38% 6.69%
Morgan Stanley UIF, Inc.-Mid Cap Value Portfolio 19.22% 18.84%
Morgan Stanley UIF, Inc.-Value Portfolio -2.55% -1.28%
Morgan Stanley UIF, Inc.-Fixed Income Portfolio -2.36% 3.65%
Morgan Stanley UIF, Inc.-U.S. Real Estate Portfolio -2.21% -1.50%
Morgan Stanley UIF, Inc.-Emerging Markets Equity Portfolio 94.23% 6.22%
PBHG Insurance Series Fund, Inc.-PBHG Growth II Portfolio 96.72% 32.95%
PBHG Insurance Series Fund, Inc.-PBHG Large Cap Growth Portfolio 63.99% 36.88%
PBHG Insurance Series Fund, Inc.-PBHG Tech. & Comm. Portfolio 231.89% 74.90%
The Timothy Plan Small-Cap Variable Series 18.19% 12.85%8/
1/ Annual mortality and expense risk charge of 1.25% of
daily net asset value and annual administration charge of
0.15% of daily net asset value.
2/ Annual mortality and expense risk charge of 0.95% of
daily net asset value and annual administration charge
of 0.15% of daily net asset value.
3/ Annual mortality and expense risk charge of
0.95% of daily net asset value.
4/ From Separate Account commencement date (7/15/97)
to 12/31/99 unless otherwise noted.
5/ From inception date of Portfolio (8/22/97) to 12/31/99.
6/ From inception date of Portfolio (10/1/97) to 12/31/99.
7/ From inception date of (8/25/97) to 12/31/99.
8/ From inception date of Portfolio (5/1/98) to 12/31/99.
9/ Annual mortality and expense risk charge of 0.75% of
daily net asset value.
</TABLE>
<PAGE>
Other Performance Measures
Any of the Contracts may be compared in advertising materials to certificates of
deposit ("CDs") or other investments issued by banks or other depository
institutions. Variable annuities differ from bank investments in several
respects. For example, variable annuities may offer higher potential returns
than CDs. However, unless you have elected to invest in only the fixed account
options, the Company does not guarantee your return. Also, none of your
investments under the Contract, whether allocated to the fixed account options
or to a Sub-Account, are FDIC-insured.
Advertising materials for any of the Contracts may, from time to time, address
retirement needs and investing for retirement, the usefulness of a tax-qualified
retirement plan, saving for college, or other investment goals. Advertising
materials for any of the Contracts may discuss, generally, the advantages of
investing in a variable annuity and the Contracts' particular features and their
desirability and may compare Contract features with those of other variable
annuities and investment products of other issuers. Advertising materials may
also include a discussion of the balancing of risk and return in connection with
the selection of investment options under the Contracts and investment
alternatives generally, as well as a discussion of the risks and attributes
associated with the investment options under the Contracts. A description of the
tax advantages associated with the Contracts, including the effects of
tax-deferral under a variable annuity or retirement plan generally, may be
included as well. Advertising materials for any of the Contracts may quote or
reprint financial or business publications and periodicals, including model
portfolios or allocations, as they relate to current economic and political
conditions, management and composition of the underlying Portfolios, investment
philosophy, investment techniques, the desirability of owning the Contract and
other products and services offered by the Company or AAG Securities, Inc. ("AAG
Securities").
The Company or AAG Securities may provide information designed to help
individuals understand their investment goals and explore various financial
strategies. Such information may include: information about current economic,
market and political conditions; materials that describe general principles of
investing, such as asset allocation, diversification, risk tolerance and goal
setting; questionnaires designed to help create a personal financial profile;
worksheets used to project savings needs based on assumed rates of inflation and
hypothetical rates of return; and alternative investment strategies and plans.
Ibbotson Associates of Chicago, Illinois ("Ibbotson"), provides historical
returns of the capital markets in the United States, including common stocks,
small capitalization stocks, long-term corporate bonds, intermediate-term
government bonds, long-term government bonds, Treasury bills, the U.S. rate of
inflation (based on the Consumer Price Index), and combinations of various
capital markets. The performance of these capital markets is based on the
returns of different indices.
Advertising materials for any of the Contracts may use the performance of these
capital markets in order to demonstrate general risk-versus-reward investment
scenarios. Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risk associated with the
security types in any capital market may or may not correspond directly to those
of the Sub-Accounts and the Portfolios. Advertising materials may also compare
performance to that of other compilations or indices that may be developed and
made available in the future.
In addition, advertising materials may quote various measures of volatility and
benchmark correlations for the Sub-Accounts and the respective Portfolios and
compare these volatility measures and correlations with those of other separate
accounts and their underlying funds. Measures of volatility seek to compare a
Sub-Account's, or its underlying Portfolio's, historical share price
fluctuations or total returns to those of a benchmark. Measures of benchmark
correlation indicate how valid a comparative benchmark may be. All measures of
volatility and correlation are calculated using averages of historical data.
<PAGE>
BENEFIT UNITS--TRANSFER FORMULAS
- --------------------------------------------------------------------------------
Transfers of a Contract owner's Benefit Units between Sub-Accounts during the
Benefit Payment Period are implemented according to the following formulas:
(1) The number of Benefit Units to be transferred from a given
Sub-Account is BU1(trans).
(2) The number of the Contract owner's Benefit Units remaining in such
Sub-Account (after the transfer)
= UNIT1 - BU1(trans).
(3) The number of Benefit Units transferred to the new Sub-Account
is BU2(trans).
BU2(trans) = BU1(trans) * BUV1/BUV2.
(4) The number of the Contract owner's Benefit Units in the new
Sub-Account (after the transfer)
= UNIT2 + BU2(trans).
(5) Subsequent variable dollar benefit payments will be based on the
number of the Contract owner's Benefit Units in each
Sub-Account (after the transfer) as of the next variable dollar
benefit payment's due date.
Where:
BU1(trans) is the number of the Contract owner's Benefit Units
transferred from a given Sub-Account.
BUV1 is the Benefit Unit Value of the Sub-Account from which
the transfer is being made as of the end of the Valuation
Period in which the transfer request was received.
BU2(trans) is the number of the Contract owner's Benefit Units
transferred into the new Sub-Account.
BUV2 is the Benefit Unit Value of the Sub-Account to which the
transfer is being made as of the end of the Valuation
Period in which the transfer request was received.
UNIT1 is the number of the Contract owner's Benefit Units in
the Sub-Account from which the transfer is being made,
before the transfer.
UNIT2 is the number of the Contract owner's Benefit Units in
the Sub-Account to which the transfer is being made,
before the transfer.
<PAGE>
FEDERAL TAX MATTERS
- --------------------------------------------------------------------------------
The following discussion supplements the discussion of federal tax matters in
the prospectuses for the Contracts. This discussion is general and is not
intended as tax advice. Federal income tax laws or the interpretation of those
laws by the Internal Revenue Service may change at any time.
Taxation of Separate Account Income
The Company is taxed as a life insurance company under Part I of Subchapter L of
the Internal Revenue Code ("IRC"). Since the Separate Account is not an entity
separate from the Company, and its operations form a part of the Company, it
will not be taxed separately as a "regulated investment company" under
Subchapter M of the IRC. Investment income and realized capital gains are
automatically applied to increase reserves under the Contracts. Under existing
federal income tax law, the Company believes that it will not be taxed on the
Separate Account investment income and realized net capital gains to the extent
that such income and gains are applied to increase the reserves under the
Contracts.
Accordingly, the Company does not anticipate that it will incur any federal
income tax liability attributable to the Separate Account and, therefore, the
Company does not intend to make provisions for any such taxes. However, if
changes in the federal tax laws or interpretations thereof result in the Company
being taxed on income or gains attributable to the Separate Account, then the
Company may impose a charge against the Separate Account (with respect to some
or all Contracts) in order to set aside provisions to pay such taxes.
In certain circumstances, owners of individual variable annuity contracts and
participants under group variable annuity contracts may be considered the
owners, for federal income tax purposes, of the assets of the separate accounts
used to support their contracts. In those circumstances, income and gains from
the separate account assets would be included in the owner's gross income. The
Internal Revenue Service has stated in published rulings that a variable
contract owner will be considered the owner of separate account assets if the
owner possesses incidents of ownership in those assets, such as the ability to
exercise investment control over the assets.
The Treasury Department has also announced, in connection with the issuance of
regulations concerning diversification, that those regulations "do not provide
guidance concerning the circumstances in which investor control of the
investments of a segregated asset account may cause the investor (i.e., the
owner or participant), rather than the insurance company, to be treated as the
owner of the assets in the account." This announcement also stated that guidance
would be issued by way of regulations or rulings on the "extent to which
policyholders may direct their investments to particular sub-accounts without
being treated as owners of the underlying assets." As of the date of this
statement of additional information, no guidance has been issued.
The ownership rights under the Contracts are similar to, but different in
certain respects from, those described by the Internal Revenue Service in
rulings in which it was determined that contract owners were not owners of
separate account assets. For example, the owner of a Contract has more
flexibility in allocating purchase payments and Account Value than was
contemplated in the rulings. These differences could result in an owner or
participant being treated as the owner of a pro rata portion of the assets of
the Separate Account and/or Fixed Account. In addition, the Company does not
know what standards will be set forth, if any, in the regulations or rulings
which the Treasury Department has stated it expects to issue. The Company
therefore reserves the right to modify the Contracts as necessary to attempt to
prevent an owner or participant from being considered the owner of a pro rata
share of the assets of the Separate Account.
Tax Deferral On Nonqualified Contracts
Section 817(h) of the Code requires that with respect to nonqualified Contracts,
the investments of the Portfolios be "adequately diversified" in accordance with
Treasury regulations in order for the Contracts to qualify as annuity contracts
under federal tax law. The Separate Account, through the Portfolios, intends to
comply with the diversification requirements prescribed by the Treasury in Reg.
Sec. 1.817-5, which affect how the Portfolios' assets may be invested. Failure
of a Portfolio to meet the diversification requirement would result in loss of
tax deferred status to owners of nonqualified Contracts.
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The audited financial statements of the Separate Account for the years ended
December 31, 1999 and 1998 and the Company's audited statutory-basis financial
statements for the years ended December 31, 1999 and 1998 are included herein.
The financial statements of the Company included in this statement of additional
information should be considered only as bearing on the ability of the Company
to meet its obligations under the Contracts. They should not be considered as
bearing on the investment performance of the assets held in the Separate
Account.
<PAGE>
ANNUITY INVESTORS
VARIABLE ACCOUNT B
Financial Statements
Year ended December 31, 1999
With Report of Independent Auditors
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
Financial Statements
Year ended December 31, 1999
Contents
Report of Independent Auditors................................1
Audited Financial Statements
Statements of Assets and Liabilities - Current Year...........3
Statements of Operations - Current Year.......................6
Statements of Changes in Net Assets - Current Year............8
Statements of Changes in Net Assets - Prior Year.............13
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 statement of assets and liabilities of Annuity
Investors Variable Account B (comprising, respectively, the BT Insurance Funds
Trust EAFE Equity Index Fund, BT Insurance Funds Trust Equity 500 Index Fund, BT
Insurance Funds Trust Small Cap Index Fund, 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 Funds Socially
Responsible Growth Fund, Inc., Dreyfus Funds Stock Index Fund, Invesco Funds
Group, Inc. High-Yield Fund, Invesco Funds Group, Inc. Equity Income Fund,
Invesco Funds Group, Inc. Total Return Fund , Janus Aspen Series Aggressive
Growth Portfolio, Janus Aspen Series Balanced Portfolio, Janus Aspen Series
Capital Appreciation Portfolio, Janus Aspen Series Growth Portfolio, Janus Aspen
Series International Growth Portfolio, Janus Aspen Series Worldwide Growth
Portfolio, Morgan Stanley Dean Witter Universal Funds, Inc. Emerging Markets
Equity Portfolio, Morgan Stanley Dean Witter Universal Funds, Inc. Fixed Income
Fund Portfolio, Morgan Stanley Dean Witter Universal Funds, Inc. Mid-Cap Value
Portfolio, Morgan Stanley Dean Witter Universal Funds, Inc. U.S. Real Estate
Portfolio, Morgan Stanley Dean Witter Universal Funds, Inc. Value Portfolio,
PBHG Insurance Series Fund, Inc. Growth II Portfolio, PBHG Insurance Series
Fund, Inc. Large Cap Growth Portfolio, PBHG Insurance Series Fund, Inc.
Technology & Communications Portfolio, Strong Funds Mid Cap Growth Fund II,
Strong Funds Opportunity Fund II, and Timothy Partners, Ltd. the Timothy Plan
Variable Series Sub Accounts) as of December 31, 1999, and the related statement
of operations and changes in net assets for the periods indicated therein. 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 auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
from 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, 1999, 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
audit provides a reasonable basis for our opinion.
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 at December
31, 1999, and the results of their operations and changes in their net assets
for each of the periods indicated therein, in conformity with accounting
principles generally accepted in the United States.
/s/---------------------
Ernst & Young LLP
Cincinnati, OH
February 7, 2000
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<CAPTION>
===================================================================================================================================
Market
Shares Cost Value
----------- ----------- -----------
<S> <C> <C> <C>
Assets:
Investments in portfolio shares, at net asset value (Note 2):
BT Insurance Funds Trust:
EAFE Equity Index Fund:..................................... 5,998.438 $ 74,997 $ 81,578
Equity 500 Index Fund....................................... 52,529.349 745,703 797,394
Small Cap Index Fund........................................ 15,254.245 159,689 177,102
Dreyfus Variable Investment Fund:
Capital Appreciation Portfolio .............................. 186,049.137 6,930,713 7,417,778
Growth and Income Portfolio ................................. 169,089.174 3,868,913 4,308,393
Money Market Portfolio ...................................... 2,869,109.650 2,869,110 2,869,110
Small Cap Portfolio ......................................... 49,893.630 2,713,736 3,309,943
Dreyfus Funds:
Socially Responsible Growth Fund, Inc. ...................... 176,782.631 5,783,272 6,906,898
Stock Index Fund ............................................ 873,325.926 29,186,372 33,579,383
INVESCO Variable Investment Funds, Inc.:
High-Yield Portfolio ........................................ 221,766.073 2,651,878 2,552,529
Equity Income Portfolio ..................................... 362,851.506 7,117,116 7,623,510
Total Return Portfolio ...................................... 180,966.300 2,975,320 2,819,454
Janus Aspen Series:
Aggressive Growth Portfolio ................................. 174,935.474 6,698,550 10,441,899
Balanced Portfolio .......................................... 990,136.857 23,511,840 27,644,621
Capital Appreciation Portfolio............................... 188,368.634 4,986,868 6,248,188
Growth Portfolio ............................................ 372,888.658 9,511,290 12,547,703
International Growth Portfolio .............................. 75,712.217 1,884,056 2,927,792
Worldwide Growth Portfolio ....................................... 174,687.736 4,616,525 5,081,666
Worldwide Growth Portfolio................................... 441,294.659 13,675,527 21,071,820
Morgan Stanley Dean Witter Universal Funds, Inc.:
Emerging Markets Equity Portfolio ........................... 46,136.031 417,812 641,752
Fixed Income Portfolio ...................................... 300,201.549 3,174,939 3,017,025
Mid Cap Value Portfolio ..................................... 177,493.539 2,573,295 2,772,448
U.S. Real Estate Portfolio .................................. 91,264.643 893,438 831,421
Value Portfolio ............................................. 70,049.485 781,450 753,733
PBHG Insurance Series Fund, Inc.:
Growth II Portfolio ......................................... 58,085.851 887,955 1,338,880
Large Cap Growth Portfolio .................................. 132,944.781 2,149,837 3,391,422
Technology & Communications Portfolio ....................... 367,857.212 8,216,666 16,925,109
Strong Funds:
Mid Cap Growth Fund II ...................................... 101,144.051 1,980,186 3,071,744
Opportunity Fund II ......................................... 85,625.956 1,858,122 2,225,418
Timothy Partners, Ltd.:
The Timothy Plan Small-Cap Variable Series .................. 92,607.694 959,457 1,144,631
Total cost............................................................... $149,238,107
==================================================================================================================================
Total assets............................................................................ 189,438,678
Liabilities:
Amounts due to Annuity Investors Life Insurance Company (Note 4)......................................... 153
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets.............................................................................. $189,438,525
==================================================================================================================================
</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, 1999
<TABLE>
<CAPTION>
===============================================================================================================================
Market
Units Unit Value Value
----------- ----------- -----------
<S> <C> <C> <C>
Net assets attributable to variable annuity contract holders (Note 2):
BT Insurance Funds Trust:
EAFE Equity Index Fund - Basic contract.............................. 6,821.832 $11.958486 $ 81,579
EAFE Equity Index Fund - Enhanced contract........................... 0.000 11.981984 0
EAFE Equity Index Fund - Modified Enhanced contract.................. 0.000 11.993767 0
Equity 500 Index Portfolio - Basic contract.......................... 73,596.514 10.815237 795,963
Equity 500 Index Portfolio - Enhanced contract....................... 0.000 10.836517 0
Equity 500 Index Portfolio - Modified Enhanced contract.............. 131.993 10,847192 1,431
Small Cap Index Portfolio - Basic contract........................... 15,259.149 11,606269 177,102
Small Cap Index Portfolio - Enhanced contract........................ 0.000 11,629080 0
Small Cap Index Portfolio - Modified Enhanced contract............... 0.000 11.640544 0
Dreyfus Variable Investment Fund:
Capital Appreciation Portfolio - Basic contract ..................... 517,772.082 14.262203 7,384,571
Capital Appreciation Portfolio - Enhanced contract .................. 2,156.774 14.366606 30,986
Capital Appreciation Portfolio - Modified Enhanced contract.......... 154.147 14.419045 2,223
Growth and Income Portfolio - Basic contract ........................ 331,756.261 12.961023 4,299,901
Growth and Income Portfolio - Enhanced contract ..................... 650.409 13.055905 8,492
Growth and Income Portfolio - Modified Enhanced contract............. 0.000 13.103601 0
Money Market Portfolio - Basic contract ............................. 2,638,837.162 1.083700 2,859,708
Money Market Portfolio - Enhanced contract .......................... 8,490.939 1.090994 9,264
Money Market Portfolio - Modified Enhanced contract.................. 0.000 1.096462 0
Small Cap Portfolio - Basic contract ................................ 275,503.637 11.984035 3,301,645
Small Cap Portfolio - Enhanced contract ............................. 486.764 12.071820 5,876
Small Cap Portfolio - Modified Enhanced contract..................... 199.908 12.116077 2,422
Dreyfus Funds:
Socially Responsible Growth Fund, Inc. - Basic contract ............. 408,482.196 16.894039 6,900,915
Socially Responsible Growth Fund, Inc. - Enhanced contract .......... 351.586 17.017705 5,983
Socially Responsible Growth Fund, Inc. - Modified Enhanced Contract.. 0.000 17.079770 0
Stock Index Fund - Basic contract ................................... 2,129,772.165 15.760394 33,566,049
Stock Index Fund - Enhanced contract ................................ 616.234 15.875757 9,784
Stock Index Fund - Modified Enhanced contract........................ 222.802 15.933836 3,550
INVESCO Funds Group, Inc.:
High-Yield Fund - Basic contract .................................... 221,636.210 11.510803 2,551,212
High-Yield Fund - Enhanced contract ................................. 113.564 11.595106 1,317
High-Yield Fund - Modified Enhanced contract......................... 0.000 11.637523 0
Equity Income Fund - Basic contract ................................. 553,696.171 13.726769 7,600,459
Equity Income Fund - Enhanced contract .............................. 1,667.041 13.827281 23,051
Equity Income Fund - Modified Enhanced contract...................... 0.000 13.877907 0
Total Return Fund - Basic contract .................................. 258,825.173 10.811807 2,798,367
Total Return Fund - Enhanced contract ............................... 1,936.199 10.890979 21,087
Total Return Fund - Modified Enhanced contract....................... 0.000 10.930872 0
Janus Aspen Series:
Aggressive Growth Portfolio - Basic contract ........................ 329,807.902 31.565210 10,410,456
Aggressive Growth Portfolio - Enhanced contract ..................... 829.264 31.796057 26,368
Aggressive Growth Portfolio - Modified Enhanced contract............. 159.044 31.911561 5,075
Balanced Portfolio - Basic contract ................................. 1,571,579.505 17.556100 27,590,807
Balanced Portfolio - Enhanced contract .............................. 2,931.027 17.684597 51,834
Balanced Portfolio - Modified Enhanced contract ..................... 111.555 17.749154 1,980
Capital Appreciation Portfolio - Basic contract ..................... 471,936.628 13.234548 6,245,868
Capital Appreciation Portfolio - Enhanced contract................... 4.141 13.260556 55
Capital AppreciationPortfolio - Modified Enhanced contract........... 170.622 13.273610 2,265
Growth Portfolio - Basic contract ................................... 643,514.256 19.453513 12,518,613
Growth Portfolio - Enhanced contract ................................ 1,374.992 19.595874 26,944
Growth Portfolio - Modified Enhanced contract........................ 109.122 19.667608 2,146
International Growth Portfolio - Basic contract ..................... 142,343.325 20.234788 2,880,287
International Growth Portfolio - Enhanced contract .................. 2,330.619 20.382770 47,505
International Growth Portfolio - Modified Enhanced contract.......... 0.000 20.457001 0
Worldwide Growth Portfolio - Basic contract ......................... 1,026,072.851 20.488548 21,022,743
Worldwide Growth Portfolio - Enhanced contract ...................... 2,225.846 20.638429 45,938
Worldwide Growth Portfolio - Modified Enhanced contract.............. 151.550 20.713399 3,139
Morgan Stanley Dean Witter Universal Funds, Inc.:
Emerging Markets Equity Portfolio - Basic contract .................. 56,080.554 11.416896 640,266
Emerging Markets Equity Portfolio - Enhanced contract ............... 128.179 11.500499 1,474
Emgerging Markets Equity Portfolio - Modified Enhanced contract...... 0.000 11.542646 0
Fixed Income Portfolio - Basic contract ............................. 279,193.758 10.749115 3,001,086
Fixed Income Portfolio - Enhanced contract .......................... 1,472.104 10.827853 15,939
Fixed Income Portfolio - Modified Enhanced contract ................. 0.000 10.867507 0
Mid-Cap Value Portfolio - Basic contract ............................ 183,388.647 15.049488 2,759,905
Mid-Cap Value Portfolio - Enhanced contract ......................... 827.448 15.159702 12,543
Mid-Cap Value Portfolio - Modified contract ......................... 0.000 15.215264 0
U.S. Real Estate Portfolio - Basic contract ......................... 86,941.426 9.482378 824,412
U.S. Real Estate Portfolio - Enhanced contract ...................... 733.827 9.551867 7,009
U.S. Real-Estate Portfolio - Modified Enhanced contract.............. 0.000 9.586849 0
Value Portfolio - Basic contract .................................... 78,330.649 9.536137 746,972
Value Portfolio - Enhanced contract ................................. 703.796 9.605992 6,761
Value Portfolio - Modified Enhanced contract......................... 0.000 9.641132 0
PBHG Insurance Series Fund, Inc.:
Growth II Portfolio - Basic contract ................................ 67,359.578 19.835104 1,336,085
Growth II Portfolio - Enhanced contract ............................. 139.873 19.980260 2,795
Growth II Portfolio - Modified Enhanced contract..................... 0.000 20.053445 0
Large Cap Growth Portfolio - Basic contract ......................... 158,614.893 21.307087 3,379,622
Large Cap Growth Portfolio - Enhanced contract ...................... 549.785 21.462991 11,800
Large Cap Growth Portfolio - Modified Enhanced contract ............. 0.000 21.541442 0
Technology & Communications Portfolio - Basic contract .............. 433,441.908 38.941384 16,878,828
Technology & Communications Portfolio - Enhanced contract ........... 904.009 39.226135 35,460
Technology & Communications Portfolio - Modified Enhanced contract... 274.877 39.369150 10,822
Strong Funds:
Growth Fund II - Basic contract ..................................... 120,559.085 25.444156 3,067,524
Growth Fund II - Enhanced contract .................................. 164.682 25.630290 4,220
Growth Fund II - Modified Enhanced contract.......................... 0.000 25.723816 0
Opportunity Fund II - Basic contract ................................ 138,453.066 15.981484 2,212,685
Opportunity Fund II - Enhanced contract ............................. 790.953 16.098506 12,733
Opportunity Fund II - Modified Enhanced contract..................... 0.000 16.157323 0
Timothy Partners Ltd.:
The Timothy Plan Small-Cap Variable Series - Basic contract ......... 94,238.615 12.097693 1,140,070
The Timothy Plan Small-Cap Variable Series - Enhanced contract ...... 374.501 12.157659 4,553
The Timothy Plan Small-Cap Variable Series - Modified Enhanced contract 0.000 12.137973 0
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets attributable to variable annuity contract holds............................. 189,438,525
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets............................................................................. $ 189,438,525
=================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
BT Insurance Funds Trust
-----------------------------------------
EAFE Equity Small
Equity 500 Cap
Index Index Index
Fund* Funds* Funds*
====================================================================================================================================
<S> <C> <C> <C>
Investment income:
Dividends from investments in portfolio shares .................... $ 3,438 $ 6,609 $ 6,454
Expenses:
Mortality and expense risk fees (Note 4) .......................... 284 2,437 698
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ................................. 3,154 4,172 5,756
Net realized gain (loss) and unrealized appreciation (depreciation)
on investments:
Net realized gain (loss) on sale of investments in portfolio shares 37 214 2
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. 6,582 51,692 17,413
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ........... 6,619 51,906 17,415
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ... $ 9,773 $ 56,078 $ 23,171
====================================================================================================================================
<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 .................... $ 67,948 $ 147,614 $ 96,066 $ 1,462
Expenses:
Mortality and expense risk fees (Note 4) .......................... 74,555 42,244 32,780 33,949
----------------------------------------------------
Net investment income (loss) ................................. (6,607) 105,370 63,286 (32,487)
Net realized gain (loss) and unrealized appreciation (depreciation)
on investments:
Net realized gain (loss) on sale of investments in portfolio shares 238,043 19,012 0 (21,349)
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. 259,369 342,538 0 595,527
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ........... 497,412 361,550 0 574,178
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ... $ 490,805 $ 466,920 $ 63,286 $ 541,691
====================================================================================================================================
<PAGE>
<CAPTION>
====================================================================================================================================
Dreyfus Funds
------------------------
Socially
Responsible Stock
Growth Index
Fund, Inc. Fund
===========================================================================================================
<S> <C> <C>
Investment income:
Dividends from investments in portfolio shares .................... $ 231,100 $ 469,755
Expenses:
Mortality and expense risk fees (Note 4) .......................... 55,968 301,566
- -----------------------------------------------------------------------------------------------------------
Net investment income (loss) ................................. 175,132 168,189
Net realized gain (loss) and unrealized appreciation (depreciation)
on investments:
Net realized gain (loss) on sale of investments in portfolio shares 41,381 529,386
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. 927,407 3,280,156
- -----------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ........... 968,788 3,809,542
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ... $ 1,143,920 $ 3,977,731
===========================================================================================================
<CAPTION>
=====================================================================================================================
INVESCO Funds Group, Inc.
--------------------------- ------------
High Equity Total
Yield Income Return
Fund Fund Fund
=====================================================================================================================
<S> <C> <C> <C>
Investment income:
Dividends from investments in portfolio shares .................... $ 157,291 $ 125,224 $ 74,416
Expenses:
Mortality and expense risk fees (Note 4) .......................... 20,348 72,959 34,257
- ---------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ................................. 136,943 52,265 40,159
Net realized gain (loss) and unrealized appreciation (depreciation)
on investments:
Net realized gain (loss) on sale of investments in portfolio shares (29,520) 86,162 (11,234)
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares ........................... (17,860) 437,941 (165,855)
- ---------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ........... (47,380) 524,103 (177,089)
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ... $ 89,563 $ 576,368 $ (136,930)
=====================================================================================================================
<CAPTION>
====================================================================================================================================
Janus Aspen Series
---------------------------------------------
Aggressive Capital
Growth Balanced Appreciation
Portfolio Portfolio Portfolo*
====================================================================================================================================
<S> <C> <C> <C>
Investment income:
Dividends from investments in portfolio shares .................... $ 94,859 $ 439,435 $ 11,901
Expenses:
Mortality and expense risk fees (Note 4) .......................... 52,637 209,733 21,529
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ................................. 42,222 229,702 (9,628)
Net realized gain (loss) and unrealized appreciation(depreciation)on investments:
Net realized gain (loss) on sale of investments in portfolio shares 60,355 104,795 74,558
Net change in unrealized appreciation (depreciation) 3,600,903 3,431,852 1,261,320
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ........... 3,661,258 3,536,647 1,335,878
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ... $ 3,703,480 $ 3,766,349 $ 1,326,250
====================================================================================================================================
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
Janus Aspen Series
-------------------------------------------
International Worldwide
Growth Growth Growth
Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C>
Investment income:
Dividends from investments in portfolio shares .................... $ 51,556 $ 2,401 $ 19,416
Expenses:
Mortality and expense risk fees (Note 4) .......................... 94,822 18,274 171,124
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ................................. (43,266) (15,873) (151,708)
Net realized gain (loss) and unrealized appreciation (depreciation)
on investments:
Net realized gain (loss) on sale of investments in portfolio shares 63,610 51,427 306,342
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares ........................... 2,661,896 1,017,938 6,931,151
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ........... 2,725,506 1,069,365 7,237,493
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ... $ 2,682,240 $ 1,053,492 $ 7,085,785
====================================================================================================================================
<CAPTION>
====================================================================================================================================
Morgan Stanley Dean Witter 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 .................... $ 63 $ 132,926 $ 317,551 $ 40,924 $ 8,877
Expenses:
Mortality and expense risk fees (Note 4) .......................... 4,770 27,694 28,429 8,867 7,892
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ................................. (4,707) 105,232 289,122 32,057 985
Net realized gain (loss) and unrealized appreciation (depreciation)
on investments:
Net realized gain (loss) on sale of investments in portfolio shares (1,692) (9,201) 28,294 (17,801) (11,045)
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. 246,465 (149,045) 95,581 (35,769) (1,062)
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ........... 244,773 (158,246) 123,875 (53,570) (12,107)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ... $ 240,066 $ (53,014) $ 412,997 $ (21,513) $(11,122)
====================================================================================================================================
<CAPTION>
====================================================================================================================================
PBHG Insurance Series Fund, Inc.
-----------------------------------------------------------
Technology
Large Cap and
Growth II Growth Communications
Portfolio Portfolio Portfolio
===================================================================================================================================
<S> <C> <C> <C>
Investment income:
Dividends from investments in portfolio shares .................... $ 0 $ 0 $ 0
Expenses:
Mortality and expense risk fees (Note 4) .......................... 8,087 24,711 84,616
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ................................. (8,087) (24,711) (84,616)
Net realized gain (loss) and unrealized appreciation (depreciation)
on investments:
Net realized gain (loss) on sale of investments in portfolio shares 40,307 59,889 172,517
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. 432,229 1,167,374 8,559,584
- -----------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ........... 472,536 1,227,263 8,732,101
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ... $ 464,449 $1,202,552 $ 8,647,485
===================================================================================================================================
<PAGE>
<CAPTION>
===================================================================================================================================
Strong Funds Timothy Partners
----------------------------------------------------------
Mid Cap
Growth Opportunity The Timothy
Fund Fund Plan Variable
II II Small Cap Series Total
===================================================================================================================================
<S> <C> <C> <C> <C>
Investment income:
Dividends from investments in portfolio shares .................... $ 1,120 $ 129,340 $ 1,972 $ 2,639,718
Expenses:
Mortality and expense risk fees (Note 4) .......................... 9,893 20,906 9,802 1,485,831
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ................................. (18,773) 108,434 (7,830) 1,153,887
Net realized gain (loss) and unrealized appreciation (depreciation)
on investments:
Net realized gain (loss) on sale of investments in portfolio shares 24,467 (3,523) 6,613 1,802,046
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. 1,024,601 333,962 176,337 36,490,227
- -----------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ........... 1,049,068 330,439 182,950 38,292,273
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ... $1,030,295 $ 438,873 $ 175,120 $ 39,446,160
===================================================================================================================================
</TABLE>
*For the period May 1, 1999 (commencement of operations) to December 31, 1999
The accompanying notes are an integral part of these financial statements.
-7-
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
==================================================================================================================================
BT Insurance Funds Trust
--------------------------------------
EAFE Equity Small
Equity 500 Cap
Index Index Index
Fund* Fund* Fund*
==================================================================================================================================
<S> <C> <C> <C>
Changes from operations:
Net investment income (loss) ...................................... $ 3,154 $ 4,172 $ 5,756
Net realized gain (loss) on sale of investments in portfolio shares 37 214 2
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. 6,582 51,692 17,413
- -------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ........ 9,773 56,078 23,171
Changes from principal transactions:
Contract purchase payments ........................................ 37,818 515,478 113,079
Contract redemptions .............................................. (123) (3,245) 0
Net transfers (to) from fixed account ............................. 34,110 229,083 40,852
- -------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal transactions ....... 71,805 741,316 153,931
- -------------------------------------------------------------------------------------------------------------------------
Net increase in net assets .............................. 81,578 797,394 177,102
Net assets, beginning of period ........................................ 0 0 0
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period .............................................. $ 81,578 $797,394 $ 177,102
==================================================================================================================================
<CAPTION>
==================================================================================================================================
Dreyfus Variable Investment Fund
-----------------------------------------
Growth
Capital and Money
Appreciation Income Market
Portfolio Portfolio Portfolio
==================================================================================================================================
<S> <C> <C> <C>
Changes from operations:
Net investment income (loss) ......................................... $ (6,607) $ 105,370 $ 63,286
Net realized gain (loss) on sale of investments in portfolio shares .. 238,043 19,012 0
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares ................................. 259,369 342,538 0
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ........... 490,805 466,920 63,286
Changes from principal transactions:
Contract purchase payments ........................................... 5,084,456 1,865,486 4,017,759
Contract redemptions ................................................. (134,245) (75,414) (26,507)
Net transfers (to) from fixed account ................................ (237,158) 258,973 (1,878,656)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal transactions .......... 4,713,053 2,049,045 2,112,596
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets ................................. 5,203,858 2,515,965 2,175,882
Net assets, beginning of period ........................................... 2,213,920 1,792,428 693,094
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ................................................. $7,417,778 $ 4,308,393 $ 2,868,976
==================================================================================================================================
<PAGE>
<CAPTION>
==================================================================================================================================
Dreyfus Funds
----------------------------------------------------
Socially
Small Responsible Stock
Cap Growth Index
Portfolio Fund, Inc. Fund
==================================================================================================================================
<S> <C> <C> <C>
Changes from operations:
Net investment income (loss) ......................................... $ (32,487) $ 175,132 168,189
Net change in unrealized appreciation (depreciation) of (21,349) 41,381 529,386
investments in portfolio shares .................................. 595,527 927,407 3,280,156
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ............ 541,691 1,143,920 3,977,731
Changes from principal transactions:
Contract purchase payments ............................................ 1,237,855 3,437,034 19,622,971
Contract redemptions .................................................. (67,011) (81,945) (568,106)
Net transfers (to) from fixed account ................................. (99,634) 555,059 217,350
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal transactions ........... 1,071,210 3,910,148 19,272,215
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets .................................. 1,612,901 5,054,068 23,249,946
Net assets, beginning of period ............................................ 1,697,042 1,852,830 10,329,437
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ................................................. $ 3,309,943 $ 6,906,898 $ 33,579,383
=================================================================================================================================
<CAPTION>
===================================================================================================================================
Invesco Funds Group, Inc.
------------------------------------------
High Equity Total
Yield Income Return
Fund Fund Fund
==================================================================================================================================
<S> <C> <C> <C>
Changes from operations:
Net investment income (loss) ...................................... $ 136,943 $ 52,265 $ 40,159
Net realized gain (loss) on sale of investments in portfolio shares (29,520) 86,162 (11,234)
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. (17,860) 437,941 (165,855)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ........ 89,563 576,368 (136,930)
Changes from principal transactions:
Contract purchase payments ........................................ 1,241,157 4,179,217 1,394,116
Contract redemptions .............................................. (65,263) (136,289) (64,428)
Net transfers (to) from fixed account ............................. 538,217 571,629 (130,922)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal transactions ....... 1,714,111 4,614,557 1,198,766
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets .............................. 1,803,674 5,190,925 1,061,836
Net assets, beginning of period ........................................ 748,855 2,432,585 1,757,618
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period .............................................. $ 2,552,529 $ 7,623,510 $ 2,819,454
==================================================================================================================================
<PAGE>
<CAPTION>
==================================================================================================================================
Janus Aspen Series
----------------------------------------------
Aggressive Capital
Growth Balanced Appreciation
Portfolio Portfolio Portfolio
==================================================================================================================================
<S> <C> <C> <C>
Changes from operations:
Net investment income (loss) ...................................... $ 42,222 $ 229,702 $ (9,628)
Net realized gain (loss) on sale of investments in portfolio shares 60,355 104,795 74,558
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. 3,600,903 3,431,852 1,261,320
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ........ 3,703,480 3,766,349 1,326,250
Changes from principal transactions:
Contract purchase payments ........................................ 4,534,253 15,693,612 3,105,966
Contract redemptions .............................................. (50,438) (409,983) (20,685)
Net transfers (to) from fixed account ............................. 1,488,790 3,349,214 1,836,657
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal transactions ....... 5,972,605 18,632,843 4,921,938
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets .............................. 9,676,085 22,399,192 6,248,188
Net assets, beginning of period ........................................ 765,814 5,245,429 0
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period .............................................. $ 10,441,899 $ 27,644,621 $ 6,248,188
==================================================================================================================================
<CAPTION>
====================================================================================================================================
Janus Aspen Series
---------------------------------------
International Worldwide
Growth Growth Growth
Portfolio Portfolio Portfolio
==================================================================================================================================
<S> <C> <C> <C>
Changes from operations:
Net investment income (loss) ...................................... $ (43,266) $ (15,873) $ (151,708)
Net realized gain (loss) on sale of investments in portfolio shares 63,610 51,427 306,342
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. 2,661,896 1,017,938 6,931,151
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ........ 2,682,240 1,053,492 7,085,785
Changes from principal transactions:
Contract purchase payments ........................................ 6,675,682 1,171,333 9,061,058
Contract redemptions .............................................. (141,914) (39,980) (293,429)
Net transfers (to) from fixed account ............................. 971,572 231,436 136,740
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal transactions ....... 7,505,340 1,362,789 8,904,369
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets .............................. 10,187,580 2,416,281 15,990,154
Net assets, beginning of period ........................................ 2,360,123 511,511 5,081,666
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period .............................................. $ 12,547,703 $ 2,927,792 $ 21,071,820
==================================================================================================================================
<PAGE>
<CAPTION>
==================================================================================================================================
Morgan Stanley Dean Witter 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) ...................................... $ (4,707) $ 105,232 $ 289,122 $ 32,057 $ 985
Net realized gain (loss) on sale of investments in portfolio shares (1,692) (9,201) 28,294 (17,801) (11,045)
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. 246,465 (149,045) 98,581 (35,769) (1,062)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ........ 240,066 (53,014) 412,997 (21,513) (11,122)
Changes from principal transactions:
Contract purchase payments ........................................ 261,307 1,252,573 870,326 339,310 391,649
Contract redemptions .............................................. (8,163) (55,730) (43,262) (17,610) (28,873)
Net transfers (to) from fixed account ............................. (30,458) 1,359,317 120,956 103,827 64,914
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal transactions ....... 222,686 2,556,160 948,020 425,527 427,690
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets .............................. 462,752 2,503,146 1,361,017 404,014 416,568
Net assets, beginning of period ........................................ 178,988 513,879 1,411,431 427,407 337,165
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period .............................................. $ 641,740 $3,017,025 $2,772,448 $ 831,421 $ 753,733
===================================================================================================================================
<CAPTION>
==================================================================================================================================
PBHG Insurance Series Fund, Inc.
--------------------------------------------
Technology
Large Cap and
Growth II Growth Communications
Portfolio Portfolio Portfolio
==================================================================================================================================
<S> <C> <C> <C>
Changes from operations:
Net investment income (loss) ...................................... $ (8,087) $ (24,711) $ (84,616)
Net realized gain (loss) on sale of investments in portfolio shares 40,307 59,889 172,517
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. 432,229 1,167,374 8,559,584
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ........ 464,449 1,202,552 8,647,485
Changes from principal transactions:
Contract purchase payments ........................................ 546,169 1,708,934 5,304,053
Contract redemptions .............................................. (8,514) (29,829) (122,730)
Net transfers (to) from fixed account ............................. 86,887 98,187 2,319,044
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal transactions ....... 624,542 1,777,292 7,500,367
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets .............................. 1,088,991 2,979,844 16,147,852
Net assets, beginning of period ........................................ 249,889 411,578 777,257
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period .............................................. $1,338,880 $ 3,391,422 $ 16,925,109
==================================================================================================================================
<PAGE>
<CAPTION>
==================================================================================================================================
Strong Funds Timothy Partners
-------------------------------------------------
Mid Cap Opportunity The Timothy Plan
Fund Fund Small Cap
II II Variable Series Total
====================================================================================================================================
<S> <C> <C> <C> <C>
Changes from operations:
Net investment income (loss) ...................................... $ (18,773) $ 108,434 $ (7,830) $ 1,153,887
Net realized gain (loss) on sale of investments in portfolio shares 24,467 (3,523) 6,613 1,802,046
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. 1,024,601 333,962 176,337 36,490,227
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ........ 1,030,295 438,873 175,120 39,446,160
Changes from principal transactions:
Contract purchase payments ........................................ 1,346,916 964,598 503,451 96,477,616
Contract redemptions .............................................. (63,446) (44,752) (31,051) (2,632,965
Net transfers (to) from fixed account ............................. 306,781 (6,091) 195,671 12,732,347
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal transactions ....... 1,590,251 913,755 668,071 106,576,998
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets .............................. 2,620,546 1,352,628 843,191 146,023,158
Net assets, beginning of period ........................................ 451,198 872,790 301,433 43,415,367
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period .............................................. $ 3,071,744 $ 2,225,418 $1,144,624 $ 189,438,525
====================================================================================================================================
</TABLE>
*For the period May 1, 1999 (commencement date of operations)
to December 31, 1999
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, 1999
Basic Contracts
<TABLE>
<CAPTION>
====================================================================================================================================
BT Insurance Funds Trust
-------------------------------------------------------
EAFE Equity Small
Equity 500 Cap
Index Index Index
Fund* Fund* Fund*
=====================================================================================================
<S> <C> <C> <C>
Units outstanding, December 31, 1998 0.000 0.000 0.000
Units purchased 6,832.096 73,908.864 15,259.832
Units redeemed (10.264) (312.350) (0.683)
----------- ----------- ------------
Units outstanding December 31, 1999 6,821.832 73,596.514 15,259.149
=========== =========== ============
====================================================================================================================================
Dreyfus Variable Investment Fund Dreyfus Funds
---------------------------------------------------------------------------------------
Growth Socially
Capital and Money Small Responsible Stock
Appreciation Income Market Cap Growth Index
Portfolio Portfolio Portfolio Portfolio Fund, Inc. Fund
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Units outstanding, December 31, 1998 170,523.015 159,409.837 658,981.650 171,968.905 140,614.024 779,485.606
Units purchased 372,946.146 178,753.260 3,758,398.024 119,600.564 273.663.600 1,389,766.200
Units redeemed (25,697.079) (6,406.836) (1,778,542.512) (16,065.832) (5,795.428) (39,479.641)
------------- ------------ --------------- ------------- ------------- --------------
Units outstanding December 31, 1999 517,772.082 331,756.261 2,638,837.162 275,503.637 408,482.196 2,129,772.165
============ ============ =============== ============= ============ =============
====================================================================================================================================
Invesco Funds Group, Inc.
------------------------------------------
High Equity Total
Yield Income Return
Fund Fund Fund
====================================================================================================================================
<S> <C> <C> <C>
Units outstanding, December 31, 1998 70,047.913 200,541.938 154,762.526
Units purchased 157,413.43 363,563.92 120,990.59
Units redeemed (5,825.13) (10,409.69) (16,927.94)
---------- ------------ -------------
Units outstanding December 31, 1999 221,636.210 553,696.171 258,825.173
============= ============= ==============
====================================================================================================================================
Janus Aspen Series
-------------------------------------------------------------------------------------------
Aggressive Capital International Worldwide
Growth Balanced Appreciation Growth Growth Growth
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Units outstanding, December 31, 1998 53,896.345 373,285.807 0.000 172,190.630 45,382.775 402,131.168
Units purchased 278,080.656 1,224,730.099 473,953.960 480,342.283 100,167.009 643,927.060
Units redeemed (2,169.099) (26,436.401) (2,017.332) (9,018.657) (3,206.459) (19,985.377)
------------ ------------ -------- ------------ ------------ ------------
Units outstanding December 31, 1999 329,807.902 1,571,579.505 471,936.628 643,514.256 142,343.325 1,026,072.851
============ ============== =========== ============ ============ ==============
====================================================================================================================================
<PAGE>
<CAPTION>
Morgan Stanley Dean Witter 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, 1998 30,255.642 46,348.096 111,076.120 43,786.457 34,212.111
Units purchased 34,003.778 237,990.514 75,629.717 44,901.681 47,456.893
Units redeemed (8,178.866) (5,144.852) (3,317.190) (1,746.712) (3,338.355)
---------- ------------ ----------- ----------- -----------
Units outstanding December 31, 1999 56,080.554 279,193.758 183,388.647 86,941.426 78,330.649
=========== ============ ============ ============ ===========
====================================================================================================================================
<CAPTION>
PBHG Insurance Series Fund, Inc. Strong Funds Timothy Partners
---------------------------------------------- ---------------------- ----------------
Technology Mid Cap
Large Cap and Growth Opportunity The Timothy
Growth II Growth Communications Fund Fund Plan Variable
Portfolio Portfolio Portfolio II II Series
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Units outstanding, December 31, 1998 24,618.770 31,474.961 65,820.143 33,197.715 72,644.387 29,293.327
Units purchased 43,279.210 129,400.234 374,005.518 91,173.444 70,112.940 68,160.700
Units redeemed (538.402) (2,260.302) (6,383.753) (3,812.074) (4,304.261) (3,215.412)
---------- ------------ ----------- ------------ ----------- ----------
Units outstanding December 31, 1999 67,359.578 158,614.893 433,441.908 120,559.085 138,453.066 94,238.615
=========== ============ ============ =========== ============ ===========
==================================================================================================================================
*For the period May 1, 1999 (commencement date of operations) to December 31, 1999
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEAR ENDED DECEMBER 31, 1999
Enhanced Contracts
<TABLE>
<CAPTION>
====================================================================================================================================
BT Insurance Funds Trust
-------------------------------------------------------
EAFE Equity Small
Equity 500 Cap
Index Index Index
Fund* Fund* Fund*
=====================================================================================================
<S> <C> <C> <C>
Units outstanding, December 31, 1998 0.000 0.000 0.000
Units purchased 0.000 0.000 0.000
Units redeemed 0.000 0.000 0.000
----------- ----------- ------------
Units outstanding December 31, 1999 0.000 0.000 0.000
=========== =========== ============
====================================================================================================================================
Dreyfus Variable Investment Fund Dreyfus Funds
---------------------------------------------------------------------------------------
Growth Socially
Capital and Money Small Responsible Stock
Appreciation Income Market Cap Growth Index
Portfolio Portfolio Portfolio Portfolio Fund, Inc. Fund
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Units outstanding, December 31, 1998 100.415 5.049 555.360 14.492 80.398 56.321
Units purchased 2,140.239 681.763 7,935.579 475.924 271.188 664.191
Units redeemed (83.880) (36.403) 0.000 (3.652) 0.000 (104.278)
----------- ---------- ------------- ---------- --------- ----------
Units outstanding December 31, 1999 2,156.774 650.409 8,490.939 486.764 351.586 616.234
=========== ========== ============ ========== ========= ==========
====================================================================================================================================
Invesco Funds Group, Inc.
------------------------------------------
High Equity Total
Yield Income Return
Fund Fund Fund
====================================================================================================================================
<S> <C> <C> <C>
Units outstanding, December 31, 1998 7.556 163.123 111.314
Units purchased 106.052 1,503.918 1,830.682
Units redeemed (0.044) 0.000 (5.797)
-------- ---------- ------------
Units outstanding December 31, 1999 113.564 1,667.041 1,936.199
========= =========== ============
====================================================================================================================================
Janus Aspen Series
-------------------------------------------------------------------------------------------
Aggressive Capital International Worldwide
Growth Balanced Appreciation Growth Growth Growth
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Units outstanding, December 31, 1998 36.621 214.770 0.000 84.318 58.950 123.659
Units purchased 792.817 2,812.213 4.141 1,290.674 2,321.121 2,207.180
Units redeemed (0.174) (95.956) 0.000 0.000 (49.452) (104.993)
---------- ---------- ------- ---------- ---------- -----------
Units outstanding December 31, 1999 829.264 2,931.027 4.141 1,374.992 2,330.619 2.225.846
========= ========== ======= =========== ========== ===========
====================================================================================================================================
<PAGE>
<CAPTION>
Morgan Stanley Dean Witter 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, 1998 0.000 30.906 15.684 10.564 23.284
Units purchased 128.179 1,441.432 811.880 758.015 682.745
Units redeemed 0.000 (0.234) (0.116) (34.752) (2.233)
-------- ----------- --------- --------- ---------
Units outstanding December 31, 1999 128.179 1,472.104 827.448 733.827 703.796
========= =========== ========== ========= =========
====================================================================================================================================
<CAPTION>
PBHG Insurance Series Fund, Inc. Strong Funds Timothy Partners
---------------------------------------------- ---------------------- ----------------
Technology Mid Cap
Large Cap and Growth Opportunity The Timothy
Growth II Growth Communications Fund Fund Plan Variable
Portfolio Portfolio Portfolio II II Series
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Units outstanding, December 31, 1998 6.572 0.000 2.516 9.046 15.156 17.653
Units purchased 133.301 565.456 920.935 155.911 781.126 357.270
Units redeemed 0.000 (15.671) (19.442) (0.275) (5.329) (0.422)
--------- --------- --------- --------- --------- --------
Units outstanding December 31, 1999 139.873 549.785 904.009 164.682 790.953 374.501
========= ========= ========= ========= ========= ========
==================================================================================================================================
</TABLE>
*For the period May 1, 1999 (commencement date of operations)
to December 31, 199
The accompanying notes are an integral part of these financial statements.
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEAR ENDED DECEMBER 31, 1999
Modified Enhanced Contracts
<TABLE>
<CAPTION>
====================================================================================================================================
BT Insurance Funds Trust
-------------------------------------------------------
EAFE Equity Small
Equity 500 Cap
Index Index Index
Fund* Fund* Fund*
=====================================================================================================
<S> <C> <C> <C>
Units outstanding, December 31, 1998 0.000 0.000 0.000
Units purchased 0.000 132.541 0.000
Units redeemed 0.000 (312.350) 0.000
------- --------- --------
Units outstanding December 31, 1999 0.000 131.993 0.000
======= ========= ========
====================================================================================================================================
Dreyfus Variable Investment Fund Dreyfus Funds
---------------------------------------------------------------------------------------
Growth Socially
Capital and Money Small Responsible Stock
Appreciation Income Market Cap Growth Index
Portfolio Portfolio Portfolio Portfolio Fund, Inc. Fund
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Units outstanding, December 31, 1998 0.000 0.000 0.000 0.000 0.000 0.000
Units purchased 179.381 0.000 0.000 202.376 0.000 246.175
Units redeemed (25.234) 0.000 0.000 (2.468) 0.000 (23.373)
--------- --------- --------- --------- -------- ----------
Units outstanding December 31, 1999 154.147 0.000 0.000 199.908 0.000 222.802
========= ========== ========= ========= ======== =========
====================================================================================================================================
Invesco Funds Group, Inc.
------------------------------------------
High Equity Total
Yield Income Return
Fund Fund Fund
====================================================================================================================================
<S> <C> <C> <C>
Units outstanding, December 31, 1998 0.000 0.000 0.000
Units purchased 0.000 0.000 0.000
Units redeemed 0.000 0.000 0.000
------- ------- -------
Units outstanding December 31, 1999 0.000 0.000 0.000
======== ======== ========
====================================================================================================================================
Janus Aspen Series
-------------------------------------------------------------------------------------------
Aggressive Capital International Worldwide
Growth Balanced Appreciation Growth Growth Growth
Portfolio Portfolio Portfolio* Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Units outstanding, December 31, 1998 0.000 0.000 0.000 0.000 0.000 0.000
Units purchased 159.044 111.697 172.055 109.122 0.000 176.308
Units redeemed 0.000 (0.142) (1.433) 0.000 0.000 (24.758)
-------- --------- -------- -------- -------- --------
Units outstanding December 31, 1999 159.044 111.555 170.622 109.122 0.000 151.550
======== ========== ========= ========= ======== =========
====================================================================================================================================
<PAGE>
<CAPTION>
Morgan Stanley Dean Witter 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, 1998 0.000 0.000 0.000 0.000 0.000
Units purchased 0.000 0.000 0.000 0.000 0.000
Units redeemed 0.000 0.000 0.000 0.000 0.000
------ ------- ------- ------- -------
Units outstanding December 31, 1999 0.000 0.000 0.000 0.000 0.000
======== ======== ======== ======= =======
====================================================================================================================================
<CAPTION>
PBHG Insurance Series Fund, Inc. Strong Funds Timothy Partners
---------------------------------------------- ---------------------- ----------------
Technology Mid Cap
Large Cap and Growth Opportunity The Timothy
Growth II Growth Communications Fund Fund Plan Variable
Portfolio Portfolio Portfolio II II Series
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Units outstanding, December 31, 1998 0.000 0.000 0.000 0.000 0.000 0.000
Units purchased 0.000 0.000 295.741 0.000 0.000 0.000
Units redeemed 0.000 0.000 (20.864) 0.000 0.000 0.000
------- -------- --------- ------- ------- -------
Units outstanding December 31, 1999 0.000 0.000 274.877 0.000 0.000 0.000
======== ======== ========= ======= ======== =======
==================================================================================================================================
*For the period May 1, 1999 (commencement date of operations) to December 31, 1999
The accompanying notes are an integral part of these financial statements.
</TABLE>
<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
====================================================================================================================================
<PAGE>
<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
==================================================================================================================================
<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
=====================================================================================================================
<PAGE>
<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
====================================================================================================================================
<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
====================================================================================================================================
<PAGE>
<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>
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
(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, 1999, the
following investment options were available:
BT Insurance Funds Trust:
o EAFE Equity Index Portfolio
o Equity 500 Index Portfolio
o Small Cap Index Portfolio
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
Invesco Funds:
o High-Yield Fund
o Equity Income Fund
o Total Return Fund
Janus Aspen Series:
o Aggressive Growth Portfolio
o Balanced Portfolio
o Capital Appreciation Portfolio
o Growth Portfolio
o International Growth Portfolio
o Worldwide Growth Portfolio
Morgan Stanley Dean Witter 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
Strong Funds:
o Mid Cap Growth Fund II
o Opportunity Fund II
Timothy Partners, Ltd.:
o The Timothy Plan Variable Series
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
The following variable sub-accounts were added to the account on May 1, 1999: BT
Insurance Funds Trust EAFE Equity Index Fund, Equity 500 Index Fund, Small Cap
Index Fund; Janus Aspen Series Capital Appreciation Portfolio. No variable
sub-accounts were deleted from the account in 1999.
In 1999, the Invesco Industrial Income Fund changed its name to the Invesco
Equity Income Fund, and the Strong Growth Fund II changed its name to the Strong
Mid Cap Growth Fund II.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States 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.
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
(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 year ended December 31, 1999 is as follows:
1999
-------------------------
Proceeds
Cost of from
Purchaes Sales
BT Insurance Funds Trust:
EAFE Equity Index Portfolio $ 75,924 $ 964
Equity 500 Index Portfolio 756,411 10,922
Small Cap Index Portfolio 162,532 2,845
Dreyfus Variable Investment Fund:
Capital Appreciation Portfolio 5,994,536 1,288,089
Growth and Income Portfolio 2,418,517 264,102
Money Market Portfolio 4,932,966 2,756,951
Small Cap Portfolio 1,463,685 424,962
Dreyfus Funds:
Socially Responsible Growth Fund, Inc. 4,236,425 151,145
Stock Index Fund 22,558,560 3,118,158
Invesco Funds:
High-Yield Fund 2,131,822 280,769
Industrial Income Fund 5,288,028 621,205
Total Return Fund 1,847,611 608,686
Janus Aspen Series:
Aggressive Growth Portfolio 6,187,083 172,257
Balanced Portfolio 19,205,526 342,980
Capital Appreciation Portfolio 5,397,253 484,943
Growth Portfolio 7,660,504 198,430
International Growth Portfolio 1,562,618 215,702
Worldwide Growth Portfolio 9,573,649 820,989
Morgan Stanley Dean Witter Universal Funds, Inc.:
Emerging Markets Equity Portfolio 345,980 127,989
Fixed Income Portfolio 2,993,137 331,744
Mid-Cap Value Portfolio 1,575,444 338,301
U.S. Real Estate Portfolio 593,357 135,773
Value Portfolio 613,170 184,496
PBHG Insurance Series Fund, Inc.:
Growth II Portfolio 741,214 124,759
Large Cap Growth Portfolio 1,929,951 177,371
Technology & Communications Portfolio 7,705,231 289,479
Strong Funds:
Growth Fund II 1,638,049 66,570
Opportunity Fund II 1,212,944 190,754
The Timothy Plan Variable Series:
The Timothy Plan Variable Series 867,375 207,127
------------- ----------
Total $121,669,502 $13,938,462
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
(4) DEDUCTIONS AND EXPENSES
Although periodic annuitization payments to contract owners vary according
to the investment performance of the sub-accounts, 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
$1,483,303 for the year ended December 31, 1999.
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, or a Modified 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 $2,361 for the year ended December 31, 1999. Under
the Modified 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 0.95% of the daily value of the total investments of the
account. These fees aggregated $167 for the year ended December 31, 1999.
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 $114,366
for the year ended December 31, 1999.
(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.
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
(6) NET ASSETS
The following is a reconciliation of net assets at December 31, 1999:
1999
-------------
Proceeds from the sales of units since organization,
less cost of units redeemed $145,559,825
Undistributed net investment income 1,832,888
Undistributed net realized gains on sale of investments 1,845,239
Net unrealized appreciation (depreciation) of investments 40,200,573
-------------
Net assets, end of period $189,438,525
==============
<PAGE>
ANNUITY INVESTORS LIFE
INSURANCE COMPANY
Statutory-Basis Financial Statements
and Other Financial Information
Years ended December 31, 1999 and 1998
With Report of Independent Auditors
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
Statutory-Basis Financial Statements
and Other Financial Information
Years ended December 31, 1999 and 1998
Contents
Report of Independent Auditors............................................1
Audited Statutory-Basis Financial Statements
Balance Sheets - Statutory-Basis..........................................2
Statements of Operations - Statutory-Basis................................3
Statements of Changes in Capital and Surplus -
Statutory-Basis...........................................................4
Statements of Cash Flows - Statutory-Basis................................5
Notes to Statutory-Basis Financial Statements.............................6
<PAGE>
Report of Independent Auditors
Board of Directors
Annuity Investors Life Insurance Company
We have audited the accompanying statutory-basis balance sheets of Annuity
Investors Life Insurance Company as of December 31, 1999 and 1998, and the
related statutory-basis statements of operations, changes in capital and
surplus, and cash flows 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 audits. We conducted our
audits in accordance with generally accepted auditing standards. Those standards
require that we plan and perform the audit 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. 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. As described in Notes B and I
to the financial statements, the Company presents its financial statements in
conformity with accounting practices prescribed or permitted by the Ohio
Insurance Department, which practices differ from generally accepted accounting
principles. The variances between such practices and generally accepted
accounting principles and the effects on the accompanying financial statements
are described in Notes B and I. In our opinion, because of the effects of the
matter described in the preceding paragraph, the financial statements referred
to above do not present fairly, in conformity with generally accepted accounting
principles, the financial position of Annuity Investors Life Insurance Company
at December 31, 1999 and 1998, or the results of its operations or its cash
flows for the years then ended. However, in our opinion, the financial
statements referred to above present fairly, in all material respects, the
financial position of Annuity Investors Life Insurance Company at December 31,
1999 and 1998, and the results of its operations and its cash flows for the
years then ended in conformity with accounting practices prescribed or permitted
by the Ohio Insurance Department.
/S/ Ernst & Young, LLP
-------------------------
Ernst & Young, LLP
March 9, 2000
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
BALANCE SHEETS
<TABLE>
<CAPTION>
STATUTORY-BASIS
December 31
1999 1998
<S> <C> <C>
ADMITTED ASSETS
Cash and investments
Fixed maturities - at amortized cost
(market value - $182,867,342 and $105,451,926) $193,743,079 $104,080,672
Policy loans 3,047,433 1,293,252
Short-term investments 10,926,798 15,489,533
Cash 3,899,250 4,400,560
Total cash and investments 211,616,560 125,264,017
Investment income due and accrued 2,755,329 1,787,577
Reinsurance ceded receivable 29,185 36,505
Other admitted assets 350,792 67,656
Total General Account admitted assets 214,751,866 127,155,755
Separate Account assets 354,371,093 120,049,207
Total admitted assets $569,122,959 $247,204,962
LIABILITIES, CAPITAL AND SURPLUS
Annuity reserves $193,500,443 $106,630,855
Policy and contract claims 1,113,896 1,190,191
Commissions due and accrued 438,742 312,211
General expenses due and accrued 386,507 258,781
Transfers to Separate Accounts due and
accrued (contingent deferred sales charges) (14,823,799) (6,469,163)
Taxes, licenses and fees due and accrued 19,861 79,500
Asset valuation reserve 736,841 370,700
Reinsurance ceded payable 58,000 416,051
Payable to parent and affiliates 322,213 288,222
Payable for securities - 2,005,397
Remittances and items not allocated 5,862,365 497,147
Other liabilities 21,380 227,316
Total General Account liabilities 187,636,449 105,807,208
Separate Account liabilities 354,371,093 120,049,207
Total liabilities 542,007,542 225,856,415
Common stock, par value- $125 per share:
- 25,000 shares authorized
- 20,000 shares issued and outstanding 2,500,000 2,500,000
Gross paid-in and contributed surplus 34,550,000 24,550,000
Unassigned deficit (9,934,583) (5,701,453)
---------- ----------
Total capital and surplus 27,115,417 21,348,547
Total liabilities, capital and surplus $569,122,959 $247,204,962
</TABLE>
See notes to statutory-basis financial statements
2
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
STATUTORY-BASIS
<TABLE>
<CAPTION>
Year ended December 31
1999 1998
<S> <C> <C>
Revenues
Premiums and annuity considerations $ 59,560,346 $ 72,586,568
Deposit-type funds 204,983,631 89,221,073
Net investment income 10,592,696 4,811,248
Amortization of interest maintenance reserve (23,774) (2,884)
Commission and expense allowance on reinsurance ceded 11,920 36,505
Contract charges - Separate Accounts 2,975,960 938,114
Other income 624,366 175,491
Total revenue 278,725,145 167,766,115
Benefits and expenses
Increase in aggregate reserves 86,869,589 83,443,867
Increase (decrease) in policy and contract claim
reserves (76,295) 1,190,191
Policyholders' benefits 25,208,176 6,298,169
Commissions 17,014,820 12,860,357
General insurance expenses 8,852,677 5,805,845
Taxes, licenses and fees 489,962 437,001
Net transfers to Separate Accounts 144,083,078 62,546,680
Total benefits and expenses 282,442,007 172,582,110
Loss from operations before federal income taxes (3,716,862) (4,815,995)
Benefit for federal income taxes - -
Loss from operations after federal income taxes before (3,716,862) (4,815,995)
net realized capital losses
Net realized capital losses:
Net realized capital losses before federal income (412,324) (2,828)
taxes and transfer to IMR
Capital loss tax benefit - -
Interest maintenance reserve transfer (net of tax) 268,011 1,838
Net realized capital losses after transfer to IMR (144,313) (990)
Net loss $ (3,861,175) $(4,816,985)
See notes to statutory-basis financial statements
</TABLE>
3
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
STATUTORY-BASIS
<TABLE>
<CAPTION>
Year ended December 31
<S> <C> <C>
1999 1998
Common stock
Balance at beginning and end of year $ 2,500,000 $ 2,500,000
Gross paid-in and contributed surplus
Balance at beginning of year $ 24,550,000 $ 17,550,000
Surplus contribution by parent 10,000,000 7,000,000
Balance at end of year $ 34,550,000 $ 24,550,000
Unassigned deficit
Balance at beginning of year $ (5,701,453) $ (154,910)
Net loss (3,861,175) (4,816,985)
Increase in non-admitted assets (39,698) (336,458)
Increase in asset valuation reserve (366,142) (244,624)
Adjustment for prior year taxes 33,885 (148,476)
Balance at end of year $ (9,934,583) $ (5,701,453)
Total capital and surplus $ 27,115,417 $ 21,348,547
See notes to statutory-basis financial statements
</TABLE>
4
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
STATUTORY-BASIS
<TABLE>
<CAPTION>
Year ended December 31
<S> <C> <C>
1999 1998
Operations:
Premiums and annuity considerations $ 59,560,346 $ 72,586,568
Deposit-type funds 204,983,631 89,221,073
Net investment income 9,706,002 3,673,508
Net increase in policy loans (1,754,181) (1,011,494)
Policyholder benefits paid (25,232,406) (6,298,169)
Commissions, expenses and other taxes paid (26,183,048) (18,779,248)
Net transfers to Separate Accounts (152,437,714) (66,844,972)
Contract charges - Separate Accounts 2,975,960 938,114
Other cash provided (used) 5,414,876 (200,930)
Net cash provided by operations 77,033,466 73,284,450
Investing activities:
Sale, maturity or repayment of fixed maturities 17,388,402 4,617,366
Purchase of fixed maturities (107,480,516) (75,650,853)
Cash (used) provided from receivable/payable
for securities (2,005,397) 2,005,397
Net cash used in investment activities (92,097,511) (69,028,090)
Financing activities:
Surplus paid in 10,000,000 7,000,000
Net cash provided by financing activities 10,000,000 7,000,000
Net (decrease) increase in cash and short-term
investments (5,064,045) 11,256,360
Cash and short-term investments at beginning of year 19,890,093 8,633,733
Cash and short-term investments at end of year $ 14,826,048 $ 19,890,093
</TABLE>
See notes to statutory-basis financial statements
5
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
A. GENERAL
Annuity Investors Life Insurance Company ("AILIC" or "the Company"), a stock
life insurance company domiciled in the State of Ohio, is an indirectly owned
subsidiary of American Annuity Group, Inc. ("AAG"), a publicly traded financial
services holding company of which American Financial Group, Inc.("AFG") owned
83% as of December 31, 1999.
AILIC's products are variable and fixed annuities. The variable annuities are
reported as deposit-type funds and are marketed to hospitals, educational
institutions and other qualified and non-qualified markets. During 1997, AILIC
also began writing individual fixed annuity products produced by one large
agency, primarily in the western part of the United States. In 1999 and 1998,
the individual fixed annuity products represented approximately 23% and 45%,
respectively, of total production
B. ACCOUNTING POLICIES
BASIS OF PRESENTATION The accompanying financial statements have been prepared
in conformity with accounting practices prescribed or permitted by the National
Association of Insurance Commissioners ("NAIC") and the Ohio Insurance
Department, which vary in some respects from generally accepted accounting
principles ("GAAP"). The more significant of these differences are as follows:
(a) annuity receipts and deposit-type funds are accounted for as revenues
versus liabilities;
(b) costs incurred in the acquisition of new business such as commissions,
underwriting and policy issuance costs are expensed at the time incurred
versus being capitalized;
(c) reserves established for annuity reserves are calculated using more
conservative assumptions for mortality and interest rates than would be
used under GAAP;
(d) an Interest Maintenance Reserve ("IMR") is provided whereby portions of
realized gains and losses from fixed income investments are deferred and
amortized into investment income as prescribed by the NAIC;
(e) investments in fixed maturity securities considered "available for sale"
(as defined by GAAP)are generally recorded at amortized cost versus market;
(f) an Asset Valuation Reserve ("AVR")is provided which reclassifies a portion
of surplus to liabilities; and
(g) the cost of certain assets designated as "non-admitted assets"
(principally advance commissions paid to agents)is charged against surplus.
Preparation of the financial statements requires management to make estimates
and assumptions that affect amounts reported in the financial statements and
accompanying notes. Such estimates and assumptions could change in the future as
more information becomes known which could impact the amounts reported and
disclosed herein.
Certain reclassifications have been made to the prior year financial statements
to conform with current year presentation.
INVESTMENTS Asset values are generally stated as follows: Bonds not backed by
other loans, where permitted, are carried at amortized cost using the interest
method; loan-backed bonds and structured securities, where permitted, are
carried at amortized cost using the interest method; short-term investments are
carried at cost; and policy loans are carried at the aggregate unpaid balance.
The Company uses dealer modeled prepayment assumptions to determine effective
yields for loan-backed bonds and structured securities. These assumptions are
consistent with the current interest rate and economic environment. Significant
changes in estimated cash flows from the original purchase assumptions are
accounted for on a prospective basis.
As prescribed by the NAIC, the market value for investments in bonds is
determined by the values included in the Valuations of Securities manual
published by the NAIC's Securities Valuation Office. Those values generally
represent quoted market value prices for securities traded in the public
marketplace or analytically determined values by the Securities Valuation
Office.
6
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1999 AND 1998
INVESTMENTS (continued)
Short-term investments having original maturities of three months or less when
purchased are considered to be cash equivalents for purposes of the
statutory-basis financial statements.
The carrying values of cash and short-term investments approximate their fair
values.
Gains or losses on sales of securities are recognized at the time of disposition
with the amount of gain or loss determined on the specific identification basis.
The IMR applies to interest-related realized capital gains and losses (net of
tax) and is intended to defer realized gains and losses resulting from changes
in the general level of interest rates. The IMR is amortized into investment
income over the approximate remaining life of the investments sold. AILIC has an
IMR asset which is non-admitted and charged against surplus.
The AVR provides for possible credit-related losses on securities and is
calculated according to a specified formula as prescribed by the NAIC for the
purpose of stabilizing surplus against fluctuations in the market value of
investment securities. Changes in the required reserve balances are made by
direct credits or charges to surplus.
PREMIUMS Annuity premiums and deposit-type funds are recognized as revenue when
received.
SEPARATE ACCOUNTS Separate account assets and liabilities reported in the
accompanying statutory-basis balance sheets represent funds that are separately
administered, principally for annuity contracts, and for which the
contractholder, rather than AILIC, bears the investment risk. Assets of the
separate accounts are not chargeable with liabilities incurred in any other
business operation of AILIC. Separate account assets are reported at market
value. The operations of the separate accounts are not included in the
accompanying statutory-basis financial statements. Fees charged on separate
account policyholder deposits are included in other income.
ANNUITY RESERVES Annuity reserves are developed by actuarial methods and are
determined based on published tables using statutory specified interest rates
and valuation methods that will provide, in the aggregate, reserves that are
greater than or equal to the minimum amounts required by law.
The fair value of the liability for annuities in the payout phase is assumed to
be the present value of the anticipated cash flows, discounted at current
interest rates. Fair value of annuities in the accumulation phase is assumed to
be no more than the policyholders' cash surrender amount. The aggregate fair
value of all reserve liabilities was approximately $193.5 million and $106.6
million at December 31, 1999 and 1998, respectively.
REINSURANCE Reinsurance premiums, benefits and expenses are accounted for on a
basis consistent with those used in accounting for the original policies issued
and the terms of the reinsurance contracts. AILIC remains obligated for amounts
ceded in the event that the reinsurers do not meet their obligations.
FEDERAL INCOME TAXES American Financial Corporation ("AFC") files consolidated
federal income tax returns which include AILIC. The provision for income taxes
has been computed as if AILIC had filed tax returns on a separate company basis.
In accordance with terms of AAG's indentures, AAG receives AILIC's tax
allocation payments and any amounts owed to AFC are paid by AAG.
BENEFIT PLAN All employees meeting minimum requirements are eligible to
participate in an Employee Stock Ownership Retirement Plan ("ESORP") established
by AAG. The ESORP is a noncontributory, trusteed plan which invests primarily in
securities of AAG for the benefit of the employees of AAG and its subsidiaries.
Contributions are discretionary by the Board of Directors of AAG and are charged
against earnings in the year for which they are declared. Qualified employees
having vested rights are entitled to benefit payments at age 60.
7
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1999 AND 1998
C. INVESTMENTS
Fixed maturity investments at December 31 consisted of the following:
<TABLE>
<CAPTION>
1999
Carrying Market Gross Unrealized
Value Value Gains Losses
<S> <C> <C> <C> <C>
U.S. Government and government
agencies and authorities $ 23,638,025 $ 22,894,844 $ 13,899 $ 757,080
Public utilities 7,860,872 7,467,832 - 393,040
Mortgage-backed securities 84,039,756 78,987,840 22,523 5,074,439
All other corporate 78,204,426 73,516,826 112,294 4,799,894
Total fixed maturity investments $193,743,079 $182,867,342 $148,716 $11,024,453
1998
Carrying Market Gross Unrealized
Value Value Gains Losses
U.S. Government and government
agencies and authorities $ 11,468,057 $ 11,725,221 $ 257,164 $ -
Public Utilities 3,515,521 3,572,345 56,824 -
Mortgage-backed securities 36,024,471 35,613,490 241,662 652,643
All other corporate 53,072,623 54,540,870 1,485,224 16,977
Total fixed maturity investments $104,080,672 $105,451,926 $2,040,874 $669,620
</TABLE>
The table below sets forth the scheduled maturities of AILIC's fixed maturity
investments as of December 31, 1999:
<TABLE>
<CAPTION> Carrying Market
Value Value
<S> <C> <C>
Bonds by maturity:
Due within 1 year or less $ 4,207,465 $ 4,174,380
Over 1 year through 5 years 18,607,502 18,066,284
Over 5 years through 10 years 93,436,969 88,555,502
Over 10 years through 20 years 54,382,249 50,109,709
Over 20 years 23,108,894 21,961,467
Total bonds by maturity $193,743,079 $182,867,342
</TABLE>
The expected maturities in the foregoing table may differ from the contractual
maturities because certain borrowers have the right to call or prepay
obligations with or without call or prepayment penalties.
Proceeds from sales of fixed maturity investments were $17.4 million in 1999 and
$4.6 million in 1998. Gross realized gains of $138,708 and $6,993 and gross
realized losses of $551,032 and $9,821 were realized on those sales during 1999
and 1998, respectively.
U.S. Treasury Notes with a carrying value of $6.8 million at December 31, 1999
and 1998 were on deposit as required by the insurance departments of various
states.
8
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1999 AND 1998
Net investment income consisted of the following:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Bonds $10,314,501 $4,421,263
Short-term investments 371,460 455,230
Cash on hand and on deposit 5,357 1,965
Policy loans 116,190 32,876
Miscellaneous 16,137 6,776
Gross investment income 10,823,645 4,918,110
Investment expenses (230,949) (106,862)
Net investment income $10,592,696 $4,811,248
</TABLE>
D. FEDERAL INCOME TAXES
AILIC has no federal income taxes available for recoupement in the event of
future losses. AILIC has approximately $2.9 million, $4.6 million and $2.0
million in loss carryforwards derived from years ended December 31, 1999, 1998
and 1997, respectively, to offset future year's taxable income. These loss
carryforwards will expire in the year 2019, 2018 and 2012, respectively. Loss
carryforwards derived prior to 1998 will expire in 15 years, and those derived
in 1998 or after, per new IRS regulations, will expire in 20 years.
E. RELATED PARTY TRANSACTIONS
On December 31, 1998, for all policies issued by AILIC on or after August 1,
1998, a co-insurance agreement was entered into with Great American Life
Insurance Company ("GALIC") to reinsure all of AILIC's equity indexed annuity
premiums, benefits and expenses with GALIC. As of December 31, 1999 and 1998,
AILIC transferred $0.1 million and $0.4 million, respectively, of premiums to
GALIC.
AILIC has an agreement with AAG, subject to the direction of the Finance
Committee of AILIC, whereby AAG, along with services provided by American Money
Management, Inc. (an affiliate), provides for management and accounting services
related to the investment portfolio. In 1999 and 1998, AILIC paid $146,072 and
$90,300 respectively, in management fees.
AILIC has an agreement with AAG Securities, Inc., a wholly-owned subsidiary of
AAG, whereby AAG Securities is the principal underwriter and distributor of
AILIC's variable contracts. AILIC pays AAG Securities for acting as underwriter
under a distribution agreement. In 1999 and 1998, AILIC paid $5.0 million and
$2.1 million, respectively, in commissions to AAG Securities.
Certain administrative, management, accounting, actuarial, data processing,
collection and investment services are provided under agreements between AILIC
and affiliates at charges not unfavorable to AILIC or the insurance affiliates.
In 1999 and 1998, AILIC paid $2.9 million and $2.4 million, respectively, for
services to affiliates.
F. DIVIDEND RESTRICTIONS
The amount of dividends which can be paid by AILIC without prior approval of
regulatory authorities is subject to restrictions relating to capital and
surplus and net income. The maximum amount of dividends payable in 2000 without
prior approval is $0.
9
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1999 AND 1998
G. ANNUITY RESERVES, EXCLUDING SEPARATE ACCOUNTS
At December 31, 1999, AILIC's annuity reserves that are subject to discretionary
withdrawal (with adjustment), subject to discretionary withdrawal (without
adjustment), and not subject to discretionary withdrawal are summarized as
follows (in millions):
<TABLE>
<CAPTION>
Amount Percent
<S> <C> <C>
Subject to discretionary withdrawal (with adjustment):
With market value adjustment $ - - %
At book value less current surrender charge of 5% or more 158.7 29.7
At market value 339.5 63.7
Total with adjustment or at market value 498.2 93.4
Subject to discretionary withdrawal (without adjustment) at
book value with minimal or no charge or adjustment 20.9 3.9
Not subject to discretionary withdrawal 14.5 2.7
Total annuity reserves-before reinsurance 533.6 100.0 %
Less reinsurance ceded (0.5)
Net annuity reserves $533.1
Reconciliation to policy benefit reserves for life policies and contracts:
Annuity reserves $193.5
Contingent deferred sales charges (14.8)
Separate Account Liabilities 354.4
Net life reserves -
Miscellaneous other reserves -
Total policy benefit reserves for life policies and contracts $533.1
</TABLE>
10
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1999 AND 1998
H. SEPARATE ACCOUNTS
The Company writes individual and group non-guaranteed variable annuities. Net
transfers to (from) the Separate Accounts for the years ended December 31, 1999
and 1998 are summarized as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
Transfers to Separate Accounts - deposit-type funds $141,316,931 $64,500,892
Transfers to Separate Accounts - withdrawals and other transfers, net 11,120,629 2,344,080
Transfers from Separate Accounts - contingent deferred sales charges (8,354,482) (4,298,292)
Net transfers to Separate Accounts $144,083,078 $62,546,680
</TABLE>
<TABLE>
<CAPTION>
All Separate Account reserves are non-guaranteed and subject to discretionary withdrawal at market value. Investments in the
Separate Accounts at December 31 consisted of the following:
1999
Market Gross Unrealized
Cost Value Gains Losses
<S> <C> <C> <C> <C>
Separate Account A $115,472,858 $164,932,414 $49,962,607 $ 503,051
Separate Account B 149,238,107 189,438,679 40,703,435 502,863
Total Separate Accounts $264,710,965 $354,371,093 $90,666,042 $1,005,914
1998
Market Gross Unrealized
Cost Value
Gains Losses
Separate Account A $ 64,754,695 $ 76,633,840 $12,249,838 $ 370,693
Separate Account B 39,705,022 43,415,367 3,876,131 165,786
Total Separate Accounts $104,459,717 $120,049,207 $16,125,969 $ 536,479
</TABLE>
11
<PAGE>
PART C - 333-19725
Other Information
Item 24. Financial Statements and Exhibits
(a) Financial Statements
All required financial statements are included in Parts A or B of this
Registration Statement.
(b) Exhibits
(1) Resolution of the Board of Directors of Annuity Investors Life
Insurance Compan(R) authorizing establishment of
Annuity Investors(R) Variable Account B.1/
(2) Not Applicable.
(3) (a) Distribution Agreement between Annuity Investors Life
Insurance Company(R) and AAG Securities, Inc.2/
(b) Form of Selling Agreement between Annuity Investors Life
Insurance Company(R), AAG Securities, Inc. and another
Broker-Dealer.1/
(c) Revised form of Selling Agreement between Annuity
Investors Life Insurance Company(R), AAG Securities, Inc.
and another Broker-Dealer.
(4) Individual and Group Contract Forms and Endorsements.
(a) Form of Qualified Individual Flexible Premium Deferred
Variable Annuity Contract.2/
(b) Form of Non-Qualified Individual Flexible Deferred
Variable Annuity Contract.2/
(c) Form of Loan Endorsement to Individual Contract.2/
(d) Form of Tax Sheltered Annuity Endorsement to Individual
Contract.2/
(e) Form of Qualified Pension, Profit Sharing and Annuity
Plan Endorsement to Individual Contract.2/
(f) Form of Employer Plan Endorsement to Individual
Contract.2/
(g) Form of Individual Retirement Annuity Endorsement to
Individual Contract.2/
(h) Form of Texas Optional Retirement Program Endorsement to
Individual Contract.2/
(i) Form of Long-Term Care Waiver Rider to Individual
Contract.2/
(j) Form of SIMPLE IRA Endorsement to Individual Contract.2/
(k) Form of Group Flexible Premium Deferred Variable Annuity
Contract.2/
(l) Form of Certificate of Participation under a Group
Flexible Premium Deferred Variable Annuity Contract.2/
(m) Form of Loan Endorsement to Group Contract.2/
(n) Form of Loan Endorsement to Certificate of Participation
under a Group Contract. 2/
<PAGE>
(o) Form of Tax Sheltered Annuity Endorsement to Group
Contract.2/
(p) Form of Tax Sheltered Annuity Endorsement to Certificate
of Participation under a Group Contract.2/
(q) Form of Qualified Pension, Profit Sharing and Annuity
Plan Endorsement to Group Contract.2/
(r) Form of Qualified Pension, Profit Sharing and Annuity
Plan Endorsement to Certificate of Participation under a
Group Contract.2/
(s) Form of Employer Plan Endorsement to Group Contract.2/
(t) Form of Employer Plan Endorsement to Certificate of
Participation under a Group Contract.2/
(u) Form of Deferred Compensation Endorsement to Group
Contract.2/
(v) Form of Deferred Compensation Endorsement to Certificate
of Participation under a Group Contract.2/
(w) Form of Texas Optional Retirement Program Endorsement to
Group Contract.2/
(x) Form of Texas Optional Retirement Program Endorsement to
Certificate of Participation under a Group Contract.2/
(y) Form of Long-Term Care Waiver Rider to Group Contract.2/
(z) Form of Long-Term Care Waiver Rider to Certificate of
Participation under a Group Contract.2/
(aa) Revised form of Individual Retirement Annuity Endorsement
to Individual Qualified Contract. 3/
(bb) Revised form of SIMPLE IRA Endorsement to Qualified
Individual Contract.3/
(cc) Form of Roth IRA Endorsement to Qualified Individual
Contract. 3/
(dd) Revised form of Employer Plan Endorsement to Group
Contract. 3/
(ee) Revised form of Employer Plan Endorsement to Certificate
of Participation under a Group Contract. 3/
(ff) Revised form of Employer Plan Endorsement to Qualified
Individual Contract. 3/
(gg) Revised form of Tax Sheltered Annuity Endorsement to
Group Contract.3/
(hh) Revised form of Tax Sheltered Annuity Endorsement to
Certificate of Participation under a Group Contract. 3/
(ii) Revised form of Tax Sheltered Annuity Endorsement to
Qualified Individual Contract. 3/
<PAGE>
(jj) Revised form of Qualified Pension, Profit Sharing and
Annuity Plan Endorsement to Group Contract. 3/
(kk) Revised form of Qualified Pension, Profit Sharing and
Annuity Plan Endorsement to Certificate of Participation
under a Group Contract. 3/
(ll) Revised form of Qualified Pension, Profit Sharing and
Annuity Plan Endorsement to Qualified Individual
Contract. 3/
(mm) Form of Governmental Section 457 Plan Endorsement to
Group Contract. 3/
(nn) Form of Governmental Section 457 Plan Endorsement to
Certificate of Participation under a Group Contract. 3/
(oo) Form of Governmental Section 457 Plan Endorsement to
Qualified Individual Contract. 3/
(pp) Form of Successor Owner Endorsement to Group Contract. 6/
(qq) Form of Successor Owner Endorsement to Certificate of
Participation under a Group Contract. 6/
(rr) Form of Successor Owner Endorsement to Qualified
Individual Contract and Non-Qualified Individual
Contract. 6/
(ss) Revised form of Successor Owner Endorsement to Group
Contract . 7/
(tt) Revised form of Successor Owner Endorsement to Certificate
of Participation under a Group Contract. 7/
(uu) Revised form of Successor Owner Endorsement to Qualified
Individual Contract and Non-Qualified Individual
Contract. 7/
(vv) Form of Individual Retirement Annuity Endorsement to Group
Contract. 7/
(ww) Form of Individual Retirement Annuity Endorsement to
Certificate of Participation under a Group Contract. 7/
(xx) Form of SIMPLE Individual Retirement Annuity Endorsement
to Group Contract. 7/
(yy) Form of SIMPLE Individual Retirement Annuity Endorsement
to Certificate of Participation under a Group Contract 7/
(zz) Form of Roth Individual Retirement Annuity Endorsement to
Group Contract. 7/
(aaa) Form of Roth Individual Retirement Annuity Endorsement to
Certificate of Participation under a Group Contract. 7/
(bbb) Form of Unisex Endorsement to Nonqualified Individual
Contract. 7/
<PAGE>
(ccc) Form of Income Benefit Rider to Non-Qualified Individual
Contract8 .
(ddd) Form of Income Benefit Rider to Qualified Individual
Contract8
(eee) Form of Income Benefit Rider to Group Contract 8 .
(fff) Form of Income Benefit Rider to Certificate of
Participation under a Group Contract 8
(5) (a) Form of Application for Individual Flexible Premium
Deferred Annuity Contract and Certificate of
Participation under a Group Contract.2/
(b) Form of Application for Group Flexible Premium Deferred
Annuity Contract.2/
(c) Revised form of Application for Individual Flexible
Premium Deferred Annuity Contract and Certificate of
Participation under a Group Contract. 4/
(d) Revised form of Application for Group Flexible Premium
Deferred Annuity Contract. 4/
(6) (a) Articles of Incorporation of Annuity Investors Life
Insurance Company(R).1/
(i) Amendment to Articles of Incorporation, adopted
April 9, 1996, and approved by the Secretary of
State, State of Ohio, on July 11, 1996.2/
(ii) Amendment to Articles of Incorporation, adopted
August 9, 1996, and approved by the Secretary of
State, State of Ohio, on December 3, 1996.2/
(b) Code of Regulations of Annuity Investors Life Insurance
Company.(R)1/
(7) Not Applicable.
(8) (a) Participation Agreement between Annuity Investors Life
Insurance Company(R) and Dreyfus Variable Investment
Fund.2/
(i) Letter Agreement dated April 14, 1997 between
Annuity Investors Life Insurance Company (R) and
Dreyfus Variable Investment Fund.2/
(b) Participation Agreement between Annuity Investors Life
Insurance Company(R) and Dreyfus Life and Annuity
Index Fund, Inc. (d/b/a Dreyfus Stock Index Fund).2/
(i) Letter Agreement dated April 14, 1997 between
Annuity Investors Life Insurance Company(R) and
Dreyfus Life and Annuity Index Fund, Inc.
(d/b/a Dreyfus Stock Index Fund).2/
(c) Participation Agreement between Annuity Investors Life
Insurance Company(R) and The Dreyfus Socially
Responsible Growth Fund, Inc.2/
(i) Letter Agreement dated April 14, 1997 between
Annuity Investors Life Insurance Company(R) and The
Dreyfus Socially Responsible Growth Fund, Inc.2/
(d) Participation Agreement between Annuity Investors Life
Insurance Company(R) and Janus Aspen Series.2/
(e) Participation Agreement between Annuity Investors Life
Insurance Company(R) and Strong Variable Insurance
Funds, Inc. and Strong Special Fund II, Inc.2/
(f) Participation Agreement between Annuity Investors Life
Insurance Company(R) and INVESCO Variable Investment
Funds, Inc.2/
<PAGE>
(g) Participation Agreement between Annuity Investors Life
Insurance Company(R) and Morgan Stanley Universal
Funds, Inc.2/
(h) Participation Agreement between Annuity Investors Life
Insurance Company(R) and PBHG Insurance Series Fund,
Inc.2/
(i) Service Agreement between Annuity Investors Life Insurance
Company(R)and American Annuity GroupSM, Inc.1/
(j) Agreement between AAG Securities, Inc. and AAG Insurance
Agency, Inc.1/
(k) Investment Service Agreement between Annuity Investors
Life Insurance Company(R) and American Annuity
GroupSM, Inc. 1/
(l) Service Agreement between Annuity Investors Life Insurance
Company(R) and Strong Capital Management, Inc.2/
(m) Service Agreement between Annuity Investors Life Insurance
Company(R) and Pilgrim Baxter & Associates, Ltd.2/
(n) Service Agreement between Annuity Investors Life Insurance
Company(R)and Morgan Stanley Asset Management, Inc. 2/
(o) Amended and Restated Agreement between The Dreyfus
Corporation and Annuity Investors Life Insurance
Company(R).2/
(p) Service Agreement between Annuity Investors Life
Insurance Company(R) and Janus Capital Corporation.2/
(q) Service Agreement between INVESCO Funds Group, Inc.
and Annuity Investors Life Insurance Company.4/
(r) Participation Agreement between The Timothy Plan Variable
Series, Timothy Partners, Ltd. and Annuity Investors Life
Insurance Company. 4/
<PAGE>
(s) Service Agreement between The Timothy Plan Variable Series
and Annuity Investors Life Insurance Company. 4/
(t) Participation Agreement between BT Insurance Funds Trust
and Annuity Investors Life Insurance Company. 8/
(u) Service Agreement between Bankers Trust Company and
Annuity Investors Life Insurance Compan. 8
(9) Opinion and Consent of Counsel.1/
(10) Consent of Independent Auditors (filed herewith).
(11) No financial statements are omitted from Item 23.
(12) Not Applicable.
(13) Schedule for Computation of Performance Quotations. 4/
(14) Not Applicable
(15) Powers of Attorney (filed herewith).
________________________
1/ Filed with Form N-4 on December 23, 1996.
2/ Filed with Pre-Effective Amendment No. 1 on June 3, 1997.
3/ Filed with Post-Effective Amendment No. 1 on February 27, 1998.
4/ Filed with Post-Effective Amendment No. 2 on April 29, 1998.
5/ Incorporated by reference to Pre-Effective Amendment No. 1, filed
on behalf of Annuity Investors Variable Account B, SEC
File No. 333-51955 on July 6, 1998.
6/ Filed with Post-Effective Amendment No. 3 on November 17, 1998.
7/ Filed with Post-Effective Amendment No. 4 on February 1, 1999.
8/ Filed with Post-Effective Amendment No. 5 on February 26, 1999.
<PAGE>
Item 25. Directors and Officers of the Depositor
Principal Positions and Offices
Name Business Address With the Company
Charles R. Scheper (1) President, Chief Executive
Officer and
Director
Stephen Craig Lindner (1) Director
William Jack Maney, II (1) Assistant Treasurer and
Director
Robert Allen Adams (1) Chairman of the Board of Directors
Mark Francis Muething (1) Executive Vice President, Secretary,
General Counsel and Director
David B. Rich (1) Chief Operating Officer, Director
Thomas Kevin Liguzinski (1) Senior Vice President
Charles Kent McManus (1) Senior Vice President
Michael Joseph O'Connor (1) Senior Vice President
John P. Gruber (1) Vice President
Betty Marie Kasprowicz (1) Vice President and Assistant
Secretary
Wendy L. Wilson (1) Vice President, and Treasurer
Thomas E. Mischell (1) Assistant Treasurer
(1) P.O. Box 5423, Cincinnati, Ohio 45201-5423.
Item 26. Persons Controlled by or Under Common Control With the Depositor or
Registrant
The Depositor, Annuity Investors Life Insurance Company(R) is a wholly owned
subsidiary of Great American(R) Life Insurance Company, which is a wholly owned
subsidiary of American Annuity Group,SM Inc. The Registrant, Annuity
Investors(R) Variable Account B, is a segregated asset account of Annuity
Investors Life Insurance Compan (R).
The following chart shows the affiliations among Annuity Investors Life
Insurance Company(R) and its parent and its affiliated entities.
<PAGE>
<TABLE>
<CAPTION>
AMERICAN FINANCIAL GROUP, INC. % OF STOCK
OWNED (1)
| STATE OF DATE OF BY IMMEDIATE NATURE OF
| DOMICILE INCORPORATION PARENT COMPANY BUSINESS
| -------- ------------- -------------- ---------
<S> <C> <C> <C> <C>
|
|_AFC Holding Company Ohio 12/09/1994 100 Holding Company
|_AHH Holdings, Inc. Florida 12/27/1995 49 Holding Company
|_Columbia Financial Company Florida 10/26/1993 100 Real Estate Holding Company
|_American Heritage Holding Corporation Delaware 11/02/1994 100 Home Builder
|_Heritage Homes Realty, Inc. Florida 07/20/1993 100 Home Sales
|_Southeast Title, Inc. Florida 05/16/1995 100 Title Company
|_Columbia Financial Company Florida 10/26/1993 100 Real Estate Holding Company
|_Heritage Home Finance Corporation Florida 02/10/1994 100 Finance Company
|_American Financial Capital Trust I Delaware 09/14/1996 100 Statutory Business Trust
|_American Financial Corporation Ohio 11/15/1955 100 Holding Company
|_AFC Coal Properties, Inc. Ohio 12/18/1996 100 Real Estate Holding Company
|_American Financial Corporation Ohio 08/27/1963 100 Inactive
|_American Money Management Corporation Ohio 03/01/1973 100 Investment Management
|_American Money Management International, N.V Netherland - 05/10/1985 100 Securities Management
Antilles
|_American Premier Underwriters, Inc. Pennsylvania 00/00/1846 100(2) Diversified
|_The Ann Arbor Railroad Company Michigan 09/21/1895 99 Inactive
|_The Associates of the Jersey Company New Jersey 11/10/1804 100 Inactive
|_Cal Coal, Inc. Illinois 05/30/1979 100 Inactive
|_GAI (Bermuda) Ltd. Bermuda 04/06/1998 100 Holding Company
|_GAI Insurance Company, Ltd. Bermuda 09/18/1989 100 Reinsurance Company
|_The Indianapolis Union Railway Company Indiana 11/19/1872 100 Inactive
|_Lehigh Valley Railroad Company Pennsylvania 04/21/1846 100 Inactive
|_The New York and Harlem Railroad Company New York 04/25/1831 97 Inactive
|_The Owasco River Railway, Inc. New York 06/02/1881 100 Inactive
|_PCC Real Estate, Inc. New York 12/15/1986 100 Holding Company
|_PCC Chicago Realty Corp. New York 12/23/1986 100 Real Estate Developer
|_PCC Gun Hill Realty Corp. New York 12/18/1985 100 Real Estate Developer
|_PCC Michigan Realty, Inc. Michigan 11/09/1987 100 Real Estate Developer
|_PCC Scarsdale Realty Corp. New York 06/01/1986 100 Real Estate Developer
|_Scarsdale Depot Associates, L.P. Delaware 05/05/1989 80 Real Estate Developer
|_Penn Central Energy Management Company Delaware 05/11/1987 100 Energy Operations Manager
|_Pennsylvania Company Delaware 12/05/1958 100 Holding Company
|_Atlanta Casualty Company Ohio 06/13/1972 100(2) Property/Casualty Insurance
|_American Premier Insurance Company Indiana 11/30/1989 100 Property/Casualty Insurance
|_Atlanta Reserve Insurance Company Ohio 12/07/1998 100 Property/Casualty Insurance
|_Atlanta Specialty Insurance Company Ohio 02/06/1974 100 Property/Casualty Insurance
|_Atlanta Casualty Group, Inc. Georgia 04/01/1977 100 Insurance Agency
|_Atlanta Casualty General Agency, Inc. Texas 03/15/1961 100 Managing General Agency
|_Atlanta Insurance Brokers, Inc. Georgia 02/06/1971 100 Insurance Agency
|_Treaty House, Ltd. (d/b/a Mr. Budget) Nevada 11/02/1971 100 Insurance Premium Finance
|_Penn Central U.K. Limited United Kingdom 10/28/1992 100 Insurance Holding Company
|_Insurance (GB) Limited United Kingdom 05/13/1992 100 Property/Casualty Insurance
</TABLE>
- 1 -
<PAGE>
<TABLE>
<CAPTION>
|_AFC Holding Company % OF STOCK
|_American Financial Corporation OWNED (1)
|_American Premier Underwriters, Inc. STATE OF DATE OF BY IMMEDIATE NATURE OF
|_Pennsylvania Company DOMICILE INCORPORATION PARENT COMPANY BUSINESS
-------- ------------- -------------- ---------
<S> <C> <C> <C> <C>
|_Delbay Corporation Delaware 12/27/1962 100 Inactive
|_Great Southwest Corporation Delaware 10/25/1978 100 Real Estate Developer
|_World Houston, Inc. Delaware 05/30/1974 100 Real Estate Developer
|_Hangar Acquisition Corp. Ohio 10/06/1995 100 Aircraft Investment
|_Infinity Insurance Company Indiana 07/09/1955 100 Property/Casualty Insurance
|_Infinity Agency of Texas, Inc. Texas 07/15/1992 100 Managing General Agency
|_The Infinity Group, Inc. Indiana 07/22/1992 100 Services Provider
|_Infinity National Insurance Company Indiana 08/05/1992 100 Property/Casualty Insurance
|_Infinity Select Insurance Company Indiana 06/11/1991 100 Property/Casualty Insurance
|_Leader Insurance Company Ohio 03/20/1963 100 Property/Casualty Insurance
|_American Commonwealth Development
Company Texas 07/23/1963 100 Real Estate Development
|_ACDC Holdings Corporation Texas 05/04/1981 100 Real Estate Development
|_Budget Insurance Premiums, Inc. Ohio 02/14/1964 100 Premium Finance Company
|_Leader Group, Inc. Ohio 12/12/1997 100 Services Provider
|_Leader Managing General Agency, Inc. Texas 05/19/1989 100 Managing General Agency
|_Leader National Agency, Inc. Ohio 04/05/1963 100 Brokering Agent
|_Leader National Agency of Texas, Inc. Texas 01/25/1994 100 Managing General Agency
|_Leader Preferred Insurance Company Ohio 11/07/1994 100 Property/Casualty Insurance
|_Leader Specialty Insurance Company Indiana 03/10/1994 100 Property/Casualty Insurance
|_TICO Insurance Company Ohio 06/03/1980 100 Property/Casualty Insurance
|_PCC Technical Industries, Inc. California 03/07/1955 100 Holding Company
|_ESC, Inc. California 11/02/1962 100 Connector Accessories
|_Marathon Manufacturing Companies, Inc. Delaware 11/18/1983 100 Holding Company
|_Marathon Manufacturing Company Delaware 12/07/1979 100 Inactive
|_PCC Maryland Realty Corp. Maryland 08/18/1993 100 Real Estate Holding Company
|_Penn Camarillo Realty Corp. California 11/24/1992 100 Real Estate Holding Company
|_Penn Towers, Inc. Pennsylvania 08/01/1958 100 Inactive
|_Republic Indemnity Company of America California 12/05/1972 100 Workers' Compensation Insurance
|_Republic Indemnity Company of California California 10/13/1982 100 Workers' Compensation Insurance
|_Republic Indemnity Medical
Management, Inc. California 03/25/1996 100 Medical Bill Review
|_Risico Management Corporation Delaware 01/10/1989 100 Risk Management
|_Windsor Insurance Company Indiana 11/05/1987 100(2) Property/Casualty Insurance
|_American Deposit Insurance Company Oklahoma 12/28/1966 100 Property/Casualty Insurance
|_Granite Finance Co., Inc. Texas 11/09/1965 100 Premium Financing
|_Coventry Insurance Company Ohio 09/05/1989 100 Property/Casualty Insurance
|_El Aguila Compania de
Seguros, S.A. de C.V. Mexico 11/24/1994 100(2) Property/Casualty Insurance
|_Financiadora De Primas
Condor S.A. de C.V. Mexico 03/06/1998 99 Premium Finance Company
|_Moore Group Inc. Georgia 12/19/1962 100 Insurance Holding Company/Agency
|_Casualty Underwriters, Inc. Georgia 10/01/1954 51 Insurance Agency
|_Dudley L. Moore Insurance, Inc. Louisiana 03/30/1978 beneficial Insurance Agency
interest
|_Hallmark General Insurance
Agency, Inc. Oklahoma 06/16/1972 beneficial Insurance Agency
interest
|_Windsor Group, Inc. Georgia 05/23/1991 100 Insurance Holding Company
|_Regal Insurance Company Indiana 11/05/1987 100 Property/Casualty Insurance
|_Texas Windsor Group, Inc. Texas 06/23/1988 100 Insurance Agency
</TABLE>
- 2 -
<PAGE>
<TABLE>
<CAPTION>
AMERICAN FINANCIAL GROUP, INC.
|_AFC Holding Company % OF STOCK
|_American Financial Corporation OWNED (1)
|_American Premier Underwriters, Inc. STATE OF DATE OF BY IMMEDIATE NATURE OF
| DOMICILE INCORPORATION PARENT COMPANY BUSINESS
| -------- ------------- -------------- ---------
<S> <C> <C> <C> <C>
|_Pennsylvania-Reading Seashore Lines New Jersey 06/14/1901 66.67 Inactive
|_Pittsburgh and Cross Creek Railroad Company Pennsylvania 08/14/1970 83 Inactive
|_PLLS, Ltd. Washington 05/14/1990 100 Insurance Agency
|_Premier Lease & Loan Services Insurance
Agency, Inc. Washington 12/27/1983 100 Insurance Agency
|_Premier Lease & Loan Services B.V. The Netherlands 08/24/1999 100 Insurance Agency
|_Premier Lease & Loan Services of Canada, Inc. Washington 02/28/1991 100 Insurance Agency
|_Terminal Realty Penn Co. District of
Columbia 09/23/1968 100 Inactive
|_United Railroad Corp. Delaware 11/25/1981 100 Inactive
|_Detroit Manufacturers Railroad Company Michigan 01/30/1902 82 Inactive
|_Waynesburg Southern Railroad Company Pennsylvania 09/01/1966 100 Inactive
|_Chiquita Brands International, Inc.
(and subsidiaries) New Jersey 03/30/1999 36.48(2) Production/Processing/
| Distribution of Food
Products
|_Dixie Terminal Corporation Ohio 04/23/1970 100 Commercial Leasing
|_Fairmont Holdings, Inc. Ohio 12/15/1983 100 Holding Company
|_FWC Corporation Ohio 03/16/1983 100 Financial Services
|_Great American Insurance Company Ohio 03/07/1872 100 Property/Casualty Insurance
|_Agricultural Excess and Surplus
Insurance Company Delaware 02/28/1979 100 Excess & Surplus Lines
Insurance
|_Agricultural Insurance Company Ohio 03/23/1905 100 Property/Casualty Insurance
|_American Alliance Insurance Company Ohio 09/11/1945 100 Property/Casualty Insurance
|_American Annuity Group, Inc. Delaware 05/15/1987 82.73(2) Holding Company
|_AAG Holding Company, Inc. Ohio 09/11/1996 100 Holding Company
|_American Annuity Group Capital Trust I Delaware 09/13/1996 100 Financing Vehicle
|_American Annuity Group Capital Trust II Delaware 03/11/1997 100 Financing Vehicle
|_American Annuity Group Capital Trust III Delaware 05/27/1997 100 Financing Vehicle
|_Great American Life Insurance Company Ohio 12/15/1959 100 Life Insurance Company
|_American Retirement Life Insurance
Company Ohio 05/12/1978 100 Life Insurance Company
|_Annuity Investors Life Insurance
Company Ohio 11/31/1981 100 Life Insurance Company
|_CHATBAR, Inc. Massachusetts 11/02/1993 100 Hotel Operator
|_Driskill Holdings, Inc. Texas 06/07/1995 beneficial Hotel Management
interest
|_GALIC Brothers, Inc. Ohio 11/12/1993 80 Real Estate Management
|_Great American Life Assurance Company Ohio 08/10/1967 100 Life Insurance Company
|_Great American Life Children's Ohio 08/06/1998 beneficial Charitable Foundation
Foundation interest
|_Great American Life Insurance Company
of New York New York 12/23/1963 100 Life Insurance Company
|_Loyal American Life Insurance Company Ohio 05/18/1955 100 Life Insurance Company
|_ADL Financial Services, Inc. North Carolina 09/10/1970 100 Marketing Services
|_Purity Financial Corporation Florida 12/21/1991 100 Marketing Services
|_Skipjack Marina Corporation Maryland 06/24/1999 100 Marine Operator
|_United Teachers Associates Limited
Partnership Texas 12-17/1998 99.9(2) Holding Company
|_United Teachers Associates Insurance
Company Texas 12/15/1958 100 Life Insurance Company
|_AAG Insurance Agency, Inc. Kentucky 12/06/1994 100 Life Insurance Agency
|_AAG Insurance Agency of Massachusetts 05/25/1995 100 Insurance Agency
Massachusetts, Inc.
|_AAG Securities, Inc. Ohio 12/10/1993 100 Broker-Dealer
|_American Data Source India Private Limited India 09/03/1997 99 Software Development
|_American Memorial Marketing Services, Inc. Washington 06/19/1980 100 Inactive
</TABLE>
- 3 -
<PAGE>
<TABLE>
<CAPTION>
AMERICAN FINANCIAL GROUP, INC.
|_AFC Holding Company
|_American Financial Corporation % OF STOCK
|_Great American Insurance Company OWNED (1)
|_American Annuity Group, Inc. STATE OF DATE OF BY IMMEDIATE NATURE OF
DOMICILE INCORPORATION PARENT COMPANY BUSINESS
| -------- ------------- -------------- ---------
<S> <C> <C> <C> <C>
|_Consolidated Financial Corporation Michigan 09/10/1985 100 Financial Planning
|_CSW Management Services, Inc. Texas 06/27/1985 100 Inactive
|_GALIC Disbursing Company Ohio 05/31/1994 100 Payroll Servicer
|_Great American Life Assurance Company Puerto Rico 07/01/1964 99 Life Insurance Company
of Puerto Rico, Inc.
|_Keyes-Graham Insurance Agency, Inc. Massachusetts 12/23/1987 100 Insurance Agency
|_Laurentian Credit Services Corporation Delaware 10/07/1994 100 Inactive
|_Laurentian Marketing Services, Inc. Delaware 12/23/1987 100 Inactive
|_Laurentian Securities Corporation Delaware 01/30/1990 100 Inactive
|_Lifestyle Financial Investments, Inc. Ohio 12/29/1993 100 Marketing Services
|_Lifestyle Financial Investments Agency Ohio 03/07/1994 beneficial Life Insurance Agency
of Ohio,Inc. interest
|_Lifestyle Financial Investments of Indiana 02/24/1994 100 Life Insurance Agency
Indiana, Inc.
|_Lifestyle Financial Investments of Kentucky 10/03/1994 100 Insurance Agency
Kentucky, Inc.
|_Lifestyle Financial Investments of Minnesota 06/10/1985 100 Insurance Agency
the Northwest, Inc.
|_Lifestyle Financial Investments of North Carolina 07/13/1994 100 Insurance Agency
the Southeast, Inc.
|_Loyal Marketing Services, Inc. Alabama 07/20/1990 100 Marketing Services
|_Money-Plan International, Inc Florida 12/31/1979 100 Insurance Agency
|_New Energy Corporation Indiana 01/08/1997 49 Holding Company
|_Retirement Resource Group, Inc. Indiana 02/07/1995 100 Insurance Agency
|_AAG Insurance Agency of Texas, Inc. Texas 06/02/1995 100 Life Insurance Agency
|_RRG of Alabama, Inc. Alabama 09/22/1995 100 Life Insurance Agency
|_RRG of Mexico, Inc. New Mexico 06/24/1999 100 Insurance Agency
|_RRG of Ohio, Inc. Ohio 02/20/1996 beneficial Insurance Agency
interest
|_SPELCO (UK) Ltd. United Kingdom 00/00/0000 99 Inactive
|_SWTC, Inc. Delaware 00/00/0000 100 Inactive
|_SWTC Hong Kong Ltd. Hong Kong 00/00/0000 100 Inactive
|_Technomil Ltd. Delaware 00/00/0000 100 Inactive
|_UTA Management Company (TX) Texas 11/24/1993 100 Management Company
|_UTA Management Company (DE) Delaware 01/19/1999 100 Holding Company
|_UTA Ltd. Texas 01/18/1999 100(2) Real Estate Holding
Company
|_American Custom Insurance Services, Inc. Illinois 07/08/1992 100 Underwriting Office
|_American Custom Insurance Services, Inc. Ohio 07/27/1983 100 Management Holding Company
|_American Custom Insurance Services California 05/18/1992 100 Insurance Agency &
California, Inc. Brokerage
|_Eden Park Insurance Brokers, Inc. California 02/13/1990 100 Wholesale Brokerage for
Surplus Lines
|_Professional Risk Brokers, Inc. Illinois 03/01/1990 100 Insurance Agency
|_Professional Risk Brokers Insurance, Inc. Massachusetts 04/19/1994 100 Surplus Lines Brokerage
|_Professional Risk Brokers of Connecticut 07/09/1992 100 Insurance Agency &
Connecticut, Inc. Brokerage
|_Professional Risk Brokers of Ohio, Inc. Ohio 12/17/1986 100 Insurance Agency and
Brokerage
|_Smith, Evans and Schmitt, Inc. California 08/05/1988 100 Insurance Agency
|_Neptune Data Systems, Inc. California 08/09/1996 100 Computer Services
|_American Custom Insurance Services Illinois, Inc. Illinois 07/08/1992 100 Underwriting Office
|_American Dynasty Surplus Lines Insurance Company Delaware 01/12/1982 100 Excess & Surplus Lines
Insurance
|_American Empire Surplus Lines Insurance Company Delaware 07/15/1977 100 Excess & Surplus Lines
Insurance
|_American Empire Insurance Company Ohio 11/26/1979 100 Property/Casualty Insurance
|_American Signature Underwriters, Inc. Ohio 04/08/1996 100 Insurance Agency
</TABLE>
- 4 -
<PAGE>
<TABLE>
<CAPTION>
AMERICAN FINANCIAL GROUP, INC.
|_AFC Holding Company
|_American Financial Corporation % OF STOCK
|_Great American Insurance Company OWNED (1)
| STATE OF DATE OF BY IMMEDIATE NATURE OF
DOMICILE INCORPORATION PARENT COMPANY BUSINESS
-------- ------------- -------------- ---------
<S> <C> <C> <C> <C>
|_Specialty Underwriters, Inc. Texas 05/19/1976 100 Insurance Agency
|_Fidelity Excess and Surplus Insurance
Company Ohio 06/30/1987 100 Property/Casualty Insurance
|_American Financial Enterprises, Inc. Connecticut 00/00/1871 100(2) Closed End Investment
Company
|_American Insurance Agency, Inc. Kentucky 07/27/1967 100 Insurance Agency
|_American National Fire Insurance Company New York 08/22/1947 100 Property/Casualty Insurance
|_American Special Risk, Inc. Illinois 12/29/1981 100 Insurance Broker/Managing
General Agency
|_American Spirit Insurance Company Indiana 04/05/1988 100 Property/Casualty Insurance
|_Aviation Specialty Managers, Inc. Texas 09/07/1965 100 Texas Managing General
Agency
|_Aviation Specialty Services, Inc. Texas 04/06/1995 100(2) Texas Local Recording Agency
|_Brothers Property Corporation Ohio 09/08/1987 80 Real Estate Investment
|_Brothers Cincinnatian Corporation Ohio 01/25/1994 100 Hotel Manager
|_Brothers Landing Corporation Louisiana 02/24/1994 100 Real Estate Holding
Corporation
|_Brothers Pennsylvanian Corporation Pennsylvania 12/23/1994 100 Real Estate Holding
Corporation
|_Brothers Port Richey Corporation Florida 12/06/1993 100 Apartment Manager
|_Brothers Property Management Corporation Ohio 09/25/1987 100 Real Estate Management
|_Brothers Railyard Corporation Texas 12/14/1993 100 Apartment Manager
|_Contemporary American Insurance Company Illinois 04/16/1996 100 Property/Casualty Insurance
|_Crop Managers Insurance Agency, Inc. Kansas 08/09/1989 100 Insurance Agency
|_Dempsey & Siders Agency, Inc. Ohio 05/09/1956 100 Insurance Agency
|_Eagle American Insurance Company Ohio 07/01/1987 100 Property/Casualty Insurance
|_Eden Park Insurance Company Indiana 01/08/1990 100 Special Risk Surplus Lines
|_FCIA Management Company, Inc. New York 09/17/1991 79 Servicing Agent
|_The Gains Group, Inc. Ohio 01/26/1982 100 Marketing of Advertising
|_Global Premier Finance Company Ohio 08/25/1998 100 Premium Finance Company
|_Great American Insurance Agency, Inc. Ohio 04/20/1999 100 Insurance Agency
|_Great American Lloyd's, Inc. Texas 08/02/1983 100 Attorney-in-Fact - Texas
Lloyd's Company
|_Great American Lloyd's Insurance Company Texas 10/09/1979 beneficial Lloyd's Plan Insurer
interest
|_Great American Management Services, Inc. Ohio 12/05/1974 100 Data Processing and
Equipment Leasing
|_American Payroll Services, Inc. Ohio 02/20/1987 100 Payroll Services
|_Great American Re Inc. Delaware 05/14/1971 100 Reinsurance Intermediary
|_Great American Risk Management, Inc. Ohio 04/21/1980 100 Insurance Risk Management
|_Great Texas County Mutual Insurance Company Texas 04/29/1954 beneficial Property/Casualty Insurance
interest
|_Grizzly Golf Center, Inc. Ohio 11/08/1993 100 Operate Golf Courses
|_Homestead Snacks Inc. California 03/02/1979 100(2) Meat Snack Distribution
|_Giant Snacks, Inc. Delaware 07/06/1989 100 Meat Snack Distribution
|_Key Largo Group, Inc. Florida 07/28/1981 100 Land Developer & Resort
Operator
|_Key Largo Group Utility Company Florida 11/26/1984 100 Water & Sewer Utility
|_Mid-Continent Casualty Company Oklahoma 02/26/1947 100 Property/Casualty Insurance
|_Mid-Continent Insurance Company Oklahoma 08/13/1992 100 Property/Casualty Insurance
|_Oklahoma Surety Company Oklahoma 08/05/1968 100 Property/Casualty Insurance
|_National Interstate Corporation Ohio 01/26/1989 52.15 Holding Company
|_Hudson Indemnity, Ltd. Cayman Islands 06/12/1996 100 Property/Casualty Insurance
</TABLE>
- 5 -
<PAGE>
<TABLE>
<CAPTION>
AMERICAN FINANCIAL GROUP, INC.
|_AFC Holding Company % OF STOCK
|_American Financial Corporation OWNED (1)
|_Great American Insurance Company STATE OF DATE OF BY IMMEDIATE NATURE OF
DOMICILE INCORPORATION PARENT COMPANY BUSINESS
-------- ------------- -------------- ---------
<S> <C> <C> <C> <C>
|_National Interstate Corporation
|-
|_American Highways Insurance Agency, Inc. California 05/05/1994 100 Insurance Agency
|_American Highways Insurance Agency, Inc. Ohio 06/29/1999 100 Insurance Agency
|_Explorer Insurance Agency, Inc. Ohio 07/17/1997 beneficial Insurance Agency
interest
|_National Interstate Insurance Agency
of Texas, Inc. Texas 06/07/1989 beneficial Insurance Agency
interest
|_National Interstate Insurance Agency, Inc. Ohio 02/13/1989 100 Insurance Agency
|_National Interstate Insurance Company Ohio 02/10/1989 100 Property/Casualty Insurance
|_Safety, Claims & Litigation Services, Inc. Pennsylvania 06/23/1995 100 Claims Third Party
Administrator
|_Sims Insurance Services, Inc. Hawaii 03/17/1999 100 Insurance Agency
|_OBGC Corporation Florida 11/23/1977 80 Real Estate Development
|_Pointe Apartments, Inc. Minnesota 06/24/1993 100 Real Estate Holding
Corporation
|_Premier Dealer Services, Inc. Illinois 06/24/1998 100 Third Party Administrator
|_Seven Hills Insurance Agency, Inc. Ohio 12/22/1997 100 Insurance Agency
|_Seven Hills Insurance Company New York 06/30/1932 100 Property/Casualty Reinsurance
|_Seven Seas Insurance Agency Ohio 09/10/1998 Life Insurance Agency
|_Stonewall Insurance Company Alabama 02/00/1866 100 Property/Casualty Insurance
|_Stone Mountain Professional Liability
Agency, Inc. Georgia 08/07/1995 100 Insurance Agency
|_Tamarack American, Inc. Delaware 06/10/1986 100 Management Holding Company
|_Timberglen Limited United Kingdom 10/28/1992 100 Investments
|_Transport Insurance Company Ohio 05/25/1976 100 Property/Casualty Insurance
|_Instech Corporation Texas 09/02/1975 100 Claim & Claim Adjustment
|_Transport Insurance Agency, Inc. Texas 08/21/1989 beneficial Insurance Agency
interest Services
|_Transport Underwriters Association California 05/11/1945 100 Holding Company/Agency
|_Worldwide Insurance Company Missouri 10/01/1991 100 Property/Casualty Insurance
|_Worldwide Direct Auto Insurance Company Kentucky 11/13/1961 100 Property/Casualty Insurance
|_Worldwide Casualty Insurance Company Kentucky 02/17/1981 100 Property/Casualty Insurance
|_One East Fourth, Inc. Ohio 02/03/1964 100 Commercial Leasing
|_PCC 38 Corp. Illinois 12/23/1996 100 Real Estate Holding Company
|_Pioneer Carpet Mills, Inc. Ohio 04/29/1976 100 Carpet Manufacturing
|_TEJ Holdings, Inc. Ohio 12/04/1984 100 Real Estate Holdings
|_Three East Fourth, Inc. Ohio 08/10/1966 100 Commercial Leasing
|_American Financial General Corporation Texas 09/14/1998 100 Holding Company
|_American General Financial Corporation Texas 09/14/1998 100 Holding Company
</TABLE>
(1) Except Director's Qualifying Shares.
(2) Total percentage owned by parent shown and by other affiliated
company(ies).
<PAGE>
Item 27. Number of Contract Owners
As of March 31, 200, there were 12,590 Individual Contract Owners, of which
11,489 were qualified and 1,101 were non-qualified. As of March 31, 2000,
there were 697 Participants (Certificate Owners) in 60 Standard Group Contracts
and 159 Participants (Certificate Owners) in 4 Enhanced Group Contracts. As
of March 31, 2000 there were 147 Participants (Certificate Owners) in 1
Enhanced Group Contract With Administration Charge Waived.
Item 28. Indemnification
(a) The Code of Regulations of Annuity Investors Life Insurance Company(R)
provides in Article V as follows:
The Corporation shall, to the full extent permitted by the General
Corporation Law of Ohio, indemnify any person who is or was a director
or officer of the Corporation and whom it may indemnify pursuant
thereto. The Corporation may, within the sole discretion of the Board
of Directors, indemnify in whole or in part any other persons whom it
may indemnify pursuant thereto.
Insofar as indemnification for liability arising under the Securities Act of
1933 ("1933 Act") may be permitted to directors, officers and controlling
persons of the Depositor pursuant to the foregoing provisions, or otherwise, the
Depositor has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Depositor of expenses incurred or paid by the director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Depositor will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue.
(b) The directors and officers of Annuity Investors Life Insurance Company(R)
are covered under a Directors and Officers Reimbursement Policy. Under
the Reimbursement Policy, directors and officers are indemnified for loss
arising from any covered claim by reason of any Wrongful Act in their capacities
as directors or officers, except to the extent the Company has indemnified them.
In general, the term "loss" means any amount which the directors or officers are
legally obligated to pay for a claim for Wrongful Acts. In general, the term
"Wrongful Acts" means any breach of duty, neglect, error, misstatement,
misleading statement, omission or act by a director or officer while acting
individually or collectively in their capacity as such claimed against them
solely by reason of their being directors and officers. The limit of liability
under the program is $20,000,000 for the policy year ending September 1,_2001.
The primary policy under the program is with National Union Fire Insurance
Company of Pittsburgh, PA in the name of American Premier Underwriters, Inc.
<PAGE>
Item 29. Principal Underwriter
AAG Securities, Inc. is the underwriter and distributor of the Contracts as
defined in the Investment Company Act of 1940 ("1940 Act").
(a) AAG Securities, Inc. does not act as a principal underwriter, depositor,
sponsor or investment adviser for any investment company other than Annuity
Investor(R) Variable Account A, Annuity Investor(R) Variable Account B, and
GALIC of New York Separate Account I.
(b) Directors and Officers of AAG Securities, Inc.
Name and Principal Position with
Business Address AAG Securities, Inc.
James Lee Henderson (1) President
Thomas Kevin Liguzinski (1) Chief Executive Officer and Director
Charles Kent McManus (1) Senior Vice President
Mark Francis Muething (1) Vice President, Secretary and Director
Christopher Gryzen (1) Vice President and Chief Compliance Officer
James T. McVey (1) Vice President
Peter J. Nerone (1) Vice President
William Claire Bair, Jr. (1) Treasurer
Thomas E. Mischell (1) Assistant Treasurer
Fred J. Runk (1) Assistant Treasurer
(1) 250 East Fifth Street, Cincinnati, Ohio 45202
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts and records required to be maintained by Section 31(a) of the 1940
Act and the rules under it are maintained by Wendy L. Wilson, Vice President and
Treasurer of the Company, at the Administrative Office.
Item 31. Management Services
Not applicable.
<PAGE>
Item 32. Undertakings
(a) Registrant undertakes that it will file a post-effective amendment to this
registration statement as frequently as necessary to ensure that the audited
financial statements in the registration statement are never more than 16 months
old for so long as payments under the variable annuity contracts may be
accepted.
(b) Registrant undertakes that it will include either (1) as part of any
application to purchase a Contract offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
post card or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information.
(c) Registrant undertakes to deliver any Prospectus and Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request to the Company at the address or
phone number listed in the Prospectus.
(d) The Company represents that the fees and charges deducted under the
Contract, in the aggregate, are reasonable in relation to the services rendered,
the expenses expected to be incurred and the risks assumed by the Company.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it has caused this Post-Effective Amendment
No. 7 to its Registration Statement to be signed on its behalf by the
undersigned in the City of Cincinnati, State of Ohio on April 14, 2000.
ANNUITY INVESTORS(R) VARIABLE ACCOUNT B
(REGISTRANT)
By: /s/ Charles R. Scheper
Charles R. Scheper
President,
Chief Executive Officer
and Director, Annuity Investors
Life Insurance Company(R)
ANNUITY INVESTORS LIFE INSURANCE COMPANy(R)
(DEPOSITOR)
By: /s/ Charles R. Scheper
Charles R. Scheper
President,
Chief Executive Officer and Director
As required by the Securities Act of 1933, this Post-Effective Amendment No. 7
has been signed by the following persons in the capacities and on the dates
indicated.
/s/Robert Allen Adams Chairman April 14, 2000
Robert Allen Adams*
/s/ Wendy L. Wilson Principal April 14, 2000
Wendy L. Wilson* Financial Officer
/s/ Wendy L. Wilson Principal April 14, 2000
Wendy L. Wilson* Accounting Officer
/s/ Stephen Craig Lindner Director April 14, 2000
Stephen Craig Lindner*
/s/ William Jack Maney, II Director April 14, 2000
William Jack Maney, II*
/s/ David B. Rich Director April 14, 2000
David B. Rich*
/s/ Mark Francis Muething Director April 14, 2000
Mark Francis Muething*
*Executed by Tina K. Manning on behalf of those indicated pursuant to Power
of Attorney.
<PAGE>
EXHIBIT INDEX
(1) Resolution of the Board of Directors of Annuity Investors Life
Insurance CompaY(R) authorizing establishment of Annuity
Investors(R) Variable Account B.1/
(2) Not Applicable.
(3) (a) Distribution Agreement between Annuity Investors Life
Insurance Company(R) and AAG Securities, Inc.2/
(b) Form of Selling Agreement between Annuity Investors Life
Insurance Compan(R), AAG Securities, Inc. and
another Broker-Dealer.1/
(c) Revised form of Selling Agreement between Annuity
Investors Life Insurance Company(R), AAG Securities,
Inc. and another Broker-Dealer.
(4) Individual and Group Contract Forms and Endorsements.
(a) Form of Qualified Individual Flexible Premium Deferre
Variable Annuity Contract.2/
(b) Form of Non-Qualified Individual Flexible Deferred
Variable Annuity Contract.2/
(c) Form of Loan Endorsement to Individual Contract.2/
(d) Form of Tax Sheltered Annuity Endorsement to Individual
Contract.2/
(e) Form of Qualified Pension, Profit Sharing and Annuity
Plan Endorsement to Individual Contract.2/
(f) Form of Employer Plan Endorsement to Individual
Contract.2/
(g) Form of Individual Retirement Annuity Endorsement to
Individual Contract.2/
(h) Form of Texas Optional Retirement Program Endorsement to
Individual Contract.2/
(i) Form of Long-Term Care Waiver Rider to Individual
Contract.2/
(j) Form of SIMPLE IRA Endorsement to Individual Contract.2/
(k) Form of Group Flexible Premium Deferred Variable Annuity
Contract.2/
(l) Form of Certificate of Participation under a Group
Flexible Premium Deferred Variable Annuity Contract.2/
(m) Form of Loan Endorsement to Group Contract.2/
(n) Form of Loan Endorsement to Certificate of Participation
under a Group Contract. 2/
(o) Form of Tax Sheltered Annuity Endorsement to Group
Contract.2/
(p) Form of Tax Sheltered Annuity Endorsement to Certificate
of Participation under a Group Contract.2/
(q) Form of Qualified Pension, Profit Sharing and
Annuity Plan Endorsement to Group Contract.2/
(r) Form of Qualified Pension, Profit Sharing and Annuity Plan
Endorsement to Certificate of Participation under a Group
Contract.2/
(s) Form of Employer Plan Endorsement to Group Contract.2/
(t) Form of Employer Plan Endorsement to Certificate of
Participation under a Group Contract.2/
(u) Form of Deferred Compensation Endorsement to Group
Contract.2/
(v) Form of Deferred Compensation Endorsement to Certificate
of Participation under a Group Contract.2/
(w) Form of Texas Optional Retirement Program Endorsement to
Group Contract.2/
(x) Form of Texas Optional Retirement Program Endorsement
to Certificate of Participation under a Group
Contract.2/
(y) Form of Long-Term Care Waiver Rider to Group Contract.2/
(z) Form of Long-Term Care Waiver Rider to Certificate of
Participation under a Group Contract.2/
(aa) Revised form of Individual Retirement Annuity Endorsement
to Individual Qualified Contract. 3/
(bb) Revised form of SIMPLE IRA Endorsement to Qualified
Individual Contract. 3/
(cc) Form of Roth IRA Endorsement to Qualified Individual
Contract. 3/
(dd) Revised form of Employer Plan Endorsement to Group
Contract. 3/
(ee) Revised form of Employer Plan Endorsement to Certificate
of Participation under a Group Contract. 3/
(ff) Revised form of Employer Plan Endorsement to Qualified
Individual Contract. 3/
(gg) Revised form of Tax Sheltered Annuity Endorsement to
Group Contract.3/
(hh) Revised form of Tax Sheltered Annuity Endorsement to
Certificate of Participation under a Group Contract. 3/
(ii) Revised form of Tax Sheltered Annuity Endorsement to
Qualified Individual Contract. 3/
(jj) Revised form of Qualified Pension, Profit Sharing and
Annuity Plan Endorsement to Group Contract. 3/
(kk) Revised form of Qualified Pension, Profit Sharing and
Annuity Plan Endorsement to Certificate of
Participation under a Group Contract. 3/
(ll) Revised form of Qualified Pension, Profit Sharing and
Annuity Plan Endorsement to Qualified Individual
Contract. 3/
(mm) Form of Governmental Section 457 Plan Endorsement to
Group Contract. 3/
(nn) Form of Governmental Section 457 Plan Endorsement to
Certificate of Participation under a Group Contract. 3/
(oo) Form of Governmental Section 457 Plan Endorsement to
Qualified Individual Contract. 3/
(pp) Form of Successor Owner Endorsement to Group Contract. 6/
(qq) Form of Successor Owner Endorsement to Certificate of
Participation under a Group Contract. 6/
(rr) Form of Successor Owner Endorsement to Qualified
Individual Contract and Non-Qualified Individual
Contract. 6/
(ss) Revised form of Successor Owner Endorsement to Group
Contract. 7/
(tt) Revised form of Successor Owner Endorsement to Certificate
of Participation under a Group Contract. 7/
(uu) Revised form of Successor Owner Endorsement to Qualified
Individual Contract and Non-Qualified Individual
Contract. 7/
(vv) Form of Individual Retirement Annuity Endorsement to
Group Contract. 7/
(ww) Form of Individual Retirement Annuity Endorsement to
Certificate of Participation under a Group Contract. 7/
(xx) Form of SIMPLE Individual Retirement Annuity Endorsement
to Group Contract. 7/
(yy) Form of SIMPLE Individual Retirement Annuity Endorsement
to Certificate of Participation under a Group
Contract. 7/
(zz) Form of Roth Individual Retirement Annuity Endorsement to
Group Contract. 7/
(aaa) Form of Roth Individual Retirement Annuity Endorsemet
to Certificate of Participation under a Group
Contract. 7/
(bbb) Form of Unisex Endorsement to Nonqualified Individual
Contract. 7/
(ccc) Form of Income Benefit Rider to Non-Qualified Individual
Contract. 8/
(ddd) Form of Income Benefit Rider to Qualified Individual
Contract. 8/
(eee) Form of Income Benefit Rider to Group Contrac. 8
(fff) Form of Income Benefit Rider to Certificate of
Participation under a Group Contract. 8
(5) (a) Form of Application for Individual Flexible Premium
Deferred Annuity Contract and Certificate of
Participation under a Group Contract.2/
(b) Form of Application for Group Flexible Premium Deferred
Annuity Contract.2/
(c) Revised form of Application for Individual Flexible
Premium Deferred Annuity Contract and Certificate of
Participation under a Group Contract. 4/
(d) Revised form of Application for Group Flexible Premium
Deferred Annuity Contract. 4/
(6) (a) Articles of Incorporation of Annuity Investors Life
Insurance Company(R).1/
(i) Amendment to Articles of Incorporation, adopted
April 9, 1996, and approved by the Secretary of
State, State of Ohio, on July 11, 1996.2/
(ii) Amendment to Articles of Incorporation, adopted
August 9, 1996, and approved by the Secretary of
State, State of Ohio, on December 3, 1996.2/
(b) Code of Regulations of Annuity Investors Life Insurance
Company.(R)1/
(7) Not Applicable.
(8) (a) Participation Agreement between Annuity Investors Life
Insurance Company(R) and Dreyfus Variable Investment
Fund.2/
(i) Letter Agreement dated April 14, 1997 between
Annuity Investors Life Insurance Company(R) and
Dreyfus Variable Investment Fund.2/
(b) Participation Agreement between Annuity Investors Life
Insurance Compan(R) and Dreyfus Life and Annuity
Index Fund, Inc. (d/b/a Dreyfus Stock Index Fund).2/
(i) Letter Agreement dated April 14, 1997 between
Annuity Investors Life Insurance Company(R) and Dreyfus
Life and Annuity Index Fund, Inc. (d/b/a Dreyfus Stock
Index Fund).2/
(c) Participation Agreement between Annuity Investors Life
Insurance Company(R) and The Dreyfus Socially
Responsible Growth Fund, Inc.2/
(i) Letter Agreement dated April 14, 1997 between
Annuity Investors Life Insurance Compan(R) and The
Dreyfus Socially Responsible Growth Fund, Inc.2/
(d) Participation Agreement between Annuity Investors Life
Insurance Company(R) and Janus Aspen Series.2/
(e) Participation Agreement between Annuity Investors Life
Insurance Company(R) and Strong Variable Insurance
Funds, Inc. and Strong Special Fund II, Inc.2/
(f) Participation Agreement between Annuity Investors Life
Insurance Company(R) and INVESCO Variable Investment
Funds, Inc.2/
(g) Participation Agreement between Annuity Investors Life
Insurance Company(R) and Morgan Stanley Universal
Funds, Inc.2/
(h) Participation Agreement between Annuity Investors Life
Insurance Company(R) and PBHG Insurance Series Fund,
Inc.2/
(i) Service Agreement between Annuity Investors Life
Insurance Company(R) and American Annuity GroupSM, Inc.1/
(j) Agreement between AAG Securities, Inc. and AAG Insurance
Agency, Inc.1/
(k) Investment Service Agreement between Annuity Investors
Life Insurance Company(R) and American Annuity
GroupSM, Inc. 1/
(l) Service Agreement between Annuity Investors Life
Insurance Company(R) and Strong Capital Management, Inc.2/
(m) Service Agreement between Annuity Investors Life Insurance
Company(R) and Pilgrim Baxter & Associates, Ltd.2/
(n) Service Agreement between Annuity Investors Life Insurance
Company(R) and Morgan Stanley Asset Management, Inc. 2/
(o) Amended and Restated Agreement between The Dreyfus
Corporation and Annuity Investors Life Insurance
Company)R).2/
(p) Service Agreement between Annuity Investors Life
Insurance Compan(R) and Janus Capital Corporation.2/
(q) Service Agreement between INVESCO Funds Group, Inc. and
Annuity Investors Life Insurance Company.4/
(r) Participation Agreement between The Timothy Plan
Variable Series, Timothy Partners, Ltd. and Annuity
Investors Life Insurance Company. 4/
(s) Service Agreement between The Timothy Plan Variable Series
and Annuity Investors Life Insurance Company. 4/
(t) Participation Agreement between BT Insurance Funds Trust
and Annuity Investors Life Insurance Company. 8
(u) Service Agreement between Bankers Trust Company and
Annuity Investors Life Insurance Company. 8
(9) Opinion and Consent of Counsel. 1/
(10) Consent of Independent Auditors (filed herewith).
(11) No financial statements are omitted from Item 23.
(12) Not Applicable.
(13) Schedule for Computation of Performance Quotations. 4/
(14) Not Applicable.
(15) Powers of Attorney (filed herewith).
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts" and
"Financial Statements" and to the use of our report dated March 9, 2000, with
respect to the statutory-basis financial statements of Annuity Investors Life
Insurance Company, and our report dated February 7, 2000, with respect to the
financial statements of Annuity Investors Variable Account B, in Post-effective
Amendment No. 7 (Form N-4 No. 333-19725) and Post-effective Amendment No. 14
(Form N-4 No. 811-08017) to the Registration Statements and related Statement of
Additional Information of Annuity Investors Variable Account B dated May 1,
2000.
/s/ Ernst & Young LLP
----------------------
Ernst & Young LLP
Cincinnati, Ohio
April 26, 2000
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby makes,
constitutes and appoints Mark F. Muething, John P. Gruber and Tina K. Manning,
and each of them, severally, his true and lawful attorneys and agents in his
name, place and stead and on his behalf (a) to sign and cause to be filed
registration statements of Annuity Investors(R) Separate Account A & B under
the Securities Act of 1933 and the Investment Company Act of 1940, and all
amendments, consents and exhibits thereto; (b) to withdraw such statements or
any amendments or exhibits and make requests for acceleration in connection
therewith; (c) to take all other action of whatever kind or nature in connection
with such registration statements which said attorneys may deem advisable; and
(d) to make, file, execute, amend and withdraw documents of every kind, and to
take other action of whatever kind they may elect, for the purpose of complying
with the laws of any state relating to the sale of securities of Annuity
Investors(R) Separate Account A & B, hereby ratifying and confirming all
actions of any of said attorneys and agents hereunder. Said attorneys or agents
may act jointly or severally, and the action of one shall bind the undersigned
as fully as if two or more had acted together.
Date March 14, 2000 /S/ Charles Richard Scheper
------------------- -------------------------------
Charles Richard Scheper
President, Chief Executive Officer,
& Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby makes,
constitutes and appoints Mark F. Muething, John P. Gruber and Tina K. Manning,
and each of them, severally, his true and lawful attorneys and agents in his
name, place and stead and on his behalf (a) to sign and cause to be filed
registration statements of Annuity Investors(R) Separate Account A & B under the
Securities Act of 1933 and the Investment Company Act of 1940, and all
amendments, consents and exhibits thereto; (b) to withdraw such statements or
any amendments or exhibits and make requests for acceleration in connection
therewith; (c) to take all other action of whatever kind or nature in connection
with such registration statements which said attorneys may deem advisable; and
(d) to make, file, execute, amend and withdraw documents of every kind, and to
take other action of whatever kind they may elect, for the purpose of complying
with the laws of any state relating to the sale of securities of Annuity
Investors(R) Separate Account A & B, hereby ratifying and confirming all actions
of any of said attorneys and agents hereunder. Said attorneys or agents may act
jointly or severally, and the action of one shall bind the undersigned as fully
as if two or more had acted together.
Date March 14, 2000 /S/ Robert A. Adams
--------------- ------------------------
Robert A. Adams
Chairman & Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby makes,
constitutes and appoints Mark F. Muething, John P. Gruber and Tina K. Manning,
and each of them, severally, his true and lawful attorneys and agents in his
name, place and stead and on his behalf (a) to sign and cause to be filed
registration statements of Annuity Investors(R) Separate Account A & B under the
Securities Act of 1933 and the Investment Company Act of 1940, and all
amendments, consents and exhibits thereto; (b) to withdraw such statements or
any amendments or exhibits and make requests for acceleration in connection
therewith; (c) to take all other action of whatever kind or nature in connection
with such registration statements which said attorneys may deem advisable; and
(d) to make, file, execute, amend and withdraw documents of every kind, and to
take other action of whatever kind they may elect, for the purpose of complying
with the laws of any state relating to the sale of securities of Annuity
Investors(R) Separate Account A & B, hereby ratifying and confirming all actions
of any of said attorneys and agents hereunder. Said attorneys or agents may act
jointly or severally, and the action of one shall bind the undersigned as fully
as if two or more had acted together.
Date March 14, 2000 /s/ S. Craig Linder
------------------ --------------------------
S. Craig Lindner, Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby makes,
constitutes and appoints Mark F. Muething, John P. Gruber and Tina K. Manning,
and each of them, severally, his true and lawful attorneys and agents in his
name, place and stead and on his behalf (a) to sign and cause to be filed
registration statements of Annuity Investors(R) Separate Account A & B under the
Securities Act of 1933 and the Investment Company Act of 1940, and all
amendments, consents and exhibits thereto; (b) to withdraw such statements or
any amendments or exhibits and make requests for acceleration in connection
therewith; (c) to take all other action of whatever kind or nature in connection
with such registration statements which said attorneys may deem advisable; and
(d) to make, file, execute, amend and withdraw documents of every kind, and to
take other action of whatever kind they may elect, for the purpose of complying
with the laws of any state relating to the sale of securities of Annuity
Investors(R) Separate Account A & B, hereby ratifying and confirming all actions
of any of said attorneys and agents hereunder. Said attorneys or agents may act
jointly or severally, and the action of one shall bind the undersigned as fully
as if two or more had acted together.
Date March 14, 2000 /S/ William J. Maney II
----------------- ------------------------
William J. Maney II,
Assistant Treasurer, Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby makes,
constitutes and appoints Mark F. Muething, John P. Gruber and Tina K. Manning,
and each of them, severally, his true and lawful attorneys and agents in his
name, place and stead and on his behalf (a) to sign and cause to be filed
registration statements of Annuity Investors(R) Separate Account A & B under the
Securities Act of 1933 and the Investment Company Act of 1940, and all
amendments, consents and exhibits thereto; (b) to withdraw such statements or
any amendments or exhibits and make requests for acceleration in connection
therewith; (c) to take all other action of whatever kind or nature in connection
with such registration statements which said attorneys may deem advisable; and
(d) to make, file, execute, amend and withdraw documents of every kind, and to
take other action of whatever kind they may elect, for the purpose of complying
with the laws of any state relating to the sale of securities of Annuity
Investors(R) Separate Account A & B, hereby ratifying and confirming all actions
of any of said attorneys and agents hereunder. Said attorneys or agents may act
jointly or severally, and the action of one shall bind the undersigned as fully
as if two or more had acted together.
Date March 14, 2000 /S/ Mark F. Muething
---------------- -------------------------
Mark F. Muething,
Executive Vice President,
General Counsel,
Secretary & Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby makes,
constitutes and appoints John P. Gruber and Tina K. Manning, and each of them,
severally, his true and lawful attorneys and agents in his name, place and stead
and on his behalf (a) to sign and cause to be filed registration statements of
Annuity Investors(R) Separate Account A & B under the Securities Act of 1933 and
the Investment Company Act of 1940, and all amendments, consents and exhibits
thereto; (b) to withdraw such statements or any amendments or exhibits and make
requests for acceleration in connection therewith; (c) to take all other action
of whatever kind or nature in connection with such registration statements which
said attorneys may deem advisable; and (d) to make, file, execute, amend and
withdraw documents of every kind, and to take other action of whatever kind they
may elect, for the purpose of complying with the laws of any state relating to
the sale of securities of Annuity Investors(R) Separate Account A & B, hereby
ratifying and confirming all actions of any of said attorneys and agents
hereunder. Said attorneys or agents may act jointly or severally, and the action
of one shall bind the undersigned as fully as if two or more had acted together.
Date March 14, 2000 /s/ David B. Rich
---------------- -------------------------------
David B. Rich
Chief Operating Officer, Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby makes,
constitutes and appoints Mark F. Muething, John P. Gruber and Tina K.Manning,
and each of them, severally, his true and lawful attorneys and agents in his
name, place and stead and on his behalf (a) to sign and cause to be filed
registration statements of Annuity Investors(R) Separate Account A & B under the
Securities Act of 1933 and the Investment Company Act of 1940, and all
amendments, consents and exhibits thereto; (b) to withdraw such statements or
any amendments or exhibits and make requests for acceleration in connection
therewith; (c) to take all other action of whatever kind or nature in connection
with such registration statements which said attorneys may deem advisable; and
(d) to make, file, execute, amend and withdraw documents of every kind, and to
take other action of whatever kind they may elect, for the purpose of complying
with the laws of any state relating to the sale of securities of Annuity
Investors(R) Separate Account A & B, hereby ratifying and confirming all actions
of any of said attorneys and agents hereunder. Said attorneys or agents may act
jointly or severally, and the action of one shall bind the undersigned as fully
as if two or more had acted together.
Date March 14, 2000 /s/ Wendy L. Wilson
--------------- -------------------------
Wendy L. Wilson
Vice President & Treasurer
